<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 2000
REGISTRATION NO. 333-[ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
IASIS HEALTHCARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 76-0450619
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
FRANK A. COYLE
GENERAL COUNSEL AND SECRETARY
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
ROBERT B. PINCUS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE RODNEY SQUARE
WILMINGTON, DELAWARE 19801
(302) 651-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1) REGISTRATION FEE(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13% Senior Subordinated Exchange
Notes Due 2009.................. $230,000,000 100% $230,000,000 $60,720
- ------------------------------------------------------------------------------------------------------------------------------
Guarantees of the 13% Senior
Subordinated Exchange
Notes(2)........................ -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total............................. $230,000,000 100% $230,000,000 $60,720
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with Rule 457(f) promulgated under the Securities
Act of 1933, as amended.
(2) No separate consideration will be received for the Guarantees, and,
therefore, no additional registration fee is required.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ADDITIONAL REGISTRANTS
MEMORIAL HOSPITAL OF TAMPA, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795584
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
MESA GENERAL HOSPITAL, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795590
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
ODESSA REGIONAL HOSPITAL, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795574
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
PALMS OF PASADENA HOSPITAL, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795583
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
<PAGE> 3
SOUTHWEST GENERAL HOSPITAL, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795572
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
ST. LUKE'S MEDICAL CENTER, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795587
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
ST. LUKE'S BEHAVIORAL HOSPITAL, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795588
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
TEMPE ST. LUKE'S HOSPITAL, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795586
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
<PAGE> 4
TOWN & COUNTRY HOSPITAL, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795580
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
BAPTIST JOINT VENTURE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796514
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
BEAUMONT HOSPITAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796501
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
BILTMORE SURGERY CENTER HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796499
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
CLINICARE OF UTAH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795211
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
<PAGE> 5
DAVIS HOSPITAL & MEDICAL CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795217
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
DAVIS SURGICAL CENTER HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796493
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796513
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
HEALTH CHOICE ARIZONA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796494
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
<PAGE> 6
IASIS HEALTHCARE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1798194
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
IASIS MANAGEMENT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1797795
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
JORDAN VALLEY HOSPITAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795215
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
METRO AMBULATORY SERVICE
CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796497
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
PIONEER VALLEY HEALTH PLAN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795212
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
<PAGE> 7
PIONEER VALLEY HOSPITAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795216
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
ROCKY MOUNTAIN MEDICAL CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795213
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
SALT LAKE REGIONAL MEDICAL
CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1795214
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
SANDY CITY HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796492
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
<PAGE> 8
SOUTHRIDGE PLAZA HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796491
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
SSJ ST. PETERSBURG HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8062 62-1796504
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
IASIS HEALTHCARE MSO SUB OF
SALT LAKE CITY, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
UTAH 8062 62-1756039
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
BILTMORE SURGERY CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
ARIZONA 8062 86-0837176
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
113 SEABOARD LANE, SUITE A-200
FRANKLIN, TENNESSEE 37067
(615) 844-2747
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
<PAGE> 9
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE INFORMATION IN THIS PROSPECTUS WILL BE AMENDED OR COMPLETED;
DATED JANUARY 12, 2000
PROSPECTUS
OFFER TO EXCHANGE ALL 13% SENIOR SUBORDINATED NOTES DUE 2009
FOR 13% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009
OF
IASIS HEALTHCARE CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON [ ] UNLESS EXTENDED.
------------------------
Terms of the exchange offer:
- - We will issue up to $230,000,000 aggregate principal amount of new notes.
- - We will exchange new notes for all outstanding old notes that are validly
tendered and not withdrawn prior to the expiration of the exchange offer.
- - You may withdraw tenders of old notes at any time prior to the expiration of
the exchange offer.
- - You will not recognize gain or loss for United States federal income tax
purposes as a result of your exchange of old notes for new notes issued in the
exchange offer, but you should see the discussion under the caption "Certain
United States Federal Income Tax Consequences" on page 36 for more
information.
- - We will not receive any cash proceeds from the exchange offer.
- - The terms of the new notes are substantially identical to those of the
outstanding old notes, except that the transfer restrictions and registration
rights relating to the old notes do not apply to the new notes.
- - The old notes are, and the new notes will be, unconditionally guaranteed by
substantially all of IASIS' subsidiaries.
- - The exchange offer is the initial public offering of the new notes.
- - There is no established trading market for the new notes or the old notes.
- - We do not intend to apply for listing of the new notes on any national
securities exchange or for quotation through The Nasdaq National Market.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF RISKS YOU SHOULD
CONSIDER BEFORE TENDERING YOUR OLD NOTES.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is [ ], 2000.
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Consequences of Not Exchanging Old Notes.................. 4
Summary Description of the New Notes...................... 4
Risk Factors.............................................. 6
IASIS Healthcare Corporation.............................. 6
Summary Historical and Unaudited Pro Forma Combined
Financial Information.................................. 8
Notes to Summary Historical and Unaudited Pro Forma
Combined Financial Information......................... 11
Risk Factors................................................ 12
Company Risks............................................. 12
Industry Risks............................................ 19
Offering Risks............................................ 23
Use of Proceeds............................................. 26
The Exchange Offer.......................................... 27
Terms of the Exchange Offer; Period for Tendering Old
Notes.................................................. 27
Procedures for Tendering Old Notes........................ 28
Acceptance of Old Notes for Exchange; Delivery of New
Notes.................................................. 30
Book-Entry Transfer....................................... 31
Guaranteed Delivery Procedures............................ 31
Withdrawal Rights......................................... 32
Conditions to the Exchange Offer.......................... 33
Exchange Agent............................................ 34
Fees and Expenses......................................... 34
Transfer Taxes............................................ 35
Consequence of Exchanging or Failing to Exchange Old
Notes.................................................. 35
Certain United States Federal Income Tax Consequences....... 36
Exchange Offer............................................ 37
U.S. Holders.............................................. 37
Non-U.S. Holders.......................................... 38
Information Reporting and Backup Withholding.............. 39
Accounting Treatment........................................ 40
The Transactions............................................ 41
The Recapitalization...................................... 41
The Tenet Acquisition..................................... 41
The Merger................................................ 42
Ownership of IASIS Following the Transactions............. 43
Capitalization.............................................. 44
Summary Unaudited Pro Forma Combined Financial
Information............................................... 45
Unaudited Pro Forma Combined Statements of Operations for
the Nine Months Ended September 30, 1999.................. 46
Notes to the Unaudited Pro Forma Combined Statements of
Operations for the Nine Months Ended September 30, 1999... 47
Unaudited Pro Forma Combined Statements of Operations for
the Year Ended December 31, 1998.......................... 50
</TABLE>
i
<PAGE> 11
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notes to Unaudited Pro Forma Combined Statements of
Operations for the Year Ended December 31, 1998............. 51
Unaudited Pro Forma Combined Balance Sheet as of September
30, 1999.................................................. 54
Notes to the Unaudited Pro Forma Combined Balance Sheet as
of September 30, 1999..................................... 55
Selected Historical Financial Information -- Paracelsus
Hospitals................................................. 57
Notes to Selected Historical Financial
Information -- Paracelsus Hospitals....................... 59
Selected Historical Financial Information -- Tenet
Hospitals................................................. 60
Notes to Selected Historical Financial Information -- Tenet
Hospitals................................................. 62
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 63
General................................................... 63
Management Discussion and Analysis........................ 64
Paracelsus Hospitals...................................... 64
Nine Months Ended September 30, 1999 Compared to Nine
Months Ended September 30, 1998........................ 64
Year Ended December 31, 1998 compared to Year Ended
December 31, 1997...................................... 65
Tenet Hospitals........................................... 66
Three Months Ended August 31, 1999 Compared to Three
Months Ended August 31, 1998........................... 66
Year Ended May 31, 1999 Compared to Year Ended May 31,
1998................................................... 67
Year Ended May 31, 1998 Compared to Year Ended May 31,
1997................................................... 67
Liquidity and Capital Resources........................... 68
Paracelsus Hospitals...................................... 68
Tenet Hospitals........................................... 69
Liquidity and Capital Resources........................... 69
IASIS..................................................... 69
Year 2000 Compliance...................................... 70
Inflation................................................. 70
Market Risk............................................... 70
New Accounting Standards.................................. 71
Business.................................................... 72
Company Overview.......................................... 72
Business Strategy......................................... 72
Services and Operations................................... 74
Utilization............................................... 74
Sources of Revenue........................................ 76
Competition............................................... 76
Properties................................................ 79
Employees and Medical Staff............................... 79
Regulatory Compliance Program............................. 80
Legal Proceedings......................................... 80
Reimbursement; Regulation................................. 80
Medicare.................................................. 80
Medicaid.................................................. 82
Annual Cost Reports....................................... 82
Managed Care.............................................. 82
Commercial Insurance...................................... 83
Government Regulation and Other Factors................... 83
</TABLE>
ii
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Licensure, Certification and Accreditation.................. 83
Certificates of Need...................................... 83
Utilization Review........................................ 84
Federal Healthcare Program Regulations and Fraud Abuse.... 84
The Federal False Claims Act.............................. 86
Corporate Practice of Medicine/Fee Splitting.............. 87
The Emergency Medical Treatment and Active Labor Act...... 87
Healthcare Reform......................................... 87
Conversion Legislation.................................... 88
Healthcare Industry Investigations........................ 88
Environmental Matters..................................... 89
Insurance................................................. 90
Management.................................................. 91
Directors and Executive Officers.......................... 91
Board of Directors........................................ 93
Employment Agreement...................................... 94
The 2000 Stock Option Plan and Other Incentive
Arrangements........................................... 94
Management Equity Purchase Program........................ 94
Stock Ownership............................................. 95
Beneficial Owners and Management............................ 95
Certain Relationships and Related Transactions.............. 97
Transition Services Agreement............................. 97
License Agreements........................................ 97
Stockholders Agreement.................................... 97
Tax Sharing Agreement..................................... 98
Description of Credit Facility.............................. 99
Revolving Credit Facility................................. 99
Tranche A Term Loan....................................... 100
Tranche B Term Loan....................................... 100
Description of Notes........................................ 101
Brief Description of the Notes and the Guarantees......... 101
Principal, Maturity and Interest.......................... 102
Methods of Receiving Payments on the Notes................ 102
Paying Agent and Registrar for the Notes.................. 102
Transfer and Exchange..................................... 102
Subsidiary Guarantees..................................... 103
Subordination............................................. 103
Optional Redemption....................................... 105
Mandatory Redemption...................................... 106
Repurchase at the Option of Holders....................... 106
Change of Control......................................... 106
Asset Sales............................................... 107
Selection and Notice...................................... 109
Covenants................................................. 110
Incurrence of Indebtedness and Issuance of Preferred
Stock.................................................. 112
No Senior Subordinated Debt............................... 116
Liens..................................................... 116
</TABLE>
iii
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Dividend and Other Payment Restrictions Affecting
Subsidiaries................................................ 116
Merger, Consolidation or Sale of Assets................... 118
Designation of Restricted and Unrestricted Subsidiaries... 119
Transaction with Affiliates............................... 119
Additional Subsidiary Guarantees.......................... 121
Business Activities....................................... 121
Reports................................................... 122
Events of Default and Remedies............................ 122
No Personal Liability of Directors, Officers, Employees
and Stockholders....................................... 124
Legal Defeasance and Covenant Defeasance.................. 124
Amendment, Supplement and Waiver.......................... 126
Satisfaction and Discharge................................ 127
Concerning the Trustee.................................... 128
Book-Entry, Delivery and Form............................. 128
Certificated Securities................................... 130
Registration Rights; Liquidated Damages................... 131
Definitions............................................... 134
Description of Preferred Stock.............................. 156
Plan of Distribution........................................ 156
Legal Matters............................................... 157
Experts..................................................... 157
Available Information....................................... 158
Index to Audited Financial Statements....................... F-1
</TABLE>
iv
<PAGE> 14
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes specific terms of the new notes, as well as information
regarding our business and detailed financial data. We encourage you to
carefully read this entire prospectus, including the discussion of risks and
uncertainties affecting our business, included under the caption "Risk Factors"
beginning on page 12 and the documents to which we refer you.
OLD NOTES...................... 13% Senior Subordinated Notes due 2009, which
were issued on October 15, 1999.
NEW NOTES...................... 13% Senior Subordinated Exchange Notes due
2009. The terms of the new notes are
substantially identical to those of the old
notes, except that the transfer restrictions
and registration rights relating to the old
notes do not apply to the new notes.
EXCHANGE OFFER................. We are offering to issue up to $230,000,000
aggregate principal amount of the new notes in
exchange for a like principal amount of the
old notes. We are offering the new notes to
satisfy our obligations under the registration
rights agreement we entered into when the old
notes were sold in transactions under Rule
144A and Regulation S under the Securities
Act.
EXPIRATION DATE; TENDERS....... The exchange offer will expire at 5:00 p.m.,
New York City time, on [twenty business days
after effective date], 2000, unless extended.
By tendering your old notes, you represent to
us:
- that you are not an "affiliate", as defined
in Rule 144 under the Securities Act, of
IASIS;
- that at the time of commencement of the
exchange offer, neither you nor, to your
knowledge, anyone receiving new notes from
you, has any arrangement or understanding
with any person to participate, nor do you
engage or intend to engage, in the
distribution, of the new notes; and
- that any new notes you receive in the
exchange offer are being acquired by you in
the ordinary course of your business. For
further information regarding resales of the
new notes by broker-dealers, see the
discussion below under the caption "Plan of
Distribution" on pages 156 to 157.
WITHDRAWAL; NON-ACCEPTANCE..... You may withdraw any old notes tendered in the
exchange offer at any time prior to 5:00 p.m.,
New York City time, on [twenty business days
after effective date], 2000. If we decide for
any reason not to accept any old notes
tendered for exchange, the old notes will be
returned to the registered holder at our
expense
1
<PAGE> 15
promptly after the expiration or termination
of the exchange offer. In the case of old
notes tendered by book-entry transfer into the
exchange agent's account at DTC, any withdrawn
or unaccepted old notes will be credited to
the tendering holder's account at DTC. For
further information regarding the withdrawal
of tendered notes, see "The Exchange
Offer -- Terms of the Exchange Offer; Period
for Tendering Old Notes" on pages 27 to 28 and
"-- Withdrawal Rights" on pages 32 to 33.
CONDITIONS TO THE EXCHANGE
OFFER.......................... The exchange offer is subject to customary
conditions, which we may waive. See the
discussion below under the caption "The
Exchange Offer -- Conditions to the Exchange
Offer" on pages 33 to 34 for more information
regarding conditions to the exchange offer.
PROCEDURES FOR TENDERING OLD
NOTES.......................... Unless you comply with the procedures
described below under the caption "The
Exchange Offer -- Guaranteed Delivery
Procedures" on pages 31 to 32, you must do one
of the following on or prior to the expiration
of the exchange offer:
- tender your old notes by sending the
certificates for your old notes, in proper
form for transfer, a properly completed and
duly executed letter of transmittal with any
required signature guarantees and all other
documents required by the letter of
transmittal, to The Bank of New York, as
exchange agent, at one of the addresses
listed below under the caption "The Exchange
Offer -- Exchange Agent" on page 34; or
- tender your old notes by using the
book-entry procedures described below and
transmitting a properly completed and duly
executed letter of transmittal, with any
required signature guarantees, or an agent's
message instead of the letter of
transmittal, to the exchange agent. In order
for a book-entry transfer to constitute a
valid tender of your old notes in the
exchange offer, the exchange agent must
receive a confirmation of book-entry
transfer of your old notes into its account
at DTC prior to the expiration of the
exchange offer. For more information
regarding the use of book-entry transfer
procedures, including a description of the
required agent's message, see the discussion
below under the caption "The Exchange
Offer -- Book Entry Transfer" on page 31.
2
<PAGE> 16
GUARANTEED DELIVERY
PROCEDURES..................... If you are a registered holder of the old
notes and wish to tender your old notes in the
exchange offer, but
- the old notes are not immediately available,
- time will not permit your old notes or other
required documents to reach the exchange
agent before the expiration of the exchange
offer, or
- the procedure for book-entry transfer cannot
be completed on a timely basis,
you may tender old notes by following the
procedures described below under the caption
"The Exchange Offer -- Guaranteed Delivery
Procedures" on pages 31 to 32.
RESALES........................ Based on interpretations by the staff of the
Securities and Exchange Commission, as set
forth in no-action letters issued to third
parties, we believe that the new notes you
receive in the exchange offer may be offered
for resale, resold or otherwise transferred
without compliance with the registration and
prospectus delivery provisions of the
Securities Act. However, you will not be able
to freely transfer the new notes if:
- you are an "affiliate", as defined in Rule
144 under the Securities Act, of IASIS;
- you are not acquiring the new notes in the
exchange offer in the ordinary course of
your business;
- you have an arrangement or understanding
with any person to participate in the
distribution of the new notes you will
receive in the exchange offer; or
- you are a broker-dealer that receives new
notes for its own account in the exchange
offer in exchange for old notes that were
acquired as a result of market-making or
other trading activities.
If you fall within one of the exceptions
listed above, you must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction
involving the new notes.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS.............. If you are a beneficial owner whose old notes
are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and you wish to tender your old
notes in the exchange offer, you should
promptly contact the person in whose name the
old notes are registered and instruct that
person to tender on your behalf. If you wish
to tender in the exchange offer on your own
behalf, prior to completing and executing the
letter of transmittal and delivering your old
notes, you must either make appropriate
arrangements to register ownership of the old
notes in your name or
3
<PAGE> 17
obtain a properly completed bond power from
the person in whose name the old notes are
registered.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES...... You will not recognize gain or loss for United
States federal income tax purposes as a result
of your exchange of old notes for new notes
issued in the exchange offer. See the
discussion below under the caption "Certain
United States Federal Income Tax Consequences"
for more information regarding certain tax
consequences to you of the exchange offer.
USE OF PROCEEDS................ We will not receive any cash proceeds from the
exchange offer.
EXCHANGE AGENT................. The Bank of New York is the exchange agent for
the exchange offer. The addresses and
telephone number of the exchange agent can be
found below under the caption "The Exchange
Offer -- Exchange Agent" on page 34.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
If you do not exchange your old notes in the exchange offer, your old notes
will continue to be subject to the restrictions on transfer described in the
legend on the certificate for your old notes. In general, you may offer or sell
your old notes only:
- if they are registered under the Securities Act and applicable state
securities laws;
- if they are offered or sold under an exemption from registration under
the Securities Act and applicable state securities laws; or
- if they are offered or sold in a transaction not subject to the
Securities Act and applicable state securities laws.
We do not currently intend to register the old notes under the Securities
Act. Under some circumstances, however, holders of old notes -- including
holders who are not permitted to participate in the exchange offer or who may
not freely resell new notes received in the exchange offer -- may require us to
file, and cause to become effective, a shelf registration statement which would
cover resales of old notes by these holders. For more information regarding the
consequences of not tendering your old notes and our obligation to file a shelf
registration statement, see "The Exchange Offer -- Consequences of Exchanging or
Failing to Exchange Old Notes" on page 35 and "Description of
Notes -- Registration Rights; Liquidated Damages" on pages 131 to 134.
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the new notes and those of the outstanding old notes are
substantially identical except that the transfer restrictions and registration
rights relating to the old notes do not apply to the new notes. In addition, if
the exchange offer is not completed by [30 days after effective day,] 2000, and
we do not have an effective shelf registration statement on file with the SEC to
register the old notes on that date, the interest rate on the old notes will
increase by 0.50% for the first 90-day period and by 0.25% with respect to each
subsequent 90 days, to a maximum of 2.00% per annum, until the exchange offer is
completed or an effective shelf registration statement is on file.
4
<PAGE> 18
SECURITIES OFFERED............. $230,000,000 aggregate principal amount of 13%
Senior Subordinated Exchange Notes due 2009.
MATURITY DATE.................. October 15, 2009.
INTEREST....................... Interest on the new notes will accrue at the
rate of 13% per annum and will be payable
semiannually in cash on April 15 and October
15 of each year, commencing on April 15, 1999.
RANKING........................ The new notes will rank equally with the other
senior subordinated indebtedness. The new
notes will be junior to all of our senior
indebtedness.
At September 30, 1999, after giving pro forma
effect to:
- the offering of the old notes,
- the recapitalization transaction in which
our current principals acquired hospitals
and related facilities previously owned by
Paracelsus Healthcare Corporation, and
- the acquisition of hospitals and related
facilities from Tenet Healthcare
Corporation,
IASIS and its subsidiaries had approximately
$561.5 million of outstanding indebtedness of
which approximately $331.5 million was senior
to the old notes and will be senior to the new
notes.
SINKING FUND................... None.
OPTIONAL REDEMPTION............ We may redeem any of the new notes beginning
on October 15, 2004 at an initial redemption
price equal to 106.50% of their principal
amount, plus accrued and unpaid interest. The
redemption price will decline each year after
2004 and will be 100% of the principal amount,
plus accrued and unpaid interest, beginning on
October 15, 2008.
In addition, before October 15, 2002, we may
redeem up to 35% of the aggregate principal
amount of all old notes and new notes
outstanding on the date of redemption at a
redemption price equal to 113.00% of the
aggregate principal amount redeemed, plus
accrued and unpaid interest and liquidated
damages, if any. We may only redeem the notes
using the net cash proceeds from issuances of
our capital stock, subject to some
limitations. For additional information
regarding optional redemption of the notes,
see the discussion below under the caption
"Description of Notes -- Optional Redemption"
on page 105.
CHANGE OF CONTROL.............. Upon a change of control of IASIS, we will be
required to make an offer to purchase all
outstanding old notes and new notes. The
purchase price will equal 101% of
5
<PAGE> 19
the principal amount of all notes outstanding
on the date of purchase, plus accrued and
unpaid interest. We may not have sufficient
funds available at the time of any change of
control to make any required debt
repayment -- including repurchases of the
notes -- and the terms of our credit facility
may block these payments.
COVENANTS...................... The terms of the new notes restrict our
ability, among other things, to:
- incur additional indebtedness,
- pay dividends or make distributions on our
capital stock,
- repurchase or redeem our capital stock,
- make particular kinds of investments and
other restricted payments,
- create liens,
- enter into transactions with affiliates,
- issue stock of subsidiaries,
- use assets as security in other
transactions,
- transfer or sell assets, and
- merge or consolidate with other companies.
These limitations are subject to a number of
important qualifications and exceptions. For
more information regarding the restrictions
imposed on IASIS by the terms of the new
notes, see the discussion below under the
caption "Description of Notes -- Covenants" on
pages 110 to 112.
SUBSIDIARY GUARANTEES.......... The obligations of IASIS under the new notes
will be guaranteed by its subsidiary
guarantors. These guarantees will be full and
unconditional and will be subordinated to all
senior indebtedness of the subsidiary
guarantors.
RISK FACTORS
You should carefully consider all of the information contained in this
prospectus before deciding to tender your old notes in the exchange offer. In
particular, you should carefully review the specific factors described below
under the caption "Risk Factors" beginning on page 12 which contain important
information about IASIS and the risks that may affect our business.
IASIS HEALTHCARE CORPORATION
COMPANY REVIEW
We are a for-profit hospital management company with operations in select
markets in the United States. Our facilities are currently located in four
regions: (1) Salt Lake City, Utah;
6
<PAGE> 20
(2) Phoenix, Arizona; (3) Tampa-St. Petersburg, Florida; and (4) three markets
within the state of Texas. We own and/or operate 15 general, acute care
hospitals and four ambulatory surgery centers, with a total of 2,144 operating
beds. We focus on networks of medium-sized hospitals, each with 100 to 400 beds.
Our general, acute care hospitals offer a variety of inpatient medical and
surgical services commonly available in hospitals, such as cardiology, emergency
services, general surgery, internal medicine, obstetrics and orthopedics. In
addition, our facilities provide outpatient and ancillary services such as
outpatient surgery, physical therapy, radiation therapy, radiology and
respiratory therapy.
Our principal executive offices are located at 113 Seaboard Lane, Suite
A-200, Franklin, Tennessee 37067 and our telephone number is (615) 844-2747.
7
<PAGE> 21
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following tables present the summary historical and unaudited pro forma
combined financial information and operating data as of the dates indicated.
We have derived the historical Statement of Operations data and Balance
Sheet data of Paracelsus Utah Facilities, which we refer to as Paracelsus or
Paracelsus hospitals, for the nine months ended September 30, 1999 and the year
ended December 31, 1998 from, and you should read the data in conjunction with,
the audited financial statements and related notes to the audited financial
statements included elsewhere in this prospectus.
We have derived the historical Statement of Operations data of Tenet
Healthcare Corporation, which we refer to as Tenet or Tenet hospitals, for the
nine months ended August 31, 1999 and the twelve months ended November 30, 1998
from unaudited financial statements not included in this prospectus. We have
derived the historical Balance Sheet data of Tenet as of August 31, 1999 from,
and you should read the data in conjunction with, unaudited financial statements
included elsewhere in this prospectus.
We have derived the historical Statement of Operations data of Iasis
Healthcare Corporation, which we refer to as management company, a Tennessee
corporation that merged with and into a wholly owned subsidiary of IASIS, for
the nine months ended September 30, 1999 and the period from inception, February
23, 1998, through December 31, 1998 from unaudited financial statements not
included in this prospectus. We have derived the historical Balance Sheet data
of management company as of September 30, 1999 from, and you should read the
data in conjunction with, the audited financial statements and related notes to
the audited financial statements included elsewhere in this prospectus.
The unaudited pro forma combined statements of operations for the year
ended December 31, 1998 and the nine months ended September 30, 1999 give effect
to the pro forma adjustments reflecting the recapitalization, the Tenet
acquisition, the merger with management company and the related financing, which
we refer to as the pro forma transactions, as if they had occurred as of January
1, 1998. The unaudited pro forma combined balance sheet data as of September 30,
1999 gives effect to each of the pro forma transactions as if they had occurred
as of September 30, 1999.
The summary unaudited pro forma combined financial information does not
purport to be indicative of our financial position or results of operations that
we would have actually achieved had the pro forma transactions been consummated
as of the dates specified, nor are they necessarily indicative of the results of
operations that may be achieved in the future.
The unaudited pro forma combined statements of operations give effect to
certain cost savings primarily related to anticipated reductions in corporate
overhead costs that management believes may be realized as a result of the
recapitalization and the Tenet acquisition. The unaudited pro forma combined
statements of operations do not reflect certain non-recurring costs expected to
be incurred in connection with the recapitalization, the Tenet acquisition and
the merger with management company. These costs are expected to include legal,
accounting and other professional fees and certain charges associated with the
combination of the operations of the Paracelsus hospitals, the Tenet hospitals
and the management company. The summary unaudited pro forma combined financial
information is based on assumptions and adjustments described in the notes to
the unaudited pro forma combined financial information included in this
prospectus.
8
<PAGE> 22
SUMMARY HISTORICAL AND
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS
NINE MONTHS NINE MONTHS ENDED
ENDED ENDED SEPTEMBER 30,
SEPTEMBER 30, AUGUST 31, 1999
1999 1999 MANAGEMENT
PARACELSUS TENET COMPANY TOTAL PRO FORMA
------------- ----------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Dollars in thousands
STATEMENT OF OPERATIONS DATA:
Operating revenues............. $140,950 $443,311 $ 758 $585,019 $585,019
Operating expenses:
Salaries, wages and
benefits................... 49,155 146,104 1,792 197,051 199,328
Supplies and other........... 58,847 181,078 874 240,799 244,795
Provision for bad debts...... 9,979 33,831 -- 43,810 43,810
Management fees and corporate
overhead................... 5,135 6,085 -- 11,220 --
Depreciation and
amortization............... 9,620 19,446 123 29,189 30,392
-------- -------- -------- -------- --------
132,736 386,544 2,789 522,069 518,325
-------- -------- -------- -------- --------
Operating income (loss)........ 8,214 56,767 (2,031) 62,950 66,694
Interest expense (income)...... 7,304 (1,407) (13) 5,884 47,955
Minority interests............. (140) 1,705 -- 1,565 (303)
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before income
taxes and cumulative effect
of accounting change......... $ 1,050 $ 56,469 $ (2,018) $ 55,501 $ 19,042
======== ======== ======== ======== ========
OTHER DATA:
Adjusted EBITDA (3)............ 97,086
Depreciation and amortization
expense...................... 9,620 19,446 123 29,189 30,392
Capital expenditures........... 13,476 9,044 77 22,597
Ratio of earnings to fixed
charges (4).................. 1.1x 1.3x
BALANCE SHEET DATA:
Cash and cash equivalents...... -- -- 181 181 100,041
Total assets................... 213,259 560,155 1,040 774,454 816,126
Long-term debt (including
current portion)............. 1,499 7,707 -- 9,206 561,499
Preferred stock................ -- -- -- -- 165,311
Shareholders' equity........... (84,585) 427,215 889 343,519 24,810
STATISTICAL DATA:
Number of hospitals at end of
period....................... 5 10 -- 15 --
Number of operating beds at the
end of period (5)............ 501 1,643 -- 2,144 --
Admissions (6)................. 13,849 39,820 -- 53,669 --
Average length of stay (days)
(7).......................... 3.6 5.0 -- 4.6 --
Average daily census (8)....... 182 724 -- 906 --
Occupancy rate (9)............. 36.3% 44.1% -- 42.3% --
</TABLE>
9
<PAGE> 23
SUMMARY HISTORICAL AND
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 23,
TWELVE MONTHS 1998 THROUGH
YEAR ENDED ENDED DECEMBER 31,
DECEMBER 31, NOVEMBER 30, 1998)
1998 1998 -------------
------------ ------------- MANAGEMENT
PARACELSUS TENET COMPANY TOTAL PRO FORMA
------------ ------------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Dollars in thousands
STATEMENT OF OPERATIONS DATA:
Operating revenues............ $183,112 $558,956 $ 181 $742,249 $742,249
Operating expenses:
Salaries, wages and
benefits.................. 65,942 196,216 685 262,843 267,349
Supplies and other.......... 73,950 243,975 270 318,195 323,638
Provision for bad debts..... 11,727 36,634 -- 48,361 48,361
Management fees and
corporate overhead........ 6,587 8,633 -- 15,220 --
Depreciation and
amortization.............. 11,770 24,634 79 36,483 39,410
Merger, impairment and
restructuring charges
(1)....................... -- 19,455 -- 19,455 19,455
Unusual item (2)............ (7,500) -- -- (7,500) (7,500)
-------- -------- ------ -------- --------
162,476 529,547 1,034 693,057 690,713
-------- -------- ------ -------- --------
Operating income.............. 20,636 29,409 (853) 49,192 51,536
Interest expense.............. 17,088 1,515 -- 18,603 63,965
Minority interests............ 68 2,068 -- 2,136 395
-------- -------- ------ -------- --------
Income (loss) from continuing
operations before income
taxes....................... $ 3,480 $ 25,826 $ (853) $ 28,453 $(12,824)
======== ======== ====== ======== ========
OTHER DATA:
Adjusted EBITDA (3)........... $102,901
Depreciation and amortization
expense..................... 11,770 24,634 79 36,483 39,410
Capital expenditures.......... 6,427 22,668 72 29,167
Ratio of earnings to fixed
charges (4)................. 1.2x N/A
</TABLE>
10
<PAGE> 24
NOTES TO SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
(Dollars in thousands)
(1) On May 31, 1998 Tenet recorded a non-cash restructuring and impairment
charge related to the planned closure of St. Luke's Behavioral Health
Center. IASIS does not currently plan to close this facility.
(2) The unusual item relates to a reversal of a reserve related to the final
contract settlement in connection with the termination of an unprofitable
payor contract at Rocky Mountain Medical Center, formerly named PHC Regional
Hospital and Medical Center.
(3) EBITDA is defined as operating income before interest expense, minority
interests, income taxes, and depreciation and amortization. While EBITDA
should not be considered in isolation or as a substitute for net income,
operating cash flows or other cash flow statement data determined in
accordance with GAAP, management understands EBITDA is a commonly used tool
for measuring a company's ability to service debt, especially in evaluating
healthcare companies. Adjusted EBITDA is defined as EBITDA for the period
presented adjusted for items considered by management to be non-recurring
and excludes merger, impairment and restructuring charges and unusual items.
The following table provides a summary of items considered by management to
be non-recurring and one-time items, along with the related impact on
Adjusted EBITDA for the periods presented.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA NINE
YEAR ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
EBITDA.................................................. $ 90,946 $ 97,086
Adjustments:
Merger, impairment and restructuring charges.......... 19,455 --
Unusual items......................................... (7,500) --
-------- --------
Adjusted EBITDA......................................... $102,901 $ 97,086
======== ========
</TABLE>
(4) The ratio of earnings to fixed charges is calculated by dividing income from
continuing operations before fixed charges, minority interests and income
taxes by fixed charges, which consists of interest charges (interest expense
plus interest charged to construction), the portion of rent expense which is
deemed to be equivalent to interest expense, and amortization of certain
financing costs. Earnings were insufficient to cover fixed charges on a pro
forma basis for the year ended December 31, 1998 by $12.5 million.
(5) Excludes 120 beds at Rocky Mountain Medical Center, formerly named PHC
Regional Hospital and Medical Center, which closed in June 1997 and is
scheduled to reopen during the first quarter of 2000. See "Liquidity and
Capital Resources" on page 69.
(6) Represents the total number of patients admitted (in the hospital for a
period in excess of 23 hours) to our hospitals and is used by management and
certain investors as a general measure of inpatient volume.
(7) Represents the average number of days that a patient stays in our hospitals.
(8) Represents the average number of inpatients in our hospitals each day.
(9) Represents the percentage of operating beds occupied by patients. Occupancy
percentage does not include 120 beds at Rocky Mountain Medical Center.
11
<PAGE> 25
RISK FACTORS
You should carefully consider the following factors in addition to the
other information set forth in this prospectus before deciding to tender your
old notes in the exchange offer. The risk factors described below -- other than
"Holders who fail to exchange their old notes will continue to be subject to
restriction on transfers" -- are generally applicable to the old notes as well
as the new notes.
The risks and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties not presently known to us or that we
currently deem to be immaterial may also materially and adversely affect our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected.
COMPANY RISKS
OUR SIGNIFICANT INDEBTEDNESS MAY LIMIT OUR ABILITY TO GROW AND COMPETE WITH
OTHER HOSPITAL MANAGEMENT COMPANIES
We are a highly-leveraged company. On September 30, 1999, after giving pro
forma effect to the offering of the old notes, the recapitalization in which our
current principals acquired control of IASIS, the acquisition by which IASIS
acquired hospitals and related facilities from Tenet Healthcare Corporation, the
merger with management company and the related financings, we had $561.5 million
of outstanding debt, excluding letters of credit and guarantees, including
$331.5 million of senior indebtedness. Of such total debt, $230.0 million
consisted of the old notes, $330.0 million consisted of borrowings under our
credit facility and $1.5 million consisted of capitalized lease obligations. In
addition, for the nine months ended September 30, 1999, on the same pro forma
basis, our ratio of earnings to fixed charges was 1.3x.
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the new notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- increase our vulnerability to interest rate fluctuations because much of
our debt may be at variable interest rates;
- limit our ability to obtain additional financing to fund future working
capital, capital expenditures and other general corporate requirements;
- limit our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
make principal payments and fund debt service;
- limit our ability to compete with others who are not as highly-leveraged;
- limit our flexibility in planning for, or reacting to, changing market
conditions, changes in our industry and economic downturns; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
Failure to comply with those covenants could result in an event of
default which, if not cured or waived, could have a material adverse
effect on us.
12
<PAGE> 26
Our ability to make scheduled payments of principal or to satisfy our other
debt obligations, to refinance our indebtedness, including the new notes, or to
fund planned capital expenditures will depend on our future performance.
Prevailing economic conditions and financial, business and other factors, many
of which are beyond our control, will also affect our ability to make these
payments.
We cannot assure you that we will generate sufficient cash flow from
operations, that we will realize anticipated revenue growth or operating
improvements or that future borrowings will be available to us in an amount
sufficient to enable us to pay our indebtedness, including the new notes, or to
fund our other liquidity needs. We may need to refinance all or a portion of our
indebtedness, including the new notes, on or before maturity. We cannot assure
you that we will be able to refinance any of our indebtedness, including our
credit facility and the new notes, on commercially reasonable terms or at all.
WE MAY BE SUBJECT TO RISKS ASSOCIATED WITH OUR ABILITY TO INCUR
SUBSTANTIALLY MORE DEBT
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. The credit facility permits additional
borrowings of up to $125.0 million and all of those borrowings would be senior
to the new notes and the subsidiary guarantees. If we or our subsidiaries add
new debt to our or their current debt levels, the related risks that we and they
now face could intensify.
IN THE EVENT THAT WE WERE TO SEEK BANKRUPTCY PROTECTION, HOLDERS OF THE NEW
NOTES WOULD NOT BE REPAID UNTIL OUR CREDIT FACILITY IS REPAID
The new notes and the subsidiary guarantees will be subordinated
obligations to substantially all of our existing and future debt, in particular
our credit facility, other than trade payables and any such debt that expressly
provides that it ranks equally with, or subordinated to, the new notes or the
subsidiary guarantees. Any subsidiary guarantee will be subordinated in right of
payment to all senior indebtedness of the relevant guarantor subsidiary
including guarantees of our credit facility. The new notes will also be
effectively subordinated to all of our secured debt to the extent of the assets
securing such indebtedness. As of September 30, 1999, on a pro forma basis after
giving effect to the offering of the old notes, the recapitalization in which
our current principals acquired control of IASIS and the acquisition by which
IASIS acquired hospitals and related facilities from Tenet Healthcare
Corporation, we had $331.5 million of senior debt, excluding letters of credit
and guarantees. We may also incur additional senior indebtedness consistent with
the terms of our debt agreements.
In a bankruptcy, liquidation, reorganization or dissolution relating to us,
our assets will be available to pay the new notes and the subsidiary guarantees
only after all payments have been made on our senior indebtedness. We cannot
assure you that sufficient assets would remain to make any payments on the new
notes. In addition, all payments on the new notes and the subsidiary guarantees
will be blocked in the event of a payment default on senior debt and may be
blocked for up to 179 of 360 consecutive days in the event of certain
non-payment defaults on senior debt.
In the event of our bankruptcy, liquidation, reorganization or similar
proceeding, our assets would be available to pay obligations on the new notes
only after payments had been made on our senior indebtedness. Because the
indenture under which the old notes were issued and the new notes will be issued
requires that amounts otherwise payable to holders
13
<PAGE> 27
of the notes in a bankruptcy or similar proceeding be paid to holders of debt
senior to such security instead, holders of the notes may receive less, ratably,
than holders of trade payables in any such proceeding. In any of these cases, we
and our guarantor subsidiaries may not have sufficient funds to pay all of our
creditors, and holders of the new notes may receive less, ratably, than the
holders of other debt.
OUR DEBT AGREEMENTS CONTAIN PROVISIONS WHICH RESTRICT OUR ACTIVITIES AND
MAY AFFECT OUR ABILITY TO MAKE PAYMENTS TO THE HOLDERS OF NEW NOTES
The operating and financial restrictions and covenants in our existing debt
agreements, including our credit facility and the indenture under which the old
notes were issued and the new notes will be issued, and any future financing
agreements may adversely affect our ability to finance future operations or
capital needs or to engage in other business activities. Specifically, our debt
agreements may restrict our ability to:
- declare dividends or redeem or repurchase capital stock;
- prepay, redeem or repurchase debt, including the new notes;
- incur liens and engage in sale-leaseback transactions;
- make loans and investments;
- incur additional indebtedness;
- amend or otherwise change debt and other material agreements;
- make capital expenditures;
- engage in mergers, acquisitions and asset sales;
- enter into transactions with affiliates; and
- change our primary business.
A breach of any of the restrictions or covenants in our debt agreements
could cause a default under the credit facility, other debt or the new notes. A
significant portion of our indebtedness then may become immediately due and
payable. We cannot assure you whether we would have, or be able to obtain,
sufficient funds to make these accelerated payments, including payments on the
new notes. For a further discussion of operating and financial restrictions
affecting us, see the discussion under the captions "Description of
Notes -- Covenants" on pages 110 to 112 and "Description of Credit Facility" on
page 99.
BECAUSE WE DO NOT HAVE AN INDEPENDENT OPERATING HISTORY, WE MAY NOT BE ABLE
TO ACCURATELY PREDICT OUR WORKING CAPITAL REQUIREMENTS
Our business operations were conducted by various entities owned directly
or indirectly by Paracelsus Healthcare Corporation, Tenet Healthcare Corporation
and their predecessors, and we have not had an independent operating history. In
addition, while the members of our senior management team have extensive
experience managing large groups of hospitals, they have not done so as a part
of a single management team and they have not managed our hospitals. While our
assets were owned by Paracelsus Healthcare Corporation and Tenet Healthcare
Corporation, such assets benefitted from the use of some of the financial and
administrative resources and infrastructure of Paracelsus Healthcare Corporation
and Tenet Healthcare Corporation in such areas as treasury, legal, information
services, cash flow maintenance and benefits administration. As a result of the
14
<PAGE> 28
recapitalization in which our current principals acquired control of IASIS and
the acquisition by which IASIS acquired hospitals and related facilities from
Tenet Healthcare Corporation, we will now be required to supplement our
hospitals' financial and administrative systems and other resources to provide
services necessary to operate successfully as an independent company. We will
also need to fund our working capital requirements and other cash needs from our
cash flow and other sources. We have a $125.0 million revolving credit facility,
which was not drawn at the closing of the offering of the old notes (other than
for the issuance of approximately $25.0 million of letters of credit) and that
can be used to fund our working capital and other general corporate
requirements. Our cash flow and the revolving credit facility may not, however,
be adequate to meet our working capital and other cash needs in the future.
WHEN OUR TRANSITIONAL SERVICES AGREEMENTS WITH PARACELSUS HEALTHCARE
CORPORATION AND TENET HEALTHCARE CORPORATION EXPIRE, WE MAY HAVE DIFFICULTY
OBTAINING SUBSTITUTE SERVICES AT A REASONABLE COST
In connection with the recapitalization by which our current principals
acquired control of IASIS and the acquisition by which IASIS acquired hospitals
and related facilities from Tenet Healthcare Corporation, we entered into a
transition services agreements pursuant to which Paracelsus Healthcare
Corporation and Tenet Healthcare Corporation will continue to provide us with
the following services for a period generally not to exceed twelve months:
- information systems;
- employees temporarily contracted from Tenet Healthcare Corporation; and
- purchasing and contract services.
When these agreements terminate, we will have to provide these services
in-house or contract with third parties. Also, in connection with the
recapitalization and the acquisition we received indemnification against
specified liabilities as described under "The Transactions" on page 41. However,
we cannot assure you that Paracelsus Healthcare Corporation and Tenet Healthcare
Corporation will honor their indemnity obligations.
BECAUSE OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE COMPARABLE TO
FUTURE PERIODS, OUR FINANCIAL STATEMENTS MAY NOT ACCURATELY REFLECT CHANGES IN
OUR FINANCIAL POSITION
The historical financial information included in this prospectus may not
necessarily reflect our results of operations, financial position and cash flows
in the future or what our results of operations, financial position and cash
flows would have been had we been a separate, independent entity during the
periods presented. The historical financial information included in this
prospectus does not reflect many significant changes that have occurred in our
capital structure, funding and operations. These significant changes have
resulted from the recapitalization in which our current principals acquired
control of IASIS, the acquisition by which IASIS acquired hospitals and related
facilities from Tenet Healthcare Corporation, the credit facility and the
offering of the old notes. In addition, we expect to incur costs in operating as
an independent company. As a consequence, our results of operations and
financial condition subsequent to the recapitalization and the acquisition are
not and will not be comparable to prior periods.
15
<PAGE> 29
BECAUSE OF FACTORS BEYOND OUR CONTROL, WE MAY BE UNABLE TO ACHIEVE
ESTIMATED COST SAVINGS
Our business plan anticipates that we will have the ability to operate our
hospitals with lower costs than the overhead allocated by former owners. These
potential annualized cash cost savings are reflected as supplemental adjustments
in the unaudited pro forma combined financial information and elsewhere in this
prospectus. The potential cost savings are based on analyses completed by
members of our management. Such analyses necessarily involve assumptions as to
future events, including general business and industry conditions, competitive
factors, local labor markets and labor productivity, many of which are beyond
our control and may not materialize. While we believe these analyses and
underlying assumptions to be reasonable, there could be unforeseen factors that
may offset the estimated cost savings or other components of our business plan
in whole or in part. As a result, our actual cost savings may vary considerably,
or be considerably delayed, compared to the estimates described in this
prospectus.
BECAUSE OF FACTORS BEYOND OUR CONTROL, WE MAY BE UNABLE TO ACHIEVE OUR
BUSINESS STRATEGIES
Our business plan for IASIS depends upon our successful execution of our
business strategies. However, we cannot assure you that we will successfully
implement our plans or that the costs of implementing our plans will not exceed
anticipated costs or the anticipated cost savings. We also cannot be sure as to
the timing or amount of any positive contribution which may be realized or that
these changes might not result in unanticipated material adverse consequences.
Our future results of operations will also depend upon a number of factors
and events, some of which are beyond our control, including the following:
- the levels of demand for our existing services;
- our ability to develop new services and successfully implement our growth
initiatives;
- our ability to control our costs and repay our indebtedness;
- the substantial competition we encounter;
- our transition to an independent company and the costs associated
therewith;
- possible changes in the healthcare industry and healthcare regulations;
and
- general economic conditions.
WE OPERATE EXCLUSIVELY IN FOUR STATES AND ARE SUBJECT TO RISKS ARISING FROM
CHANGES IN INDIVIDUAL MARKETS
Five of our fifteen general, acute care hospitals will be located in Utah,
three hospitals will be located in Arizona, three hospitals will be located in
Florida, and four hospitals will be located in Texas. Accordingly, any material
change in the current demographic, economic, competitive and regulatory
conditions in Utah, Arizona, Florida or Texas could adversely effect us. On a
pro forma basis for the nine months ended September 30, 1999, 26.9% of our net
revenues were generated by our Utah hospitals, 23.7% were generated by our
Arizona hospitals, 23.4% were generated by our Florida hospitals and 26.0% were
generated by our Texas hospitals.
16
<PAGE> 30
THE LOSS OF ANY OF OUR KEY PERSONNEL WITH HEALTHCARE EXPERTISE COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION
Our success is largely dependent on the skills, experience and efforts of
our senior management team. Our operations are also dependent on the efforts,
ability and experience of key members of our hospital management staffs. The
loss of services of one or more members of the senior management team or of a
significant portion of our hospital management staff at one or more of our
hospitals could have a material adverse effect on our business, financial
condition and results of operations. We do not maintain key man life insurance
policies on any of our officers. For further information regarding our senior
management team, see the discussion below under the caption "Management"
beginning on page 91.
OUR FAILURE TO RETAIN AND RECRUIT PHYSICIANS AND OTHER HEALTHCARE
PROFESSIONALS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION
The success of our hospitals is largely dependent upon the number and
quality of the physicians representing various specialties on our hospitals'
medical staffs. We generally do not employ our physicians and most of our
physicians have admitting privileges at multiple hospitals. The loss of
physicians in the communities in which we operate, or our inability to recruit
physicians to these communities, could have a material adverse effect on our
business, financial condition or results of operations. The operations of our
hospitals may also be affected by difficulties in retaining and recruiting
nurses and other healthcare professionals in these communities.
THE INABILITY TO INTEGRATE MANAGEMENT INFORMATION SYSTEMS INTO OUR
HOSPITALS OR THE TERMINATION OR DEFAULT OF THIRD-PARTY VENDORS OF THOSE
INFORMATION SYSTEMS MAY ADVERSELY AFFECT OUR BUSINESS AND REVENUES
Our success is dependent in part on our access to sophisticated information
systems and our ability to integrate these systems into our hospitals.
Information management systems are critical to negotiating, pricing and managing
payor contracts and such systems are expected to assist us in realizing
operating efficiencies and enabling us to capture, maintain, monitor and analyze
cost, quality and utilization data. We may experience unanticipated delays,
complications and expenses in implementing, integrating and operating such
systems. Furthermore, such systems may require modifications, improvements,
replacements or substantial expenditures and may require interruptions in
operations during implementation. To the extent such systems require software
and support from third-party vendors, termination by such vendors of their
relationships with us, or a default in the performance of such vendors'
contractual obligations with respect to us, could have a negative impact on our
business and revenues. There can be no assurance that we will be able to obtain
or maintain these systems or that these systems or vendors' support could be
replaced by us in a reasonable time or at a reasonable cost.
BECAUSE OF THE INCREASE OF PROFESSIONAL LIABILITY CLAIMS, MALPRACTICE
LIABILITY INSURANCE MAY BE UNAVAILABLE OR MORE EXPENSIVE
In recent years, physicians, hospitals and other healthcare providers have
become subject to an increasing number of lawsuits alleging malpractice, product
liability or related legal theories, many of which involve large claims and
significant defense costs. To cover various claims arising out of the operations
of our hospitals, we maintain professional malpractice liability insurance and
general liability insurance in amounts that management believes to be sufficient
for our operations. However, some claims may exceed, or may not
17
<PAGE> 31
be covered by, the policy in effect. The cost of malpractice and other liability
insurance has risen significantly during the past few years. We cannot assure
you that adequate levels of insurance will continue to be available at a
reasonable cost to us.
BECAUSE OF FACTORS BEYOND OUR CONTROL, WE MAY BE UNABLE TO ACHIEVE OUR
ACQUISITION STRATEGY
One element of our business strategy is expansion through the acquisition
of hospitals in our existing and new high growth markets. The competition to
acquire hospitals is significant, and there can be no assurance that suitable
acquisitions, for which other healthcare companies (including those with greater
financial resources than us) may be competing, can be accomplished on terms
favorable to us, that financing, if necessary, can be obtained for such
acquisitions or that acquired facilities can be effectively integrated with our
operations. The consummation of acquisitions may result in the incurrence of or
assumption by us of additional indebtedness. We cannot assure you that even if
we continue to acquire and/or enter into partnerships or affiliations with
additional facilities and related healthcare service providers in the geographic
areas in which we currently operate, federal and state regulatory agencies will
not constrain our ability to grow. Additionally, we cannot assure you that we
will be able to operate profitably, or effectively integrate the operations of
or otherwise achieve the intended benefits from, any hospitals, facilities,
businesses or other assets we may acquire or with which we may enter into
partnerships or affiliations.
Acquired businesses may have unknown or contingent liabilities, including
liabilities for failure to comply with healthcare laws and regulations. Although
we have policies to conform the practices of acquired facilities to our
standards, and generally will seek indemnification from prospective sellers
covering these matters, there can be no assurance that we will not become liable
for past activities of acquired businesses or that any such liabilities will not
be material.
THE INTERESTS OF OUR CONTROLLING STOCKHOLDER, JOSEPH LITTLEJOHN & LEVY, MAY
CONFLICT WITH YOUR INTERESTS AS A NEW NOTE HOLDER
JLL Healthcare, LLC, which is controlled by Joseph Littlejohn & Levy Fund
III, L.P., an affiliate of Joseph Littlejohn & Levy, beneficially owns 84.7% of
our outstanding common stock. As a result of its voting power, Joseph Littlejohn
& Levy Fund III, L.P. is in a position to elect a majority of our board of
directors and control all matters affecting us, including any determination with
respect to:
- our direction and policies;
- the acquisition and disposition of assets;
- future issuances of common stock, preferred stock or other securities;
- our future incurrence of debt; and
- any dividends on the common stock or preferred stock.
Some decisions concerning our operations or financial structure may present
conflicts of interest between Joseph Littlejohn & Levy Fund III, L.P. and the
holders of the new notes. If we encounter financial difficulties or are unable
to pay our debts as they mature the interests of our equity holders might
conflict with those of the holders of the new notes. In addition, our equity
holders may have an interest in pursuing acquisitions, divestitures, financings
or other transactions, that, in their judgment, could enhance their
18
<PAGE> 32
equity investment even though such transactions might involve risks to the
holders of the new notes.
INDUSTRY RISKS
THE USE OF ALTERNATIVES TO HOSPITAL TREATMENTS MAY REDUCE THE NUMBER AND
LENGTH OF STAYS IN OUR HOSPITALS AND MAY NEGATIVELY AFFECT US
Increased competition, excess capacity at hospitals, a shift from inpatient
to outpatient treatment and consolidation has led the hospital industry to the
emphasis on the use of alternative healthcare delivery systems. Those
alternative healthcare systems include home health services, outpatient surgery
and emergency and diagnostic centers. With patients being treated and procedures
being performed outside of hospitals, the number and the length of hospital
stays has been reduced and has led to a higher acuity level for patients who are
admitted to hospitals. The principal factors contributing to these trends are:
- advances in medical technology and pharmaceuticals;
- cost-containment efforts by managed care payors, employers and
traditional healthcare insurers;
- changes in regulations and reimbursement policies;
- increases in the number and type of competing healthcare providers; and
- changes in physician practice patterns. Some of the hospitals that
compete with ours have greater financial resources and/or are owned by
governmental agencies or not-for-profit corporations supported by
endowments and charitable contributions and can finance capital
expenditures on a tax-exempt basis. We expect these trends and factors to
continue and they may adversely impact our hospitals.
WE MAY BE ADVERSELY AFFECTED IF WE ARE UNABLE TO ENTER INTO FAVORABLE
CONTRACTS WITH MANAGED CARE PAYORS OR TO RETAIN AND RECRUIT PHYSICIANS
The revenues and operating results of most of our hospitals are
significantly affected by our ability to negotiate favorable contracts with
Health Maintenance Organizations, Preferred Provider Organizations and other
managed care payors. Our future success will depend, in part, on our hospitals'
ability to continue to retain and recruit physicians, to enter into managed care
contracts and to organize and structure local hospital networks. We cannot
assure you that our hospitals will continue to be able to, on terms favorable to
us,
- retain and recruit physicians,
- enter into managed care contracts, or
- organize and structure local hospital networks,
for which other healthcare companies, including some with greater financial
resources or a wider range of services, may be competing. We expect pressures
imposed by government and private payors and the increasing percentage of
business negotiated with purchasers of group healthcare services to continue to
affect our hospitals.
19
<PAGE> 33
BECAUSE OF RECENT LEGISLATIVE CHANGES WE MAY BE ADVERSELY AFFECTED BY
LIMITATIONS ON PAYMENTS PROVIDED BY GOVERNMENTAL PROGRAMS
Payments from government healthcare programs, such as Medicare and
Medicaid, accounted for approximately 38.2% of our pro forma net operating
revenues for the nine months ended September 30, 1999. Recent legislative
changes, including those enacted as part of the Balanced Budget Act of 1997,
have resulted in limitations on and, in some cases, reductions in levels of,
payments to healthcare providers under many of these government programs. Many
changes imposed by the Balanced Budget Act are being phased in over a period of
years. The Balanced Budget Act significantly changes the method of payment under
the Medicare and Medicaid programs which has resulted, and we expect will
continue to result, in significant reductions in payments for our inpatient,
outpatient, home health and skilled nursing services.
BECAUSE WE ENTER INTO CAPITATED CONTRACTS WITH PRIVATE PAYORS WE MAY BE
ADVERSELY AFFECTED BY LIMITATIONS ON PAYMENTS AND REIMBURSEMENTS
Private payors, including indemnity and managed care payors, accounted for
approximately 61.8% of our pro forma net operating revenues for the nine months
ended September 30, 1999. These payors are increasingly demanding discounted fee
structures or the assumption by healthcare providers of all or a portion of the
financial risk through prepaid capitation arrangements. With capitated
contracts, we receive specific fixed periodic payments from a Health Maintenance
Organization, Preferred Provider Organizations, or employer, based on the number
of members of such organization we service. In return, we agree to provide
healthcare services to such members regardless of the actual costs incurred and
services provided. The profitability of such contracts depends upon our ability
to negotiate payments per patient that, in the aggregate, are adequate to cover
the cost of meeting the healthcare needs of the covered individuals. We cannot
assure you that we will be able to enter into any such contracts or that, if we
do, the payments received will be adequate to cover the cost of meeting the
healthcare needs of the covered persons.
Pre-authorization and utilization review and payor pressure to maximize
outpatient and alternative healthcare services negatively affect inpatient
utilization, average lengths of stay and occupancy rates. Efforts to impose
reduced allowances, greater discounts and more stringent cost controls by
government and other payors are also expected to continue. Although we are
unable to predict the effect these changes will have on our operations,
significant limits on the scope of services reimbursed and on reimbursement
rates and fees could have a material adverse effect on our business, financial
condition or results of operations.
BECAUSE THE HEALTHCARE INDUSTRY IS SUBJECT TO EXTENSIVE REGULATION, WE MAY
BE SUBJECT TO INCREASED SCRUTINY WITH RESPECT TO CONDUCTS UNDER FRAUD AND ABUSE
LAWS AND OTHER LAWS
The healthcare industry is subject to extensive regulation relating to
- licensure,
- conduct of operations,
- ownership of facilities,
- addition of facilities and services and
- payment for services.
20
<PAGE> 34
In particular, the Medicare and Medicaid antikickback, antifraud and abuse
amendments codified under Section 1128B(b) of the Social Security Act prohibit
business practices and relationships that might affect the provision and cost of
healthcare services payable under Medicare, Medicaid and other government
programs. The business practices included are the offering, soliciting, paying
or receiving remuneration in return for the referral of patients whose care will
be paid for by these government programs. Sanctions for violating the
antikickback amendments include criminal penalties and civil sanctions,
including fines and possible exclusion from government programs such as the
Medicare and Medicaid programs. In addition to the federal antikickback
amendments, many states have adopted similar provisions prohibiting some
kickback arrangements. Some of these state prohibitions apply to referral of
patients for healthcare services reimbursed by any source, not only the Medicare
and Medicaid programs.
We believe that the healthcare industry will continue to be subject to
increased government scrutiny and investigations and that we may be adversely
affected by these and other regulatory frameworks. See "Business -- Government
Regulation and Other Factors."
BECAUSE OF THE INCREASED USE OF THE FALSE CLAIMS ACT, WE MAY BE SUBJECT TO
ACTIONS BROUGHT BY INDIVIDUALS ON BEHALF OF THE GOVERNMENT
Under the federal False Claims Act, individuals may bring actions under the
False Claims Act qui tam, or "whistleblower" provisions. Whistleblower
provisions allow private individuals to bring actions on behalf of the
government alleging that the defendant has defrauded the federal government.
When a defendant is determined to be liable under the False Claims Act, it
must pay three times the actual damages sustained by the government, plus
mandatory civil penalties. Among the many potential bases for liability under
the False Claims Act, liability often arises when an entity knowingly submits a
false claim for reimbursement to the United States government. The False Claims
Act defines the term "knowingly" broadly. In some circumstances, submitting a
claim with reckless disregard to its truth or falsity constitutes "knowing"
submission and, therefore, will qualify for liability. From time to time,
companies in the healthcare industry, including ours, may be subject to qui tam
actions. We are unable to predict the impact of such actions.
A DETERMINATION OF MATERIAL VIOLATION UNDER THE MEDICARE PROGRAM COULD
ADVERSELY AFFECT US.
Under the Medicare program, acute care hospitals receive reimbursement
under a prospective payment system for inpatient hospital services. Payment
amounts per inpatient discharge are established based on the patient's assigned
diagnosis related group. The diagnosis related group classifies categories of
illnesses according to the estimated intensity of hospital resources necessary
to furnish care for each principal diagnosis. Although we believe that we are in
compliance in all material respects with these laws, rules and regulations, if a
determination were made that we were in material violation of these laws, rules
or regulations, it could have a material adverse effect on our business,
financial condition or results of operations.
BECAUSE OF FACTORS BEYOND OUR CONTROL, WE MAY BE ADVERSELY AFFECTED BY
HEALTHCARE REFORM LEGISLATION
Healthcare reform continues to attract much legislative interest and public
attention. In recent years, an increasing number of legislative proposals have
been introduced or
21
<PAGE> 35
proposed in Congress and in some state legislatures that would effect major
changes in the healthcare system, either nationally or at the state level.
Proposals that have been considered include
- cost controls on hospitals,
- insurance market reforms to increase the availability of group health
insurance to small businesses,
- patients' bill of rights and
- requirements that all businesses offer health insurance coverage to their
employees.
The costs of some proposals would be funded in significant part by reductions in
payments by governmental programs, including Medicare and Medicaid, to
healthcare providers such as hospitals. There can be no assurance that future
healthcare legislation or other changes in the administration or interpretation
of governmental healthcare programs that affect our revenues or increase our
costs will not have a material adverse effect on our business, financial
condition or results of operations.
WE MAY BE ADVERSELY AFFECTED BY GOVERNMENT INVESTIGATIONS THAT MAY RESULT
IN INTERPRETATIONS THAT ARE INCONSISTENT WITH OUR INDUSTRY PRACTICES
There are numerous ongoing federal and state investigations regarding,
among others,
- cost reporting,
- billing practices relating to clinical laboratory test claims,
- home health agency costs,
- physician recruitment practices, and
- physician ownership of healthcare providers and joint ventures with
hospitals.
Because the law in this area is complex and constantly evolving, there can be no
assurance that government investigations will not result in interpretations that
are inconsistent with industry practices, including ours.
The federal government has also launched a national investigative
initiative targeting the billing of claims for inpatient services related to
bacterial pneumonia, as the government has found that many hospital providers
have attempted to bill for pneumonia cases under more complex and expensive
reimbursement codes, such as diagnosis related group codes.
We are aware that prior to our ownership of them, various of the acquired
hospitals were contacted in relation to certain government initiatives which
were targeted at an entire segment of the healthcare industry. While we take the
position that, under the terms of the agreements pursuant to which we acquired
these hospitals, the prior owners retained any liability resulting from these
government initiatives, we cannot assure you that the prior owners' resolution
of these matters, in the event that any resolution was deemed necessary, will
not have an effect on our operations.
In addition, we cannot assure you that governmental entities will not
initiate similar investigations in the future at hospitals operated by us and
that such investigations will not result in significant penalties to us.
Governmental investigation of us or entities with whom we do business could
result in adverse publicity concerning us and could limit our ability to make
acquisitions.
22
<PAGE> 36
The positions taken by authorities in the current investigations or any
future investigations of us or other providers and the liabilities or penalties
that may be imposed could have a material adverse effect on our business,
financial condition or results of operations. For further information regarding
government investigations, see "Business -- Healthcare Industry Investigations"
beginning of page 88.
OFFERING RISKS
BECAUSE OF FACTORS BEYOND OUR CONTROL, WE MAY BE UNABLE TO REPURCHASE THE
NEW NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a change of control, you may require us to
repurchase your new notes at 101% of their principal, plus accrued and unpaid
interest to the date of purchase. Please note, however, that events that would
constitute a change of control also would constitute an event of default under
our credit facility. The occurrence of an event of default under our credit
facility will constitute an event of default under the indenture.
Any of our future credit agreements or other agreements relating to
indebtedness may contain similar restrictions and provisions. Accordingly, we
may not be able to satisfy our obligations to purchase your new notes unless we
are able to refinance or obtain waivers with respect to our credit facility and
other indebtedness. If we do not obtain a waiver or consent or repay these
borrowings, we would remain prohibited from purchasing the new notes by the
terms of the relevant senior indebtedness.
Our failure to purchase the tendered new notes would constitute an event of
default under the indenture which would, in turn, constitute a default under our
credit facility and could constitute a default under other senior indebtedness.
In this situation, the subordination provisions in the indenture would likely
restrict payments to the holders of the new notes until our obligations under
the credit facility and any other senior indebtedness are paid in full. We
cannot assure you that we will have sufficient resources to purchase your new
notes in the event of change of control particularly if the change of control
requires us to refinance or results in the acceleration of other indebtedness.
For a further discussion and definition of a change of control, see "Description
of Notes -- Repurchase at the Option of Holders" on pages 106 to 107.
THE NOTES AND THE SUBSIDIARY GUARANTEES COULD BE VOID IF THEY ARE FOUND BY
A COURT TO BE FRAUDULENT CONVEYANCES
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, the new notes and the subsidiary guarantees could be
voided, or claims in respect of the new notes or the subsidiary guarantees could
be subordinated to all of our other debts or debt of any guarantor subsidiary,
if, among other things, we or such guarantor subsidiary, at the time we or it
incurred the indebtedness evidenced by the new notes or guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such indebtedness;
- was insolvent or rendered insolvent by reason of such incurrence;
- was engaged in a business or transaction for which our or such guarantor
subsidiary's remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that we or it would incur, debts beyond
our or its ability to pay such debts as they mature.
23
<PAGE> 37
In addition, any payment by us or such guarantor subsidiary pursuant to the
new notes or any subsidiary guarantee could be voided and required to be
returned to us, such guarantor subsidiary or to a fund for the benefit of our
creditors or the creditors of such guarantor subsidiary.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, we or a guarantor
subsidiary would be considered insolvent if:
- the sum of our or such guarantor subsidiary's debts, including contingent
liabilities, was greater than the fair saleable value of all of our or
such guarantor subsidiary's assets;
- the present fair saleable value of our or such guarantor subsidiary's
assets was less than the amount that would be required to pay our or such
guarantor subsidiary's probable liability on existing debts, including
contingent liabilities, as they become absolute and mature; or
- we or any guarantor subsidiary could not pay debts as they become due.
Based on historical financial information, recent operating history and
other factors, neither we nor any of our guarantor subsidiaries believes that,
immediately after issuance of the new notes, it will be insolvent, will have
unreasonably small capital for the business in which it is engaged or will have
incurred debts beyond its ability to pay as they mature. There can be no
assurance, however, as to what standard a court would apply in making such
determinations or that a court would agree with our or our guarantor
subsidiaries' conclusions in this regard.
BECAUSE THERE IS NO ESTABLISHED TRADING MARKET FOR THE NOTES, YOU MAY FIND
IT DIFFICULT TO SELL YOUR NOTES
There is no established trading market for the new notes or the old notes.
Although J.P. Morgan Securities Inc., the initial purchaser from the offering of
the old notes, has informed us that it currently intends to make a market in the
new notes it has no obligation to do so and may discontinue making a market at
any time without notice.
We do not intend to apply for listing of the new notes on any securities
exchange or for quotation through The Nasdaq National Market.
The liquidity of any market for the new notes will depend upon the number
of holders of the new notes, our performance, the market for similar securities,
the interest of securities dealers in making a market in the new notes and other
factors relating to us. A liquid trading market may not develop for the new
notes. In addition, to the extent old notes are tendered and accepted in the
exchange offer, the trading market, if any, for the old notes would be adversely
affected.
HOLDERS WHO FAIL TO EXCHANGE THEIR OLD NOTES WILL CONTINUE TO BE SUBJECT TO
RESTRICTIONS ON TRANSFERS
If you do not exchange your old notes for new notes in the exchange offer,
you will continue to be subject to the restrictions on transfer of your old
notes described in the legend on the certificates for your old notes. The
restrictions on transfer of your old notes arise because we issued the old notes
under exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
24
<PAGE> 38
In general, you may only offer or sell the old notes if they are registered
under the Securities Act and applicable state securities laws, or offered and
sold under an exemption from these requirements. We do not plan to register the
old notes under the Securities Act. For further information regarding the
consequences of tendering your old notes in the exchange offer, see the
discussions below under the captions "The Exchange Offer -- Consequences of
Exchanging or Failing to Exchange Old Notes" on page 35 and "Certain United
States Federal Income Tax Consequences" on pages 36 to 37.
SOME HOLDERS WHO EXCHANGE THEIR OLD NOTES MAY BE DEEMED TO BE UNDERWRITERS
If you exchange your old notes in the exchange offer for the purpose of
participating in a distribution of the new notes, you may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
BECAUSE OF RISKS AND UNCERTAINTIES BEYOND OUR CONTROL, THE FORWARD-LOOKING
STATEMENTS IN THIS PROSPECTUS MAY NOT PROVE TO BE ACCURATE.
This prospectus includes or incorporates forward-looking statements
regarding, among other things, our financial condition and business strategy. We
have based these forward-looking statements on our current expectations and
projections about future events. While we believe these expectations and
projections are reasonable, such forward-looking statements are inherently
subject to risks, uncertainties and assumptions about us, including, among other
things:
- our high degree of leverage;
- our ability to incur substantially more debt;
- operating and financial restrictions in our debt agreements;
- our ability to service indebtedness incurred in connection with the
transactions described in this prospectus;
- our lack of history as an independent operating company;
- our ability to achieve estimated cost savings;
- our ability to successfully implement our business strategies;
- intense levels of competition in the healthcare industry;
- the risks related to healthcare regulation reforms; and
- our ability to successfully integrate any future acquisitions.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur. These forward looking
statements are also subject to the risks, uncertainties and assumptions
discussed above, as well as under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 63 to 64.
25
<PAGE> 39
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes in
the exchange offer. We will receive old notes in like principal amount in
exchange for the issuance of the new notes in the exchange offer. We will cancel
all old notes surrendered in exchange for new notes in the exchange offer.
The net proceeds from the offering of the old notes, after deducting
underwriting discounts and commissions and our expenses, were approximately
$223,100,000 and together with amounts available under the credit facility and
the issuance of our preferred stock were used to
- repay our $200.0 million credit facility, of which approximately $160.0
million was outstanding, in its entirety (hereinafter referred to as the
$160.0 million credit facility),
- finance the acquisition of hospitals and related facilities from Tenet
Healthcare Corporation,
- fund an opening cash balance required for working capital, and
- pay related fees and expenses of the transactions.
Our $160.0 million credit facility consisted of a revolving loan facility
and a Term-A Loan having final maturities of October 8, 2005, a Term-B Loan
having a final maturity of April 8, 2006 and a Term-C Loan of January 8, 2000.
The loans under the $160.0 million credit facility bore interest at a rate per
annum equal to The Bank of Nova Scotia's alternate base rate plus a margin of
2.00% for revolving loans, 1.00% for Term-A Loans, and 3.00% for Term-B Loans
and Term-C Loans. Borrowings under our $160.0 million credit facility were used
to finance a portion of the recapitalization in which our current principals
acquired control of IASIS.
The material terms of our current credit facility are described under the
caption "Description of Credit Facility" on pages 99 to 100. For further
information regarding the current indebtedness of IASIS, see "Capitalization" on
page 44.
26
<PAGE> 40
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
On October 15, 1999, we issued an aggregate principal amount of
$230,000,000 of our 13% Senior Subordinated Notes due 2009 in offerings under
Rule 144A and Regulation S of the Securities Act that were not registered under
the Securities Act. The old notes were issued, and the new notes will be issued,
under an indenture, dated as of October 15, 1999, by and among IASIS, our wholly
owned subsidiaries, as subsidiary guarantors, and The Bank of New York, as
trustee. We sold the old notes to J.P. Morgan Securities Inc. as initial
purchaser, under a purchase agreement, dated October 13, 1999, among IASIS, the
subsidiary guarantors and J.P. Morgan Securities Inc. When we sold the old notes
to J.P. Morgan, we also signed a registration rights agreement in which we
agreed to exchange all the issued and outstanding old notes for a like principal
amount of our 13% Senior Subordinated Exchange Notes due 2009. Copies of the
indenture and the registration rights agreement are filed as exhibits to the
registration statement of which this prospectus is a part. The terms of the new
notes are substantially identical to those of the old notes, except that the
transfer restrictions and registration rights relating to the old notes do not
apply to the new notes.
This prospectus and the enclosed letter of transmittal constitute an offer
to exchange new notes for all of the issued and outstanding old notes. This
exchange offer is being extended to all holders of the old notes. As of the date
of this prospectus, $230,000,000 aggregate principal amount of the old notes are
outstanding. This prospectus and the enclosed letter of transmittal are first
being sent on or about [effective date], 2000, to all holders of old notes known
to us. Subject to the conditions listed below, we will accept for exchange all
old notes which are properly tendered on or prior to the expiration of the
exchange offer and not withdrawn as permitted below. The exchange offer will
expire at 5:00 p.m., New York City time, on [twenty business days after
effective date]. However, if we, in our sole discretion, extend the period of
time during which the exchange offer is open, the exchange offer will expire at
the latest time and date to which we extend the exchange offer. Our obligation
to accept old notes for exchange in the exchange offer is subject to the
conditions listed below under the caption "-- Conditions to the Exchange Offer."
We expressly reserve the right, at any time and from time to time, to
extend the period of time during which the exchange offer is open, and thereby
delay acceptance for exchange of any old notes. If we elect to extend the period
of time during which the exchange offer is open, we will give you oral or
written notice of the extension and delay, as described below. During any
extension of the exchange offer, all old notes previously tendered and not
withdrawn will remain subject to the exchange offer and may be accepted for
exchange by us. We will return to the registered holder, at our expense, any old
notes not accepted for exchange as promptly as practicable after the expiration
or termination of the exchange offer. In the case of an extension, we will issue
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration of
the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer,
and not to accept for exchange any old notes not previously accepted for
exchange if any of the events described below under the caption "-- Conditions
to the Exchange Offer" should occur. We will give you oral or written notice of
any amendment, termination or nonacceptance as promptly as practicable.
27
<PAGE> 41
Following completion of the exchange offer, we may, in our sole discretion,
commence one or more additional exchange offers to those holders of old notes
who did not exchange their old notes for new notes. The terms of these
additional exchange offers may differ from those applicable to this exchange
offer, as provided in the registration rights agreement. We may use this
prospectus, as amended or supplemented from time to time, in connection with any
additional exchange offers. These additional exchange offers will take place
from time to time until all outstanding old notes have been exchanged for new
notes, subject to the terms and conditions contained in the prospectus and
letter of transmittal we will distribute in connection with the additional
exchange offers.
PROCEDURES FOR TENDERING OLD NOTES
Old notes tendered in the exchange offer must be in denominations of $1,000
principal amount and any integral multiple thereof.
When you tender your old notes, and we accept the old notes, this will
constitute a binding agreement between you and IASIS, subject to the terms and
conditions set forth in this prospectus and the enclosed letter of transmittal.
Unless you comply with the procedures described below under the caption "--
Guaranteed Delivery Procedures," you must do one of the following on or prior to
the expiration of the exchange offer to participate in the exchange offer:
(1) tender your old notes by sending the certificates for your old
notes, in proper form for transfer, a properly completed and duly
executed letter of transmittal, with any required signature
guarantees, and all other documents required by the letter of
transmittal, to The Bank of New York, as exchange agent, at one of
the addresses listed below under the caption "-- Exchange Agent";
or
(2) tender your old notes by using the book-entry procedures described
below under the caption "-- Book-Entry Transfer" and transmitting
a properly completed and duly executed letter of transmittal, with
any required signature guarantees, or an agent's message instead
of the letter of transmittal, to The Bank of New York, as exchange
agent, at one of the addresses listed below under the caption
"-- Exchange Agent."
In order for a book-entry transfer to constitute a valid tender of your old
notes in the exchange offer, the exchange agent must receive a confirmation of
book-entry transfer of your old notes into the exchange agent's account at The
Depository Trust Company ("DTC") prior to the expiration of the exchange offer.
The term "agent's message" means a message, transmitted by DTC and received by
the exchange agent and forming a part of the book-entry confirmation, which
states that DTC has received an express acknowledgment from you that you have
received and have agreed to be bound by the letter of transmittal. If you use
this procedure, we may enforce the letter of transmittal against you.
THE METHOD OF DELIVERY OF CERTIFICATES FOR OLD NOTES, LETTERS OF
TRANSMITTAL, AGENT'S MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR
ELECTION. IF YOU DELIVER YOUR OLD NOTES BY MAIL, WE RECOMMEND REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW
SUFFICIENT TIME TO ASSURE TIMELY DELIVERY. DO NOT SEND CERTIFICATES FOR OLD
NOTES, LETTERS OF TRANSMITTAL OR AGENT'S MESSAGES TO US.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless you are either (1) a registered holder of
old notes and have not completed the box entitled "Special Issuance
Instructions" or "Special Delivery
28
<PAGE> 42
Instructions" on the letter of transmittal or (2) exchanging old notes for the
account of an eligible guarantor institution. An eligible guarantor institution
means:
- Banks, as defined in Section 3(a) of the Federal Deposit Insurance Act;
- Brokers, dealers, municipal securities dealers, municipal securities
brokers, government securities dealers and government securities brokers,
as defined in the Securities Exchange Act of 1934, as amended;
- Credit unions, as defined in Section 19B(1)(A) of the Federal Reserve
Act;
- National securities exchanges, registered securities associations and
clearing agencies, as these terms are defined in the Exchange Act; and
- Savings associations, as defined in Section 3(b) of the Federal Deposit
Insurance Act.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible guarantor
institution. If you plan to sign the letter of transmittal but you are not the
registered holder of the old notes -- which term, for this purpose, includes any
participant in DTC's system whose name appears on a security position listing as
the owner of the old notes -- you must have the old notes signed by the
registered holder of the old notes and that signature must be guaranteed by an
eligible guarantor institution. You may also send a separate instrument of
transfer or exchange signed by the registered holder and guaranteed by an
eligible guarantor institution, but that instrument must be in a form
satisfactory to us in our sole discretion. In addition, if a person or persons
other than the registered holder or holders of old notes signs the letter of
transmittal, certificates for the old notes must be endorsed or accompanied by
appropriate bond powers, in either case signed exactly as the name or names of
the registered holder or holders that appear on the certificates for old notes.
All questions as to the validity, form, eligibility -- including time of
receipt -- and acceptance of old notes tendered for exchange will be determined
by us in our sole discretion. Our determination will be final and binding. We
reserve the absolute right to reject any and all tenders of old notes improperly
tendered or to not accept any old notes, the acceptance of which might be
unlawful as determined by us or our counsel. We also reserve the absolute right
to waive any defects or irregularities or conditions of the exchange offer as to
any old notes either before or after the expiration of the exchange
offer -- including the right to waive the ineligibility of any holder who seeks
to tender old notes in the exchange offer. Our interpretation of the terms and
conditions of the exchange offer as to any particular old notes either before or
after the expiration of the exchange offer -- including the terms and conditions
of the letter of transmittal and the accompanying instructions -- will be final
and binding. Unless waived, any defects or irregularities in connection with
tenders of old notes for exchange must be cured within a reasonable period of
time, as determined by us. Neither we, The Bank of New York, as exchange agent,
nor any other person has any duty to give notification of any defect or
irregularity with respect to any tender of old notes for exchange, nor will we
have any liability for failure to give this notification.
If you are a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or act in a similar fiduciary or representative
capacity, and wish to sign the letter of transmittal or any certificates for old
notes or bond powers, you must indicate your status when signing. If you are
acting in any of these capacities, you must submit proper evidence satisfactory
to us of your authority to so act unless we waive this requirement.
29
<PAGE> 43
By tendering your old notes, you represent to us:
(1) that you are not an "affiliate" of IASIS, as defined in Rule 144
under the Securities Act;
(2) that at the time of the commencement of the exchange offer, you do
not have any arrangement or understanding with any person to
participate nor do you engage or intend to engage in the
distribution of the new notes; and
(3) that any new notes you receive in the exchange offer are being
acquired by you in the ordinary course of your business.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration of the exchange offer, all old
notes properly tendered and will issue the new notes promptly after acceptance
of the old notes. For purposes of the exchange offer, we will be deemed to have
accepted properly tendered old notes for exchange when, as and if we have given
oral or written notice of acceptance to The Bank of New York, as exchange agent,
with written confirmation of any oral notice to be given promptly after any oral
notice.
For each old note accepted for exchange in the exchange offer, the holder
of the old note will receive a new note having a principal amount at maturity
equal to that of the surrendered old note. Interest on the new note will accrue:
(1) from the later of (a) the last date to which interest was paid on
the old note surrendered in exchange for the new note or (b) if
the old note is surrendered for exchange on a date in a period
which includes the record date for an interest payment date to
occur on or after the date of the exchange and as to which
interest will be paid, the date to which interest will be paid on
such interest payment date; or
(2) if no interest has been paid on the old note, from and including
October 15, 1999.
If the exchange offer is not completed by [thirty days after effective
date], and IASIS does not have an effective shelf registration statement on file
with the SEC to register the old notes on that date, the interest rate on the
old notes will be equal to a per annum rate of 0.50% the first 90 day-period and
will increase by an additional per annum rate of 0.25% with respect to each
subsequent 90-day period, up to a maximum amount of 2.0%, until the exchange
offer is completed or an effective shelf registration statement is on file with
the SEC. Payments of interest, if any, on old notes that were exchanged for new
notes will be made on each April 15th and October 15th during which the new
notes are outstanding. Interest payments will be made to the person who, at the
close of business on the October 1st or April 1st next preceding the interest
payment date, is the registered holder of the old notes if the record date
occurs prior to the exchange, or is the registered holder of the new notes if
the record date occurs on or after the date of the exchange, even if the notes
are cancelled after the record date and on or before the interest payment date.
For a further discussion of the events in which we would be required to pay
liquidated damages, see the caption "Description of Notes -- Registration
Rights; Liquidated Damages" on page 131.
30
<PAGE> 44
In all cases, the issuance of new notes in exchange for old notes will be
made only after The Bank of New York, as exchange agent, timely receives:
(1) either certificates for all physically tendered old notes, in
proper form for transfer, or a book-entry confirmation of transfer
of the old notes into the exchange agent's account at DTC, as the
case may be, and
(2) a properly completed and duly executed letter of transmittal, with
any required signature guarantees, and all other required
documents or, in the case of a book-entry confirmation, a properly
completed and duly executed letter of transmittal, with any
required signature guarantees, or an agent's message instead of
the letter of transmittal.
If for any reason we do not accept any tendered old notes or if old notes
are submitted for a greater principal amount than the holder desires to
exchange, we will return the unaccepted or non-exchanged old notes without
expense to the registered tendering holder. In the case of old notes tendered by
book-entry transfer into the exchange agent's account at DTC by using the
book-entry procedures described below, the unaccepted or non-exchanged old notes
will be credited to an account maintained with DTC. Any old notes to be returned
to the holder will be returned as promptly as practicable after the expiration
or termination of the exchange offer.
BOOK-ENTRY TRANSFER
Within two business days after the date of this prospectus, The Bank of New
York, as exchange agent, will establish an account at DTC for the old notes
tendered in the exchange offer. Once established, any financial institution that
is a participant in DTC's systems may make book-entry delivery of old notes by
causing DTC to transfer the old notes into the exchange agent's account at DTC
in accordance with DTC's procedures for transfer. Although delivery of the old
notes may be effected through book-entry transfer at DTC, the letter of
transmittal or facsimile of the letter of transmittal, with any required
signature guarantees, or an agent's message instead of a letter of transmittal,
and any other required documents, must be transmitted to and received by the
exchange agent on or prior to the expiration of the exchange offer at one of the
addresses listed below under the caption "-- Exchange Agent." In addition, the
exchange agent must receive book-entry confirmation of transfer of the old notes
into the exchange agent's account at DTC prior to the expiration of the exchange
offer. If you cannot comply with these procedures, you may be able to use the
guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you are a registered holder of the old notes and wish to tender your old
notes, but
- the certificates for the old notes are not immediately available,
- time will not permit your certificates for the old notes or other
required documents to reach The Bank of New York as exchange agent,
before the expiration of the exchange offer or
- the procedure for book-entry transfer cannot be completed before the
expiration of the exchange offer, you may effect a tender of your
old notes if:
- the tender is made through an eligible guarantor institution;
- prior to the expiration of the exchange offer, the exchange agent
receives from an eligible guarantor institution a properly
completed and duly
31
<PAGE> 45
executed notice of guaranteed delivery, substantially in the form
we have provided, setting forth your name and address, and the
amount of old notes you are tendering and stating that the tender
is being made by notice of guaranteed delivery. These documents
may be sent by overnight courier, registered or certified mail or
facsimile transmission. If you elect to use this procedure, you
must also guarantee that within three New York Stock Exchange,
Inc. trading days after the date of execution of the notice of
guaranteed delivery,
- the certificates for all physically tendered old notes, in
proper form for transfer, or a book-entry confirmation of
transfer of the old notes into the exchange agent's account
at DTC, as the case may be, and
- a properly completed and duly executed letter of
transmittal, with any required signature guarantees, and all
other required documents or, in the case of a book-entry
confirmation, a properly completed and duly executed letter
of transmittal, with any required signature guarantees, or
an agent's message instead of the letter of transmittal,
will be deposited by the eligible guarantor institution with the
exchange agent; and
- the exchange agent receives
- the certificates for all physically tendered old notes,
in proper form for transfer, or a book-entry
confirmation of transfer of the old notes into the
exchange agent's account at DTC, as the case may be,
and
- a properly completed and duly executed letter of
transmittal, with any required signature guarantees,
and all other required documents or, in the case of a
book-entry confirmation, a properly completed and duly
executed letter of transmittal, with any required
signature guarantees, or an agent's message instead of
the letter of transmittal,
in each case, within three NYSE trading days after the date of execution
of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
YOU MAY WITHDRAW TENDERS OF OLD NOTES AT ANY TIME PRIOR TO THE EXPIRATION
OF THE EXCHANGE OFFER.
For a withdrawal to be effective, a written notice of withdrawal must be
received by The Bank of New York, as exchange agent, prior to the expiration of
the exchange offer at one of the addresses listed below under the caption
"--Exchange Agent." Any notice of withdrawal must:
- specify the name of the person who tendered the old notes to be
withdrawn,
- identify the old notes to be withdrawn, including the principal
amount of the old notes, and
- where certificates for old notes have been transmitted, specify the
name in which the old notes are registered, if different from that
of the withdrawing holder.
32
<PAGE> 46
If certificates for old notes have been delivered or otherwise identified
to the exchange agent, then, prior to the release of the certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible guarantor institution unless the holder is an eligible
guarantor institution. If old notes have been tendered using the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn old
notes and otherwise comply with the procedures of the book-entry transfer
facility. All questions as to the validity, form and eligibility -- including
time of receipt -- of these notices will be determined by us. Our determination
will be final and binding. Any old notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the exchange offer.
Any old notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the registered holder without cost
to that holder as soon as practicable after withdrawal, non-acceptance of tender
or termination of the exchange offer. In the case of old notes tendered by
book-entry transfer into the exchange agent's account at DTC by using the
book-entry transfer procedures described above, any withdrawn or unaccepted old
notes will be credited to the tendering holder's account at DTC. Properly
withdrawn old notes may be retendered at any time on or prior to the expiration
of the exchange offer by following one of the procedures described above under
"-- Procedures for Tendering Old Notes."
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we will not be
required to accept any old notes for exchange or to issue any new notes in
exchange for old notes, and we may terminate or amend the exchange offer if, at
any time before the acceptance of the old notes for exchange or the exchange of
new notes for old notes, any of the following events occurs:
- the exchange offer is determined to violate any applicable law or any
applicable interpretation of the staff of the SEC;
- any federal law, statute or regulation shall have been adopted or enacted
or an action or proceeding is pending or threatened in any court or by
any governmental agency that might materially impair our ability to
proceed with the exchange offer;
- any material adverse development occurs in any existing legal action or
proceeding involving IASIS;
- we do not receive any governmental approval we deem necessary for the
completion of the exchange offer;
- any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939, as
amended;
- there shall occur a change in the current interpretation by the staff of
the SEC which permits the notes to be issued in the exchange offer to be
offered for resale, resold and otherwise transferred by such holders,
other than broker-dealers and any holder which is an "affiliate" of IASIS
within the meaning of Rule 144 under the Securities Act, without
compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that new notes received in the exchange
offer are received in the ordinary course of the holder's business and
the holder has
33
<PAGE> 47
no arrangement or understanding with any person to participate in the
distribution of new notes to be issued in the exchange offer; or
- any of the conditions precedent to our obligations under the registration
rights agreement are not fulfilled.
These conditions are for our benefit only and we may assert them regardless
of the circumstances giving rise to any condition. We may also waive any
condition in whole or in part at any time in our sole discretion. Our failure at
any time to exercise any of the foregoing rights will not constitute a waiver of
that right and each right is an ongoing right that we may assert at any time.
In addition, we will not accept any old notes for exchange or issue any new
notes in exchange for old notes, if at the time a stop order is threatened or in
effect which relates to:
- the registration statement of which this prospectus forms a part; or
- the qualification under the Trust Indenture Act of 1939 of the
indenture under which the old notes were issued and the new notes
will be issued.
EXCHANGE AGENT
We have appointed The Bank of New York as the exchange agent for the
exchange offer. All completed letters of transmittal and agent's messages should
be directed to the exchange agent at one of the addresses listed below.
Questions and requests for assistance, requests for additional copies of this
prospectus or the letter of transmittal, agent's messages and requests for
notices of guaranteed delivery should be directed to the exchange agent at one
of the following addresses:
Delivery To: The Bank of New York, Exchange Agent
<TABLE>
<S> <C> <C>
By Regular or Certified By Facsimile: By Overnight Courier or Hand:
Mail: (Eligible Guarantor
Institutions only) The Bank of New York
The Bank of New York 101 Barclay Street
101 Barclay Street, 7E (212) 815-6339 Corporate Trust Services
New York, NY 10286 Window
Attention: To Confirm by Telephone Ground Level
Reorganization Section or for Information Call: New York, NY 10286
Attention:
(212) 815-3428 Reorganization Section
</TABLE>
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS OTHER
THAN THE ADDRESS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER
THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER OF TRANSMITTAL OR
AGENT'S MESSAGE.
FEES AND EXPENSES
The principal solicitation is being made by mail by The Bank of New York,
as exchange agent. We will pay the exchange agent customary fees for its
services, reimburse the exchange agent for its reasonable out-of-pocket expenses
incurred in connection with the provision of these services and pay other
registration expenses, including fees and expenses of the trustee under the
indenture relating to the notes, filing fees, blue sky fees and printing and
distribution expenses. We will not make any payment to brokers, dealers or
others soliciting acceptances of the exchange offer.
34
<PAGE> 48
Additional solicitation may be made by telephone, facsimile or in person by
officers and regular employees of IASIS and its affiliates and by persons so
engaged by the exchange agent.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection with the
tender of old notes in the exchange offer unless you instruct us to register new
notes in the name of, or request that old notes not tendered or not accepted in
the exchange offer be returned to, a person other than the registered tendering
holder. In those cases, you will be responsible for the payment of any
applicable transfer tax.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
If you do not exchange your old notes for new notes in the exchange offer,
your old notes will continue to be subject to the provisions of the indenture
relating to the notes regarding transfer and exchange of the old notes and the
restrictions on transfer of the old notes described in the legend on your
certificates. These transfer restrictions are required because the old notes
were issued under an exemption from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, the old notes may not be offered or sold, unless registered
under the Securities Act, except under an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. We do
not plan to register the old notes under the Securities Act. Based on
interpretations by the staff of the SEC, as set forth in no-action letters
issued to third parties, we believe that the new notes you receive in the
exchange offer may be offered for resale, resold or otherwise transferred
without compliance with the registration and prospectus delivery provisions of
the Securities Act. However, you will not be able to freely transfer the new
notes if:
- you are an "affiliate" of IASIS, as defined in Rule 144 under the
Securities Act;
- you are not acquiring the new notes in the exchange offer in the ordinary
course of your business; or
- you have an arrangement or understanding with any person to participate,
or you engage or intend to engage, in the distribution of the new notes
you will receive in the exchange offer.
We do not intend to request the SEC to consider, and the SEC has not
considered, the exchange offer in the context of a similar no-action letter. As
a result, we cannot guarantee that the staff of the SEC would make a similar
determination with respect to the exchange offer as in the circumstances
described in the no-action letters discussed above. Each holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of new notes and has no arrangement or
understanding to participate in a distribution of new notes. If you are an
affiliate of IASIS, are engaged in or intend to engage in a distribution of the
new notes or have any arrangement or understanding with respect to the
distribution of the new notes you will receive in the exchange offer, you:
- may not rely on the applicable interpretations of the staff of the SEC,
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction involving
the new notes. If you are a broker-dealer that holds old notes acquired
for its own account as a result of market-making or other trading
activities, and who receives new notes in the
35
<PAGE> 49
exchange offer, you must acknowledge that you may be considered an underwriter
within the meaning of the Securities Act and that you will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
the new notes. In addition, to comply with state securities laws, you may not
offer or sell the new notes in any state unless they have been registered
or qualified for sale in that state or an exemption from registration or
qualification is available and is complied with. The offer and sale of the
new notes to "qualified institutional buyers" -- as defined in Rule 144A
under the Securities Act -- is generally exempt from registration or
qualification under state securities laws. We do not plan to register or
qualify the sale of the new notes in any state where an exemption from
registration or qualification is required and not available.
The exchange offer is not being made to, and we will not accept surrenders
for exchange from, holders of the notes in any jurisdiction in which the
exchange offer or its acceptance would not comply with the securities or blue
sky laws of such jurisdiction.
All resales must be made in compliance with state securities or "blue sky"
laws. Such compliance may require that the exchange notes be registered or
qualified in a state or that the resales be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. We
assume no responsibility with regard to compliance with these requirements.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences to U.S. holders and non-U.S. holders, as defined below, of
- the exchange of old notes for the new notes, but only to the extent
discussed below under the caption "Exchange Offer"; and
- the ownership and disposition of the new notes to be issued in the
exchange offer.
This discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury regulations and judicial decisions and
administrative interpretations thereunder, as of the date hereof, all of which
are subject to change, possibly with retroactive effect or different
interpretations. This discussion does not address all tax considerations that
may be important to a particular holder in light of the holder's circumstances
or to certain categories of investors (such as some financial institutions,
insurance companies, tax-exempt organizations, dealers in securities, persons
who hold notes through partnerships or other pass-through entities, U.S.
expatriates or persons who hold the notes as part of a hedge, conversion
transaction, straddle or other risk reduction transaction) that may be subject
to special rules. This summary assumes the holders have held the old notes and
will hold the new notes as capital assets (generally, property held for
investment). This discussion does not address the tax considerations arising
under the laws of any state, local or foreign jurisdiction. You are urged to
consult your tax advisor as to the particular tax considerations to you of the
exchange, ownership and dispositions of the notes, including the effect and
applicability of state, local or foreign tax laws.
As used herein, the term "U.S. holder" means a beneficial owner of a note
that is:
- a citizen or resident of the United States for United States federal
income tax purposes;
36
<PAGE> 50
- a corporation or partnership created or organized in, or under the law
of, the United States or any political subdivision thereof;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust, the administration of which is subject to the primary
supervision of a court within the United States and that has one or more
United States persons with authority to control all substantial
decisions, or if the trust was in existence on August 20, 1996 and has
elected to continue to be treated as a United States person.
A "non-U.S. holder" is a holder that is not a U.S. holder.
EXCHANGE OFFER
The exchange of old notes for new notes issued in the exchange offer will
not be treated as an "exchange" for United States federal income tax purposes
because the new notes issued in the exchange offer will not differ materially in
kind or extent from the old notes. Rather, the new notes received in the
exchange offer will be treated as a continuation of the old notes. Consequently,
you will not recognize gain or loss as a result of the exchange. In addition,
you will have the same adjusted tax basis and holding period in the new notes
issued in the exchange offer as you had in your old notes immediately prior to
the exchange.
U.S. HOLDERS
INTEREST ON THE NEW NOTES. Interest on the new notes will be taxable to a
U.S. holder as ordinary income at the time it is received or accrued, depending
on such holder's method of tax accounting.
SALE, EXCHANGE, RETIREMENT OR OTHER TAXABLE DISPOSITION OF THE NEW
NOTES. Upon the sale, exchange, redemption or other taxable disposition of a
new note, a U.S. holder will recognize capital gain or loss equal to the
difference between the amount of money and fair market value of property
received in exchange for the new note (except to the extent attributable to
accrued but unpaid interest) and the U.S. holder's adjusted tax basis in the new
note.
MARKET DISCOUNT. U.S. holders, other than original purchasers of the old
notes in the original offering, should be aware that the sale of the new notes
may be affected by the market discount provisions of the Code. These rules
generally provide that if a U.S. holder of an old note purchased such note,
subsequent to the original offering, at a market discount in excess of a
statutorily-defined de minimis amount, and thereafter recognizes gain upon a
disposition (including a partial redemption) of the new note, the lesser of such
gain or the portion of the market discount that accrued while the old note and
new note were held by such holder will be treated as ordinary interest income at
the time of disposition. The rules also provide that a U.S. holder who acquires
a note at a market discount may be required to defer a portion of any interest
expense that may otherwise be deductible on any indebtedness incurred or
maintained to purchase or carry such note until the holder disposes of such note
in a taxable transaction. If a U.S. holder of such a note elects to include
market discount in income currently, neither of the foregoing rules would apply.
37
<PAGE> 51
NON-U.S. HOLDERS
INTEREST ON THE NEW NOTES. Subject to the discussion of backup withholding
set forth below, interest paid on the new notes to a non-U.S. holder will
generally qualify for the "portfolio interest exemption" and therefore will
generally not be subject to United States federal income or withholding tax if:
- such interest is not effectively connected with the conduct of a trade or
business within the United States by such non-U.S. holder;
- the non-U.S. holder does not actually or constructively own 10% or more
of the total voting power of our stock entitled to vote;
- the non-U.S. holder is not a controlled foreign corporation with respect
to which we are a "related person" within the meaning of the Code; and
- the beneficial owner certifies, under penalties of perjury, that the
owner is not a United States person and provides the owner's name and
address.
If certain requirements are satisfied, the certification described
immediately above may be provided by a securities clearing organization, a bank
or other financial institution that holds customers' securities in the ordinary
course of its trade or business.
Under new Treasury regulations, which generally are effective for payments
made after December 31, 2000, subject to certain transition rules, the
certification described above may also be provided by a qualified intermediary
on behalf of one or more beneficial owners (or other intermediaries), provided
that such intermediary has entered into a withholding agreement with the
Internal Revenue Service and certain other conditions are met.
A non-U.S. holder that is not exempt from tax under these rules will be
subject to United States federal income tax withholding at a rate of 30% unless:
- the interest is effectively connected with the conduct of a United States
trade or business, in which case the interest will be subject to the same
United States federal income tax on net income that applies to United
States persons generally (and, with respect to corporate holders and
under certain circumstances, the branch profits tax); or
- the rate of withholding is reduced or eliminated by an applicable income
tax treaty; and
- in either case, the non-U.S. holder provides the proper certification as
to the holder's exemption from withholding.
GAIN ON THE DISPOSITION OF THE NEW NOTES. A non-U.S. holder will generally
not be subject to United States federal income or withholding tax on gain
realized on the sale, exchange, redemption or other disposition of a new note,
unless:
- in the case of an individual non-U.S. holder, such holder is present in
the United States for 183 days or more in the year of such sale,
exchange, redemption or other disposition and either (1) has a "tax home"
in the United States and certain other requirements are met or (2) the
gain from the disposition is attributable to an office or other fixed
place of business in the United States; or
- the gain is effectively connected with the conduct of a trade or business
within the United States by the non-U.S. holder.
38
<PAGE> 52
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. HOLDERS. In general, information reporting will apply to payments of
interest on or the gross proceeds resulting from the sale or other disposition
of the new notes made by us with respect to certain non-corporate U.S. holders.
A U.S. holder will further be subject to backup withholding at the rate of 31%
with respect to interest, principal and premium, if any, we pay on a new note,
unless the U.S. holder (1) is an entity (including corporations, tax-exempt
organizations and certain qualified nominees) that is exempt from withholding
and, when required, demonstrates this fact, or (2) provides us with a correct
taxpayer identification number, certifies that the taxpayer identification
number is correct and that the holder has not been notified by the Internal
Revenue Service that it is subject to backup withholding due to under reporting
of interest or dividends and otherwise complies with applicable requirements of
the backup withholding rules. Any amount withheld under the backup withholding
rules is allowable as a credit against the U.S. holder's United States federal
income tax liability, provided that the required information is furnished to the
Internal Revenue Service.
NON-U.S. HOLDERS. We will, when required, report to the Internal Revenue
Service and to each non-U.S. holder the amount of any interest paid to, and the
tax withheld with respect to, such holder, regardless of whether any tax was
actually withheld on such payments. Copies of these information returns may also
be made available to the tax authorities of the country in which the non-U.S.
holder resides under the provisions of a specific treaty or agreement.
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments of interest on or principal of the new
notes by us or our agent to a non-U.S. holder if the non-U.S. holder certifies,
under penalties of perjury, as to its status as a non-United States person or
otherwise establishes an exemption (provided that neither we nor our agent have
actual knowledge that the holder is a United States person or that the
conditions of any other exemptions are not in fact satisfied). The payment of
the proceeds on the disposition of new notes to or through the United States
office of a United States or foreign broker will be subject to information
reporting and backup withholding unless the owner provides the certification
described above or otherwise establishes an exemption (provided that the broker
does not have actual knowledge that the holder is a United States person or that
the conditions of any other exemption are not in fact satisfied). The proceeds
of the disposition by a non-U.S. holder of notes to or through a foreign office
of a broker will generally not be subject to backup withholding or information
reporting. If such broker is a United States person, a controlled foreign
corporation or a foreign person deriving 50% or more of its gross income from
all sources for certain periods from activities that are effectively connected
with the conduct of a United States trade or business, information reporting
requirements will apply unless such broker has documentary evidence in its files
of the holder's status as a non-U.S. holder and has no actual knowledge to the
contrary or unless the holder otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the non-U.S.
holder's United States federal income tax liability provided that the required
information is furnished to the Internal Revenue Service.
New Treasury regulations relating to withholding tax on income paid to
non-U.S. holders will generally be effective for payments made after December
31, 2000, subject to certain transition rules. In general, these new regulations
do not significantly alter the
39
<PAGE> 53
substantive withholding and information reporting requirements, but rather unify
current certification procedures and forms, and clarify reliance standards. The
new regulations also alter the procedures for claiming benefits of an income tax
treaty and permit the shifting of primary responsibility for withholding to
certain financial intermediaries acting on behalf of beneficial owners under
some circumstances.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
notes, which is face value as reflected in our accounting records on the date of
exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes. The expenses of the exchange offer will be amortized over the term of
the exchange notes.
40
<PAGE> 54
THE TRANSACTIONS
THE RECAPITALIZATION
Pursuant to a recapitalization transaction, JLL Healthcare, LLC acquired
approximately 87.4%, Triumph Capital Corporation acquired approximately 4.9% and
General Electric Capital Corporation acquired approximately 1.7% of the
outstanding common stock of HoldCo, a wholly owned subsidiary of Paracelsus
Healthcare Corporation, which held the following hospitals in the Salt Lake
City, Utah area: Davis Hospital and Medical Center, Jordan Valley Hospital,
Pioneer Valley Hospital, Rocky Mountain Medical Center, formerly named PHC
Regional Hospital and Medical Center, and Salt Lake Regional Medical Center.
As part of the recapitalization, JLL Healthcare, LLC, Triumph Capital
Corporation and General Electric Capital Corporation purchased $125.0 million of
our common stock from Paracelsus Healthcare Corporation and we repurchased
$155.0 million of our common stock from Paracelsus Healthcare Corporation. The
recapitalization valued HoldCo at $288.0 million, subject to a subsequent
working capital adjustment. Upon the closing of the recapitalization, Paracelsus
Healthcare Corporation retained approximately 6.0% of HoldCo's outstanding
common stock, at an implied value of $8.0 million. The recapitalization was
financed with a $160.0 million credit facility together with the above
referenced $125.0 million stock purchase.
Following the recapitalization, HoldCo changed its name to IASIS Healthcare
Corporation.
THE TENET ACQUISITION
IASIS acquired the following general, acute care hospitals and other
related facilities and assets from Tenet Healthcare Corporation: Mesa General
Hospital Medical Center, St. Luke's Medical Center and Tempe St. Luke's Hospital
in Phoenix, Arizona; Memorial Hospital of Tampa, Palms of Pasadena Hospital and
Town & Country Hospital in Tampa-St. Petersburg, Florida; and Mid-Jefferson
Hospital, Odessa Regional Hospital, Park Place Medical Center and Southwest
General Hospital in Texas for $447.2 million in cash subject to a working
capital adjustment. Based on unaudited working capital as of August 31, 1999,
the purchase price is estimated to be $428.3 million.
In connection with the acquisition of the hospitals and other related
facilities and assets from Tenet Healthcare Corporation, we did not acquire
patient accounts receivable, which as of August 31, 1999 were $110.6 million
(excluding patient credit balances), nor did we assume specific current
liabilities. We have, however, financed an opening cash balance of $99.9 million
to fund working capital as accounts receivable and current liabilities increase
to normalized levels.
Concurrently with the offering of the old notes and the acquisition of the
hospitals and other related facilities and assets from Tenet Healthcare
Corporation, we repayed the $160.0 million credit facility in its entirety.
In connection with the recapitalization and the acquisition, we have not
assumed any liability or obligation due to payors including private insurers and
government payors such as the Medicare and Medicaid programs. We also did not
assume any cost report reimbursements, settlements, repayments, or fines, to the
extent they relate to periods prior to the respective closing dates of such
transactions. The agreements with Tenet Healthcare Corporation and Paracelsus
Healthcare Corporation include customary indemnifications
41
<PAGE> 55
and hold harmless provisions for any damages incurred by us related to these
types of excluded liabilities.
THE MERGER
Concurrent with the acquisition of the hospitals and related facilities
from Tenet Healthcare Corporation, Iasis Healthcare Corporation, a Tennessee
corporation, which we refer to as management company and which was originally
formed by members of our current management to acquire and operate hospitals and
related businesses, was merged with and into a wholly-owned subsidiary of IASIS,
with IASIS' subsidiary as the surviving entity. In the merger, shareholders
received shares of our common stock and preferred stock with a total value of
$9.5 million.
SOURCES AND USES
The following sets forth the aggregate sources and uses of cash funds for
each of the transactions taken as a whole.
<TABLE>
<CAPTION>
Dollars in millions
SOURCES OF FUNDS:
<S> <C>
Credit facility (1)........ $ 330.0
Old notes.................. 230.0
Credit facility -- $160.0
million (5).............. 160.0
Preferred stock (3)........ 160.0
Common stock (4)........... 125.0
--------
Total................. $1,005.0
========
<CAPTION>
USES OF FUNDS:
<S> <C>
Tenet acquisition (2)...... $ 428.3
The recapitalization (5)... 280.0
Credit facility -- $160.0
million (5).............. 160.0
Opening cash balance (2)... 99.9
Fees and expenses.......... 36.8
--------
Total................. $1,005.0
========
</TABLE>
- -------------------------
(1) The credit facility includes $330.0 million of term loans and a $125.0
million revolving credit facility which is not expected to be drawn at the
consummation of the exchange offer.
(2) IASIS has not acquired accounts receivable and certain current liabilities
associated with the Tenet hospitals, and as a result, IASIS funded an
opening cash balance required for working capital as accounts receivable and
current liabilities increase to normalized levels. The purchase price
(excluding accounts receivable) of $447.2 million has been reduced by an
estimated $18.9 million working capital adjustment determined in accordance
with the acquisition agreement.
(3) Of such amount, JLL Healthcare, LLC provided $148.8 million, Triumph Capital
Corporation provided $8.4 million, General Electric Capital Corporation
provided $2.8 million. Former shareholders of management company were issued
preferred stock valued at $5.3 million.
(4) Of such amount, JLL Healthcare, LLC provided $116.2 million, Triumph Capital
Corporation provided $6.6 million and General Electric Capital Corporation
provided $2.2 million. Former shareholders of management company were issued
common stock valued at $4.2 million, and Paracelsus Healthcare Corporation
retained equity valued at $8.0 million. Common stock of $133.0 million was
used to fund, in part, the
42
<PAGE> 56
recapitalization in which our current principals acquired control of IASIS
and $4.2 million was issued in connection with the merger.
(5) As part of the recapitalization, JLL Healthcare, LLC, Triumph Capital
Corporation and General Electric Capital Corporation purchased $125.0
million of IASIS' common stock from Paracelsus Healthcare Corporation and
IASIS repurchased $155.0 million of its common stock from Paracelsus
Healthcare Corporation. The recapitalization was financed in part with a
$160.0 million credit facility, which was repaid concurrently with the
offering of the old notes and the acquisition of the hospitals and other
related facilities and assets from Tenet Healthcare Corporation.
OWNERSHIP OF IASIS FOLLOWING THE TRANSACTIONS
JLL Healthcare, LLC, which owns 84.7% of our common stock, is controlled by
Joseph Littlejohn & Levy Fund III, L.P., an affiliate of Joseph Littlejohn &
Levy.
Joseph Littlejohn & Levy is a leading private equity firm managing more
than $1.4 billion of committed capital. Joseph Littlejohn & Levy invests in a
variety of buyout situations including financial restructurings, operational
turnarounds, industry consolidations and strategic co-investments. Joseph
Littlejohn & Levy focuses on industries with long-term growth fundamentals
populated by a large group of participants, many of which are undercapitalized,
underperforming or neglected subsidiaries of large diversified parent companies.
Since its formation in 1988, Joseph Littlejohn & Levy has made investments
across a broad range of industries including healthcare, basic manufacturing,
food and consumer products, automotive components, commodity and specialty
chemicals, and media and telecommunications. Joseph Littlejohn & Levy has
substantial experience in the hospital management industry as a result of its
sponsorship of the 1991 restructuring of OrNda HealthCorp. After making a
significant equity investment in OrNda HealthCorp., Joseph Littlejohn & Levy and
management implemented a comprehensive restructuring, acquisition and growth
program, increasing revenues from $460.0 million to $3.0 billion and improving
cash flow over seven-fold from $60.0 million to $440.0 million by 1997. OrNda
HealthCorp. grew to become the third largest for-profit hospital management
company in the United States.
Current investments include, among others, Hayes Lemmerz International,
Inc., Motor Coach Industries International, Inc., New World Pasta Company, and
Builders First Source. IASIS is Joseph Littlejohn & Levy's largest equity
investment to date.
43
<PAGE> 57
CAPITALIZATION
The following table sets forth the capitalization of Paracelsus on a
historical basis as of September 30, 1999 and of IASIS, as adjusted on a pro
forma basis to give effect to the following transactions as if they had occurred
on September 30, 1999:
- the recapitalization in which our current principals acquired control of
IASIS,
- the merger of Iasis Healthcare Corporation, a Tennessee corporation with
and into a wholly owned subsidiary of IASIS,
- the acquisition by which we acquired hospitals and related facilities
from Tenet Healthcare Corporation and
- the related financings. The information in this table should be read in
conjunction with "Summary Unaudited Pro Forma Combined Financial
Information" on page 45, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 63 and each of the
historical audited financial statements for Paracelsus hospitals, Tenet
hospitals and Iasis Healthcare corporation, a Tennessee corporation,
including the notes thereto, which appear elsewhere in this prospectus.
<TABLE>
<CAPTION>
PARACELSUS PRO FORMA
AS OF AS OF
SEPTEMBER 30, SEPTEMBER 30,
1999 RECAPITALIZATION 1999
------------- ---------------- -------------
<S> <C> <C> <C>
Dollars in thousands
Cash and cash equivalents (1)............. $ -- $ 2,000 $ 100,041
============= ================ =========
Long-term debt:
Credit Facility (2)..................... -- -- 330,000
Old notes............................... -- -- 230,000
Credit facility -- $160.0 million(3).... -- 160,000 --
Capital lease obligations............... 1,499 1,499 1,499
------------- ---------------- ---------
Total long-term debt...................... 1,499 161,499 561,499
Minority interest......................... 1,461 1,461 1,612
Preferred stock........................... -- -- 165,311
Due to parent............................. 270,814 -- --
Shareholders' equity:
Common stock............................ -- 133,000 137,149
Retained deficit and additional paid-in
capital.............................. (84,585) (112,339) (112,339)
------------- ---------------- ---------
Total shareholders' equity................ (84,585) 20,661 24,810
------------- ---------------- ---------
Total capitalization...................... $ 189,189 $ 183,621 $ 753,232
============= ================ =========
</TABLE>
- -------------------------
(1) IASIS did not acquire accounts receivable or specific current liabilities
associated with the Tenet hospitals, and as a result, IASIS funded an
opening cash balance to provide working capital as accounts receivable and
current liabilities increase to normalized levels.
(2) The credit facility includes $330.0 million of term loans and a $125.0
million revolving credit facility. For more information about our credit
facility, see "Description of Credit Facility" on page 99.
(3) The recapitalization was financed in part with a $160.0 million credit
facility which was repaid in its entirety concurrently with the offering of
the old notes and the acquisition of the hospitals and other related
facilities and assets from Tenet Healthcare Corporation.
44
<PAGE> 58
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following tables present the unaudited pro forma combined financial
information and should be read in conjunction with the related notes. The
statement of operations data included in the unaudited pro forma combined
statement of operations reflects the following:
- The unaudited pro forma combined statements of operations for the nine
months ended September 30, 1999 include (1) the results of operations of
the Paracelsus hospitals and management company for the nine months ended
September 30, 1999, and (2) the results of operations of the Tenet
hospitals for the nine months ended August 31, 1999.
- The unaudited pro forma combined statements of operations for the year
ended December 31, 1998 include (1) the results of operations of the
Paracelsus hospitals for the year ended December 31, 1998, (2) the
results of operations of the Tenet hospitals for the twelve months ended
November 30, 1998, and (3) the results of operations of management
company for the period from inception, February 23, 1998 through December
31, 1998.
The unaudited pro forma combined balance sheets reflect the combination of
(1) the historical balance sheets of the Paracelsus hospitals and the management
company as of September 30, 1999, and (2) the historical balance sheet of the
Tenet hospitals as of August 31, 1999.
The unaudited pro forma combined financial information is presented to
reflect the recapitalization, the merger with management company and the Tenet
acquisition. The merger with management company and the Tenet acquisition are
accounted for as purchases, wherein goodwill will be recorded for the excess of
the purchase consideration over the fair value of the net assets acquired. The
unaudited pro forma combined financial information has been presented as if such
transactions had occurred as of January 1, 1998. The unaudited pro forma
combined financial information has been prepared to give effect to related
financing transactions, including the sale of the old notes, and the application
of the net proceeds therefrom.
The summary unaudited pro forma financial information does not purport to
be indicative of our financial position or results of operations that we would
have actually achieved had the pro forma transactions occurred as of the dates
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future.
The unaudited pro forma combined statements of operations give effect to
certain cost savings primarily related to anticipated reductions of corporate
overhead costs that management believes may be realized as a result of the
recapitalization and the Tenet acquisition. The unaudited pro forma combined
statements of operations do not reflect certain non-recurring costs expected to
be incurred in connection with the recapitalization, the Tenet acquisition and
the merger with management company. These costs are expected to include legal,
accounting and other professional fees and certain charges associated with the
combination of the operations of the Paracelsus hospitals, the Tenet hospitals
and management company. The unaudited pro forma combined financial information
is based on certain assumptions and adjustments described in the notes to the
unaudited pro forma combined financial information included below.
45
<PAGE> 59
IASIS HEALTHCARE CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
MANAGEMENT PRO FORMA
PARACELSUS TENET COMPANY TOTAL ADJUSTMENTS PRO FORMA
---------- -------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dollars in thousands
STATEMENT OF OPERATIONS DATA:
Operating revenues............... $140,950 $443,311 $ 758 $585,019 $ -- $585,019
Operating expenses:
Salaries, wages and benefits... 49,155 146,104 1,792 197,051 2,277(1) 199,328
Supplies and other............. 58,847 181,078 874 240,799 3,996(1)(2) 244,795
Provision for bad debts........ 9,979 33,831 -- 43,810 -- 43,810
Management fees and corporate
overhead.................... 5,135 6,085 -- 11,220 (11,220)(1) --
Depreciation and
amortization................ 9,620 19,446 123 29,189 1,203(3) 30,392
-------- -------- ------- -------- -------- --------
132,736 386,544 2,789 522,069 (3,744) 518,325
-------- -------- ------- -------- -------- --------
Operating income (loss).......... 8,214 56,767 (2,031) 62,950 3,744 66,694
Interest expense (income)........ 7,304 (1,407) (13) 5,884 42,071(4) 47,955
Minority interests............... (140) 1,705 -- 1,565 (1,868)(5) (303)
-------- -------- ------- -------- -------- --------
Income (loss) before income taxes
and cumulative effect of
accounting change.............. 1,050 56,469 (2,018) 55,501 (36,459) 19,042
Provision (benefit) for income
taxes.......................... -- 22,676 -- 22,676 (15,059)(6) 7,617
-------- -------- ------- -------- -------- --------
Income (loss) before cumulative
effect of accounting change.... 1,050 33,793 (2,018) 32,825 (21,400) 11,425
Cumulative effect of accounting
change, net of tax benefit..... -- 1,018 -- 1,018 -- 1,018
-------- -------- ------- -------- -------- --------
Net income (loss).............. $ 1,050 $ 32,775 $(2,018) $ 31,807 $(21,400) $ 10,407
======== ======== ======= ======== ========
Accretion of preferred dividends................................................ (19,837)(7) (19,837)
======== ========
Net loss attributable to common shareholders.................................................. $ (9,430)
========
OTHER DATA:
Adjusted EBITDA (8) $ 97,086
Depreciation and amortization
expense........................ 9,620 19,446 123 29,189 1,203 30,392
Capital expenditures............. 13,476 9,044 77 22,597
Ratio of earnings to fixed
charges(9)..................... 1.1x 1.3x
</TABLE>
See accompanying Notes to the Unaudited Pro Forma Combined Statements of
Operations
46
<PAGE> 60
IASIS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(1) Management fees and corporate overhead include allocations of corporate
costs for general and administrative functions. The costs were
historically allocated based on relative revenues or costs incurred
divided by the number of hospital operations. The allocated costs do
not necessarily relate to the level of service provided to individual
hospitals being acquired. The pro forma corporate cost structure
includes salaries and benefits and other costs for executive
management, finance, human resource, risk management, information
systems, corporate compliance and other general and administrative
functions. The following table presents a reconciliation of historical
management fees and corporate overhead and the cost structure to be
implemented by management.
<TABLE>
<S> <C>
Management fees and corporate overhead...................... $11,220
Corporate costs pro forma adjustments:
Salaries, wages and benefits.............................. 2,277
Supplies and other........................................ 2,996
Amounts included in management company financial statements
(a)....................................................... 2,339
-------
Pro forma corporate costs......................... 7,612
-------
Decrease in pro forma corporate costs....................... $ 3,608
=======
</TABLE>
(a) Represents the portion of expenses reflected in the financial
statements of management company that are considered ongoing
corporate overhead.
<TABLE>
<S> <C>
Total reported expenses..................................... $2,789
Costs attributable to revenues.............................. 450
------
Estimated corporate costs included in management company
financial statements...................................... $2,339
======
</TABLE>
Actual results and cost savings may differ materially from those reflected
above due to a number of factors, including without limitation, (1) an
inability to replace existing services provided by Paracelsus and Tenet at the
costs anticipated by our management, (2) an inability to reduce salaries,
wages and benefits and (3) an increase in other of our costs. See "Because of
factors beyond our control, we may be unable to achieve estimated cost
savings" on page 16.
(2) Operating expenses in the historical combined financial statements for
Tenet hospitals did not include rent expense for St. Luke's Behavioral
Health Center. Payments made were charged against restructuring
reserves established as of May 31, 1998. Accordingly, a pro forma
adjustment has been made to supplies and other expenses in the amount
of $1.0 million, representing nine months of such rent payments.
(3) To adjust depreciation and amortization based on the increase in
goodwill (as defined below) in connection with the Tenet acquisition
and the merger with management company and pro forma amortization of
deferred financing fees. The recorded values of the depreciable assets
acquired are considered to approximate fair value. Costs in excess of
the fair market value of the net assets acquired, or "goodwill", are
being amortized over thirty-five to forty year periods. Deferred
financing fees are amortized over the term of the related debt. The
following
47
<PAGE> 61
IASIS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
table presents a reconciliation of the pro forma depreciation and
amortization adjustment:
<TABLE>
<S> <C>
Amortization of goodwill of $179,285 recognized in
connection with Tenet acquisition and the merger with
management company........................................ $3,841
Amortization of deferred financing fees..................... 1,914
------
Pro forma amortization...................................... 5,755
Amortization included in historical Tenet hospitals and
management company financial statements................... 4,552
------
Pro forma adjustment........................................ $1,203
======
</TABLE>
(4) To record interest expense on the debt incurred to finance the
transactions, calculated on a nine month basis as follows:
<TABLE>
<CAPTION>
INTEREST INTEREST
INSTRUMENT AMOUNT RATE EXPENSE
- ---------- -------- -------- --------
<S> <C> <C> <C>
Revolving credit facility......................... $ -- 9.50% $ 469
Term loans
Tranche A....................................... 80,000 9.50 5,700
Tranche B....................................... 250,000 10.25 19,219
-------- -------
Total term loans.................................. 330,000 24,919
Senior subordinated notes......................... 230,000 13.00 22,425
-------- -------
560,000 47,813
Capitalized leases................................ 1,499 Various 142
-------- -------
$561,499 $47,955
======== =======
</TABLE>
The $125.0 million revolving credit facility has a 0.5% commitment fee on the
unused balance.
The above interest amounts on the revolving credit facility and term loans
assume a Eurodollar rate (equivalent to LIBOR) of 6.0%. A 0.125% increase or
decrease in the assumed average interest rate would change the pro forma
interest expense for the nine months ended September 30, 1999 by approximately
$.3 million.
(5) To eliminate the minority interest relating to the 25% interest in
Odessa Regional Hospital previously owned by various physicians as
limited partners. Tenet Healthcare Corporation conveyed to IASIS 100%
of the assets of Odessa Regional Hospital.
(6) To record the tax benefit on the pro forma adjustments and to adjust
the effective tax rate on the pro forma combined financial statements
to equal 40.0% for the nine months ended September 30, 1999.
(7) To accrue preferred stock dividends at a rate of 16% of the preferred
stock stated amount.
(8) EBITDA is defined as operating income before interest expense, minority
interests, income taxes, and depreciation and amortization. While
EBITDA should not be considered in isolation or as a substitute for net
income, operating
48
<PAGE> 62
IASIS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
cash flows or other cash flow statement data determined in accordance
with generally accepted accounting principles, management understands
EBITDA is a commonly used tool for measuring a company's ability to
service debt, especially in evaluating companies. Adjusted EBITDA is
defined as EBITDA adjusted to eliminate the impact of restructuring and
impairment charges, unusual items and pro forma adjustments to
operating expenses.
(9) The ratio of earnings to fixed charges is calculated by dividing income
from continuing operations before fixed charges, minority interests and
income taxes by fixed charges, which consists of interest charges
(interest expense plus interest charged to construction), the portion
of rent expense which is deemed to be equivalent to interest expense,
and amortization of certain financing costs.
49
<PAGE> 63
IASIS HEALTHCARE CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MANAGEMENT PRO FORMA
PARACELSUS TENET COMPANY TOTAL ADJUSTMENTS PRO FORMA
---------- -------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dollars in thousands
STATEMENT OF OPERATIONS DATA:
Operating revenues..................... $183,112 $558,956 $ 181 $742,249 $ -- $742,249
Operating expenses:
Salaries, wages and benefits......... 65,942 196,216 685 262,843 4,506(1) 267,349
Supplies and other................... 73,950 243,975 270 318,195 5,443(1)(2) 323,638
Provision for bad debts.............. 11,727 36,634 -- 48,361 -- 48,361
Management fees and corporate
overhead........................... 6,587 8,633 -- 15,220 (15,220)(1) --
Depreciation and amortization........ 11,770 24,634 79 36,483 2,927(3) 39,410
Merger, impairment and restructuring
charges (4)........................ -- 19,455 -- 19,455 -- 19,455
Unusual item (5)..................... (7,500) -- -- (7,500) -- (7,500)
-------- -------- ------ -------- -------- --------
162,476 529,547 1,034 693,057 (2,344) 690,713
-------- -------- ------ -------- -------- --------
Operating income (loss)................ 20,636 29,409 (853) 49,192 2,344 51,536
Interest expense (income).............. 17,088 1,515 -- 18,603 45,362(6) 63,965
Minority interests..................... 68 2,068 -- 2,136 (1,741)(7) 395
-------- -------- ------ -------- -------- --------
Income (loss) before income taxes...... 3,480 25,826 (853) 28,453 (41,277) (12,824)
Provision (benefit) for income taxes... -- 10,513 1 10,514 (10,514)(8) --
-------- -------- ------ -------- -------- --------
Net income (loss)...................... $ 3,480 $ 15,313 $ (854) $ 17,939 $(30,763) $(12,824)
======== ======== ====== ======== ======== ========
Accretion of preferred dividends...................................................... (26,450)(9) (26,450)
======== --------
Net loss attributable to common shareholders.......................................... $(39,274)
========
OTHER DATA:
Adjusted EBITDA (10) $102,901
Depreciation and amortization
expense.............................. 11,770 24,634 79 36,483 2,927 39,410
Capital expenditures................... 6,427 22,668 72 29,167
Ratio of earnings to fixed charges
(11)................................. 1.2x N/A
</TABLE>
See accompanying Notes to the Unaudited Pro Forma Combined Statements of
Operations
50
<PAGE> 64
IASIS HEALTHCARE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(1) Management fees and corporate overhead include allocations of corporate
costs for general and administrative functions. The costs were
historically allocated based on relative revenues or costs incurred
divided by the number of hospitals operated. The allocated costs do not
necessarily relate to the levels of service provided to the individual
hospitals being acquired. The pro forma corporate cost structure
includes salaries and benefits and other costs for executive
management, finance, human resource, risk management, information
systems, corporate compliance and other general and administrative
functions. The following table presents a reconciliation of historical
management fees and corporate overhead and the cost structure to be
implemented by management.
<TABLE>
<S> <C>
Management fees and corporate overhead...................... $15,220
Corporate costs pro forma adjustments:
Salaries, wages and benefits.............................. 4,506
Supplies and other........................................ 4,743
Amounts included in management company financial statements
(a)....................................................... 900
-------
Pro forma corporate costs......................... 10,149
-------
Decreases in pro forma corporate costs...................... $ 5,071
=======
</TABLE>
(a) Represents the portion of expenses reflected in the financial
statements of management company that are considered ongoing
corporate overhead.
<TABLE>
<S> <C>
Total reported expenses..................................... $1,034
Costs attributable to revenues.............................. 134
------
Estimated corporate costs reported in management company
financial statements...................................... $ 900
======
</TABLE>
Actual results and cost savings may differ materially from those
reflected above due to a number of factors, including, without
limitation, (a) an inability to replace existing services provided by
Paracelsus Healthcare Corporation and Tenet Healthcare Corporation at
the costs anticipated by IASIS management, (b) an inability to reduce
salary, wages and benefits and (c) an increase in other costs of
IASIS. See "Because of factors beyond our control, we may be unable to
achieve estimated cost savings" on page 16.
(2) Operating expenses in the historical combined financial statements for
Tenet hospitals did not include rent expense associated with St. Luke's
Behavioral Health Center for the period from June 1, 1998 through
December 31, 1998. Accordingly, a pro forma adjustment has been made to
supplies and other expenses in the amount of $0.7 million representing
six months of such rent payments.
(3) To adjust depreciation and amortization based on the increase in
goodwill in connection with the Tenet acquisition and the merger with
management company and pro forma amortization of deferred financing
fees. The recorded values of the depreciable assets acquired are
considered to approximate fair value. Goodwill is
51
<PAGE> 65
IASIS HEALTHCARE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(CONTINUED)
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
being amortized over thirty-five to forty year periods. Deferred
financing fees are amortized over the term of the related debt. The following
table presents a reconciliation of the pro forma depreciation and
amortization adjustment:
<TABLE>
<S> <C>
Amortization of goodwill of $179,285 recognized in
connection with Tenet acquisition and the merger..... $5,122
Amortization of deferred financing fees................ 2,552
------
Pro forma amortization................................. 7,674
Amortization included in historical Tenet hospitals and
management company financial statements.............. 4,747
------
Pro forma adjustment................................... $2,927
======
</TABLE>
(4) On May 31, 1998 Tenet recorded a non-cash merger, impairment and
restructuring charge related to the planned closure of St. Luke's
Behavioral Health Center. IASIS does not currently plan to close this
facility. The charges primarily included cash payments which would
have been made subsequent to May 31, 1998 under long-term lease
commitments, demolition and other anticipated costs of closure.
(5) The unusual item relates to a reversal of a reserve related to the
final contract settlement for the termination of an unprofitable payor
contract at Rocky Mountain Medical Center, formerly named PHC Regional
Hospital and Medical Center.
(6) To record interest expense on the debt incurred to finance the
transactions, calculated as follows:
<TABLE>
<CAPTION>
INTEREST INTEREST
INSTRUMENT AMOUNT RATE EXPENSE
---------- -------- -------- --------
<S> <C> <C> <C>
Revolving credit facility....................... $ -- 9.50% $ 625
Term loans
Tranche A..................................... 80,000 9.50 7,600
Tranche B..................................... 250,000 10.25 25,625
-------- -------
Total term loans................................ 330,000 33,225
Senior subordinated notes....................... 230,000 13.00 29,900
-------- -------
560,000 63,750
Capitalized leases.............................. 2,150 Various 215
-------- -------
$562,150 $63,965
======== =======
</TABLE>
The $125.0 million revolving credit facility has a 0.5% commitment
fee on the unused balance.
The above interest amounts on the revolving credit facility and term
loans assume a Eurodollar rate (equivalent to LIBOR) of 6.0%. A
0.125% increase or decrease in the assumed average interest rate
would change the pro forma
52
<PAGE> 66
IASIS HEALTHCARE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(CONTINUED)
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
interest expense for the year ended December 31, 1998 by
approximately $0.4 million.
(7) To eliminate the minority interest relating to the 25% interest in
Odessa Regional Hospital previously owned by various physicians as
limited partners. Tenet Healthcare Corporation conveyed to IASIS 100%
of the assets of Odessa Regional Hospital.
(8) To record the tax benefit on the pro forma adjustments. Because of the
uncertainty of IASIS' future ability to utilize net operating losses,
the tax benefit has been limited to the amount of expense recognized
prior to the pro forma adjustments.
(9) To accrue preferred stock dividends at a rate of 16% of the preferred
stock stated amount.
(10) EBITDA is defined as operating income before interest expense,
minority interest, income taxes, and depreciation and amortization.
While EBITDA should not be considered in isolation or as a substitute
for net income, operating cash flows or other cash flow statement data
determined in accordance with generally accepted accounting
principles, management understands EBITDA is a commonly used tool for
measuring a company's ability to service debt, especially in
evaluating companies. The following is a summary of items considered
by management to be non-recurring and one-time items, along with the
related impact on pro forma Adjusted EBITDA for the year ended
December 31, 1998:
<TABLE>
<CAPTION>
PRO FORMA
---------
<S> <C>
EBITDA...................................................... $ 90,946
Merger, impairment and restructuring charges................ 19,455
Unusual item................................................ (7,500)
--------
Adjusted EBITDA............................................. $102,901
========
</TABLE>
(11) The ratio of earnings to fixed charges is calculated by dividing
income from continuing operations before fixed charges, minority
interests and income taxes by fixed charges, which consists of
interest charges (interest expense plus interest charged to
construction), the portion of rent expense which is deemed to be
equivalent to interest expense, and amortization of certain financing
costs. Earnings were insufficient to cover fixed charges on a pro
forma basis by $12.5 million.
53
<PAGE> 67
IASIS HEALTHCARE CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MANAGEMENT PRE-TRANSACTIONS TRANSACTIONS
PARACELSUS TENET COMPANY TOTAL ADJUSTMENTS(1) ADJUSTMENTS PRO FORMA
---------- -------- ---------- -------- ---------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dollars in thousands
ASSETS
Cash and cash equivalents... $ -- $ -- $ 181 $ 181 $ -- $ 99,860(2) $100,041
Accounts receivable, net of
allowances................ 19,674 110,561 118 130,353 (110,561) -- 19,792
Inventories................. 4,501 15,412 -- 19,913 -- -- 19,913
Deferred income taxes....... -- 5,047 -- 5,047 (5,047) -- --
Prepaid expenses and other
current assets............ 4,283 12,263 183 16,729 (9,912) -- 6,817
-------- -------- ------ -------- --------- --------- --------
Total current assets........ 28,458 143,283 482 172,223 (125,520) 99,860 146,563
Property and equipment,
net....................... 136,927 283,046 278 420,251 -- -- 420,251
Goodwill and intangibles,
net....................... 46,988 130,845 186 178,019 (131,031) 179,285(3) 226,273
Deferred financing fees..... -- -- -- -- -- 19,450(4) 19,450
Other assets................ 886 2,981 94 3,961 (372) -- 3,589
-------- -------- ------ -------- --------- --------- --------
Total assets................ $213,259 $560,155 $1,040 $774,454 $(256,923) $ 298,595 816,126
======== ======== ====== ======== ========= ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt payable within one
year...................... $ 701 $ 1,088 $ -- $ 1,789 $ (1,088) $ -- $ 701
Accounts payable and accrued
expenses.................. 23,139 20,215 151 43,505 (19,476) -- 24,029
Other current liabilities... 931 43,978 -- 44,909 (6,044) -- 38,865
-------- -------- ------ -------- --------- --------- --------
Total current liabilities... 24,771 65,281 151 90,203 (26,608) -- 63,595
Long-term debt.............. 798 6,619 -- 7,417 (6,619) -- 798
Senior credit facility...... -- -- -- -- -- 330,000(5) 330,000
Senior subordinated debt.... -- -- -- -- -- 230,000(5) 230,000
Minority interest and other
long-term liabilities..... 1,461 17,223 -- 18,684 (17,072) -- 1,612
Deferred income taxes....... -- 43,817 -- 43,817 (43,817) -- --
Due to parent............... 270,814 -- -- 270,814 (270,814) -- --
-------- -------- ------ -------- --------- --------- --------
Total liabilities........... 297,844 132,940 151 430,935 (364,930) 560,000 626,005
Preferred stock............. -- -- -- -- -- 165,311(6) 165,311
Shareholders' equity
(deficit):
Common stock................ -- -- -- -- -- 137,149(2) 137,149
Retained earnings
(deficit)................. (84,585) 427,215 889 343,519 108,007 (563,865)(2) (112,339)
-------- -------- ------ -------- --------- --------- --------
Total shareholders' equity
(deficit)................. (84,585) 427,215 889 343,519 108,007 (426,716) 24,810
-------- -------- ------ -------- --------- --------- --------
Total liabilities and
shareholders' equity
(deficit)................. $213,259 $560,155 $1,040 $774,454 $(256,923) $ 298,595 $816,126
======== ======== ====== ======== ========= ========= ========
</TABLE>
See accompanying Notes to the Unaudited Pro Forma Combined Balance Sheet
54
<PAGE> 68
IASIS HEALTHCARE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(1) To remove assets not acquired, liabilities not assumed and the related
impact on shareholders' equity.
The following table reflects the elimination of assets not acquired and
liabilities not assumed by IASIS in accordance with the transactions:
<TABLE>
<CAPTION>
-------------------------------------------------
MANAGEMENT
PARACELSUS TENET COMPANY TOTAL
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Assets not acquired:
Accounts receivable, net.... $ -- $ 110,561 $ -- $110,561
Deferred income taxes....... -- 5,047 -- 5,047
Goodwill and intangibles,
net...................... -- 130,845 186 131,031
Other miscellaneous
assets................... 2,125 8,159 -- 10,284
-------- --------- ----- --------
2,125 254,612 186 256,923
Liabilities not assumed:
Debt payable within one
year..................... -- 1,088 -- 1,088
Accounts payable and accrued
expenses................. -- 19,476 -- 19,476
Third party payor cost
settlements.............. 931 -- -- 931
Current portion of merger,
impairment and
restructuring reserve.... -- 5,113 -- 5,113
Long-term debt (net of
current portion)......... -- 6,619 -- 6,619
Minority interest........... -- 4,990 -- 4,990
Merger, impairment and
restructuring reserve.... -- 12,082 -- 12,082
Deferred income taxes....... -- 43,817 -- 43,817
Due to Parent............... 270,814 -- -- 270,814
-------- --------- ----- --------
271,745 93,185 -- 364,930
-------- --------- ----- --------
Net increase (decrease) to
equity...................... $269,620 $(161,427) $(186) $108,007
======== ========= ===== ========
</TABLE>
(2) IASIS is not acquiring accounts receivable and specific current liabilities
associated with the Tenet hospitals and, as a result, is funding an opening
cash balance to fund working capital as accounts receivable and current
liabilities increase to normalized levels.
(3) To record goodwill arising in connection with the Tenet acquisition and the
merger with management company. The excess of the purchase consideration
over the net assets acquired is required to be applied to write-up assets to
their fair market value. No appraisals of assets have yet to be performed
and all of the excess of purchase consideration over the net assets to be
acquired is being recorded as goodwill. Subsequent valuation analyses could
potentially change the purchase price allocation. Goodwill is being
amortized over thirty-five to forty year periods for purposes of the pro
forma balance sheet.
(4) To record deferred financing fees for the debt incurred in the refinancing
of the recapitalization transaction and the Tenet acquisition. The deferred
financing fees are
55
<PAGE> 69
IASIS HEALTHCARE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(CONTINUED)
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
being amortized over the term of the related debt, which ranges from seven
to ten years.
(5) To record the debt incurred to finance the transactions, as follows:
<TABLE>
<S> <C>
Revolving credit facility................................... $ --
Term loans:
Tranche A................................................. 80,000
Tranche B................................................. 250,000
--------
Total term loans............................................ 330,000
Senior subordinated notes................................... 230,000
--------
Total....................................................... $560,000
========
</TABLE>
The $125.0 million revolving credit facility was not drawn at the closing of
the offering of the old notes (other than for the issuance of approximately
$25.0 million of letters of credit).
(6) To record (a) the purchase and subsequent retirement of stock and the
issuance of new stock in connection with the recapitalization, (b) the
issuance of new preferred stock in connection with the Tenet acquisition,
(c) the issuance of new common and preferred stock in connection with the
merger with management company and (d) the related impact of purchase
accounting on the Tenet acquisition and the merger with management company.
The following table records the impact of the transactions on shareholders'
equity:
<TABLE>
<S> <C> <C>
Historical combined shareholders' equity................ $ 343,519
Net impact of assets not acquired and liabilities not
assumed............................................... 108,007
Issuance of common stock for cash:
JLL Healthcare LLC.................................... 116,228
Triumph Capital Corporation........................... 6,579
General Electric Capital Corporation.................. 2,193
--------
125,000
Issuance of common stock in exchange for management
company common stock.................................. 4,149
Net cash payments to Paracelsus Healthcare
Corporation........................................... (280,000)
Purchase accounting adjustments:
Tenet hospitals acquisition........................... (265,788)
Merger with management company........................ (703)
--------
(266,491)
Transaction expenses.................................... (9,374)
---------
Net impact.................................... (275,865)
---------
Pro forma combined shareholders' equity................. $ 24,810
=========
</TABLE>
56
<PAGE> 70
SELECTED HISTORICAL FINANCIAL INFORMATION
PARACELSUS HOSPITALS
The following tables set forth selected historical financial information
for the Paracelsus hospitals for each of the fiscal years in the five-years
ended December 31, 1998 and for the nine months ended September 30, 1998 and
1999. The selected financial information for each of the three years ended
December 31, 1996, 1997 and 1998 and for the nine months ended September 30,
1999 has been derived from the combined financial statements of the Paracelsus
hospitals, which have been audited by Ernst & Young LLP, independent auditors
for Paracelsus Healthcare Corporation, and from the underlying accounting
records of the Paracelsus hospitals. The selected financial information for the
years ended December 31, 1994 and 1995 has been derived from unaudited combined
financial statements of the predecessor owners of the Paracelsus hospitals. The
selected financial information for the nine months ended September 30, 1998 has
been derived from the unaudited combined financial statements of the Paracelsus
hospitals and reflects all adjustments (consisting of normal recurring
adjustments) that, in the opinion of the management of Paracelsus Healthcare
Corporation, are necessary for a fair presentation of such information.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the twelve months
ending December 31, 1999.
All information included in the following tables should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on page 63 and with the combined financial statements
and related notes. Certain amounts derived from the combined statements of
operations have been reclassified to conform with the presentation below.
57
<PAGE> 71
SELECTED HISTORICAL FINANCIAL INFORMATION(1)
PARACELSUS HOSPITALS
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES
------------------------------------------
PERIOD PERIOD
TO DATE FROM DATE
YEARS ENDED OF ACQUISITION OF ACQUISITION YEARS ENDED
DECEMBER 31, FROM THROUGH DECEMBER 31,
------------------------- JANUARY 1, DECEMBER 31, -------------------
1994 1995 1996 1996 1997 1998
----------- ----------- -------------- -------------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Dollars in thousands
STATEMENT OF OPERATIONS DATA:
Operating revenues......................... $71,769 $80,006 $88,886 $ 98,249 $192,575 $183,112
Operating expenses:
Salaries, wages and benefits.............. 25,670 28,882 32,087 41,040 67,664 65,942
Supplies and other........................ 23,538 27,502 32,377 43,343 75,434 73,950
Provision for bad debts................... 3,777 5,323 6,032 7,382 17,020 11,727
Management fees and corporate overhead.... 1,475 4,806 2,822 3,839 7,519 6,587
Depreciation and amortization............. 4,236 4,022 4,031 6,863 11,122 11,770
Restructuring and impairment charges
(2)..................................... -- -- -- 52,492 3,500 --
Unusual item (3).......................... -- -- -- 38,082 (15,531) (7,500)
------- ------- ------- -------- -------- --------
58,696 70,535 77,349 193,041 166,728 162,476
------- ------- ------- -------- -------- --------
Operating income (loss).................... 13,073 9,471 11,537 (94,792) 25,847 20,636
Interest expense (income).................. 3,144 2,566 6,125 8,465 22,097 17,088
Minority interests......................... -- -- -- -- 23 68
------- ------- ------- -------- -------- --------
Income (loss) before income taxes......... 9,929 6,905 5,412 (103,257) 3,727 3,480
Provision (benefit) for income taxes....... 3,893 2,738 2,116 (9,210) -- --
------- ------- ------- -------- -------- --------
Net income (loss)......................... $ 6,036 $ 4,167 $ 3,296 $(94,047) $ 3,727 $ 3,480
======= ======= ======= ======== ======== ========
OTHER DATA (4):
EBITDA (5)............................................................................. $ 2,645 $ 24,938 $ 24,906
Depreciation and amortization expense.................................................. 6,863 11,122 11,770
Capital expenditures................................................................... 5,752 1,897 6,427
Ratio of earnings to fixed charges(6).................................................. N/A 1.1x 1.2x
BALANCE SHEET DATA (4):
Total assets........................................................................... $256,288 $232,943 $216,319
Long-term debt (including current portion)............................................. 1,565 2,019 2,273
Shareholders' deficit.................................................................. (93,879) (89,114) (85,634)
Working capital........................................................................ 11,112 16,028 10,350
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1998 1999
----------- --------
(UNAUDITED)
<S> <C> <C>
Dollars in thousands
STATEMENT OF OPERATIONS DATA:
Operating revenues......................... $137,722 $140,950
Operating expenses:
Salaries, wages and benefits.............. 49,480 49,155
Supplies and other........................ 57,097 58,847
Provision for bad debts................... 8,073 9,979
Management fees and corporate overhead.... 4,940 5,135
Depreciation and amortization............. 8,606 9,620
Restructuring and impairment charges
(2)..................................... -- --
Unusual item (3).......................... (7,500) --
-------- --------
120,696 132,736
-------- --------
Operating income (loss).................... 17,026 8,214
Interest expense (income).................. 13,426 7,304
Minority interests......................... 54 (140)
-------- --------
Income (loss) before income taxes......... 3,546 1,050
Provision (benefit) for income taxes....... -- --
-------- --------
Net income (loss)......................... $ 3,546 $ 1,050
======== ========
OTHER DATA (4):
EBITDA (5)................................. $ 18,132 $ 17,834
Depreciation and amortization expense...... 8,606 9,620
Capital expenditures....................... 2,513 13,476
Ratio of earnings to fixed charges(6)...... 1.2x 1.1x
BALANCE SHEET DATA (4):
Total assets............................... $222,458 $213,259
Long-term debt (including current portion). 1,269 1,499
Shareholders' deficit...................... (85,568) (84,585)
Working capital............................ 17,433 3,687
</TABLE>
58
<PAGE> 72
NOTES TO SELECTED HISTORICAL FINANCIAL INFORMATION
PARACELSUS HOSPITALS
(1) The selected financial information excludes the financial information
related to discontinued operations. See note 4 of Notes to Combined
Financial Statements of Paracelsus hospitals.
The selected financial data includes financial information for the
Paracelsus hospitals for the following periods:
<TABLE>
<CAPTION>
HOSPITAL PERIOD
-------- ------
<S> <C>
Davis Hospital and Medical
Center.......................... Since January 1, 1994 (Predecessor
Company)
Pioneer Valley Hospital........... Since January 1, 1994 (Predecessor
Company)
Rocky Mountain Medical Center..... Since being acquired by Paracelsus
Healthcare Corporation as of May 17, 1996
through closure of facility as of June
30, 1997
Salt Lake Regional Medical
Center.......................... Since being acquired by Paracelsus
Healthcare Corporation on August 16, 1996
Jordan Valley Hospital............ Since being acquired by Paracelsus
Healthcare Corporation on August 16, 1996
</TABLE>
(2) During 1996, an impairment charge of $52.5 million was recorded due to
significant losses incurred at Rocky Mountain Medical Center, formerly
named PHC Regional Hospital and Medical Center. The charge was based
upon independent third party appraisals. In 1997 a charge of $3.5
million was recorded due to the closure of Rocky Mountain Medical
Center in June 1997.
(3) The unusual item in 1996 of $38.1 million is due to a loss reserve
established in connection with an unprofitable payor contract at Rocky
Mountain Medical Center. The unusual item in 1997 represents a $15.5
million reduction in the loss reserve recorded in 1996. The unusual
item in 1998 represents a $7.5 million reversal in the loss reserve
recorded in 1996 based on the final settlement of the unprofitable
payor contract.
(4) Other data and balance sheet data for the predecessor companies for the
year ended December 31, 1994 and 1995 and the period to acquisition
from January 1, 1996 represents information for only two hospitals and
therefore is not considered comparable with other periods.
(5) EBITDA is defined as operating income before interest expense, minority
interests, income taxes, and depreciation and amortization. While
EBITDA should not be considered in isolation or as a substitute for net
income, operating cash flows or other cash flow statement data
determined in accordance with generally accepted accounting principles,
management understands EBITDA is a commonly used tool for measuring a
company's ability to service debt, especially in evaluating healthcare
companies. EBITDA excludes restructuring and impairment charges and
unusual items.
(6) The ratio of earnings to fixed charges is calculated by dividing income
from continuing operations before fixed charges, minority interests and
income taxes by fixed charges, which consists of interest charges
(interest expense plus interest charged to construction), the portion
of rent expense which is deemed to be equivalent to interest expense,
and amortization of certain financing costs. Earnings were insufficient
to cover fixed charges by $103.3 million for the period ended December
31, 1996.
59
<PAGE> 73
SELECTED HISTORICAL FINANCIAL INFORMATION
TENET HOSPITALS
The following tables set forth selected historical financial information
for the Tenet hospitals for each of the fiscal years in the five-years ended May
31, 1999 and for the three months ended August 31, 1998 and 1999. The selected
financial information for each of the three fiscal years ended May 31, 1997,
1998 and 1999 has been derived from the combined financial statements of the
Tenet hospitals, which have been audited by KPMG LLP, independent auditors for
Tenet Healthcare Corporation, and from the underlying accounting records of the
Tenet hospitals. The selected financial information for the fiscal years ended
May 31, 1995 and 1996 and for the three months ended August 31, 1998 and 1999
has been derived from unaudited condensed combined financial statements of the
Tenet hospitals and reflects all adjustments (consisting of normal recurring
adjustments) that, in the opinion of the management of Tenet Healthcare
Corporation, are necessary for a fair presentation of such information.
Operating results for the three months ended August 31, 1999 are not necessarily
indicative of the results that may be expected for the year.
All information included in the following tables should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on page 63 and with the consolidated financial
statements and related notes. Certain amounts derived from the combined
statements of operations have been reclassified to conform with the presentation
below.
60
<PAGE> 74
SELECTED HISTORICAL FINANCIAL INFORMATION
TENET HOSPITALS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED MAY 31, AUGUST 31,
------------------------------------------------------------- --------------------
1995 1996(1) 1997 1998 1999 1998 1999
----------- ----------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Dollars in thousands
STATEMENT OF OPERATIONS DATA:
Operating revenues.............. $440,476 $593,213 $540,609 $547,226 $572,506 $133,482 $142,196
Operating expenses:
Salaries, wages and
benefits.................... 152,659 202,649 195,532 199,186 192,573 47,601 47,435
Supplies and other............ 172,920 254,239 221,542 227,271 237,874 59,234 63,903
Provision for bad debts....... 23,957 30,680 29,404 37,827 41,904 9,936 11,843
Management fees and corporate
overhead.................... 14,063 17,504 19,717 10,641 7,518 1,702 1,880
Depreciation and
amortization................ 22,978 23,316 24,703 25,291 26,638 7,663 7,130
Merger, impairment and
restructuring charges (2)... -- -- 3,775 19,455 -- -- --
Unusual items................. 3,822 4,334 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
390,399 532,722 494,673 519,671 506,507 126,136 132,191
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)......... 50,077 60,491 45,936 27,555 65,999 7,346 10,005
Net interest expense (income)... 8,512 2,049 1,036 1,179 (669) 536 (210)
Minority interests (3).......... -- 3,190 3,176 2,597 2,421 545 205
-------- -------- -------- -------- -------- -------- --------
Income before income taxes,
extraordinary charge and
cumulative effect of
accounting change............. 41,565 55,252 41,724 23,779 64,247 6,265 10,010
Provision for income taxes
(4)........................... 16,626 22,101 17,130 10,513 25,650 2,500 3,994
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary
charge and cumulative effect
of accounting change.......... 24,939 33,151 24,594 13,266 38,597 3,765 6,016
Extraordinary charge from early
extinguishment of debt (5).... -- -- -- 6,726 -- -- --
-------- -------- -------- -------- -------- -------- --------
Cumulative effect of accounting
change(6)..................... -- -- -- -- -- 1,018
-------- -------- -------- -------- -------- -------- --------
Net income.................... $ 24,939 $ 33,151 $ 24,594 $ 6,540 $ 38,597 $ 3,765 $ 4,998
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA (7)...................... $ 76,877 $ 88,141 $ 74,414 $ 72,301 $ 92,637 $ 15,009 $ 17,135
Depreciation and amortization
expense....................... 22,978 23,316 24,703 25,291 26,638 7,663 7,130
Capital expenditures............ -- -- 23,481 28,055 17,280 3,070 598
BALANCE SHEET DATA:
Total assets.................... $458,035 $522,819 $546,676 $555,002 $569,597 $548,333 $560,155
Long-term debt (including
current portion).............. 62,278 33,738 32,652 8,591 7,971 8,495 7,707
Shareholders' equity............ 343,121 420,686 449,190 422,957 437,930 421,705 427,215
Working capital................. 46,015 63,737 60,525 61,262 80,949 65,084 78,002
</TABLE>
61
<PAGE> 75
NOTES TO SELECTED HISTORICAL FINANCIAL INFORMATION
TENET HOSPITALS
(1) The summary historical financial information for the year ended May 31,
1995 does not include a full year of results of operations for
hospitals acquired from a third party.
(2) The merger, impairment and restructuring charges for the year ended May
31, 1997 is due to a change made by those Tenet hospitals acquired from
third parties in the accounting methodology used to estimate allowances
for doubtful accounts. On May 31, 1998 Tenet recorded a non-cash
restructuring and impairment charge related to the planned closure of
St. Luke's Behavioral Health Center. IASIS does not currently plan to
close this facility. The restructuring reserves primarily included
future cash payments which would have been made under long-term lease
commitments, demolition and other anticipated costs of closure.
(3) Minority interests primarily relates to the 25% interest in Odessa
Regional Hospital owned by various physicians as limited partners.
(4) Income tax expense for the years ended May 31, 1995 and 1996 has been
adjusted to reflect an average rate of 40% for the periods presented.
(5) The extraordinary charge, which is net of tax benefits of $4.2 million,
represents the allocation to Tenet hospitals of an extraordinary charge
related to the redemption of certain Tenet senior notes.
(6) On June 1, 1999, the Tenet hospitals changed its method of accounting
for start-up costs to expense such costs as incurred in accordance with
Statement of Position 98-5, published by the Accounting Standards
Executive Committee of the American Institute of Certified Public
Accountants. The adoption of the Statement resulted in the write-off of
previously capitalized start-up costs as of May 31, 1999 in the amount
of $1.0 million, net of tax benefit, which amount is shown as a
cumulative effect of an accounting change in the three months ended
August 31, 1999.
(7) EBITDA is defined as operating income before interest expense, minority
interests, income taxes, and depreciation and amortization. While
EBITDA should not be considered in isolation or as a substitute for net
income, operating cash flows or other cash flow statement data
determined in accordance with generally accepted accounting principles,
management understands EBITDA is a commonly used tool for measuring a
company's ability to service debt, especially in evaluating healthcare
companies. EBITDA excludes restructuring and impairment charges and
unusual items.
62
<PAGE> 76
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations has been prepared separately for the Paracelsus hospitals and the
Tenet hospitals and should be read in conjunction with the financial statements
of each entity, the notes thereto, and the other financial information appearing
elsewhere in this prospectus. This discussion contains, in addition to
historical information, forward-looking statements that are subject to risks and
uncertainties. Our actual results may differ materially from those anticipated
in the forward-looking statements. For more information regarding the risks and
uncertainties, see "Risk Factors."
GENERAL
We are a for-profit hospital management company with operations in select
markets in the United States. Our facilities are currently located in four
regions: (1) Salt Lake City, Utah; (2) Phoenix, Arizona; (3) Tampa-St.
Petersburg, Florida; and (4) three markets within the state of Texas. We own
and/or operate 15 general, acute care hospitals and four ambulatory surgery
centers, with a total of 2,144 operating beds. We also operate a Medicaid
managed health plan called HealthChoice in Phoenix, Arizona. We focus on
networks of medium-sized hospitals, each with 100 to 400 beds.
Our hospitals are located in high growth markets. According to industry
sources, the cumulative population growth in our markets from 1998 to 2003, on a
weighted average revenue basis, is projected to be 9.3%. This growth compares
favorably to the projected national growth rate of 5.0% over the same period.
Our hospitals' revenues continue to be affected by an increasing proportion
of revenue being derived from fixed payment, higher discount sources including
Medicare, Medicaid, managed care organizations, insurance companies and
employer-based health plans. Fixed payment amounts are often based upon the
diagnosis, regardless of the cost incurred of the level of service provided. Our
revenues, cash flows and earnings have been significantly reduced by this shift
in reimbursement. The Balanced Budget Act has reduced the amount of
reimbursement that we receive from Medicare and Medicaid. Although we expect our
volume from governmental sources to increase, the level of reimbursement from
these programs was reduced in 1998 and further reductions will be phased in over
the next two years. The percentage of pro forma net revenue related to Medicare
and Medicaid was 38.2% for the nine months ended September 30, 1999 compared to
42.7% for the prior period ending December 31, 1998.
Our revenues are also affected by the trend toward the conversion of more
services being performed on an outpatient basis due to advances in medical
technology and pharmaceuticals and cost containment pressures from Medicare,
Medicaid, managed care organizations and other payors.
Hospital revenues are primarily received from Medicare, Medicaid and
commercial insurance. Medicare is a federal program for elderly patients and
patients with disabilities. The payment rates under the Medicare program for
inpatients are based on a prospective payment system that is tied to the
diagnosis of the patient. Medicaid is a jointly-funded federal and state program
administered by individual states for indigent patients. Payments from Medicare
and Medicaid account for a significant portion of our operating revenues.
Managed care organizations, such as Health Maintenance Organizations and
Preferred Provider Organizations, also account for a significant portion of our
revenues.
63
<PAGE> 77
Net operating revenues are comprised of net patient service revenue and
other revenue. Net patient service revenue is reported net of contractual
adjustments and policy discounts. The adjustments principally result from
differences between the hospitals' customary charges and payment rates under the
Medicare and Medicaid programs. Customary charges have generally increased at a
faster rate than the rate of increase for Medicare and Medicaid payments. Other
revenue includes revenue from HealthChoice, a Medicaid managed health plan in
Arizona, medical office building rental income and other miscellaneous revenue.
Operating expenses primarily consist of hospital related costs of operation and
include salaries and benefits, professional fees, supplies, provision for
doubtful accounts and other expenses such as utilities, insurance, property
taxes, travel, freight, postage, telephone, advertising, repairs and
maintenance.
MANAGEMENT DISCUSSION AND ANALYSIS
PARACELSUS HOSPITALS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
Net revenue for the nine months ended September 30, 1999, was $140.9
million, an increase of $3.2 million, or 2.3%, from $137.7 million for the same
period in 1998. The increase in net revenue is largely due to increased patient
volumes in admissions, patient days and outpatient visits (excluding home
health). To a lesser extent, net revenue was unfavorably impacted by the
Balanced Budget Act of 1997, which was substantially phased in by the third
quarter of 1998, the increasing penetration of managed care and the
restructuring of home health operations in the latter half of 1998.
The Paracelsus hospitals experienced a slight increase of 0.8% in inpatient
admissions from 13,736 in the nine months ended September 30, 1998 to 13,849 for
the same period in 1999. Patient days increased 3.7% from 48,003 in 1998 to
49,773 in 1999. Excluding home health visits, outpatient visits increased 13.6%
from 214,940 in 1998 to 244,248 in 1999. The increase in admissions and
outpatient visits resulted from (1) the increase in number of physicians and
services at several hospitals, (2) increased volume generated from certain
hospital benchmarking and service awareness programs implemented in 1998 and (3)
favorable demographic changes in the Salt Lake metropolitan area. Due to the
closure or sale of all home health operations in 1998, the Paracelsus hospitals
reported no home health visits in 1999 as compared to 26,920 in 1998.
Operating expenses (salaries and benefits, other operating expenses and
provision for bad debts) increased by $3.3 million from $114.7 million for the
nine months ended September 30, 1998 to $118.0 million for the same period in
1999 primarily from increases in bad debt expense and supply costs. The increase
in bad debt expense resulted from (1) the effect of computer system conversion
at certain hospitals, (2) personnel turnover, which unfavorably affected
billings and collections at certain facilities and (3) a favorable impact in
1998 from the collection of accounts previously written off. An increase in
acuity at one hospital contributed to the increase in supply costs. Operating
expenses expressed as a percentage of net revenue, remained relatively flat at
83.3% for the nine months ended September 30, 1998 and 83.7% for the nine months
ended September 30, 1999. The stability of operating margins of 16.3% and 16.7%
for the nine months ended September 30, 1999 and 1998, respectively, reflects
the favorable impact of the various cost reduction initiatives undertaken in the
latter half of 1998, which reduced salaries and benefits.
64
<PAGE> 78
Interest expense decreased $6.1 million from $13.4 million for the nine
months ended September 30, 1998 to $7.3 million for the same period in 1999,
primarily due to an increase in cash generated from operations and a decrease in
interest allocation from Paracelsus Healthcare Corporation.
Depreciation and amortization expense increased $1.0 million from $8.6
million for the nine months ended September 30, 1998 to $9.6 million for the
same period in 1999 primarily due to additions to property and equipment.
Income from continuing operations before income taxes was $1.0 million and
$3.5 million for the nine months ended September 30, 1999 and 1998,
respectively. Income from continuing operations before income taxes in 1998
included an unusual gain of $7.5 million relating to the settlement of a
capitated contract dispute.
The Paracelsus hospitals recorded no income tax provision or benefit for
the nine months ended September 30, 1999 and 1998 due to revisions of the
estimated valuation allowance on deferred tax assets.
Net income for the nine months ended September 30, 1999 was $1.0 million
compared to net income of $3.5 million for the same period of 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net revenues decreased 4.9% to $183.1 million in 1998 from $192.6 million
in 1997. Inpatient admissions decreased 3.9% from a year ago and outpatient
visits decreased 8.0%. The decrease in revenues was due to several factors
including decreases in Medicare reimbursement rates mandated by the Balanced
Budget Act, which became effective October 1, 1997, and the sale of a home
health business during 1998. Other factors that contributed to the decline in
revenues included the closing of skilled nursing and psychiatric units and lower
reimbursement rates from managed care payors.
Salaries, wages and benefits were $65.9 million or 36.0% of net operating
revenues in 1998 compared to $67.7 million or 35.1% of net operating revenues in
1997. This $1.8 million decrease was due to a reduction in staffing levels in
reaction to the implementation of the Balanced Budget Act. As a percentage of
net operating revenues, salaries, wages and benefits increased due to the
overall decrease in net revenue discussed above.
Other operating expenses were $74.0 million or 40.4% of net operating
revenues in 1998, compared to $75.4 million or 39.1% of net operating revenues
in 1997. Included in this category are supply costs, which remained essentially
flat as a percentage of net operating revenues at approximately 13.5% for both
periods, which was attributable to a reduction in certain higher cost procedures
at some facilities. The remaining expenses in this category including
professional fees, contract services, repairs and maintenance, rents and leases,
utilities and insurance increased as a percentage of net operating revenues to
26.8% in 1998 from 25.5% in 1997. This increase reflects a decline in net
revenues that was not sufficiently offset by cost reduction efforts.
Provision for doubtful accounts decreased to $11.8 million or 6.4% of net
operating revenues in 1998 from $17.0 million or 8.8% of net operating revenues
in 1997. The decrease was due primarily to the improvement of collection
processes at two facilities and the collection of previously reserved home
health accounts receivable.
Depreciation and amortization expense was $11.8 million or 6.4% of net
operating revenues in 1998 compared to $11.1 million or 5.8% of net operating
revenues in 1997. The increase was due primarily to additions to property and
equipment.
65
<PAGE> 79
Income from continuing operations before income taxes was $3.5 million and
$3.7 million for the year ended December 31, 1998 and 1997, respectively. Income
from continuing operations before income taxes in 1998 included an unusual gain
of $7.5 million relating to the settlement of a capitated contract dispute.
Income from continuing operations before income taxes in 1997 included an
unusual gain of $12.0 million relating to a $15.5 million reduction of a loss
contract accrual, offset by charges of $3.5 million relating to a hospital
closure.
The Paracelsus hospitals recorded no income tax provision or benefit for
the years ended December 31, 1998 and 1997 due to revisions of the estimated
valuation allowance on deferred tax assets.
Net income for the year ended December 31, 1998 was $3.5 million compared
to net income of $4.8 million for the year ended December 31, 1997.
TENET HOSPITALS
THREE MONTHS ENDED AUGUST 31, 1999 COMPARED TO THREE MONTHS ENDED AUGUST 31,
1998
Net operating revenues for the three months ended August 31, 1999 was
$142.2 million, an increase of $8.7 million, or 6.5%, from $133.5 for the same
period in 1998. Net operating revenues increased due to improved managed care
reimbursement and facility-specific initiatives offset, in part, by a decrease
in volumes due to the impending sale.
The Tenet hospitals experienced a slight decrease of 1.5% in inpatient
admissions from 12,601 for the three months ended August 31, 1998 to 12,412 for
the same period in 1999. Patient days decreased 4.6% from 62,032 for the three
months ended August 31, 1998 to 59,154 for the same period in 1999. Outpatient
visits decreased 8.6% from 137,518 for the three months ended August 31, 1998 to
125,752 for the same period in 1999.
Cost savings initiatives related to salaries and benefits had a positive
impact decreasing salaries and benefits expense to $47.4 million or 33.3% of net
operating revenues for the three months ended August 31, 1999, compared to
$47.6, or 35.7%, of net operating revenues for the same period in 1998.
Supply expense was $20.4 million or 14.3% of net operating revenues for the
three months ended August 31, 1999 compared to $20.2 million or 15.1% of net
operating revenues for the same period in 1998. Supply saving initiatives had a
positive impact decreasing supplies expense as a percentage of net operating
revenue.
Provision for doubtful accounts increased to $11.8 million, or 8.3%, of net
operating revenue for the three months ended August 31, 1999 compared to $9.9
million, or 7.4%, of net operating revenues for the same period in 1998. The
increase in provision for doubtful accounts resulted from personnel turnover,
which unfavorably affected billings and collections at certain facilities.
Other operating expenses increased to $43.5 million, or 30.6%, of net
operating revenue for the three months ended August 31, 1999 from $39.1 million,
or 29.3%, of net operating revenue for the same period in 1998. Factors
contributing to this increase included increased operating expenses attributable
to the increase in collection agency and consulting fees and increased
administrative expenses.
Overhead allocated from the parent company increased to $1.9 million for
the three months ended August 31, 1999 compared to $1.7 million for the same
period in 1998.
66
<PAGE> 80
Depreciation and amortization expense was $7.1 million or 5.0% of net
operating revenues for the three months ended August 31, 1999 compared to $7.7
million for the same period in 1998.
YEAR ENDED MAY 31, 1999 COMPARED TO YEAR ENDED MAY 31, 1998
Net operating revenues, which comprise net patient service revenues and
capitation premiums, increased 4.6% to $572.5 million in 1999 from $547.2
million in 1998. Net patient service revenues increased 2.6% to $490.3 million
in 1999 from $477.7 million in 1998. Volume increased due to the signing of new
managed care contracts in one market and facility-specific initiatives at
several other hospitals. The increase in volume was offset in part by the
reduction of inpatient hospital, home health and skilled nursing facility
reimbursement due to the Balanced Budget Act. Hospital net revenue per adjusted
patient day increased 5.9% in 1999. Capitation revenue from HealthChoice, a
Medicaid managed health plan, increased 18.4% from $69.5 million in 1998 to
$82.3 million in 1999, due in part to a 6.8% premium increase and a $2.3 million
increase in independent physician association, or IPA, management revenue.
Salaries and benefits were $192.6 million or 33.6% of net operating
revenues in 1999 compared to $199.2 million or 36.4% of net operating revenues
in 1998. Supplies were $82.9 million or 14.5% of net operating revenues in 1999
compared to $81.5 million or 14.9% of net operating revenues in 1998. Supply
expenses increased on an absolute dollar basis due to an increase in high cost
procedures and the opening of a cardiac catheterization lab. Salaries and
benefits and supplies as a percentage of total net operating revenues decreased
primarily due to a reduction in the number of employees and the significant
increase in HealthChoice revenue, which required minimal additional staffing and
no incremental supply costs.
Other operating expenses increased to $155.0 million or 27.1% of net
operating revenue in 1999 from $145.8 million or 26.6% of net operating revenue
in 1998. Factors contributing to this increase included increased operating
expenses attributable to the increase in HealthChoice revenues, increased
collection agency and consulting fees and increased administrative expenses.
Provision for doubtful accounts increased to $41.9 million or 7.3% of net
operating revenues in 1999 compared to $37.8 million or 6.9% of net operating
revenues in 1998. The increase was primarily attributable to the turnover of
billings and collection staff at some of the hospitals and a change in the
accounting for bad debt expense at some facilities.
Overhead allocated from the parent company decreased to $7.5 million in
1999 compared to $10.6 million in 1998. This decrease is attributable to changes
in accounting treatment for certain allocated corporate costs and reductions in
corporate headcount and expenses as a result of a resource review program
implemented by Tenet Healthcare Corporation in January 1999.
Depreciation and amortization were $26.6 million or 4.6% of net operating
revenues in 1999, up from $25.3 million or 4.6% of net operating revenues in
1998.
YEAR ENDED MAY 31, 1998 COMPARED TO YEAR ENDED MAY 31, 1997
Total net operating revenues increased 1.2% to $547.2 million in 1998 from
$540.6 million in 1997. Net patient service revenues increased 0.2% to $477.7
million in 1998 from $476.9 million in 1997. Inpatient admissions increased 2.9%
and outpatient visits
67
<PAGE> 81
decreased 11.6% over the prior period. Volume increased due to a number of
factors including the signing of new managed care contracts and increased
admissions to specialty units (rehabilitation and skilled nursing) at one
facility. The decrease in outpatient visits was primarily attributable to a
reduction in home health services offered. Hospital net revenue per adjusted
patient day decreased 2.4% in 1998. Capitation revenue for Health Choice
increased 9.1% from $63.7 million in 1997 to $69.5 million in 1998, due in part
to a 4.9% premium increase and, a 13.4% increase in covered lives, offset by a
$3.6 million decrease in independent physician association, or IPA, management
revenue due to the loss of a contract.
Salaries and benefits were $199.2 million or 36.4% of net operating
revenues in 1998 compared to $195.5 million or 36.2% of net operating revenues
in 1997. Salaries and benefits increased primarily due to annual wage and merit
increases and increased utilization of contract nurses at one facility. Supplies
increased to $81.5 million in 1998 from $80.4 million in 1997, and remained
constant as a percentage of net operating revenues at 14.9% over the same
period.
Other operating expenses increased to $145.8 million or 26.6% of net
operating revenues in 1998 from $141.1 million or 26.1% of net operating
revenues in 1997. Factors contributing to this increase included increased
collection agency fees, increased operating expenses attributable to the
increase in HealthChoice revenues and increased administrative expenses.
Provision for doubtful accounts increased to $37.8 million or 6.9% of net
operating revenues in 1998 from $29.4 million or 5.4% in 1997. Some of the
factors contributing to this increase included a change in reserve methodology
at some facilities, an increase in managed care payor mix and an increase in
self-pay visits to emergency rooms.
Overhead allocated from the parent company decreased to $10.6 million in
1998 compared to $19.7 million in 1997. This decrease can be primarily
attributed to a reduction in allocable non-recurring charges at the corporate
level.
Depreciation and amortization were $25.3 million or 4.6% of net operating
revenues in 1998, up slightly from $24.7 million or 4.6% of net operating
revenues in 1997.
LIQUIDITY AND CAPITAL RESOURCES
PARACELSUS HOSPITALS
Historically, the major source of financing for the Paracelsus hospitals
has been cash generated from operations and funds provided by the former parent
company.
At September 30, 1999, the Paracelsus hospitals had working capital of $3.7
million compared to $10.4 million at December 31, 1998. At December 31, 1997,
working capital was $16.0 million. The decline was due to decreased accounts
receivable balances, which were partially offset by a decrease in accrued
liabilities.
For the nine months ended September 30, 1999, cash provided by operating
activities increased to $17.6 million from cash used in operating activities of
$2.0 million for the nine months ended September 30, 1998 primarily due to a
reduction in interest expense allocated by the parent company and the 1998
settlement of a capitated contract dispute. Cash provided by operating
activities increased to $6.2 million for the year ended December 31, 1998 from
cash used in operating activities of $14.6 million for the year ended December
31, 1997. The increase at December 31, 1998 was due to reductions in
68
<PAGE> 82
unusual items and supplies and a significant increase in accounts payable, which
was partially offset by growth in accounts receivable balances in the same year.
For the nine months ended September 30, 1999, cash used in investing
activities increased to $13.5 million from $2.5 million for the nine months
ended September 30, 1998, and cash used in investing activities increased to
$6.4 million for the year ended December 31, 1998 from $0.4 million for the year
ended December 31, 1997. These increases were primarily due to increased
purchases of property and equipment during these periods.
TENET HOSPITALS
Historically, the major source of financing for the Tenet hospitals has
been cash generated from operations and funds provided by the former parent
company.
At August 31, 1999, the Tenet hospitals had working capital of $78.0
million compared to $80.9 million at May 31, 1999. At May 31, 1998, working
capital was $61.3 million. The increase was due to increases in accounts
receivable balances, supplies, deferred income taxes and other prepaid expenses.
For the three months ended August 31, 1999 cash provided by operating
activities increased to $16.8 million from $8.9 million for the three months
ended August 31, 1998 primarily due to an increase in accounts payable and
accrued expenses, offset in part by growth in accounts receivable. Cash provided
by operating activities decreased to $44.0 million for the year ended May 31,
1999 from cash provided of $70.6 million for the year ended May 31, 1998. The
decrease was due to reductions in merger, impairment, restructuring and
extraordinary charges as well as a large reduction in accounts payable and
accrued expenses. For the year ended May 31, 1997, cash provided by operating
activities was $45.9 million. The increase from 1997 to 1998 was primarily due
to a significant increase in accounts payable.
For the three months ended August 31, 1999, cash used in investing
activities decreased to $0.3 million from $3.1 million for the three months
ended August 31, 1998, and cash used in investing activities decreased to $18.0
million for the year ended May 31, 1999 from $24.2 million for the year ended
May 31, 1998. For the year ended May 31, 1997, cash used in investing activities
was $23.5 million. These changes were primarily due to capital expenditures.
LIQUIDITY AND CAPITAL RESOURCES
IASIS
We have recently become an independent company. Therefore, historical cash
flows may not be indicative of future liquidity. Ongoing operations will require
the availability of sufficient funds to service debt, fund working capital and
perform maintenance and growth capital expenditures on our facilities, including
start-up capital expenditures for Rocky Mountain Medical Center, formerly named
PHC Regional Hospital and Medical Center. We intend to finance these activities
through cash flows from our operating activities and from amounts available
under the revolving credit facility. In addition, we did not acquire the
accounts receivable related to the Tenet hospitals as part of the acquisition of
the Tenet hospitals and other assets of Tenet Healthcare Corporation and are
therefore funding a cash balance of $99.9 million out of the credit facility and
the offering of the old notes to fund working capital as accounts receivable
increase to normalized levels.
Capital expenditures for the nine months ended September 30, 1999 combined
for the Paracelsus hospitals, Tenet hospitals and management company were $22.6
million,
69
<PAGE> 83
primarily due to routine maintenance of equipment and facilities and an
expansion project at one of our facilities. Management anticipates that capital
expenditures during the remainder of 1999 and for 2000 will increase over prior
periods primarily due to the re-opening and operation of Rocky Mountain Medical
Center, formerly named PHC Regional Hospital and Medical Center, enhancement of
services at some of the facilities and capital investments relating to operating
independently. Accordingly, capital expenditures for 2000 are budgeted at
approximately $50.0 million. However, this estimate is based upon management's
analysis of various factors, many of which are beyond our control and there can
be no assurance that such capital expenditures (including those associated with
the re-opening of Rocky Mountain Medical Center) will not significantly exceed
budget or that the re-opening of Rocky Mountain Medical Center will be
successful.
We recently entered into a $330.0 million credit facility, consisting of a
$125.0 million revolving credit facility, an $80.0 million tranche A term loan,
and a $250 million tranche B term loan. None of the revolving credit facility
was drawn at the closing of the offering of the old notes (other than for the
issuance of approximately $25.0 million of letters of credit). The credit
facility is guaranteed by substantially all of our subsidiaries and secured by
substantially all of our assets. For further information on our credit facility,
see "Description of Credit Facility" on page 99.
Based upon the current level of operations and anticipated growth, we
believe that cash generated from operations and amounts available under the
revolving credit facility will be adequate to meet our anticipated debt services
requirements, capital expenditures and working capital needs for the next
several years. There can be no assurance, however, that our business will
generate sufficient cash flow from operations, that future borrowings will be
available under the credit facility or otherwise to enable us to service our
indebtedness including the credit facility and the notes, or to make anticipated
capital expenditures. Our future operating performance, our ability to service
or refinance the notes, and our ability to service and extend or refinance the
credit facility will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond our control.
YEAR 2000 COMPLIANCE
We did not experience any material disruptions or other effects caused by
the Year 2000 Problem, nor do we expect to experience any material disruptions
or other effects caused by the Year 2000 Problem in the future.
INFLATION
Management believes inflation has not had a significant impact on IASIS's
results of operations for the periods presented. Management does not anticipate
inflation having a significant impact on the future results of operations.
MARKET RISK
IASIS is subject to market risk associated with some commodity prices and,
effective with the revolving credit agreement we entered into in October,
changes in interest rates.
To manage the risk of fluctuations in interest rates, IASIS's borrowings
are a mix of fixed and floating rate obligations. This includes the $230.0
million of old notes that bear interest at a 13% fixed rate and are due 2009.
IASIS's $455.0 million term loan and revolving credit facility bear interest at
a floating rate. The carrying amount of IASIS's
70
<PAGE> 84
debt obligations approximates the fair value of similar debt instruments of
comparable maturity and the interest rate market risk is currently not
considered significant.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement establishes comprehensive accounting and
reporting standards for derivative instruments and hedging activities that
require a company to record the derivative instruments at fair value in the
balance sheet. Furthermore, the derivative instrument must meet specific
criteria or the change in its fair value is to be recognized in earnings in the
period of change. To achieve hedge accounting treatment the derivative
instrument needs to be part of a well-documented hedging strategy that describes
the exposure to be hedged, the objective of the hedge and a measurable
definition of its effectiveness in hedging the exposure. This statement is
effective as of the beginning of the first quarter of the fiscal year beginning
after June 15, 2000. Adoption of this statement is not expected to have a
material adverse effect on IASIS's financial statements.
In March and in April 1998, the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants issued two Statements of
Position ("SOPs") that are effective for financial statements for fiscal years
beginning after December 15, 1998, which will apply to IASIS beginning with its
fiscal year ended September 30, 2000. SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," provides guidance on
the circumstances under which the costs of certain computer software should be
capitalized and/or expensed. SOP 98-5, "Reporting on the Costs of Start-Up
Activities," requires such costs to be expensed as incurred instead of
capitalized and amortized. IASIS does not expect the adoption of either of these
SOPs to have a material effect on its future results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statement and requires that these enterprises
report selected information about operating segments in interim financial
reports. Management has not yet determined whether IASIS has separately
reportable segments as defined under SFAS 131.
71
<PAGE> 85
BUSINESS
COMPANY OVERVIEW
We are a for-profit hospital management company with operations in select
markets in the United States. Our facilities are currently located in four
regions: (1) Salt Lake City, Utah; (2) Phoenix, Arizona; (3) Tampa-St.
Petersburg, Florida; and (4) three markets within the state of Texas. We own
and/or operate 15 general, acute care hospitals and four ambulatory surgery
centers, with a total of 2,144 operating beds. We focus on networks of
medium-sized hospitals, each with 100 to 400 beds. We also operate a Medicaid
managed health plan called Health Choice in Phoenix, Arizona.
Our general, acute care hospitals offer a variety of inpatient medical and
surgical services commonly available in hospitals, such as cardiology, emergency
services, general surgery, internal medicine, obstetrics and orthopedics. In
addition, our facilities provide outpatient and ancillary services such as
outpatient surgery, physical therapy, radiation therapy, radiology and
respiratory therapy.
Our hospitals are located in high growth markets. According to industry
sources, the cumulative population growth in our markets from 1998 to 2003, on a
weighted average revenue basis, is projected to be 9.3%. This growth compares
favorably to the projected national growth rate of 5.0% over the same period.
Our senior management team has extensive experience in multi-facility
hospital operations, financial management and business development with an
average of 23 years of experience in the for-profit hospital industry. Several
of our senior executives, including Wayne Gower, President and Chief Executive
Officer, are former senior executives at Columbia/HCA Healthcare Corporation.
Mr. Gower previously served as President of Columbia/HCA's Summit Division,
overseeing the operations of 21 hospitals with annual net revenues in excess of
$1.0 billion.
Our revenues and EBITDA are well-distributed throughout each of our
markets. This diversity helps to insulate us from individual local economic,
demographic and legislative changes. For the nine months ended September 30,
1999, on a pro forma basis to reflect corporate overhead adjustments, we
generated $585.0 million in revenues and $97.1 million in Adjusted EBITDA.
BUSINESS STRATEGY
Our strategic objective is to provide high-quality, cost-effective
healthcare services in the select communities we serve throughout the United
States. We intend to build strong relationships with physicians, employees and
payors founded on a common vision of customer service, quality care, appropriate
services mix, elimination of unnecessary costs and sound investment of capital
to meet the healthcare needs of the community. We believe that we will operate a
leading for-profit hospital management company by:
- Developing community-focused hospital networks in high growth markets;
- Capitalizing on opportunities for revenue enhancement; and
- Increasing margins by taking advantage of cost saving opportunities.
The key elements of our business strategy are the following:
- Increase volume by expanding services. We intend to increase our
revenues by increasing the capacity of our facilities and broadening the
scope of services offered at our facilities in accordance with local
needs. Recognizing the shift from inpatient
72
<PAGE> 86
to outpatient treatments, we intend to enhance the convenience of our
outpatient services. In addition, we believe that the expansion of
surgical capacity and the upgrading of specialty services, such as
physical therapy, radiology, rehabilitation and other diagnostic
services, represent particularly attractive opportunities to increase
patient visits, admissions and surgeries. We also seek to increase the
efficiency, and therefore volume, of our emergency rooms by operating
dual-track ERs. We believe that this dual-track strategy, which separates
urgent care patients from non-urgent care patients will allow us to
optimize staffing efficiencies, alleviate patient flow bottlenecks and
design protocols to match the acuity of medical cases, which we believe
will result in a more efficient allocation of hospital resources.
- Improve operating efficiencies. We believe margins at our facilities can
be improved through the implementation of well-defined operating expense
control initiatives. Several measures will be implemented including
optimizing staffing levels according to patient volumes and seasonal
needs at each facility, reducing bad debt expense by effectively managing
each hospital's billing and collection processes, reducing supply costs
by eliminating waste and over-utilization and reallocating hospital
services and resources in order to balance community needs and
profitability.
- Retain and develop local management. A strong, attentive management team
at each facility is integral to developing and implementing strategic
objectives at our hospitals. Under previous ownership, several of our
hospitals experienced significant turnover. Many of those hospitals
shared management teams with other facilities. We intend to recruit
experienced senior managers in order to give each hospital its own
dedicated management team. Stable local management, including a chief
executive officer, chief financial officer and chief nursing officer at
each facility, will enhance medical staff relations and maintain
continuity in the community. We will also incentivize local management
teams by basing compensation on the operating results and quality of care
at each facility.
- Strengthen physician retention and recruiting. We believe that the
retention and recruitment of physicians is critical to our long term
success. We will execute this strategy by broadening the range of
services at our hospitals and by utilizing our existing physician
relationships to recruit new primary care physicians and specialists. We
also intend to create local physician advisory committees, comprised of
leading area physicians who will work with management to ascertain local
needs. Our management believes that establishing such committees will
also assist in developing a long-term relationship between physicians and
local management, enhance physician loyalty and improve the quality of
healthcare.
- Improve managed care position through better payor relationships. We
believe that establishing and maintaining strong relationships with
payors is critical to our success. We plan to increase volume by entering
into new contracts with payors and plan to improve profitability by
negotiating more favorable terms in our existing contracts. Under the
larger corporate structures of the previous owners, some managed care
contracting was not negotiated to provide maximum benefit to each of the
individual facilities in the community. We believe that understanding
facility-specific issues and concerns, developing relationships with
local payors and strengthening our market presence will enable us to
negotiate more favorable terms in both new and existing contracts.
73
<PAGE> 87
- Selectively pursue strategic acquisitions and partnerships. We intend to
selectively pursue hospital acquisitions which will improve financial
performance and regional presence in our existing markets. Additionally,
we will focus our new market development efforts on regions with a
growing population base greater than 100,000, a stable or improving
managed care environment and favorable demographics. In addition, we will
continue to identify opportunities to expand our presence through
strategic alliances with providers and by partnering with physicians to
develop additional services.
SERVICES AND OPERATIONS
Our general, acute care hospitals offer a variety of inpatient medical and
surgical services commonly available in hospitals, such as cardiology, emergency
services, general surgery, internal medicine, obstetrics and orthopedics. In
addition, our facilities provide outpatient and ancillary services such as
outpatient surgery, physical therapy, radiation therapy, radiology and
respiratory therapy.
Each of our hospitals is governed by a board of trustees, which includes
members of the hospital's medical staff as well as community leaders. The board
of trustees establishes policies concerning medical, professional and ethical
practices, monitors such practices, and is responsible for ensuring that these
practices conform to established standards. We intend to maintain quality
assurance programs to support and monitor quality of care standards and to meet
accreditation and regulatory requirements. Patient care evaluations and other
quality of care assessment activities will be monitored on a continuing basis.
Our hospitals do not engage in extensive medical research and medical
education programs. However, some of our hospitals have affiliations with
medical schools.
In addition to providing capital resources, we will make available a
variety of management services to our healthcare facilities. These services will
include information systems; ethics and compliance programs; leasing contracts;
accounting, financial and clinical systems; legal support; personnel and
employee benefits management; internal auditing; supply purchasing agreements;
and resource management. Some of these services initially will be provided
through transitional arrangements made with Paracelsus Healthcare Corporation
and Tenet Healthcare Corporation. We will participate in the Tenet buy power
purchasing program, allowing us access to very favorable rates on medical and
non-medical supplies.
UTILIZATION
We believe that there are two important factors relating to the overall
utilization of a hospital: (1) the quality and market position of the hospital
and (2) the number, quality and specialities of physicians providing patient
care within the facility. Generally, we believe that the ability of a hospital
to meet the healthcare needs of its community is determined by its breadth of
services, level of technology, emphasis on quality of care and convenience for
patients and physicians. Other factors which impact utilization include the size
of and growth in local population, local economic conditions, the availability
of reimbursement programs such as Medicare and Medicaid, and market penetration
of managed care programs. Utilization across the industry is also being affected
by improved treatment protocols as a result of advances in medical technology
and pharmacology.
74
<PAGE> 88
The following table sets forth combined operating statistics for our hospitals:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Number of hospitals at end of period................. 15 15 15
Number of operating beds at end of period (1)........ 2,144 2,144 2,144
Admissions (2)....................................... 69,721 70,484 53,669
Patient days (3)..................................... 334,998 336,068 247,492
ER Visits............................................ N/A 260,633 206,855
Average daily census (4)............................. 918 921 906
</TABLE>
- -------------------------
Note: Data for 1997 and 1998 is for the twelve months ended December 31 for the
Paracelsus hospitals and is for the twelve months ended May 31 for the
Tenet hospitals; data for 1999 is for the nine months ended September 30
for the Paracelsus hospitals and is for the nine months ended August 31
for the Tenet hospitals; statistics do not include HealthChoice.
(1) Excludes 120 beds at Rocky Mountain Medical Center, formerly named PHC
Regional Hospital and Medical Center, which closed in June 1997 and is
scheduled to reopen during the first quarter of 2000. See "Liquidity and
Capital Resources" on page 68.
(2) Represents the total number of patients admitted (who remain in the facility
for a period in excess of 23 hours) to our hospitals and is used by
management and investors as a general measure of inpatient volume.
(3) Represents the number of days beds were occupied over the period.
(4) Represents the average number of inpatients in our hospital beds each day.
Our hospitals have experienced significant shifts from inpatient to
outpatient care as well as decreases in average lengths of inpatient stay,
primarily as a result of improvements in technology and clinical practices and
hospital payment changes by Medicare, insurance carriers and self-insured
employers. These hospital payment changes generally encourage the utilization of
outpatient, rather than inpatient, services whenever possible and shortened
lengths of stay for inpatient care. In response to this shift toward outpatient
care, we are reconfiguring some hospitals to more effectively accommodate
outpatient services and restructuring existing surgical capacity to permit
additional outpatient volume and a greater variety of outpatient services.
Our facilities will continue to emphasize those outpatient services that
can be provided on a quality, cost-effective basis and that we believe will
experience increased demand. The patient volumes and net operating revenues at
our hospitals and our outpatient surgery centers are subject to seasonal
variations caused by a number of factors, including, but not necessarily limited
to, seasonal cycles of illness, climate and weather conditions, vacation
patterns of both patients and physicians and other factors relating to the
timing of elective procedures.
In addition, inpatient care is increasingly incorporating sub-acute care,
where a less-intensive level of care is necessary. We have been proactive in the
development of a variety of sub-acute inpatient services to utilize a portion of
our unused capacity. By offering cost-effective sub-acute services in
appropriate circumstances, we are able to provide a continuum of care where the
demand for such services exists. For example, some of our hospitals have
developed rehabilitation units. Such units utilize less intensive staffing
levels with corresponding lower costs to provide the range of services sought by
payors.
75
<PAGE> 89
SOURCES OF REVENUE
We receive payment for patient services from the federal government
primarily under the Medicare program, state governments under their respective
Medicaid programs, Health Maintenance Organizations, Preferred Provider
Organizations and other private insurers, as well as directly from patients. The
approximate percentages of net patient revenues from continuing operations of
our facilities from such sources during the periods specified below were as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Medicare................................................... 37.8% 35.8% 31.5%
Medicaid................................................... 8.6 6.9 6.7
Commercial Payors.......................................... 53.6 57.3 61.8
----- ----- -----
Total............................................ 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
- -------------------------
Note: Data for 1997 and 1998 is for the twelve months ended December 31 for the
Paracelsus hospitals and is for the twelve months ended May 31 for Tenet
hospitals; data for 1999 is for the nine months ended September 30 for
the Paracelsus hospitals and is for the nine months ended August 31 for
Tenet hospitals; statistics do not include HealthChoice.
Medicare is a federal program that provides hospital and medical insurance
benefits to persons age 65 and over, some disabled persons and persons with
end-stage renal disease. Medicaid programs are jointly funded by federal and
state governments and are administered by states under an approved plan which
provides hospital benefits to qualifying individuals who are unable to afford
care. All of our hospitals are certified as providers of Medicare and Medicaid
services. Amounts received under the Medicare and Medicaid programs are
generally significantly less than the hospital's customary charges for the
services provided.
Private payors include Health Maintenance Organizations, Preferred Provider
Organizations, private insurance companies, employers and individual private
payors. Most of our hospitals offer discounts from established charges to
private payors if they are large group purchasers of healthcare services. These
discount programs limit our ability to increase charges in response to
increasing costs. For more information on managed care programs, see
"-- Competition" below. Patients are generally not responsible for any
difference between customary hospital charges and amounts reimbursed for such
services under Medicare, Medicaid, some private insurance plans, Health
Maintenance Organizations or Preferred Provider Organizations, but are
responsible for services not covered by such plans, exclusions, deductibles or
co-insurance features of their coverage. The amount of such exclusions,
deductibles and co-insurance has generally been increasing each year. Collecting
amounts due from individual patients is typically more difficult than collecting
from governmental or private payors. For more information on the reimbursement
programs on which our revenues are dependent, see "-- Reimbursement; Regulation"
on page 80.
COMPETITION
Our facilities and related businesses operate in competitive environments.
Our competitive position within a geographic area is affected by a number of
factors including:
- the scope, breadth and quality of services;
76
<PAGE> 90
- number, quality and specialties of physicians, nurses and other
healthcare professionals;
- reputation;
- managed care contracting relationships; physical condition of facilities
and medical equipment;
- location; parking or proximity to public transportation;
- ability to form local hospital networks;
- tenure in the community; and
- charges for services.
We currently face competition from established, not-for-profit healthcare
corporations. In the future, we expect to encounter increased competition from
companies, like ours, that consolidate hospitals and healthcare companies in
specific geographic markets. Continued consolidation will be a leading
contributing factor to increased competition in markets in which we already have
a presence and in markets we wish to penetrate.
One factor in the competitive position of a hospital is the number and
quality of physicians affiliated with the hospital. In large part, a hospital's
revenues, whether from managed care payors, traditional health insurance payors
or directly from patients, depend on the quality and scope of physicians'
practices associated with the hospital. Physicians refer patients to hospitals
on the basis of the quality of services provided by the hospital, the quality of
the medical staff and employees affiliated with the hospital, the quality and
age of the hospital's facilities and equipment, and the hospital's location. We
intend to retain and recruit physicians by equipping our hospitals with
technologically advanced equipment, sponsoring training programs to educate
physicians on advanced medical procedures and creating an environment within
which physicians prefer to practice. While physicians may terminate their
association with a hospital operated by us at any time, our hospitals seek to
retain physicians of varied specialities on the hospitals' medical staffs and to
recruit other qualified physicians. Accordingly, we strive to maintain and
improve the level of care at our hospitals, uphold ethical and professional
standards and provide quality facilities, equipment, employees and services for
physicians and their patients.
Another factor in the competitive position of a hospital is the ability of
its management to negotiate service contracts with purchasers of group
healthcare services. The importance of obtaining managed care contracts has
increased over the years and is expected to continue to increase as employers,
private and government payors and others turn to the use of managed care in an
attempt to control rising healthcare costs. The revenues and operating results
of most of our hospitals are significantly affected by the hospitals' ability to
negotiate favorable contracts with managed care payors. Health Maintenance
Organizations and Preferred Provider Organizations use managed care contracts to
direct patients to, and manage the use of, hospital services in exchange for
discounts from the hospitals' established charges. Employers and traditional
health insurers are also increasingly interested in containing costs through
similar contracts with hospitals. The importance of obtaining contracts with
managed care organizations varies from market to market, depending on the market
strength of such organizations.
An additional competitive factor is whether the hospital is part of a local
hospital network and, if so, the scope and quality of services offered by such
network and by competing networks. A hospital that is part of a network that
offers a broad range of
77
<PAGE> 91
services in a wide geographic area is more likely to obtain managed care
contracts than a hospital that is not. We intend to evaluate changing
circumstances in each geographic area on an ongoing basis and to position
ourselves to compete in the managed care market by forming our own, or joining
with others to form, local hospital networks.
State Certificate of Need laws, which place limitations on a hospitals'
ability to expand hospital services and add new equipment, also may have the
effect of restricting competition. The application process for approval of
covered services, facilities, changes in operations and capital expenditures is
highly competitive. In those states which have no Certificate of Need laws or
which set relatively high thresholds before expenditures become reviewable by
state authorities, competition in the form of new services, facilities and
capital spending may be more prevalent. Florida is the only state in which we
currently operate that requires compliance with Certificate of Need laws. For
more information on regulation and Certificate of Needs, see "-- Government
Regulation and Other Factors" on page 83.
The hospital industry and our hospitals continue to have significant unused
capacity. Inpatient utilization, average lengths of stay and average inpatient
occupancy rates continue to be negatively affected by pre-authorization and
utilization review as well as payment mechanisms to maximize outpatient and
alternative healthcare delivery services for less acutely ill patients.
Admissions constraints, payor pressures and increased competition are expected
to continue. We will endeavor to meet these challenges by expanding our
facilities' outpatient services, offering appropriate discounts to private payor
groups, upgrading facilities and equipment, and offering new programs and
services.
One element of our business strategy is expansion through the acquisition
of general, acute care hospitals in growing markets. The competition to acquire
hospitals is significant, and there can be no assurance that suitable
acquisitions, for which other healthcare companies (including those with greater
financial resources than ours) may be competing, will be available to us. The
acquiror will often be selected for a variety of reasons and not exclusively on
the basis of price. We believe that our strategic goals align our interests with
those of the local communities served by our hospitals. We also believe that our
commitment to maintaining the local availability of healthcare services,
together with the reputation of our hospitals for providing market specific,
high quality healthcare, our focus on physician recruiting and retention, our
management's operating experience, and our direct access to capital will enable
us to compete successfully for acquisitions.
78
<PAGE> 92
PROPERTIES
The following table lists the facilities acquired pursuant to the
recapitalization and the Tenet acquisition:
<TABLE>
<CAPTION>
LICENSED
HOSPITALS CITY STATE BEDS
- --------- ---------------- ----- --------
<S> <C> <C> <C>
Davis Hospital and Medical Center.............. Layton UT 126
Jordan Valley Hospital....................... West Jordan UT 50
Pioneer Valley Hospital...................... West Valley City UT 139
Salt Lake Regional Medical Center............ Salt Lake City UT 200
Rocky Mountain Medical Center (1)............ Salt Lake City UT 120
Mesa General Hospital Medical Center......... Mesa AZ 143
St. Luke's Medical Center (2)................ Phoenix AZ 350
Tempe St. Luke's Hospital.................... Tempe AZ 106
Memorial Hospital of Tampa................... Tampa FL 174
Palms of Pasadena Hospital................... St. Petersburg FL 307
Town & Country Hospital...................... Tampa FL 201
Mid-Jefferson Hospital....................... Nederland TX 138
Odessa Regional Hospital..................... Odessa TX 100
Park Place Medical Center.................... Port Arthur TX 244
Southwest General Hospital................... San Antonio TX 286
OTHER OPERATIONS
- ----------------
Davis Surgical Center........................ Layton UT --
Sandy City ASC............................... West Jordan UT --
Biltmore Surgery Center...................... Phoenix AZ --
Metro Surgery Center......................... Mesa AZ --
Health Choice of Arizona..................... Phoenix AZ --
</TABLE>
- -------------------------
(1) Rocky Mountain Medical Center, formerly named PHC Regional Hospital and
Medical Center, has been closed since June 1997 and is scheduled to reopen
during the first quarter of 2000. See "Liquidity and Capital Resources" on
page 69.
(2) Includes St. Luke's Behavioral Health Center.
Medical office buildings also are operated in conjunction with our
hospitals. These office buildings are primarily occupied by physicians who
practice at our hospitals.
Our headquarters are located in Franklin, Tennessee. We also have a
division office in Salt Lake City, Utah.
Our hospitals and other facilities are suitable for their respective uses
and are, in general, adequate for our present needs.
EMPLOYEES AND MEDICAL STAFF
We have approximately 7,000 employees, including approximately 900
part-time employees. None of our employees is subject to collective bargaining
agreements. We consider our employee relations to be good. While some of our
hospitals experience union organizing activity from time to time, we do not
expect such efforts to materially adversely affect our future operations. Our
hospitals, like most hospitals, have had labor costs rise
79
<PAGE> 93
faster than the general inflation rate. There can be no assurance as to future
availability and cost of qualified medical personnel.
Our hospitals are staffed by licensed physicians who have been admitted to
the medical staff of our individual hospitals. Any licensed physician may apply
to be admitted to the medical staff of any of our hospitals, but admission to
the staff must be approved by the hospital's medical staff and the appropriate
governing board of the hospital in accordance with established credentialing
criteria. With exceptions, physicians generally are not employees of our
hospitals. However, some physicians provide services in our hospitals in
exchange for a fair market value fee.
REGULATORY COMPLIANCE PROGRAM
It is our policy to conduct our business with integrity and in compliance
with the law. Under separate license agreements, we plan to use the compliance
programs and corresponding policies and procedures of Tenet Healthcare
Corporation and Paracelsus Healthcare Corporation for a limited period of time
following consummation of the transactions until such time as we adopt our own
compliance program. Our compliance program will focus on all areas of regulatory
compliance, including physician relationships, reimbursement and cost reporting
practices and laboratory operations.
This regulatory compliance program is intended to ensure that high
standards of conduct are maintained in the operation of our business and that
policies and procedures are implemented so that employees act in full compliance
with all applicable laws, regulations and company policies. Under the regulatory
compliance program, we intend to provide initial and periodic legal compliance
and ethics training to every employee, review various areas of our operations,
and develop and implement policies and procedures designed to foster compliance
with the law. The program will also include a mechanism for employees to report,
without fear of retaliation, any suspected legal or ethical violations to their
supervisors or designated compliance officers in our hospitals. We will
regularly monitor our ongoing compliance efforts.
LEGAL PROCEEDINGS
We will be, from time to time, subject to claims and suits arising in the
ordinary course of business, including claims for damages for personal injuries,
medical malpractice, breach of management contracts, or for wrongful restriction
of or interference with physicians' staff privileges. In a number of these
actions, plaintiffs request punitive or other damages that may not be covered by
insurance. We are currently not a party to any such proceeding which, in
management's opinion, would have a material adverse effect on our business,
financial condition or results of operations.
REIMBURSEMENT; REGULATION
MEDICARE
Under the Medicare program, acute care hospitals receive reimbursement
under a prospective payment system for inpatient hospital services. Currently,
hospitals exempt from prospective payment system methodology, include
psychiatric, long-term care and rehabilitation hospitals. Specially designated
psychiatric or rehabilitation units that are distinct parts of an acute care
hospital and that meet Health Care Financing Administration criteria for
exemption are reimbursed on a reasonable cost-based system, subject to cost
limits. Under the Balanced Budget Act, prospective payment system-exempt
hospitals and hospital units may receive reduced reimbursement. For inpatient
80
<PAGE> 94
rehabilitation services, a prospective payment system methodology is to be
phased in between October 1, 2000 and October 1, 2002.
Under current hospital prospective payment system, predetermined payment
amounts per inpatient discharge are established based on the patient's assigned
diagnosis related group. This diagnosis related group classify categories of
illnesses according to the estimated intensity of hospital resources necessary
to furnish care for each principal diagnosis. The diagnosis related group rates
have been established for acute care hospitals participating in the Medicare
program and are based upon a statistically normal distribution of severity. When
treatments for patients fall well outside the normal distribution, providers may
request and receive additional payments, known as outliers. The diagnosis
related group payments do not consider a specific hospital's actual costs but
are adjusted for geographic area wage differentials.
The diagnosis related group rates are updated and re-calibrated annually
and have been affected by several recent federal enactments. The index used to
adjust the diagnosis related group rates, known as the "market basket index,"
gives consideration to the inflation experienced by hospitals and entities
outside of the healthcare industry in purchasing goods and services. However,
for several years the percentage increases to the diagnosis related group rates
have been lower than the percentage increases in the costs of goods and services
purchased by hospitals. The diagnosis related group rates are adjusted each
federal fiscal year. We anticipate that future legislation may decrease the
future rate of increase for diagnosis related group payments, but we are unable
to predict the amount of the reduction.
Outpatient services provided at general, acute care hospitals typically are
reimbursed by Medicare at the lower of customary charges or reasonable costs,
subject to additional limits on the reimbursement of outpatient services. The
Balanced Budget Act contains provisions that affect outpatient hospital
services, including a requirement that the Health Care Financing Administration
develop an outpatient prospective payment system to begin January 1, 1999. While
proposed regulations were published in September 1998, there have been delays
due to year 2000 operational factors, among other issues. Therefore,
implementation of outpatient prospective payment system has been delayed until
after January 1, 2000 and we anticipate even further delays. We are not able to
predict the effect, if any, that the new payment system will have on our
business, financial conditions or results of operations. After the fee schedule
is established for this new system, the fee schedule is to be updated by the
market basket minus 1.0% for each of the federal fiscal years 2000 through 2002.
Similarly, effective January 1, 1999, therapy services rendered by hospitals to
outpatients and inpatients not reimbursed by Medicare Part A are reimbursed
according to the Medicare physician fee schedule.
Skilled nursing units within hospitals have historically been reimbursed by
Medicare on the basis of actual costs, subject to limits. The Balanced Budget
Act requires the establishment of a prospective payment system for Medicare
skilled nursing units, under which units will be paid a federal per diem rate
for virtually all covered services. The new payment system is being phased in
over three cost reporting periods, starting with cost reporting periods
beginning on or after July 1, 1998. The impact of the new payment system has
generally been to significantly reduce reimbursement for skilled nursing
services, which has led many hospitals to close such units. We will closely
monitor and evaluate the few remaining skilled nursing units in our hospitals
and related facilities to determine whether it is feasible to continue to offer
such services under the new reimbursement regime.
81
<PAGE> 95
MEDICAID
Medicaid programs are jointly funded by federal and state governments and
are administered by states under an approved plan. State Medicaid programs may
use a prospective payment system, cost-based or other payment methodology for
hospital services. Medicaid programs are required to take into account and make
payments to hospitals serving disproportionate numbers of low income patients
with special needs. Medicaid reimbursement often is less than a hospital's cost
of services. The federal government and many states are currently considering
significant reductions in the level of Medicaid funding while at the same time
expanding Medicaid benefits which could adversely affect future levels of
Medicaid reimbursements received by our hospitals.
On November 27, 1991, Congress enacted the Medicaid Voluntary Contribution
and Provider-Specific Tax Amendments of 1991, which limit the amount of
voluntary contributions and provider-specific taxes that can be used by states
to fund Medicaid and require the use of broad-based taxes for such funding. As a
result of the enactment of these amendments, some of the states in which we
operate have adopted broad-based provider taxes to fund their Medicaid programs.
The impact of these new taxes upon us has not been materially adverse. However,
we cannot predict whether any additional broad-based provider taxes will be
adopted by the states in which we operate and, accordingly, we are not able to
assess the effect of such additional taxes on our results of operations or
financial position.
ANNUAL COST REPORTS
All hospitals participating in the Medicare and Medicaid programs, whether
paid on a reasonable cost basis or under a prospective payment system, are
required to meet specific financial reporting requirements. Federal regulations
require submission of annual cost reports identifying medical costs and expenses
associated with the services provided by each hospital to Medicare beneficiaries
and Medicaid recipients. Annual cost reports required under the Medicare and
Medicaid programs are subject to routine audits, which may result in adjustments
to the amounts ultimately determined to be due to us under these reimbursement
programs. The audit process, particularly in the case of Medicaid, takes several
years to reach the final determination of allowable amounts under the programs.
Providers also have the right of appeal, and it is common to contest issues
raised in audits of prior years' reports.
Although we are not aware of any investigations of cost reports, many cost
reports of our facilities are still open. If we, or any of our facilities, are
found to be in violation of federal or state laws relating to Medicare, Medicaid
or similar programs, we and our facilities could be subject to substantial
monetary fines, civil and criminal penalties and exclusion from participation in
the Medicare and Medicaid programs. Any such sanctions could have a material
adverse effect on our financial position and results of operations.
MANAGED CARE
Pressures to control the cost of healthcare services have resulted in
increases to the percentage of admissions and net revenues attributable to
managed care payors. The percentage of our admissions attributable to managed
care payors has increased in recent years. We expect that the trend toward
increasing percentages related to managed care payors will continue in the
future. We generally receive lower payments from managed care payors than from
traditional commercial/indemnity insurers; however, as part of our
82
<PAGE> 96
business strategy, we intend to take steps to improve our managed care position.
For a more detailed discussion of such strategy, see "Business Strategy" on page
72.
COMMERCIAL INSURANCE
Our hospitals provide services to some individuals covered by traditional
private healthcare insurance. Private insurance carriers make direct payments to
hospitals or, in some cases, reimburse their policy holders, based upon the
particular hospital's established charges and the particular coverage provided
in the insurance policy.
Commercial insurers are continuing efforts to limit the payments for
hospital services by adopting discounted payment mechanisms, including
prospective payment or diagnosis related group-based payment systems, for more
inpatient and outpatient services. To the extent that such efforts are
successful, there will be reduced levels of reimbursement to hospitals which may
have a negative impact on operating results.
GOVERNMENT REGULATION AND OTHER FACTORS
LICENSURE, CERTIFICATION AND ACCREDITATION
Healthcare facility construction and operation is subject to federal, state
and local regulations relating to the adequacy of medical care, equipment,
personnel, operating policies and procedures, fire prevention, rate-setting and
compliance with building codes and environmental protection laws. Our facilities
are also subject to periodic inspection by governmental and other authorities to
assure continued compliance with the various standards necessary for licensing
and accreditation. We believe that all of our operating healthcare facilities
are properly licensed under appropriate state laws. All of our operating
hospitals are certified under the Medicare program and are accredited by the
Joint Commission on Accreditation of Healthcare Organizations, the effect of
which is to permit the facilities to participate in the Medicare and Medicaid
programs. We will seek to have Rocky Mountain Medical Center, formerly named PHC
Regional Hospital and Medical Center, accredited upon reopening. Should any
facility lose its accreditation by this Joint Commission, or otherwise lose its
certification under the Medicare program, the facility would be unable to
receive reimbursement from the Medicare and Medicaid programs. We intend to
conduct our operations in compliance with current applicable federal, state,
local and independent review body regulations and standards. The requirements
for licensure, certification and accreditation are subject to change and, in
order to remain qualified, it may be necessary for us to effect changes in our
facilities, equipment, personnel and services.
CERTIFICATES OF NEED
In some states, the construction of new facilities, the acquisition of
existing facilities and the addition of new beds or services may be subject to
review by state regulatory agencies under a Certificate of Need program. Florida
is the only state in which we currently operate that requires approval under a
Certificate of Need program. Such laws generally require appropriate state
agency determination of public need and approval prior to the addition of beds
or services or other capital expenditures. Failure to obtain necessary state
approval can result in the inability to expand facilities, add services,
complete an acquisition or change ownership. Further, violation may result in
the imposition of civil sanctions or the revocation of a facility's license.
83
<PAGE> 97
UTILIZATION REVIEW
Federal law contains numerous provisions designed to ensure that services
rendered by hospitals to Medicare and Medicaid patients meet professionally
recognized standards, are medically necessary and that claims for reimbursement
are properly filed. These provisions include a requirement that a sampling of
admissions of Medicare and Medicaid patients must be reviewed by peer review
organizations, which review the appropriateness of Medicare and Medicaid patient
admissions and discharges, the quality of care provided, the validity of
diagnosis related group classifications and the appropriateness of cases of
extraordinary length of stay or cost. Peer review organizations may deny payment
for services provided, may assess fines and also have the authority to recommend
to the Department of Health and Human Services that a provider which is in
substantial noncompliance with the standards of the peer review organization be
excluded from participation in the Medicare program. Utilization review is also
a requirement of most non-governmental managed care organizations.
FEDERAL HEALTHCARE PROGRAM REGULATIONS AND FRAUD AND ABUSE
Participation in any federal healthcare program, such as Medicare, is
heavily regulated. If a hospital provider fails substantially to comply with the
numerous conditions of participation in the Medicare or Medicaid program or
performs specific prohibited acts, such hospital's participation in the Medicare
program may be terminated or civil or criminal penalties may be imposed upon it
under provisions of the Social Security Act.
Among these regulations are the antikickback, antifraud and abuse
amendments codified under Section 1128B(b) of the Social Security Act which
prohibit providers and others from soliciting, receiving, offering or paying,
directly or indirectly, any remuneration in return for the referral for a
service or item covered by a federal healthcare program or ordering any covered
services or item. Violations of this statute constitute a felony and can result
in imprisonment or fines, civil penalties up to $50,000, damages up to three
times the total amount of remuneration and exclusion from participation in
federal health care programs, such as Medicare and Medicaid.
Congress authorized the Office of the Inspector General to publish
regulations which outline categories of activities that would be deemed not to
violate the antikickback regulations. The Office of the Inspector General has
published final safe harbor regulations aimed at protecting some activities from
prosecution under the antikickback regulations. Currently there are safe harbors
for various activities, including but not limited to investment interests, space
rental, equipment rental, personal services and management contracts, sale of
practice, referral services, warranties, discounts, employees, group purchasing
organizations, waiver of beneficiary coinsurance and deductible amounts and
managed care arrangements.
The fact that a conduct or a given business arrangement does not fall
within a safe harbor does not automatically render the conduct or business
arrangement illegal under the antikickback regulations. Such conduct and
business arrangements, however, do risk increased scrutiny by government
enforcement authorities. We may be less willing than some of our competitors to
enter into conduct or business arrangements that do not clearly satisfy the safe
harbors which may put us at a competitive disadvantage.
The Health Insurance Portability and Accountability Act enacted a criminal
provision for healthcare fraud offenses which applies to all health benefit
programs, whether or not they are reimbursed under a federal program. This act
also created new enforcement
84
<PAGE> 98
mechanisms to combat fraud and abuse, including the Medicare Integrity program
as well as an incentive program under which individuals can receive up to $1,000
for providing information on Medicare fraud and abuse that leads to the recovery
of at least $100 of Medicare funds. In addition, federal enforcement officials
now have the ability to exclude from Medicare and Medicaid any investors,
officers and managing employees associated with business entities that have
committed health care fraud, even if the investor, officer or employee had no
knowledge of the fraud. It also establishes a new violation for the payment of
inducements to Medicare or Medicaid beneficiaries in order to influence those
beneficiaries to order or receive services from a particular provider or
practitioner. The Balanced Budget Act also allows civil monetary penalties to be
imposed on a provider contracting with individuals or entities that the provider
knows or should know is excluded from a federal healthcare program.
The Office of the Inspector General at the Department of Health and Human
Services, among other regulatory agencies, is responsible for identifying and
eliminating fraud, abuse and waste, as well as promoting efficiency in the
Department of Health and Human Services departmental operations. The Office of
the Inspector General carries out this mission through a nationwide program of
audits, investigations and inspections. In order to provide guidance to
healthcare providers, the Office of the Inspector General has from time to time
issued "fraud alerts" which, although they do not have the force of law,
identify features of transactions which may indicate that the transaction could
violate the antikickback regulations or other federal healthcare laws.
Section 1877 of the Social Security Act, commonly known as the "Stark Law,"
prohibits referrals of Medicare and Medicaid patients by physicians to entities
with which the physician has a financial relationship and which provide
"designated health services" which are reimbursable by Medicare. "Designated
health services" include, among other things, clinical laboratory services,
physical and occupational therapy services, radiology services, durable medical
equipment, home health services and inpatient and outpatient hospital services.
Sanctions for violating the Stark Law include civil money penalties up to
$15,000 per prohibited service provided, assessments equal to twice the dollar
value of each such service provided and exclusion from the federal healthcare
programs. There are a number of exceptions to the self-referral prohibition,
including an exception for physician's ownership interest in the entire hospital
to which the physician refers patients.
Proposed regulations implementing the Stark Law have not been implemented,
although final regulations dealing with an earlier version of the Stark
Law -- which dealt exclusively with clinical laboratory services rather than
designated health services -- have been in effect since 1995. We cannot predict
the final form that such regulations will take or the effect that the final
regulations promulgated thereunder will have on us.
We provide financial incentives to recruit physicians into the communities
serviced by our hospitals, including loans and minimum revenue guarantees. On
occasion, we enter into different types of financial relationships with
physicians, including but not limited to, recruitment incentives given to new
and/or relocating physicians where a need for such physician exists, employment
agreements, medical director agreements and lease agreements. We believe that
our arrangements with physicians have been structured in an attempt to comply
with current law. The Department of Health and Services has adopted a safe
harbor against antikickback regulations for some physician recruitment, however,
as some of these arrangements do not expressly meet requirements for safe harbor
protection under the antikickback regulations, there can be no assurance that
regulatory authorities who enforce these laws will not determine that these
financial arrangements violate the
85
<PAGE> 99
antikickback regulations or other applicable laws. This determination could
subject us to liabilities under the Social Security Act, including criminal
penalties, civil monetary penalties and/or exclusion from participation in
Medicare, Medicaid or other federal healthcare programs, any of which could have
a material adverse effect on the business, financial condition or results of our
operations.
Evolving interpretations of current, or the adoption of new, federal or
state laws or regulations could affect many of the arrangements entered into by
each of our hospitals. There is increasing scrutiny by law enforcement
authorities, including the Office of the Inspector General, the courts and
Congress with respect to arrangements between healthcare providers and potential
referral sources to ensure that the arrangements are not designed as a mechanism
to exchange remuneration for patient care referrals and opportunities.
Investigators also have demonstrated a willingness to look behind the
formalities of a business transaction to determine the underlying purpose of
payments between healthcare providers and potential referral sources.
The Social Security Act also imposes criminal and civil penalties for
submitting false claims to Medicare and Medicaid. False claims include, but are
not limited to, billing for services not rendered, misrepresenting actual
services rendered in order to obtain higher reimbursement and cost report fraud.
Like the antikickback regulations, this statute is very broad. Careful and
accurate preparation and submission of claims for reimbursement (including cost
report preparation) must be performed in order to avoid liability under the
false claims statutes.
Many of the states in which we operate also have adopted, or are
considering adopting, laws that prohibit payments to physicians in exchange for
referrals similar to the antikickback regulations, some of which apply
regardless of the source of payment for care. These statutes typically provide
criminal and civil penalties as well as loss of licensure. Many states also have
passed self-referral legislation similar to the Stark Law, prohibiting the
referral of patients to entities with which the physician has a financial
relationship regardless of the source of payment for care. Little precedent
exists for the interpretation or enforcement of these state laws.
THE FEDERAL FALSE CLAIMS ACT
Another trend impacting the healthcare industry today is the increased use
of the federal False Claims Act, and, in particular, actions being brought by
individuals under the False Claims Act qui tam, or "whistleblower" provisions.
Whistleblower provisions allow private individuals to bring actions on behalf of
the government alleging that the defendant has defrauded the federal government.
If the government intervenes in the action and prevails, the party filing the
initial complaint may share in any settlement or judgment. If the government
does not intervene in the action, the qui tam plaintiff may pursue the action
independently.
When a defendant is determined to be liable under the False Claims Act, it
must pay three times the actual damages sustained by the government, plus
mandatory civil penalties of between $5,000 to $10,000 for each separate false
claim. There are many potential bases for liability under the False Claims Act.
Liability often arises when an entity knowingly submits a false claim for
reimbursement to the United States government. The False Claims Act defines the
term "knowingly" broadly. Thus, although simple negligence will not give rise to
liability under the False Claims Act, submitting a claim with reckless disregard
to its truth or falsity constitutes "knowing" submission under the False Claims
Act and, therefore, will qualify for liability. From time to time, companies in
86
<PAGE> 100
the healthcare industry, including ours, may be subject to qui tam actions. We
are unable to predict the impact of such actions.
CORPORATE PRACTICE OF MEDICINE/FEE SPLITTING
Some of the states in which we operate have laws that prohibit unlicensed
persons or business entities, including corporations, from employing physicians
or laws that prohibit direct or indirect payments or fee-splitting arrangements
between physicians and unlicensed persons or business entities. Possible
sanctions for violations of these restrictions include loss of a physician's
license, civil and criminal penalties and rescission of business arrangements
which may violate these restrictions. These statutes vary from state to state,
are often vague and have seldom been interpreted by the courts or regulatory
agencies. Although we exercise care to structure our arrangements with
healthcare providers to comply with the relevant state law, and believe such
arrangements comply with applicable laws in all material respects, we cannot
assure you that governmental officials charged with responsibility for enforcing
these laws will not assert that we, or transactions in which we are involved,
are in violation of such laws, or that such laws ultimately will be interpreted
by the courts in a manner consistent with our interpretations.
THE EMERGENCY MEDICAL TREATMENT AND ACTIVE LABOR ACT
The federal Emergency Medical Treatment and Active Labor Act was adopted by
Congress in response to reports of a widespread hospital emergency room practice
of "patient dumping." At the time of the enactment, patient dumping was
considered to have occurred when a hospital capable of providing the needed care
sent a patient to another facility or simply turned the patient away based on
such patient's inability to pay for his or her care. The law imposes
requirements upon physicians, hospitals and other facilities which provide
emergency medical services. Such requirements pertain to what care must be
provided to anyone who comes to such facilities seeking care before they may be
transferred to another facility or otherwise denied care. Sanctions, which may
be imposed on a physician, hospital or other facility failing to fulfill these
requirements, include termination of a hospital's Medicare provider agreement,
exclusion of a physician from participation in Medicare and Medicaid programs
and civil money penalties. In addition, the law creates private civil remedies
which enable (1) an individual who suffers personal harm as a direct result of a
violation of the law and (2) a medical facility that suffers a financial loss as
a direct result of another participating hospital's violation of the law to sue
the offending hospital for damages and equitable relief. One Paracelsus hospital
was notified by the Healthcare Financing Administration that it had violated the
requirements of the Emergency Medical Treatment and Active Labor Act prior to
our ownership of the hospitals. The hospital submitted a plan of correction to
the Healthcare Financing Administration and it is not anticipated that there
will be any material adverse consequences resulting from the violation. In
addition, one of our hospitals in Utah recently was inspected in connection with
an allegation of a potential violation of the Emergency Medical Treatment and
Active Labor Act. Although we believe that our practices are otherwise in
compliance with the law, we can give no assurance that governmental officials
responsible for enforcing the law will not assert that this or other of our
facilities are in violation of these laws.
HEALTHCARE REFORM
The healthcare industry attracts much legislative interest and public
attention. Changes in the Medicare, Medicaid and other programs, hospital
cost-containment
87
<PAGE> 101
initiatives by public and private payors, proposals to limit payments and
healthcare spending and industry-wide competitive factors are highly significant
to the healthcare industry. In addition, the healthcare industry is governed by
a framework of federal and state laws, rules and regulations that are extremely
complex and, for many provisions, there is little history of regulatory or
judicial interpretation to rely on.
The Balanced Budget Act has the effect of reducing payments to hospitals
and other healthcare providers under the Medicare and Medicaid programs. This
has had, and we expect it to continue to have, an impact on our revenues under
the Medicare and Medicaid programs. In addition, there continue to be federal
and state proposals that would, and actions that do, impose more limitations on
payments to providers like ourselves and proposals to increase co-payments and
deductibles from patients.
Many states have enacted or are considering enacting measures that are
designed to reduce their Medicaid expenditures and to change private healthcare
insurance. Various states have applied, or are considering applying, for a
federal waiver from current Medicaid regulations to allow them to serve some of
their Medicaid participants through managed care providers.
We are unable to predict the future course of federal, state or local
healthcare legislation. Further changes in the law or regulatory framework that
reduce our revenues or increase our costs could have a material adverse effect
on our business, financial condition or results of operations.
CONVERSION LEGISLATION
Many states have enacted or are considering enacting laws affecting the
conversion or sale of not-for-profit hospitals. These laws, in general, include
provisions relating to attorney general approval, advance notification and
community involvement. In addition, state attorneys general in states without
specific conversion legislation may exercise authority over these transactions
based upon existing law. In many states, there has been an increased interest in
the oversight of not-for-profit conversions. The adoption of conversion
legislation and the increased review of not-for-profit hospital conversions may
increase the cost and difficulty or prevent the completion of transactions with
not-for-profit organizations in various states in the future.
HEALTHCARE INDUSTRY INVESTIGATIONS
Significant media and public attention recently has focused on the hospital
industry. There are numerous ongoing federal and state investigations regarding
multiple issues including but not limited to cost reporting and billing
practices relating to clinical laboratory test claims and home health agency
costs, physician recruitment practices, and physician ownership of healthcare
providers and joint ventures with hospitals. We have substantial Medicare,
Medicaid and other governmental billings, which in itself could result in
heightened scrutiny of our operations. We continue to monitor these and all
other aspects of our business and have developed a compliance program to assist
us in gaining comfort that our business practices are consistent with current
industry standards. However, because the law in this area is complex and
constantly evolving, there can be no assurance that government investigations
will not result in interpretations that are inconsistent with industry
practices, including ours. In public statements surrounding current
investigations, governmental authorities have taken positions on a number of
issues, including some for which little official interpretation previously has
been available, that appear to be inconsistent with practices that have been
common within the industry and
88
<PAGE> 102
which previously have not been challenged in this manner. In some instances,
government investigations that have in the past been conducted under the civil
provisions of federal law may now be conducted as criminal investigations.
Many current healthcare investigations are national initiatives in which
federal agencies target an entire segment of the healthcare industry. One such
example is the federal government's initiative regarding hospital providers'
improper requests for separate payments for services rendered to a patient on an
outpatient basis within three days prior to the patient's admission to the
hospital, where reimbursement for such services is included as part of the
reimbursement for services furnished during an inpatient stay. In particular,
the government has targeted all hospital providers including several of our
hospitals to ensure conformity with this reimbursement rule. Another example
involves the federal government's initiative regarding healthcare providers
"unbundling" and separately billing for laboratory tests that should have been
billed as a "bundled unit." The federal government has also launched a national
investigative initiative targeting the billing of claims for inpatient services
related to bacterial pneumonia, as the government has found that many hospital
providers have attempted to bill for pneumonia cases under more complex and
expensive reimbursement codes, such as diagnosis related groups codes. We are
aware that prior to our ownership of them various of the acquired hospitals were
contacted in relation to certain government initiatives which were targeted at
an entire segment of the healthcare industry. While we take the position that,
under the terms of the agreements pursuant to which we acquired these hospitals,
the prior owners retained any liability resulting from these government
initiatives, we cannot assure you that the prior owners' resolution of these
matters, in the event that any resolution was deemed necessary, will not have an
effect on our operations.
We cannot assure you that governmental entities will not initiate similar
investigations in the future at hospitals operated by us and that such
investigations will not result in significant penalties to us. In some
instances, indemnity insurers and other non-governmental payors of hospitals
under investigation or the subject of litigation have sought repayment from
hospitals for alleged wrongful conduct that was identified by government
attorneys or investigators. These insurers and other non-government payors may
not have had any more information than their review of the government's
investigation or court actions. Therefore, governmental investigation of us or
entities with whom we do business could result in adverse publicity concerning
us and could limit our ability to make acquisitions.
The positions taken by authorities in the current investigations or any
future investigations of us or other providers and the liabilities or penalties
that may be imposed could have a material adverse effect on our business,
financial condition or results of operations.
ENVIRONMENTAL MATTERS
We are subject to various federal, state and local laws and regulations
relating to environmental protection. Our hospitals are not highly regulated
under environmental laws since we do not engage in any industrial activities at
those locations. The principal environmental requirements and concerns
applicable to our operations relate to the proper handling and disposal of small
quantities of hazardous and low level medical radioactive waste, the ownership
or historical use of underground and above-ground storage tanks at some
locations, the management of potential past and future impacts from leaks of
hydraulic fluid and/or oil associated with elevators, chiller units and/or
incinerators, the appropriate management of asbestos-containing materials
present or likely to be present at
89
<PAGE> 103
some locations, and the potential acquisition of and/or maintenance of air
emission permits for boilers and/or other equipment. The matters discussed above
and our compliance with environmental laws and regulations are not expected to
have a material impact on our capital expenditures, earnings or competitive
position. We cannot assure you, however, that additional environmental issues
relating to presently known or unknown matters will not require investigation,
assessment or expenditures. In addition, future events, such as changes in
existing laws and regulations or their interpretation and the approach of other
compliance deadlines may or will give rise to additional compliance costs or
liabilities. Compliance with more stringent laws or regulations, as well as
different interpretations of existing laws, may require additional expenditures
by us which may be material.
We also may be subject to requirements related to the remediation of, or
the liability for remediation of, substances that have been released to the
environment at properties owned or operated by us or at properties where
substances were sent for off-site treatment or disposal. Such remediation
requirements may be imposed without regard to fault, and liability for
environmental remediation can be substantial. We have not been notified of any
such releases relating to our off-site treatment or disposal of hazardous waste.
However, after due inquiry, to the best of our knowledge we are aware that nine
of our locations have been or currently are the subject of environmental
investigation or remediation, six as a consequence of known or suspected leaks
from underground storage tanks, two from a minor leak of hydraulic fluid, and
the other from broken battery casings discovered on an undeveloped portion of a
site. All remedial activities and significant required expenditures in
connection with the cleanup of six of these releases have been made and no
additional investigative or remedial activities are expected. With respect to
the remaining three locations, additional investigations and potential remedial
activities are not expected to have a material impact on our capital
expenditures, earnings or competitive position.
INSURANCE
As is typical in the healthcare industry, we are subject to claims and
legal actions by patients in the ordinary course of business. To cover these
claims, we maintain professional malpractice liability insurance and general
liability insurance in amounts which we believe to be sufficient for our
operations, although some claims may exceed the scope of the coverage in effect.
We also maintain umbrella coverage. At various times in the past, the cost of
malpractice and other liability insurance has risen significantly. Therefore, we
cannot assure you that such insurance will continue to be available at
reasonable prices which will allow us to maintain adequate levels of coverage.
Any losses incurred in excess of amounts maintained under such insurance will be
funded from working capital. We cannot assure you that our cash flow will be
adequate to provide for professional and general liability claims in the future.
90
<PAGE> 104
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to our directors and executive officers, as of
December 31, 1999, is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David R. White............................ 52 Non-executive Chairman of the Board
C. Wayne Gower............................ 52 President, Chief Executive Officer and
Director
Kenneth W. Perry.......................... 38 Vice President of Operations and
Finance
Roberta A. Kale........................... 48 Vice President of Physician Services
Frank A. Coyle............................ 35 Secretary, General Counsel
Linda W. Hischke.......................... 54 Division President
Paul S. Levy.............................. 52 Director
David Y. Ying............................. 45 Director
Jeffrey C. Lightcap....................... 40 Director
Anthony Grillo............................ 44 Director
Ramsey A. Frank........................... 39 Director
Frank J. Rodriguez........................ 28 Director
Michael S. Berk........................... 29 Director
Stuart C. McWhorter....................... 31 Director
Jay R. Bloom.............................. 44 Director
Robert E. Kiss............................ 41 Director
</TABLE>
DAVID R. WHITE is our non-executive Chairman of the Board of Directors. Mr.
White is currently President and Chief Executive Officer of LifeTrust, an
assisted living company, which he joined in 1998. From 1994 to 1998 Mr. White
served as President of the Atlantic Group at Columbia/HCA, where he was
responsible for 45 hospitals located in 10 different states. Previously, Mr.
White was Executive Vice President and Chief Operating Officer at Community
Health Systems, Inc., a for-profit hospital management company that operated
approximately 20 acute-care hospitals.
C. WAYNE GOWER is our President and Chief Executive Officer and one of our
Directors. Prior to joining us, Mr. Gower served as President of Columbia/HCA's
Summit Division from 1994 to 1998 with responsibility for 21 hospitals with net
revenues in excess of $1.0 billion. During his tenure with Columbia/HCA, Mr.
Gower had direct accountability for 30 hospitals which included the acquisition
and development of five hospitals. From 1982 to 1993, Mr. Gower served as Group
Vice President of Quorum Health Resources, Inc., Senior Vice President of
Acquisitions and Development for Community Health Systems, Inc. and Vice
President of Operations for Republic Health Corporation. Prior to 1982 Mr. Gower
spent seven years in various management and financial capacities at Hospital
Affiliates International. Mr. Gower began his career as an auditor with Peat,
Marwick and Mitchell.
KENNETH W. PERRY is our Vice President of Operations and Finance. Prior to
joining us, Mr. Perry was Assistant Vice President at UniPhy Healthcare, Inc.
from 1996 to 1998, where he was responsible for development, valuations and due
diligence. From 1995 to 1996, Mr. Perry served as Chief Financial Officer for
the Utah Division of Columbia/HCA where he was responsible for nine hospitals
with net revenue in excess of
91
<PAGE> 105
$450.0 million. From 1985 to 1995, Mr. Perry worked in various financial
capacities at Hospital Corporation of America and HealthTrust Inc.
ROBERTA A. KALE is our Vice President of Physician Services. Prior to
joining us, Ms. Kale served in various development roles from 1989 to 1998 in
Utah for Columbia/ HCA, most recently as Vice President of Network Services,
where she was responsible for the development of new and existing hospital and
physician services, physician networks and physician joint ventures. Previously,
Ms. Kale served in various management roles at several hospitals including
Humana Hospital in Huntsville, Alabama and the United Hospital in Grand Forks,
North Dakota.
FRANK A. COYLE is our Secretary and General Counsel. Prior to joining us,
Mr. Coyle served from 1995 to 1998 as Assistant Vice President Development in
Physician Services and in-house Development Counsel for Columbia/HCA. From 1990
to 1995 Mr. Coyle was an attorney with Baker, Worthington, Crossley, Stansberry
& Woolf where his work included mergers, acquisitions, securities transactions,
not-for-profit representation and formation of Tennessee HMOs.
LINDA W. HISCHKE is our Division President for the Utah and Texas markets.
Prior to joining us, Ms. Hischke served from 1998 to 1999 as President of WYN
Associates Healthcare Consulting in Park City, Utah. From 1995 to 1997 Ms.
Hischke served as President for the Mountain Division of Columbia/HCA, where she
was responsible for hospitals with net revenues in excess of $1.0 billion.
Previously she served as a Regional Vice President for HealthTrust in Houston,
Texas, where she was responsible for 12 hospitals.
PAUL S. LEVY is one of our Directors. Mr. Levy is a Senior Managing
Director of Joseph Littlejohn & Levy, which he founded in 1988. Mr. Levy serves
as a Director of several companies, including Motor Coach Industries
International Inc., Hayes Lemmerz International Inc., Builders FirstSource,
Inc., Jackson Automotive Group, Inc., Fairfield Manufacturing Company, Inc. and
New World Pasta Company.
DAVID Y. YING is one of our Directors. Mr. Ying is a Senior Managing
Director of Joseph Littlejohn & Levy, which he joined in 1997. From 1993 to 1997
Mr. Ying was a Managing Director at Donaldson, Lufkin & Jenrette, Inc., where he
was the head of its restructuring department. Mr. Ying serves as a Director of
several companies, including Motor Coach Industries International, Inc., Hayes
Lemmerz International Inc., Builders FirstSource, Inc. and New World Pasta
Company.
JEFFREY C. LIGHTCAP is one of our Directors. Mr. Lightcap is a Senior
Managing Director of Joseph Littlejohn & Levy, which he joined in 1997. From
1993 to 1997 Mr. Lightcap was a Managing Director at Merrill Lynch & Co., Inc.,
where he was the head of leveraged buyout firm coverage for the mergers and
acquisitions group. Mr. Lightcap serves as a Director of several companies,
including Motor Coach Industries International Inc., Hayes Lemmerz International
Inc., Jackson Automotive Group Inc. and New World Pasta Company.
ANTHONY GRILLO is one of our Directors. Mr. Grillo is a Senior Managing
Director of Joseph Littlejohn & Levy, which he joined in 1999. From 1991 to 1999
Mr. Grillo was a Senior Managing Director at The Blackstone Group, where he was
involved with Blackstone's private equity, restructuring and mergers practices.
Mr. Grillo serves as a Director of several companies, including Hayes Lemmerz
International Inc., Lancer Industries and Littelfuse, Inc.
92
<PAGE> 106
RAMSEY A. FRANK is one of our Directors. Mr. Frank is a Senior Managing
Director of Joseph Littlejohn & Levy, which he joined in 1999. From 1993 to 1999
Mr. Frank was a Managing Director at Donaldson, Lufkin & Jenrette, where he
headed the restructuring group and was a senior member of the leveraged finance
group.
FRANK J. RODRIGUEZ is one of our Directors. Mr. Rodriguez is a Vice
President of Joseph Littlejohn & Levy, which he joined in 1995. From 1993 to
1995 Mr. Rodriguez was a member of the Merchant Banking Group at Donaldson,
Lufkin & Jenrette. Mr. Rodriguez serves as a Director of Motor Coach Industries
International, Inc. and Jackson Automotive Group.
MICHAEL S. BERK is one of our Directors. Mr. Berk is a Vice President of
Joseph Littlejohn & Levy, which he joined in 1999. From 1997 to 1999 Mr. Berk
was an Associate at Frontenac Company, and prior to 1993 served as an Analyst at
Wasserstein Perella & Co., Inc.
STUART C. MCWHORTER is one of our Directors. Mr. McWhorter is a principal
of Clayton Associates, a Nashville, Tennessee-based advisory and venture capital
company, which he founded in 1996. From 1996 to 1998, Mr. McWhorter was Vice
President of Acquisitions at Ortholink Physicians Corporation. Prior to 1996,
Mr. McWhorter was an independent consultant. Mr. McWhorter serves as a Director
of Patriot Medical Technologies, Bytes of Knowledge and eConception.
JAY R. BLOOM is one of our Directors. Mr. Bloom is a Managing Director and
co-head of the High Yield Division of CIBC World Markets, a position he has held
since August 1995. From 1990 to 1995 Mr. Bloom was a Managing Director of the
Argosy Group L.P. Mr. Bloom serves as a Director of several companies, including
Global Crossing Ltd., Consolidated Advisers Limited, L.L.C., Heating Oil
Partners, L.P. and Morris Material Handling, Inc.
ROBERT E. KISS is one of our Directors. Mr. Kiss is a Vice President of
J.P. Morgan Capital Corporation, the private equity investment unit of J.P.
Morgan & Co. Inc., which he joined in 1996. Prior to 1996 Mr. Kiss served in
various capacities in J.P. Morgan's corporate finance department. Mr. Kiss
serves as a Director of several companies, including Jeepers! Inc. and Iowa
Select Farms, Inc.
Pursuant to the stockholders agreement, dated as of October 8, 1999 among
IASIS, JLL Healthcare, LLC, Triumph Capital Corporation, General Electric
Capital Corporation and other stockholders of IASIS, our board of directors will
initially be comprised of thirteen members, including ten designees of JLL
Healthcare, LLC, the chairman of the board, the chief executive officer and one
independent physician. For further information on the stockholders agreement,
see "Stockholders Agreement" on page 96.
Pursuant to the operating agreement of JLL Healthcare, LLC, its designees
on the board of directors will include eight designees of Joseph Littlejohn &
Levy, one designee of CIBC WMC Inc. and one designee of J.P. Morgan Capital
Corporation. Messrs. Levy, Ying, Lightcap, Grillo, Frank, Rodriguez, Berk,
McWhorter, Bloom and Kiss serve on the board of directors as designees of JLL
Healthcare, LLC.
BOARD OF DIRECTORS
GENERAL. The business and affairs of IASIS are managed by its board of
directors. Under our by-laws, the IASIS board of directors must consist of not
less than three nor more than eighteen members, with the exact number of members
being fixed from time to
93
<PAGE> 107
time by our board of directors. Currently, our board of directors is comprised
of twelve members.
TERM OF OFFICE OF DIRECTORS. Directors are elected by a plurality of the
votes cast at IASIS's annual meeting of stockholders. Once elected, each
director serves until the next annual meeting of stockholders and until his or
her successor is duly elected and qualified, or until his or her earlier death,
resignation or removal.
DIRECTOR COMPENSATION. Directors of IASIS do not receive any compensation
for their services. They are, however, reimbursed for travel expenses and other
out-of-pocket costs incurred in connection with attendance at board of directors
and committee meetings.
COMMITTEES OF THE BOARD OF DIRECTORS. As permitted by our amended and
restated by-laws, IASIS' board of directors has two standing committees: the
Audit Committee and the Compensation Committee.
The Audit Committee currently consists of Messrs. McWhorter, Kiss, Bloom
and Ying. The primary purpose of the Audit Committee is to provide objective
oversight of the accounting functions and internal controls of IASIS, its
subsidiaries and affiliates and to ensure the quality and objectivity of our
financial statements.
The Compensation Committee currently consists of Messrs. White, Levy,
Lightcap and Rodriguez. The primary purpose of the Compensation Committee is to
oversee and maintain the compensation practices of IASIS, to establish
appropriate incentives to motivate and reward key management employees and
oversee the competency and qualification of key management personnel.
EMPLOYMENT AGREEMENT
We intend to enter into an employment agreement with Mr. Gower, our
President, Chief Executive Officer and one of our Directors.
THE 2000 STOCK OPTION PLAN AND OTHER INCENTIVE ARRANGEMENTS
We plan to adopt the 2000 Stock Option Plan which will provide for the
grant to our officers and key employees of incentive stock options and
nonqualified stock options, in either case, to acquire shares of our common
stock. The 2000 Stock Option Plan will provide for the issuance of options to
purchase shares of common stock. The options will vest in seven years, but this
vesting may be accelerated upon the achievement of specific performance
objectives. The grant of options to purchase stock under our 2000 Stock Option
Plan is intended to assist us in retaining and recruiting employees of
outstanding ability and to give senior management a financial stake in the
future performance of IASIS. No options under the plan have been granted yet.
MANAGEMENT EQUITY PURCHASE PROGRAM
We expect to establish a management equity purchase program to assist some
of our executive officers in acquiring shares of our common stock. Pursuant to
the program, some of our executive officers will enter into loan agreements with
IASIS to pay for a portion of their investment in our common stock. The
principal amount of such loans, plus interest thereon, will be due in full three
years from issuance and must be repaid from a portion of any cash bonuses
received by the executives prior to such time. The aggregate principal amount of
loans outstanding under the program will not exceed $5.0 million.
94
<PAGE> 108
STOCK OWNERSHIP
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding ownership of shares of
our common stock and preferred stock, as of December 31, 1999 by:
- each person known to be a holder of our common stock;
- the members of our board of directors;
- our four most highly compensated executive officers; and
- all our current directors and executive officers as a group.
When reviewing the following table, you should be aware that:
- The amounts and percentage of common stock and preferred stock
beneficially owned are reported on the basis of regulations of the SEC
governing the determination of beneficial ownership of securities. Under
the rules of the SEC, a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power," which includes the
power to vote or to direct the voting of such security, or "investment
power," which includes the power to dispose of or to direct the
disposition of such security. A person is also deemed to be a beneficial
owner of any securities of which that person has a right to acquire
beneficial ownership within 60 days. Under these rules, more than one
person may be deemed a beneficial owner of securities as to which he has
no economic interest.
- We have two series of preferred stock. All of the shares of Series B
preferred stock are owned by the former shareholders of IASIS Healthcare
Corporation, a Tennessee corporation merged with and into a wholly owned
subsidiary of IASIS. For further information on the terms of our
preferred stock, see "Description of Preferred Stock" on page 156.
- Through its controlling interest in JLL Healthcare, LLC, JLL Fund III,
L.P. is deemed to beneficially own all of the shares of common stock and
preferred stock owned by JLL Healthcare, LLC. Members of JLL Healthcare,
LLC include JLL Fund III, L.P., CIBC WMC Inc., J.P. Morgan Capital
Corporation and other investors.
- Messrs. Gower, Perry and Coyle and Ms. Kale are each former shareholders
of IASIS Healthcare Corporation, a Tennessee corporation merged with and
into a wholly owned subsidiary of IASIS, and received shares of our
common stock and preferred stock in the merger.
- Messrs. Levy, Ying, Lightcap, Grillo, Frank, Rodriguez and Berk are all
associated with JLL Fund III, L.P. which, through its controlling
interest in JLL Healthcare, LLC, is deemed to beneficially own all of the
shares of common stock and preferred stock owned by JLL Healthcare, LLC.
Messrs. Rodriguez and Berk disclaim any beneficial ownership of such
common stock and preferred stock. Messrs. Levy, Ying, Lightcap, Grillo
and Frank are managing members of JLL Associates III, LLC, the general
partner of JLL Fund III, L.P., and, as a result, may each be deemed to
beneficially own all of the shares owned by JLL Healthcare, LLC.
- Unless otherwise indicated, the address of each person listed below is
113 Seaboard Lane, Suite A-200, Franklin, Tennessee 37067.
95
<PAGE> 109
<TABLE>
<CAPTION>
COMMON STOCK OF IASIS PREFERRED STOCK OF IASIS
-------------------------------- --------------------------------
PERCENT OF PERCENT OF
NUMBER OF SHARES CLASS NUMBER OF SHARES CLASS
---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
BENEFICIAL OWNERS:
JLL Healthcare, LLC........... 1,162,281 84.7% 148,772 90.0%
Paracelsus Healthcare
Corporation................. 80,000 5.8% -- --
Triumph Capital Corporation... 65,789 4.8% 8,421 5.1%
General Electric Capital
Corporation................. 21,930 1.6% 2,807 1.7%
Other third-party
investors(1)................ 41,490 3.0% 5,311 3.2%
DIRECTORS AND EXECUTIVE
OFFICERS:
David R. White................ 433 * 55 *
C. Wayne Gower................ 1,874 * 240 *
Kenneth W. Perry.............. 1,761 * 225 *
Roberta A. Kale............... 1,085 * 142 *
Frank A. Coyle................ 1,428 * 183 *
Linda W. Hischke.............. -- -- -- --
Paul S. Levy.................. 1,162,281 84.7% 148,772 90.0%
David Y. Ying................. 1,162,281 84.7% 148,772 90.0%
Jeffrey C. Lightcap........... 1,162,281 84.7% 148,772 90.0%
Anthony Grillo................ 1,162,281 84.7% 148,772 90.0%
Ramsey A. Frank............... 1,162,281 84.7% 148,772 90.0%
Frank J. Rodriguez............ -- -- -- --
Michael S. Berk............... -- -- -- --
Stuart C. McWhorter........... 1,212 * 155 *
Jay R. Bloom(2)............... -- -- -- --
Robert E. Kiss(3)............. -- -- -- --
All directors and executive
officers as a group (11
persons).................... 1,170,074 85.3% 149,772 90.6%
</TABLE>
- -------------------------
(1) Comprised of the former shareholders of IASIS Healthcare Corporation, a
Tennessee corporation merged with and into a wholly owned subsidiary of
IASIS.
(2) Mr. Bloom is a Managing Director and co-head of the High Yield Division of
CIBC World Markets, which has a membership interest in JLL Healthcare, LLC.
Mr. Bloom disclaims beneficial ownership of such interest or the shares of
common and preferred stock owned by JLL Healthcare, LLC.
(3) Mr. Kiss is a Vice President and an officer of J.P. Morgan Capital
Corporation, which has a membership interest in JLL Healthcare, LLC. Mr.
Kiss disclaims beneficial ownership of such interest or the shares of common
and preferred stock owned by JLL Healthcare, LLC.
* Less than 1%.
96
<PAGE> 110
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
JLL Healthcare, LLC, which beneficially owns 84.7% of our common stock, is
controlled by Joseph Littlejohn & Levy Fund III, L.P., an affiliate of Joseph
Littlejohn & Levy. PHC/PHC Holdings, Inc., which beneficially owns 5.8% of our
common stock, is controlled by Paracelsus Healthcare Corporation. Some of these
entities and individuals are parties to material agreements with IASIS, as
described below.
TRANSITION SERVICES AGREEMENT
We are a party to transition services agreements with Paracelsus Healthcare
Corporation and Tenet Healthcare Corporation. Paracelsus Healthcare Corporation
and Tenet Healthcare Corporation have agreed to provide certain services to us,
for periods generally not to exceed twelve months, including data processing
services and systems technology services, at the service provider's cost plus
2.0%, in the case of the arrangement with Paracelsus Healthcare Corporation, or
for a flat fee based on out of pocket expenses, in the case of the arrangement
with Tenet Healthcare Corporation.
LICENSE AGREEMENTS
We are a party to license agreements with Paracelsus Healthcare Corporation
and Tenet Healthcare Corporation, pursuant to which those parties granted us
licenses to utilize specific intellectual property related to the administration
of our business for a period of twelve months. This intellectual property
agreement consists of administrative software, and policies, procedures and
compliance manuals.
STOCKHOLDERS AGREEMENT
In connection with the recapitalization and the acquisition of hospitals
and related facilities from Tenet Healthcare Corporation, JLL Healthcare, LLC,
Triumph Capital Corporation, General Electric Capital Corporation and the other
investors in IASIS entered into a stockholders agreement dated October 8, 1999
governing their ownership of IASIS. The following is a summary of the material
terms of the stockholders agreement:
- The stockholders agreement provides that our board of directors initially
consists of thirteen members, composed of ten representatives of JLL
Healthcare, LLC, the chairman of the board, the chief executive officer
and an independent physician.
- The stockholders other than JLL Healthcare, LLC have agreed to certain
provisions relating to the transfer of their shares.
- There is no provision restricting how our stockholders vote on any
matters.
- Following an initial public offering of our common stock, the
stockholders, under specified circumstances and subject to some
conditions, will have the right to require us to register their shares
under the Securities Act and to participate in specified registrations of
shares by IASIS.
- Prior to an initial public offering of our common stock, each stockholder
will have designated preemptive rights to participate in any future
private offerings of our capital stock to maintain their pro rata
interest in IASIS.
- We have agreed to pay some administrative expenses incurred by JLL
Healthcare, LLC.
97
<PAGE> 111
Some provisions of the stockholders agreement will terminate in the event
of an initial public offering of our common stock.
TAX SHARING AGREEMENT
We and some of our subsidiaries are included in JLL Healthcare, LLC's
consolidated group for U.S. federal income tax purposes as well as in some
consolidated, combined or unitary groups which include JLL Healthcare, LLC for
state, local and foreign income tax purposes. We and JLL Healthcare have entered
into a tax sharing agreement in connection with the recapitalization. Pursuant
to the tax sharing agreement, we generally will make payments to JLL Healthcare,
LLC such that, with respect to tax returns for any taxable period in which we or
any of our subsidiaries is included in JLL Healthcare, LLC's consolidated group
or any combined group, including JLL Healthcare, LLC, the amount of taxes to be
paid by us will be determined, subject to some adjustments, as if we and each of
our subsidiaries included in JLL Healthcare, LLC's consolidated group or a
combined group including JLL Healthcare, LLC filed their own consolidated,
combined or unitary tax return. We and JLL Healthcare, LLC will prepare pro
forma tax returns with respect to any tax return filed with respect to JLL
Healthcare, LLC's consolidated group or any combined group including JLL
Healthcare, LLC in order to determine the amount of tax sharing payments under
the tax sharing agreement.
JLL Healthcare, LLC will be responsible for filing any tax return with
respect to JLL Healthcare, LLC's consolidated group or any combined group
including JLL Healthcare, LLC. Pursuant to the tax sharing agreement, we will be
responsible for preparing these tax returns. The tax sharing agreement does not
alter our general responsibility for preparing and filing any tax returns that
include only IASIS and its subsidiaries.
JLL Healthcare, LLC will be primarily responsible for controlling and
contesting any audit or other tax proceeding with respect to JLL Healthcare,
LLC's consolidated group or any combined group including JLL Healthcare, LLC.
Pursuant to the tax sharing agreement, we will conduct the contest of any audit
or tax proceeding that relates to any tax return which we are responsible for
preparing; provided, that the entering into of any settlement or agreement or
any decision in connection with any judicial or administrative tax proceeding
will be subject to the control of JLL Healthcare, LLC.
Each member of a consolidated group for U.S. federal income tax purposes is
jointly and severally liable for the federal income tax liability of each other
member of the consolidated group. Accordingly, although the tax sharing
agreement allocates tax liabilities between us and JLL Healthcare, LLC, for any
period in which we were included in JLL Healthcare, LLC's consolidated group, we
could be liable in the event that any federal tax liability was incurred, but
not discharged, by any other member of JLL Healthcare, LLC's consolidated group.
98
<PAGE> 112
DESCRIPTION OF CREDIT FACILITY
The following summary of the material provisions of the credit facility
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the terms of the credit facility.
Under the credit facility, a syndicate of lenders made a total of $455.0
million available to us in the form of
- $80.0 million Tranche A term loan, fully drawn upon the offering of the
old notes,
- $250.0 million Tranche B term loan, fully drawn upon the offering of the
old notes, and
- a commitment to provide a revolving credit facility of up to $125.0
million.
Proceeds from the credit facility together with proceeds from the offering
of the old notes and the equity investment made by JLL Healthcare, LLC and other
investors were used by us to:
- repay in its entirety the $200.0 million credit facility of which
approximately $160.0 million was outstanding,
- finance a portion of the acquisition of hospitals and related facilities
from Tenet Healthcare Corporation,
- fund an opening cash balance required for working capital and
- pay related fees and expenses associated with the transactions.
The loans under the credit facility bear interest at variable rates at a
fixed margin above either Morgan Guaranty Trust Company of New York's alternate
base rate or its reserve-adjusted LIBOR. Initially, the margins will be as
follows:
<TABLE>
<CAPTION>
CREDIT FACILITY BASE RATE LIBOR
- --------------- --------- -----
<S> <C> <C>
Revolver................................... 2.50% 3.50%
Tranche A Term Loan........................ 2.50% 3.50%
Tranche B Term Loan........................ 3.25% 4.25%
</TABLE>
Thereafter, the margins for the revolver and the Tranche A Loan will vary
based on a pricing grid.
We may voluntarily prepay some or all of our obligations under the credit
facility. In addition, the loans under the credit facility are subject to
mandatory prepayment under specific circumstances, including from a portion of
excess cash flow and the net proceeds of specified casualty events, asset sales
and debt issuances, each subject to various exceptions.
REVOLVING CREDIT FACILITY
Pursuant to the revolving credit facility, up to $125.0 million may be
borrowed, repaid and reborrowed by us from time to time. Letters of credit and
swing line loans are available under the revolving credit facility. The
revolving credit facility terminates five years after the closing date of the
credit facility.
99
<PAGE> 113
TRANCHE A TERM LOAN
The $80.0 million Tranche A term loan was fully drawn in a single borrowing
on the closing date of the credit facility and, once repaid, cannot be
reborrowed. The Tranche A term loan matures on the five year anniversary of the
closing of the credit facility.
TRANCHE B TERM LOAN
The $250.0 million Tranche B term loan was fully drawn in a single
borrowing on the closing date of the credit facility and, once repaid, cannot be
reborrowed. The Tranche B term loan matures on the seven year anniversary of the
closing of the credit facility. There will be no substantial amortization of the
Tranche B term loan until the sixth year.
The credit facility contains negative covenants limiting our ability to,
among other things, incur debt, create liens, pay dividends, make distribution
or stock repurchases, make investments or capital expenditures, engage in
transactions with affiliates, sell assets, and engage in mergers or acquisitions
and other negative covenants customary for such type of financing.
The credit facility requires us to comply with certain financial tests and
to maintain certain financial ratios relating to total leverage, fixed charge
coverage, and interest expense coverage. Failure to satisfy any of these
financial covenants constitutes a default under the credit facility. The credit
facility also includes representations and warranties, affirmative covenants and
events of default, including, without limitation, a cross default to our other
material indebtedness (and our subsidiaries) or a change of control, in each
case, customary for such type of financing.
Our obligations under the credit facility are guaranteed by our direct and
indirect domestic subsidiaries (other than unrestricted subsidiaries). In
addition, our obligations and such guarantor subsidiary's obligations under the
credit facility are secured by substantially all of our assets and such
guarantor subsidiary's assets, including the capital stock of subsidiaries with
customary and other specific exceptions.
100
<PAGE> 114
DESCRIPTION OF NOTES
IASIS issued the old notes under an indenture, by and among itself, its
Guarantors and The Bank of New York, as trustee. The following summary of the
indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Trust Indenture Act and to all of the
provisions of the indenture, including the definitions of various terms in the
indenture and those terms made a part of the indenture by reference to the Trust
Indenture Act as in effect on the date of the indenture.
The indenture is attached as an exhibit to the registration statement of
which this prospectus forms a part and is incorporated by reference in this
prospectus in its entirety. A copy of the indenture may be obtained from IASIS
by any holder of the notes upon request. Please refer to the section below
captioned "--Definitions" for the definitions of capitalized terms used in this
section of the prospectus and not otherwise defined. Review of the defined terms
found in that section is necessary to an understanding of the restrictions and
limitations imposed on IASIS by the notes and the indenture. For purposes of
this description, the word "IASIS" refers only to IASIS Healthcare Corporation
and not its subsidiaries.
The terms of the new notes are identical in all material respects to the
terms of the old notes, except for transfer restrictions relating to the
outstanding notes, and, in both cases, include those terms stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act. Any old notes that remain outstanding after the exchange offer,
together with the new notes issued in the exchange offer, will be treated as a
single class of securities under the indenture for voting purposes. When we
refer to the term "note" or "notes" in this "Description of Notes" section, we
are referring to both the old notes and the new notes to be issued in the
exchange offer. When we refer to "holders" of the notes, we are referring to
those persons who are the registered holders of the notes on the books of the
registrar appointed under the indenture.
As of the date of the indenture, all of our subsidiaries will be
"Restricted Subsidiaries." However, under the circumstances described below
under the caption "--Covenants--Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate some of our subsidiaries as
"Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will not be subject
to many of the restrictive covenants in the indenture. Our Unrestricted
Subsidiaries will not guarantee the notes.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The notes:
- are general unsecured obligations of IASIS;
- are subordinated in right of payment to all existing and future Senior
Debt of IASIS;
- are equal in right of payment with any future senior subordinated
Indebtedness of IASIS; and
- are unconditionally guaranteed by the Guarantors.
The notes are guaranteed by all of the Domestic Subsidiaries of IASIS.
101
<PAGE> 115
Each Guarantee of the notes:
- is a general unsecured obligation of the Guarantor;
- is subordinated in right of payment to all existing and future Senior
Debt of the Guarantor; and
- is equal in right of payment with any future senior subordinated
Indebtedness of the Guarantor.
As of the date of this prospectus, all of our subsidiaries will be
Guarantors.
PRINCIPAL, MATURITY AND INTEREST
The notes in aggregate principal amount of $230.0 million will mature on
October 15, 2009 under the indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. The old notes and the new notes
will be issued in denominations of $1,000 and integral multiples of $1,000.
Interest on the notes will accrue at the rate of 13% per annum and will be
payable semi-annually in arrears on April 15 and October 15, commencing on April
15, 2000. IASIS will make each interest payment to the persons who are holders
of record at the close of business on the April 1 and October 1 immediately
preceeding the applicable interest payment date.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a holder has given wire transfer instructions to IASIS, IASIS will pay
all principal, interest and premium and Liquidated Damages, if any, on that
holder's notes in accordance with those instructions. All other payments on the
notes will be made at the office or agency of the paying agent and registrar
within the City and State of New York unless IASIS elects to make interest
payments by check mailed to the registered addresses of the holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar for the notes.
IASIS may change the paying agent or registrar without prior notice to holders
of the notes, and IASIS or any of its Subsidiaries may act as paying agent or
registrar.
TRANSFER AND EXCHANGE
A holder of the notes may transfer or exchange the notes in accordance with
the indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and IASIS may
require a holder to pay any taxes and fees required by law or permitted by the
indenture. IASIS is not required to transfer or exchange any note selected for
redemption. Also, IASIS is not required to transfer or exchange any note for a
period of 15 days before a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
102
<PAGE> 116
SUBSIDIARY GUARANTEES
The Guarantors will jointly and severally guarantee IASIS' obligations
under the notes. Each Subsidiary Guarantee will be subordinated to the prior
payment in full of all Senior Debt of that Guarantor. The subordination
provisions applicable to the Subsidiary Guarantees will be the same as the
subordination provisions applicable to the notes, as set forth below under
"-- Subordination." The obligations of each Guarantor under its Subsidiary
Guarantee will be limited as necessary to prevent that Subsidiary Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk
Factors--The Notes and the Subsidiary Guarantees Could be Deemed to be
Fraudulent Conveyances."
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into--whether or not the
Guarantor is the surviving Person--another Person, other than IASIS or another
Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in the sale or disposition or
the Person formed by or surviving the consolidation or merger
assumes all the obligations of that Guarantor pursuant to a
supplemental indenture satisfactory to the trustee; or
(b) the Net Proceeds of the sale or other disposition are applied
in accordance with the "Asset Sale" provisions of the
indenture.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that guarantor or of a
Guarantor which is the parent company of that Guarantor (including
by way of merger or consolidation) to a Person that is not (either
before or after giving effect to the transaction) a Subsidiary of
IASIS, if the Guarantor or the parent company applies the Net
Proceeds of that sale or other disposition in accordance with the
"Asset Sale" provisions of the indenture;
(2) in connection with any sale of all of the Capital Stock of a
Guarantor (or a parent company Guarantor) to a Person that is not
(either before or after giving effect to the transaction) a
Subsidiary of IASIS, if no Default or Event of Default has
occurred and is continuing or if IASIS applies the Net Proceeds of
that sale in accordance with the "Asset Sale" provisions of the
indenture; or
(3) if IASIS properly designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary.
See "--Repurchase at the Option of Holders--Asset Sales."
SUBORDINATION
The payment of principal, interest and premium and Liquidated Damages, if
any, and any other Obligations under or relating to the notes will be
subordinated to the prior payment in full in cash or Cash Equivalents (other
than Cash Equivalents of the type referred to in clauses (3) and (4) of the
definition of Cash Equivalents) of all Senior Debt of IASIS, including Senior
Debt incurred after the date of the indenture.
103
<PAGE> 117
The holders of Senior Debt will be entitled to receive payment in full in
cash or Cash Equivalents--other than Cash Equivalents of the type referred to in
clauses (3) and (4) of the definition of Cash Equivalents--of all Obligations
due in respect of Senior Debt, including interest after the commencement of any
bankruptcy proceeding at the rate specified in the applicable Senior Debt,
whether or not such interest is an allowable claim, before the holders of the
notes will be entitled to receive any payment or distribution of any kind or
character with respect to any Obligations on, or relating to, the notes--except
that the holders of the notes may receive and retain Permitted Junior Securities
and payments made from the trust described under "--Legal Defeasance and
Covenant Defeasance" so long as the trust was created in accordance with all
relevant conditions specified in the indenture at the time it was created--in
the event of any distribution to creditors of IASIS:
(1) in a liquidation or dissolution of IASIS;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to IASIS or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of IASIS' assets and liabilities.
IASIS also may not make any payment or distribution of any kind with
respect to any Obligations on or with respect to, the notes or acquire any notes
for cash or property or otherwise--except in Permitted Junior Securities or from
the trust described under "--Legal Defeasance and Covenant Defeasance" so long
as the trust was created in accordance with all relevant conditions specified in
the indenture at the time it was created--if:
(1) a payment default on Designated Senior Debt occurs and is
continuing; or
(2) any other default occurs and is continuing on any Designated
Senior Debt that permits holders of that Designated Senior Debt or
their Representative to accelerate its maturity and the Trustee
receives a notice of the default which by its terms states that it
is a "Payment Blockage Notice" hereunder (a "Payment Blockage
Notice") from the Representative of that Designated Senior Debt.
Payments on and distributions with respect to any Obligations on, or with
respect to, the notes may and will be resumed:
(1) in the case of a payment default, upon the date on which the
default is cured or waived; and
(2) in the case of a nonpayment default, the earlier of (a) the date
on which all nonpayment defaults are cured or waived, (b) 179 days
after the date of delivery of the applicable Payment Blockage
Notice or (c) the date on which the Trustee receives notice from
the Representative for such Designated Senior Debt rescinding the
Payment Blockage Notice, unless the maturity of any Designated
Senior Debt has been accelerated.
No new Payment Blockage Notice will be effective unless and until at least
360 days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee will be, or be made, the
basis for a subsequent
104
<PAGE> 118
Payment Blockage Notice unless the default has been cured or waived for a period
of not less than 90 consecutive days.
If the trustee or any holder of the notes receives any payment or
distribution of assets of any kind or character, whether in cash, properties or
securities, in respect of any Obligations with respect to the notes--except in
Permitted Junior Securities or from the trust as described under "--Legal
Defeasance and Covenant Defeasance" so long as the trust was created in
accordance with all relevant conditions specified in the indenture at the time
it was created--at a time when such payment is prohibited by these subordination
provisions, the trustee or the holder, as the case may be, will hold the payment
in trust for the benefit of the holders of Senior Debt. Upon the proper written
request of the holders of Senior Debt or their representative, the trustee or
the holder, as the case may be, shall forthwith deliver the amounts in trust to
the holders of Senior Debt (on a pro rata basis based on the aggregate principal
amount of the Senior Debt) or their proper representative.
IASIS must promptly notify holders of Senior Debt if payment of the notes
is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of IASIS, holders of notes may
recover less ratably than creditors of IASIS who are holders of Senior Debt. See
"Risk Factors--Subordination."
OPTIONAL REDEMPTION
At any time prior to October 15, 2002, IASIS may on any one or more
occasions redeem up to 35% of the aggregate principal amount of notes issued
under the indenture at a redemption price of 113.000% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net cash proceeds of one or more Equity Offerings;
provided that:
(1) at least 65% of the aggregate principal amount of notes issued
under the indenture remains outstanding immediately after the
occurrence of the redemption, excluding notes held by IASIS and
its Subsidiaries; and
(2) the redemption must occur within 90 days of the date of the
closing of the Equity Offering.
Except pursuant to the preceding paragraph, the notes will not be
redeemable at IASIS' option prior to October 15, 2004.
After October 15, 2004, IASIS may redeem all or a part of the notes upon
not less than 30 nor more than 60 days' notice, at the redemption
prices--expressed as percentages of principal amount--set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on October 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004................................................... 106.500%
2005................................................... 104.875%
2006................................................... 103.250%
2007................................................... 101.625%
2008 and thereafter.................................... 100.000%
</TABLE>
105
<PAGE> 119
MANDATORY REDEMPTION
IASIS is not required to make mandatory redemption or sinking fund payments
with respect to the notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of notes will have the right to
require IASIS to repurchase all or any part, equal to $1,000 or an integral
multiple of $1,000, of that holder's notes pursuant to a Change of Control Offer
on the terms set forth in the indenture. In the Change of Control Offer, IASIS
will offer a Change of Control Payment in cash equal to 101% of the aggregate
principal amount of notes repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the date of purchase. Within 30 days
following any Change of Control, IASIS will mail a notice to each holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase notes on the Change of Control Payment Date specified
in such notice (the "Change of Control Payment Date"), which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed, pursuant to the procedures required by the indenture and described in
such notice. IASIS will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions of the indenture, IASIS will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Change of Control provisions of the indenture by virtue of
the conflict.
On the Change of Control Payment Date, IASIS will, to the extent lawful:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions of notes so
tendered; and
(3) deliver or cause to be delivered to the Trustee the notes so
accepted together with an Officers' Certificate stating the
aggregate principal amount of notes or portions of notes being
purchased by IASIS.
The Paying Agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for those notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new note will be in a principal
amount of $1,000 or an integral multiple of $1,000.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, IASIS
will either repay all outstanding Senior Debt or obtain the requisite consents,
if any, under all agreements governing outstanding Senior Debt to permit the
repurchase of notes required by this covenant. IASIS will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
IASIS shall first comply with the covenant in the first sentence in the
immediately preceding paragraph before it will be required to repurchase notes
pursuant to the
106
<PAGE> 120
provisions described above. IASIS's failure to comply with the covenant
described in the immediately preceding sentence may, constitute with notice and
lapse of time, an Event of Default described under clause (2) under the caption
"-- Events of Default and Remedies."
The provisions described above that require IASIS to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the holders of the notes to require that IASIS
repurchase or redeem the notes in the event of a takeover, recapitalization or
similar transaction.
IASIS will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by IASIS and purchases
all notes validly tendered and not withdrawn under the Change of Control Offer.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of IASIS and its
Restricted Subsidiaries taken as a whole. Although there is a limited body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a holder of notes to require IASIS to repurchase the notes as a
result of a sale, lease, transfer, conveyance or other disposition of less than
all of the assets of IASIS and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
ASSET SALES
IASIS will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:
(1) IASIS or the Restricted Subsidiary, as the case may be, receives
consideration at the time of the Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold
or otherwise disposed of;
(2) the fair market value is determined by IASIS' Board of Directors
and evidenced by a resolution of the Board of Directors; and
(3) at least 75% of the consideration received by IASIS or such
Restricted Subsidiary is in the form of cash or Cash Equivalents
other than in the case where IASIS or such Restricted Subsidiary
is undertaking a Hospital Swap. For purposes of this provision,
each of the following will be deemed to be cash:
(a) any liabilities -- as shown on IASIS' or such
Restrict -- Subsidiary's most recent balance sheet -- of IASIS
or any Restricted Subsidiary -- other than contingent
liabilities and liabilities that are by their terms
subordinated to the notes or any Subsidiary Guarantee -- that
are assumed by the transferee of any of those assets pursuant
to a novation agreement that releases IASIS or the Restricted
Subsidiary from further liability; and
107
<PAGE> 121
(b) any securities, notes or other obligations received by IASIS or
any Restricted Subsidiary from the transferee that are (subject
to ordinary settlement periods) converted by IASIS or the
Restricted Subsidiary into cash (to the extent of the cash
received in that conversion) within 180 days of the applicable
Asset Sale.
Notwithstanding the foregoing, the 75% limitation referred to in clause (3)
will not apply to any Asset Sale in which the cash or Cash Equivalents portion
of the consideration received from the Asset Sale, determined in accordance with
the foregoing provision, is equal to or greater than what the after-tax proceeds
would have been had such Asset Sale complied with the 75% limitation described
above.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
IASIS may apply such Net Proceeds at its option:
(1) to repay Senior Debt and, if the Senior Debt repaid is revolving
credit Indebtedness, to correspondingly reduce commitments with
respect to that Indebtedness;
(2) to acquire all or substantially all of the assets of, or the
Voting Stock of, another Permitted Business;
(3) to make capital expenditures; or
(4) to acquire other assets that are used or useful in a Permitted
Business;
The requirements of clauses (2)-(4) above will, however, be deemed to be
satisfied if an agreement (including a lease, whether a capital lease or an
operating lease) committing to make the acquisitions or expenditures referred to
in the agreement is entered into by IASIS or its Restricted Subsidiary within
365 days after the receipt of such Net Proceeds and such Net Proceeds are
applied in accordance with such agreement.
Notwithstanding the foregoing, in the event that a Restricted Subsidiary
dividends or distributes to all of its stockholders on a pro rata basis any
proceeds of an Asset Sale to IASIS or another Restricted Subsidiary, IASIS or
the Restricted Subsidiary need only apply its share of such proceeds in
accordance with the preceding clauses (1) through (4).
Pending the final application of any such Net Proceeds, IASIS may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, IASIS will make an
Asset Sale Offer to all holders of notes and all holders of other Indebtedness
that is equal in ranking to the notes containing provisions similar to those set
forth in the indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets to purchase the maximum principal amount of notes
and the other equal ranking Indebtedness that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of
principal amount plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, IASIS may use such
Excess Proceeds for any purpose not otherwise prohibited by the indenture. If
the aggregate principal amount of notes and such other equal ranking
Indebtedness tendered into the Asset Sale Offer exceeds the amount of Excess
Proceeds, the trustee will select the notes and such other equal ranking
Indebtedness to be purchased on a pro rata basis based on the principal
108
<PAGE> 122
amount of notes and such other equal ranking Indebtedness tendered. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset
at zero.
IASIS will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with each repurchase of notes
pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the Asset Sales provisions of the
indenture, IASIS will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under the Asset Sale
provisions of the indenture by virtue of such conflict.
The agreements governing IASIS' outstanding Senior Debt currently prohibit
IASIS from purchasing any notes, and also provides that certain change of
control or asset sale events with respect to IASIS would constitute a default
under these agreements. Any future credit agreements or other agreements
relating to Senior Debt to which IASIS becomes a party may contain similar
restrictions and provisions. In the event a Change of Control or Asset Sale
occurs at a time when IASIS is prohibited from purchasing notes, IASIS could
seek the consent of its senior lenders to the purchase of notes or could attempt
to refinance the borrowings that contain such prohibition. If IASIS does not
obtain such a consent or repay those borrowings, IASIS will remain prohibited
from purchasing notes. In that case, IASIS' failure to purchase tendered notes
would constitute an Event of Default under the indenture which would, in turn,
constitute a default under such Senior Debt. In those circumstances, the
subordination provisions in the indenture would likely restrict payments to the
holders of notes.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of
the principal national securities exchange on which the notes are
listed; or
(2) if the notes are not so listed, on a pro rata basis, by lot or by
a method as the trustee deems fair and appropriate.
No notes of $1,000 or less will be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at his or her
registered address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount to be
redeemed. A substitute note in principal amount equal to the unredeemed portion
of the original Note will be issued in the name of the holder upon cancellation
of the original note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
notes or portions of them called for redemption.
109
<PAGE> 123
COVENANTS
Restricted Payments
IASIS will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of IASIS' or any of its Restricted
Subsidiaries' Equity Interests including, without limitation, any
payment in connection with any merger or consolidation involving
IASIS or any of its Restricted Subsidiaries or to the direct or
indirect holders of IASIS' or any of its Restricted Subsidiaries'
Equity Interests in their capacity as such -- other than dividends
or distributions payable in Equity Interests (other than
Disqualified Stock) -- of IASIS or payable to IASIS or a
Restricted Subsidiary of IASIS;
(2) purchase, redeem or otherwise acquire or retire for value
including, without limitation, in connection with any merger or
consolidation involving IASIS any Equity Interests of IASIS or any
direct or indirect parent of IASIS;
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness
that is subordinated to the notes or the Subsidiary Guarantees,
except a payment of interest or principal at or after the Stated
Maturity thereof; or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) IASIS would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described below under
the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by IASIS and its Restricted
Subsidiaries after the date of the indenture (excluding Restricted
Payments permitted by clauses (2) through (10) of the next
succeeding paragraph and the aggregate amount of outstanding
Permitted Investments allowed pursuant to clause (16) of the
definition of Permitted Investments), is less than the sum,
without duplication, of:
(a) 50% of the Consolidated Net Income of IASIS for the period,
taken as one accounting period, from the beginning of the first
fiscal quarter ending after the date of the Indenture to the
end of IASIS' most recently ended fiscal quarter for which
internal financial statements are available at the time of the
Restricted Payment or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit, plus
110
<PAGE> 124
(b) 100% of the aggregate net cash proceeds received by IASIS since
the date of the indenture as a contribution to its equity
capital, other than Disqualified Stock, or from the issue or
sale of Equity Interests of IASIS, other than Disqualified
Stock, or from the issue or sale of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt
securities of IASIS that have been converted into or exchanged
for such Equity Interests, other than Equity Interests,
Disqualified Stock or debt securities, sold to a Subsidiary of
IASIS, plus
(c) the lesser of (i) all cash returns, including dividends,
interest, distributions, returns of principal and profits on
sale, on Restricted Investments that were made after the date
of the indenture (less the cost of disposition, if any);
provided that the amount of cash return on the Restricted
Investment will be excluded from Consolidated Net Income for
purposes of calculating clause 3(a) above on an after tax basis
to the extent included in Consolidated Net Income, and (ii) the
initial amount of the Restricted Investment, plus
(d) upon redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary not in violation of the indenture, the
fair market value of the net assets of the Subsidiary.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the
payment would have complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of IASIS or any
Guarantor or of any Equity Interests of IASIS in exchange for, or
out of the net cash proceeds of the substantially concurrent sale,
other than to a Restricted Subsidiary of IASIS, of, Equity
Interests of IASIS, other than Disqualified Stock; provided that
the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (3)(b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of IASIS or any Guarantor with the net
cash proceeds from an incurrence of Permitted Refinancing
Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of IASIS to
the holders of its common Equity Interests on a pro rata basis;
(5) the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of IASIS issued after the date of
the indenture in accordance with the covenant described below
under the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock;"
(6) the declaration and payment of regularly accruing dividends to
holders of any class or series of Designated Preferred Stock of
IASIS issued on or after the date of the indenture; provided that
at the time of the designation of the preferred stock as
Designated Preferred Stock, and after giving effect to such
111
<PAGE> 125
designation on a pro forma basis (for purposes of making
determinations on a pro forma basis pursuant to this clause (6),
treating all dividends which will accrue on such Designated
Preferred Stock during the four full fiscal quarters immediately
following such issuance, as well as all other Designated Preferred
Stock then outstanding, as if the same will in fact be, or have in
fact been, paid in cash), IASIS would have been able to incur at
least $1.00 of additional Indebtedness, other than Permitted Debt,
in accordance with the covenant described below under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock;"
(7) the retirement of any shares of Disqualified Stock of IASIS by
conversion into, or by exchange for, shares of Refinancing
Disqualified Stock of IASIS, or out of the Net Proceeds of the
substantially concurrent sale, other than to a Subsidiary of
IASIS, of other shares of Refinancing Disqualified Stock of
IASIS;
(8) payments to JLL Healthcare, LLC in an amount not to exceed
$500,000 per annum to pay its operating and administrative
expenses incurred in the ordinary course of business;
(9) payments pursuant to the tax sharing agreement among JLL
Healthcare, LLC, IASIS and its subsidiaries, as in effect on the
date of the indenture; and
(10) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of IASIS or any Restricted
Subsidiary of IASIS held by any member of IASIS', or any of its
Restricted Subsidiaries', management pursuant to any management
equity subscription agreement or stock option agreement in effect
as of the date of the indenture; provided that the aggregate
price paid, excluding the cancellation of debt owing by such
management member, for all such repurchased, redeemed, acquired
or retired Equity Interests will not exceed $2.0 million in any
twelve-month period.
The amount of all Restricted Payments other than cash will be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by IASIS or the Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant will be determined by the Board of Directors.
For purposes of determining compliance with this "Restricted Payments"
covenant, in the event that a Restricted Payment meets the criteria of more than
one of the types of Restricted Payments described in the above clauses, IASIS,
in its sole discretion, may order and classify, and from time to time may
reorder and reclassify, such Restricted Payment if it would have been permitted
at the time such Restricted Payment was made and at the time of any such
reclassification.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
IASIS will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness, including Acquired Debt, and IASIS
will not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; provided,
112
<PAGE> 126
however, that IASIS may incur Indebtedness, including Acquired Debt, or issue
Disqualified Stock, and the Guarantors may incur Indebtedness or issue preferred
stock, if the Fixed Charge Coverage Ratio for IASIS' most recently ended four
full fiscal quarters for which financial statements are available immediately
preceding the date on which the additional Indebtedness is incurred or the
Disqualified Stock or preferred stock is issued would have been at least 2.0 to
1, if the additional Indebtedness is incurred or the Disqualified Stock or
preferred stock is issued on or prior to October 15, 2002, or 2.25 to 1, if
additional Indebtedness is incurred or the Disqualified Stock or preferred stock
is issued thereafter, determined on a pro forma basis, including a pro forma
application of the net proceeds therefrom, as if the additional Indebtedness had
been incurred or the preferred stock or Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period;
The first paragraph of this covenant will not prohibit any of the following
(collectively, "Permitted Debt"):
(1) the incurrence by IASIS and any Guarantor of additional
Indebtedness and letters of credit under Credit Facilities in an
aggregate principal amount at any one time outstanding under this
clause (1) (with letters of credit being deemed to have a
principal amount equal to the face amount thereof) not to exceed
$330.0 million plus the greater of (x) $125.0 million and (y) the
amount equal to 85% of the net book value of receivables and 65%
of the net book value of inventory of IASIS and its Restricted
Subsidiaries on a consolidated basis at the time the Indebtedness
is incurred, as determined in accordance with GAAP, less the
aggregate amount of all scheduled repayments and mandatory
prepayments, of the principal amount of any term Indebtedness
under a Credit Facility, other than repayments that are
concurrently reborrowed, that have actually been made since the
date of the indenture and less the aggregate amount of all Net
Proceeds of Asset Sales that have actually been applied by IASIS
or any of its Restricted Subsidiaries since the date of the
indenture to repay revolving credit Indebtedness to the extent
that the corresponding revolving credit commitments have been
permanently reduced under a Credit Facility pursuant to the
covenant described above under the caption "--Repurchase at the
Option of Holders--Asset Sales" (provided that the amount will be
reduced to the extent of any reduction or elimination of any
commitment under any Credit Facility resulting from or relating
to the consummation of any Qualified Receivables Transaction;
provided, further, that the reduction will apply only for so long
as the Qualified Receivables Transaction is in effect);
(2) the incurrence by IASIS and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by IASIS and the Guarantors of Indebtedness
represented by the notes and the related Subsidiary Guarantees to
be issued on the date of the indenture and the exchange notes and
the related Subsidiary Guarantees to be issued pursuant to the
registration rights agreement;
(4) the incurrence by IASIS or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase
price or cost of construction or
113
<PAGE> 127
improvement of property, plant or equipment used in the business
of IASIS or such Restricted Subsidiary, in an aggregate principal
amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant
to this clause (4), not to exceed the greater of $25.0 million and
3% of Total Assets at any time outstanding;
(5) the incurrence by IASIS or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace
Indebtedness, other than intercompany Indebtedness, that was
permitted by the indenture to be incurred under the first
paragraph of this covenant or clauses (2), (3), (4), (5), (14) or
(18) of this paragraph;
(6) the incurrence by IASIS or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among IASIS and any of its
Restricted Subsidiaries; provided, however, that:
(a) if IASIS or any Guarantor is the obligor on the Indebtedness,
unless such Indebtedness is owing to IASIS or another
Guarantor, that Indebtedness must be expressly subordinated to
the prior payment in full in cash of all Obligations with
respect to the notes, in the case of IASIS, or the Subsidiary
Guarantee, in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any Indebtedness being held by a Person other
than IASIS or a Restricted Subsidiary thereof and (ii) any sale
or other transfer of any Indebtedness to a Person that is not
either IASIS or a Restricted Subsidiary thereof shall be
deemed, in each case, to constitute an incurrence of
Indebtedness by IASIS or the Restricted Subsidiary, as the case
may be, that was not permitted by this clause (6);
(7) the issuance by any Restricted Subsidiary of preferred stock to
IASIS and any of its Restricted Subsidiaries; provided, however,
that (a) any subsequent issuance or transfer of Equity Interests
that results in any preferred stock being held by a Person other
than IASIS or a Restricted Subsidiary thereof and (b) any sale or
other transfer of any preferred stock to a Person that is not
either IASIS or a Restricted Subsidiary thereof shall be deemed,
in each case, to constitute an issuance of preferred stock by the
Restricted Subsidiary that was not permitted by this clause (7);
(8) the issuance of Refinancing Disqualified Stock, Refinancing
Preferred Stock and Refinancing Subsidiary Preferred Stock;
(9) the incurrence by IASIS or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing
or hedging (i) interest rate risk with respect to any floating or
fixed rate Indebtedness that is permitted by the terms of the
indenture to be outstanding or (ii) fluctuations in foreign
currency exchange rates or commodity prices, with respect to
currencies or commodities used by IASIS or its Restricted
Subsidiaries in the ordinary course of business;
114
<PAGE> 128
(10) the guarantee by IASIS or any of the Guarantors of Indebtedness
of IASIS or a Restricted Subsidiary of IASIS that was permitted
to be incurred by another provision of this covenant;
(11) the accrual of interest, the accretion or amortization of
original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same
terms, and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock
will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included
in Fixed Charges of IASIS as accrued;
(12) Indebtedness of IASIS or any Restricted Subsidiary arising from
the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently, except in the case of
daylight overdrafts, drawn against insufficient funds in the
ordinary course of business; provided, that the Indebtedness is
extinguished within five business days of incurrence;
(13) Indebtedness of IASIS or any of its Restricted Subsidiaries
represented by letters of credit for the account of IASIS or such
Restricted Subsidiary, as the case may be, including, without
limitation, in order to provide security for workers'
compensation claims or payment obligations in connection with
self-insurance and other Indebtedness with respect to workers'
compensation claims, self-insurance and similar obligations of
IASIS or any Restricted Subsidiary;
(14) the incurrence by IASIS of additional Indebtedness in an
aggregate principal amount or accreted value, as applicable,
-- which amount may, but need not be, incurred in whole or in
part under the Credit Facilities -- at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant
to this clause (14), not to exceed $65.0 million;
(15) Indebtedness arising from any agreement entered into by IASIS or
any of its Restricted Subsidiaries providing for indemnification,
purchase price adjustment, holdback, contingency payment
obligations based on the performance of the acquired or disposed
assets or similar obligations, other than Guarantees of
Indebtedness, incurred by any Person in connection with the
acquisition or disposition of assets permitted by the indenture;
(16) trade letters of credit, performance and surety bonds, completion
guarantees or similar arrangements of IASIS or any of its
Restricted Subsidiaries in the ordinary course of business;
(17) Physician Support Obligations incurred by IASIS or any of its
Restricted Subsidiaries;
(18) Acquired Debt of Restricted Subsidiaries acquired or assumed by
IASIS or another Restricted Subsidiary of IASIS, or resulting
from the merger or consolidation of one or more Persons into or
with one or more Restricted Subsidiaries of IASIS; provided, that
(a) the Acquired Debt is not incurred in contemplation of the
respective acquisition, merger or consolidation, and
115
<PAGE> 129
(b) after giving effect to any Acquired Debt acquired or assumed
pursuant to this clause (18), IASIS would be permitted to
incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first
paragraph of this "--Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant; and
(19) the incurrence by a Receivables Subsidiary of Indebtedness in a
Qualified Receivables Transaction.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (19) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, IASIS
will be permitted to classify such item of Indebtedness on the date of its
incurrence, or from time to time reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this covenant. Indebtedness under
Credit Facilities outstanding on the date on which notes are first issued and
authenticated under the indenture shall be deemed to have been incurred on such
date in reliance on the exception provided by clause (1) of the definition of
Permitted Debt.
NO SENIOR SUBORDINATED DEBT
IASIS will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
any Senior Debt of IASIS and senior in any respect in right of payment to the
notes. No Guarantor will incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to the Senior Debt of the Guarantor and senior in any respect in right
of payment to such Guarantor's Subsidiary Guarantee.
LIENS
IASIS will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of any
kind securing Indebtedness or trade payables on any asset now owned or hereafter
acquired, except Permitted Liens, unless:
(1) if the Lien secures Indebtedness which is subordinated to the
notes, that Lien will be subordinated to the Lien granted to the
holders of the notes to the same extent as the Indebtedness is
subordinated to the notes; and
(2) in all other cases, the notes are equally and ratably secured.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
IASIS will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock to IASIS or any of its Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured
by, its profits, or pay any indebtedness owed to IASIS or any of
its Restricted Subsidiaries;
(2) make loans or advances to IASIS or any of its Restricted
Subsidiaries; or
116
<PAGE> 130
(3) transfer any of its properties or assets to IASIS or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indenture
and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings
thereof, provided that those amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a
whole, with respect to the dividend and other payment
restrictions than those contained in such Existing Indebtedness,
as in effect on the date of the indenture;
(2) the indenture, the notes and the Subsidiary Guarantees;
(3) applicable law;
(4) any contract or Capital Stock of a Person acquired by IASIS or
any of its Restricted Subsidiaries as in effect at the time of
such acquisition -- except to the extent such contract was
entered into in connection with or in contemplation of such
acquisition -- which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other
than the Person and its Subsidiaries, or the property or assets
of the Person and its Subsidiaries, so acquired, provided that,
in the case of any contract evidencing Indebtedness, that
Indebtedness was permitted by the terms of the indenture to be
incurred;
(5) customary non-assignment provisions in leases or other agreements
entered into in the ordinary course of business and consistent
with past practices;
(6) customary restrictions in Capital Lease Obligations, security
agreements or mortgages securing Indebtedness of IASIS or a
Restricted Subsidiary to the extent those restrictions restrict
the transfer of the property subject to the Capital Lease
Obligations, security agreements and mortgages;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a
whole, than those contained in the agreements governing the
Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to the Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, asset sale
agreements, stock sale agreements and other similar agreements
entered into in the ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
117
<PAGE> 131
(12) contracts entered into in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in
the aggregate, detract from the value of property or assets of
IASIS or any Restricted Subsidiary in any manner material to
IASIS or any Restricted Subsidiary;
(13) customary provisions restricting dispositions of real property
interests set forth in any reciprocal easement agreements of
IASIS or any Restricted Subsidiary;
(14) Indebtedness or other contractual requirements of a Receivables
Subsidiary in connection with a Qualified Receivables
Transaction, provided that such restrictions apply only to the
Receivables Subsidiary; and
(15) restrictions on the transfer of property or assets required by
any regulatory authority having jurisdiction over IASIS or any
Restricted Subsidiary or any of their businesses.
MERGER, CONSOLIDATION OR SALE OF ASSETS
IASIS may not, directly or indirectly: (1) consolidate or merge with or
into another Person, whether or not IASIS is the surviving corporation; or (2)
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of IASIS and its Restricted Subsidiaries taken as a
whole, in one or more related transactions, to another Person; unless:
(1) either:
(a) IASIS is the surviving corporation; or
(b) the Person formed by or surviving any such consolidation or
merger, if other than IASIS, or to which such sale, assignment,
transfer, conveyance or other disposition shall have been made
is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or
merger, if other than IASIS, or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have
been made assumes all the obligations of IASIS under the notes,
the indenture and the registration rights agreement pursuant to
agreements reasonably satisfactory to the trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) IASIS or the Person formed by or surviving any such consolidation
or merger, if other than IASIS, or to which such sale,
assignment, transfer, conveyance or other disposition shall have
been made, will, on the date of such transaction after giving pro
forma effect thereto and any related financing transactions as if
the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant
described above under the caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock."
118
<PAGE> 132
In addition, IASIS may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation or Sale of
Assets" covenant will not apply to (x) a merger, consolidation, sale,
assignment, transfer, conveyance or other disposition of assets between or among
IASIS and any Guarantor or (y) transfers of accounts receivable and related
assets of the type specified in the definition of "Qualified Receivables
Transaction" (or a fractional undivided interest therein) by a Receivables
Subsidiary in a Qualified Receivables Transaction.
Notwithstanding the foregoing clause (4), IASIS may merge with an Affiliate
incorporated or organized solely either
(1) for the purpose of reincorporating or reorganizing IASIS in another
jurisdiction or
(2) to realize tax benefits without complying with the foregoing clause
(4) provided, that, immediately after giving effect to such
transaction on a pro forma basis, either
(a) the surviving entity could incur at least $1.00 of additional
Indebtedness, other than Permitted Indebtedness, under the
"--Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant and
(b) the Fixed Charge Coverage Ratio of the surviving entity is not
less than the Fixed Charge Coverage Ratio of IASIS immediately
prior to such transaction and the surviving entity conducts no
business other than a Permitted Business except to such extent
as would not be material to such surviving entity and its
Restricted Subsidiaries taken as a whole.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by IASIS and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will either reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "--Restricted Payments" or reduce the
amount available for future Investments under one or more clauses of the
definition of Permitted Investments, as IASIS shall determine. That designation
will only be permitted if such Investment would be permitted at that time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if the redesignation would not cause a Default.
TRANSACTIONS WITH AFFILIATES
IASIS will not, and will not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to IASIS or the relevant Restricted Subsidiary than those that
would have been
119
<PAGE> 133
obtained in a comparable transaction by IASIS or such Restricted
Subsidiary with an unrelated Person; and
(2) IASIS delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as to the fairness to the
holders of the Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking
firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) reasonable fees and compensation paid to, and indemnity and
similar arrangements provided on behalf of, officers, directors
or employees of IASIS or any Restricted Subsidiary of IASIS as
determined in good faith by IASIS' Board of Directors or senior
management;
(2) transactions between or among IASIS and/or its Restricted
Subsidiaries;
(3) the payment of management fees to any Affiliate of IASIS not to
exceed in the aggregate to all Affiliates, in any twelve-month
period, the greater of
(a) $1.0 million and
(b) an amount equal to 1% of Consolidated Cash Flow and the
reimbursement of expenses incurred by Affiliates from time to
time in the course of providing management, investment banking,
commercial banking, or financial advisory services to, or
monitoring their investments in, IASIS;
(4) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted
Payments;"
(5) loans and advances to officers and employees of IASIS or any of
its Restricted Subsidiaries for bona fide business purposes in
the ordinary course of business;
(6) transactions between IASIS and any of its Affiliates involving
investment banking, commercial banking, financial advisory and
related activities;
(7) issuances of securities or payments or distributions in
connection with employment incentive plans, employee stock plans,
employees stock option plans and similar plans and arrangements
approved by the Board of Directors of IASIS;
(8) sales and issuances of the Capital Stock of IASIS, other than
Disqualified Stock, to the extent otherwise permitted under the
indenture;
(9) any agreements or arrangements in effect on, or entered into on
or prior to, the date of the indenture, including the tax sharing
agreement, or any
120
<PAGE> 134
amendment, modification, or supplement or any replacement, so long
as any such amendment, modification, supplement or replacement
agreement is not materially more disadvantageous to the holders of
the notes than the original agreements as in effect on the date of
the indenture, and any transactions contemplated by any of the
foregoing agreements or arrangements;
(10) the existence of, or the performance by IASIS or any of its
Restricted Subsidiaries of its obligations under the terms of,
any stockholders agreement, partnership agreement or limited
liability company members agreement, including any registration
rights agreement or purchase agreement related thereto, to which
it is a party as of the date of the indenture and any similar
agreements which it may enter into thereafter, in each case
subject to compliance with the other provisions of the indenture;
provided, however, that the existence, or the performance by
IASIS or any of its Restricted Subsidiaries of obligations under
any future amendment to any such existing agreement or under any
similar agreement entered into after the date of the Indenture
shall only be permitted by this clause (10) to the extent that
the terms, taken as a whole, of any such amendment or new
agreement are not otherwise materially disadvantageous to the
holders of the notes;
(11) payments in respect of fees, costs and expenses incurred in
connection with the Transactions; and
(12) transactions between or among IASIS and/or its Subsidiaries or
transactions between a Receivables Subsidiary and any Person in
which the Receivables Subsidiary has an Investment.
ADDITIONAL SUBSIDIARY GUARANTEES
If IASIS or any of its Restricted Subsidiaries acquires or creates another
Domestic Subsidiary or if any Restricted Subsidiary becomes a Domestic
Subsidiary of IASIS after the date of the indenture, then that newly acquired or
created Domestic Subsidiary must become a Guarantor and execute a supplemental
indenture and deliver an Opinion of Counsel to the trustee; provided, that no
such Domestic Subsidiary shall be required to become a Guarantor, execute a
supplemental indenture and deliver an Opinion of Counsel
(1) for so long as a Credit Agreement shall be in effect, if it is not
an obligor thereunder and is not required to deliver a Guarantee
under such Credit Agreement of the obligations of IASIS thereunder
or
(2) if such Domestic Subsidiary is a Receivables Subsidiary.
BUSINESS ACTIVITIES
IASIS will not, and will not permit any Restricted Subsidiary to, engage in
any business other than Permitted Businesses, except to such extent as would not
be material to IASIS and its Restricted Subsidiaries taken as a whole. Any
Receivables Subsidiary and any Subsidiary thereof may engage in a business
related or ancillary to a Qualified Receivables Transaction.
121
<PAGE> 135
REPORTS
Whether or not required by the SEC, so long as any notes are outstanding,
IASIS will furnish to the holders of notes, within the time periods specified in
the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and
10-K if IASIS were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by IASIS'
certified independent accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if IASIS were required to file such reports.
In addition, whether or not required by the SEC, IASIS will file a copy of
all of the information and reports referred to in clauses (1) and (2) above with
the Commission for public availability within the time periods specified in the
SEC's rules and regulations, unless the SEC will not accept such a filing, and
make such information available to securities analysts and prospective investors
upon request. In addition, IASIS and the Subsidiary Guarantors have agreed that,
for so long as any notes remain outstanding, they will furnish to the holders
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
If IASIS has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of IASIS and
its Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of IASIS.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the notes, whether or not
prohibited by the subordination provisions of the indenture;
(2) default in payment when due of the principal of, or premium, if any,
on the notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) failure by IASIS or any of its Subsidiaries to comply with the
provisions described under the captions "-- Repurchase at the Option
of Holders -- Asset Sales," or "-- Covenants -- Merger,
Consolidation or Sale of Assets;"
(4) failure by IASIS or any of its Subsidiaries to comply with any of
the other covenants in the indenture for a period of 60 consecutive
days after written notice by the trustee or by the holders of at
least 25% in principal amount of the notes;
122
<PAGE> 136
(5) default under any mortgage, indenture or instrument under which
there is issued and outstanding any Indebtedness for money borrowed
by IASIS or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by IASIS or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created
after the date of the indenture, if that default:
(a) is caused by a failure to pay principal at the final stated
maturity of such Indebtedness (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
in the case of both clauses (a) and (b), only if the principal
amount of any such Indebtedness, together with the principal amount
of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated,
aggregates $10.0 million or more;
(6) failure by IASIS or any of its Subsidiaries to pay final judgments
aggregating in excess of $10.0 million (net of any amounts covered
by insurance or indemnity arrangements provided by a reputable and
creditworthy insurance company or other Person), which judgments are
not paid, discharged or stayed for a period of 60 consecutive days
after such judgments become final and non-appealable;
(7) except as permitted by the indenture, any Subsidiary Guarantee by a
Guarantor that is a Significant Subsidiary shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor that
is a Significant Subsidiary, or any Person acting on behalf of any
Guarantor that is a Significant Subsidiary, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; and
(8) events of bankruptcy or insolvency with respect to IASIS or any of
its Restricted Subsidiaries which is a Significant Subsidiary.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to IASIS, all outstanding notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee, upon request of
holders of at least 25% in principal amount of the notes then outstanding, or
the holders of at least 25% in principal amount of the then outstanding notes
may declare all the notes to be due and payable by notice in writing to IASIS
and the trustee specifying the respective Event of Default and that notice is a
"notice of acceleration" (the "Acceleration Notice"), and the same (1) will
become immediately due and payable or (2) if there are any amounts outstanding
under the Credit Agreement, will become immediately due and payable upon the
first to occur of an acceleration under the Credit Agreement or five business
days after receipt by IASIS and the Representative under the Credit Agreement of
such Acceleration Notice but only if the Event of Default is then continuing.
The holders of a majority in aggregate principal amount of the then outstanding
notes by written notice to the trustee may on behalf of all of the holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
123
<PAGE> 137
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to limitations, holders of a majority in
principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders of the
notes notice of any continuing Default or Event of Default -- except a Default
or Event of Default relating to the payment of principal or interest or
Liquidated Damages -- if it determines that withholding notice is in their
interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest or Liquidated Damages on, or the principal of, the notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of IASIS with the
intention of avoiding payment of the premium that IASIS would have had to pay if
IASIS then had elected to redeem the notes pursuant to the optional redemption
provisions of the indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the notes. If an Event of Default occurs prior to October 15, 2004, by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of
IASIS with the intention of avoiding the prohibition on redemption of the notes
prior to October 15, 2004, then the premium specified in the indenture will also
become immediately due and payable to the extent permitted by law upon the
acceleration of the notes.
IASIS is required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any Default or Event of
Default, IASIS is required to deliver to the trustee a statement specifying such
Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of IASIS or any
Guarantor, as such, will have any liability for any obligations of IASIS or the
Guarantors under the notes, the indenture, the Subsidiary Guarantees, or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of notes by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes. The waiver may not be effective to waive liabilities under the
federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
IASIS may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all obligations
of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal
Defeasance") except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and Liquidated
Damages, if any, on the notes when payments are due from the trust
referred to below;
(2) IASIS' obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for
payment and money for security payments held in trust;
124
<PAGE> 138
(3) the rights, powers, trusts, duties and immunities of the trustee,
and IASIS' and the Guarantor's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the indenture.
In addition, IASIS may, at its option and at any time, elect to have the
obligations of IASIS and the Guarantors released with respect to covenants that
are described in the indenture ("Covenant Defeasance") and thereafter any
omission to comply with those covenants will not constitute a Default or Event
of Default with respect to the notes. In the event Covenant Defeasance occurs,
some events, not, however, including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events, described under "Events of Default" will
no longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) IASIS must irrevocably deposit with the trustee, in trust, for the
benefit of the holders of the notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, or interest and premium and Liquidated Damages, if
any, on the outstanding notes on the stated maturity or on the
applicable redemption date, as the case may be, and IASIS must
specify whether the notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, IASIS will have delivered to the
trustee an Opinion of Counsel reasonably acceptable to the trustee
confirming that
(a) IASIS has received from, or there has been published by, the
Internal Revenue Service a ruling or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm
that, the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance
had not occurred;
(3) in the case of Covenant Defeasance, IASIS will have delivered to the
trustee an Opinion of Counsel reasonably acceptable to the trustee
confirming that the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had
not occurred;
(4) no Default or Event of Default will have occurred and be continuing
either:
(a) on the date of the deposit, other than a Default or Event of
Default resulting from the borrowing of funds to be applied to
the deposit; or
(b) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the
91st day after the date of deposit;
125
<PAGE> 139
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument, other than the indenture, to which IASIS or
any of its Subsidiaries is a party or by which IASIS or any of its
Subsidiaries is bound;
(6) IASIS must have delivered to the trustee an Opinion of Counsel to
the effect that, assuming no intervening bankruptcy of IASIS or any
Guarantor between the date of deposit and the 91st day following the
deposit and assuming that no holder is an "insider" of IASIS under
applicable bankruptcy law, after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(7) IASIS must deliver to the trustee an Officers' Certificate stating
that the deposit was not made by IASIS with the intent of preferring
the holders of notes over the other creditors of IASIS with the
intent of defeating, hindering, delaying or defrauding creditors of
IASIS or others; and
(8) IASIS must deliver to the trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have
been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the holders of
at least a majority in principal amount of the notes then outstanding including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, notes, and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, notes.
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes,
other than provisions relating to the covenants described above
under the caption "-- Repurchase at the Option of Holders";
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a Default or Event of Default in the payment of principal of,
or interest or premium, or Liquidated Damages, if any, on the notes,
except a rescission of acceleration of the notes by the holders of
at least a majority in aggregate principal amount of the notes and a
waiver of the payment default that resulted from such acceleration;
(5) make any note payable in money other than that stated in the notes;
126
<PAGE> 140
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to
receive payments of principal of, or interest or premium or
Liquidated Damages, if any, on the notes;
(7) waive a redemption payment with respect to any note, other than a
payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders";
(8) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the indenture, except in accordance with the
terms of the indenture; or
(9) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of the
holders of the notes will require the consent of the holders of at least 75% in
aggregate principal amount of notes then outstanding.
Notwithstanding the preceding, without the consent of any holder of notes,
IASIS, the Guarantors and the trustee may amend or supplement the indenture or
the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of IASIS' obligations to holders of
notes in the case of a merger or consolidation or sale of all or
substantially all of IASIS' assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect
the legal rights under the indenture of any such holder; or
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust
Indenture Act.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated -- except lost, stolen
or destroyed notes that have been replaced or paid and notes
for whose payment money has theretofore been deposited in trust
and thereafter repaid to IASIS -- have been delivered to the
trustee for cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become
due and payable within one year and IASIS or any Guarantor has
irrevocably deposited or caused to be deposited with the
trustee as trust funds in trust solely for the benefit of the
holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will
be
127
<PAGE> 141
sufficient without consideration of any reinvestment of
interest, to pay and discharge the entire indebtedness on the
notes not delivered to the trustee for cancellation for
principal, premium and Liquidated Damages, if any, and accrued
interest to the date of maturity or redemption;
(2) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation
of, or constitute a default under, any other instrument to which
IASIS or any Guarantor is a party or by which IASIS or any Guarantor
is bound;
(3) IASIS or any Guarantor has paid or caused to be paid all sums
payable by it under the indenture; and
(4) IASIS has delivered irrevocable instructions to the trustee under
the indenture to apply the deposited money toward the payment of the
notes at maturity or the redemption date, as the case may be.
In addition, IASIS must deliver an Officers' Certificate and an Opinion of
Counsel to the trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of IASIS or any Guarantor, the indenture
limits its right to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise.
The trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person in the conduct of his
or her own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any holder of notes, unless such holder shall have offered to the
trustee security and indemnity satisfactory to it against any loss, liability or
expense.
BOOK-ENTRY, DELIVERY AND FORM
Except as described below, the new notes will be issued in the form of one
or more registered notes in global form without coupons. Each global note will
be deposited with, or on behalf of, DTC and registered in the name of Cede &
Co., as nominee of DTC, or will remain in the custody of the trustee pursuant to
the FAST Balance Certificate Agreement between DTC and the trustee.
DTC has advised IASIS that it is:
(1) a limited purpose trust company organized under the laws of the
State of New York,
(2) a member of the Federal Reserve System,
128
<PAGE> 142
(3) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and
(4) a "clearing agency" registered pursuant to Section 17A of the
Exchange Act.
DTC was created to hold securities for its participating organizations
(collectively, the "DTC Participants") and facilitates the clearance and
settlement of securities transactions between DTC Participants through
electronic book-entry changes to the accounts of the DTC Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC
Participants include securities brokers and dealers, including the placement
agents from the original offering of the old notes, banks and trust companies,
clearing corporations and other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect DTC Participants") that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly.
Holders who are not DTC Participants may beneficially own securities held by or
on behalf of DTC only through DTC Participants or Indirect DTC Participants.
IASIS expects, as provided in the procedures established by DTC, that
(1) upon deposit of the global notes, DTC will credit the accounts of
DTC Participants with an interest in the global note and
(2) ownership of the new notes will be shown on, and the transfer of
ownership of the new notes will be effected only through, records
maintained by DTC with respect to the interest of DTC Participants,
the DTC Participants and the Indirect DTC Participants.
The laws of some states require that some persons take physical delivery in
definitive form of securities that they own and that a security interest in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer the new
notes or to pledge the new notes as collateral will be limited to this extent.
So long as DTC or its nominee is the registered owner of a global note, DTC
or the nominee, as the case may be, will be considered the sole owner or holder
of the new notes represented by the global note for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
note will not
(1) be entitled to have the new notes represented by the global note
registered in their names,
(2) receive or be entitled to receive physical delivery of certificated
securities, and
(3) be considered the owners or holders of the new notes for any
purpose, including with respect to the giving of any directions,
instruction or approval to the trustee. As a result, the ability of
a person having a beneficial interest in new notes represented by a
global note to pledge or transfer that interest to persons or
entities that do not participate in DTC's system or to otherwise
take action with respect to that interest, may be affected by the
lack of a physical certificate evidencing the interest.
Accordingly, each holder owning a beneficial interest in a global note must
rely on the procedures of DTC and, if the holder is not a DTC Participant or an
Indirect DTC Participant, on the procedures of the DTC Participant through which
the holder owns its
129
<PAGE> 143
interest, to exercise any rights of a holder of new notes under the indenture or
the global note. IASIS understands that under existing industry practice, in the
event IASIS requests any action of holders of new notes or a holder that is an
owner of a beneficial interest in a global note desires to take any action that
DTC, as the holder of the global note, is entitled to take, DTC would authorize
the DTC Participants to take the action and the DTC Participants would authorize
holders owning through the DTC Participants to take the action or would
otherwise act upon the instruction of such holders. Neither IASIS nor the
trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of the new notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to the new
notes.
Payments of the principal of, premium, if any, and interest on, any new
notes represented by a global note registered in the name of DTC or its nominee
on the applicable record date will be payable by the trustee to or at the
direction of DTC or its nominee in its capacity as the registered holder of the
global note representing the new notes. Under the terms of the indenture, IASIS
and the trustee may treat the persons in whose names the new notes, including
the global notes, are registered as the owners for the purpose of receiving
payment and for any and all other purposes whatsoever. As a result, neither
IASIS nor the trustee has or will have any responsibility or liability for the
payment of amounts due to beneficial owners of interest in the global note,
including principal, premium, if any, and interest, or to immediately credit the
accounts of the relevant DTC Participants with such payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the global note as shown on the records of DTC. Payments by the DTC
Participants and the Indirect DTC Participants to the beneficial owners of
interests in the global note will be governed by standing instructions and
customary practice and will be the responsibility of the DTC Participants or the
Indirect DTC Participants and DTC.
CERTIFICATED SECURITIES
(1) If DTC notifies IASIS in writing that it is no longer willing or
able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and IASIS is unable to locate
a qualified successor within 90 days,
(2) IASIS, at its option, notifies the trustee in writing that it elects
to cause the issuance of notes issued in the exchange offer in
definitive form under the indenture or
(3) upon the occurrence of other specified events,
then, upon surrender by DTC of its global notes, certificated securities will be
issued to each Person that DTC identifies as the beneficial owner of the new
notes, represented by the global notes.
Upon any such issuance, the trustee is required to register the
certificated securities in the name of the Persons identified as beneficial
owners -- or the nominee of any thereof -- and cause the same to be delivered to
these Persons.
NO LIABILITY FOR DELAY IN IDENTIFYING BENEFICIAL OWNERS. Neither IASIS nor
the trustee will be liable for any delay by DTC or any DTC Participant or
Indirect DTC Participant in identifying the beneficial owners of the related new
notes and each beneficial owner may conclusively rely on, and will be protected
in relying on, instructions from DTC
130
<PAGE> 144
for all purposes, including with respect to the registration and delivery, and
the respective principal amounts, of the new notes to be issued.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Holders of the new notes are not entitled to own registration rights with
respect to the new notes.
The following description is a summary of the material provisions of the
registration rights agreement and does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all of the provisions of
the registration rights agreement, a copy of which is attached as an exhibit to
the registration statement of which this prospectus forms a part and is
incorporated by reference in this prospectus in its entirety.
IASIS, the subsidiary guarantors and J. P. Morgan Securities, Inc. entered
into the registration rights agreement on October 15, 1999. Pursuant to the
registration rights agreement, IASIS and the subsidiary guarantors have agreed
to file with the SEC the exchange offer registration statement on the
appropriate form under the Securities Act with respect to the new notes. The
registration statement of which this prospectus forms a part is the registration
statement required by the registration rights agreement. Upon the effectiveness
of the exchange offer registration statement, IASIS and the subsidiary
guarantors will offer to the holders of transfer restricted securities pursuant
to the exchange offer who are able to make certain representations the
opportunity to exchange their transfer restricted securities for a like
principal amount of the new notes and related guarantees.
We have agreed to file with the SEC a shelf registration statement to cover
resales of the notes by the holders thereof who satisfy certain conditions
relating to the provision of information in connection with the shelf
registration statement if:
(1) We are not
(a) required to file the exchange offer registration statement; or
(b) permitted to consummate the exchange offer because the exchange
offer is not permitted by applicable law or SEC policy; or
(2) any holder of transfer restricted securities notifies us prior to
the 20th day following consummation of the exchange offer that:
(a) it is prohibited by law or SEC policy from participating in the
exchange offer; or
(b) that it may not resell the new notes acquired by it in the
exchange offer to the public without delivering a prospectus
and the prospectus contained in the exchange offer registration
statement is not appropriate or available for such resales; or
(c) that it is a broker-dealer and owns notes acquired directly
from us or one of our affiliates.
We will use our commercially reasonable efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
SEC.
For purposes of the preceding, "transfer restricted securities" means each
note until the earliest to occur of:
(1) the date on which such note has been exchanged by a Person other
than a broker-dealer for a new note issued in the exchange offer;
131
<PAGE> 145
(2) following the exchange by a broker-dealer in the exchange offer of
an old note for a new note, the date on which the new note is sold
to a purchaser who receives from such broker-dealer on or prior to
the date of such sale a copy of the prospectus contained in the
exchange offer registration statement;
(3) the date on which the note has been effectively registered under the
Securities Act and disposed of in accordance with the shelf
registration statement; or
(4) the date on which the note is distributed to the public pursuant to
Rule 144 under the Securities Act.
Pursuant to the registration rights agreement IASIS and the Guarantors
agreed to:
(1) file an exchange offer registration statement with the SEC on or
prior to January 13, 2000;
(2) use their commercially reasonable efforts to have the exchange offer
registration statement declared effective by the SEC on or prior to
April 12, 1999;
(3) unless the exchange offer would not be permitted by applicable law
or SEC policy,
(a) use their commercially reasonable efforts to commence the
exchange offer; and
(b) use their commercially reasonable efforts to issue on or prior
to 30 business days, or longer, if required by the federal
securities laws, after the date on which the exchange offer
registration statement was declared effective by the SEC, new
notes issued in the exchange offer in exchange for all old
notes tendered prior thereto in the exchange offer; and
(4) if obligated to file the shelf registration statement, use their
commercially reasonable efforts to file the shelf registration
statement with the SEC on or prior to 30 days after such filing
obligation arises and to cause the shelf registration to be declared
effective by the SEC on or prior to 90 days after such obligation
arises.
The registration rights agreement also requires us to include the
prospectus for the exchange offer information necessary to allow broker-dealers
who hold notes, other than notes purchased directly from us or one of our
affiliates, to exchange such notes in the exchange offer and to satisfy the
prospectus delivery requirements in connection with resales of the exchange
notes received by such broker-dealers in the exchange offer.
This prospectus covers the offer and sale of the new notes in the exchange
offer and the resale of new notes received in the exchange offer by any
broker-dealer who held notes other than notes purchased directly from us or one
of our affiliates.
We will pay liquidated damages if:
(1) we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for
such filing; or
132
<PAGE> 146
(2) any of such registration statements is not declared effective by the
SEC on or prior to the date specified for such effectiveness (the
"effectiveness target date"); or
(3) we fail to consummate the exchange offer within 30 business days of
the effectiveness target date with respect to the registration
statement relating to the exchange offer; or
(4) the shelf registration statement or the registration statement
relating to the exchange offer is declared effective but thereafter
ceases to be effective or usable in connection with resales of
transfer restricted securities during the periods specified in the
registration rights agreement (each such event referred to in
clauses (1) through (4) above, a "registration default"),
The amount of liquidated damages will be equal to a per annum rate of 0.50%
on the principal amount of notes held by such holder, with respect to the first
90-day period immediately following the occurrence of the first registration
default.
Liquidated damages will increase by an additional per annum rate of 0.25%
with respect to each subsequent 90-day period until all registration defaults
have been cured, up to a maximum amount of liquidated damages for all
registration defaults of 2.00% per annum on the principal amount of notes.
We will pay all accrued liquidated damages on each interest date in the
manner provided for the payment of interest in the indenture. Following the cure
of all registration defaults, the accrual of liquidated damages will cease.
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, we believe that the new notes and the related
guarantees you receive in the exchange offer may be offered for resale, resold
or otherwise transferred without compliance with the registration and prospectus
delivery provisions of the Securities Act. Any purchaser of the notes, however,
who is either an "affiliate" of IASIS a broker-dealer who purchased notes
directly from us or one of the affiliates for resale, or who intends to
participate in the exchange offer for the purpose of distributing the new notes:
- will not be able to rely on the interpretation of the staff of the
SEC;
- will not be able to tender its notes in the exchange offer; and
- must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of the
notes, unless such sale or transfer is made in compliance with an
exemption from such requirements.
By tendering your old notes, you represent to us:
- that you are not an "affiliate" of IASIS, as defined in Rule 144 under
the Securities Act;
- that any new notes you receive in the exchange offer are being
acquired by you in the ordinary course of your business; and
- that at the time of the commencement of the exchange offer, neither
you nor, to your knowledge, anyone receiving new notes from you, has
any arrangement or understanding with any person to participate in the
distribution of the new notes in violation of the Securities Act.
133
<PAGE> 147
The SEC has taken the position that participating broker-dealers may
fulfill their prospectus delivery requirements with respect to resales of the
new notes -- other than a resale of an unsold allotment from the original sale
of the old notes -- by delivering this prospectus to prospective purchasers.
IASIS and the subsidiary guarantors have agreed that for a period of 180 days
after the date on which the registration statement of which this prospectus
forms a part is declared effective, they will make this prospectus, as amended
or supplemented, available to any participating broker-dealer for use in
connection with any resale of the new notes. For further information regarding
the obligations of broker-dealers, including the prospectus delivery
requirement, see "Plan of Distribution."
In the event that a shelf registration statement if filed, we will:
- provide a copy of the prospectus that forms a part of the shelf
registration statement to each holder of old notes;
- notify each holder of old notes when the shelf registration statement
has been declared effective; and
- take other actions as are required to permit unrestricted resales of
the old notes.
If you sell old notes under the shelf registration statement:
- you must be named as a selling security holder in the prospectus that
forms a part of the shelf registration statement;
- you must deliver a prospectus to any purchasers of your old notes;
- you will be subject to the civil liability provisions of the
Securities Act in connection with such sales; and
- you will be bound by the provisions of the registration rights
agreement that are applicable to holders who sell their old notes
under the shelf registration statement, including various
indemnification rights and obligations.
In addition, each such holder will be required to deliver information to be used
in connection with the shelf registration statement and to provide comments on
the shelf registration statement within the time periods set forth in the notes
registration rights agreement in order to have their notes included in the shelf
registration statement and to benefit from the provisions regarding liquidated
damages.
Holders of old notes who sell their old notes under a shelf registration
statement are subject to various indemnification rights and obligations.
DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
134
<PAGE> 148
"ACQUIRED DEBT" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged or consolidated with or into or became a Subsidiary
of such specified Person, whether or not such Indebtedness is
incurred in connection with, or in contemplation of, such other
Person merging with or into, or becoming a Subsidiary of, such
specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings. No Person (other than IASIS or any
Subsidiary of IASIS) in whom a Receivables Subsidiary makes an Investment in
connection with a Qualified Receivables Transaction will be deemed to be an
Affiliate of IASIS or any of its Subsidiaries solely by reason of such
Investment.
"ASSET SALE" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights; provided that the sale, conveyance or other disposition of
all or substantially all of the assets of IASIS and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of
the Indenture described above under the caption "--Repurchase at the
Option of Holders--Change of Control" and/or the provisions
described above under the caption "--Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the
Asset Sale covenant; and
(2) the issuance of Equity Interests by any of IASIS' Restricted
Subsidiaries or the sale of Equity Interests in any of IASIS'
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than the greater
of (a) $1.0 million and (b) 1% of Consolidated Cash Flow;
(2) a sale or transfer of assets between or among IASIS and its
Restricted Subsidiaries,
(3) an issuance of Equity Interests by a Restricted Subsidiary to IASIS
or to another Restricted Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
135
<PAGE> 149
(6) a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption
"--Covenants--Restricted Payments;"
(7) the sale, lease, conveyance, disposition or other transfer of (a)
the Capital Stock of or any Investment in any Unrestricted
Subsidiary or (b) Permitted Investments made pursuant to clause
(16) of the definition thereof;
(8) surrender or waiver of contract rights or the settlement, release
or surrender of contract, tort or other claims of any kind;
(9) the licensing of intellectual property in the ordinary course of
business;
(10) granting of Liens not otherwise prohibited by the indenture;
(11) leases or subleases to third persons in the ordinary course of
business that do not interfere in any material respect with the
business of IASIS or any of its Restricted Subsidiaries.
(12) sales of accounts receivable and related assets of the type
specified in the definition of "Qualified Receivables Transaction"
to a Receivables Subsidiary for the fair market value thereof, less
amounts required to be established as reserves and customary
discounts pursuant to contractual agreements with entities that are
not Affiliates of IASIS entered into as part of a Qualified
Receivables Transaction;
(13) transfers of accounts receivable and related assets of the type
specified in the definition of "Qualified Receivables Transaction,"
or a fractional undivided interest therein, by a Receivables
Subsidiary in a Qualified Receivables Transaction; and
(14) the substantially contemporaneous sale and leaseback of an asset
acquired after the date of the indenture; provided that such sale
and leaseback occurs within 180 days after the date of the
acquisition of such asset by IASIS and its Restricted Subsidiaries.
"BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"BOARD OF DIRECTORS" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the board of directors of the general
partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
136
<PAGE> 150
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited);
and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof,
provided that the full faith and credit of the United States is
pledged in support thereof, having maturities of not more than one
year from the date of acquisition;
(3) certificates of deposit, demand and time deposits, eurodollar time
deposits, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case, with any lender
party to the Credit Agreement or with any domestic commercial bank
having capital and surplus in excess of $500.0 million;
(4) repurchase obligations with a term of not more than one year for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having one of the two highest ratings obtainable
from Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Rating Services ("S&P") and in each case maturing within one
year after the date of acquisition;
(6) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or
any public instrumentality thereof having one of the two highest
ratings obtainable from Moody's or S&P and maturing within one year
from the date of acquisition thereof; and
(7) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (6)
of this definition.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one
or a series of related
137
<PAGE> 151
transactions, of all or substantially all of the properties or
assets of IASIS and its Restricted Subsidiaries taken as a whole to
any "person," as that term is used in Section 13(d)(3) of the
Exchange Act, other than to a Principal or a Related Party of a
Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
IASIS;
(3) the consummation of any transaction, including, without limitation,
any merger or consolidation, the result of which is that any
"person," as defined above, other than the Principals and their
Related Parties, becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock of IASIS, measured
by voting power rather than number of shares;
(4) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of IASIS
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of
IASIS has been approved by the Principals or a majority of the
directors then still in office who either were directors at the
beginning of such period or whose election or recommendation for
election was previously so approved) cease to constitute a majority
of the Board of Directors of IASIS.
"CONSOLIDATED CASH FLOW" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary gain or loss and any net gain
or loss realized by such Person or any of its Restricted
Subsidiaries in connection with an Asset Sale, to the extent that
such gains or losses were utilized in computing such Consolidated
Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net
Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or
not capitalized, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers'
acceptance financings, and net of the effect of all payments made or
received pursuant to Hedging Obligations, to the extent that any
such expense was deducted in computing such Consolidated Net Income;
plus
(4) fees, costs, charges, and expenses incurred in connection with the
Paracelsus Recapitalization and the Tenet Acquisition; plus
(5) depreciation, amortization including amortization of goodwill and
other intangibles, but excluding amortization of prepaid cash
expenses that were paid in a prior period, and other non-cash
expenses and items (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses
in any future period or amortization of a prepaid cash expense that
was paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation,
138
<PAGE> 152
amortization and other non-cash expenses and items were deducted in
computing such Consolidated Net Income; minus
(6) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, the interest expense of, and the depreciation and amortization
and other non-cash items of, a Restricted Subsidiary of a Person shall be added
to Consolidated Net Income to compute Consolidated Cash Flow only to the extent
and in the same proportion that Net Income of that Restricted Subsidiary was
included in calculating the Consolidated Net Income of that Person.
"CONSOLIDATED NET INCOME" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP (before dividends on preferred stock); provided that:
(1) the Net Income, but not loss, of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the specified Person or
a Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is
not at the date of determination permitted without any prior
governmental approval that has not been obtained or, directly or
indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its
stockholders;
(3) solely for purposes of determining the aggregate amount available
for Restricted Payments under clause 3(a) of the Restricted
Payments covenant, the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded;
(5) there shall be added to the Net Income of such Person the amount of
any decrease in the deferred tax asset for such period relating to
the actual cash tax benefit realized by IASIS (or the consolidated
tax group of which IASIS is a member) resulting from the election
under Section 338(h)(10) of the Code in respect of the Paracelsus
Recapitalization;
(6) the fees, costs and expenses of the Transactions shall be excluded;
(7) income or losses attributable to discontinued operations
(including, without limitation, operations disposed of during such
period whether or not such operations were classified as
discontinued) shall be excluded;
139
<PAGE> 153
(8) all extraordinary gains and losses, non-recurring cumulative
effects of accounting changes and, without duplication,
non-recurring or unusual gains and losses and all restructuring
charges shall be excluded;
(9) any non-cash charges attributable to applying the purchase method
of accounting in accordance with GAAP shall be excluded; and
(10) non-cash charges relating to employee benefit or other management
compensation plans of IASIS or a Restricted Subsidiary (excluding
any such non-cash charge to the extent that it represents an
accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense incurred in a prior period)
to the extent that such non-cash charges are deducted in computing
such Consolidated Net Income; provided, further that if IASIS or
any Restricted Subsidiary makes a cash payment in respect of such
non-cash charge in any period, such cash payment shall (without
duplication) be deducted from the Consolidated Net Income of IASIS
for such period.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of October 15,
1999, by and among IASIS and Morgan Guaranty Trust Company of New York, as
administrative agent, and the other lenders that are a party thereto, together
with the related documents thereto including, without limitation, any guarantee
agreements and security documents, in each case as such agreements may be
amended including any amendment and restatement thereof, supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring, including
increasing the amount of available borrowings thereunder or adding Subsidiaries
of IASIS as additional borrowers or guarantors thereunder, all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"CREDIT FACILITIES" means, one or more debt facilities including, without
limitation, the Credit Agreement or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing, including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables, or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DESIGNATED PREFERRED STOCK" means the preferred stock (not constituting
Disqualified Stock) of IASIS (excluding any preferred stock issued prior to the
date of the indenture and any preferred stock issued in exchange or substitution
therefor) that is designated as Designated Preferred Stock on or after the date
of issuance thereof pursuant to an Officers' Certificate delivered to the
trustee on the designation thereof, the cash proceeds of which are excluded from
the calculation set forth in clause 3(b) of the covenant described above under
the caption "--Covenants--Restricted Payments."
"DESIGNATED SENIOR DEBT" means:
(1) any Indebtedness under or in respect of the Credit Agreement; and
(2) any other Senior Debt permitted under the Indenture the principal
amount of which is $25.0 million or more and that has been
designated by IASIS in
140
<PAGE> 154
the instrument or agreement relating to the same as "Designated
Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the notes mature, other than for Capital Stock which is not
Disqualified Stock. Notwithstanding the preceding sentence, (a) any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require IASIS to repurchase such Capital Stock upon
the occurrence of a change of control or an asset sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that IASIS may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless
such repurchase or redemption complies with the covenant described above under
the caption "--Covenants--Restricted Payments," and (b) any Capital Stock that
would constitute Disqualified Stock solely because such Capital Stock is issued
pursuant to any plan for the benefit of employees of IASIS or its Subsidiaries
or by any such plan to such employees and may be required to be repurchased by
IASIS in order to satisfy applicable statutory or regulatory obligations shall
not constitute Disqualified Stock. The amount of Disqualified Stock shall be its
mandatory maximum redemption price or liquidation preference, as applicable,
plus accrued dividends.
"DOMESTIC SUBSIDIARY" means any Restricted Subsidiary that was formed under
the laws of the United States or any state thereof or the District of Columbia
or that guarantees or otherwise provides direct credit support for any
Indebtedness of IASIS or any Guarantor.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"EQUITY OFFERING" means a sale by IASIS of shares of its Capital Stock
however designated and whether voting or non-voting, other than Disqualified
Stock, and any and all rights, warrants or options to acquire such Capital
Stock.
"EXISTING INDEBTEDNESS" means Indebtedness of IASIS and its Subsidiaries,
other than Indebtedness under the Credit Agreement, in existence on the date of
the indenture.
"FIXED CHARGES" means, with respect to any specified Person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued,
including, without limitation, original issue discount, non-cash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations and
excluding amortization of deferred financing costs; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
141
<PAGE> 155
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries, whether or not such Guarantee or Lien is
called upon; plus
(4) the product of (a) all dividends paid (whether or not in cash), on
any series of Disqualified Stock or Designated Preferred Stock of
such Person or any of its Restricted Subsidiaries, other than
dividends on Equity Interests payable solely in Equity Interests
of IASIS (other than Disqualified Stock) or to IASIS or a
Restricted Subsidiary of IASIS, times (b) a fraction, the
numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory
tax rate of such Person, expressed as a decimal, in each case, on
a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the specified
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees,
repays, repurchases or redeems any Indebtedness, other than ordinary working
capital borrowings, or issues, repurchases or redeems preferred stock subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee, repayment, repurchase or redemption
of Indebtedness, or such issuance, repurchase or redemption of preferred stock,
and the use of the proceeds therefrom as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be
given pro forma effect as if they had occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated on a pro forma basis in
accordance with Regulation S-X under the Securities Act, but
without giving effect to clause (3) of the proviso set forth in
the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be
excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the specified Person or any of
its Restricted Subsidiaries following the Calculation Date.
142
<PAGE> 156
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
"GUARANTEE" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"GUARANTORS" means each Restricted Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of the indenture and their
respective successors and assigns; provided that upon the release of such
Subsidiary Guarantee pursuant to the Indenture, such Person shall cease to be a
Guarantor.
"HEDGING OBLIGATIONS" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates, currency exchange rates or
commodity prices.
"HOSPITAL" means a hospital, outpatient clinic, long-term care facility,
medical office building or other facility, business or other asset that is used
or useful in or related to the provision of healthcare services.
"HOSPITAL SWAP" means an exchange of assets and, to the extent necessary to
equalize the value of the assets being exchanged, cash by IASIS or a Restricted
Subsidiary for one or more Hospitals and/or one or more Related Businesses or
for 100% of the Capital Stock of any Person owning or operating one or more
Hospitals and/or one or more Related Businesses, provided that cash does not
exceed 20% of the sum of the amount of the cash and the fair market value of the
Capital Stock or assets received or given by IASIS or a Restricted Subsidiary in
such transaction, unless such excess cash is applied in accordance with the
requirements of the third paragraph of the "Asset Sales" covenant.
"IASIS MERGER" means the merger of Iasis Healthcare, a Tennessee
corporation, into IASIS on or prior to the date of the indenture.
"INDEBTEDNESS" means, without duplication with respect to any specified
Person, any indebtedness of such Person, whether or not contingent, in respect
of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect
thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued
expense or trade payable; or
143
<PAGE> 157
(6) representing the net obligations under any Hedging Obligations, if
and to the extent any of the preceding items (other than letters
of credit and Hedging Obligations) would appear as a liability
upon a balance sheet of the specified Person prepared in
accordance with GAAP. In addition, the term "Indebtedness"
includes all Indebtedness of others secured by a Lien on any asset
of the specified Person (whether or not such Indebtedness is
assumed by the specified Person) and, to the extent not otherwise
included, the Guarantee by the specified Person of any
indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; or
(2) the principal amount thereof in the case of all other
Indebtedness.
"INVESTMENTS" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons, including Affiliates, in the forms
of loans, including Guarantees or other obligations, advances or capital
contributions (excluding commission, travel, relocation, payroll, entertainment
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If IASIS or any Subsidiary of IASIS sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of IASIS such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of IASIS, IASIS shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "--Covenants--Restricted Payments." The acquisition by IASIS
or any Subsidiary of IASIS of a Person that holds an Investment in a third
Person shall be deemed to be an Investment by IASIS or such Subsidiary in such
third Person in an amount equal to the fair market value of the Investment held
by the acquired Person in such third Person in an amount determined as provided
in the final paragraph of the covenant described above under the caption
"--Covenants--Restricted Payments." The outstanding amount of any Investment
shall be the original cost thereof, reduced by all returns on such Investment
(including dividends, interest, distributions, returns of principal and profits
on sale).
"JLL HOSPITAL MERGER" means the merger of JLL Hospital, LLC into IASIS on
or prior to the date of the indenture.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with any Qualified Receivables
Transaction, any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to
Section 5 of the registration rights agreement.
144
<PAGE> 158
"NET INCOME" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with: (a) any Asset
Sale; or (b) the disposition of any securities by such Person or
any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries;
and
(2) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by IASIS or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale, including, without limitation, legal, accounting and investment
banking fees, and sales commissions, and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof, in each case, after
taking into account any available tax credits or deductions and any tax sharing
arrangements, and amounts required to be applied to the repayment of
Indebtedness, other than Indebtedness under a Credit Facility, secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither IASIS nor any of its Restricted Subsidiaries
(a) provides credit support of any kind, including any undertaking,
agreement or instrument that would constitute Indebtedness,
other than the pledge of the stock of an Unrestricted
Subsidiary; provided that such pledge otherwise constitutes
Non-Recourse Debt,
(b) is directly or indirectly liable as a guarantor or otherwise,
or
(c) constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time
or both any holder of any other Indebtedness, other than the
notes, of IASIS or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity; and
(3) as to which the lenders of such Indebtedness have been notified in
writing or have agreed in writing (in the agreement relating
thereto or otherwise) that they will not have any recourse to the
stock or assets of IASIS or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PARACELSUS RECAPITALIZATION" means the recapitalization of IASIS, which at
the time of such recapitalization was a wholly owned Subsidiary of Paracelsus
Healthcare
145
<PAGE> 159
Corporation that owned hospital assets located in Utah, pursuant to the
recapitalization agreement, dated as of August 16, 1999.
"PERMITTED BUSINESS" means any business
(1) which is the same, similar, ancillary or related to any of the
businesses that IASIS and its Restricted Subsidiaries are engaged in
on the date of the indenture or
(2) in the healthcare industry.
"PERMITTED INVESTMENTS" means:
(1) any Investment in, including Guarantees of the obligations of, IASIS
or a Restricted Subsidiary of IASIS;
(2) any Investment in Cash Equivalents;
(3) any Investment by IASIS or any Restricted Subsidiary of IASIS in a
Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of IASIS; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets
to, or is liquidated into, IASIS or a Restricted Subsidiary of
IASIS;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales;"
(5) any acquisition of assets, including Capital Stock, solely in
exchange for the issuance of Equity Interests, other than
Disqualified Stock, of IASIS;
(6) Hedging Obligations;
(7) loans and advances made to and guarantees provided for the benefit
of officers and employees of IASIS and its Restricted Subsidiaries
in the ordinary course of business not to exceed $5.0 million in the
aggregate at any one time outstanding;
(8) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and workers compensation, performance
and similar deposits entered into as a result of the operations of
the business in the ordinary course of business;
(9) Investments in securities of trade debtors or customers received
pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers or
in good faith settlement of delinquent obligations of such trade
debtors or customers;
(10) obligations of one or more officers or other employees of IASIS or
any of its Restricted Subsidiaries in connection with such
officer's or employee's acquisition of shares of common stock of
IASIS so long as no cash or other assets are paid by IASIS or any
of its Restricted Subsidiaries to such officers or employees in
connection with the acquisition of any such obligations;
146
<PAGE> 160
(11) Investments in any of the notes;
(12) receivables owing to IASIS or any Restricted Subsidiary created in
the ordinary course of business;
(13) the acquisition by a Receivables Subsidiary in connection with a
Qualified Receivables Transaction of Equity Interests of a trust or
other Person established by such Receivables Subsidiary to effect
such Qualified Receivables Transaction; and any other Investment by
IASIS or a Subsidiary of IASIS in a Receivables Subsidiary or any
Investment by a Receivables Subsidiary in any other Person in
connection with a Qualified Receivables Transaction customary for
such transactions;
(14) Physician Support Obligations;
(15) in the event IASIS or a Restricted Subsidiary shall establish a
Subsidiary for the purpose of insuring the healthcare businesses or
facilities owned or operated by IASIS, any Subsidiary, any
physician employed by or on the medical staff of any such business
or facility (the "Insurance Subsidiary"), Investments in an amount
which do not exceed the minimum amount of capital required under
the laws of the jurisdiction in which the Insurance Subsidiary is
formed, and any Investment by such Insurance Subsidiary which is a
legal investment for an insurance company under the laws of the
jurisdiction in which the Insurance Subsidiary is formed and made
in the ordinary course of business and rated in one of the four
highest rating categories;
(16) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause
(16) that are at the time outstanding not to exceed an amount equal
to the greater of (x) $30.0 million and (y) 3% of Total Assets; and
(17) Investments in connection with Hospital Swaps.
"PERMITTED JUNIOR SECURITIES" means debt or equity securities of IASIS or
any successor corporation issued pursuant to a plan of reorganization or
readjustment of IASIS that are subordinated to the payment of all then
outstanding Senior Debt of IASIS at least to the same extent that the notes are
subordinated to the payment of all Senior Debt of IASIS on the date of the
indenture, so long as:
(1) the effect of the use of this defined term in the subordination
provisions contained in the indenture is not to cause the notes to
be treated as part of:
(a) the same class of claims as the Senior Debt of IASIS; or
(b) any class of claims equal in ranking with, or senior to, the
Senior Debt of IASIS for any payment or distribution in any
case or proceeding or similar event relating to the
liquidation, insolvency, bankruptcy, dissolution, winding up or
reorganization of IASIS; and
(2) to the extent that any Senior Debt of IASIS outstanding on the date
of consummation of any such plan of reorganization or readjustment
is not paid in full in cash or Cash Equivalents (other than Cash
Equivalents of the type
147
<PAGE> 161
referred to in clauses (3) and (4) of the definition thereof) on
such date, either:
(a) the holders of any such Senior Debt not so paid in full in cash
or Cash Equivalents (other than Cash Equivalents of the type
referred to in clauses (3) and (4) of the definition thereof)
have consented to the terms of such plan of reorganization or
readjustment; or
(b) such holders receive securities which constitute Senior Debt of
IASIS (which are guaranteed pursuant to guarantees constituting
Senior Debt of each Guarantor) and which have been determined
by the relevant court to constitute satisfaction in full in
money or money's worth of any Senior Debt of IASIS (and any
related Senior Debt of the Guarantors) not paid in full in cash
or Cash Equivalents (other than Cash Equivalents of the type
referred to in clauses (3) and (4) of the definition thereof).
"PERMITTED LIENS" means:
(1) Liens of IASIS and any Guarantor securing Senior Debt that was
permitted by the terms of the Indenture to be incurred;
(2) Liens in favor of IASIS or the Guarantors;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with or is acquired by, IASIS or
any Subsidiary of IASIS; provided that such Liens were in existence
prior to the contemplation of such merger, consolidation or
acquisition and do not extend to any assets other than those of the
Person merged into, consolidated with or acquired by IASIS or the
Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by
IASIS or any Subsidiary of IASIS, provided that such Liens were in
existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business;
(6) Liens to secure Indebtedness, including Capital Lease Obligations,
permitted by clause (4) of the second paragraph of the covenant
entitled "--Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired, constructed or
improved with such Indebtedness;
(7) Liens existing on the date of the indenture;
(8) Liens for taxes, assessments or governmental charges or claims that
(a) are not yet delinquent or (b) are being contested in good faith
by appropriate proceedings promptly instituted and diligently
concluded, provided that in the case of clause (b), any reserve or
other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor;
(9) Liens incurred in the ordinary course of business of IASIS or any
Subsidiary of IASIS with respect to obligations that do not exceed
$5.0 million at any one time outstanding;
148
<PAGE> 162
(10) security for the payment of workers' compensation, unemployment
insurance, other social security benefits or other
insurance-related obligations (including, but not limited to, in
respect of deductibles, self-insured retention amounts and premiums
and adjustments thereto) entered into in the ordinary course of
business;
(11) deposits or pledges in connection with bids, tenders, leases and
contracts (other than contracts for the payment of money) entered
into in the ordinary course of business;
(12) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold
interests, mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising by,
through or under a landlord or owner of the leased property, with
or without consent of the lessee), none of which interferes in any
material respect with the ordinary conduct of the business of IASIS
or any of its Subsidiaries or materially impairs the use of any
parcel of property;
(13) deposits or pledges to secure public or statutory obligations,
progress payments, surety and appeal bonds or other obligations of
like nature incurred in the ordinary course of business;
(14) survey title exceptions, title defects, encumbrances, easements,
reservations of, or rights of others for, rights of way, sewers,
electric lines, telegraph or telephone lines and other similar
purposes or zoning or other restrictions as to the use of real
property not materially interfering with the ordinary conduct of
the business of IASIS and its Subsidiaries taken as a whole;
(15) Liens arising by operation of law in favor of landlords, mechanics,
carriers, warehousemen, materialmen, laborers, employees, suppliers
or the like, incurred in the ordinary course of business for sums
which are not yet delinquent or are being contested in good faith
by negotiations or by appropriate proceedings which suspend the
collection thereof;
(16) leases, subleases, licenses or sublicenses to third parties entered
into in the ordinary course of business;
(17) Liens securing any Permitted Refinancing Indebtedness so long as
the Lien securing such Permitted Refinancing Indebtedness is
limited to all or part of the same property or assets, plus
improvements, accessions, proceeds or dividends or distributions in
respect thereof, that secured, or under such written arrangements
could secure, the original Indebtedness; or incurred in respect of
any Indebtedness secured by, or securing any refinancing,
refunding, extension, renewal or replacement, in whole or in part,
of any other obligation secured by, any other Permitted Liens,
provided that any such new Lien is limited to all or part of the
same property or assets, plus improvements, accessions, proceeds or
dividends or distributions in respect thereof, that secured, or,
under the written arrangements under which the original Lien arose
could secure, the obligations to which such Liens relate;
(18) Liens securing Hedging Obligations;
149
<PAGE> 163
(19) Liens arising out of judgments, decrees, orders or awards in
respect of which IASIS shall in good faith be prosecuting an
appeal or proceedings for review which appeal or proceedings
shall not have been finally terminated, or if the period within
which such appeal or proceedings may be initiated shall not have
expired;
(20) Liens on Capital Stock of an Unrestricted Subsidiary that secure
Indebtedness or other obligation of such Unrestricted Subsidiary;
and
(21) Liens incurred in connection with a Qualified Receivables
Transaction (which in the case of IASIS and its Restricted
Subsidiaries (other than Receivables Subsidiaries) shall be
limited to receivables and related assets referred to in the
definition of Qualified Receivables Transaction).
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of IASIS or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of IASIS or any of its Restricted Subsidiaries, other than
intercompany Indebtedness; provided that:
(1) the principal amount, or accreted value, if applicable, of such
Permitted Refinancing Indebtedness does not exceed the principal
amount, or accreted value, if applicable, of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded, plus
all accrued interest thereon and the amount of all fees,
commissions, discounts, costs, expenses and premiums incurred in
connection therewith;
(2) if such Indebtedness is not Senior Debt, either
(a) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded or
(b) all scheduled payments on or in respect of such Permitted
Refinancing Indebtedness, other than interest payments, shall
be at least 91 days following the final scheduled maturity of
the notes; and if such Indebtedness is Senior Debt and has a
final stated maturity later than the final stated maturity of
the notes, such Permitted Refinancing Indebtedness has a final
stated maturity later than the final stated maturity of the
notes;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the
notes, such Permitted Refinancing Indebtedness is subordinated in
right of payment to, the notes on terms at least as favorable to the
holders of notes as those contained in the documentation governing
the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and
(4) such Indebtedness is incurred either by IASIS or any Guarantor or by
the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
150
<PAGE> 164
"PHYSICIAN SUPPORT OBLIGATION" means a loan to or on behalf of, or a
guarantee of indebtedness of, a physician or healthcare professional providing
service to patients in the service area of a Hospital or other health care
facility operated by IASIS or any of its Restricted Subsidiaries made or given
by IASIS or any Subsidiary of IASIS
(a) in the ordinary course of its business and
(b) pursuant to a written agreement having a period not to exceed
five years.
"PRINCIPALS" means Joseph Littlejohn & Levy, Inc. ("JLL"), investment funds
managed by JLL, partners of JLL, an entity controlled by any of the foregoing
and/or by a trust of the type described hereafter, and/or a trust for the
benefit of any of the foregoing.
"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of
transactions entered into by IASIS or any of its Subsidiaries pursuant to which
IASIS or any of its Subsidiaries sells, conveys or otherwise transfers to:
(1) a Receivables Subsidiary, in the case of a transfer by IASIS or any
of its Subsidiaries, which transfer may be effected through IASIS or
one or more Subsidiaries; and
(2) any other Person (in the case of a transfer by a Receivables
Subsidiary), or grants a security interest in, any accounts
receivable, instruments, chattel paper, general intangibles and
similar assets (whether now existing or arising in the future, the
"Receivables") of IASIS or any of its Subsidiaries, and any assets
related thereto including, without limitation, all collateral
securing such Receivables, all contracts, contract rights and all
guarantees or other obligations in respect of such Receivables,
proceeds of such Receivables and any other assets which are
customarily transferred or in respect of which security interests
are customarily granted in connection with asset securitization
transactions of such type;
provided that a Receivables Subsidiary participating in a Qualified Receivables
Transaction shall meet the requirements set forth in the definition of
"Receivables Subsidiary."
"RECAPITALIZATION REFINANCING" means the debt refinancing in connection
with the Paracelsus Recapitalization and Tenet Acquisition.
"RECEIVABLES SUBSIDIARY" means a Subsidiary of IASIS which engages in no
activities other than in connection with the financing of accounts receivable
and which is designated by the Board of Directors of IASIS (as provided below)
as a Receivables Subsidiary (a) no portion of the Indebtedness or any other
Obligations (contingent or otherwise) of which:
(1) is guaranteed by IASIS or any Subsidiary of IASIS, excluding
guarantees of Obligations, (other than the principal of, and
interest on, Indebtedness) pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of
business in connection with a Qualified Receivables Transaction;
(2) is recourse to or obligates IASIS or any Subsidiary of IASIS in any
way other than pursuant to representations, warranties, covenants
and indemnities customarily entered into in connection with a
Qualified Receivables Transaction; or
(3) subjects any property or asset of IASIS or any Subsidiary of IASIS
(other than accounts receivable and related assets as provided in
the definition of
151
<PAGE> 165
"Qualified Receivables Transaction"), directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than
pursuant to representations, warranties, covenants and indemnities
customarily entered into in connection with a Qualified Receivables
Transaction;
(b) with which neither IASIS nor any Subsidiary of IASIS has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to IASIS or such Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of IASIS, other than as may be
customary in a Qualified Receivables Transaction including for fees payable in
the ordinary course of business in connection with servicing accounts
receivable; and (c) with which neither IASIS nor any Subsidiary of IASIS has any
obligation to maintain or preserve such Subsidiary's financial condition or
cause such Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of IASIS will be evidenced to the trustee
by filing with the trustee a certified copy of the resolution of the Board of
Directors of IASIS giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"REFINANCING DISQUALIFIED STOCK" means any Disqualified Stock of IASIS
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace or refund other Disqualified Stock of IASIS; provided
that:
(1) the amount of such Refinancing Disqualified Stock does not exceed the
amount of the Disqualified Stock so extended, refinanced, renewed,
replaced or refunded, plus all accrued dividends thereon and the amount
of all fees, commissions, discounts, costs, expenses and premiums
incurred in connection therewith; and
(2) either
(a) such Refinancing Disqualified Stock by its terms, or upon the
happening of any event, matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise at the option of
the holder thereof, in whole or in part, on or later than the final
maturity date of, or date that by its terms, or upon the happening
of any event, matures, or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise at the option of the holder
thereof, in whole or in part, of, the Disqualified Stock being
extended, refinanced, renewed, replaced or refunded or
(b) all scheduled payments on or in respect of such Refinancing
Disqualified Stock (other than dividend payments) shall be at least
91 days following the final scheduled maturity of the notes.
"REFINANCING PREFERRED STOCK" means any preferred stock of IASIS issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace or refund other preferred stock of IASIS; provided that:
(1) the amount of such Refinancing Preferred Stock does not exceed the
amount of the preferred stock so extended, refinanced, renewed,
replaced or refunded, plus all accrued dividends thereon and the amount
of all fees, commissions, discounts, costs, expenses and premiums
incurred in connection therewith; and
(2) such Refinancing Preferred Stock is not Disqualified Stock.
"REFINANCING SUBSIDIARY PREFERRED STOCK" means any preferred stock of any
Restricted Subsidiary of IASIS issued in exchange for, or the net proceeds of
which are used to
152
<PAGE> 166
extend, refinance, renew, replace or refund other preferred stock of such
Restricted Subsidiary; provided that:
(1) the amount of such Refinancing Subsidiary Preferred Stock does not
exceed the amount of the preferred stock so extended, refinanced,
renewed, replaced or refunded, plus all accrued dividends thereon and
the amount of all fees, commissions, discounts, costs, expenses and
premiums incurred in connection therewith; and
(2) such Refinancing Subsidiary Preferred Stock is not Disqualified Stock.
"RELATED BUSINESS" means a healthcare business affiliated or associated
with a Hospital or any business related or ancillary to the provision of
healthcare services or information or the investment in, or the management,
leasing or operation of, a Hospital.
"RELATED PARTY" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or
immediate family member, in the case of an individual, of any
Principal; or
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80%
or more controlling interest of which consist of any one or more
Principals and/or such other Persons referred to in the immediately
preceding clause (1).
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SENIOR DEBT" means:
(1) all Indebtedness outstanding under all Credit Facilities, all Hedging
Obligations (including guarantees thereof) with respect thereto of
IASIS and the Guarantors, whether outstanding on the date of the
indenture or thereafter incurred;
(2) any other Indebtedness incurred by IASIS and the Guarantors, unless the
instrument under which such Indebtedness is incurred expressly provides
that it is on a parity with or subordinated in right of payment to the
notes or the Subsidiary Guarantees, as the case may be; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2) (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing by
IASIS or the Guarantors;
(2) any Indebtedness of IASIS or any Guarantor to any of its Subsidiaries;
(3) any trade payables; or
153
<PAGE> 167
(4) the portion of any Indebtedness that is incurred in violation of the
indenture (but only to the extent so incurred).
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such regulation is in effect on the date
hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination
thereof); and
(2) any partnership
(a) the sole general partner or the managing general partner of which is
such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"SUBSIDIARY GUARANTEE" means the Guarantee of the notes by a Guarantor.
"TENET ACQUISITION" means the acquisition of some acute care hospitals
located in Arizona, Florida and Texas, from Tenet Healthcare Corporation, by
IASIS, pursuant to the asset sale agreement, dated as of August 15, 1999.
"TOTAL ASSETS" means the total consolidated assets of IASIS and its
Restricted Subsidiaries as set forth on the most recent consolidated balance
sheet of IASIS and its Restricted Subsidiaries.
"TRANSACTIONS" means the Paracelsus Recapitalization, the Recapitalization
Refinancing, the Tenet Acquisition, the JLL Hospital Merger and the IASIS
Merger.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of IASIS that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution
of the Board of Directors of IASIS, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with IASIS or any Restricted Subsidiary of IASIS unless the terms of
any such agreement, contract, arrangement or understanding are no less
favorable to IASIS or such Restricted Subsidiary than those that might
be obtained at the time from Persons who are not Affiliates of IASIS;
(3) is a Person with respect to which neither IASIS nor any of its
Restricted Subsidiaries has any direct or indirect obligation
(a) to subscribe for additional Equity Interests or
(b) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating
results; and
154
<PAGE> 168
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of IASIS or any of its Restricted
Subsidiaries;
except in the case of clause (3) or (4), to the extent
(a) that IASIS or such Restricted Subsidiary could otherwise provide
such a guarantee or incur such Indebtedness (other than as Permitted
Debt) pursuant to "--Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock" above and
(b) the provision of such guarantee and the incurrence of such
indebtedness otherwise would be permitted under
"--Covenants--Restricted Payments" above.
Any designation of a Subsidiary of IASIS as an Unrestricted Subsidiary
shall be evidenced to the trustee by filing with the trustee a certified copy of
the resolution of the Board of Directors of IASIS giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by the covenant
described above under the caption "--Covenants--Restricted Payments." If, at any
time, any Unrestricted Subsidiary would fail to meet the preceding requirements
as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of IASIS as of such
date and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the caption "--Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," IASIS shall be in default of such
covenant. The Board of Directors of IASIS may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of IASIS of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption
"--Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund, serial
maturity or other required payments of principal, including payment
at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
155
<PAGE> 169
DESCRIPTION OF PREFERRED STOCK
Our board of directors is authorized to issue up to 550,000 shares of
preferred stock in such series and with such designation and rights as the board
determines. In connection with the acquisition of hospitals and related
facilities from Tenet Healthcare Corporation, we authorized the issuance of up
to 500,000 shares of Series A preferred stock and in connection with the merger
we authorized the issuance of up to 50,000 shares of Series B preferred stock.
The Series A preferred stock and the Series B preferred stock are identical in
all respects, except as provided below. 160,000 shares of Series A preferred
stock and 5,311 of Series B preferred stock will be outstanding following the
acquisition of hospitals and related facilities from Tenet Healthcare
Corporation and the merger. The Series A preferred stock is mandatorily
redeemable by us on October 15, 2010 and the Series B preferred stock is
mandatorily redeemable by us on October 15, 2020, in each case, for $1,000 per
share plus all accrued and unpaid dividends to the redemption date or as soon
thereafter as will not be prohibited by our then-existing debt agreements. The
preferred stock has a liquidation preference over the common stock equal to the
redemption price of $1,000 per share plus all accrued and unpaid dividends.
Dividends on the preferred stock are payable when, as and if declared by our
board of directors and will accrue at the rate of 16.0% per annum from their
date of issuance. No dividends or distributions may be made on the common stock
unless and until all accrued and unpaid dividends are first paid to the holders
of the preferred stock. Without the consent of the holders of a majority of the
outstanding preferred stock, we may not enter into any merger, consolidation or
other business combination, unless and until the preferred stock is repurchased
for an amount equal to $1,000 per share plus all accrued and unpaid dividends
thereon. Except as required by law or as described above, the holders of the
preferred stock are not entitled to vote on any matter submitted to a vote of
the stockholders. The redemption of, and payment of cash dividends on, the
preferred stock is restricted by the terms of our credit facility and the
indenture. For a description of the ownership of the preferred stock, see "Stock
Ownership" on page 95.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes where the old notes
were acquired as a result of market-making activities or other trading
activities. IASIS has agreed that for a period of 180 days after the exchange
offer is consummated, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with resales of the new
notes. All resales must be made in compliance with state securities or blue sky
laws. IASIS assumes no responsibility with regard to compliance with these
requirements.
IASIS will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account in
the exchange offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any resale of the new notes may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such new notes. Any broker-dealer
that resells new notes that
156
<PAGE> 170
were received by it for its own account in the exchange offer and any broker or
dealer that participates in a distribution of the new notes may be deemed to be
an "underwriter" within the meaning of the Securities Act. Any profit on any
resale of new notes and any commissions or concessions received by any persons
deemed to be underwriters may be deemed to be underwriting compensation under
the Securities Act. The enclosed letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the exchange offer is consummated, IASIS
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests these documents
from the exchange agent. IASIS has agreed to pay all expenses incident to the
exchange offer--other than commissions or concessions of any brokers or
dealers--and will indemnify the holders of the new notes (including any
broker-dealers) against specific liabilities, including liabilities under the
Securities Act.
This prospectus, as it may be amended or supplemented from time to time,
may be used by IASIS in connection with any additional exchange offers. These
additional exchange offers may take place from time to time until all
outstanding old notes have been exchanged for new notes, subject to the terms
and conditions contained in the prospectus and the letter of transmittal
distributed by IASIS in connection with these additional exchange offers.
LEGAL MATTERS
The legality of the new notes being offered by this prospectus will be
passed upon for IASIS by Skadden, Arps, Slate, Meagher & Flom LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the combined
financial statements of the Paracelsus Utah Facilities, as of September 30, 1999
and December 31, 1998 and for the nine months ended September 30, 1999 and for
each of the two years in the period ended December 31, 1998 as set forth in
their report included in this prospectus. We have included the combined
financial statements of the Paracelsus Utah Facilities in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
The combined financial statements of the Tenet hospitals as of May 31, 1999
and 1998, and for each of the years in the three-year period ended May 31, 1999,
have been included herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of IASIS Healthcare Corporation as of September 30, 1999
and 1998 and for the year ended September 30, 1999 and the period from February
23, 1998 (date of inception) through September 30, 1998 as set forth in their
report included in this prospectus. We have included the consolidated financial
statements of IASIS Healthcare Corporation in the prospectus and elsewhere in
the registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
157
<PAGE> 171
AVAILABLE INFORMATION
IASIS and the subsidiary guarantors have filed with the SEC a registration
statement on Form S-4 of which this prospectus forms a part, under the
Securities Act, in connection with our offering of the new notes. As permitted
by the rules and regulations of the SEC, this prospectus does not contain all of
the information in the registration statement. You will find additional
information about IASIS, the subsidiary guarantors and the new notes in the
registration statement. Any statements made in this prospectus concerning the
provisions of legal documents are not necessarily complete and you should read
the documents that are filed as exhibits to the registration statement.
As a result of the exchange offer, IASIS will become subject to the
informational requirements of the Exchange Act and will file periodic reports,
statements and other information with the SEC. We do not expect that the
subsidiary guarantors will be subject to the informational requirements of the
Exchange Act. You may inspect and copy the registration statement, including
exhibits, and, when filed, our periodic reports, statements and other
information filed with the SEC at the public reference facilities maintained by
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's regional offices located at 7 World Trade Center, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street (Suite
1400), Chicago, Illinois 60661. Copies may be obtained from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The SEC also maintains a Web site at http://www.sec.gov which
will contain, when filed, our reports, statements and other information filed
with the SEC.
If we are not required to be subject to the reporting requirements of the
Exchange Act in the future, we will be required under the indenture for the new
notes and the old notes to continue to file with the SEC and to furnish to
holders of the new notes and the old notes the reports, statements and other
information specified in Sections 13 and 15(d) of the Exchange Act, including
annual reports containing audited consolidated financial statements of IASIS and
quarterly reports containing unaudited condensed consolidated financial data for
the first three quarters of each fiscal year.
158
<PAGE> 172
INDEX TO AUDITED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Paracelsus Utah Facilities (Subsidiaries of Paracelsus
Healthcare Corporation) and Predecessor Companies:
Report of Independent Auditors............................ F-2
Combined Balance Sheets as of September 30, 1999 and
December 31, 1998...................................... F-3
Combined Statements of Operations and Changes in
Shareholder's Deficit.................................. F-4
Combined Statements of Cash Flows......................... F-5
Notes to Combined Financial Statements.................... F-6
Tenet Hospitals:
Independent Auditors' Report.............................. F-20
Combined Balance Sheets -- May 31, 1999 and 1998.......... F-21
Combined Statements of Income and Changes in Ownership
Equity Three years ended May 31, 1999.................. F-22
Combined Statements of Cash Flows Three years ended May
31, 1999............................................... F-23
Notes to Combined Financial Statements Three years ended
May 31, 1999........................................... F-24
IASIS Healthcare Corporation:
Report of Independent Auditors............................ F-36
Consolidated Balance Sheets as of September 30, 1999 and
1998................................................... F-37
Consolidated Statements of Operations..................... F-38
Consolidated Statements of Changes in Stockholders'
Equity................................................. F-39
Consolidated Statements of Cash Flows..................... F-40
Notes to Consolidated Financial Statements................ F-41
</TABLE>
F-1
<PAGE> 173
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Paracelsus Healthcare Corporation
We have audited the accompanying combined balance sheets of PHC-Salt Lake
City, Inc., Paracelsus Pioneer Valley Hospital, Inc., Pioneer Valley Health
Plan, Inc., PHC-Jordan Valley, Inc., Paracelsus PHC Regional Medical Center,
Inc., Paracelsus Davis Hospital, Inc., PHC Utah, Inc., Clinicare of Utah, Inc.,
and PHC/Psychiatric Healthcare Corporation (collectively the "Paracelsus Utah
Facilities" or the "Company"), all of which are wholly owned subsidiaries of
Paracelsus Healthcare Corporation as of September 30, 1999 and December 31,
1998, and the related combined statements of operations and changes in
shareholder's deficit and cash flows for the nine month period ended September
30, 1999, and each of the two years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Paracelsus Utah Facilities at September 30, 1999 and December 31, 1998, and the
combined results of their operations and their cash flows for the nine month
period ended September 30, 1999, and each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
November 12, 1999
F-2
<PAGE> 174
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ -- $ 1,485,222
Accounts receivable, net of allowance for doubtful
accounts: 1999 -- $10,850,000; 1998 -- $12,637,000..... 19,673,625 24,730,251
Supplies.................................................. 4,501,201 4,278,132
Note receivable........................................... 2,125,000 --
Prepaid expenses and other current assets................. 2,157,706 2,880,353
------------ ------------
Total current assets................................... 28,457,532 33,373,958
Property and equipment:
Land and improvements..................................... 15,200,127 14,726,526
Buildings and improvements................................ 112,694,063 111,855,814
Equipment................................................. 65,525,370 62,933,215
Construction in progress (estimated cost to complete and
equip after September 30, 1999 -- $5,897,000).......... 10,923,188 1,485,627
------------ ------------
204,342,748 191,001,182
Less: Accumulated depreciation.............................. (67,415,717) (59,575,856)
------------ ------------
136,927,031 131,425,326
Goodwill and other intangible assets, net of accumulated
amortization:
1999 -- $6,521,000; 1998 -- $5,046,000.................... 46,987,794 48,459,844
Note receivable............................................. -- 2,000,000
Other assets................................................ 886,408 1,059,381
------------ ------------
Total assets........................................... $213,258,765 $216,318,509
============ ============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable.......................................... $ 15,739,117 $ 14,624,350
Due to government third parties........................... 930,535 1,413,669
Accrued liabilities:
Accrued salaries and benefits.......................... 5,228,768 3,974,716
Other.................................................. 2,171,204 2,466,492
Current maturities of capital lease obligations........... 701,217 545,121
------------ ------------
Total current liabilities.............................. 24,770,841 23,024,348
Due to Paracelsus........................................... 270,813,584 275,599,990
Capital lease obligations................................... 798,302 1,727,651
Minority interest........................................... 1,460,664 1,600,808
Commitments and contingencies (Note 7)...................... -- --
Shareholder's deficit....................................... (84,584,626) (85,634,288)
------------ ------------
Total Liabilities and Shareholder's Deficit............ $213,258,765 $216,318,509
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 175
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN SHAREHOLDER'S DEFICIT
<TABLE>
<CAPTION>
PARACELSUS UTAH FACILITIES COMBINED
--------------------------------------------------------------
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenue................................ $140,949,655 $137,722,329 $183,111,848 $192,574,770
Costs and expenses:
Salaries and benefits.................... 49,154,953 49,479,811 65,941,842 67,663,759
Other operating expenses................. 58,846,888 57,097,346 73,950,516 75,434,320
Provision for bad debts.................. 9,979,306 8,072,997 11,727,282 17,020,294
Interest................................. 7,304,134 13,426,170 17,087,855 22,096,944
Depreciation and amortization............ 9,619,669 8,605,581 11,769,622 11,122,134
Allocated management fees................ 5,135,187 4,940,319 6,587,092 7,518,557
Unusual items............................ -- (7,500,000) (7,500,000) (12,031,000)
------------ ------------ ------------ ------------
Total costs and expenses.............. 140,040,137 134,122,224 179,564,209 188,825,008
------------ ------------ ------------ ------------
Income from continuing operations before
minority interests and income taxes...... 909,518 3,600,105 3,547,639 3,749,762
Minority interests......................... (140,144) 53,607 67,919 23,484
------------ ------------ ------------ ------------
Income from continuing operations before
income taxes............................. 1,049,662 3,546,498 3,479,720 3,726,278
Provision for income taxes................. -- -- -- --
Discontinued operations:
Income from operations of discontinued
psychiatric hospitals................. -- -- -- 1,038,306
------------ ------------ ------------ ------------
Net income................................. 1,049,662 3,546,498 3,479,720 4,764,584
Shareholder's deficit at beginning of
period................................... (85,634,288) (89,114,008) (89,114,008) (93,878,592)
------------ ------------ ------------ ------------
Shareholder's deficit at end of period..... $(84,584,626) $(85,567,510) $(85,634,288) $(89,114,008)
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 176
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PARACELSUS UTAH FACILITIES COMBINED
--------------------------------------------------------------
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................... $ 1,049,662 $ 3,546,498 $ 3,479,720 $ 4,764,584
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization.................. 9,619,669 8,605,581 11,769,622 11,122,134
Unusual items.................................. -- (7,500,000) (7,500,000) (12,031,000)
Minority interests............................. (140,144) 53,607 67,919 23,484
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Accounts receivable......................... 5,056,626 3,655,102 8,664,594 1,346,012
Supplies, prepaid expenses and other current
assets.................................... 374,576 293,700 93,951 1,602,868
Accounts payable and other accrued
liabilities............................... 1,590,397 (10,681,342) (10,384,803) (21,408,034)
------------ ----------- ------------ ------------
Net cash provided by (used in) operating
activities..................................... 17,550,786 (2,026,854) 6,191,003 (14,579,952)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment...... (13,476,349) (2,512,736) (6,427,458) (1,897,084)
Increase in minority interests................... -- -- -- 1,509,405
Decrease in other assets......................... -- -- 16,058 3,686
------------ ----------- ------------ ------------
Net cash used in investing activities............ (13,476,349) (2,512,736) (6,411,400) (383,993)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of capital leases........................ (773,253) (749,827) (1,210,780) (438,097)
Net (decrease) increase in due to Paracelsus..... (4,786,406) 4,845,879 (1,531,680) 15,464,670
------------ ----------- ------------ ------------
Net cash provided by (used in) financing
activities..................................... (5,559,659) 4,096,052 (2,742,460) 15,026,573
------------ ----------- ------------ ------------
(Decrease) increase in cash and cash
equivalents.................................... (1,485,222) (443,538) (2,962,857) 62,628
Cash and cash equivalents at beginning of the
period......................................... 1,485,222 4,448,079 4,448,079 4,385,451
------------ ----------- ------------ ------------
Cash and cash equivalents at end of the period... $ -- $ 4,004,541 $ 1,485,222 $ 4,448,079
============ =========== ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 177
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Paracelsus Utah Facilities is comprised of PHC-Salt Lake City, Inc.,
Paracelsus Pioneer Valley Hospital, Inc., Pioneer Valley Health Plan, Inc.,
PHC-Jordan Valley, Inc., Paracelsus PHC Regional Medical Center, Inc.,
Paracelsus Davis Hospital, Inc., PHC Utah, Inc., Clinicare of Utah, Inc., and
PHC/Psychiatric Healthcare Corporation (which includes Lakeland Regional
Hospital and Crossroads Regional Hospital) (collectively the "Paracelsus Utah
Facilities" or the "Company"), each of which is a wholly owned subsidiary of
Paracelsus Healthcare Corporation ("Paracelsus").
The Company, with 515 licensed beds, excluding PHC Regional Hospital and
Medical Center, which has been closed since June 1997, provides health care
services to patients in and around metropolitan Salt Lake City, Utah. Lakeland
Regional Hospital and Crossroads Regional Hospital were sold in 1997 (See Note
4).
BASIS OF COMBINATION
The combined financial statements include the accounts of the Company and
its wholly-owned or majority owned subsidiaries and partnerships, for the nine
months ended September 30, 1999, and for the years ended December 31, 1998 and
1997, and have been prepared on the push-down basis of the historical cost of
Paracelsus.
All significant intrafacility accounts and transactions have been
eliminated. Minority interests represent income allocated to the minority
partners' investment. Investments in affiliates, of which the Company owns more
than 20% but not in excess of 50%, are recorded on the equity method.
The combined financial statements included herein may not necessarily be
indicative of the results of operations, financial position, and cash flows of
the Company in the future or had the Company operated as a separate and
independent company during the periods presented.
The combined financial statements included herein do not reflect any
changes that may occur in the financing and operations of the Company as a
result of the Recapitalization (See Note 13).
UNAUDITED INTERIM COMBINED FINANCIAL STATEMENTS
The combined statement of operations and the combined statement of cash
flows for the nine months ended September 30, 1998 (interim combined financial
statements) have been prepared by the Company's management in accordance with
generally accepted accounting principles for interim financial information and
with the instructions of Regulation S-X and are unaudited. In the opinion of the
Company's management, the interim financial statements include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the interim results.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim combined unaudited financial
statements. The interim combined financial statements should be read in
conjunction with the audited financial
F-6
<PAGE> 178
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
statements appearing herein. The results of the nine months ended September 30,
1998 may not be indicative of operating results for the full respective years.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents.
SUPPLIES
Supplies, principally medical supplies, are stated at the lower of cost
(first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the land
improvements (5-25 years), buildings and improvements (5-40 years) and equipment
(3-20 years). Leaseholds are amortized on a straight-line basis over the lesser
of the terms of the respective leases or their estimated useful lives.
Expenditures for renovations and other significant improvements are capitalized;
however, maintenance and repairs, which do not improve or extend the useful
lives of the respective assets are charged to operations as incurred. Included
in property and equipment is capitalized interest expense of $218,000 for the
nine month period ended September 30, 1999. Depreciation expense recognized by
the Company was approximately $7,863,000, $9,597,000, and $8,874,000 for the
nine month period ended September 30, 1999 and for the years ended December 31,
1998 and 1997, respectively.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill, representing costs in excess of net assets acquired, is amortized
on a straight-line basis over a period of 20 to 35 years. Approximately
$3,349,000 of the purchase price of certain hospitals was allocated to
identifiable intangible assets, including medical records, assembled work force,
and manuals (the "other intangible assets"), based upon their fair value as
determined by an independent appraiser. The other intangible assets are being
amortized over a period of 2 to 10 years. Amortization expense recognized by the
Company was approximately $1,757,000, $2,173,000, and $2,248,000 for the nine
month period ended September 30, 1999 and for the years ended December 31, 1998
and 1997, respectively.
F-7
<PAGE> 179
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company regularly reviews the carrying value of goodwill and other
intangible assets in relation to the operating performance and future
undiscounted cash flows of the underlying hospitals. The Company records to
expense, on a current basis, any diminution in values of goodwill and other
intangible assets based on the difference between the sum of the future
discounted cash flows and net book value.
SHAREHOLDER'S DEFICIT
Shareholder's deficit represents the net investment in the Company by
Paracelsus. It includes common stock, additional paid-in-capital, and net
earnings or losses.
NET REVENUE
Net revenue includes amounts estimated by management to be reimbursable by
Medicare under the Prospective Payment System and by Medicare and Medicaid
programs under the provisions of cost-reimbursement and other payment formulas.
Payments for services rendered to patients covered by such programs are
generally less than billed charges. Deductions from revenue are made to reduce
the charges to these patients to estimated receipts based on each program's
principles of payment/reimbursement. Final settlements under these programs are
subject to administrative review and audit by third parties.
Approximately 34% of the Company's gross patient revenue for the nine month
period ended September 30, 1999 and for the years ended December 31, 1998 and
1997 related to services rendered to patients covered by Medicare and Medicaid
programs.
Administrative procedures for both Medicare and Medicaid preclude final
determination of retrospective settlements until the related cost reports have
been audited and settled by the intermediaries. Settlements under cost
reimbursement agreements with third-party payers are estimated and recorded in
the period in which the related services are rendered and are adjusted in future
periods as final settlements are determined. Final determination of amounts
earned under the Medicare and Medicaid programs often occur in subsequent years
because of audits by the programs, rights of appeal and the application of
numerous technical provisions. In the opinion of the Company's management,
adequate provision has been made for any adjustments that may result from such
reviews.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. Compliance with such laws and regulations can be subject to future
governmental review and interpretation, as well as significant regulatory action
including fines, penalties, and exclusion from the Medicare and Medicaid
programs. Noncompliance could result in regulatory action including fines,
penalties, and exclusion from the Medicare and Medicaid programs.
In the ordinary course of business, the Company renders services free of
charge to patients who are financially unable to pay for hospital care. The
value of these services rendered is not material to the Company's consolidated
results of operations for the
F-8
<PAGE> 180
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
nine month period ended September 30, 1999 and for the years ended December 31,
1998 and 1997, respectively.
INCOME TAXES
Paracelsus files consolidated federal and state income tax returns which
include all of its eligible subsidiaries, including the Company. The provisions
for income taxes in the combined statements of operations for all periods
presented have been computed on a separate return basis (i.e., assuming the
Company had not been included in a consolidated income tax return with
Paracelsus). All income tax payments are made by the Company through Paracelsus.
The Company records its income taxes under the liability method. Under this
method, deferred income tax assets and liabilities are recognized for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of accounts receivable, which consists of
amounts owed by various governmental agencies, insurance companies and private
patients. Credit risk on accounts receivable is limited because a majority of
the receivables are due from governmental agencies, commercial insurance
companies and managed care organizations. The Company continually monitors and
adjusts its reserves and allowances associated with these receivables.
Fair Value of Financial Instruments
The estimated fair values of all financial instruments, including cash and
cash equivalents, accounts receivable, and accounts payable, approximate their
carrying amounts due to the short-term maturity of these instruments.
RECLASSIFICATIONS
The accompanying 1998 financial statements have been reclassified to
conform to the 1999 financial statement presentation. The reclassifications had
no impact on net income or shareholder's deficit.
2. UNUSUAL ITEMS
During 1998, the Company recorded an unusual gain of approximately
$7,500,000 resulting from a settlement with PacifiCare of Utah ("PacifiCare")
regarding a dispute over administration of a 1996 capitation agreement. That
agreement had resulted in losses to PHC Regional Hospital and Medical Center
("PHC Regional") in 1996 and 1997, and the eventual closure of PHC Regional in
June 1997 (See Note 3). On August 20, 1997, PacifiCare and Paracelsus agreed to
a specific mechanism to determine amounts owed to
F-9
<PAGE> 181
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
each other as the result of amending the agreement effective July 1, 1997.
Following the completion of this process in August 1998, the Company recorded a
gain of approximately $7,500,000, which represents the excess of the loss
contract accrual (see below) over the settlement payment.
During 1997, the Company recorded an unusual gain totaling approximately
$12,000,000, consisting of (i) a reduction of approximately $15,500,000 in the
loss contract accrued at PHC Regional based upon the most recent available
operating information associated with the 1996 capitation agreement (see below),
offset by charges of (ii) approximately $3,500,000 relating to the closure of
PHC Regional in June 1997 (See Note 3). The Company had recorded during 1996 an
unusual charge of approximately $38,100,000 for a loss contract at PHC Regional.
Paracelsus had entered into a capitated contract arrangement in 1996 in
connection with its acquisition of PHC Regional. Under the capitated contract,
PHC Regional was financially committed to provide healthcare services to members
under the contract in return for a fixed premium per member per month. The loss
contract charge was based on a study conducted by Paracelsus with the assistance
of independent third-party consultants, which projected future healthcare and
maintenance costs under the then capitation agreement to exceed future premiums.
3. ACQUISITIONS AND CLOSURE OF HOSPITALS
ACQUISITIONS
On August 16, 1996, Paracelsus acquired, among other entities, Salt Lake
Regional Medical Center ("Salt Lake"), Jordan Valley Hospital ("Jordan Valley"),
Lakeland Regional Hospital ("Lakeland"), and Crossroads Regional Hospital
("Crossroads") through its merger with Champion Healthcare Corporation
("Champion"). The total purchase price, including all costs associated with the
merger transaction and liabilities assumed, was approximately $394,400,000.
Paracelsus allocated to the Company a purchase price of approximately
$138,900,000 associated with the fair value of the assets acquired and
liabilities assumed, including goodwill and other intangibles of $42,800,000 of
Salt Lake, Jordan Valley, Lakeland, and Crossroads.
On May 17, 1996, Paracelsus acquired PHC Regional Hospital and Medical
Center ("PHC Regional"), including certain current assets, for approximately
$71,000,000 in cash which has been allocated to the Company. In connection with
the adoption of SFAS No. 121 and the significant operating losses recognized at
this facility since its acquisition date, the Company, in conjunction with an
independent appraisal, recorded an impairment charge of $52,500,000 on December
31, 1996, for the write down of the long-lived assets of PHC Regional, including
initially recorded goodwill of approximately $15,800,000.
On May 17, 1996, Paracelsus acquired Pioneer Valley Hospital ("Pioneer
Valley") and Davis Hospital and Medical Center ("Davis") from Columbia/HCA
Healthcare Corporation ("Columbia"). In exchange, Columbia received three
acute-care facilities then owned by Paracelsus and $38,500,000 in cash, net of a
working capital differential. Paracelsus purchased the real property of two of
its facilities from a real estate investment trust ("REIT") prior to exchanging
the facilities with Columbia and then sold the Pioneer Valley real property
acquired from Columbia to the REIT (See Note 6). Paracelsus allocated to the
Company a purchase price of approximately $48,300,000 associated with
F-10
<PAGE> 182
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the fair value of the assets acquired and liabilities assumed, including
goodwill of approximately $10,800,000, of Pioneer Valley and Davis.
CLOSURE
In June 1997, PHC Regional was closed as a result of continuing losses
under the capitation agreement with PacifiCare. In August 1997, Paracelsus
executed an Amended and Restated Provider Agreement with PacifiCare, retroactive
to July 1, 1997, to (i) receive payment for services provided to enrollees on a
per diem basis instead of a capitation basis; (ii) revise the contract term from
15 years to 5 years ending in June 2002; (iii) no longer provide exclusive
service to enrollees; and (iv) agree on a mechanism to resolve disagreements
regarding the administration of the capitation agreement prior to July 1, 1997.
Following the completion of this process in August 1998, the Company paid
PacifiCare approximately $5,500,000 as a final settlement under the capitation
agreement.
4. DISCONTINUED OPERATIONS
In April 1997, the Company completed the sale of its two psychiatric
hospitals, Lakeland and Crossroads, and received proceeds of approximately
$12,700,000 ($10,200,000 in cash and $2,500,000 note receivable) which
approximated the carrying value of the net assets. As the Company implemented
plans to exit the psychiatric hospital business in September 1996, the net
assets of Lakeland and Crossroads were recorded at their estimated net
realizable value upon their acquisition as part of the Champion acquisition (See
Note 3). The combined financial statements reflect the results of operations of
Lakeland and Crossroads as discontinued operations.
5. INCOME TAXES
For the periods presented, federal and state income taxes are provided as
if the Company files its own separate income tax returns. The Company uses the
liability method in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on the differences between financial
reporting and tax basis of assets and liabilities, and are measured using
enacted rates and laws that will be in effect when differences are expected to
reverse.
F-11
<PAGE> 183
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PARACELSUS UTAH FACILITIES COMBINED
---------------------------------------------
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Continuing operations:
Current:
Federal......................... $ -- $ -- $ --
State........................... -- -- --
Deferred:
Federal......................... -- -- --
State........................... -- -- --
------------ ------------ -----------
Total income tax provision
(benefit).......................... $ -- $ -- $ --
============ ============ ===========
</TABLE>
The following table reconciles the differences between the statutory
federal income tax rate and the effective tax rate for continuing operations:
<TABLE>
<CAPTION>
PARACELSUS UTAH FACILITIES COMBINED
---------------------------------------------
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Federal statutory rate............... $ 367,000 $ 1,218,000 $ 1,304,000
State income taxes................... 106,000 209,000 235,000
Unbenefitted affiliate losses........ -- 696,000 4,306,000
Non-deductible goodwill
amortization....................... 542,000 722,000 636,000
Adjustment to valuation allowance.... (1,015,000) (2,845,000) (6,481,000)
------------ ------------ -----------
Effective income tax rate............ $ -- $ -- $ --
============ ============ ===========
</TABLE>
F-12
<PAGE> 184
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the federal and state deferred tax assets and liabilities are
comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Deferred tax assets:
Property, plant, and equipment............ $ -- $ 1,128,000
Allowance for bad debts................... 3,811,000 4,495,000
Accrued expenses.......................... 1,005,000 1,005,000
Net operating losses...................... 9,265,000 8,363,000
Other -- net.............................. 5,724,000 5,788,000
------------- -------------
Total deferred tax assets......... 19,805,000 20,779,000
Valuation allowance against deferred tax
assets.................................... (19,764,000) (20,779,000)
------------- -------------
Net deferred tax assets................ $ 41,000 $ --
============= =============
Deferred Tax Liabilities:
Property, plant and equipment............. $ 41,000 $ --
============= =============
</TABLE>
For financial reporting purposes, the Company recorded valuation allowances
of approximately $19,764,000 and $20,779,000 as of September 30, 1999 and
December 31, 1998, respectively, to offset deferred tax assets principally
related to the Company's net operating losses, bad debt allowances and other
accrued expenses.
At September 30, 1999, the Company has net operating loss carryforwards of
approximately $24,221,000, inclusive of approximately $3,636,000 acquired from
Champion in the merger, for U.S. Federal income tax purposes that will expire
beginning in 2006. As a result of the change in ownership of the Champion group
at August 16, 1996, the Champion net operating losses are also limited under
Section 382 of the Internal Revenue Code.
At September 30, 1999 the Company had generated approximately $11,964,000
of tax losses which were absorbed by the members of the Paracelsus consolidated
group. The Paracelsus group was in a loss position during the period the losses
were generated, so the Company has not recognized a tax benefit related to those
losses.
The valuation allowance decreased by approximately $1,016,000 in 1999 and
$2,845,000 in 1998. The Company maintains a valuation allowance against deferred
tax assets it believes will not be realized.
6. LEASES
On May 16, 1996, Pioneer Valley entered into a lease agreement with an
unrelated real estate investment trust for the hospital building. The lease
agreement terminates on January 31, 2004, unless extended by Pioneer Valley for
three consecutive ten-year periods. Under this lease, rent is subject to
increases based on patient revenues with minimum annual increases of 2% and a
maximum annual rent of approximately $8,914,000. The lease agreement grants
Pioneer Valley the option of purchasing the hospital building at any
F-13
<PAGE> 185
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
time after the initial lease term at the greater of fair market value or
$63,013,000, plus any capital additions paid for by the landlord. Pioneer Valley
has agreed to make capital improvements through December 31, 1999 of at least
$3,400,000. As of September 30, 1999, approximately $3,111,000 had been expended
towards this commitment. In accordance with the lease covenants, Pioneer Valley
obtained, through Paracelsus, a yearly renewable standby letter of credit for
approximately $7,551,000, all of which is unused as of September 30, 1999.
The Company leases property and equipment under cancelable and
noncancelable leases. Future minimum operating and capital lease payments as of
September 30, 1999, including amounts relating to the lease of Pioneer Valley,
for the next five years and thereafter are approximately as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASE SUBLEASE
PAYMENTS PAYMENTS INCOME
---------- ----------- ----------
<S> <C> <C> <C>
2000.................................... $ 788,000 $10,466,000 $ 645,000
2001.................................... 736,000 10,437,000 645,000
2002.................................... 44,000 10,544,000 645,000
2003.................................... 32,000 10,497,000 580,000
2004.................................... 11,000 4,675,000 489,000
Thereafter.............................. -- 5,730,000 2,977,000
---------- ----------- ----------
Total minimum future
payments................... 1,611,000 $52,349,000 $5,981,000
=========== ==========
Less amount representing interest....... (112,000)
----------
1,499,000
Less current portions................... (701,000)
----------
Long-term capital lease obligations..... $ 798,000
==========
</TABLE>
The following summarized amounts relate to assets leased by the Company
under capital leases:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Property, plant, and equipment...................... $2,452,000 $2,375,000
Accumulated depreciation............................ (823,000) (470,000)
---------- ----------
Net book value...................................... $1,629,000 $1,905,000
========== ==========
</TABLE>
Depreciation of assets under capital leases is included in depreciation and
amortization in the Combined Statements of Operations.
Rental expense recognized by the Company was approximately $8,454,000,
$11,667,000, and $11,359,000 for the nine months ended September 30, 1999 and
for the years ended December 31, 1998 and 1997, respectively.
F-14
<PAGE> 186
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
SELF-INSURED LIABILITIES
General and Professional Liability
The Company is subject to claims and suits in the ordinary course of
business, including those arising from care and treatment afforded at its
hospitals. Paracelsus assumes the liability for all general and professional
liability claims incurred. Accordingly, no reserve for general and professional
liability risks is recorded in the accompanying Combined Balance Sheets.
Paracelsus is self-insured for the first $1 million per occurrence of general
and professional liability claims and $4 million in the aggregate. In addition,
Paracelsus has purchased excess insurance coverage up to $50 million in the
aggregate from third-party insurance carriers. The cost of general and
professional liability coverage is allocated by Paracelsus to the Company based
on actuarially determined estimates. The net cost (income) allocated to the
Company for the nine months ended September 30, 1999 and for the years ended
December 31, 1998 and 1997, was approximately $1,333,000, $(45,000), and
$621,000, respectively, net of adjustments allocated for a change in estimate in
accordance with actuarial evaluations of approximately $0, $1,170,000, and
$524,000, respectively.
Worker's Compensation and Health Insurance
The Company participates in Paracelsus' self-insured program for workers'
compensation and health insurance. Paracelsus assumes the liability for all
workers' compensation claims incurred up to $250,000 per claim after which the
Company is insured by a commercial insurance carrier. Accordingly, no reserve
for workers' compensation risk is recorded in the accompanying Combined Balance
Sheets. The cost of workers' compensation coverage is allocated by Paracelsus to
the Company based on actuarially determined estimates. The costs of health
insurance is allocated by Paracelsus to the Company based upon claims paid on
behalf of the Company and an estimate of the total cost of unpaid claims in
accordance with an average lag time and past experience. The costs allocated to
the Company for these self-insured programs for the nine months ended September
30, 1999 and for the years ended December 31, 1998 and 1997, was approximately
$3,182,000, $4,491,000, and $3,125,000, respectively.
Other
The Company has acquired businesses with prior operating histories.
Acquired companies may have unknown or contingent liabilities, including
liabilities for failure to comply with healthcare laws and regulations, such as
billing and reimbursement, fraud and abuse, and similar anti-referral laws.
Although the Company institutes policies designed to conform practices to its
standards following completion of acquisitions, there can be no assurance that
the Company will not become liable for past activities that may later be
asserted to be improper by private plaintiffs or government agencies. Although
the Company generally seeks to obtain indemnification from prospective sellers
covering such matters, there can be no assurance that any such matter will be
covered by indemnification, or if covered, that such indemnification will be
adequate to cover potential losses and fines.
F-15
<PAGE> 187
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is subject to claims and legal actions by patients and others
in the ordinary course of business. The Company believes that all such claims
and actions are either adequately covered by insurance or will not have a
material adverse effect on the Company's financial condition, results of
operations, or liquidity.
Certain term loan and revolving loan facilities of Paracelsus are secured
in part by the right of lenders to a first priority lien in the real and
personal properties of the Company and a first priority interest in the capital
stock of the Company (See Note 13).
PHYSICIAN COMMITMENTS
The Company has committed to provide certain financial assistance pursuant
to recruiting agreements with various physicians practicing in the communities
it serves. In consideration for a physician relocating to one of its communities
and agreeing to engage in private practice for the benefit of the respective
community, the Company may loan certain amounts of money to a physician normally
over a period of one year to assist in establishing his or her practice. Amounts
committed to be advanced approximated $1,300,000 at September 30, 1999. The
actual amount of such commitments to be subsequently advanced to physicians
often depends upon the financial results of a physician's private practice
during the guaranteed period. Generally, amounts advanced under the recruiting
agreements may be forgiven pro rata over a period of 24 months contingent upon
the physician continuing to practice in the respective community. It is
management's opinion that amounts actually advanced and not repaid will not have
a material adverse effect on the Company's results of operations or financial
position.
8. EMPLOYEE BENEFITS
The Company participates in Paracelsus' defined contribution 401(k)
retirement plan (the "Plan"). The Plan covers all employees of the Company who
have been employed for one year, are at least 21 years of age and work at least
1,000 hours annually. Participants may contribute up to 15% of pretax
compensation not to exceed limits established annually by the Internal Revenue
Service. Paracelsus matches on behalf of the Company $0.25 for each dollar of
employee contributions up to 6% of the employee's gross salary and may make
additional discretionary contributions. The employees immediately vest 100% in
their own contributions and vesting in the employer portion of contributions
occurs gradually after seven years to 100%. The cost allocated to the Company
for contributions to the Plan made by Paracelsus on behalf of the Company for
the nine months ended September 30, 1999 and for the years ended December 31,
1998 and 1997, was approximately $281,000, $417,000, and $430,000, respectively.
9. DUE TO PARACELSUS
Due to Paracelsus consists of expenses allocated from Paracelsus to the
Company and the net excess of funds transferred to or paid on behalf of the
Company, including the initial costs of the hospitals, over funds transferred to
the centralized cash management account at Paracelsus. Generally, this balance
is increased by automatic cash transfers from the account to reimburse the
Company's bank accounts for completed construction project additions, fees and
services provided by Paracelsus, and other operating expenses,
F-16
<PAGE> 188
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
such as payroll, interest, insurance, and income taxes. Generally, the balance
is decreased through daily cash deposits from collections of accounts receivable
by the Company to the account. The Company is charged interest on the
outstanding amounts due to Paracelsus at various rates. Interest expense charged
to the Company related to the net balances due Paracelsus was approximately
$7,300,000, $17,000,000, and $22,000,000, for the nine months ended September
30, 1999 and for the years ended December 31, 1998 and 1997, respectively.
Allocated Management Fees
Paracelsus incurs various corporate general and administrative expenses.
These corporate overhead expenses are allocated to the Company based on net
revenue. The amounts allocated by Paracelsus are not necessarily indicative of
the actual costs which may have been incurred had the Company operated as an
entity unaffiliated with Paracelsus; however, in the opinion of Paracelsus
management, this allocation method is reasonable.
10. SALE OF ACCOUNTS RECEIVABLE
A subsidiary of Paracelsus has an agreement with an unaffiliated trust (the
"Trust") to sell the hospital eligible accounts receivable (the "Eligible
Receivables") of certain of its subsidiaries, including certain hospitals of the
Company, on a nonrecourse basis to the Trust. A special purpose subsidiary of a
major lending institution provides up to $65,000,000 in commercial paper
financing to the Trust to finance the purchase of the Eligible Receivables, with
the Eligible Receivables serving as collateral. The commercial paper notes have
a term of not more than 120 days. In 1998, Davis and Jordan Valley were added to
the commercial paper financing program and Salt Lake Regional Medical Center was
added in 1999. Eligible Receivables sold to the Trust were approximately
$11,527,000 and $6,644,000 at September 30, 1999 and December 31, 1998,
respectively.
11. ALLOWANCE FOR DOUBTFUL ACCOUNTS
A summary of activity in the Company's allowance for doubtful accounts
follows:
<TABLE>
<CAPTION>
BALANCES AT ADDITIONS ACCOUNTS BALANCE AT THE
BEGINNING OF CHARGED TO WRITTEN OFF, NET END OF THE
PERIOD EXPENSES OF RECOVERIES PERIOD
------------ ----------- ---------------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended December 31,
1997................ $11,556,000 $17,020,000 $ (8,208,000) $20,368,000
Year ended December 31,
1998................ 20,368,000 11,727,000 (19,458,000) 12,637,000
Nine months ended
September 30,
1999................ 12,637,000 9,979,000 (11,766,000) 10,850,000
</TABLE>
F-17
<PAGE> 189
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
12. RECENT PRONOUNCEMENTS
In March and in April 1998, the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants issued two Statements of
Position ("SOPs") that are effective for financial statements for fiscal years
beginning after December 15, 1998, which will apply to the Company beginning
with its fiscal year ended December 31, 1999. SOP 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use," provides
guidance on the circumstances under which the costs of certain computer software
should be capitalized and/or expensed. SOP 98-5, "Reporting on the Costs of
Start-Up Activities," requires such costs to be expensed as incurred instead of
capitalized and amortized. The Company does not expect the adoption of either of
these SOPs to have a material effect on its future results of operations.
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"), which will require companies to recognize
all derivatives on the balance sheet at fair value. SFAS No. 133 is effective
for all companies for fiscal years beginning after June 15, 1999. The Company
expects SFAS No. 133 to have no impact on the Company's financial position or
results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statement and requires that these enterprises
report selected information about operating segments in interim financial
reports. Management has determined that the Company does not have separately
reportable segments as defined under SFAS 131. Rather, the Company's facilities
are all similar in their business activities and the economic environments in
which they operate. Assessment of performance and corresponding management
decisions are based upon individual facility results.
13. SUBSEQUENT EVENTS
Effective October 8, 1999, Paracelsus and unrelated third parties
recapitalized the Paracelsus Utah Facilities. The recapitalization transaction
resulted in Paracelsus retaining a minority interest in a preexisting Paracelsus
subsidiary holding the ownership interests in the Paracelsus Utah Facilities,
which subsequent to the recapitalization changed its name to IASIS Healthcare
Corporation ("IASIS") and changed its fiscal year end to September 30th. IASIS,
effective October 15, 1999, acquired ten acute-care hospitals and other related
facilities and assets from an unrelated party.
The following table provides unaudited pro forma operating results as if
such transactions had occurred as of January 1, 1999.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
1999
-------------------
<S> <C>
Net revenue...................................... $585,019,000
Net income....................................... $ 10,407,000
</TABLE>
F-18
<PAGE> 190
PARACELSUS UTAH FACILITIES
(SUBSIDIARIES OF PARACELSUS HEALTHCARE CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The summary unaudited pro forma operating results do not purport to be
indicative of the results of operations that would have actually been achieved
had the pro forma transactions occurred as of the date specified, nor are they
necessarily indicative of the results of operations that may be achieved in the
future.
F-19
<PAGE> 191
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Tenet Healthcare Corporation:
We have audited the accompanying combined balance sheets of St. Luke's
Medical Center, St. Luke's Behavioral Health Center, Mesa General Hospital
Medical Center, Tempe St. Luke's Hospital, Health Choice Arizona, Inc., Memorial
Hospital of Tampa, Town & Country Hospital, Palms of Pasadena Hospital, Odessa
Regional Hospital, Southwest General Hospital, Mid-Jefferson Hospital and Park
Place Medical Center including certain medical office buildings and other
healthcare businesses related to the operations of these hospitals (collectively
the "Tenet Hospitals"), as of May 31, 1999 and 1998, and the related combined
statements of income and changes in ownership equity and cash flows for each of
the years in the three-year period ended May 31, 1999. These combined financial
statements are the responsibility of Tenet Hospitals' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Tenet Hospitals
as of May 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the years in the three-year period ended May 31, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
Dallas, Texas
September 20, 1999
F-20
<PAGE> 192
TENET HOSPITALS
COMBINED BALANCE SHEETS (NOTE 1)
<TABLE>
<CAPTION>
AUGUST 31, MAY 31, MAY 31,
1999 1999 1998
----------- --------- --------
(UNAUDITED)
<S> <C> <C> <C>
In thousands
ASSETS
Current assets:
Accounts receivable, less allowance for
doubtful accounts ($14,662 (unaudited)
at August 31, 1999, $10,152 at May 31,
1999 and $11,095 at May 31, 1998)....... $ 110,561 112,950 100,345
Inventories of supplies, at cost........... 15,412 15,154 13,567
Deferred income taxes...................... 5,047 4,159 608
Prepaid expenses and other current
assets.................................. 12,263 11,996 10,403
--------- --------- --------
Total current assets......................... 143,283 144,259 124,923
Other assets................................. 2,981 3,010 2,393
Property and equipment, net.................. 283,046 288,419 291,810
Costs in excess of net assets acquired, less
accumulated amortization ($20,160
(unaudited) at August 31, 1999, $19,084 at
May 31, 1999 and $15,444 at May 31,
1998)...................................... 127,272 128,830 132,929
Other intangible assets at cost, less
accumulated amortization ($581 (unaudited)
at August 31, 1999, $901 at May 31, 1999
and $546 at May 31, 1998).................. 3,573 5,079 2,947
--------- --------- --------
$ 560,155 569,597 555,002
========= ========= ========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt.......... $ 1,088 1,137 841
Accounts payable........................... 20,215 19,575 20,029
Employee compensation and benefits......... 10,002 9,806 9,046
Medical claims payable..................... 15,442 15,123 7,945
Other current liabilities.................. 18,534 17,669 25,800
--------- --------- --------
Total current liabilities.......... 65,281 63,310 63,661
Long-term debt, net of current portion....... 6,619 6,834 7,750
Other long-term liabilities and minority
interests.................................. 17,223 17,671 18,529
Deferred income taxes........................ 43,817 43,852 42,105
Commitments and contingencies................
Equity:
Ownership equity........................... 575,402 570,404 531,807
Due from affiliate......................... (148,187) (132,474) (108,850)
--------- --------- --------
Total equity....................... 427,215 437,930 422,957
--------- --------- --------
$ 560,155 569,597 555,002
========= ========= ========
</TABLE>
See accompanying notes to combined financial statements.
F-21
<PAGE> 193
TENET HOSPITALS
COMBINED STATEMENTS OF INCOME AND CHANGES IN OWNERSHIP EQUITY
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, MAY 31, MAY 31, MAY 31,
1999 1998 1999 1998 1997
------------ ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
In thousands
Net patient service
revenues.................... $119,879 114,352 490,256 477,735 476,931
Capitation premiums......... 22,317 19,130 82,250 69,491 63,678
-------- -------- -------- ------- -------
Net operating
revenues............. 142,196 133,482 572,506 547,226 540,609
Operating expenses:
Salaries and benefits..... 47,435 47,601 192,573 199,186 195,532
Supplies.................. 20,361 20,170 82,915 81,503 80,407
Provision for doubtful
accounts................ 11,843 9,936 41,904 37,827 29,404
Other operating
expenses................ 43,542 39,064 154,959 145,768 141,135
Depreciation.............. 5,198 6,433 21,663 20,279 19,487
Amortization.............. 1,932 1,230 4,975 5,012 5,216
Merger, impairment and
restructuring charges... -- -- -- 19,455 3,775
Overhead allocated from
affiliate............... 1,880 1,702 7,518 10,641 19,717
-------- -------- -------- ------- -------
Operating income........ 10,005 7,346 65,999 27,555 45,936
Interest expense............ (203) (405) (996) (909) (1,161)
Investment earnings......... 43 30 185 374 138
Interest income (expense) on
certain due from (to)
affiliate balances........ 370 (161) 1,480 (644) (13)
Minority interests.......... (205) (545) (2,421) (2,597) (3,176)
-------- -------- -------- ------- -------
Income before income
taxes, extraordinary
charge and cumulative
effect of accounting
change............... 10,010 6,265 64,247 23,779 41,724
Taxes on income............. 3,994 2,500 25,650 10,513 17,130
-------- -------- -------- ------- -------
Income before
extraordinary charge
and cumulative effect
of accounting
change............... 6,016 3,765 38,597 13,266 24,594
Extraordinary charge from
early extinguishment of
corporate debt (note
1h)....................... -- -- -- (6,726) --
Cumulative effect of
accounting change......... 1,018 -- -- -- --
-------- -------- -------- ------- -------
Net income.............. 4,998 3,765 38,597 6,540 24,594
Ownership equity, beginning
of period................. 570,404 531,807 531,807 525,267 500,673
-------- -------- -------- ------- -------
Ownership equity, end of
period.................... $575,402 535,572 570,404 531,807 525,267
======== ======== ======== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-22
<PAGE> 194
TENET HOSPITALS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, MAY 31, MAY 31, MAY 31,
1999 1998 1999 1998 1997
------------ ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
In thousands
Cash flows from operating activities:
Net income................................ $ 4,998 3,765 $ 38,597 6,540 24,594
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 7,130 7,663 26,638 25,291 24,703
Provision for doubtful accounts......... 11,843 9,936 41,904 37,827 29,404
Deferred income taxes................... (265) (451) (1,804) (3,634) (2,238)
Merger, impairment and restructuring
charges............................... -- -- -- 19,455 3,775
Extraordinary charge.................... -- -- -- 6,726 --
Cumulative effect of accounting
change................................ 1,018 -- -- -- --
Increase (decrease) in cash from changes
in operating assets and liabilities
Accounts receivable, net.............. (9,454) (6,159) (58,724) (40,754) (34,267)
Inventories, prepaid expenses and
other current assets............... (525) (739) (648) (539) 1,553
Accounts payable and accrued
expenses........................... 2,369 (4,781) (547) 19,680 (1,632)
Net expenditures for merger,
impairment and restructuring....... (350) (350) (1,400) -- --
-------- ------ -------- ------- -------
Net cash provided by operating
activities....................... 16,764 8,884 44,016 70,592 45,892
-------- ------ -------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment....... (598) (3,070) (17,280) (28,055) (23,481)
Other items............................... 258 (74) (680) 3,850 --
-------- ------ -------- ------- -------
Net cash used in investing
activities....................... (340) (3,144) (17,960) (24,205) (23,481)
-------- ------ -------- ------- -------
Cash flows from financing activities:
Net payments with affiliate............... (15,713) (5,017) (23,624) (41,991) (36,979)
Principal payments on borrowings.......... (264) (96) (667) (1,934) --
Other items............................... (447) (627) (1,765) (2,462) --
-------- ------ -------- ------- -------
Net cash used in financing
activities....................... (16,424) (5,740) (26,056) (46,387) (36,979)
-------- ------ -------- ------- -------
Net decrease in cash and cash equivalents... -- -- -- -- (14,568)
Cash and cash equivalents, beginning of
period.................................... -- -- -- -- 14,568
-------- ------ -------- ------- -------
Cash and cash equivalents, end of period.... $ -- -- -- -- --
======== ====== ======== ======= =======
Supplemental disclosures:
Interest paid, net of amounts
capitalized............................. 203 405 996 909 1,161
Taxes received (paid) are made at the
Parent level
</TABLE>
See accompanying notes to combined financial statements.
F-23
<PAGE> 195
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS
THREE YEARS ENDED MAY 31, 1999
(1) SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business and Basis of Presentation
On August 15, 1999, Tenet Healthcare Corporation (Tenet) and certain of its
wholly-owned subsidiaries entered into an Asset Sale Agreement (Agreement) with
JLL Hospital, LLC (JLL), pursuant to which JLL agreed to acquire from Tenet and
certain of its subsidiaries substantially all of the property, equipment and
lease rights related to the operations of nine acute care hospitals, one
specialty hospital and a health maintenance organization (HMO) including certain
medical office buildings and other healthcare businesses related to the
operations of these hospitals for a purchase price of $405.2 million, subject to
certain net working capital and other adjustments at the closing date. In
addition, an eleventh hospital contemplated in the Agreement, Odessa Regional
Hospital, is owned by Odessa Hospital, Ltd., a partnership that is owned 75% by
Tenet Healthcare, Ltd. (a partnership indirectly wholly-owned by Tenet) as
general partner and 25% by various physicians as limited partners. Pursuant to
the Odessa Partnership Agreement, the limited partners have a right of first
refusal with respect to any sale of substantially all the assets of the
partnership. In the event the limited partners do not exercise the right of
first refusal, Tenet will cause Tenet Healthcare, Ltd. to convey all of its
interests in Odessa Hospital, Ltd. to JLL pursuant to the Odessa Asset Sale
Agreement and the above purchase price will increase by $42 million, subject to
certain net working capital and other adjustments at the closing date. In the
event the limited partners exercise the right of first refusal, Tenet will cause
Tenet Healthcare, Ltd. to convey all of its interests in Odessa Hospital, Ltd.
to the limited partners. The eleven hospitals and the HMO including certain
medical office buildings and other healthcare businesses related to the
operations of these hospitals are referred to collectively herein as the "Tenet
Hospitals".
The Tenet Hospitals are primarily engaged in the operation of general
hospitals and related healthcare facilities and are subject to changes in
government legislation that could impact Medicare and Medicaid reimbursement
levels and to increased levels of managed care penetration and changes in payor
patterns that may impact the level and timing of payments for services rendered.
The combined financial statements of the Tenet Hospitals include the
accounts of the following entities which are ultimately wholly-owned by
subsidiaries of Tenet.
<TABLE>
<S> <C> <C> <C>
St. Luke's Medical Center................... Phoenix, Arizona 280 beds
St. Luke's Behavioral Health Center......... Phoenix, Arizona 70 beds
Mesa General Hospital Medical Center........ Mesa, Arizona 143 beds
Tempe St. Luke's Hospital................... Tempe, Arizona 106 beds
Health Choice Arizona, Inc. (HMO)........... Phoenix, Arizona -- --
Memorial Hospital of Tampa.................. Tampa, Florida 174 beds
Town & Country Hospital..................... Tampa, Florida 201 beds
Palms of Pasadena Hospital.................. St. Petersburg, Florida 307 beds
Odessa Regional Hospital.................... Odessa, Texas 100 beds
Southwest General Hospital.................. San Antonio, Texas 286 beds
</TABLE>
F-24
<PAGE> 196
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C> <C> <C>
Mid-Jefferson Hospital.................................... Nederland, Texas 138 beds
Park Place Medical Center................................. Port Arthur, Texas 244 beds
</TABLE>
At May 31, 1999, the Tenet Hospitals' concentrations of general hospital
beds were in Arizona with 29.2%, Florida with 33.3% and Texas with 37.5%. The
concentrations of hospital beds in these three states increase the risk that any
adverse economic, regulatory or other developments that may occur in such states
may adversely affect the Tenet Hospitals' results of operations or financial
condition.
The accompanying combined financial statements reflect the historical
accounts of the Tenet Hospitals for years presented which reflect the May 31
fiscal year end of Tenet. The combined financial statements include allocations
for certain general and administrative, financial, legal, human resources,
information systems and other services from Tenet. The basis for allocations are
generally determined on a pro-rata basis utilizing net operating revenues for
all of Tenet's hospitals. Such expense allocations to the Tenet Hospitals may
not be representative of the costs of such services to be incurred in the future
or on a stand alone basis.
The Tenet Hospitals maintain their books and records on the accrual basis
of accounting. All significant transactions and balances resulting from business
conducted between the Tenet Hospitals have been eliminated.
(b) Unaudited Interim Combined Financial Statements
The accompanying unaudited combined balance sheet as of August 31, 1999 and
the related unaudited combined statements of income and changes in ownership
equity and cash flows for the three months ended August 31, 1999 and 1998
(interim financial statements) of the Tenet Hospitals have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of the interim results
have been included.
The interim unaudited combined financial statements should be read in
conjunction with the audited May 31, 1999 and 1998 financial statements
appearing herein. The results of the three months ended August 31, 1999 may not
be indicative of operating results for the full respective year.
On June 1, 1999, the Tenet Hospitals changed its method of accounting for
start-up costs to expense such costs as incurred in accordance with Statement of
Position 98-5, published by the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants. The adoption of the
Statement resulted in the write-off of previously capitalized start-up costs as
of May 31, 1999 in the amount of $1.0 million, net of tax benefit, which amount
is shown in the accompanying unaudited combined statements of income and changes
in ownership equity as a cumulative effect of an accounting change in the three
months ended August 31, 1999.
F-25
<PAGE> 197
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Tenet Hospitals to
make estimates and assumptions that affect the amounts reported in the combined
financial statements and accompanying notes. Actual results could differ from
those estimates.
(d) Revenue Recognition
Net patient service revenues consist primarily of charges that are based on
the hospitals' established billing rates less contractual allowances and
discounts, principally for patients covered by Medicare, Medicaid and other
contractual programs. These allowances and discounts were approximately $761.7
million in 1999, $649.7 million in 1998 and $573.1 million in 1997. Payments
under these programs are based on either predetermined rates or the costs of
services. Estimates of governmental contractual allowances (Medicare arid
Medicaid) are based on historically developed models adjusted for currently
effective reimbursement or contract rates, the results of which are adjusted as
final settlements of cost reports are reached, and are determined on a
hospital-by-hospital year-by-year basis. Final settlements of prior year cost
reports resulted in adjustments that increased net patient service revenue by
approximately $5.9 million in 1999 and decreased net patient service revenue by
approximately $10.4 million and $1.5 million in 1998 and 1997, respectively.
Estimates of commercial contractual allowances are based primarily on the terms
of the contractual arrangements with commercial payors. Amounts related to
settlements are included in accounts receivables in the accompanying balance
sheets. Management of the Tenet Hospitals believes that adequate provision has
been made for adjustments that may result from final determination of amounts
earned under these programs. There are no known material claims, disputes or
unsettled matters with third-party payors not adequately provided for in the
combined financial statements. Approximately 40%, 47%, and 50% of net operating
revenues in 1999, 1998 and 1997, respectively were from the participation of the
Tenet Hospitals in Medicare and Medicaid programs.
The Tenet Hospitals provide care to patients who meet certain financial or
economic criteria without charge or at amounts substantially less than its
established rates. Because the Tenet Hospitals do not pursue collection of
amounts determined to qualify as charity care, they are not reported in the
accompanying combined statements of income and changes in ownership equity.
Health Choice Arizona, Inc. HMO (Health Choice or the Plan) is a prepaid
health plan that derives substantially all of its revenue through a contract
with the Arizona Health Care Cost Containment System (AHCCCS) to provide
specified health services, through contract providers to qualified enrollees.
The contract provides for fixed monthly premiums, based on negotiated per capita
member rates. Health Choice recently received notification from the state of
Arizona making inquiry into a 1999 claim of approximately $3.4 million submitted
by the Plan for payment under a certain state program. Discussions between the
parties continue with respect to this claim. The ultimate outcome of this matter
is not presently determinable. Health Choice management believes their claim,
after factoring an appropriate allowance, is recoverable.
F-26
<PAGE> 198
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Capitation premiums received by Health Choice are recognized as revenue in
the month that members are entitled to health care services.
Reinsurance revenue related to Health Choice is stated at the actual
(billed) and estimated (unbilled) amounts due to the Plan pursuant to the AHCCCS
contract. AHCCCS is required to reimburse Health Choice 75 percent (85 percent
for catastrophic cases) of qualified health care costs in excess of applicable
reinsurance levels of $5,000 to $35,000 depending on the rate code assigned to
the member. Qualified costs must be incurred during the contract year and are
the lesser of the amount paid by the Plan or the AHCCCS fee schedule.
(e) Medical Expenses
Monthly capitation payments made by Health Choice to primary care
physicians and other health care providers are expensed in the month services
are contracted to be performed. Claims expense for non-capitated arrangements is
accrued as services are rendered by hospitals, physicians, and other health care
providers during the year. These expenses are approximately $66.9 million, $48.6
million and $41.0 million in 1999, 1998 and 1997, respectively, and are included
in other operating expenses in the accompanying statements of income and changes
in ownership equity.
Medical claims payable related to Health Choice include claims received but
not paid and an estimate of claims incurred but not reported. Incurred but not
reported claims are estimated using a combination of historical claims payment
data and known admissions based upon preauthorization logs.
Contracts between Health Choice and primary care physicians contain
preventative health incentive clauses. Incentives, which are based on annual
performance, are estimated monthly and recorded in medical claims payable with
actual incentives paid semiannually.
(f) Long-Lived Assets
The Tenet Hospitals use the straight-line method of depreciation for
buildings, building improvements and equipment over their estimated useful lives
as follows: buildings and improvements--25 to 40 years; equipment--3 to 15
years. Capital leases are recorded at the beginning of the lease term as assets
and liabilities at the lower of present value of the minimum lease payments or
the fair value of the assets, and such assets, including improvements are
amortized over the shorter of the lease term or estimated useful life.
Costs in excess of the fair value of the net assets of purchased businesses
(goodwill) generally are amortized over 20 to 40 years. The straight-line method
is used to amortize other intangible assets generally for periods ranging from
one to fifteen years.
Impairment of long-lived assets, including goodwill related to such assets,
is recognized whenever events or changes in circumstances indicate that the
carrying amount of the asset, or related groups of assets, may not be
recoverable from estimated future cash flows. Measurement of the amount of
impairment may be based on appraisal, market values of similar assets or
estimates of future discounted cash flows resulting from use and ultimate
disposition of the asset.
F-27
<PAGE> 199
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Tenet Hospitals begin the process of determining if their facilities
are impaired at each fiscal year-end by reviewing all of the facilities'
three-year historical and one-year projected cash flows. Facilities whose cash
flows are negative or trending significantly downward on this basis are selected
for further impairment analysis. Their future cash flows (undiscounted and
without interest charges) are estimated over the expected useful life of the
facility and consider patient volumes, changes in payor mix, revenue and expense
growth rates and reductions in Medicare payments due to the Balanced Budget Act
of 1997 (the "BBA") and other regulatory actions, which assumptions vary by
hospital, home health agency and physician practice. The sum of those expected
future cash flows is compared to the carrying value of the assets. If the sum of
the expected future cash flows is less than the carrying amount of the assets,
the Tenet Hospitals recognize an impairment loss.
(g) Equity
Ownership equity represents Tenet's investment in the net assets of the
Tenet Hospitals and is non-interest bearing.
Due from affiliate includes net intercompany activity with Tenet.
Intercompany activity includes advances to the Tenet Hospitals by Tenet for
insurance coverage, working capital requirements, other operating expenses, and
asset purchases. Additionally, Tenet charged the Tenet Hospitals management fees
of approximately $7.5 million, $10.6 million and $19.7 million in 1999, 1998 and
1997, respectively, for general and administrative, financial, legal, human
resources, information services and other services. Offsetting these advances
and management fees are excess cash amounts Tenet transfers daily from the Tenet
Hospitals resulting in a net due from affiliate balance at May 31, 1999 and
1998. Intercompany interest (income) expense was approximately $(1.5) million,
$644,000 and $13,000 in 1999, 1998 and 1997, respectively, for the portion of
the due to/from affiliate balances subject to interest charges pursuant to Tenet
internal policy.
(h) Income Taxes
Tenet files a federal income tax return and state income tax returns for
the respective states in which it does business, which include the operating
results of the Tenet Hospitals as appropriate. Tenet allocates taxes to each of
the Tenet Hospitals on a separate-return basis whereby current and deferred
taxes are allocated to each of the Tenet Hospitals pursuant to the asset and
liability method, as if each of the Tenet Hospitals were a separate taxpayer.
(i) Extraordinary Charge
The approximate $6.7 million extraordinary charge, which is net of tax
benefits of approximately $4.2 million, represents the allocation to the Tenet
Hospitals of an extraordinary charge recorded by Tenet in fiscal 1998 related to
the redemption of certain Tenet senior notes.
(2) MERGER, IMPAIRMENT AND RESTRUCTURING CHARGES
In the fourth quarter of the year ended May 31, 1998, Tenet Hospitals
recorded impairment and restructuring charges of approximately $19.5 million
related to the
F-28
<PAGE> 200
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
anticipated closure of a specialty hospital including lease commitments,
demolition and other costs of closure by May 31, 1999. Prior to final closure,
Tenet began negotiations with potential buyers for certain Arizona operations,
including the specialty hospital. A substantial amount of these charges relate
to lease commitments that will result in cash payments over ten years. During
the year-end May 31, 1999, approximately $1.4 million in cash payments were the
only significant adjustments made related to the 1998 charges. The reserve
balances are included in other current liabilities and other long-term
liabilities in the accompanying balance sheets. In the third and fourth quarters
of the year ended May 31, 1997, certain Tenet Hospitals recorded a charge of
approximately $3.8 million primarily relating to costs to conform accounting
methodologies used to estimate allowances for doubtful accounts in connection
with Tenet's merger with OrNda HealthCorp.
(3) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consists of the following
(dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- -------
<S> <C> <C>
Land............................................. $ 28,029 27,958
Buildings and improvements....................... 219,406 213,810
Construction in progress......................... 519 7,689
Equipment........................................ 150,164 130,975
--------- -------
398,118 380,432
Less accumulated depreciation and amortization... (109,699) (88,622)
--------- -------
Property and equipment, net................. $ 288,419 291,810
========= =======
</TABLE>
(4) OTHER TRANSACTIONS WITH AFFILIATES
Health Choice remitted fee-for-service payments of approximately $12.6
million in 1999, $14.9 million in 1998 and $13.4 million in 1997 to certain of
the Tenet Hospitals which amounts are eliminated in the accompanying combined
statements of income and changes in ownership equity.
Health Choice paid approximately $39.3 million and $7.7 million of
sub-capitation fees to First Choice, an organization in which Tenet has
significant ownership interest, in 1999 and 1998, respectively (none in 1997).
At May 31, 1999 and 1998, Health Choice owed First Choice approximately $4.4
million and $1.5 million, respectively, in sub-capitation fees net of medical
claims expense. Additionally, Health Choice received approximately $2.8 million
and $534,000 in management fees revenue from First Choice in 1999 and 1998,
respectively (none in 1997).
F-29
<PAGE> 201
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(5) LONG-TERM DEBT MATURITIES AND LEASE OBLIGATIONS
Future long-term debt maturities and minimum operating lease payments for
the next five years are as follows (dollars in thousands):
<TABLE>
<CAPTION>
LATER
2000 2001 2002 2003 2004 YEARS
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Long-term debt........ $ 1,137 753 820 892 971 3,398
Lease obligations..... 13,266 12,955 12,668 12,451 10,617 83,900
</TABLE>
Long-term debt consists of loans payable secured by property and equipment
and other unsecured debt with interest rates approximating 8.5%. Rental expense
under operating leases, including short-term leases, was approximately $14.1
million in 1999, $18.5 million in 1998 and $20 million in 1997.
(6) PROFESSIONAL AND GENERAL LIABILITY INSURANCE
In its normal course of business, the Tenet Hospitals are subject to claims
and lawsuits relating to patient treatment. The Tenet Hospitals believe that its
liability for damages resulting from such claims and lawsuits is adequately
covered by insurance or is adequately provided for in its combined financial
statements.
The Tenet Hospitals insure substantially all of its professional and
comprehensive general liability risks in excess of self-insured retentions
through a majority-owned insurance subsidiary of Tenet. These self-insured
retentions currently are $1 million per occurrence and in prior years varied by
hospital and by policy period from $500,000 to $3 million per occurrence. A
significant portion of these risks is, in turn, reinsured with major independent
insurance companies. The Tenet Hospitals are charged an allocation of cost by
Tenet for its portion of cost relating to this program. The amount allocated to
the Tenet Hospitals for these costs was approximately $1.8 million in fiscal
1999, $3.1 million in fiscal 1998 and $1.6 million in fiscal 1997, which amounts
are included in other operating expenses in the accompanying statements of
income and changes in ownership equity.
Health Choice's contract with AHCCS requires the Plan to maintain
professional liability insurance, comprehensive general insurance and automobile
liability insurance coverage of at least $1 million for each occurrence. During
1999 and 1998 Health Choice was covered under Tenet's umbrella policy.
A significant portion of these risks is, in turn, reinsured with major
independent insurance companies. During 1997, Health Choice maintained an
occurrence-based policy with coverages of $3 million per claim and $5 million in
the aggregate annually which was applicable to Health Choice individually.
F-30
<PAGE> 202
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES
Taxes on income from operations consist of the following amounts (dollars
in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Current:
Federal.................................... $24,636 12,695 17,380
State.................................... 2,818 1,452 1,988
------- ------ ------
27,454 14,147 19,368
------- ------ ------
Deferred:
Federal.................................. (1,619) (3,261) (2,008)
State.................................... (185) (373) (230)
------- ------ ------
(1,804) (3,634) (2,238)
------- ------ ------
$25,650 10,513 17,130
======= ====== ======
</TABLE>
A reconciliation between the amount of reported income tax expense and the
amount computed by multiplying income before tax by the statutory Federal income
tax rate is shown below (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Tax provision at statutory
federal rates................. $22,487 35.0% 8,323 35.0% 14,603 35.0%
State income taxes net of
federal income tax benefit...... 1,711 2.7% 701 2.9% 1,144 2.7%
Goodwill amortization........... 1,274 1.9% 1,271 5.3% 1,273 3.1%
Other........................... 178 0.3% 218 1.0% 110 0.3%
------- ---- ------ ---- ------ ----
Taxes on income................. $25,650 39.9% 10,513 44.2% 17,130 41.1%
======= ==== ====== ==== ====== ====
</TABLE>
F-31
<PAGE> 203
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities as of May 31, 1999 and 1998 relate to
the following (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Depreciation and fixed asset basis
differences............................. $ 46,302 44,487
Receivables -- doubtful accounts and
adjustments............................... 4,312 585
Accruals for insurance risks.............. 1,179 1,179
Other long-term liabilities............... 1,909 1,630
Intangible assets......................... 986 1,054
Other accrued liabilities................. 455 --
Inventories............................... 23 20
Other..................................... 2,985 2,988
------ ------ ----- ------
$9,229 48,922 5,223 46,720
====== ====== ===== ======
</TABLE>
Management of the Tenet Hospitals believes that realization of the deferred
tax assets is more likely than not to occur as temporary differences reverse
against future taxable income. Accordingly, no valuation allowance has been
established.
(8) EMPLOYEE BENEFIT PLANS
Substantially all employees who are employed by the Tenet Hospitals, upon
qualification, are eligible to participate in the Tenet defined contribution
401(k) plan. Employees who elect to participate generally make contributions
ranging from 1% to 20% of their eligible compensation, and Tenet matches such
contributions up to a maximum percentage. Expenses allocated to the Tenet
Hospitals during fiscal 1999, 1998 and 1997 for the plan were approximately $2.1
million, $1.9 million and $1.8 million, respectively, and are included in
salaries and benefits in the accompanying statements of income.
The Tenet Hospitals do not provide post-retirement healthcare or life
insurance benefits.
(9) DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of accounts and notes receivable, current portion of
long-term debt, accounts payable and interest payable approximate fair value
because of the short maturity of these instruments. The carrying values of
investments and other assets and liabilities consisting primarily of long-term
notes receivable and long-term debt are not materially different from the
estimated fair values of these instruments.
(10) CONTINGENCIES
Tenet is involved in a lease dispute with the lessor of Mesa General
Hospital Medical Center (Mesa General) regarding the calculation of rent
escalations under the lease. Currently, the lessor and Tenet are exchanging
documentation regarding interpretation of the escalation cause. The ultimate
outcome of this dispute is not presently determinable
F-32
<PAGE> 204
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and accordingly no adjustments have been made to the accompanying combined
financial statements. Pursuant to the Agreement, Tenet has agreed to pay JLL a
multiple of incremental annual lease payments that may result from the
resolution of this matter, if any. Mesa General continues to make lease payments
in accordance with Tenet's interpretation of the lease.
Pursuant to its contract with the state of Arizona, Health Choice is
required annually to provide performance bonds, in an acceptable form, to
guarantee performance of the Plan's obligations under its contract. In both 1999
and 1998, the Plan provided approximately $6.7 million related to this
commitment in the form of either a letter of credit under a surety bond or a
performance bond.
Future contract awards are contingent upon the continuation of the AHCCCS
program by the state of Arizona and the Plan's ability and desire to retain its
status as a contractor under the program.
(11) SEGMENT DISCLOSURES
The Tenet Hospitals have adopted Statement of Financial Accounting
standards No. 131 "Disclosures About Segments of an Enterprise and Related
Information." The Tenet Hospitals business is providing health care through its
acute care hospitals, physician practices, and related health care business.
Tenet's chief operating decision maker, as that term is defined in the
accounting standard, regularly reviews financial information about each of its
hospitals including the Tenet Hospitals' facilities and subsidiaries for
assessing performance and allocating resources. Accordingly, the Tenet Hospitals
reportable operating segments consist of (1) acute care hospitals, physician
practices and related healthcare businesses; collectively, and (2) its HMO,
Health Choice.
<TABLE>
<CAPTION>
ACUTE CARE HMO
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) SERVICES SERVICES TOTAL
- ---------------------------------------------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net patient service revenues.................. $120,766 $ -- $120,766
Capitation premiums........................... -- 22,317 22,317
Revenues between segments..................... (887) -- (887)
-------- ------- --------
Net operating revenues...................... $119,879 $22,317 $142,196
======== ======= ========
Net income.................................... $ 4,923 $ 813 $ 5,736
======== ======= ========
Total assets.................................. $504,514 $56,851 $561,365
======== ======= ========
</TABLE>
F-33
<PAGE> 205
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
ACUTE CARE HMO
THREE MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) SERVICES SERVICES TOTAL
- ---------------------------------------------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net patient service revenues.................. $115,527 $ -- $115,527
Capitation premiums........................... -- 19,130 19,130
Revenues between segments..................... (1,175) -- (1,175)
-------- ------- --------
Net operating revenues...................... $114,352 $19,130 $133,482
======== ======= ========
Net income.................................... $ 3,079 $ 686 $ 3,765
======== ======= ========
Total assets.................................. $504,758 $43,575 $548,333
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
ACUTE CARE HMO
1999 SERVICES SERVICES TOTAL
- ---- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net patient service revenues.................. $502,856 $ -- $502,856
Capitation premiums........................... -- 82,250 82,250
Revenues between segments..................... (12,600) (12,600)
-------- ------- --------
Net operating revenues...................... $490,256 $82,250 $572,506
======== ======= ========
Net income.................................... $ 34,993 $ 3,604 $ 38,597
======== ======= ========
Total assets.................................. $516,380 $53,217 $569,597
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
ACUTE CARE HMO
1998 SERVICES SERVICES TOTAL
- ---- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net patient service revenues.................. $492,635 $ -- $492,635
Capitation premiums........................... -- 69,491 69,491
Revenues between segments..................... (14,900) (14,900)
-------- ------- --------
Net operating revenues...................... $477,735 $69,491 $547,226
======== ======= ========
Net income.................................... $ 2,855 $ 3,685 $ 6,540
======== ======= ========
Total assets.................................. $510,633 $44,369 $555,002
======== ======= ========
</TABLE>
F-34
<PAGE> 206
TENET HOSPITALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
ACUTE CARE HMO
1997 SERVICES SERVICES TOTAL
- ---- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net patient service revenues.................. $490,331 $ -- $490,331
Capitation premiums........................... -- 63,678 63,678
Revenues between segments..................... (13,400) -- (13,400)
-------- ------- --------
Net operating revenues...................... $476,931 $63,678 $540,609
======== ======= ========
Net income.................................... $ 21,885 $ 2,709 $ 24,594
======== ======= ========
Total assets.................................. $504,652 $42,024 $546,676
======== ======= ========
</TABLE>
(12) RECENTLY ISSUED ACCOUNTING STANDARDS
As of June 1, 1999, the Tenet Hospitals changed their method of accounting
for start-up costs in accordance with SOP 98-5, "Reporting on the Costs of
Start-up Activities" which requires such costs to be expensed as incurred
instead of capitalized and amortized. The change in accounting principle will
result in the write-off of the start-up costs (approximately $1.1 million net of
tax benefit) capitalized as of May 31, 1999. Previously, the Tenet Hospitals
capitalized start-up costs and amortized them over one year.
SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," provides guidance on the circumstances under which
the costs of certain computer software should be capitalized and/or expensed and
is effective for financial statements for fiscal years beginning after December
15, 1998, which will apply to the Tenet Hospitals beginning June 1, 1999.
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133), which is effective
for financial statements for fiscal years beginning after June 15, 2000, and
which will apply to the Tenet Hospitals beginning June 1, 2001 establishes
accounting and reporting standards for derivative instruments and for hedging
activities.
The Tenet Hospitals do not expect the adoption of these new accounting
standards and statements of position to have a material effect on their future
results of operations.
(13) SUBSEQUENT EVENT
Effective August 31, 1999, Tenet and certain Tenet subsidiaries entered
into a Receivables Sale Agreement pursuant to which those Tenet subsidiaries
agreed to sell to Tenet, without recourse, patient related receivables existing
on August 31, 1999 as well as receivables generated thereafter. Concurrently,
Tenet entered into a Receivables Purchase Agreement with a subsidiary indirectly
wholly-owned by Tenet, pursuant to which Tenet agreed to sell to the subsidiary
all patient related receivables acquired by Tenet pursuant to the Receivables
Sale Agreement. Approximately $95 million of net receivables were sold by the
Tenet Hospitals to Tenet on August 31, 1999.
The patient related receivables sold by the Tenet Hospitals to Tenet on
August 31, 1999, were sold at their fair values, which were less than the
balances of such receivables on the respective Tenet Hospitals' balance sheets
due to the fact that they were discounted to primarily reflect the time value of
money.
F-35
<PAGE> 207
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
IASIS Healthcare Corporation
We have audited the accompanying consolidated balance sheets of IASIS
Healthcare Corporation as of September 30, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year ended September 30, 1999 and the period from February 23,
1998 (date of inception) to September 30, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of IASIS
Healthcare Corporation at September 30, 1999 and 1998, and the consolidated
results of its operations and its cash flows for the year ended September 30,
1999 and the period from February 23, 1998 (date of inception) to September 30,
1998 in conformity with generally accounting principles.
ERNST & YOUNG LLP
Nashville, Tennessee
December 8, 1999
F-36
<PAGE> 208
IASIS HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 181,083 $ 154,687
Accounts receivable, net of allowances of
approximately $77,000 in 1999...................... 117,833 --
Prepaid expenses and other current assets............. 21,702 18,187
Due from physician practice........................... 161,123 --
----------- -----------
Total current assets.................................... 481,741 172,874
Equipment, net.......................................... 203,175 45,670
Construction in progress (estimated cost to complete and
equip after September 30, 1999 -- $20,600)............ 74,364 --
Service agreement rights, net........................... 185,878 --
Other assets............................................ 94,273 7,087
----------- -----------
Total assets.................................. $ 1,039,431 $ 225,631
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 138,076 $ 15,500
Accrued expenses...................................... 12,496 4,594
----------- -----------
Total current liabilities..................... 150,572 20,094
Stockholders' equity:
Common stock, no par value; 75,000,000 shares
authorized; 1,748,491 and 1,300,000 shares issued
and outstanding at September 30, 1999 and 1998,
respectively....................................... 568,505 1,000
Preferred stock--Series A, convertible, $2.00 par
value; 1,000,000 shares authorized; 1,000,000
shares issued and outstanding at September 30, 1999
and 1998 (liquidation preference amount at
September 30, 1999 -- $2,300,000).................. 2,000,000 2,000,000
Preferred stock--Series B, convertible, $2.00 par
value; 4,000,000 shares authorized; 630,750 shares
issued and outstanding at September 30, 1999
(liquidation preference amount at September 30,
1999 -- $1,261,500)................................ 1,261,500 --
Additional paid-in capital............................ 39,800 --
Stock subscription receivable......................... -- (1,500,000)
Receivable from management............................ (109,018) --
Accumulated deficit................................... (2,871,928) (295,463)
----------- -----------
Total stockholders' equity.................... 888,859 205,537
----------- -----------
Total liabilities and stockholders' equity.... $ 1,039,431 $ 225,631
=========== ===========
</TABLE>
See accompanying notes.
F-37
<PAGE> 209
IASIS HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 23,
1998 (DATE OF
YEAR ENDED INCEPTION) TO
SEPTEMBER 31, SEPTEMBER 30,
1999 1998
------------- -------------
<S> <C> <C>
Net service agreement revenue...................... $ 702,075 $ --
Other revenue...................................... 236,986 --
----------- ---------
939,061 --
Costs and expenses:
Salaries, wages and benefits..................... 2,273,110 203,802
Lease expenses................................... 282,000 20,264
Other operating expenses......................... 771,031 71,440
Depreciation and amortization.................... 199,196 2,645
Interest income.................................. (9,811) (2,688)
----------- ---------
Total costs and expenses........................... 3,515,526 295,463
----------- ---------
Loss before income taxes........................... (2,576,465) (295,463)
Income taxes....................................... -- --
----------- ---------
Net loss........................................... $(2,576,465) $(295,463)
=========== =========
</TABLE>
See accompanying notes.
F-38
<PAGE> 210
IASIS HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK PREFERRED STOCK ADDITIONAL STOCK
COMMON STOCK SERIES A SERIES B PAID-IN SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE
--------- -------- --------- ---------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at February 23,
1998,
(date of inception)...... -- $ -- -- $ -- -- $ -- $ -- $ --
Issuance of Common Stock... 1,300,000 1,000 -- -- -- -- -- --
Issuance of Preferred
Stock.................. -- -- 1,000,000 2,000,000 -- -- -- (1,500,000)
Net loss................. -- -- -- -- -- -- -- --
--------- -------- --------- ---------- ------- ---------- ------- -----------
Balance at September 30,
1998..................... 1,300,000 $ 1,000 1,000,000 $2,000,000 -- $ -- $ -- $(1,500,000)
Issuance of Common
Stock.................. 200,000 154 -- -- -- -- -- --
Common Stock repurchase.. (35,200) (30) -- -- -- -- -- --
Issuance of Common Stock
for acquisition........ 283,691 567,381 -- -- -- -- -- --
Issuance of Preferred
Stock.................. -- -- -- -- 630,750 1,261,500 -- --
Proceeds per subscription
agreement.............. -- -- -- -- -- -- -- 1,500,000
Stock compensation....... -- -- -- -- -- -- 39,800 --
Net loss................. -- -- -- -- -- -- -- --
--------- -------- --------- ---------- ------- ---------- ------- -----------
Balance at September 30,
1999..................... 1,748,491 $568,505 1,000,000 $2,000,000 630,750 $1,261,500 $39,800 $ --
========= ======== ========= ========== ======= ========== ======= ===========
<CAPTION>
RECEIVABLE
FROM ACCUMULATED
MANAGEMENT DEFICIT TOTAL
------------ ------------ -----------
<S> <C> <C> <C>
Balance at February 23,
1998,
(date of inception)...... $ -- $ -- $ --
Issuance of Common Stock... -- -- 1,000
Issuance of Preferred
Stock.................. -- -- 500,000
Net loss................. -- (295,463) (295,463)
--------- ------------ -----------
Balance at September 30,
1998..................... $ -- $ (295,463) $ 205,537
Issuance of Common
Stock.................. -- -- 154
Common Stock repurchase.. -- -- (30)
Issuance of Common Stock
for acquisition........ -- -- 567,381
Issuance of Preferred
Stock.................. (109,018) -- 1,152,482
Proceeds per subscription
agreement.............. -- -- 1,500,000
Stock compensation....... -- -- 39,800
Net loss................. -- (2,576,465) (2,576,465)
--------- ------------ -----------
Balance at September 30,
1999..................... $(109,018) $ (2,871,928) $ 888,859
========= ============ ===========
</TABLE>
See accompanying notes.
F-39
<PAGE> 211
IASIS HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 23,
1998 (DATE OF
YEAR ENDED INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................ $(2,576,465) $(295,463)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... 199,196 2,645
Stock compensation................................ 39,800 --
Changes in operating assets and liabilities, net
of effects of acquisition......................
Accounts receivable............................... 25,260
Prepaid expenses and other current assets......... (3,515) (18,187)
Accounts payable.................................. 122,576 15,500
Accrued expenses.................................. (2,098) 4,594
Due from physician practice....................... (161,123) --
----------- ---------
Net cash used in operating activities............... (2,356,369) (290,911)
INVESTING ACTIVITIES
Purchase of physician practice...................... (81,555) --
Purchases of equipment.............................. (101,100) (48,315)
Increase in other assets............................ (87,186) (7,087)
----------- ---------
Net cash used in investing activities............... (269,841) (55,402)
FINANCING ACTIVITIES
Issuance of Preferred Stock - Series A.............. 1,500,000 500,000
Issuance of Preferred Stock - Series B.............. 1,152,482
Issuance of Common Stock............................ 154 1,000
Repurchase of Common Stock.......................... (30) --
----------- ---------
Net cash provided by financing activities........... 2,652,606 501,000
Net increase in cash and cash equivalents........... 26,396 154,687
Cash and cash equivalents at beginning of period.... 154,687 --
----------- ---------
Cash and cash equivalents at end of period.......... $ 181,083 $ 154,687
=========== =========
SUPPLEMENTAL CASH FLOW INFORMATION
Effects of acquisition:
Fair value of assets acquired..................... $ 658,936 $ --
Liabilities assumed............................... (10,000) --
Fair value of Common Stock issued for
acquisition.................................... (567,381) --
----------- ---------
Cash paid for acquisitions, including transaction
costs.......................................... $ 81,555 $ --
=========== =========
</TABLE>
See accompanying notes.
F-40
<PAGE> 212
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
IASIS Healthcare Corporation (the "Company"), which was incorporated in the
state of Tennessee in February 1998, was formed with the intention of becoming a
healthcare delivery company with its core business comprising hospital ownership
and operation, syndicated ownership of Company hospitals to physician partners,
management and administrative services for affiliated physician practices and
IPA wraparound network development and management. As of September 30, 1999, the
Company was affiliated with one physician practice operating in Salt Lake City,
Utah ("Physician Practice"). The Company provides a facility and equipment as
well as administrative and technical support for professional services rendered
by the Physician Practice under a long-term service agreement.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions are eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable principally represent receivables from patients and
other third-party payors for medical services provided by the Physician
Practice. Terms of the service agreement requires the Company to purchase
receivables generated by the Physician Practice on a monthly basis. Such amounts
are recorded net of contractual allowances and estimated bad debts. Accounts
receivable are a function of the Physician Practice net revenue rather than the
net revenue of the Company.
EQUIPMENT
Equipment is stated at cost and depreciated using the straight-line method
over the estimated useful lives of the assets. The general range of useful lives
is 7 years for medical equipment and 3 to 7 years for computer equipment and
software and office equipment. Accumulated depreciation at September 30, 1999
and 1998 totaled approximately $57,600 and $2,600, respectively.
SERVICE AGREEMENT RIGHTS
The Company has entered into a service agreement with the Physician
Practice for a period up to 25 years. Upon acquisition of the Physician
Practice's assets by the Company, the Physician Practice maintained its separate
partnership entity and entered into employment and noncompete agreements with
the practicing physicians. Costs of obtaining the service agreement is amortized
using the straight-line method over 2 years. The service agreement represents
the exclusive right to operate the Physician Practice in affiliation with the
related physician group during the term of the agreement. Amounts reported at
September 30, 1999 are net of accumulated amortization of approximately
$114,200.
F-41
<PAGE> 213
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pursuant to the service agreement, the Company provides the Physician
Practice with equipment, supplies, support personnel, and management and
financial advisory services. The Physician Practice is responsible for the
recruitment and hiring of physicians and all other personnel who provide medical
services, and for all issues related to the professional, clinical and ethical
aspects of the practice. As part of the agreement, the Physician Practice is
required to maintain medical malpractice insurance which names the Company as an
additional insured. The Company is also required to maintain general liability
insurance and name the Physician Practice as an additional insured. Upon
termination of the services agreement, the Physician Practice is required to
obtain continuing liability insurance coverage under either a "tail policy" or a
"prior acts policy."
The management fees charged under the service agreement are based on a
predetermined percentage of net operating income of the Physician Practice.
Management fees are recognized by the Company at the time physician service
revenue is accrued by the Physician Practice.
To the extent that operating results indicate the possibility that the
carrying value of service agreement rights has been impaired, the Company would
prepare projections of the undiscounted cash flows from operations of the
Physician Practice over the remaining amortization period. If the projections
indicated that the recorded cost would not be recoverable, such cost amounts
would be reduced to estimated fair value.
CAPITAL STOCK
In August 1998, the Board of Directors approved a 1,300-for-1 Common Stock
split effective August 21, 1998. All shares information has been retroactively
adjusted as if the stock split occurred at the inception date.
INCOME TAXES
The Company accounts for income taxes under the liability method. Under
this method, deferred tax assets and liabilities are determined based upon
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax laws that will be in effect when the
differences are expected to reverse.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," (APB 25) and related
interpretations, as permitted under FASB Statement No. 123, "Accounting for
Stock-Based Compensation" (FAS 123). Accordingly, the Company recognizes no
compensation expense for options granted when the exercise price equals, or is
greater than, the market price of the underlying stock on the date of grant.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and
F-42
<PAGE> 214
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
liabilities at the dates of the financial statements and reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts payable, and due from Physician Practice approximate fair
value.
3. NET SERVICE AGREEMENT REVENUE
Net service agreement revenue reported by the Company represents Physician
Practice net revenue less amounts retained by the Physician Practice. The
amounts retained by the Physician Practice represent amounts due to the
physicians pursuant to the management service agreement between the Company and
the Physician Practice.
Contractual adjustments represent the difference between amounts billed and
amounts reimbursable by commercial insurers and other third-party payors
pursuant to their respective contracts with the Physician Practice. The
allowance for doubtful accounts represents management's estimate of potential
credit issues associated with amounts due from patients, commercial insurers,
and other third-party payors. Management does not believe that receivables from
these payors represent a significant credit risk.
Net service agreement revenue consists approximately of the following:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1999
-------------
<S> <C>
Gross Physician Practice revenue.......................... $1,692,000
Contractual adjustments and bad debt expense.............. 691,000
----------
Physician Practice net revenue............................ 1,001,000
Less: Amounts retained by the Physician Practice.......... 299,000
----------
Net service agreement revenue............................. $ 702,000
==========
</TABLE>
The Company's affiliated Physician Practice derives approximately 45% of
their aggregate Physician Practice net revenue from services provided under the
Medicare program for the year ended September 30, 1999. In addition, the
Medicare program comprises approximately 45% of accounts receivable of the
Physician Practice at September 30, 1999. Other than the Medicare program, the
Physician Practice has no payors which represent more than 10% of Physician
Practice net revenue or 10% of accounts receivable at September 30, 1999.
4. AFFILIATION AND ACQUISITION
On November 30, 1998, the Company acquired the net assets of a physician
practice located in Salt Lake City, Utah ("Physician Practice") in exchange for
283,691 shares of Common Stock valued by the Company at approximately $567,381,
cash of $30,829, and the assumption of approximately $10,000 in liabilities. In
addition, the Company paid $50,726 in acquisition costs related to the purchase
of the Physician Practice.
F-43
<PAGE> 215
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Simultaneous with the acquisition, the Company entered into a long-term
service agreement with the Physician Practice. The acquisition of the Physician
Practice was accounted for as a purchase, and the accompanying consolidated
financial statements include the results of its operations from the effective
date of the service agreement, which was November 1, 1998.
The fair value of assets acquired, liabilities assumed and Common Stock
issued as a result of the acquisition consisted approximately of the following:
<TABLE>
<S> <C>
Accounts receivable......................................... $143,093
Leasehold improvements and equipment........................ 185,762
Service agreements rights................................... 330,081
Other accrued expenses...................................... (10,000)
Common Stock issued for acquisition......................... (567,381)
--------
Cash paid for acquisitions, including transaction costs..... $ 81,555
========
</TABLE>
5. CAPITALIZATION
The authorized stock of the Company consists of 75,000,000 shares of Common
Stock, no par value, and 25,000,000 shares of preferred stock of which 1,000,000
shares are designated as Series A Convertible Preferred Stock and 4,000,000
shares are designated as Series B Convertible Preferred Stock.
COMMON STOCK
Holders of each share of Common Stock outstanding are entitled to one vote
for each such share on each matter to be decided by the shareholders. Cumulative
voting for directors is not permitted, which means that the holders of more than
50% of the shares of Common Stock and preferred stock can elect all of the
directors. The Common Stock has no redemption provisions, and the holders
thereof have no preemptive rights. Holders of the Common Stock are entitled to
receive ratably such dividends, if any, as the Board of Directors may declare
from time to time out of funds legally available therefor, subject to the prior
rights of holders of preferred stock. Upon any liquidation of the Company, after
payment or provision for payment of all of the Company's debts and obligations
and subject to the rights of holders of preferred stock, the holders of the
Common Stock are entitled to share ratably in any of the Company's remaining
assets. The outstanding shares of Common Stock are fully paid and
non-assessable.
PREFERRED STOCK
Preferred stock may be issued by the Board of Directors from time to time,
without prior shareholder approval, in one or more series, and the Board of
Directors may fix and determine as to any series any and all of the relative
rights and preferences of shares in such series, including, without limitation,
preferences, limitations or relative rights with respect to redemption rights,
conversion rights, voting rights, dividend rights and preferences in
liquidation.
F-44
<PAGE> 216
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Series A Preferred Shares
The Board has designated 1,000,000 shares of preferred stock as Series A
Convertible Preferred Stock (the "Series A Preferred Shares"), par value of
$2.00 per share, all of which was sold in September 1998 to one venture capital
investor pursuant to the terms of a Preferred Share Purchase Agreement with the
Company for $500,000 cash and a subscription note receivable of $1,500,000
bearing interest at an annual rate of 5.42%. The subscription note receivable
was paid in 1999. In the event of liquidation, dissolution or winding up of the
Company, the holders of the Series A Preferred Shares are entitled to receive,
in preference to the holders of Common Stock and any other series of preferred
stock, an amount equal to $2.00 per share (subject to equitable adjustment for
stock splits, combinations and similar transactions) plus 15% per annum thereon,
plus any declared but unpaid dividends (the "Series A Liquidation Preference"),
before any funds that would be otherwise distributable to holders of Common
Stock or any other series of preferred stock.
The Series A Preferred Shares will be convertible, from time to time, at
the option of the holders, into Common Stock at an initial conversion price of
$2.00 per share and will automatically so convert upon the earlier of (i) the
closing of an underwritten initial registered public offering of Common Stock by
the Company at a price of at least $4.00 per share (adjusted as required to
reflect changes in the conversion price for the Series A Preferred Shares, stock
splits, stock dividends, stock combinations and other similar events) resulting
in net proceeds to the Company of at least $25 million, (ii) the Company's
achievement of annual cash flow from operations in excess of $15 million, as
reflected on the Company's audited annual financial statements, or (iii) the
approval of a Qualifying Sale by the Board of Directors of the Company.
In the event of any subsequent issuance of capital shares by the Company at
a purchase price of less than the then current conversion price for the Series A
Preferred Shares, the conversion price of the Series A Preferred Shares will be
automatically reset to half of the purchase price of the subsequent financing.
In the event of an initial public offering of equity securities by the Company
at a price below $4.00 per share, the Company will automatically reset either
the conversion price or the conversion ratio of the Series A Preferred Shares as
though the price of the equity securities sold in the public offering had been
sold at a price of $4.00 per share.
The holders of the Series A Preferred Shares shall be entitled to vote upon
any matter submitted to the stockholders for a vote on the basis of one vote per
share of Common Stock into which the Series A Preferred Shares are convertible.
No dividends may be paid on the Common Stock or any other series of
preferred stock, without the approval of the holders of 66 2/3% of the Series A
Preferred Shares, until the holders of the Series A Preferred Shares have
received full payment of the Series A Liquidation Preference on a cumulative
basis, after which the holders of Series A Preferred Shares will participate in
any such dividends as though the Series A Preferred Shares had been converted
into Common Stock.
Series B Preferred Shares
The Board has designated 4,000,000 shares of preferred stock as Series B
Convertible Preferred Stock (the "Series B Preferred Shares") par value of $2.00
per share. During
F-45
<PAGE> 217
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1999, 630,750 Series B Preferred Shares were issued for $1,152,482 cash and
notes receivable from certain members of management with a combined outstanding
balance of $109,018 at September 30, 1999. The notes receivable from management
are to be reimbursed through salary deferrals over varying periods ending no
later than December 31, 1999 for each of the respective members of management
and bear interest at an annual rate of 6%. In the event of liquidation,
dissolution or winding up of the Company, the holders of the Series B Preferred
Shares are entitled to receive, after payment of the Series A Liquidation
Preference to the holders of the Series A Preferred Shares and in preference to
the holders of Common Stock, an amount equal to $2.00 per share (subject to
equitable adjustment for stock splits, combinations and similar transactions)
plus any declared but unpaid dividends (the "Series B Liquidation Preference"),
before any funds that would be otherwise distributable to holders of Common
Stock.
The Series B Preferred Shares will be convertible, from time to time, at
the option of the holders, into Common Stock at an initial conversion price of
$2.00 per share and will automatically so convert upon the earlier of (i) the
closing of an underwritten initial registered public offering of Common Stock by
the Company at a price of at least $4.00 per share (adjusted as required to
reflect changes in the conversion price for the Series B Preferred Shares, stock
splits, stock dividends, stock combinations and other similar events) resulting
in net proceeds to the Company of at least $25 million, (ii) the Company's
achievement of annual cash flow from operations in excess of $15 million, as
reflected on the Company's audited annual financial statements, or (iii) the
approval of a Qualifying Sale by the Board of Directors of the Company.
In the event of any subsequent issuance of capital shares by the Company at
a purchase price of less than the then current conversion price for the Series B
Preferred Shares, the conversion price of the Series B Preferred Shares will be
automatically reset on a weighted average basis, based on the purchase price of
the subsequent financing and the number of shares issued in the subsequent
financing.
The holders of the Series B Preferred Shares shall be entitled to vote upon
any matter submitted to the stockholders for a vote on the basis of one vote per
share of Common Stock into which the Series B Preferred Shares are convertible.
No dividends may be paid on the Common Stock, without the approval of the
holders of 66 2/3% of the Series B Preferred Shares, until the holders of the
Series B Preferred Shares have received full payment of the Series B Liquidation
Preference on a cumulative basis, after which the holders of Series B Preferred
Shares will participate in any such dividends as though the Series B Preferred
Shares had been converted into Common Stock.
The Company has the right of first refusal, and to other shareholders
holding at least 2% of the outstanding stock of the Company the right of second
refusal, to repurchase Series B Preferred Shares from investors upon any attempt
by an investor to transfer Series B Preferred Shares.
Series B Preferred Shares have registration rights entitling them to
unlimited piggyback rights, along with the holders of Series A Preferred Shares.
F-46
<PAGE> 218
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Tax at U.S. statutory rates............................ $(875,998) $(100,457)
State income taxes, net of federal tax benefit......... (102,999) (11,796)
Change in valuation allowance.......................... 979,508 112,064
Other.................................................. (511) 189
--------- ---------
$ -- $ --
========= =========
</TABLE>
Deferred federal and state income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Accumulated depreciation.............................. $ 7,744 $ (1,259)
Service agreement rights.............................. 47,480 --
Allowances on accounts receivable..................... 29,349 --
Net operating loss carryforwards...................... 917,334 14,505
Start-up costs........................................ 89,665 98,818
----------- ---------
Total deferred tax assets............................. 1,091,572 112,064
Valuation allowance................................... (1,091,572) (112,064)
----------- ---------
Net deferred tax assets............................... $ -- $ --
=========== =========
</TABLE>
The Company has established a valuation allowance for deferred tax assets
at September 30, 1999 and 1998 due to the uncertainty of realizing these assets
in the future. The valuation allowance increased $979,508 during 1999. At
September 30, 1999, the Company has federal net operating loss carryforwards of
$2,414,038 that will expire in 2019.
7. COMMITMENTS AND CONTINGENCIES
INSURANCE
The Company and its affiliated Physician Practice are insured with respect
to medical malpractice risks on a claims-made basis at the Physician Practice
level. It is the Company's policy that provision for estimated premium
adjustments to medical professional liability costs be made for asserted and
unasserted claims and based upon experience. Provision for such professional
liability claims includes estimates of the ultimate costs of such claims. To
date, the Company's experience with such claims has not been significant.
Accordingly, no such provision has been made. Management is not aware
F-47
<PAGE> 219
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of any claims against it or its affiliated Physician Practice which might have a
material impact on the Company's financial position.
EMPLOYMENT AGREEMENTS
Certain members of management have entered into employment agreements (the
"Agreements") with the Company. The Agreements provide for base salaries,
subject to annual adjustments by the Board of Directors, as well as
participation in any bonus programs adopted by the Company. As of September 30,
1999, the Company has not adopted any such bonus programs.
The Agreements have an initial term of one to two years and automatically
extend for successive one-year periods unless 60 days notice is given by either
the Company or the employee. The Agreements may be terminated prior to that time
for cause, without notice, under certain events by the employee specified in the
Agreements. In the event the employee is terminated for cause, the Company has
no further obligation to make any payments to the employee.
In the event that the Company terminates the employment of the employee
without cause, or the employee elects to resign and terminate the employment
agreement upon the occurrence of a change in control (as defined in the
Agreement), then, in addition to all accrued but unpaid compensation earned to
the effective date of such termination, the Company shall pay to the employee a
severance benefit in an amount equal to a multiple of the then current base
salary (currently ranging from one to five times), and any stock options held by
the employee pursuant to any qualified or nonqualified Company option plan shall
immediately vest and become exercisable.
In the event that the employee resigns prior to the expiration of, or
becomes disabled or dies during the stated or extended term of the Agreement,
the Company shall, as applicable, pay to the employee or his estate all accrued
but unpaid compensation earned to the date of resignation or death. The
Agreement otherwise shall terminate in all respects.
EMPLOYEE STOCK PURCHASE AGREEMENTS
The outstanding shares of Common Stock were issued to certain members of
Company management and directors under stock purchase agreements (the "Stock
Purchase Agreements"). The shares of Common Stock purchased by Company
management vest ratably over 60 months. Additionally, all Stock Purchase
Agreements have certain restrictions, including, but not limited to,
transferability of the stock.
F-48
<PAGE> 220
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OPERATING LEASES
Minimum rental commitments under operating leases having an initial or
remaining noncancelable term of more than one year are approximately as follows:
<TABLE>
<S> <C>
2000............................................. $ 887,000
2001............................................. 887,000
2002............................................. 887,000
2003............................................. 735,000
2004............................................. 389,000
Thereafter....................................... --
----------
$3,785,000
==========
</TABLE>
Total rent expense related to operating leases amounted to $282,000 and
approximately $20,000 for the period ended September 30, 1999 and 1998,
respectively, which include amounts related to general corporate expenses.
Future payments under operating leases include total commitments of
approximately $3,785,000 to be reduced by amounts reimbursable under the service
agreement of approximately $318,000. In the event of termination of the service
agreement, any related lease obligations are also terminated.
HEALTHCARE REGULATION
Current Operations
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing. While no such regulatory inquires have been made, compliance with
such laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties, and exclusion from the Medicare and Medicaid programs.
Acquired Practices
The Company has acquired and will likely continue to acquire the net assets
of practices and other companies with prior operating histories. Acquired
practices and companies may have unknown or contingent liabilities for failure
to comply with healthcare laws and regulations, such as billing and
reimbursement, fraud and abuse and similar anti-referral laws. Although the
Company attempts to assure itself that no such liabilities exist and obtains
indemnification from prospective sellers covering such matters, there can be no
assurance that any such matter will be covered by indemnification or, if
covered, that the liability sustained will not exceed contractual limits or the
financial capacity of the indemnifying party.
F-49
<PAGE> 221
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCK OPTION PLANS
During 1998, the Company adopted the 1998 Stock and Incentive Plan ("the
1998 Stock Plan"). Under the 1998 Stock Plan, options to purchase a total of
1,750,000 shares of Common Stock were reserved for grant to eligible employees
and other key persons. The options vest over a five-year period and have a term
of ten years from the date of issuance.
On August 1, 1998, 972,000 qualified stock options were granted under the
1998 Stock Plan. These option grants were subsequently approved by the Board of
Directors of the Company in November 1998. An additional 150,000 qualified stock
options were granted on February 19, 1999. If there is a Change in Control (as
defined in the 1998 Stock Option Plan) of the Company, each outstanding option
shall become fully vested on the day before the Change in Control occurs.
Options may be exercised by payment of the option exercise price in either
cash or by tender of shares of Company Common Stock previously owned by the
optionee having a fair market value on the date of exercise equal to the option
price, provided, however, that the optionee shall not be entitled to tender
shares of Company Common Stock pursuant to successive, substantially
simultaneous exercises of options issued under the 1998 Stock Plan or any other
stock option plan of the Company. The optionee may also exercise the options by
delivering a notice of exercise of the options and by simultaneously selling
shares of the option stock thereby acquired pursuant to a brokerage or similar
agreement approved in advance by proper officers of the Company, using the
proceeds of such sale as payment of the exercise price.
Since the exercise price of the ISO options granted in 1999 was below the
fair value of the Company's Common Stock on the date of grant, the Company
recorded $39,800 of noncash stock option compensation for the year ended
September 30, 1999, with an offsetting increase to additional paid-in capital.
The total excess of fair value over exercise price at the date of grant for all
options granted was $298,500, which is being amortized over the vesting period.
The following is a summary of option transactions during the year ended
September 30, 1999 and the period from February 28, 1998 through September 30,
1998.
<TABLE>
<CAPTION>
1998 EXERCISE WEIGHTED
OPTION PLAN PRICE RANGE AVERAGE PRICE
----------- ----------- -------------
<S> <C> <C> <C>
Balance at February 23, 1998............ -- $ -- $ --
Granted............................... 972,000 0.01 0.01
--------- ------ ------
Balance at September 30, 1998........... 972,000 $ 0.01 $ 0.01
--------- ------ ------
Granted............................... 150,000 $ 0.01 $ 0.01
========= ====== ======
Balance at September 30, 1999........... 1,122,000 $ 0.01 $ 0.01
========= ====== ======
</TABLE>
F-50
<PAGE> 222
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Weighted average fair value for options granted during
the period............................................. $ 1.99 $ .01
Options exercisable...................................... 194,400 --
Options available for grant.............................. 628,000 778,000
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, in accounting for stock-based compensation and,
accordingly no compensation cost has been recognized for grants of stock options
in the financial statements. Pro forma information regarding net income is
required by Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, and has been determined as if the
Company had accounted for its stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using the Minimum Value option pricing model with the following weighted average
assumptions: risk-free interest rate of 6.00%; dividend yield of 0%; and
expected life of the options of five years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Net loss......................................
As reported................................. $2,576,465 $295,463
Pro forma................................... $2,581,259 $295,488
</TABLE>
The effects of applying SFAS No. 123 for providing pro forma disclosures
are not likely to be representative of the effects on reported net income for
future years, because options vest over several years and additional grants
generally are made each year. The weighted-average remaining contractual life of
those options outstanding at September 30, 1999 is 8 years.
9. RECENT PRONOUNCEMENTS
In March and in April 1998, the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants issued two Statements of
Position ("SOPs") that are effective for financial statements for fiscal years
beginning after December 15, 1998, which will apply to the Company beginning
with its fiscal year ended September 30, 2000. SOP 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use," provides
guidance on the circumstances under which the costs of certain computer software
should be capitalized and/or expensed. SOP 98-5, "Reporting on the Costs of
Start-Up Activities," requires such costs to be expensed as incurred instead of
capitalized and amortized. The Company does not expect the adoption of either of
these SOPs to have a material effect on its future results of operations.
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging
F-51
<PAGE> 223
IASIS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Activities ("SFAS 133"), which will require companies to recognize all
derivatives on the balance sheet at fair value. SFAS No. 133 is effective for
all companies for fiscal years beginning after June 15, 1999. The Company
expects SFAS No. 133 to have no impact on the Company's financial position or
results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statement and requires that these enterprises
report selected information about operating segments in interim financial
reports. Management has determined that the Company, whose operations are
comprised entirely of providing administrative and technical support to
physician practices, does not have separately reportable segments as defined
under SFAS 131.
10. SUBSEQUENT EVENTS
On October 15, 1999, the Company was merged with and into a subsidiary of
an unrelated healthcare company which then changed its name to IASIS Healthcare
Corporation.
F-52
<PAGE> 224
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY
ANY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF [ ].
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 12
Use of Proceeds....................... 26
The Exchange Offer.................... 27
Certain United States Federal Income
Tax Consequences.................... 36
The Transactions...................... 41
Capitalization........................ 44
Summary Unaudited Pro Forma Combined
Financial Information............... 45
Selected Historical Financial
Information......................... 57
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 63
Business.............................. 72
Management............................ 91
Stock Ownership....................... 95
Certain Relationships and Related
Transactions........................ 97
Description of Credit Facility........ 99
Description of Notes.................. 101
Description of Preferred Stock........ 156
Plan of Distribution.................. 156
Legal Matters......................... 157
Experts............................... 157
Available Information................. 158
Index to Financial Statements......... F-1
</TABLE>
DEALER PROSPECTUS DELIVERY REQUIREMENT
UNTIL , [90 DAYS AFTER EFFECTIVE DATE] ALL DEALERS THAT EFFECT
TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$230,000,000
IASIS HEALTHCARE
CORPORATION
13% SENIOR SUBORDINATED
EXCHANGE NOTES DUE 2009
------------------------
PROSPECTUS
------------------------
[ ]
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 225
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") permits a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation) or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may indemnify against expenses, (including attorneys' fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. If the person indemnified is not wholly successful in such
action, suit or proceeding, but is successful, on the merits or otherwise, in
one or more but less than all claims, issues or matters in such proceeding, he
or she may be indemnified against expenses actually and reasonably incurred in
connection with each successfully resolved claim, issue or matter. In the case
of an action or suit by or in the right of the corporation to procure a judgment
in its favor, no indemnification may be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery of the
State of Delaware, or the court in which such action or suit was brought, shall
determine upon application that, despite the adjudication of liability, such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper. Section 145 provides that, to the extent a present
or former director or officer of a corporation has been successful in the
defense of any action, suit or proceeding referred to above or in the defense of
any claim, issue or manner therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
The Amended and Restated Certificate of Incorporation and By-Laws of IASIS
and each of the By-Laws of Baptist Joint Venture Holdings, Inc., Beaumont
Hospital Holdings, Inc., Biltmore Surgery Center Holdings, Inc., CliniCare of
Utah, Inc., Davis Hospital & Medical Center, Inc., Davis Surgical Center
Holdings, Inc., First Choice Physicians Network Holdings, Inc., Health Choice
Arizona, Inc., IASIS Healthcare Holdings, Inc., IASIS Management Company, Jordan
Valley Hospital, Inc., Metro Ambulatory Surgery Center, Inc., Pioneer Valley
Health Plan, Inc., Pioneer Valley Hospital, Inc., Rocky Mountain Medical Center,
Inc., Salt Lake Regional Medical Center, Inc., Sandy City Holdings, Inc.,
Southridge Plaza Holdings, Inc. and SSJ St. Petersburg Holdings, Inc.,
(collectively, the "Delaware Subsidiary Guarantors") provide for indemnification
by IASIS and each of the Delaware Subsidiary Guarantors of each of their
respective directors and officers to the fullest extent permitted by the DGCL
and such right to indemnification shall continue as to a person who has ceased
to be a director or officer of IASIS or of each of the Delaware Subsidiary
Guarantors, as the case may be, and shall inure to the benefit of his or her
heirs, executors and administrators. IASIS' and each of the Delaware Subsidiary
Guarantors' By-Laws provide that every person will be indemnified against any
expenses (including attorneys' fees), judgments, fines, amounts paid in
settlement actually
II-1
<PAGE> 226
and reasonably incurred on such actions, suits or proceedings (including an
action by or in the right of IASIS, subject to certain conditions), whether by
fact that he or she is or was a director or officer of IASIS or of each of the
Delaware Subsidiary Guarantors, as the case may be, or is or was serving at the
request of IASIS or of each of the Delaware Subsidiary Guarantors, as the case
may be, as a director, officer, employee or agent of another corporation or
enterprise, subject in all instances to the requirements that such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of IASIS or of each of the Delaware Subsidiary
Guarantors, and with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. While these
provisions provide directors with protection from awards for monetary damages
for breaches of their duty of care, they do not eliminate such duty.
Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act (the
"LP Act") empowers a Delaware limited partnership to indemnify and hold harmless
any partner or other person from and against any and all claims and demands
whatsoever. In accordance with such section, the limited partnership agreements
of Memorial Hospital of Tampa, LP, Mesa General Hospital, LP, Odessa Regional
Hospital, LP, Palms of Pasadena Hospital, LP, Southwest General Hospital, LP,
St. Luke's Behavioral Hospital Center, LP, St. Luke's Medical Center, LP, Tempe
St. Luke's Hospital, LP, Town & Country Hospital, LP (collectively, the "Limited
Partnership Subsidiary Guarantors") each provide that the Limited Partnership
Subsidiary Guarantor, its receivers or its trustee, shall indemnify, hold
harmless and pay all judgments and claims against the general partner, IASIS
Healthcare Holdings, Inc., in the case of each Limited Partnership Subsidiary
Guarantor, its officers, directors, shareholders, employees, agents,
subsidiaries and assigns from any liability, loss or damage incurred by reason
of any act performed, or omitted to be performed in connection with the
partnership business, including reasonable costs, attorney fees and any amount
expended in the settlement of any claims of liability, loss or damage, unless
the loss, liability or damage was caused by the intentional misconduct, gross
negligence or knowing violation of law by the indemnified person.
Article 5 of the Business Corporation Act of the State of Arizona (the
"BCASA") permits an Arizona corporation to indemnify a person made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than a proceeding by or in the
right of the corporation or a proceeding charging improper personal benefit to
the director), because he or she is or was a director or officer of the
corporation or is or was serving at the corporation's request as a director,
officer or partner, trustee, employee or agent of another corporation or other
enterprise. A corporation may indemnify such persons against obligations to pay
a judgment, settlement, penalty or fine or reasonable expenses incurred with
respect to such proceedings if their conduct was in good faith and not opposed
to the best interests of the corporation (except that conduct in an official
capacity with the corporation shall be in the best interests of the
corporation), and, with respect to criminal proceedings, the individual had no
reasonable cause to believe the conduct was unlawful. The BCASA allows a
corporation to indemnify a director or officer in connection with a proceeding
by or in the right of the corporation, against reasonable expenses, including
attorney fees, incurred in connection therewith unless the director or officer
was adjudged liable to the corporation. A corporation may indemnify a director
or officer in connection with a proceeding charging improper personal benefit to
the director or officer unless the director or officer was adjudged liable on
the basis that personal benefit was improperly received by the director or
officer.
II-2
<PAGE> 227
The articles of incorporation and by-laws of Biltmore Surgery Center, Inc.,
an Arizona corporation (the "Arizona Subsidiary Guarantor"), provide for
indemnification by the corporation of its directors and officers to the fullest
extent permitted by the BCASA and such right to indemnification shall continue
as to a person who has ceased to be a director, officer, employee, fiduciary or
agent and shall inure to the benefit of his or her heirs, executors and
administrators. The corporation's by-laws provide that any such person may be
indemnified against all costs, charges, expenses, liabilities and losses
(including, without limitation, attorneys' fees, judgments, fines, employee
benefit plan exercise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection with
any action, suit or proceeding, whether by fact that he or she is or was a
director or officer of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary or agent of another
corporation or other enterprise. Unless otherwise determined by the board of
directors, the corporation may indemnify any such person seeking indemnification
in connection with a proceeding initiated by him or her only if the proceeding
was authorized by the board.
Section 48-2b-105(1)(l) of the Utah Limited Liability Company Act (the
"ULLCA") permit a limited liability company to indemnify its members, managers
and any other persons to the same extent that a partnership may indemnify any of
the partners, managers, employees or agents of the partnership against expenses
actually and reasonably incurred by the member or manager in connection with the
defense of an action, suit or proceeding, whether civil or criminal, in which
the member or manager is made a party.
The operating agreement of IASIS Healthcare MSO Sub of Salt Lake City, LLC,
(the "Utah Subsidiary Guarantor") a member managed limited liability company
whose sole member is IASIS, provides for the indemnification of all its members
and employees to the fullest extent of the ULLCA.
IASIS, and the Delaware Subsidiary Guarantors, the Limited Partnership
Subsidiary Guarantors, the Arizona Subsidiary Guarantor and the Utah Subsidiary
Guarantor, (collectively, the "Subsidiary Guarantors") have each purchased and
maintain insurance to protect persons entitled to indemnification pursuant to
their by-laws, limited partnership agreements or operating agreements, as the
case may be, against liabilities asserted against or incurred by them in such
capacity or arising out of their status as such.
ITEM 21. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.1 Recapitalization Agreement, dated as of August 16, 1999, by
and among Paracelsus Healthcare Corporation, PHC/CHC
Holdings, Inc., PHC/Psychiatric Healthcare Corporation,
PHC-Salt Lake City, Inc., Paracelsus Pioneer Valley
Hospital, Inc., Pioneer Valley Health Plan, Inc., PHC-Jordan
Valley, Inc., Paracelsus PHC Regional Medical Center,
Paracelsus Davis Hospital, Inc., PHC Utah, Inc., Clinicare
of Utah, Inc. and JLL Hospital, LLC.
2.2 Asset Sale Agreement between Tenet Healthcare Corporation
and JLL Hospital, LLC, dated August 15, 1999.
</TABLE>
II-3
<PAGE> 228
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.3 Amendment No. 1 to Asset Sale Agreement, made and entered
into as of October 15, 1999, by and between Tenet Healthcare
Corporation and IASIS Healthcare Corporation.
2.4 Amendment No. 2 to Asset Sale Agreement, made and entered
into as of October 15, 1999, by and between Tenet Healthcare
Corporation and IASIS Healthcare Corporation.
2.5 Asset Sale Agreement between Odessa Hospital, Ltd., and JLL
Hospital, LLC, dated as of August 15, 1999.
2.6 Amendment No. 1 to Asset Sale Agreement, dated as of October
15, 1999, by and between Odessa Hospital, Ltd. and IASIS
Healthcare Corporation.
3.1 Amended and Restated Certificate of Incorporation of
PHC/Psychiatric Healthcare Corporation, changing its name to
IASIS Healthcare Corporation, as filed with the Secretary of
State of the State of Delaware on October 8, 1999.
3.2 Certificate of Designation, Preferences and Rights of Series
A Preferred Stock of IASIS Healthcare Corporation, as filed
with the Secretary of State of the State of Delaware on
October 15, 1999.
3.3 Certificate of Designation, Preferences and Rights of Series
B Preferred Stock of IASIS Healthcare Corporation, as filed
with the Secretary of State of the State of Delaware on
October 15, 1999.
3.4 Amended and Restated By-Laws of IASIS Healthcare
Corporation.
3.5 Certificate of Incorporation of Baptist Joint Venture
Holdings, Inc., as filed with the Secretary of State of the
State of Delaware on October 1, 1999.
3.6 Certificate of Incorporation of Beaumont Hospital Holdings,
Inc., as filed with the Secretary of State of the State of
Delaware on October 4, 1999.
3.7 Certificate of Incorporation of Biltmore Surgery Center,
Inc., as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.8 Certificate of Amendment to the Certificate of Incorporation
of Biltmore Surgery Center, Inc., changing its name to
Biltmore Surgery Center Holdings, Inc., as filed with the
Secretary of State of the State of Delaware on November 9,
1999.
3.9 Certificate of Incorporation of CliniCare of Utah, Inc., as
filed with the Secretary of State of the State of Delaware
on September 23, 1999.
3.10 Certificate of Incorporation of Davis Hospital & Medical
Center, Inc., as filed with the Secretary of State of the
State of Delaware on September 23, 1999.
3.11 Certificate of Incorporation of Davis Surgical Center
Holdings, Inc., as filed with the Secretary of State of the
State of Delaware on October 1, 1999.
3.12 Certificate of Incorporation of First Choice Physicians
Network Holdings, Inc., as filed with the Secretary of State
of the State of Delaware on October 1, 1999.
3.13 Certificate of Incorporation of Health Choice Arizona, Inc.,
as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.14 Certificate of Incorporation of IASIS Healthcare Holdings,
Inc., as filed with the Secretary of State of the State of
Delaware on September 23, 1999.
</TABLE>
II-4
<PAGE> 229
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.15 Certificate of Incorporation of IASIS Management Company, as
filed with the Secretary of State of the State of Delaware
on October 4, 1999.
3.16 Certificate of Incorporation of Jordan Valley Hospital,
Inc., as filed with the Secretary of State of the State of
Delaware on September 23, 1999.
3.17 Certificate of Incorporation of Metro Ambulatory Surgery
Center, Inc., as filed with the Secretary of State of the
State of Delaware on October 1, 1999.
3.18 Certificate of Incorporation of Pioneer Valley Health Plan,
Inc., as filed with the Secretary of State of the State of
Delaware on September 23, 1999.
3.19 Certificate of Incorporation of Pioneer Valley Hospital,
Inc., as filed with the Secretary of State of the State of
Delaware on September 23, 1999.
3.20 Certificate of Incorporation of Rocky Mountain Medical
Center, Inc., as filed with the Secretary of State of the
State of Delaware on September 23, 1999.
3.21 Certificate of Incorporation of Salt Lake Regional Medical
Center, Inc., as filed with the Secretary of State of the
State of Delaware on September 23, 1999.
3.22 Certificate of Incorporation of Sandy City Holdings, Inc.,
as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.23 Certificate of Incorporation of Southridge Plaza Holdings,
Inc., as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.24 Certificate of Incorporation of SSJ St. Petersburg Holdings,
Inc., as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.25 Form of By-Laws of Delaware Subsidiary Guarantors.
3.26 Certificate of Limited Partnership of Memorial Hospital of
Tampa, LP as filed with the Secretary of State of the State
of Delaware on September 24, 1999.
3.27 Certificate of Limited Partnership of Mesa General Hospital,
LP as filed with the Secretary of State of the State of
Delaware on September 24, 1999.
3.28 Certificate of Limited Partnership of Odessa Regional
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.29 Certificate of Limited Partnership of Palms of Pasadena
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.30 Certificate of Limited Partnership of Southwest General
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.31 Certificate of Limited Partnership of St. Luke's Behavioral
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.32 Certificate of Limited Partnership of St. Luke's Medical
Center, LP as filed with the Secretary of State of the State
of Delaware on September 24, 1999.
3.33 Certificate of Limited Partnership of Tempe St. Luke's
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.34 Certificate of Limited Partnership of Town & Country
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.35 Form of Limited Partnership Agreement of Limited Partnership
Subsidiary Guarantors.
</TABLE>
II-5
<PAGE> 230
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.36 Articles of Incorporation of Biltmore Surgery Center, Inc.
as filed with the Executive Secretary of the Arizona
Corporation Commission on September 23, 1996.
3.37 By-Laws of Biltmore Surgery Center, Inc., an Arizona
corporation.
3.38 Articles of Organization of IASIS Healthcare MSO Sub of Salt
Lake City, LLC, as filed with the Utah Division of
Corporations and Commercial Code on October 5, 1999.
3.39 Operating Agreement of IASIS Healthcare MSO Sub of Salt Lake
City, LLC.
4.1 Indenture, dated as of October 15, 1999, among IASIS
Healthcare Corporation, the Delaware and Limited Partnership
Subsidiary Guarantors and The Bank of New York, as Trustee.
4.2 Supplemental Indenture, dated October 25, 1999, among IASIS
Healthcare Corporation, the Delaware and Limited Partnership
Subsidiary Guarantors, the Arizona Subsidiary Guarantor, as
guaranteeing subsidiary and The Bank of New York, as
Trustee.
4.3 Supplemental Indenture, dated November 4, 1999, among IASIS
Healthcare Corporation, the Delaware, Limited Partnership
and Arizona Subsidiary Guarantors, the Utah Subsidiary
Guarantor, as guaranteeing subsidiary and The Bank of New
York, as Trustee.
4.4 Senior Subordinated Guarantee, dated October 15, 1999 by the
Delaware and Limited Partnership Subsidiary Guarantors in
favor of (i) the holders of IASIS Healthcare Corporation's
outstanding 13% Senior Subordinated Notes due 2009 and 13%
Senior Subordinated Exchange Notes due 2009 to be issued in
the Exchange Offer and covered by this Registration
Statement and (ii) the Bank of New York, as Trustee under
the Indenture governing the above-referenced notes.
4.5 Senior Subordinated Guarantee, dated October 25, 1999 by the
Arizona Subsidiary Guarantor in favor of (i) the holders of
IASIS Healthcare Corporation's outstanding 13% Senior
Subordinated Notes due 2009 and 13% Senior Subordinated
Exchange Notes due 2009 to be issued in the Exchange Offer
and covered by this Registration Statement and (ii) the Bank
of New York, as Trustee under the Indenture governing the
above-referenced notes.
4.6 Senior Subordinated Guarantee, dated November 4, 1999 by the
Utah Subsidiary Guarantor in favor of (i) the holders of
IASIS Heathcare Corporation's outstanding 13% Senior
Subordinated Notes due 2009 and 13% Senior Subordinated
Exchange Notes due 2009 to be issued in the Exchange Offer
and covered by this Registration Statement and (ii) the Bank
of New York, as Trustee under the Indenture governing the
above-referenced notes.
4.7 Registration Rights Agreement, dated as of October 15, 1999,
by and among IASIS Healthcare Corporation, the Subsidiary
Guarantors and J.P. Morgan Securities Inc.
4.8 Form of IASIS Healthcare Corporation 13% Senior Subordinated
Note due 2009 (included in Exhibit 4.1).
4.9 Form of IASIS Healthcare Corporation 13% Senior Subordinated
Exchange Note due 2009.
</TABLE>
II-6
<PAGE> 231
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the securities being registered
hereby.*
10.1 Stockholders Agreement, dated as of October 8, 1999, by and
among IASIS Healthcare Corporation, JLL Healthcare, LLC,
Paracelsus Healthcare Corporation and each of the other
investors listed thereto.
10.2 Credit Agreement, dated as of October 15, 1999, among IASIS
Healthcare Corporation, Various Lenders, J.P. Morgan
Securities Inc. and The Bank of Nova Scotia, as Co-Lead
Arrangers and Co-Book Runners, Paribas, as Documentation
Agent, The Bank of Nova Scotia, as Syndication Agent, and
Morgan Guaranty Trust Company of New York, as Administrative
Agent.
10.3 First Amendment, dated as of November 16, 1999, to the
Credit Agreement listed as Exhibit No. 10.2.
10.4 Security Agreement, dated as of October 15, 1999, between
IASIS Healthcare Corporation, Various Subsidiaries of IASIS
Healthcare Corporation and Morgan Guaranty Trust Company of
New York, as Collateral Agent.
10.5 Pledge Agreement, dated as of October 15, 1999, between
IASIS Healthcare Corporation, Various Subsidiaries of IASIS
Healthcare Corporation and Morgan Guaranty Trust Company of
New York, as Collateral Agent.
10.6 Subsidiaries Guaranty, dated as of October 15, 1999 (as
amended, restated, modified and/or supplemented from time to
time), made by each of the Subsidiary Guarantors of IASIS
Healthcare Corporation.
10.7 Hypothecation Agreement, dated as of October 15, 1999 (as
amended, restated, modified and/or supplemented from time to
time), among each of the pledgors in favor of Morgan
Guaranty Trust Company of New York, as Collateral Agent.
10.8 Employee Leasing Agreement, dated as of October 15, 1999, by
and among IASIS Healthcare Corporation and Tenet Healthcare
Corporation and certain subsidiaries of Tenet Healthcare
Corporation.
10.9 Tenet Buypower Purchasing Assistance Agreement, dated as of
October 15, 1999, by and between IASIS Healthcare
Corporation and Tenet HealthSystem Medical, Inc.
10.10 Transition Services Agreement, dated as of October 8, 1999,
by and between Paracelsus Healthcare Corporation and
PHC/Psychiatric Healthcare Corporation.
10.11 Tax Sharing Agreement, dated as of October 8, 1999, among
JLL Healthcare, LLC and its affiliates.
12.1 Statement regarding Computation of Ratio of Earnings to
Fixed Charges for the Paracelsus Utah Facilities.
21.1 Subsidiaries of IASIS Healthcare Corporation.
23.1 Consent of KPMG LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).*
24.1 Powers of Attorney (included in the signature pages to the
Registration Statement).
</TABLE>
II-7
<PAGE> 232
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
25.1 Statement of Eligibility and Qualification on Form T-1 of
The Bank of New York, as Trustee under the Indenture.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities a that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as
II-8
<PAGE> 233
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by one or more of the registrants of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, each
registrant will, unless in the opinion of its counsel the matter has been
settled by such indemnification by it is against policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrants hereby undertake to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act, as amended, in accordance with
the rules and regulation prescribed by the Securities and Exchange Commission
under Section 305(b)(2) of the Securities Act.
II-9
<PAGE> 234
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
each of the Registrants has duly caused this Registration Statement Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Franklin, State of Tennessee, on January 12, 2000.
IASIS HEALTHCARE CORPORATION
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary and General
Counsel
BAPTIST JOINT VENTURE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
BEAUMONT HOSPITAL HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
BILTMORE SURGERY CENTER
HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
BILTMORE SURGERY CENTER, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
II-10
<PAGE> 235
CLINICARE OF UTAH, INC.
By: /s/ FRANK A. COYLE
----------------------------------
Name: Frank A. Coyle
Title: Secretary
DAVIS HOSPITAL & MEDICAL CENTER, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
DAVIS SURGICAL CENTER HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
FIRST CHOICE PHYSICIANS NETWORK
HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
HEALTH CHOICE ARIZONA, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
II-11
<PAGE> 236
IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
----------------------------------
Name: Frank A. Coyle
Title: Secretary
IASIS MANAGEMENT COMPANY
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
JORDAN VALLEY HOSPITAL, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
METRO AMBULATORY SURGERY CENTER, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
PIONEER VALLEY HEALTH PLAN, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
PIONEER VALLEY HOSPITAL, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
II-12
<PAGE> 237
ROCKY MOUNTAIN MEDICAL CENTER, INC.
By: /s/ FRANK A. COYLE
----------------------------------
Name: Frank A. Coyle
Title: Secretary
SALT LAKE REGIONAL MEDICAL CENTER,
INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
SANDY CITY HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
SOUTHRIDGE PLAZA HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
SSJ ST. PETERSBURG HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
II-13
<PAGE> 238
MEMORIAL HOSPITAL OF TAMPA, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
MESA GENERAL HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
ODESSA REGIONAL HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
PALMS OF PASADENA HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
SOUTHWEST GENERAL HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
ST. LUKE'S MEDICAL CENTER, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
II-14
<PAGE> 239
ST. LUKE'S BEHAVIORAL HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
TEMPE ST. LUKE'S HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
TOWN & COUNTRY HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary
IASIS HEALTHCARE MSO SUB OF SALT LAKE
CITY, LLC
By: IASIS HEALTHCARE CORPORATION
By: /s/ FRANK A. COYLE
------------------------------------
Name: Frank A. Coyle
Title: Secretary and General
Counsel
II-15
<PAGE> 240
POWER OF ATTORNEY
Each of the persons whose signature appears below hereby authorizes Kenneth
W. Perry and Frank A. Coyle, and each of them, as attorney-in-fact and agents,
with full powers of substitution, to sign on his or her behalf, individually and
in the capacities stated below, and to file any and all amendments (including
post-effective amendments) to this Registration Statement with the Securities
and Exchange Commission, granting to said attorney-in-fact and agents full power
and authority to perform any other act on behalf of the undersigned required to
be done in the premises.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates set forth below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID R. WHITE Non-executive Chairman of January , 2000
- --------------------------------------------------- the Board of IASIS
David R. White
/s/ C. WAYNE GOWER President and Chief January , 2000
- --------------------------------------------------- Executive Officer of IASIS
C. Wayne Gower and the Subsidiary
Guarantors and Director of
IASIS
/s/ KENNETH W. PERRY Vice President of Operations January , 2000
- --------------------------------------------------- and Finance of IASIS and
Kenneth W. Perry Vice President and
Treasurer of the
Subsidiary Guarantors
/s/ ROBERTA A. KALE Vice President of Physician January , 2000
- --------------------------------------------------- Services of IASIS and Vice
Roberta A. Kale President of the
Subsidiary Guarantors
/s/ FRANK A. COYLE Secretary of IASIS and the January , 2000
- --------------------------------------------------- Subsidiary Guarantors and
Frank A. Coyle General Counsel of IASIS
/s/ LINDA W. HISCHKE Division President of IASIS January , 2000
- --------------------------------------------------- and Vice President of
Linda W. Hischke IASIS and the Subsidiary
Guarantors
/s/ PAUL S. LEVY Director of IASIS and the January , 2000
- --------------------------------------------------- Arizona and Delaware
Paul S. Levy Subsidiary Guarantors
/s/ DAVID Y. YING Director of IASIS and the January , 2000
- --------------------------------------------------- Arizona and Delaware
David Y. Ying Subsidiary Guarantors
/s/ JEFFREY C. LIGHTCAP Director of IASIS and the January , 2000
- --------------------------------------------------- Arizona and Delaware
Jeffrey C. Lightcap Subsidiary Guarantors
</TABLE>
II-16
<PAGE> 241
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ANTHONY GRILLO Director of IASIS January , 2000
- ---------------------------------------------------
Anthony Grillo
/s/ RAMSEY A. FRANK Director of IASIS January , 2000
- ---------------------------------------------------
Ramsey A. Frank
/s/ FRANK J. RODRIGUEZ Director of IASIS January , 2000
- ---------------------------------------------------
Frank J. Rodriguez
/s/ MICHAEL S. BERK Director of IASIS January , 2000
- ---------------------------------------------------
Michael S. Berk
/s/ STUART C. MCWHORTER Director of IASIS January , 2000
- ---------------------------------------------------
Stuart C. McWhorter
/s/ JAY R. BLOOM Director of IASIS January , 2000
- ---------------------------------------------------
Jay R. Bloom
/s/ ROBERT E. KISS Director of IASIS January , 2000
- ---------------------------------------------------
Robert E. Kiss
</TABLE>
II-17
<PAGE> 242
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.1 Recapitalization Agreement, dated as of August 16, 1999, by
and among Paracelsus Healthcare Corporation, PHC/CHC
Holdings, Inc., PHC/Psychiatric Healthcare Corporation,
PHC-Salt Lake City, Inc., Paracelsus Pioneer Valley
Hospital, Inc., Pioneer Valley Health Plan, Inc., PHC-Jordan
Valley, Inc., Paracelsus PHC Regional Medical Center,
Paracelsus Davis Hospital, Inc., PHC Utah, Inc., Clinicare
of Utah, Inc. and JLL Hospital, LLC.
2.2 Asset Sale Agreement between Tenet Healthcare Corporation
and JLL Hospital, LLC, dated August 15, 1999.
2.3 Amendment No. 1 to Asset Sale Agreement, made and entered
into as of October 15, 1999, by and between Tenet Healthcare
Corporation and IASIS Healthcare Corporation.
2.4 Amendment No. 2 to Asset Sale Agreement, made and entered
into as of October 15, 1999, by and between Tenet Healthcare
Corporation and IASIS Healthcare Corporation.
2.5 Asset Sale Agreement between Odessa Hospital, Ltd., and JLL
Hospital, LLC, dated as of August 15, 1999.
2.6 Amendment No. 1 to Asset Sale Agreement, dated as of October
15, 1999, by and between Odessa Hospital, Ltd. and IASIS
Healthcare Corporation.
3.1 Amended and Restated Certificate of Incorporation of
PHC/Psychiatric Healthcare Corporation, changing its name to
IASIS Heathcare Corporation as filed with the Secretary of
State of the State of Delaware on October 8, 1999.
3.2 Certificate of Designation, Preferences and Rights of Series
A Preferred Stock of IASIS Healthcare Corporation, as filed
with the Secretary of State of the State of Delaware on
October 15, 1999.
3.3 Certificate of Designation, Preferences and Rights of Series
B Preferred Stock of IASIS Healthcare Corporation, as filed
with the Secretary of State of the State of Delaware on
October 15, 1999.
3.4 Amended and Restated By-Laws of IASIS Healthcare
Corporation.
3.5 Certificate of Incorporation of Baptist Joint Venture
Holdings, Inc., as filed with the Secretary of State of the
State of Delaware on October 1, 1999.
3.6 Certificate of Incorporation of Beaumont Hospital Holdings,
Inc., as filed with the Secretary of State of the State of
Delaware on October 4, 1999.
3.7 Certificate of Incorporation of Biltmore Surgery Center,
Inc., as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.8 Certificate of Amendment to the Certificate of Incorporation
of Biltmore Surgery Center, Inc., changing its name to
Biltmore Surgery Center Holdings, Inc., as filed with the
Secretary of State of the State of Delaware on November 9,
1999.
3.9 Certificate of Incorporation of CliniCare of Utah, Inc., as
filed with the Secretary of State of the State of Delaware
on September 23, 1999.
3.10 Certificate of Incorporation of Davis Hospital & Medical
Center, Inc., as filed with the Secretary of State of the
State of Delaware on September 23, 1999.
</TABLE>
<PAGE> 243
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.11 Certificate of Incorporation of Davis Surgical Center
Holdings, Inc., as filed with the Secretary of State of the
State of Delaware on October 1, 1999.
3.12 Certificate of Incorporation of First Choice Physicians
Network Holdings, Inc., as filed with the Secretary of State
of the State of Delaware on October 1, 1999.
3.13 Certificate of Incorporation of Health Choice Arizona, Inc.,
as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.14 Certificate of Incorporation of IASIS Healthcare Holdings,
Inc., as filed with the Secretary of State of the State of
Delaware on September 23, 1999.
3.15 Certificate of Incorporation of IASIS Management Company, as
filed with the Secretary of State of the State of Delaware
on October 4, 1999.
3.16 Certificate of Incorporation of Jordan Valley Hospital,
Inc., as filed with the Secretary of State of the State of
Delaware on September 23, 1999.
3.17 Certificate of Incorporation of Metro Ambulatory Surgery
Center, Inc., as filed with the Secretary of State of the
State of Delaware on October 1, 1999.
3.18 Certificate of Incorporation of Pioneer Valley Health Plan,
Inc., as filed with the Secretary of State of the State of
Delaware on September 23, 1999.
3.19 Certificate of Incorporation of Pioneer Valley Hospital,
Inc., as filed with the Secretary of State of the State of
Delaware on September 23, 1999.
3.20 Certificate of Incorporation of Rocky Mountain Medical
Center, Inc., as filed with the Secretary of State of the
State of Delaware on September 23, 1999.
3.21 Certificate of Incorporation of Salt Lake Regional Medical
Center, Inc., as filed with the Secretary of State of the
State of Delaware on September 23, 1999.
3.22 Certificate of Incorporation of Sandy City Holdings, Inc.,
as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.23 Certificate of Incorporation of Southridge Plaza Holdings,
Inc., as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.24 Certificate of Incorporation of SSJ St. Petersburg Holdings,
Inc., as filed with the Secretary of State of the State of
Delaware on October 1, 1999.
3.25 Form of By-Laws of Delaware Subsidiary Guarantors.
3.26 Certificate of Limited Partnership of Memorial Hospital of
Tampa, LP as filed with the Secretary of State of the State
of Delaware on September 24, 1999.
3.27 Certificate of Limited Partnership of Mesa General Hospital,
LP as filed with the Secretary of State of the State of
Delaware on September 24, 1999.
3.28 Certificate of Limited Partnership of Odessa Regional
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.29 Certificate of Limited Partnership of Palms of Pasadena
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.30 Certificate of Limited Partnership of Southwest General
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.31 Certificate of Limited Partnership of St. Luke's Behavioral
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.32 Certificate of Limited Partnership of St. Luke's Medical
Center, LP as filed with the Secretary of State of the State
of Delaware on September 24, 1999.
</TABLE>
<PAGE> 244
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.33 Certificate of Limited Partnership of Tempe St. Luke's
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.34 Certificate of Limited Partnership of Town & Country
Hospital, LP as filed with the Secretary of State of the
State of Delaware on September 24, 1999.
3.35 Form of Limited Partnership Agreement of Limited Partnership
Subsidiary Guarantors.
3.36 Articles of Incorporation of Biltmore Surgery Center, Inc.
as filed with the Executive Secretary of the Arizona
Corporation Commission on September 23, 1996.
3.37 By-Laws of Biltmore Surgery Center, Inc., an Arizona
corporation.
3.38 Articles of Organization of IASIS Healthcare MSO Sub of Salt
Lake City, LLC, as filed with the Utah Division of
Corporations and Commercial Code on October 5, 1999.
3.39 Operating Agreement of IASIS Healthcare MSO Sub of Salt Lake
City, LLC.
4.1 Indenture, dated as of October 15, 1999, among IASIS
Healthcare Corporation, the Delaware and Limited Partnership
Subsidiary Guarantors and The Bank of New York, as Trustee.
4.2 Supplemental Indenture, dated October 25, 1999, among IASIS
Healthcare Corporation, the Delaware and Limited Partnership
Subsidiary Guarantors, the Arizona Subsidiary Guarantor, as
guaranteeing subsidiary and The Bank of New York, as
Trustee.
4.3 Supplemental Indenture, dated November 4, 1999, among IASIS
Healthcare Corporation, the Delaware, Limited Partnership
and Arizona Subsidiary Guarantors, the Utah Subsidiary
Guarantor, as guaranteeing subsidiary and The Bank of New
York, as Trustee.
4.4 Senior Subordinated Guarantee, dated October 15, 1999 by the
Delaware and Limited Partnership Subsidiary Guarantors in
favor of (i) the holders of IASIS Healthcare Corporation's
outstanding 13% Senior Subordinated Notes due 2009 and 13%
Senior Subordinated Exchange Notes due 2009 to be issued in
the Exchange Offer and covered by this Registration
Statement and (ii) the Bank of New York, as Trustee under
the Indenture governing the above-referenced notes.
4.5 Senior Subordinated Guarantee, dated October 25, 1999 by the
Arizona Subsidiary Guarantor in favor of (i) the holders of
IASIS Healthcare Corporation's outstanding 13% Senior
Subordinated Notes due 2009 and 13% Senior Subordinated
Exchange Notes due 2009 to be issued in the Exchange Offer
and covered by this Registration Statement and (ii) the Bank
of New York, as Trustee under the Indenture governing the
above-referenced notes.
4.6 Senior Subordinated Guarantee, dated November 4, 1999 by the
Utah Subsidiary Guarantor in favor of (i) the holders of
IASIS Heathcare Corporation's outstanding 13% Senior
Subordinated Notes due 2009 and 13% Senior Subordinated
Exchange Notes due 2009 to be issued in the Exchange Offer
and covered by this Registration Statement and (ii) the Bank
of New York, as Trustee under the Indenture governing the
above-referenced notes.
</TABLE>
<PAGE> 245
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
4.7 Registration Rights Agreement, dated as of October 15, 1999,
by and among IASIS Healthcare Corporation, the Subsidiary
Guarantors and J.P. Morgan Securities Inc.
4.8 Form of IASIS Healthcare Corporation 13% Senior Subordinated
Note due 2009 (included in Exhibit 4.1).
4.9 Form of IASIS Healthcare Corporation 13% Senior Subordinated
Exchange Note due 2009.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the securities being registered
hereby.*
10.1 Stockholders Agreement, dated as of October 8, 1999, by and
among IASIS Healthcare Corporation, JLL Healthcare, LLC,
Paracelsus Healthcare Corporation and each of the other
investors listed thereto.
10.2 Credit Agreement, dated as of October 15, 1999, among IASIS
Healthcare Corporation, Various Lenders, J.P. Morgan
Securities Inc. and The Bank of Nova Scotia, as Co-Lead
Arrangers and Co-Book Runners, Paribas, as Documentation
Agent, The Bank of Nova Scotia, as Syndication Agent, and
Morgan Guaranty Trust Company of New York, as Administrative
Agent.
10.3 First Amendment, dated as of November 16, 1999, to the
Credit Agreement listed as Exhibit No. 10.2.
10.4 Security Agreement, dated as of October 15, 1999, between
IASIS Healthcare Corporation, Various Subsidiaries of IASIS
Healthcare Corporation and Morgan Guaranty Trust Company of
New York, as Collateral Agent.
10.5 Pledge Agreement, dated as of October 15, 1999, between
IASIS Healthcare Corporation, Various Subsidiaries of IASIS
Healthcare Corporation and Morgan Guaranty Trust Company of
New York, as Collateral Agent.
10.6 Subsidiaries Guaranty, dated as of October 15, 1999 (as
amended, restated, modified and/or supplemented from time to
time), made by each of the Subsidiary Guarantors of IASIS
Healthcare Corporation.
10.7 Hypothecation Agreement, dated as of October 15, 1999 (as
amended, restated, modified and/or supplemented from time to
time), among each of the pledgors in favor of Morgan
Guaranty Trust Company of New York, as Collateral Agent.
10.8 Employee Leasing Agreement, dated as of October 15, 1999, by
and among IASIS Healthcare Corporation and Tenet Healthcare
Corporation and certain subsidiaries of Tenet Healthcare
Corporation.
10.9 Tenet Buypower Purchasing Assistance Agreement, dated as of
October 15, 1999, by and between IASIS Healthcare
Corporation and Tenet HealthSystem Medical, Inc.
10.10 Transition Services Agreement, dated as of October 8, 1999,
by and between Paracelsus Healthcare Corporation and
PHC/Psychiatric Healthcare Corporation.
10.11 Tax Sharing Agreement, dated as of October 8, 1999, among
JLL Healthcare, LLC and its affiliates.
12.1 Statement regarding Computation of Ratio of Earnings to
Fixed Charges for the Paracelsus Utah Facilities.
21.1 Subsidiaries of IASIS Healthcare Corporation.
</TABLE>
<PAGE> 246
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
23.1 Consent of KPMG LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).*
24.1 Powers of Attorney (included in the signature pages to the
Registration Statement).
25.1 Statement of Eligibility and Qualification on Form T-1 of
The Bank of New York, as Trustee under the Indenture.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
RECAPITALIZATION AGREEMENT
- --------------------------------------------------------------------------------
BY AND AMONG
PARACELSUS HEALTHCARE CORPORATION,
PHC/CHC HOLDINGS, INC.
AS PARENTS,
AND
PHC/PSYCHIATRIC HEALTHCARE CORPORATION.,
PHC-SALT LAKE CITY, INC.,
PARACELSUS PIONEER VALLEY HOSPITAL, INC.,
PIONEER VALLEY HEALTH PLAN, INC.,
PHC-JORDAN VALLEY, INC.,
PARACELSUS PHC REGIONAL MEDICAL CENTER, INC.,
PARACELSUS DAVIS HOSPITAL, INC.,
PHC UTAH, INC., AND
CLINICARE OF UTAH, INC.
AS SELLERS,
AND
JLL HOSPITAL, LLC, AS BUYER
- --------------------------------------------------------------------------------
DATED AS OF AUGUST 16, 1999
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS.........................................................1
1.1. Definition of Certain Terms...........................................1
ARTICLE II. PRE-CLOSING TRANSACTIONS; RECAPITALIZATION........................12
2.1. Pre-Closing Transactions.............................................12
2.2. Assets...............................................................12
2.3. Excluded Assets......................................................14
2.4. Assumption of Liabilities............................................15
2.5. Excluded Liabilities.................................................15
2.6. Consent of Third Parties.............................................17
ARTICLE III. THE CLOSING......................................................18
3.1. Closing..............................................................18
3.2. Buyer's Delivery of the Transaction Consideration....................18
3.3. Closing Deliveries...................................................18
3.3.1. Seller Deliveries............................................18
3.3.2. Buyer Deliveries.............................................20
3.4. Post-Closing Adjustments to Cash Purchase Price......................20
ARTICLE IV. REPRESENTATIONS AND WARRANTIES....................................22
4.1. Representations and Warranties of the Seller.........................22
4.1.1. Authorization, etc...........................................22
4.1.2. Corporate Status.............................................23
4.1.3. No Conflicts, etc............................................23
4.1.4. Seller Financial Statements..................................23
4.1.5. Absence of Changes...........................................23
4.1.6. Litigation...................................................24
4.1.7. Compliance with Laws.........................................24
4.1.8. Government Program Participation.............................24
4.1.9. Cost Reports.................................................25
4.1.10. JCAHO Accreditation..........................................25
4.1.11. Governmental Approval........................................25
4.1.12. Fraud and Abuse..............................................25
4.1.13. Hill-Burton Loans............................................26
4.1.14. Interests....................................................26
4.1.15. Assets.......................................................26
4.1.16. Material Contracts...........................................27
4.1.17. Intellectual Property........................................27
4.1.18. Owned Real Property..........................................28
4.1.19. Leases.......................................................28
4.1.20. Environmental Matters........................................29
4.1.21. Employment Relations.........................................29
4.1.22. Employee Benefit Plans.......................................30
4.1.23. Accounts Receivable..........................................31
4.1.24. Insurance....................................................32
<PAGE> 3
4.1.25. Taxes........................................................32
4.1.26. Affiliate Transactions.......................................34
4.1.27. Brokers, Finders, etc........................................34
4.1.28. Disclosure...................................................35
4.1.29. Solvency.....................................................35
4.1.30. Disclaimer of Warranties.....................................35
4.1.31. Absence of Undisclosed Liabilities...........................35
4.1.32. Inventory....................................................35
4.1.33. Year 2000 Compliance.........................................35
4.1.34. Holdco Capitalization........................................36
4.1.35. Holdco Information...........................................36
4.2. Representations and Warranties of the Buyer.
Buyer represents and warrants to Seller as follows:..................37
4.2.1. Corporate Status; Authorization, etc.........................37
4.2.2. No Conflicts, etc............................................37
4.2.3. Litigation...................................................38
4.2.4. Financial Capability.........................................38
4.2.5. No Current Operations........................................38
4.2.6. No Brokers...................................................38
4.2.7. Disclosure...................................................38
4.2.8. Solvency.....................................................38
4.3. Representations and Warranties of Parent.
4.3.1. Authorization, etc...........................................38
4.3.2. Corporate Status.............................................39
4.3.3. No Conflicts, etc............................................39
4.3.4. Fraud and Abuse..............................................39
4.3.5. Solvency.....................................................39
ARTICLE V. COVENANTS..........................................................40
5.1. Covenants of Seller..................................................40
5.1.1. Conduct of Business..........................................40
5.1.2. Access and Information.......................................41
5.1.3. Further Assurances...........................................42
5.1.4. Schedules....................................................42
5.1.5. Purchasing Contract..........................................42
5.1.6. Use of Names.................................................42
5.1.7. Title and Survey Matters.....................................42
5.1.8. Expansion Project............................................44
5.1.9. Year 2000 Project Plan.......................................44
5.1.10. Bonuses......................................................44
5.2. Covenants of Buyer...................................................45
5.2.1. Further Assurances...........................................45
5.2.2. Post-Closing Access to Information...........................45
5.2.3. Preservation and Access to Patient Records After the
Closing......................................................45
5.2.4. Confidentiality..............................................45
ii
<PAGE> 4
5.2.5. Release of Letter of Credit..................................46
5.2.6. Financing Commitment. .......................................46
5.2.7. Return of Privileged Documents...............................46
5.2.8. Amendment to Holdco Certificate of Incorporation.............47
5.3. Additional Covenants.................................................47
5.3.1. Hart Scott Rodino............................................47
5.3.2. Other Government Consents....................................47
5.3.3. Best Efforts; No Inconsistent Action.........................48
5.3.4. Press Releases...............................................48
5.3.5. Stockholders Agreement.......................................48
5.3.6. Termination of Affiliate Transactions........................48
5.4. Tax Matters Covenants................................................48
5.4.1. Code Section 338(h)(10) Election; Allocation of Transaction
Consideration................................................48
5.4.2. Transferors' Taxes and Returns...............................49
5.4.3. PHC's Returns for Tax Periods Including the Closing Date.....49
5.4.4. Tax Periods Ending on or Before the Closing Date.............50
5.4.5. Tax Periods Beginning Before and Ending After the Closing
Date.........................................................50
5.4.6. Cooperation on Tax Matters...................................52
5.4.7. Tax Sharing Agreements.......................................52
5.4.8. Audits.......................................................52
5.4.9. Carrybacks...................................................53
5.4.10. LLC Entity Tax Years Beginning Before and Ending After
Closing......................................................53
5.4.11. Tax Indemnification..........................................53
5.4.12. Procedures Relating to Indemnification of Tax Claims.........54
ARTICLE VI. CONDITIONS PRECEDENT..............................................55
6.1. Conditions to Obligations of Each Party..............................55
6.1.1. HSR Action Notification......................................55
6.1.2. No Injunction, etc...........................................55
6.1.3. Government Approvals.........................................55
6.2. Conditions to Obligations of the Buyer...............................55
6.2.1. Representations, Performance.................................55
6.2.2. Collateral Agreements........................................56
6.2.3. Reorganization...............................................56
6.2.4. No Material Adverse Effect...................................56
6.2.5. Title Commitment.............................................56
6.2.6. Consents.....................................................56
6.2.7. FIRPTA Affidavit.............................................56
6.2.8. Financing....................................................56
6.3. Conditions to Obligations of the Seller..............................56
6.3.1. Representations, Performance, etc............................56
6.3.2. Collateral Agreements........................................57
iii
<PAGE> 5
6.3.3. Letter of Credit.............................................57
6.3.4. Buyer's Certificate..........................................57
ARTICLE VII. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.............................57
7.1. Employment of Seller's Employees.....................................57
7.2. Welfare and Fringe Benefit Plans.....................................58
7.3. Workers Compensation.................................................59
7.4. Employment Taxes.....................................................59
7.5. No Continuing Obligation.............................................59
ARTICLE VIII. TERMINATION.....................................................60
8.1. Termination..........................................................60
8.2. Break-Up Fee.........................................................60
8.3. Effect of Termination................................................60
ARTICLE IX. ADDITIONAL AGREEMENTS.............................................60
9.1. Seller's Cost Reports................................................60
9.2. Misdirected Payments.................................................61
9.3. WARN Act.............................................................61
9.4. Power of Attorney for D.E.A. Registration Number(s) and Utah
Pharmacy License(s)..................................................61
9.5. Covenant Not to Compete..............................................61
ARTICLE X. INDEMNIFICATION....................................................62
10.1. Indemnification......................................................62
10.2. Survival of Representations and Warranties, etc......................64
10.3. Limitations on Indemnification Provisions; Exclusive Remedy..........65
10.3.1. Limitation on Indemnification................................65
10.3.2. Waiver of Non-Compensatory Damages...........................65
10.3.3. Exclusive Remedy; Waiver and Release.........................65
ARTICLE XI. MISCELLANEOUS.....................................................65
11.1. Expenses.............................................................65
11.2. Severability.........................................................66
11.3. Notices..............................................................66
11.4. Miscellaneous........................................................67
11.4.1. Headings.....................................................67
11.4.2. Entire Agreement.............................................67
11.4.3. Counterparts.................................................67
11.4.4. Governing Law, etc...........................................67
11.4.5. Binding Effect...............................................67
11.4.6. Assignment...................................................67
11.4.7. No Third Party Beneficiaries.................................67
11.4.8. Amendment; Waivers, etc......................................68
11.4.9. Specific Performance.........................................68
iv
<PAGE> 6
SCHEDULES
Schedule 2.3 Assets
Schedule 2.3(n) Excluded Interests
Schedule 2.5(b) Certain Excluded Liabilities
Schedule 3.1 Recapitalization Transactions
Schedule 4.1.3 Conflicts
Schedule 4.1.5 Changes Post-Seller Financial Statements Date
Schedule 4.1.6 Litigation (Seller)
Schedule 4.1.7 Compliance with Laws (Seller)
Schedule 4.1.8 Medicare/Medicaid Contingencies
Schedule 4.1.9 Amounts Owed to the Programs
Schedule 4.1.10 JCAHO Contingencies
Schedule 4.1.11 Governmental Approvals
Schedule 4.1.12 Applicable Executives
Schedule 4.1.14 Interests
Schedule 4.1.15 Encumbrances
Schedule 4.1.16(a) Material Contracts
Schedule 4.1.16(b) Defaults on Material Contracts
Schedule 4.1.17 Intellectual Property
Schedule 4.1.18 Owned Real Property
Schedule 4.1.19 Leases
Schedule 4.1.20 Environmental Matters
Schedule 4.1.20(a) Certain Leased Real Property
Schedule 4.1.21 Employment Relations
Schedule 4.1.22(a) Employee Benefit Plans
Schedule 4.1.22(e) Exceptions to ERISA and the Code
Schedule 4.1.22(f) Exceptions to "qualifications" under the Code
Schedule 4.1.22(k) Exceptions to the WARN Act
Schedule 4.1.23 Accounts Receivable
Schedule 4.1.24 Insurance Policies
Schedule 4.1.25 Tax Matters
Schedule 4.1.33 Year 2000 Compliance
Schedule 4.1.35 Holdco Assets
Schedule 4.2.2 Governmental Approvals or Consents to be obtained by Buyer
Schedule 4.2.3 Litigation (Buyer)
Schedule 5.3.6 Affiliate Transactions
Schedule 5.4.1 Allocation of Transaction Consideration
Schedule 7.1 Additional Offerees
Schedule 7.2 COBRA Employees
v
<PAGE> 7
LIST OF EXHIBITS
Exhibit A Facilities
Exhibit B Interests
Exhibit C Net Working Capital
Exhibit D Terms of License Agreement
Exhibit E Terms of Stockholders Agreement
Exhibit F Terms of Transition Services Agreements
Exhibit G Matters to be covered by Seller Legal Opinion
vi
<PAGE> 8
RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT ("Agreement") is made and entered into as
of August 16, 1999, by and among PARACELSUS HEALTHCARE CORPORATION, a California
corporation ("PHC"), PHC/CHC HOLDINGS, INC., a Delaware corporation ("PHC
Holdings" and, together with PHC, collectively, "Parent"), PHC/PSYCHIATRIC
HEALTHCARE CORPORATION, a Delaware corporation ("Holdco"), PHC-SALT LAKE CITY,
INC., a Utah corporation ("PHC-Salt Lake"), PARACELSUS PIONEER VALLEY HOSPITAL,
INC., a Utah corporation ("Paracelsus Pioneer"), PIONEER VALLEY HEALTH PLAN,
INC., a Utah Corporation ("PVHP"), PHC-JORDAN VALLEY, INC., a Utah corporation
("PHC-Jordan"), PARACELSUS PHC REGIONAL MEDICAL CENTER, INC., a Utah corporation
("Paracelsus-PHC"), PARACELSUS DAVIS HOSPITAL, INC., a Utah corporation
("Paracelsus Davis"), PHC UTAH, INC., a Delaware corporation ("PHC Utah"),
CLINICARE OF UTAH, INC., a Utah Corporation, ("Clinicare"), (Holdco, PHC-Salt
Lake, Paracelsus Pioneer, PVHP, PHC-Jordan, Paracelsus-PHC, Paracelsus Davis,
PHC Utah and Clinicare, are referred to hereinafter individually, jointly and
severally as the "Seller"), and JLL HOSPITAL, LLC, a Delaware limited liability
company ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns or leases the acute care hospitals and other health
care facilities set forth in Exhibit A hereto (collectively, the "Facilities");
WHEREAS, Seller owns the capital stock or other equity interests set
forth on Exhibit B hereto in the various corporations, partnerships, limited
liability companies and other entities listed therein in connection with
Seller's health care-related operations in the Salt Lake City, Utah area
(collectively, "the Interests");
WHEREAS, Buyer wishes to acquire, and Seller wishes to sell, assign and
transfer substantially all of the assets and properties, including the
Facilities and the Interests, owned, leased or used by Seller in the operations
of the Business in the manner and upon the terms and subject to the conditions
hereinafter set forth;
WHEREAS, an election will be made to treat Buyer as a corporation for
U.S. federal income Tax purposes;
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definition of Certain Terms. The terms defined in this Article I,
whenever used in this Agreement (including in the Schedules), shall have the
respective meanings indicated below for
<PAGE> 9
all purposes of this Agreement. All references herein to a Section, Article or
Schedule are to a Section, Article or Schedule of or to this Agreement, unless
otherwise indicated.
Accounts Receivable: as defined in Section 2.2(d).
Adjusted Cash Purchase Price: as defined in Section 3.4(a).
Affiliate: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first Person.
Affiliate Transactions: all accounts payable, notes payable,
accounts receivable and Contracts, whether or not entered into in the
ordinary course of the Business, to or by which Seller or the Business,
on the one hand, and Seller's Affiliates, on the other hand, are a party
or are otherwise bound, or by which any of the Assets is bound or
pursuant to which Seller or the Business has made or is obligated to make
payments or incur expenses to or for the benefit of Seller's Affiliates.
Agreement: this Recapitalization Agreement, including the
Schedules hereto.
Applicable Executives: the individuals set forth on SCHEDULE
4.1.12 hereto.
Applicable Law: all applicable statutes, laws, rules, regulations,
ordinances, codes, judgments, decrees or orders of any Governmental
Authority having jurisdiction over Seller, the Assets or the Business.
Applicable Rate: as defined in Section 3.4(b)
Assets: as defined in Section 2.2.
Assumed Liabilities: as defined in Section 2.4
Assumption Agreement: as defined in Section 2.4.
Benefit Liabilities: liabilities, obligations, commitments,
damages and costs payable under any Employee Benefit Plan.
Best Efforts: best efforts reasonable under the circumstances,
excluding, except to the extent specifically provided herein, the payment
of any money or other consideration to any third party or the
commencement of any litigation.
Books and Records: as defined in Section 2.2(g).
Business: the business conducted by Seller relating to Seller's
ownership and operation of the Facilities, Clinicare, PVHP and the
Interests.
Business Day: shall mean a day other than a Saturday, Sunday or
other day on which commercial banks in Utah are authorized or required to
close.
Buyer: as defined in the first paragraph of this Agreement.
2
<PAGE> 10
Buyer Indemnitees: as defined in Section 10.1(a).
Buyer's Certificate: the certificate to be executed by Buyer (i)
describing the agreements and instruments executed by Seller in
connection with the Pre-Closing Transactions and the transaction
contemplated by Paragraph 1 of SCHEDULE 3.1 that have been furnished to
Buyer and (ii) certifying that the Pre-Closing Transactions and the
transactions contemplated by Paragraph 1 of SCHEDULE 3.1 have been
completed in a manner satisfactory to Buyer.
Buyer's 401(k) Plan: as defined in Section 7.1(d)
Buyer's Pre-Closing Expansion Costs: as defined in Section 3.4(c)
Cash Purchase Price: the cash to be delivered to Seller at Closing
as set forth on SCHEDULE 3.1.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq.
Clean Up: all action required to: (1) cleanup, remove, treat or
remediate Hazardous Materials in the indoor or outdoor environment, (2)
prevent the Release of Hazardous Materials so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment; (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care; or (4) respond to
any government requests for information or documents in any way relating
to cleanup, removal, treatment or remediation or potential cleanup,
removal, treatment or remediation of Hazardous Materials in the indoor or
outdoor environment.
Closing: as defined in Section 3.1.
Closing Date: as defined in Section 3.1.
Closing Net Working Capital: as defined in Section 3.4(a)
Code: the Internal Revenue Code of 1986, as amended.
Collateral Agreements: the Stockholders Agreement, the Transition
Services Agreement, the License Agreement, the Buyer's Certificate and
each of the agreements and other documents and instruments described in
Section 3.3.
Commitment Letter: as defined in Section 4.2.4
Confidential Information: as defined in 5.2.4
Consent: any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of
registration, certificate, declaration or filing with, or report or
notice to, any Person, including but not limited to any Governmental
3
<PAGE> 11
Authority but expressly excluding the procurement by Buyer of provider
contracts with the Programs.
Construction Agreement: the agreement dated as of December 1,
1998, by and between PHC-Jordan and McDevitt Street Bovis relating to
additions and renovations at Jordan Valley Hospital.
Contracts: those Assets described in Section 2.2(h).
Contractor: collectively, the General Contractor, the
Sub-Contractors and the Other Contractors.
Contractors' Interim Invoices: as defined in Section 5.1.8.
Control (including the terms "controlled by" and "under common
control with"): the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person,
whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise.
Corporation: as defined in Section 4.1.14.
Cost Reports: as defined in Section 4.1.9
Current Program Receivables: Program Receivables which have been
billed since the close of the most recent cost reporting fiscal year.
Cut-Off Invoices: as defined in Section 5.1.8.
D.E.A.: the United States Department of Justice Drug Enforcement
Agency.
Deliverables: the deliverables summarized in the Year 2000 Project
Plan with respect to the operation of the Business and the Facilities.
Department of Health: The Utah Department of Health.
$ or dollars: lawful money of the United States.
DOJ: the United States Department of Justice.
Draw Request: the monthly invoice of the General Contractor
representing the monthly draw, in arrears, of the General Contractor and
the Sub-Contractors, with respect to the Expansion Project.
Effective Time: as defined in Section 3.1.
Election: as defined in Section 5.4.1
4
<PAGE> 12
Employees: collectively, any employee or former employee employed
or formerly employed in the operation of the Business or the
beneficiaries or dependents of any such employee or former employee.
Employee Benefit Plan: as defined in Section 4.1.22.
Environmental Authorities: the United States Environmental
Protection Agency, and all other federal, state, regional, county or
local government authorities authorized or having jurisdiction to enforce
Environmental Laws.
Environmental Laws: any applicable federal, state or local
statute, law, rule, regulation, ordinance, code or rule of common law in
effect as of the Closing Date (including any amendments in effect as of
the Closing Date) relating to the pollution or protection of the
environment, or to exposure to or Releases into the indoor or outdoor
environment of Hazardous Substances, including without limitation,
CERCLA; The Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Sections 6901, et seq.; the Federal Water Pollution Control Act, 33
U.S.C. Sections 1201, et seq.; the Toxic Substances Control Act, 15
U.S.C. Sections 2601, et seq.; the Clean Air Act, 42 U.S.C. Sections
7401, et seq.; and the Medical Waste Tracking Act of 1988, 42 U.S.C.,
Section 6992, et seq.
Environmental Permits: all permits, licenses, registrations and
other authorizations required under Environmental Laws to operate a
Facility or to Release, use or dispose of Hazardous Substances used,
stored, generated, treated, transported or Released by or on behalf of
the Facilities.
Environmental Proceedings: any proceeding initiated by an
Environmental Authority or by any other third party, under any
Environmental Law related to or regarding the Facilities, the Assets or
the Real Property or the use, release or disposal of Hazardous Substances
by Seller or otherwise on or from the Facilities.
Environmental Reports: as defined in Section 4.1.20.
Equipment: as defined in Section 2.2(b).
Equity Investment: as defined in Section 5.2.6.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Affiliates: as defined in Section 4.1.22(a).
Excluded Assets: as defined in Section 2.3.
Excluded Liabilities: as defined in Section 2.5.
Expansion Costs: as defined in Section 5.1.8.
Expansion Costs Invoices: as defined in Section 3.4(c).
5
<PAGE> 13
Expansion Project: as defined in Section 5.1.8.
Facilities: as defined in the Recitals.
Financing Ceiling: as defined in Section 5.2.6
FIRPTA Affidavit: as defined in Section 6.2.7.
FTC: the Federal Trade Commission.
GAAP: generally accepted accounting principles as in effect in the
United States.
General Contractor: McDevitt Street Bovis.
Governmental Approval: any consent, permit, license, certificate,
franchise approval or authorization of any Governmental Authority, but
expressly excluding any Environmental Permit and the procurement by Buyer
of provider contracts with the Programs.
Governmental Authority: any federal, state or local governmental
authority, agency, court, department, bureau, board or commission,
domestic or foreign.
Hazardous Substances: all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5,
or defined as such by, or regulated as such under, any Environmental Law,
including, without limitation, friable asbestos, asbestos-containing
material and poly-chlorinated biphenyls, radioactive wastes and
radioactive substances.
Holdco: PHC/Psychiatric Healthcare Corporation.
Holdco Common Stock: as defined in Section 4.1.34.
Hospitals: the hospitals set forth on Exhibit A hereto.
HSR Act: the Hart-Scott-Rodino Anti-trust Improvements Act of
1976, as amended.
Indemnified Party: as defined in Section 10.1(c).
Independent Accounting Firm: as defined in Section 3.4(a)(ii).
Initial Allocation: as defined in Section 5.4.1.
Indemnifying Party: as defined in Section 10.1(c).
Intellectual Property: all (a) trademarks (registered or
unregistered), service marks, trade names, assumed names and logos (other
than the Excluded Assets) (b) copyrights and computer software and
registrations thereof and applications therefor (other than the
6
<PAGE> 14
Excluded Assets); and (c) if any, patents and patent applications (as
applicable) and (d) all agreements and licenses relating to any of the
foregoing owned, filed or licensed by Seller and used in the Business.
Interests: as defined in the Recitals.
Inventory: as defined in Section 2.2(c).
IRS: the Internal Revenue Service.
Jordan Valley Hospital: The Hospital owned and operated by
PHC-Jordan and listed on Exhibit A.
Leased Real Property: the Real Property subject to the Leases.
Leases: means the real property leases and subleases pursuant to
which the Seller is the lessee, lessor, sublessee or sublessor and that
pertain to the Business as listed and described in SCHEDULE 4.1.19.
Letter of Credit: the letter of credit in the amount of $7,550,750
issued by Paribas in favor of AHP of Utah, Inc. or any successor thereof,
securing obligations under the Pioneer Valley Lease.
License Agreement: the agreement to be executed by Seller and
Buyer providing for the license of certain Intellectual Property
substantially in the form of Exhibit D hereto.
Lien: any mortgage, pledge, security interest, encumbrance,
recorded easement, encroachment, option or lien on any real or personal
property.
Litigation: as defined in Section 4.1.6.
LLC Interests: as set forth on Exhibit B.
Losses: as defined in Section 10.1.
Material Adverse Effect: a material adverse effect (i) with
respect to Seller, on the Assets, business, operations, environmental
liability, financial condition or results of operations of the Business
taken as a whole, and (ii) with respect to Buyer, on the assets,
business, operations, environmental liability, financial condition or
results of operations of Buyer taken as a whole.
Material Contract: as defined in Section 4.1.16(a).
Material Intellectual Property: as defined in Section 4.1.17.
Medical Benefit Plan: as defined in Section 7.2(a).
Minimum Claim Amount: as defined in Section 10.3.1.
7
<PAGE> 15
Net Working Capital: as defined in Exhibit C hereto.
Offerees: as defined in Section 7.1(a).
Other Contractors: any architect, construction manager,
contractor, engineer, laborer, supplier, independent contractor or
construction consultant used in connection with the Expansion Project,
other than the General Contractor and the Sub-Contractors.
Other LLC Entities: as defined in Section 4.1.25
Owned Real Property: the real property owned by Seller and used in
the operation of the Business, as listed on SCHEDULE 4.1.18.
Parent: collectively, PHC and PHC Holdings.
Party or Parties: either the Buyer or any of the Sellers, or all
of them, as the context requires.
Permitted Liens: (i) Except for Liens securing the Seller
Indebtedness, Liens securing liabilities which are reflected or reserved
against in the Seller Financial Statements to the extent so reflected or
reserved, (ii) Liens for Taxes not yet due and payable or which are being
contested in good faith and by appropriate proceedings (iii) Liens
arising or imposed by law in the ordinary course of business (including
easements, permits, zoning requirements and other restrictions of record
or limitations on the use of real property or irregularities in title
thereto and Liens for obligations not yet due to carriers, warehousemen,
laborers, materialmen and the like) that do not materially detract from
the value of the Assets or materially interfere with Seller's use thereof
in the operation of the Business and which do not involve an amount in
excess of $50,000 individually, (iv) Liens, including those arising by
operation of law, otherwise relating to the liabilities to be assumed by
Buyer pursuant to Section 2.4 hereof and (v) Liens set forth on SCHEDULES
4.1.14, 4.1.15 and 4.1.18.
Person: any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or
other entity.
PHC: Paracelsus Healthcare Corporation.
Pioneer Valley Hospital: the Hospital leased and operated by
Paracelsus Pioneer and listed on Exhibit A.
Pioneer Valley Lease: the lease dated as of May 15, 1996 by and
between Paracelsus Pioneer and American Health Properties, Inc., as
amended from time to time, governing the lease of the real property and
the improvements thereon used by Paracelsus Pioneer to operate Pioneer
Valley Hospital.
Pioneer Valley Real Property: the real property governed by the
Pioneer Valley Lease.
8
<PAGE> 16
Pre-Closing Net Working Capital: an amount equal to $19,451,000.
Pre-Closing Period: as defined in Section 3.4(c).
Pre-Closing Tax Period: as defined in Section 5.4.11.
Pre-Closing Transactions: as defined in Section 2.1.
Privileged Documents: shall mean any documents of Seller subject
to the attorney-client privilege or the work product privilege except for
those documents the disclosure or transfer of which would not, in the
good faith opinion of Seller after consulting with legal counsel, result
in a loss of any such privilege with respect to the subject matter of any
pending, threatened or possible cause of action or judicial or
administrative action, suit, proceeding or investigation.
Program Receivables: accounts receivable owing to Seller pursuant
to its provider contracts with the Programs.
Programs: the Medicare, Medicaid and TRICARE programs.
Progress Reports: as defined in Section 4.1.33.
Purchasing Contracts: (i) the Purchasing Agreement dated August 2,
1999 entered into by and between Paracelsus Healthcare Corporation and
Tenet HealthSystem Medical, Inc., having a term of two (2) years
commencing on August 1, 1999 and ending on July 31, 2001 and (ii) the
Agreement dated November 20, 1996 entered into by and between Health
Services Corporation of America and Paracelsus Healthcare Corporation,
having a term of three (3) years commencing on November 20, 1996 and
ending on November 19, 1999.
Pro-Rated Draw Requests: as defined in Section 5.1.8.
Real Property: as defined in Section 2.2(a).
Recapitalization Transactions: the transactions to be completed as
set forth on SCHEDULE 3.1 hereto.
Release: any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration
into the indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater and surface or subsurface strata)
or into or out of any property, including the movement of Hazardous
Substances through or in the air, soil, surface water, groundwater or
property.
Securitization Program: the accounts receivable securitization
program governed by the documents, instruments, and agreements executed
and delivered by PHC Funding Corp. II, PHC and certain Subsidiaries of
PHC, initially entered into as of April 16, 1993 with Sheffield
Receivables Corporation, together with any documents, instruments and
agreements from time to time executed and delivered in connection
therewith.
9
<PAGE> 17
Seller: as defined in the Recitals.
Seller Cost Reports: as defined in Section 9.1.
Seller Financial Statements: as defined in Section 4.1.4.
Seller Financial Statements Date: as defined in Section 4.1.4.
Seller Indebtedness: the Senior Bank Credit Facility and the
Securitization Program.
Seller Indemnitees: as defined in Section 10.1(a).
Seller's 401(k) Plan: as defined in Section 7.1(d).
Senior Bank Credit Facility: the Paracelsus Healthcare Corporation
Amended and Restated Credit Agreement, providing for a $140,000,000
Reducing Revolving Credit Facility and a $115,000,000 Term Loan Facility,
dated as of March 30, 1998, as amended.
Severance Plan: as defined in Section 7.1(b).
Shares: as defined in Section 4.1.34.
SLRMC: Salt Lake Regional Medical Center, the Hospital owned and
operated by PHC - Salt Lake and listed on Exhibit A.
Statement: as defined in Section 3.4(a).
8023 Statement: as defined in Section 5.4.1.
Stockholders Agreement: as defined in Section 5.3.5.
Straddle Period: as defined in Section 5.4.5(a).
Sub-Contractors: those sub-contractors and suppliers whose
services in connection with the Construction Agreement are invoiced by
the General Contractor in the Draw Requests.
Subsidiaries: each corporation or other Person in which a Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or
other equity interests.
Survey: as defined in Section 5.1.7(b).
Tax: includes all foreign, federal, state, or local government
income, franchise, withholding, estimated, excise, sales, use, gross
receipt, employment, payroll, transfer, property, profit, value added,
service, capital stock, license, social security, workers compensation,
unemployment, utility, gains, severance, stamp, occupation, premium,
10
<PAGE> 18
windfall, environmental, disability, registration, alternative or add-on
minimum, gift, ad valorem, export, import, customs duties or other taxes,
charges, fees, duties, levies, penalties, or other assessments of any
kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts imposed by any taxing authority, whether
disputed or not; provided, however, Tax does not include any charge, fee
or penalty imposed exclusively under the Programs on Seller or its
Affiliates as a result of services provided by Seller or its Affiliates.
Tax Claim: as defined in Section 5.4.12(a).
Taxing Authority: includes any federal, state, local, or foreign
governmental authority responsible for the imposition of any Tax.
Tax Returns: any return, report, declaration, form, claim for
refund or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
Termination Notice: as defined in Section 8.1(b)
Title Commitment: as defined in Section 5.1.7(a).
Title Company: as defined in Section 5.1.7(a).
Title Policy: as defined in Section 5.1.7(a).
Transaction Consideration: the consideration to be delivered to
SELLER as set forth on SCHEDULE 3.1 hereto.
Transaction Expenses: as defined in Section 11.1.
Transferor: as defined in Section 4.1.25.
Transferred Corporation: as defined in Section 4.1.25
Transferred Employees: as defined in Section 7.1(a).
Transferred Entities: those entities listed on Exhibit B hereto.
Transition Services Agreement: the agreement to be executed by
Seller and Buyer providing for certain transition services substantially
in the form of Exhibit F hereto.
Underlying Documents: as defined in Section 5.1.7(a).
WARN Act: Worker Adjustment and Retraining Notification Act of
1988.
Work: as defined in Section 5.1.8.
Year 2000 Compliance: as defined in Section 4.1.33.
11
<PAGE> 19
Year 2000 Project Plan: as defined in Section 4.1.33.
ARTICLE II.
PRE-CLOSING TRANSACTIONS; RECAPITALIZATION
2.1. Pre-Closing Transactions. Upon the terms and subject to the
conditions set forth in this Agreement, the parties agree that prior to the
consummation of the Closing, Parent and Seller shall take such actions and
undertake such transactions as they deem necessary or appropriate to cause
Holdco or a Subsidiary of Holdco to acquire all of the Assets as of the Closing,
free and clear of all liabilities and obligations other than the Assumed
Liabilities and Permitted Liens, in a manner mutually acceptable to Buyer and
Seller. Such actions and transactions shall be referred to herein as the
"Pre-Closing Transactions."
2.2. Assets. The term "Assets" shall mean all right, title and interest
of the Seller in and to all assets, real, personal and mixed, tangible and
intangible, other than the Excluded Assets, owned or leased and used by Seller
in the operation of the Business, whether carried on the books of Seller or not
carried on the books of Seller, due to expense, full depreciation or otherwise,
as the same may exist on the Closing Date, including, without limitation except
to the extent included in the Excluded Assets, those in the following categories
(collectively, the "Assets"):
(a) fee or leasehold title to all real property including,
without limitation, the real property described in SCHEDULES 4.1.18 and
4.1.19 hereto, together with all improvements, buildings and fixtures
located thereon or therein other than those improvements, buildings and
fixtures owned by third parties that have leased real property from
Seller pursuant to ground leases, and all rights and appurtenances
pertaining thereto and all construction in progress (collectively, the
"Real Property");
(b) all leased and owned tangible personal property, including
all equipment, furniture, furnishings, parts, machinery, fixtures,
computer equipment, tools, spare parts, motor vehicles and leasehold
improvements owned or leased by Seller and used in the Business
("Equipment"), as well as manufacturers' warranties associated with such
items;
(c) all inventories owned or leased by Seller and used in the
Business, including all inventories of supplies, drugs, food, janitorial
and office supplies and other disposables and consumables located at the
Facilities or purchased by Seller for use in the Business ("Inventory"),
as well as all manufacturer's and vendor's warranties associated with
such items;
(d) all accounts receivable and notes receivable arising out of
the operation of the Business ("Accounts Receivable");
(e) all claims and causes of action of Seller against third
parties and Seller's rights to offset amounts against claims and causes
of action made by third parties with respect to the Assets, Assumed
Liabilities or the operation of the Business, including, but not limited
to, all rights against suppliers under warranties covering any of the
Inventory
12
<PAGE> 20
or Equipment, and all rights against insurers arising out of the
insurance policies maintained by Seller or otherwise relating to the
Assets, Assumed Liabilities or operation of the Business;
(f) all rights to causes of action, lawsuits, judgments, claims
and demands of any nature available to or being pursued by the Seller
with respect to the Business or the ownership, use, function or value of
any Asset, whether arising by way of counterclaim or otherwise;
(g) all books and records and other documents (whether on
paper, computer diskette, tape or other storage media) associated with
the Assets or the Assumed Liabilities and used in the operation of the
Business, including, without limitation, all financial, patient, medical
staff and personnel records, property records, production records,
engineering records, environmental compliance records, purchase and sales
records, credit data, marketing, advertising and promotional materials,
payroll records, accounting records, fixed asset lists, supplier lists,
manuals, technical and repair data, correspondence, files and any similar
items ("Books and Records");
(h) All commitments, contracts, leases, and agreements in
respect of the Business, including, without limitation, Seller's provider
contracts with the Programs (collectively, the "Contracts");
(i) to the extent assignable, all licenses and permits relating
to the ownership, development and operations of the Assets and the
Business (including, without limitation, any pending or approved
Governmental Approvals regarding the Business) necessary, or required by
Applicable Laws, to own or lease and operate the Assets and to conduct
the Business as it is presently conducted by Seller;
(j) all Intellectual Property;
(k) all Hospital-based computer software, programs and similar
systems owned or licensed by Seller and used in the Business;
(l) the Interests;
(m) to the extent assignable, all prepaid expenses, deposits
and other similar items of Seller associated with the operation of the
Business;
(n) except those relating to Excluded Assets, all claims,
refunds and rebates and similar items with respect to the Assets;
(o) all stationery, forms, labels, shipping materials,
brochures, art work, photographs, advertising materials and any similar
items owned by Seller and used in the operation of the Business;
(p) all goodwill of the businesses evidenced by the Assets;
13
<PAGE> 21
(q) all insurance proceeds arising in connection with property
damage to the Assets occurring after the date hereof and on or prior the
Closing Date, to the extent not expended on the repair or restoration of
the Assets or required to be applied to amounts outstanding under the
Senior Bank Credit Facility pursuant to the terms thereof;
(r) the names, symbols and telephone numbers used with respect
to the operation of any of the Business, including, without limitation,
the names of any of the Facilities set forth on Exhibit A and the Related
Entities set forth on Exhibit C; and
(s) all of Seller's right, title and interest in and to all
other assets, property and rights owned or leased by Seller and used in
the Business, tangible and intangible, real, personal or mixed, wherever
located, whether or not carried at value or listed on the books and
records of Seller, and whether in the possession of Seller or others.
Subject to the terms and conditions hereof, prior to the Closing, the
Assets shall be transferred or otherwise conveyed to Holdco or a Subsidiary
thereof free and clear of any and all Liens other than the Permitted Liens.
2.3. Excluded Assets. The Seller will retain and not transfer, and
Holdco or a Subsidiary thereof will not purchase or acquire, the following
properties, assets and rights (collectively, the "Excluded Assets"):
(a) cash and cash equivalents;
(b) rights to settlements and retroactive adjustments, if any,
for cost reporting periods ending on or prior to the Closing Date arising
from or against the United States government under the terms of the
Programs;
(c) all Privileged Documents;
(d) all claims of Seller against third parties, and Seller's
rights to offset amounts against claims made by third parties, with
respect to any Excluded Liabilities;
(e) all proceeds, benefits, income or revenues accruing (and
any security or other deposits made) with respect to any of the Excluded
Assets;
(f) Seller's corporate minute books, minutes, tax records and
other records of Seller required to be maintained by Seller as a matter
of law (it being understood that patient medical records are not intended
to be excluded);
(g) the name "Paracelsus" and all variations thereof, all
trademarks and logos related thereto and all stationery, forms, labels,
brochures, advertising materials and similar items bearing any of the
foregoing;
(h) all intercompany accounts of Seller and its Affiliates;
(i) all commitments, contracts, leases, capital leases, notes,
and agreements between Seller and its Affiliates; and
14
<PAGE> 22
(j) all policies, procedures, internal controls and reporting
systems that have been developed and maintained by PHC at its principal
offices located in Houston, Texas;
(k) all computer hardware and software owned and licensed by
PHC and maintained and located at PHC's Houston data center;
(l) any interest in and to the "Paracelsus Pride" and "Service
Advantage" programs;
(m) all other assets located outside of the State of Utah other
than assets used primarily in the Business or located outside the State
of Utah on a temporary basis;
(n) the equity interest held by Seller in the entities set
forth on SCHEDULE 2.3(n); and
(o) the other assets set forth on SCHEDULE 2.3.
2.4. Assumption of Liabilities. Subject to the terms and conditions set
forth herein and except for the Excluded Liabilities, at the time of the
Pre-Closing Transactions, Seller shall cause Holdco or a Subsidiary thereof to
assume and agree to be responsible for and agree to discharge or otherwise
satisfy all liabilities, obligations and commitments of Seller of any nature,
whether known or unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, relating to or arising out of the operation of the
Business. Prior to the Closing, Holdco or a Subsidiary thereof shall assume the
liabilities described in this Section 2.4 (the "Assumed Liabilities") by
executing and delivering to Seller an assumption agreement in form and substance
satisfactory to Buyer and Seller (the "Assumption Agreement").
2.5. Excluded Liabilities. None of Holdco, any Subsidiary thereof or
Buyer have agreed to pay, shall be required to assume and shall have any
liability or obligation with respect to, any of the following liabilities or
obligations, direct or indirect, absolute or contingent, of Seller or the
Business (the "Excluded Liabilities"):
(a) liabilities or obligations of Seller in respect of periods
prior to Closing arising under the terms of the Programs, Blue Cross or
other third party payor programs, including, without limitation, any
retroactive denial of claims, civil monetary penalties or any gain on
sale that may be recognized under the Medicare or Medicaid program as a
result of the consummation of the transactions described herein;
(b) any cause of action or judicial or administrative action,
suit, proceeding or investigation, pending or threatened on or prior to
the Closing Date or relating to periods prior to the Closing Date
including, without limitation, those items listed on SCHEDULES 2.5(b) AND
4.1.6;
(c) any failure to comply with, or any violation of, any law,
rule, regulation, statute, ordinance, permit, judgment, injunction,
order, decree, license or other Governmental Approval applicable to the
Assets (other than Environmental Laws, which are addressed in subsections
(l) and (m) below), which failure or violation occurred on or prior to
the Closing Date;
15
<PAGE> 23
(d) any obligations of Seller under this Agreement and the
Collateral Agreements;
(e) any obligations or liabilities of Seller for expenses or
fees incident to or arising out of the negotiation, preparation, approval
or authorization of this Agreement and the other agreements contemplated
hereby or the consummation (or preparation for the consummation) of the
transactions contemplated hereby and thereby, including brokers',
attorneys' and accountants' fees;
(f) any obligation of Seller under provider contracts with the
Programs in respect of periods prior to and including the Closing Date;
(g) any obligation or liability of Seller or any of its
Affiliates with respect to any Tax (including any obligation or liability
pursuant to Treas. Reg. Section 1.1502-6 or any similar provision of
state, local, or foreign law or as a result of the election under Section
338(h)(10) of the Code, as contemplated by Section 5.4.1 of this
Agreement) relating to (i) any taxable period (or portion thereof) ending
on or prior to the Closing Date, other than Buyer's share of any Taxes
specifically required to be prorated pursuant to the terms of this
Agreement or any Collateral Agreement, (ii) the portion of a Straddle
Period (as defined in Section 5.4.5(a)), ending on the Closing Date (with
due regard being given to Sections 5.4.5(b) and (c)), but with respect to
liabilities imposed pursuant to Treas. Reg. Section 1.1502-6 or any
similar provision of state, local or foreign law, for the entire Straddle
Period, or (iii) the Seller's or its Affiliates' share of Taxes as set
forth in Section 5.4.2;
(h) all Benefit Liabilities except as specifically assumed in
Article VII hereof;
(i) liabilities or obligations arising at any time under any
Contract not assumed by Buyer except to the extent provided pursuant to
Section 2.6(c);
(j) liabilities or obligations attributable to any breach of or
default under any Contract by Seller prior to the Closing Date (whether
or not Buyer has assumed such Contract), which breach or default has not
been cured on or prior to the Closing Date;
(k) any obligation or liability asserted under any federal
Hill-Burton program or other restricted grant and loan programs with
respect to the ownership or operation of the Facilities;
(l) liabilities or obligations arising out of or relating to
(i) violations of Environmental Laws on or prior to the Closing Date by
Seller or any of its Affiliates relating to the Facilities or Real
Properties, (ii) Environmental Proceedings pending or threatened on or
prior to the Closing Date against Seller or any of its Affiliates
relating to the Facilities or Real Properties or (iii) the Cleanup of
Hazardous Substances Released, disposed of or discharged by Seller or any
of its Affiliates; (A) on, beneath or adjacent to any of the Real
Properties prior to or on the Closing Date; or (B) at any other location
if such substances were generated, used, stored, treated, transported or
Released by or on behalf of a Facility prior to or on the Closing Date;
16
<PAGE> 24
(m) liabilities or obligations arising out of or relating to
(i) violations of Environmental Laws on or prior to the Closing Date by
Persons other than Seller or any of its Affiliates relating to the
Facilities or Real Properties, (ii) Environmental Proceedings pending or
threatened on or prior to the Closing Date against Persons other than
Seller or any of its Affiliates relating to the Facilities or Real
Properties or (iii) the Cleanup of Hazardous Substances Released,
disposed of or discharged by Persons other than Seller or any of its
Affiliates; (A) on, beneath or adjacent to any of the Real Properties
prior to or on the Closing Date; or (B) at any other location if such
substances were generated, used, stored, treated, transported or Released
by or on behalf of a Facility prior to or on the Closing Date;
(n) liabilities or obligations arising out of or relating to
the entities set forth on SCHEDULE 2.3(n); or
(o) liabilities or obligations of Parent, Seller or any of
their Affiliates that do not arise out of or relate to the Business.
2.6. Consent of Third Parties.
(a) Notwithstanding anything to the contrary in this Agreement,
this Agreement shall not constitute an agreement to assign or transfer
any Governmental Approval, Environmental Permit, instrument, contract,
lease, permit or other agreement or arrangement or any claim, right or
benefit arising thereunder or resulting therefrom if an assignment or
transfer or an attempt to make such an assignment or transfer without the
Consent of a third party would constitute a breach or violation thereof;
and any transfer or assignment to the Buyer by the Seller of any interest
under any such instrument, contract, lease, license, permit or other
agreement or arrangement that requires the Consent of a third party shall
be made subject to such Consent or approval being obtained. The Seller
shall use its Best Efforts to obtain any such Consent or approval prior
to the Closing Date. In the event any such Consent or approval is not
obtained on or prior to the Closing Date, the Seller shall continue to
use its Best Efforts to obtain any such approval or consent after the
Closing Date until such Consent or approval has been obtained.
Notwithstanding anything contained herein to the contrary, the failure to
obtain such a Consent or approval despite otherwise complying with the
terms of this Section 2.6 shall not constitute a breach hereof or a
default hereunder.
(b) If any such Consent is not obtained by Seller prior to the
Closing, until such Consent is obtained, Seller shall use its Best
Efforts, at Seller's sole cost and expense, to (i) provide Holdco or its
Subsidiaries the benefits of any Governmental Approval, Environmental
Permit or Contract to which such Consent relates, (ii) cooperate in any
reasonable and lawful arrangement designed to provide such benefits to
Holdco or its Subsidiaries, without incurring any financial obligation to
Holdco or its Subsidiaries, and (iii) enforce for the account and benefit
of Holdco or its Subsidiaries any and all rights of Seller arising from
such Governmental Approval, Environmental Permit or Contract against such
issuer thereof and all other parties thereto (including the right to
elect to terminate in accordance with the terms thereof on the advice of
Holdco). Notwithstanding the foregoing, no action taken pursuant to this
Section 2.6 shall be deemed to satisfy the conditions set forth in
Sections 6.1.3 or 6.2.6 hereof.
17
<PAGE> 25
(c) To the extent that Holdco or its Subsidiaries are provided
the benefits pursuant to Section 2.6(b) of any Governmental Approval,
Environmental Permit or Contract, Holdco or such Subsidiaries shall
perform, on behalf of Seller, for the benefit of the issuer thereof and
all other parties thereto, the obligations of Seller thereunder or in
connection therewith, but only to the extent that (i) such action by
Holdco or such Subsidiaries would not result in any material default
thereunder or in connection therewith and (ii) such obligation would have
been an Assumed Liability but for the non-assignability or
non-transferability thereof.
ARTICLE III.
THE CLOSING
3.1. Closing. Upon the terms and subject to the conditions set forth in
this Agreement, the parties agree to complete the transactions set forth on
SCHEDULE 3.1 hereto (the "Recapitalization Transactions"), and the closing of
the Recapitalization Transactions and the other transactions contemplated hereby
(the "Closing") that have not been consummated prior to such time shall take
place at 10:00 A.M. local time on the 15th day of October, 1999 AT THE OFFICES
OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, 919 THIRD AVENUE, NEW YORK, NY
10022, or at such other time and place upon which the parties may agree (the
"Closing Date"); provided, however, that the parties shall pre-close the
transactions contemplated hereby within two business days of the Closing at THE
OFFICES OF MAYOR, DAY, CALDWELL & KEETON, L.L.P., 700 LOUISIANA, 19TH FLOOR,
HOUSTON, TEXAS 77002. The Closing shall be effective as of 11:59 P.M. local time
on the Closing Date (the "Effective Time"). If the conditions set forth in
Article VI have not been satisfied prior to October 15, 1999, the Closing Date
shall be on the third business day after the last of such conditions have been
satisfied; provided that the Closing Date shall not be later than November 30,
1999.
3.2. Buyer's Delivery of the Transaction Consideration.
Buyer agrees to deliver or cause to be delivered the Transaction
Consideration in accordance with SCHEDULE 3.1.
3.3. Closing Deliveries.
3.3.1. Seller Deliveries. Seller and Parent shall deliver the
following documents, as applicable, duly executed and delivered to the
Buyer at the Closing, each in form and substance reasonably satisfactory
to Buyer's counsel:
(a) bills of sale, assignment and general conveyance, with
respect to the transfer of Assets to Holdco or a Subsidiary
thereof (other than any Asset to be transferred pursuant to any of
the instruments referred to in any other clause of this Section
3.3.1);
(b) assignments of all Contracts, Permits and any other
agreements and instruments constituting Assets, assigning to
Holdco or a Subsidiary thereof, all of Seller's right, title and
interest therein and thereto, with any required Consent endorsed
thereon;
18
<PAGE> 26
(c) a special warranty deed, with covenants against
grantor's acts, or its equivalent, with respect to each parcel of
Owned Real Property in form and substance reasonably satisfactory
to Buyer and Seller, conveying fee simple title to the Owned Real
Property to Holdco or a Subsidiary thereof, together with any
necessary transfer declarations, or other filings;
(d) assignments and assumptions of the Leases conveying
leasehold title to Holdco or a Subsidiary thereof, subject to the
Permitted Liens, together with any necessary transfer declarations
or other filings;
(e) an assignment of names and Intellectual Property, in
recordable form;
(f) certificates representing the Interests, duly endorsed
or accompanied by stock powers duly executed in blank, with
appropriate stock transfer tax stamps, if any, affixed, or any
other documents that are necessary to transfer good and valid
title to the Interests to Holdco;
(g) the compliance certificate referred to in Section 6.2.1
hereof;
(h) each of the Collateral Agreements to which Seller or
Parent is a party;
(i) the Books and Records;
(j) certified copies of resolutions duly adopted by each
Seller's and Parent's board of directors authorizing the
execution, delivery and performance of this Agreement and the
other agreements contemplated hereby as applicable;
(k) certified copies of each Seller's and Parent's
certificate of incorporation and bylaws;
(l) a certificate of the Secretary or an Assistant
Secretary of each Seller and Parent as to the incumbency of the
officer(s) of such Seller and Parent executing this Agreement and
the Collateral Agreements;
(m) resignations of the directors and officers of the
Transferred Entities that are designated by Seller effective as of
the Closing;
(n) a short-form certificate of good standing of each
Seller and Parent;
(o) a legal opinion from counsel to Seller and Parent
reflecting the matters specified in Exhibit G hereto;
(p) evidence of the release of the liens attributable to
the Seller Indebtedness;
(q) the FIRPTA Affidavit as provided for in Section 6.2.7;
19
<PAGE> 27
(r) estoppel certificates from the landlords under the
material Leases;
(s) copies of the material Consents referred to in Section
6.2.6 hereof; and
(t) such other documents, certificates and instruments (i)
to be delivered to Buyer as contemplated by this Agreement or the
Collateral Agreements or (ii) as Buyer reasonably deems necessary
to effect the transfer of the Assets to Holdco or a Subsidiary
thereof as contemplated hereby.
3.3.2. Buyer Deliveries. Buyer shall deliver or cause to be
delivered the following to Seller at Closing, each in form and substance
reasonably satisfactory to Seller:
(a) an aggregate amount equal to the Cash Purchase Price by
wire transfer in immediately available funds to the bank account
or accounts designated by Parent in writing at least two business
days prior to the Closing Date;
(b) certified copies of resolutions duly adopted by Buyer's
board of managers authorizing the execution, delivery and
performance of this Agreement and the other agreements
contemplated hereby;
(c) certified copies of Buyer's certificate of formation
and limited liability company agreement;
(d) a certificate of the Secretary or an Assistant
Secretary of Buyer as to the incumbency of the officer(s) of Buyer
executing this Agreement and the Collateral Agreements;
(e) a short-form certificate of good standing of Buyer;
(f) the Assumption Agreement;
(g) each of the Collateral Agreements to which Buyer is a
party; and
(h) such other payments, documents, certificates and
instruments to be delivered to Seller as contemplated by this
Agreement and the Collateral Agreements.
3.4. Post-Closing Adjustments to Cash Purchase Price.
(a) The Cash Purchase Price shall be adjusted following the
Closing as follows (as so adjusted, the "Adjusted Cash Purchase Price"):
(i) As soon as practicable, but in no event later than 60
days after the Closing Date, Seller shall deliver to Buyer a
statement (the "Statement") setting forth Seller's determination
of Seller's Net Working Capital as of the Closing
20
<PAGE> 28
Date (the "Closing Net Working Capital"), and setting forth in
reasonable detail Seller's calculation thereof. The Statement
shall be prepared in accordance with GAAP, consistently applied in
accordance with Seller's historical financial statements.
(ii) Buyer and its accountants shall have 60 days following
receipt by Buyer of the Statement during which to review the
Statement and any related work papers prepared in connection with
the calculation of Closing Net Working Capital and to dispute any
item contained in the Statement. If Buyer fails to notify Seller
of any such dispute within such 60-day period, the Statement shall
be the "Final Settlement." If Buyer timely notifies Seller of any
such dispute, and Seller and Buyer cannot resolve any such dispute
within 20 days of receipt by Seller of such notice, such dispute
shall be resolved by Ernst & Young, LLP, or if such accounting
firm is unable to so act, by a nationally recognized accounting
firm selected by Ernst & Young (the accounting firm so engaged
shall hereinafter be referred to as the "Independent Accounting
Firm"); the determination of the Independent Accounting Firm shall
be made as promptly as practicable (but no later than 165 days
after the Closing Date) and shall be final and binding on both
Buyer and Seller. Any expenses relating to engagement of the
Independent Accounting Firm shall be shared equally by Buyer and
Seller. In the event of a dispute, the Statement, as modified by
resolution by Buyer and Seller, or by the Independent Accounting
Firm, shall be the "Final Settlement."
(iii) The Adjusted Cash Purchase Price shall be equal to
the Cash Purchase Price, increased or decreased, as the case may
be, as follows: The Cash Purchase Price shall be (i) reduced by
the amount, if any, by which the Closing Net Working Capital is
less than the Pre-Closing Net Working Capital or (ii) increased by
the amount, if any, by which the Closing Net Working Capital is
greater than the Pre-Closing Net Working Capital.
(b) Notwithstanding the foregoing, the Cash Purchase Price
shall not be reduced or increased if the aggregate difference between (i)
the Closing Net Working Capital and the Pre-Closing Net Working Capital
is less than $250,000, whether positive or negative. To the extent that
the Cash Purchase Price is reduced as contemplated hereby, PHC shall pay
such amount to Holdco or, to the extent that the Cash Purchase Price is
increased as contemplated hereby, Holdco shall pay such amount to PHC, in
either case, within five (5) days of the final determination of such
amount together with interest thereon at the prime rate as then in effect
at Citibank (the "Applicable Rate") calculated on the basis of the number
of days elapsed from the Closing Date to the date of the payment, by wire
transfer of immediately available funds to an account designated by
Holdco or PHC, as applicable.
(c) The Parties agree that Seller shall be responsible for
Expansion Costs incurred prior to the date hereof (regardless of whether
or not such Expansion Costs have been paid on or prior to the date
hereof) and (assuming the Closing occurs) Buyer shall be responsible for
Expansion Costs incurred during the period of time from the date hereof
through the Closing Date (the "Pre-Closing Period") and thereafter.
Accordingly,
21
<PAGE> 29
the Cash Purchase Price shall be increased by an amount equal to the
Expansion Costs incurred and paid by Seller during the Pre-Closing Period
("Buyer's Pre-Closing Expansion Costs") in accordance with the provisions
of this Section 3.4(c). At least three (3) business days prior to the
Closing Date, Seller shall deliver to Buyer the Pro-Rated Draw Request,
any subsequent Draw Requests and all Contractors' Interim Invoices which
have been paid by Seller (collectively, the "Expansion Costs Invoices"),
copies of which may have previously been provided to Buyer pursuant to
the provisions of Section 5.1.8 hereof. Upon receipt of the Expansion
Costs Invoices, Buyer shall have the right to review any item contained
therein, and Buyer and Seller shall use Best Efforts to resolve any
dispute with respect thereto at or prior to the Closing. At the Closing,
Holdco shall pay to Seller by wire transfer of immediately available
funds to an account designated by Parent, an amount equal to Buyer's
Pre-Closing Expansion Costs as set forth in the Expansion Costs Invoices,
or as otherwise agreed to by Buyer and Seller, plus interest on any
amounts reflected in the Expansion Costs Invoices as Buyer's Pre-Closing
Expansion Costs which Seller has actually paid during the Pre-Closing
Period to third parties, at the Applicable Rate on the basis of the
number of days elapsed from the date of such payment by Seller of Buyer's
Pre-Closing Expansion Costs to the Closing Date. All Draw Requests and
Contractors Interim Invoices, in each case for the Pre-Closing Period,
which have not been paid by Seller as of the Closing Date shall be
assumed by Holdco as part of the Assumed Liabilities.
(d) The Cash Purchase Price shall be decreased by an amount
equal to any insurance proceeds arising in connection with damage to the
Assets and received by Seller during the Pre-Closing Period that are
applied by Seller to amounts outstanding under the Senior Bank Credit
Facility pursuant to the terms thereof.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Seller. Each Seller jointly
and severally represents and warrants to Buyer as follows:
4.1.1. Authorization, etc. Each Seller has the corporate power and
authority to execute and deliver this Agreement and each of the
Collateral Agreements to which it will be a party, to perform fully its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each
Seller of this Agreement, and the consummation of the transactions
contemplated hereby, have been, and on the Closing Date the execution and
delivery by each Seller of each of the Collateral Agreements and the
consummation of the transactions contemplated thereby will have been,
duly authorized by all requisite corporate action of each Seller. Each
Seller has duly executed and delivered this Agreement and on the Closing
Date each Seller will have duly executed and delivered each of its
respective Collateral Agreements. This Agreement is, and on the Closing
Date each of the Collateral Agreements to which each Seller is a party
will be, legal, valid and binding obligations of each Seller, enforceable
against such Seller in accordance with their respective terms except that
(a) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or
22
<PAGE> 30
hereafter in effect, relating to or limiting creditors' rights generally
and (b) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
4.1.2. Corporate Status. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified or licensed to do
business and is in good standing in each of the jurisdictions in which
the ownership of its Assets or the operation of the Business makes such
qualification or licensing necessary, except to the extent that any
failure to be so licensed or qualified would not result in a Material
Adverse Effect. Each Seller has all requisite corporate power and
authority to own, lease and operate the Assets and to conduct the
Business as it is now being conducted.
4.1.3. No Conflicts, etc. The execution, delivery and performance
by each Seller of this Agreement and each of the Collateral Agreements,
and the consummation of the transactions contemplated hereby and thereby,
do not and will not (a) conflict with or result in a violation of or a
default under (i) any Applicable Law applicable to such Seller, the
Business or the Assets, or (ii) the certificate of incorporation or
bylaws or other organizational documents of such Seller, or (b) except as
set forth in SCHEDULE 4.1.3, conflict with, or result in any material
violation of or constitute a material default (or an event or condition
which, with notice or lapse of time or both, would constitute a material
default) under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any
liability or obligation pursuant to, or result in the creation or
imposition of any Lien (as hereinafter defined) under, any Material
Contract. Except as set forth in SCHEDULE 4.1.11, no material Consent of
any Governmental Authority is required to be obtained or made by or with
respect to Seller in connection with the execution and delivery of this
Agreement or the Collateral Agreements, or the consummation by Seller of
the transactions contemplated hereby or thereby, or the conduct of the
Business by Buyer after the Closing, other than compliance with the
filings under the HSR Act.
4.1.4. Seller Financial Statements. Seller has delivered to Buyer
(i) the unaudited balance sheet of each Seller dated at December 31,
1998, 1997 and 1996 and the related unaudited statements of income of
such Seller for each such year then ended used in preparing the audited
consolidated financial statements of Parent and its consolidated
subsidiaries for the years ended December 31, 1998, 1997 and 1996 and
(ii) the unaudited balance sheet of each Seller at June 30, 1999 (the
"Seller Financial Statements Date") and the related unaudited statements
of income for the six months then ended (together, the "Seller Financial
Statements"). The Seller Financial Statements were prepared in accordance
with GAAP consistently applied and fairly present in all material
respects the financial position and results of operations of the
respective Sellers at their respective dates, subject in the case of
unaudited interim financial statements to normal year end adjustments and
the absence of explanatory footnote disclosure required by GAAP.
4.1.5. Absence of Changes. Except as set forth in SCHEDULE 4.1.5,
since the Seller Financial Statements Date through the date hereof,
Seller has conducted the Business only
23
<PAGE> 31
in the ordinary course consistent with prior practice and has not, on
behalf of, in connection with or relating to the Business or the Assets:
(a) suffered any event or change which individually or in
the aggregate, has had or would reasonably be expected to result
in a Material Adverse Effect;
(b) taken any action which, if taken after the execution
and delivery of this Agreement, would constitute a breach or
violation of Section 5.1.1 hereof; or
(c) entered into any contract, agreement or arrangement
with respect to any of the foregoing.
4.1.6. Litigation. Except as set forth on SCHEDULE 4.1.6, there is
no action, claim, suit, investigation or proceeding material to the
Business ("Litigation") pending, or to Seller's knowledge threatened,
against or relating to Seller in connection with the Assets, the Assumed
Liabilities, or the Business or against or relating to the transactions
contemplated by this Agreement at law or in equity or before any
Governmental Authority or arbitration tribunal by any private party or
any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign. Seller is not in default with respect to any judgment, order,
writ, injunction or decree material to the Business and served upon it of
any court or of any Governmental Authority. The Privileged Documents do
not contain any information with respect to any pending, threatened or
possible cause of action or judicial or administrative action, suit,
proceeding or investigation or any other facts or circumstances that are
reasonably likely to have a Material Adverse Effect.
4.1.7. Compliance with Laws. Except as disclosed in SCHEDULE
4.1.7, to Seller's knowledge, since August 16, 1996, Seller has complied
in all material respects, and is presently complying in all material
respects, with all Applicable Laws material to the operation of the
Business or the Assets, and Seller has not received any notice alleging
any violation of an Applicable Law material to the operation of the
Business or the Assets. Seller has not been indicted, convicted or, to
Seller's knowledge, subject to an investigation of the Office of
Inspector General of the Department of Health and Human Services (the
"OIG") or other applicable Governmental Authority, or received a notice
from the OIG or other applicable Governmental Authority, with respect to
a violation or an alleged violation of the Medicare and Medicaid fraud
and abuse provisions of the federal Social Security Act, and to Seller's
knowledge has not committed a violation of any of such provisions.
4.1.8. Government Program Participation. Each of the Facilities is
eligible to receive payment from the Programs and is a "provider" under
existing provider agreements with the Programs. Each of the Facilities is
in substantial compliance with the conditions of participation in the
Programs and has received all approvals or qualifications necessary for
reimbursement on the Assets. Except as set forth on SCHEDULE 4.1.8, there
is not pending, nor to Seller's knowledge threatened, any proceeding or
investigation under the Programs involving the Facilities or any of the
Assets.
24
<PAGE> 32
4.1.9. Cost Reports. All cost reports ("Cost Reports") required to
be filed by the Hospitals under the Programs, or any other Applicable
Laws, have been prepared and filed in accordance with such Applicable
Laws. Seller has made available to Buyer true and complete copies of the
Cost Reports relating to the Business which the Seller has filed with the
Programs for the last three (3) years, as well as all correspondence and
other documents relating to any disputes and/or settlements with the
Programs by the Seller within the last three (3) years; except as set
forth on SCHEDULE 4.1.9, Seller has paid all amounts which, to Seller's
knowledge, are owed to the Programs for periods ended prior to March 31,
1997. SCHEDULE 4.1.9 sets forth, for each of the Facilities, the years
for which Cost Reports remain to be settled. Except for disputes between
Seller and the intermediary which concern the payment of individual
claims (as opposed to a dispute concerning the right of Seller to receive
reimbursement generally or to participate in the Programs), and except as
set forth on SCHEDULE 4.1.9, to Seller's knowledge, there is no dispute
between Seller and any Governmental Authorities regarding such Cost
Reports other than with respect to adjustments thereto made in the
ordinary course of business.
4.1.10. JCAHO Accreditation. Each Hospital is duly accredited with
no contingencies (except as set forth in SCHEDULE 4.1.10), by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO") for the
period specified in SCHEDULE 4.1.10. Seller has made available to Buyer
copies of each Hospital's most recent JCAHO accreditation survey report
and deficiency list, if any and each Hospital's most recent Statement of
Deficiencies and Plan of Correction, if any.
4.1.11. Governmental Approval. SCHEDULE 4.1.11 sets forth all
Governmental Approvals that are material to the conduct of the Business.
SCHEDULE 4.1.11 includes a complete description of all licenses, permits,
franchises and certificates of need, if any, and their respective dates
of termination or renewal, owned or held by Seller that are material to
the ownership or operation of the Assets or the Business, together with
any formal and specific notices or directives received by Seller from the
agency responsible for such SCHEDULE 4.1.11 item, for which noncompliance
with such notice or directive would likely cause the revocation or
suspension for such item or a material fine or penalty. Except as set
forth in SCHEDULE 4.1.11, all such Governmental Approvals have been duly
obtained and are in full force and effect, and the Seller is in
compliance with each of such Governmental Approvals held by it with
respect to the Assets and the Business, except where non-compliance would
not result in damages in excess of $100,000. There is no claim, action,
suit, investigation or proceeding pending or, to the knowledge of Seller,
threatened regarding suspension or cancellation of any such Governmental
Approval. Except as set forth in SCHEDULE 4.1.11, none of such
Governmental Approvals will lapse, terminate or expire as a result of the
performance of this Agreement by Seller or the consummation of the
transactions contemplated hereby or by the Collateral Agreements.
4.1.12. Fraud and Abuse. To the knowledge of the Applicable
Executives, Seller has not engaged in any activities which are prohibited
under 42 U.S.C. Sections 1320a-7, 1320a-7a, 1320a-7b, 1395nn and 1396b,
the federal Civil False Claims Act (31 U.S.C. Section 3729 et seq.), the
federal TRICARE statute, or the regulations promulgated pursuant to such
statutes or related state or local statutes or regulations.
25
<PAGE> 33
4.1.13. Hill-Burton Loans. The Seller does not have any
outstanding obligation to repay any loans, grants, or loan guarantees, or
to provide uncompensated care in consideration thereof, pursuant to the
Hill-Burton Act (42 U.S.C. Section 291a et seq.)
4.1.14. Interests. Except as set forth on SCHEDULE 4.1.14, the
membership interests (the "LLC Interests") in each limited liability
company (an "LLC") set forth opposite the name of a Seller or Parent on
Exhibit B hereto are owned by such Seller and constitute, except as set
forth in SCHEDULE 4.1.14, all of its equity interests in such LLC. Such
Seller has good and valid title to the LLC Interests owned directly by
it, free and clear of all Liens other than Permitted Liens, and upon
delivery to Holdco or a Subsidiary thereof of an assignment of the LLC
Interests executed by Seller, good and valid title to the LLC Interests
will pass to Holdco or a Subsidiary thereof, free and clear of any Liens
other than Permitted Liens. Except as set forth on SCHEDULE 4.1.14,
neither such Seller or any other Person has any right to acquire any
additional membership or other equity interest in such LLC or any
securities convertible into membership or other equity interests in such
LLC. Except as set forth on SCHEDULE 4.1.14, there are no outstanding
options, rights, calls, commitments of any kind relating to, or any
presently effective voting trusts, agreements or understandings, with
respect to any of the LLC Interests which would prevent the assignment
and transfer of the LLC Interests as provided herein or restricting or
otherwise relating to the voting, dividend rights or disposition of the
LLC Interests. All of the LLC Interests are validly issued and
outstanding, fully paid and nonassessable. The LLC Interests have not
been issued in violation of, and are not subject to, any preemptive,
subscription or similar rights. No LLC owns, directly or indirectly, any
capital stock or other equity interest in or of any corporation,
partnership, joint venture or other entity. Except as set forth on
SCHEDULE 4.1.14, each such Seller is, and at all times from the date
hereof to the transfer to Holdco or a Subsidiary thereof will be, the
sole record and beneficial owner of the LLC Interests set forth opposite
its name on Exhibit B, free and clear of any lien, charge, security
interest, encumbrance or claim other than Permitted Liens.
4.1.15. Assets. Except as disclosed in SCHEDULE 4.1.15, Seller
has, and on the Closing Date, Holdco or Subsidiaries thereof will have,
good and valid title to the Assets owned by it, other than the Real
Property (which is addressed in Section 4.1.18) and valid leasehold
interests in, or other rights to use, all of the Assets not owned by
Seller, whether or not such Assets are reflected on the December 31, 1998
balance sheet, included in the Seller's Financial Statements or
thereafter acquired, in each case, free and clear of any and all Liens
other than Permitted Liens. Except as set forth on SCHEDULE 4.1.15, as of
the date hereof and as of the Closing Date, all Equipment material to the
conduct of the Business will be in substantially the same operating
condition, reasonable wear and tear excepted, as existed on the Seller
Financial Statements Date. The Assets comprise all assets, properties,
licenses, rights and agreements (i) in each case, being used in the
conduct of the Business on the date hereof and (ii) required for the
conduct of the Business by Seller as now being conducted, except for the
Excluded Assets.
26
<PAGE> 34
4.1.16. Material Contracts.
(a) SCHEDULE 4.1.16 contains a complete and correct list of
all Material Contracts. "Material Contracts" shall mean those
Contracts relating to the Business to which a Seller is a party or
by which a Seller or the Assets are bound, other than any Leases
or any contract, agreement or commitment that (i) by its terms,
terminates, or may be terminated by the Seller unconditionally and
without penalty within one year of the Closing Date and is in an
amount less than $100,000; (ii) relates to the Seller
Indebtedness; or (iii) is set forth on SCHEDULES 4.1.18 and 4.1.19
hereto. Notwithstanding the foregoing, each of the following
Contracts is a "Material Contract" and is set forth on SCHEDULE
4.1.16: (i) collective bargaining agreements and other contracts
with any labor union; (ii) agreements including covenants which
restrict the Business' rights to compete; (iii) consent decrees of
Governmental Authorities to which the Assets or the Facilities are
bound; (iv) employment agreements and severance agreements,
including severance arrangements included in Seller's policies
applicable to employees generally; (v) other than the Contracts
relating to the Seller Indebtedness, any Contract under which
Seller has borrowed or loaned money in excess of $100,000, or any
mortgage, note, bond, indenture or other evidence of indebtedness
(excluding advances, deposits or similar obligations) or any
guarantee of indebtedness; or (vi) joint ventures or similar
agreements.
(b) There does not exist under any Material Contract any
material event of default or event or condition that, after notice
or lapse of time or both, would constitute a material violation,
breach or event of default thereunder on the part of Seller or, to
Seller's knowledge, any other party thereto except as set forth in
SCHEDULE 4.1.16. Except as set forth in SCHEDULE 4.1.16, no
consent of any third party is required under any Material Contract
as a result of or in connection with the execution, delivery and
performance of this Agreement or the consummation of the
transactions contemplated hereby. Each Material Contract is in
full force and effect and is the valid and binding obligation of
Seller and, to the knowledge of Seller, of each other party
thereto. Seller has made available to Buyer copies of all Material
Contracts. Except as set forth in SCHEDULE 4.1.16 the consummation
of the transactions contemplated by this Agreement will not result
in any Material Contract failing to remain in full force and
effect (without imposition of any material restriction, adverse
condition, limitation, cost or penalty to Seller, Buyer or the
Business). Except as set forth on SCHEDULE 4.1.16, Seller has
satisfied all of its material obligations under the Material
Contracts to the extent that such obligations can be determined as
of the date of this Agreement and Seller will continue to satisfy
all such obligations pursuant to such Material Contracts through
the Closing Date.
4.1.17. Intellectual Property. SCHEDULE 4.1.17 contains a complete
and correct list of Intellectual Property material to the operation of
the Business (the "Material Intellectual Property"). Seller owns or has
the right to use pursuant to license, sublicense, agreement or permission
all Material Intellectual Property. Except as set forth in SCHEDULE
4.1.17, Seller is the sole and exclusive owner of the Material
Intellectual
27
<PAGE> 35
Property for which it is identified as the owner thereof on SCHEDULE
4.1.17, and is listed in the records of the appropriate agency as the
sole and exclusive owner of record for each such registration, grant and
application listed thereon. Except as set forth in SCHEDULE 4.1.17,
Seller has the full right to use (without payment) the Material
Intellectual Property in the conduct of the Business, as currently
conducted. Except as set forth in SCHEDULE 4.1.17, no claims have been
asserted or, to the knowledge of Seller, threatened, nor has Seller
received notice of any such claim that (i) the operations of the Business
infringe upon or conflict with the rights of any other Person in respect
of any Material Intellectual Property or (ii) any Material Intellectual
Property or the use by the Business of any Material Intellectual Property
is invalid or unenforceable. To the knowledge of Seller, no Person is
presently infringing or, since January 1, 1997, has infringed upon
Seller's rights in respect of the Material Intellectual Property.
4.1.18. Owned Real Property. SCHEDULE 4.1.18 contains a complete
and correct list of the Owned Real Property setting forth the address of
each parcel of Owned Real Property including, without limitation, the
properties reflected as being so owned on the Seller Financial Statements
and not disposed of after the Seller Financial Statements Date in the
ordinary course of business and in accordance with the terms of this
Agreement. Seller has, and on the Closing Date, Holdco or a Subsidiary
thereof will have, good and valid fee title to the Owned Real Property
free and clear of all Liens other than Permitted Liens. All of the
buildings, structures and material appurtenances owned by Seller and
situated on the Owned Real Property are in substantially good operating
condition, and substantially in a state of good maintenance and repair,
subject to ordinary wear and tear. The Owned Real Property has adequate
rights of ingress and egress for operation of the Business in the
ordinary course. Except as disclosed on SCHEDULE 4.1.18, no condemnation
or similar proceeding is pending or, to the best knowledge of Seller,
threatened, with respect to the Owned Real Property. Except for Owned
Real Property subject to any of the Leases, Seller is not obligated under
any option, right of first refusal or other contractual right to sell,
lease or otherwise dispose of any Owned Real Property.
4.1.19. Leases. SCHEDULE 4.1.19 contains a complete and correct
list of all Leases to which a Seller is a party setting forth the
address, landlord and tenant for each Lease. Seller has made available to
the Buyer true, correct and complete copies of the Leases. Except as
disclosed on SCHEDULE 4.1.19, no event has occurred and is continuing
that constitutes or, with notice or the passage of time or both, would
constitute a material default, violation or breach by Seller in any
respect under any Lease. Except as disclosed on SCHEDULE 4.1.19, to the
best knowledge of Seller, all of the buildings, structures and material
appurtenances situated on the Leased Real Property are in reasonably good
operating condition, and in a state of good maintenance and repair,
subject to ordinary wear and tear. The Leased Real Property has adequate
rights of ingress and egress for operation of the Business in the
ordinary course. Except as disclosed on SCHEDULE 4.1.19, to the best
knowledge of Seller, no condemnation or similar proceeding is pending or
threatened with respect to the Leased Real Property. Except as set forth
in SCHEDULE 4.1.19, no Consent of any third party is required under any
Lease as a result of or in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. Each Lease is in full force and effect and is the
valid and binding obligation of Seller and, to the knowledge of Seller,
of
28
<PAGE> 36
each other party thereto. Except as set forth on SCHEDULE 4.1.19, Seller
has not assigned its interest under any such Lease, sublet any interest
in any Leased Real Property or pledged its interest therein. Except as
set forth in SCHEDULE 4.1.19 the consummation of the transactions
contemplated by this Agreement will not result in any Lease failing to
remain in full force and effect (without imposition of any material
restriction, adverse condition, limitation, cost or penalty to Seller,
Buyer or the Business). Except as set forth in SCHEDULE 4.1.19, Seller
has satisfied all of its material obligations under the Leases to the
extent that such obligations can be determined as of the date of this
Agreement and Seller will continue to satisfy all such obligations
pursuant to such Leases through the Closing Date.
4.1.20. Environmental Matters. Except as set forth in SCHEDULE
4.1.20 (i) to Seller's knowledge, the Facilities are in compliance in all
material respects with Environmental Laws; (ii) Seller has obtained all
material Environmental Permits necessary for the operation of the
Facilities, and all such Environmental Permits are in full force and
effect; (iii) Seller is in compliance with all such Environmental
Permits, except for noncompliance, individually or in the aggregate, that
does not have a Material Adverse Effect; (iv) there are no pending or, to
the best knowledge of Seller, threatened Environmental Proceedings; (v)
Seller has not generated, handled, stored, disposed of or released any
Hazardous Substances on any of the Owned Real Property or Leased Real
Property other than in compliance, in all material respects, with
applicable Environmental Laws; (vi) there have been no Releases of
Hazardous Substances by Seller on or underneath any of the Owned Real
Property or Leased Real Property, except pursuant to and in material
compliance with an Environmental Permit; (vii) there are not now and to
Seller's knowledge there never have been any underground storage tanks,
PCBs or asbestos located on the Owned Real Property or on the Pioneer
Valley Real Property or the Leased Real Property set forth on SCHEDULE
4.1.20(a) hereto except as allowed by and in material compliance with all
applicable Environmental Permits and Environmental Laws; and (viii)
Seller has not received any written communication, whether from a
Governmental Authority, citizens group, employee or otherwise, that
alleges that Seller is not in full compliance with Environmental Laws.
There is no Environmental Proceeding pending or to the knowledge of
Seller, threatened against Seller or with respect to the Assets. Seller
has made available to Buyer all environmental reports and studies
relating to the Assets, the Facilities or the Real Property of which
Seller is aware and of which Seller has possession (the "Environmental
Reports"). Notwithstanding anything in this Agreement to the contrary,
this Section 4.1.20 sets forth the exclusive representations and
warranties of Seller to Buyer with respect to environmental matters of
any kind or nature whatsoever. The inclusion of any item disclosed in
SCHEDULE 4.1.20 does not constitute an admission by any Party that any
matters disclosed in such Schedule constitute a violation of any
Environmental Law.
4.1.21. Employment Relations. Except as set forth on SCHEDULE
4.1.21, (a) no Seller is now engaging or has since August 16, 1996
engaged in any unfair labor practice involving the Business that could
reasonably be expected to result in a material liability to the Business,
(b) no Seller has been notified of any material grievance involving an
employee of the Business, (c) no Seller is a party to any collective
bargaining agreement involving the Business and no such collective
bargaining agreement is currently being
29
<PAGE> 37
negotiated by any Seller, (d) there is no labor strike, slowdown or work
stoppage pending or, to the knowledge of Seller, threatened against
Seller relating to the Business, and (e) to the knowledge of Seller,
there have been no union-organizing efforts relating to the Business.
Seller has not received written notice of the intent of any federal,
state or local agency responsible for the enforcement of labor or
employment laws to conduct an investigation of or relating to Seller or
the Business, and no such investigation is in progress except, in each
case, for investigations in the ordinary course of business.
4.1.22. Employee Benefit Plans.
(a) SCHEDULE 4.1.22(a) contains a true and complete list of
each deferred compensation and each bonus or other incentive
compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each
severance or termination pay, medical, surgical, hospitalization,
life insurance and other "welfare" plan, fund or program (within
the meaning of section 3(1) of "ERISA"); each profit-sharing,
stock bonus or other "pension" plan, fund or program (within the
meaning of section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be
contributed to by any Seller or by any trade or business, whether
or not incorporated (an "ERISA Affiliate"), that together with any
Seller would be deemed a "single employer" within the meaning of
section 4001(b) of ERISA, or to which any Seller or an ERISA
Affiliate is party, whether written or oral, for the benefit of
any employee or former employee of the Business (the "Employee
Benefit Plans").
(b) With respect to each Employee Benefit Plan, Seller has
heretofore delivered or made available to Buyer true and complete
copies of each of the plan and all related documents, including
annual reports, Summary Plan Descriptions, trust agreements and
the most recent determination letter received from the Internal
Revenue Service with respect to each Employee Benefit Plan
intended to qualify under section 401 of the Code.
(c) No Employee Benefit Plan is subject to Title IV of
ERISA, and no liability under Title IV or section 302 of ERISA has
been incurred by the Seller or any ERISA Affiliate that has not
been satisfied in full. Insofar as the representation made in this
Section (c) applies to sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to
which the Company or any ERISA Affiliate made, or was required to
make, contributions during the five (5)-year period ending on the
last day of the most recent plan year ended prior to the Closing
Date.
(d) All contributions required to be made with respect to
any Employee Benefit Plan on or prior to the Closing Date have
been timely made or are reflected on the Seller Financial
Statements.
30
<PAGE> 38
(e) Except as set forth in SCHEDULE 4.1.22(e), each
Employee Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable law,
including, but not limited to, ERISA and the Code.
(f) Except as set forth in SCHEDULE 4.1.22(f), each
Employee Benefit Plan intended to be "qualified" within the
meaning of section 401(a) of the Code is so qualified and the
trusts maintained thereunder are exempt from taxation under
section 501(a) of the Code.
(g) No Employee Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not
insured) for employees or former employees of the Business for
periods extending beyond their retirement or other termination of
service, other than coverage mandated by applicable law.
(h) No amounts payable under the Employee Benefit Plans
will fail to be deductible for federal income tax purposes by
virtue of section 162(a)(1), 162(m) or 280G of the Code.
(i) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee or
officer of Seller or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due
any such employee or officer.
(j) There are no pending, threatened or anticipated claims
by or on behalf of any Employee Benefit Plan, by any employee or
beneficiary covered under any such Employee Benefit Plan, or
otherwise involving any such Employee Benefit Plan (other than
routine claims for benefits).
(k) Except as set forth in SCHEDULE 4.1.22(k), (i) since
the enactment of the WARN Act, Seller has not effectuated a "plant
closing" or a "mass layoff" (as such terms are defined in the WARN
Act); (ii) Seller has not effected any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign law or
regulation; and (iii) none of Seller's employees has suffered an
"employment loss" (as defined in the WARN Act) during the 90-day
period prior to the date of this Agreement.
4.1.23. Accounts Receivable. Except as set forth on SCHEDULE
4.1.23, the Accounts Receivable on the Seller Financial Statements and
all Accounts Receivable that exist as of the Closing Date constitute
valid claims arising from bona fide transactions in the ordinary course
of business, and are collectible, net of any reserves for bad debt and
31
<PAGE> 39
contractual allowances (which reserves and allowances are determined in
accordance with GAAP as applied by Seller, consistent with past
practice).
4.1.24. Insurance. Seller has made available to Buyer or its
representatives copies of, and SCHEDULE 4.1.24 lists, all insurance
policies that Seller maintains with respect to the Business and the
Assets or on the employees of the Business. In Seller's judgment, such
policies, with respect to their amounts and types of coverage, are
adequate to insure against risks to which Seller and its property and the
Assets are normally exposed in the operation of the Business, subject to
customary deductibles and policy limits. All such policies are in full
force and effect. Except as set forth in SCHEDULE 4.1.24, there are no
pending, nor to the knowledge of Seller, threatened disputes relating to
coverage or other disputed claims under any of the foregoing insurance
policies and there are no pending defaults and Seller has received no
notices of cancellation of such policies.
4.1.25. Taxes. For purposes of this Section 4.1.25 and Section
5.4, (i) "Transferors" shall mean PHC Holdings, PHC - Salt Lake, PHC -
Jordan, Paracelsus Davis, Paracelsus-PHC, Paracelsus Pioneer, PHC Utah,
Clinicare and PVHP (each a "Transferor"); (ii) "Transferred Corporation"
shall mean Holdco; (iii) "Other LLC Entities" shall mean SouthRidge
Professional Plaza, LLC, and Davis Surgical Center, LLC, (each an "Other
LLC Entity"). (Sandy City ASC, LLC, and Other LLC Entities are sometimes
collectively referred to in this 4.1.25 and Section 5.1.4 as the "LLC
Entities." Except as set forth on SCHEDULE 4.1.25:
(a) All Tax Returns required to be filed by or on behalf of
the Transferors, the Transferred Corporation or Sandy City ASC,
LLC on or before the Closing Date have been (or will be as of the
Closing Date) timely filed. All such Tax Returns are (or will be
as of the Closing Date) true, correct and complete in all
respects. None of the Transferors, the Transferred Corporation or
Sandy City ASC, LLC is at present the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever
been made by a Taxing Authority in a jurisdiction where the
Transferors, the Transferred Corporation or Sandy City ASC, LLC do
not file Tax Returns to the effect that any Transferor, the
Transferred Corporation or Sandy City ASC, LLC is or may be
subject to Taxes imposed by that jurisdiction. None of the
Transferors, the Transferred Corporation or Sandy City ASC, LLC is
required to file any state Tax Returns other than in those states
set forth in SCHEDULE 4.1.25.
(b) Each Transferor, the Transferred Corporation and Sandy
City, ASC, LLC have timely paid or will pay prior to the Closing
Date all Taxes due from it. Each Transferor, the Transferred
Corporation and Sandy City, ASC, LLC have established (and until
the Closing will establish) on their books and records reserves
that are adequate for the payment of all Taxes not yet due or
payable.
(c) There are no Liens for Taxes upon the assets,
properties or business of any Transferor, the Transferred
Corporation or Sandy City ASC, LLC. No facts exist which would
reasonably be expected to result in the assessment of
32
<PAGE> 40
any liability for Taxes by any Taxing Authority against any
Transferor, the Transferred Corporation or Sandy City ASC, LLC.
(d) Prior to the date of this Agreement, Parent has
provided Buyer with written schedules of (i) the taxable years of
the Transferors, the Transferred Corporation, Sandy City ASC, LLC
and, to Parent's knowledge, Other LLC Entities for which any
statute of limitations with respect to any Tax has not expired and
(ii) with respect to U.S. federal income Taxes, for all taxable
years of the Transferors, the Transferred Corporation, Sandy City
ASC, LLC, and, to Parent's knowledge, Other LLC Entities for which
the statutes of limitations have not yet expired, those years for
which examinations have been completed, those years for which
examinations are presently being conducted and those years for
which examinations have not yet been initiated. No deficiency or
material adjustment to taxable income or deductions for any Taxes
has been proposed, asserted, or assessed against the Transferors,
the Transferred Corporation, Sandy City ASC, LLC or, to Parent's
knowledge, Other LLC Entities which has not been resolved and paid
in full and no issue has been raised by a Taxing Authority in any
such examination which reasonably would be expected to result in a
proposed deficiency, penalty or interest for any other period.
There are no outstanding waivers or comparable consents regarding
the application of any statute of limitations with respect to any
Taxes or Tax Returns of the Transferors, the Transferred
Corporation, Sandy City ASC, LLC or, to Parent's knowledge, any
Other LLC Entities, and no power of attorney with respect to the
Transferors, any Transferred Corporation, Sandy City ASC, LLC or,
to Parent's knowledge, any Other LLC Entity has been granted which
currently remains in force.
(e) Parent has delivered to Buyer correct and complete
copies of all Tax Returns, examination reports, and statement of
deficiencies assessed against or agreed to with respect to the
Transferred Corporation, Sandy City ASC, LLC and, to Parent's
knowledge, Other LLC Entities.
(f) Neither the Transferors, the Transferred Corporation,
Sandy City ASC, LLC, or to Parent's knowledge, the Other LLC
Entities, nor any of their respective representatives has received
notice or is otherwise aware of any pending audit or other
proceeding by any federal, state, local or foreign court,
governmental, regulatory, administrative or similar authority with
respect to any Taxes or Tax Returns.
(g) Neither Sandy City ASC, LLC nor, to Parent's knowledge,
any of the Other LLC Entities is a party to, is bound by, or has
any obligation under, any Tax allocation, sharing agreement or
similar contract or arrangement. The Transferred Corporation will
have no liability under any Tax allocation, sharing agreement or
similar contract or arrangement. None of the Transferors, the
Transferred Corporation, Sandy City ASC, LLC or, to Parent's
knowledge, the Other LLC Entities have any liability for the Taxes
of any Person (other than the Parent and its Subsidiaries) as a
transferee or successor or otherwise (including
33
<PAGE> 41
under Treas. Reg. Section 1.1502-6 or any similar provision of
state, local or foreign law).
(h) None of the Transferors, the Transferred Corporation,
or, to Parent's knowledge, the LLC Entities have failed to
withhold and pay over to the appropriate Taxing Authority all
Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(i) The Transferred Corporation has not filed a consent
under Section 341(f) of the Code concerning collapsible
corporations.
(j) No Transferor or Transferred Corporation has been a
member of an affiliated group, within the meaning of Section
1504(a) of the Code, filing a consolidated federal income Tax
Return (other than a group the common parent of which is Parent).
(k) Neither Parent nor its Affiliates have ever been the
Tax Matters Partner as defined in Section 6231(a)(7) of the Code
with respect to the Other LLC Entities.
(l) Parent or its Affiliates have paid all Taxes due with
respect to any ownership interest of Parent or its Affiliate in
the in the LLC Entities.
(m) Seller believes that neither the Pre-Closing
Transactions nor any transactions contemplated in this Agreement
will terminate one or more of the LLC Entities under Section 708
of the Code. Prior to Seller or any of its Affiliates transferring
interests in an LLC Entity, Seller shall confirm that such
transfer will not terminate the LLC Entity under Section 708. If a
transfer contemplated by this Agreement would terminate an LLC
Entity, either (i) Seller shall obtain the consent of (A) Buyer
and (B) any Members of the affected LLC Entity whose consent is
required under the LLC's operating agreement to the termination of
the LLC under Section 708 or (ii) the portion of the LLC Entity
Interest which may be transferred without causing a termination
shall be transferred immediately and Seller or its Affiliates
shall enter into an agreement to sell the balance of the interest
to Holdco no more than 13 months from the date of the initial
transfer. In the event (ii) applies, the Transaction Consideration
shall be reduced by the amount to be paid by Holdco for the
balance of the LLC Entity Interest.
4.1.26. Affiliate Transactions. SCHEDULE 4.1.26 sets forth a true,
correct and complete description of all material Affiliate Transactions.
Except as set forth in SCHEDULE 4.1.26, each of the Affiliate
Transactions will terminate at or prior to the Closing without any
payment by or liability to the Business or relating to any Asset.
4.1.27. Brokers, Finders, etc. Other than Chase Securities Inc. no
agent, broker, Person or firm acting on behalf of Seller or any of its
Affiliates is, or will be, entitled to
34
<PAGE> 42
any fee, commission or broker's or finder's fees in connection with this
Agreement or any of the transactions contemplated hereby.
4.1.28. Disclosure. No representation or warranty by Seller
contained in this Agreement or any Collateral Agreement, and no
information contained in any certificate delivered by Seller pursuant to
this Agreement or any Collateral Agreement, contains any untrue statement
of a material fact or omits to state any material fact necessary in order
to make the statements contained herein or therein not misleading.
4.1.29. Solvency. Except as set forth on SCHEDULE 4.1.29, no
Seller is, nor after Closing as result of the transactions contemplated
hereby will be, rendered insolvent or otherwise unable to pay its debts
as they become due. No Seller has any intention of filing in any court
pursuant to any statute either of the United States or of any state, a
petition in bankruptcy or insolvency or for reorganization under
bankruptcy laws or for the appointment of a receiver or trustee of all or
any portion of such Seller's property; and, to Seller's knowledge, no
other Person has filed or threatened to file such a petition against any
Seller.
4.1.30. Disclaimer of Warranties. EXCEPT FOR THE WARRANTIES AND
REPRESENTATIONS EXPRESSLY SET FORTH HEREIN, THE ASSETS WILL BE
TRANSFERRED BY SELLER TO HOLDCO OR A SUBSIDIARY THEREOF IN THEIR
CONDITION AT CLOSING, "AS IS", WITH NO WARRANTY OF HABITABILITY OR
FITNESS FOR HABITATION, WITH RESPECT TO THE REAL PROPERTY, AND WITH NO
OTHER WARRANTIES, INCLUDING THE WARRANTIES OF SUITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
OTHER ASSETS, ANY AND ALL OF WHICH WARRANTIES (WHETHER EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE) SELLER HEREBY DISCLAIMS.
4.1.31. Absence of Undisclosed Liabilities. Except for liabilities
and obligations (i) set forth in SCHEDULE 4.1.31, (ii) reflected in the
Seller Financial Statements or (iii) incurred in the ordinary course of
business consistent with past practice, Seller does not have any material
liabilities or obligations of any nature, direct or indirect, whether
accrued, fixed, contingent or otherwise, relating to the Business. This
Section 4.1.31 shall not be deemed to apply to any obligations or
liabilities of the types that (i) are covered by any other
representations and warranties under this Section 4.1 and (ii) are either
(a) disclosed in the Schedules or (b) are specifically excluded or
excepted from the terms of such representations and warranties under the
express language of such representations and warranties or by reason of
qualifications of such representations and warranties relating to
materiality, Seller's knowledge or other specific qualifications set
forth therein.
4.1.32. Inventory. The inventory with respect to each Facility is,
and at Closing will be, maintained in all material respects in such
quality and quantities as is consistent with such Facility's historical
practices.
4.1.33. Year 2000 Compliance. Seller has provided Buyer with
copies of Parent's Year 2000 Project Plan and the weekly progress reports
the "Progress Reports" under the
35
<PAGE> 43
Year 2000 Project Plan prepared as of the date hereof, and has provided
Buyer with access to all supplementary material and documentation with
respect at the steps taken to cause the Business and the Facilities to be
in Year 2000 Compliance. The Year 2000 Project Plan and the Progress
Reports accurately set forth (i) the steps to implement the Deliverables
(ii) the actions completed by Seller as of the date of this Agreement to
implement the Deliverables, which actions are set forth on SCHEDULE
4.1.33 and (iii) those remaining actions identified in the Year 2000
Project Plan to implement the Deliverables which have not been completed
as of the date of this Agreement. Seller believes that upon completion of
such remaining patient critical and operations critical actions as set
forth in and in accordance with the Year 2000 Project Plan, that the
systems described in the Year 2000 Project Plan will function in Year
2000 Compliance in all material respects. For purposes of this Agreement,
"Year 2000 Compliance" means that such systems will operate without
resulting in material disruption to the operation of the Facilities or
material liability to the Business as a result of errors relating to the
processing of date data in connection with the year change from December
31, 1999 to January 1, 2000, provided that such systems are used with
accurate date and other data.
4.1.34. Holdco Capitalization. The authorized capital stock of
Holdco consists of 1000 shares of no par value common stock ("Holdco
Common Stock"), all of which are issued and outstanding as of the date
hereof (the "Shares") and are owned by PHC Holdings, and all of which
will be issued and outstanding and owned by PHC Holdings immediately
prior to consummation of the transactions contemplated by SCHEDULE 3.1.
There are no outstanding options, rights, calls or commitments of any
kind relating to, or any presently effective agreements or
understandings, with respect to, the Shares which would affect or prevent
the transfer of the Shares contemplated by SCHEDULE 3.1 or restricting or
otherwise relating to the voting, dividend rights or disposition of the
Shares. All of the Shares are validly issued and outstanding, fully paid
and nonassessable. None of the Shares have been issued in violation of,
and are not subject to, any preemptive, subscription or similar rights.
Neither Parent, nor Seller nor any other Person (other than Buyer) has
any right to acquire any additional shares of Holdco Common Stock or any
securities convertible or exchangeable into Holdco Common Stock. Except
as set forth on SCHEDULE 4.1.34, Holdco does not own any capital stock or
other equity interest in or of any corporation, partnership, joint
venture or other entity. PHC Holdings is, and at all times from the date
hereof until immediately prior to the consummation of the transactions
contemplated by SCHEDULE 3.1 will be, the sole record and beneficial
owner of the Shares, free and clear of all Liens, other than Permitted
Liens. Upon delivery by Buyer of the Transaction Consideration in
accordance with such SCHEDULE 3.1, and upon delivery to Buyer of a
certificate or certificates representing the shares of Holdco Common
Stock to be issued to Buyer at the Closing in accordance with SCHEDULE
3.1, such shares of Holdco Common Stock will be duly authorized and
validly issued, fully paid and non-assessable.
4.1.35. Holdco Information. Seller has made available to Buyer or
its representatives all material agreements and instruments that relate
to Holdco, its assets, business or operations as well as any documents
executed in connection with the transactions set forth on SCHEDULE 3.1
hereto. Except for the Assets being acquired in connection with the
consummation of the transactions set forth on SCHEDULE 3.1, and except as
set forth on SCHEDULE 4.1.35, Holdco does not own any assets and has not
since
36
<PAGE> 44
January 1, 1997 entered into any agreements or been bound by or a party
to any agreements under which it has any obligations in excess of
$10,000.
4.2. Representations and Warranties of the Buyer. Buyer represents and
warrants to Seller as follows:
4.2.1. Corporate Status; Authorization, etc. Buyer is a limited
liability company duly formed, validly existing and in good standing
under the laws of the jurisdiction of its organization with full power
and authority to execute and deliver this Agreement and the Collateral
Agreements to which it is a party, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Buyer of this Agreement, and the
consummation of the transactions contemplated hereby, have been, and on
the Closing Date the execution and delivery by Buyer of the Collateral
Agreements to which it is a party will have been, duly authorized by all
requisite corporate action of Buyer. Buyer has duly executed and
delivered this Agreement and on the Closing Date Buyer will have duly
executed and delivered the Collateral Agreements to which it is a party.
This Agreement is, and on the Closing Date each of the Collateral
Agreements to which Buyer is a party will be, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms except that (a) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.2.2. No Conflicts, etc. The execution, delivery and performance
by Buyer of this Agreement and each of the Collateral Agreements to which
it is a party, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (a) conflict with or result in a
violation of or a default under (i) the organizational documents of
Buyer, or (ii) any Applicable Law applicable to Buyer or any of its
properties or assets, or (b) except as set forth in SCHEDULE 4.2.2,
conflict with, or result in any violation of or constitute a default (or
an event or condition which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or
accelerate the performance required by, or cause the acceleration of the
maturity of any liability or obligation pursuant to, or result in the
creation or imposition of any Lien under, any contract, agreement or
other instrument applicable to Buyer or any of its properties or assets,
except, in the case of clause (ii), for violations and defaults that,
individually and in the aggregate, have not and will not materially
impair the ability of Buyer to perform its obligations under this
Agreement or under any of the Collateral Agreements to which it is a
party. Except as specified in SCHEDULE 4.2.2, no Governmental Approval or
other Consent is required to be obtained or made by Buyer in connection
with the execution and delivery of this Agreement or the Collateral
Agreements or the consummation of the transactions contemplated hereby
and thereby. Except as set forth in SCHEDULE 4.2.2, no material Consent
of any Governmental Authority is required to be obtained or made by or
with respect to Buyer in connection with the execution and delivery of
this Agreement or the Collateral Agreements, the consummation by Buyer of
the transactions contemplated hereby or thereby, other than compliance
with and filings under the HSR Act.
37
<PAGE> 45
4.2.3. Litigation. Except as set forth on SCHEDULE 4.2.3, there is
no action, claim, suit, investigation or proceeding material to Buyer
pending, or to Buyer's knowledge threatened, against or relating to Buyer
or against or relating to the transactions contemplated by this Agreement
at law or in equity or before any Governmental Authority that is
reasonably likely to have a Material Adverse Effect.
4.2.4. Financial Capability. Prior to the execution of this
Agreement, Buyer executed a commitment letter dated August 11, 1999 with
The Bank of Nova Scotia (the "Commitment Letter"), complete and current
copies of which have been furnished to Seller.
4.2.5. No Current Operations. Buyer does not currently own or
operate an acute care hospital in the geographic area encompassing the
Salt Lake City - Ogden Metropolitan Statistical Area (encompassing the
three contiguous counties in Northern Utah of Weber County, Davis County
and Salt Lake County).
4.2.6. No Brokers. No agent, broker, Person or firm acting on
behalf of Buyer is, or will be, entitled to any fee, commission or
broker's or finder's fees in connection with this Agreement or any of the
transactions contemplated hereby.
4.2.7. Disclosure. No representation or warranty by Buyer
contained in this Agreement or any Collateral Agreement, and no
information contained in any certificate delivered by Buyer pursuant to
this Agreement or any Collateral Agreement, and no information contained
in any certificate delivered by Buyer pursuant to this Agreement or any
Collateral Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading.
4.2.8. Solvency. Buyer is not, nor after Closing as result of the
transactions contemplated hereby will be, rendered insolvent or otherwise
unable to pay its debts as they become due. Buyer has no intention of
filing in any court pursuant to any statute either of the United States
or of any state, a petition in bankruptcy or insolvency or for
reorganization under bankruptcy laws or for the appointment of a receiver
or trustee of all or any portion of Buyer's property; and, to Buyer's
knowledge, no other Person has filed or threatened to file such a
petition against Buyer.
4.3. Representations and Warranties of Parent. Each Parent jointly and
severally represents and warrants to Buyer as follows:
4.3.1. Authorization, etc. Each Parent has the corporate power and
authority to execute and deliver this Agreement and each of the
Collateral Agreements to which it will be a party, to perform fully its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each
Parent of this Agreement, and the consummation of the transactions
contemplated hereby, have been, and on the Closing Date the execution and
delivery by each Parent of each of the Collateral Agreements and the
consummation of the transactions contemplated thereby will have been,
duly authorized by all requisite
38
<PAGE> 46
corporate action of each Parent. Each Parent has duly executed and
delivered this Agreement and on the Closing Date each Parent will have
duly executed and delivered each of the Collateral Agreements to which it
is a party. This Agreement is, and on the Closing Date each of the
Collateral Agreements to which each Parent is a party will be, legal,
valid and binding obligations of each Parent, enforceable against such
Parent in accordance with their respective terms except that (a) such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in
effect, relating to or limiting creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
4.3.2. Corporate Status. Each Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified or licensed to do
business and is in good standing in each of the jurisdictions in which
the ownership of its assets or the operation its business makes such
qualification or licensing necessary, except to the extent that any
failure to be so licensed or qualified would not result in a material
adverse effect on the operations of such Parent's business taken as a
whole.
4.3.3. No Conflicts, etc. The execution, delivery and performance
by each Parent of this Agreement and each of the Collateral Agreements,
and the consummation of the transactions contemplated hereby and thereby,
do not and will not (a) conflict with or result in a violation of or a
default under (i) any Applicable Law applicable to such Parent, or (ii)
the certificate of incorporation or bylaws or other organizational
documents of such Parent or (b) conflict with, or result in any material
violation of or constitute a material default (or an event or condition
which, with notice or lapse of time or both, would constitute a material
default) under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any
liability or obligation pursuant to, or result in the creation or
imposition of any Lien under, any material Contract to which such Parent
is a party or by which such Parent or its assets are bound or affected.
Except as set forth in SCHEDULE 4.1.11, no material Consent of any
Governmental Authority, or any third party is required to be obtained or
made by or with respect to Parent in connection with the execution and
delivery of this Agreement or the Collateral Agreements, or the
consummation by Parent of the transactions contemplated hereby or
thereby, or the conduct of the Business by Buyer after the Closing, other
than compliance with the filings under the HSR Act.
4.3.4. Fraud and Abuse. To the knowledge of the Applicable
Executives, Parent has not engaged in any activities with respect to the
Business which are prohibited under 42 U.S.C. Sections 1320a-7, 1320a-7a,
1320a-7b, 1395nn and 1396b, the federal Civil False Claims Act (31 U.S.C.
Section 3729 et seq.), the federal TRICARE statute, or the regulations
promulgated pursuant to such statutes or related state or local statutes
or regulations.
4.3.5. Solvency. Parent is not, nor after Closing as result of the
transactions contemplated hereby will be, rendered insolvent or otherwise
unable to pay its debts as they become due. Parent has no intention of
filing in any court pursuant to any statute
39
<PAGE> 47
either of the United States or of any state, a petition in bankruptcy or
insolvency or for reorganization under bankruptcy laws or for the
appointment of a receiver or trustee of all or any portion of Parent's
property; and, to Parent's knowledge, no other Person has filed or
threatened to file such a petition against Parent.
ARTICLE V.
COVENANTS
5.1. Covenants of Seller.
5.1.1. Conduct of Business. From the date hereof to the Closing
Date, except as expressly permitted or required by this Agreement or as
otherwise consented to by the Buyer, or as required to effect the
transactions set forth on SCHEDULE 3.1 hereto, Seller will use its Best
Efforts to carry on the Business in the ordinary course, in substantially
the same manner as heretofore conducted, and to preserve intact its
present business organization, its current relationships with customers,
suppliers and others having business dealings with it with respect to the
Business or the Assets. Without limiting the generality of the foregoing,
and, except as contemplated by this Agreement or as set forth on SCHEDULE
5.1.1, during the period from the date of this Agreement to the Closing
Date, without the prior written consent of Buyer, Seller will not, with
respect to the Business or the Assets:
(a) increase the rate of compensation of, or pay or agree
to pay any benefit to, its directors, officers or employees,
except in the ordinary course of business or as may be required by
any existing plan, agreement or arrangement;
(b) enter into, adopt or amend any Plan, or employment or
severance agreement, except in the ordinary course of business;
(c) (i) sell, lease, transfer, or otherwise dispose of any
of the Assets, other than in the ordinary course of business, or
(ii) mortgage or encumber any of the Assets which have an
aggregate book value in excess of $100,000;
(d) acquire or agree to acquire by merging or consolidating
with, or by purchasing the stock or a substantial portion of the
assets of, or by any other manner, any business or any
corporation, partnership, association or other business
organization, or division thereof or otherwise acquire or agree to
acquire any assets which are material individually, or in the
aggregate, to Seller, except to the extent any of the foregoing do
not relate to the Business;
(e) amend the certificate of incorporation, by-laws or
similar organizational documents of any of the Corporations, LLCs
or partnerships;
(f) modify, amend or terminate any Material Contract to be
assumed by Holdco or a Subsidiary thereof, pursuant to this
Agreement (except modifications or amendments associated with
renewals in the ordinary course of business consistent with past
practice);
40
<PAGE> 48
(g) enter into any Contract other than in the ordinary
course of business (i) obligating Seller or the Business to expend
more than $100,000 or (ii) relating to the Assets and extending
beyond the Closing Date;
(h) permit any change to any of the Assets (other than
normal wear and tear, depreciation or casualty or changes that
would not materially and adversely affect the conduct of the
Business) or enter into any agreement or commitment to sell to any
third party any of the Assets, other than transactions in the
ordinary course of business or that would not materially and
adversely affect the conduct of the Business, including, without
limitation, sales of obsolete Assets not currently used in the
conduct of the Business; or solicit any offers or proposals in
connection with the foregoing;
(i) (i) incur, assume or prepay any material indebtedness
or any other liabilities other than borrowings in connection with
the Seller Indebtedness or otherwise in the ordinary course of
business, consistent with past practice; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for any material obligations
of any other person other than in the ordinary course of business,
consistent with past practice; or (iii) make any material loans,
advances or capital contributions to, or investments in, any other
person; or
(j) agree, whether in writing or otherwise, to do any of
the foregoing.
5.1.2. Access and Information.
(a) From the date hereof to the Closing Date, Seller shall
afford to the officers and authorized representatives and agents of
Buyer, full access, during normal business hours, upon reasonable notice
and at such time(s) and in such manner as will not disrupt or adversely
affect the delivery of care to patients, to all documents, records, work
papers and information relating to the Assets and the Business (except
for Privileged Documents) and all facilities, offices and warehouses of
the Business as Buyer shall from time to time reasonably request. In
addition, Seller will permit Buyer's officers and authorized
representatives and agents reasonable access to such personnel of Seller
during normal business hours, upon reasonable notice and at such times
and in such manner as will not disrupt or adversely affect the delivery
of care to patients, as reasonably required by Buyer in its review of the
properties, assets and business affairs of the Business. Seller will keep
Buyer generally informed as to the affairs of the Business.
(b) Seller acknowledges that prior to the Closing, Buyer
intends to cause its accountants to conduct an audit of the Business.
Seller agrees to cooperate with such accountants to the extent reasonably
required by Buyer's accountants to effect such audit in a timely fashion,
including by providing management representation letters as may be
reasonably requested. Accordingly, Seller shall afford such accountants
full access, during normal business hours, upon reasonable notice and at
such time(s) and in such manner as will not disrupt or adversely affect
the delivery of care to patients, to all documents, records, work papers
and information relating to the Assets and the Business
41
<PAGE> 49
(except for Privileged Documents) and all Facilities, offices and
warehouses of the Business, as such accountants shall from time to time
reasonably request.
(c) Seller will cooperate with and provide such information and
assistance to Buyer as is reasonably requested in connection with
obtaining the financing contemplated by the Commitment Letter.
5.1.3. Further Assurances. Following the Closing, Seller shall
from time to time, at no additional expense to Seller, execute and
deliver such additional instruments, documents, conveyances or assurances
and take such other actions as shall be necessary, or otherwise
reasonably requested by Buyer, to confirm and assure the rights and
obligations provided for in this Agreement and in the Collateral
Agreements and render effective the consummation of the transactions
contemplated hereby and thereby.
5.1.4. Schedules. Seller may revise or supplement the Schedules at
any time on or prior to the Closing Date to reflect information that
either (i) existed on the date hereof and should have been included on
one or more Schedules but was not, or (ii) came into existence after the
date hereof and would have been required to be disclosed on one or more
Schedules if such information was in existence on the date hereof. Such
revisions and supplements, if any, shall not be deemed disclosed as of
the date hereof and shall not prohibit Buyer from relying on the
condition set forth in Section 6.2.1 hereof.
5.1.5. Purchasing Contract. For a period of one (1) year from and
after the Closing, Parent shall use its Best Efforts, and shall cause its
Affiliates to use their respective Best Efforts to, provide Holdco and
its Affiliates, for their use in connection with the Business, with
benefits under the Purchasing Contracts, as the same may be in effect
from time to time, in substantially the same manner as presently
provided, provided, however, that neither Parent nor its Affiliates shall
be required to take any action that could reasonably be expected to (i)
adversely affect their rights under any Purchasing Contract or their
relationship with the other parties to such contract, (ii) subject Parent
or its Affiliates to any liability or require them to make any payments
or (iii) otherwise significantly and adversely affect Parent or its
Affiliates.
5.1.6. Use of Names. At or prior to the Closing, Seller shall
cause an amendment to the certificate of incorporation or other
organizational documents of Seller to be filed with the Secretary of
State of the State of jurisdiction of its incorporation or formation, or
other appropriate official, changing its name or a name bearing no
resemblance to those set forth on SCHEDULE 5.1.6. At the Closing, Seller
will deliver to Holdco duplicate originals of such amendments, each duly
executed and suitable for filing, or file-stamped copies of such
amendments, if previously filed. After the Closing, neither Seller nor
any Affiliate of Seller shall use or permit any of its affiliates to use
the names set forth on SCHEDULE 5.1.6 or any variant or derivative
thereof.
5.1.7. Title and Survey Matters.
(a) Title Commitment. Prior to Closing, Seller shall cause to
be furnished to Buyer current title commitments (collectively, the "Title
Commitment") issued by
42
<PAGE> 50
Chicago Title (the "Title Company") to issue to Holdco, at or as soon as
possible after Closing, its ALTA Form B owner's title insurance policies
(for each of the Owned Real Property) and, at Buyer's election, its
leasehold title insurance policy for the Pioneer Valley Real Property,
without standard exceptions and, at Buyer's election, with normal
endorsements (including, without limitation, endorsements relating to
zoning, access, tax parcel, contiguity (if applicable and available),
survey and the owner's comprehensive endorsement), subject to all
Permitted Liens in an amount equal to the fair market value of each such
Owned Real Property or the leasehold value of the Pioneer Valley Real
Property as determined by Buyer. The Title Commitment will commit the
insurer to insure that, with respect to the Owned Real Property, the fee
simple title to such Owned Real Property is marketable and valid and
vested in Holdco, and, with respect to the Pioneer Valley Real Property,
that the leasehold estate is good and marketable subject to the terms and
conditions of the lease, and the lessor named in the lease was the owner
of such Pioneer Valley Real Property on the date of the signing of the
lease, subject, in each case, only to Permitted Liens. The Title
Commitments will be accompanied by readable copies of all documents cited
as exceptions to title therein (the "Underlying Documents"), which will
be certified by the Title Company as true, correct and complete copies of
the Underlying Documents. The cost of such title insurance (including
premiums) will be borne by Buyer. To the extent that reference is made in
the Title Commitment to any material exceptions ("additional exceptions")
other than the Permitted Liens, Buyer will have ten (10) days from the
later of (x) the date Seller delivers the Title Commitment to Buyer and
(y) the date Seller delivers the Survey to Buyer, to notify Seller in
writing of any material objections to such additional exceptions. If
notice of such objection is not given to Seller within such period, then
any objection to the additional exceptions shall be deemed to have been
waived by Buyer, and all those additional exceptions shall be Permitted
Liens. Seller shall have the right (including without limitation the
right to use all or any part of the Purchase Price for this purpose), but
not the obligation, up to and including the Closing to cure or remove any
objectionable exceptions, so that the Title Policies can be issued to
Buyer at the Closing at Buyer's expense without making exception to the
objectionable exceptions. If, at or prior to the Closing, Seller notifies
Buyer that Seller is unable or unwilling to cure or remove any such
objectionable exceptions, and if any such objectionable exception would
materially and adversely affect the conduct of the Business after the
Closing, then Buyer shall have the option of giving notice to Seller
within ten (10) days after receipt of Seller's notice or on the date of
the Closing, whichever date first occurs, either to terminate this
Agreement or to waive any such objections, in which case the
objectionable exceptions shall be Permitted Liens; and if no such notice
is given by Buyer, then Buyer will be deemed to have elected to waive any
such objections.
(b) Survey. As soon as reasonably practical after the date
hereof, but in no event less than twenty (20) days prior to Closing,
Seller shall deliver to Buyer surveys (collectively, the "Survey") of the
Owned Real Property and the Pioneer Valley Real Property acceptable to
the Title Company for purposes of deleting standard survey exceptions as
provided above and reflecting all improvements visible on the ground and
all easements, rights of way, means of ingress or egress encroachments
and drainage ditches, whether abutting or interior, of record or on the
grounds. The legal description of the Real Property set forth in the
title policies issued pursuant to the Title
43
<PAGE> 51
Commitments will conform to the legal descriptions set forth in any
surveys required under this Section. The expense of preparing any surveys
hereunder will be borne by Seller.
5.1.8. Expansion Project. Seller has construction work in progress
at Jordan Valley Hospital with a budgeted completion cost of $15,512,401
(the "Expansion Project"). Both Seller and Buyer wish for the work on the
Expansion Project to continue during the Pre-Closing Period. To this end,
Seller agrees, in all material respects and consistent with Seller's
practice prior to the date hereof with respect thereto, to (i) continue
to plan, design, construct, equip, obtain government approvals and
implement the Expansion Project consistent with its approved plans,
specifications, schedule and budget; (ii) discharge its obligations and
enforce its rights against the Contractors; (iii) pay all invoices and
other amounts owed to any Contractor or other party in order to fund the
costs and expenses of the Expansion Project, including, without
limitation, the cost of labor, materials, equipment, tools and services
(the "Work") provided by any Contractor (but excluding retainage under
each individual contract), in accordance with the terms and conditions of
such invoice or any contract relating to the Expansion Project, including
the Construction Agreement (the "Expansion Costs"); (iv) obtain from (a)
the Other Contractors, an invoice (a "Cut-Off Invoice") for all Expansion
Costs incurred for Work performed in connection with the Expansion
Project for the period between the date of the most recent invoice prior
to the date hereof and the date hereof and monthly invoices for work
performed in connection with the Expansion Project thereafter in the
ordinary course of business and (b) the General Contractor, all Draw
Requests in the ordinary course of business; (v) provide to Buyer as soon
as practicable after Sellers receipt thereof, copies of the Cut-Off
Invoices and a copy of the Draw Request for the calendar month during
which the date hereof occurs (the "Pro-Rated Draw Request") together with
a calculation of the pro-rated amount of the Pro-Rated Draw Request, if
applicable, representing the Expansion Costs for Work performed in
connection with the Expansion Project from and after the date hereof;
(vi) provide to Buyer monthly reports of the Expansion Costs throughout
the Pre-Closing Period (which reports shall be provided within three (3)
business days of the end of each calendar month and shall include, for
such month, (a) the Draw Request and (b) the Other Contractor's invoices
(collectively, the "Contractors' Interim Invoices"); and (vii) obtain
from Buyer the approval of any material changes in the scope or schedule
of the Expansion Project, or any material increase in the budgeted costs.
5.1.9. Year 2000 Project Plan. During the Pre-Closing Period
Seller will continue to take the steps set forth in the Year 2000 Project
Plan to implement the Deliverables in accordance with such Plan and
Seller's past practices with respect thereto, including the preparation
of Progress Reports. Seller will provide Buyer with copies of all
Progress Reports prepared during the Pre-Closing Period as they are
completed. On the Closing Date or as soon thereafter as practicable,
Seller will provide Buyer with an update of SCHEDULE 4.1.33 setting forth
the actions completed by Seller to implement the Deliverables as of the
Closing Date.
5.1.10. Bonuses. At or prior to the time of the final
determination of the Adjusted Cash Purchase Price pursuant to Section
3.4, Seller shall pay all amounts owing pursuant
44
<PAGE> 52
to bonus letters addressed to the individuals set forth on SCHEDULE
5.1.10 hereto in accordance with the terms of such letters.
5.2. Covenants of Buyer.
5.2.1. Further Assurances. Following the Closing, Buyer shall, and
shall cause its Affiliates to, from time to time, at no additional
expense to Buyer or such Affiliates, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably requested by
Seller, to confirm and assure the rights and obligations provided for in
this Agreement and in the Collateral Agreements and render effective the
consummation of the transactions contemplated hereby and thereby.
5.2.2. Post-Closing Access to Information. Buyer acknowledges that
subsequent to Closing, Seller may need access to information or documents
in the control or possession of Buyer (or its Affiliates) for the
purposes of concluding the transactions set forth herein, audits,
compliance with Applicable Laws and requirements of Governmental
Authorities, and the prosecution or defense of third party claims.
Accordingly, Buyer agrees that, after Closing, Buyer (and its Affiliates)
will, at the expense of the Seller and upon written request, make
available to agents, independent auditors and/or governmental agencies,
such documents and information as may be available relating to the Assets
for periods prior and subsequent to Closing to the extent necessary to
facilitate concluding the transactions set forth herein, audits,
compliance with Applicable Laws and requirements of Governmental
Authorities and the prosecution or defense of claims.
5.2.3. Preservation and Access to Patient Records After the
Closing. After the Closing, Buyer shall, in the ordinary course of
business and as required by law, keep and preserve all medical records
and other records of the Facilities existing as of the Closing Date.
Buyer acknowledges that as a result of entering into this Agreement and
its ownership of the Assets, it will gain access to patient and other
information which is subject to rules and regulations concerning
confidentiality. Buyer agrees to abide by any such rules and regulations
relating to the confidential information it acquires. Buyer agrees to
maintain the patient records delivered to Buyer at Closing at the
Facilities after Closing in accordance with applicable law (including, if
applicable, Section 1861(v)(i)(1) of the Social Security Act (42 U.S.C.
Section 1395(v)(1)(1)), and requirements of relevant insurance carriers.
Upon reasonable notice, during business hours, and upon receipt of
appropriate consents and authorizations, Buyer shall afford to the
representatives of Seller, including its counsel and accountants, full
and complete access to, and copies of, the records transferred to Buyer
at the Closing (including, without limitation, access to patient records
in respect of patients treated by Seller at the Facilities). In addition,
Seller shall be entitled to remove from the Facilities any such patient
records for purposes of pending litigation involving a patient to whom
such records refer, upon receipt of appropriate consents and
authorizations.
5.2.4. Confidentiality. With respect to Confidential Information
provided by either Seller or Buyer or their respective Affiliates in
connection with and relative to the transactions contemplated by this
Agreement, each Party hereto agrees to use Best Efforts
45
<PAGE> 53
to cause its officers, employees, representatives and agents to hold all
such Confidential Information in strict confidence and only to disclose
such Confidential Information to such duly authorized persons as are
necessary to effect the transactions contemplated hereby, and, if
requested, to return all originals and copies of any such written
Confidential Information to the other Party hereto or its Affiliates (as
applicable) in the event, for any reason, the transactions contemplated
hereby are not consummated. Nothing in this Section shall prohibit the
use of such Confidential Information for such governmental filings as are
required by law or governmental regulations or the disclosure of such
Confidential Information if such disclosure is compelled by judicial or
administrative process or, in the opinion of such disclosing Party's
counsel, other requirements of law. Each Party agrees that it will not
use, and will not knowingly permit others to use, any Confidential
Information in a manner detrimental to the Business, the other Party
hereto or to their competitive disadvantage. Each Party and its officers,
employees and agents recognize that any breach of this Section by a Party
would result in irreparable harm to the other Party and its Affiliates
and that therefore such other Party hereto shall be entitled to an
injunction to prohibit any such breach in addition to all of their other
legal and equitable remedies. For the purposes hereof, "Confidential
Information" shall mean all information of any kind concerning either
Seller or Buyer or their respective Affiliates obtained, directly or
indirectly, from the other Party hereto in connection with the
transactions contemplated by this Agreement except information (i)
ascertainable or obtained from public or published information, (ii)
received from a third party not under an obligation to keep such
information confidential, (iii) which is or becomes known to the public
(other than through a breach of this Agreement), or (iv) which was in
such Party's possession prior to disclosure thereof to such Party in
connection herewith.
5.2.5. Release of Letter of Credit. On or prior to Closing, Buyer
shall replace or otherwise cause the Letter of Credit to be terminated
and released and shall cause Seller to be fully released from all
liabilities and obligations with respect thereto.
5.2.6. Financing Commitment. Buyer will immediately provide Seller
with written notice of any amendments to or modifications of the terms
and conditions of the Commitment Letter and will promptly notify Seller
in writing of any fact or occurrence that might cause any conditions to
the financing provided for by the Commitment Letter not to be satisfied.
Buyer agrees that it will not agree to any amendments or modifications to
the Commitment Letter providing for an increase in the aggregate amount
of financing contemplated thereby to an amount exceeding $200,000,000
(the "Financing Ceiling") or to eliminate or reduce the equity investment
to be made in Buyer to an amount below $125,000,000 (the "Equity
Investment"). In the event that Buyer determines to pursue financing in
lieu of the financing contemplated by the Commitment Letter, Buyer agrees
that it will not seek financing with respect to the transactions
contemplated hereby that would exceed the Financing Ceiling or that would
permit Buyer to consummate the transactions contemplated hereby without
the Equity Investment having been made.
5.2.7. Return of Privileged Documents. In the event that Seller
inadvertently furnishes to Buyer any Privileged Documents, Buyer agrees
to use its Best Efforts to
46
<PAGE> 54
protect and preserve the privilege applicable to such Privileged
Documents at Seller's expense and to promptly return the same to Seller
immediately upon Seller's request.
5.2.8. Amendment to Holdco Certificate of Incorporation. At
Closing or within five (5) business days thereof, Buyer shall cause an
amendment to the Certificate of Incorporation of Holdco to be filed with
the Secretary of State of Utah changing the name of Holdco to a name that
bears no resemblance to "PHC" or "Paracelsus."
5.3. Additional Covenants.
5.3.1. Hart Scott Rodino. Each of Buyer and Seller will, within
five business days after executing this Agreement, prepare and file with
the FTC and the DOJ the premerger notification form required under the
HSR Act and a request for early termination of the waiting period. The
Parties will further (i) discuss with each other any comments the
reviewing Party may have; (ii) cooperate with each other in connection
with such filings, which cooperation will include, but not be limited to,
furnishing the other with such information or documents as may be
reasonably required in connection with such filings; (iii) promptly file
after any request by the FTC or the DOJ any appropriate information or
documents so requested by FTC or the DOJ; and (iv) notify each other of
any other communications with the FTC or the DOJ that relate to the
transactions contemplated by this Agreement and, to the extent
appropriate, permit the other to participate in any conferences with the
FTC or the DOJ. The Parties will use Best Efforts to accelerate and
obtain HSR Act clearance. Buyer and Seller will each pay one-half of the
filing fee required by the HSR Act. Each of Buyer and Seller will pay its
own expenses in connection with the preparation of the premerger
notification form. The Parties will each pay one-half of the fees of any
experts or advisers mutually retained to assist the parties to obtain HSR
Act clearance.
5.3.2. Other Government Consents. Promptly following the execution
of this Agreement, the Parties will proceed to prepare and file with the
appropriate Governmental Authority any requests for approval or waiver
(in addition to those specifically described above), if any, that are
required from any Governmental Authority which may be necessary or
appropriate or are reasonably deemed necessary or appropriate by a
Party's counsel in connection with the transactions contemplated by this
Agreement, including, without limitation, the consent of the FTC to the
transfer of SLRMC, and the Parties will diligently and expeditiously
prosecute and cooperate fully in the prosecution of such requests for
approval or waiver and all proceedings necessary to secure such approvals
and waivers. Each Party shall, in good faith, take all reasonable steps
that are within its power to cause to be satisfied the conditions
precedent to its obligations or other Parties' obligations to close that
are dependent upon its actions. Each Party shall cooperate fully with the
other Parties to provide such support, assistance and information to the
other Parties as may be reasonably requested by them in connection with
its applications for all necessary Consents by Governmental Authorities
and by private parties in connection with the transactions contemplated
hereunder and to consult regularly with the other Parties in the
preparation of any such applications or requests for consent. The Parties
shall pay any and all customary fees and charges in connection with the
foregoing. The Parties will use Best Efforts to obtain any Consents
47
<PAGE> 55
or Governmental Authorities required to be obtained in connection with
the transactions contemplated hereby.
5.3.3. Best Efforts; No Inconsistent Action. Subject to the terms
and conditions hereof, each Party will use its Best Efforts to effect the
transactions contemplated by this Agreement and to fulfill the conditions
to the obligations of the Parties hereto set forth in Article VI of this
Agreement. No Party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the
consummation of the transactions contemplated by this Agreement, except
that nothing in this Section 5.3.3 will limit the rights of the Parties
under Article VIII of this Agreement.
5.3.4. Press Releases. No press releases or other public
announcements concerning the transactions contemplated by this Agreement
may be made by any Party without the prior written consent of the other
Party, which consent will not be unreasonably withheld; provided,
however, that (i) Seller's consent shall not be required for Buyer to
include the Facilities (by Facility name) in payer provider directories
(both new and existing) and (ii) nothing in this provision will prevent a
Party from making such releases or announcements as are necessary for a
Party to satisfy its legal obligations or the requirements of the New
York Stock Exchange, but in any such case the affected Party will
promptly notify the other Party.
5.3.5. Stockholders Agreement. At Closing, Parent, Holdco, Buyer
and certain other investors in Holdco shall enter into a Stockholders
Agreement substantially on the terms specified in Exhibit F hereto.
5.3.6. Termination of Affiliate Transactions. Seller shall cause
all Affiliate Transactions, including, without limitation, those listed
in SCHEDULE 5.3.6 to be cancelled, terminated, waived and released at or
prior to the Closing without any consideration being paid or payable by
the Business in respect thereof, pursuant to appropriate agreements or
other instruments, in form and substance satisfactory to Buyer.
5.4. Tax Matters Covenants.
5.4.1. Code Section 338(h)(10) Election; Allocation of Transaction
Consideration. PHC and Buyer shall jointly make an election under Section
338(h)(10) of the Code (and any comparable provision of applicable state
or local income tax law) with respect to the purchase of the stock of
Holdco by Buyer (and, at Buyer's Option, with respect to those lower-tier
Subsidiaries of Holdco for which such an election may be made) and, as
soon as practicable after the Closing shall mutually prepare a Form 8023,
with all attachments (the "8023 Statement") and shall cooperate with each
other to take all actions necessary and appropriate (including filing
such additional forms, returns, elections, schedules and other documents
as may be required) to effect and preserve a timely election, in
accordance with the provisions of Treas. Reg. Section 1.338(h)(10)-1 (or
any comparable provisions of state or local tax law) or any successor
provisions (the "Election"). The Buyer shall make an allocation of that
portion of what it estimates will be the Modified ADSP (as defined in
Treas. Reg. Section 1.338(h)(10)) allocable to assets of Class I, II, and
III (as defined in Treas. Reg. Section 1.338(b)-2T) among the Assets and
among
48
<PAGE> 56
the properties of each subsidiary corporation for which an Election is
made that are Class I, II, or III assets (the "Initial Allocation"). The
Initial Allocation shall be submitted to PHC within 90 days of Closing.
If PHC agrees with the Initial Allocation (or fails to notify Buyer of
any disagreement within 30 days of receipt of the Initial Allocation)
such allocation shall be the basis for allocating the Modified ADSP once
the Adjusted Cash Purchase Price has been determined. If PHC disagrees
with the Initial Allocation, Buyer and PHC shall attempt to resolve their
differences during the 30 day period following PHC's giving notice of the
disagreement to Buyer. If the Parties are unable to resolve their
differences during such 30 day period, the differences shall be resolved
by a mutually agreed upon mediator within 180 days of Closing. If the
Parties are unable to agree on a mediator, it shall be a national
accounting firm mutually agreed upon by the independent accounting firms
which audit PHC and Buyer and the differences shall be resolved within
180 days of Closing. Nothing in this Section 5.4.1 shall prevent the
parties from agreeing to vary the timing requirements herein to make an
Election under any Applicable Law.
After the later of the determination of the Adjusted Cash Purchase
Price and the determination of Initial Allocation, but in no event later
than 70 days prior to the due date of the Form 8023, the Buyer shall
prepare, and submit to PHC, a draft of Form 8023 based upon the Initial
Allocation and the Adjusted Cash Purchase Price. If PHC accepts the draft
Form 8023 (or fails to notify Buyer of any disagreement within 15 days of
receipt of the draft Form 8023) such draft shall be the basis for the
Form 8023 filed with the IRS. If PHC disagrees with the draft Form 8023,
Buyer and PHC shall attempt to resolve their differences during the 15
day period following PHC's giving notice of the disagreement to Buyer. If
the Parties are unable to resolve their differences during such 15 day
period, the differences shall be resolved by a mutually agreed upon
mediator not later than 10 days prior to the due date of the Form 8023.
If the Parties are unable to agree on a mediator, it shall be a national
accounting firm mutually agreed upon by the independent accounting firms
which audit PHC and Buyer and the differences shall be resolved not later
than 10 days prior to the due date of the Form 8023.
5.4.2. Transferors' Taxes and Returns. Tax Returns and Taxes of
the Transferors will be the responsibility of Parent and the Transferors,
except that (i) Buyer shall pay any sales or use Taxes related to the
transfers of assets or property in connection with the Pre-Closing
Transactions and (ii) any other transfer or recordation taxes shall be
allocated between the Buyer and the Transferor in the manner customary in
the taxing jurisdiction.
5.4.3. PHC's Returns for Tax Periods Including the Closing Date.
PHC will include the income of the Transferred Corporation (including any
deferred income triggered into income by Treas. Reg. Section 1.1502-13
and Treas. Reg. Section 1.1502-14, any excess loss accounts taken into
income under Treas. Reg. Section 1.1502-19 and any income from the deemed
sale of assets pursuant to the Election) for the Transferred
Corporation's tax periods ending on and including the Closing Date on
PHC's consolidated federal and applicable state and local income Tax
Returns that include the Closing Date and pay any income Taxes
attributable to such income. Holdco and its Affiliates will furnish Tax
information to PHC for inclusion in such Tax Returns for the period which
includes the
49
<PAGE> 57
Closing Date in general accordance with the past custom and practice of
PHC and its Subsidiaries. PHC will allow the Buyer an opportunity to
review and comment upon such Tax Returns (including any amended returns)
to the extent that they relate to the Transferred Corporation. Except to
the extent consistent with past practice, or required by applicable law,
PHC and its Affiliates will take no position on such Tax Returns that
relates to the Transferred Corporation that would adversely affect the
Transferred Corporation after the Closing Date. The income of the
Transferred Corporation will be apportioned to the period up to and
including the Closing Date and the period after the Closing Date by
closing the books of the Transferred Corporation as of the end of the
Closing Date.
5.4.4. Tax Periods Ending on or Before the Closing Date. Parent
shall prepare or cause to be prepared and file or cause to be filed all
income Tax Returns for the Transferred Corporation for all periods ending
on or prior to the Closing Date which are due after the Closing Date.
Buyer shall provide (or shall cause its Subsidiaries to provide) (i)
cooperation in the preparation and filing of such Tax Returns, which
shall include reasonable access to the books and records of its
Subsidiaries, and (ii) such powers of attorney or other instruments as
are necessary to file such Tax Returns (including, if necessary, causing
an appropriate authorized officer of the Transferred Corporation to sign
the return). Parent shall reimburse Buyer for Taxes of the Transferred
Corporation with respect to such periods within fifteen (15) days after
payment by Buyer or its Affiliates to the extent such Taxes are not
reflected in Taxes payable (rather than in any general Tax reserve or any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the balance sheet as of
the Closing Date.
5.4.5. Tax Periods Beginning Before and Ending After the Closing
Date.
(a) Any Tax period of a Transferor or of a Transferred
Corporation that both begins before and ends after the Closing Date is
referred to in this Section 5.4 as a "Straddle Period."
(i) Buyer shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns due after the Closing Date with
respect to Straddle Periods of the Transferred Corporation and
shall provide Parent with adequate opportunity to review and
comment on such Tax Returns prior to their due date. Upon notice
from Buyer, the Parent shall pay to Buyer, prior to the due date
of any such Tax Returns, the portion of the Taxes due on such Tax
Returns that are attributable to the portion of the Straddle
Period ending on the Closing Date.
(ii) Parent shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns due on or before the Closing
Date with respect to Straddle Periods of the Transferred
Corporation and shall provide Buyer with adequate opportunity to
review and comment on such Tax Returns prior to their due date
(unless filed prior to the date of this Agreement). Upon notice
from Parent, the Buyer shall pay to Parent prior to the due date
of any such Tax Returns (or, if
50
<PAGE> 58
later, on the Closing Date), the portion of the Taxes due on such
Tax Returns that are attributable to the portion of the Straddle
Period following the Closing Date.
(iii) Buyer shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns due after the Closing Date
with respect to Straddle Periods of Transferors, other than PHC
Holdings, for Taxes not measured by income imposed with respect to
its Business or Assets and shall provide Parent with adequate
opportunity to review and comment on such Tax Returns prior to
their due date. Upon notice from Buyer, Parent shall pay to Buyer,
prior to the due date of any such Tax Returns, the portion of the
Taxes due on such Tax Returns that are attributable to the portion
of the Straddle Period ending on the Closing Date.
(iv) Parent shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns due on or before the Closing
Date with respect to Straddle Periods of the Transferors imposed
with respect to its Business or Assets and shall provide Buyer
with adequate opportunity to review and comment on such Tax
Returns prior to their due date (unless filed prior to the date of
this Agreement). Upon notice from Parent, the Buyer shall pay to
Parent prior to the due date of any such Tax Returns (of, if
later, on the Closing Date), the portion of the Taxes due on such
Tax Returns that are attributable to the portion of the Straddle
Period following the Closing Date.
(v) Parent shall prepare or cause to be prepared and file
or cause to be filed all income Tax Returns for the Transferors
with respect to Straddle Periods.
(b) Except as provided in the final sentence of this (b) of
Section 5.4, for purposes of Section 5.4.5(a) in the case of any sales
and use, income, gross receipts, franchise or similar taxes that are
imposed on a periodic basis and payable for a Straddle Period, the
portion of such Taxes attributable to the portion of the Straddle Period
ending on the Closing Date shall be deemed equal to the amount which
would be payable if the relevant Straddle Period ended on the Closing
Date. Any deductions, credits, or other items relating to a Straddle
Period shall be taken into account as though the relevant taxable period
ended on the Closing Date. All determinations necessary to give effect to
the foregoing allocations shall be made in a manner consistent with the
prior practice of Parent and its Affiliates. Notwithstanding the
preceding sentences of this (b), Taxes which are described in Section
5.4.2 and are reportable on a Tax Return described in (a) of this Section
5.4.5 shall (i) be treated as attributable to the portion of the Straddle
Period ending on the Closing Date to the extent they are the
responsibility of the Parent under Section 5.4.2 and (ii) not be treated
as attributable to the portion of the Straddle Period ending on the
Closing Date to the extent they are the responsibility of the Buyer under
Section 5.4.2.
(c) For purposes of Section 5.4.5(a), in the case of any Taxes
payable for a Straddle Period (other than those described in Section
5.4.5(b)) that are imposed on a periodic basis and with respect to the
business or assets of the Transferors or the Transferred Corporation, the
portion of such Taxes attributable to the portion of the
51
<PAGE> 59
Straddle Period ending on the Closing Date shall be deemed equal to the
amount of such Taxes for the entire Straddle Period (or, in the case of
such Taxes determined on an arrears basis, the amount of such Taxes for
the immediately preceding Tax period) multiplied by a fraction the
numerator of which is the number of calendar days in the portion of the
Straddle Period ending on and including the Closing Date and the
denominator of which is the number of calendar days in the entire
Straddle Period.
5.4.6. Cooperation on Tax Matters.
(i) Buyer, Parent, and their respective Subsidiaries shall
cooperate fully, as and to the extent reasonably requested by any
Party, in connection with the filing of Tax Returns pursuant to
this Section 5.4 and any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the
retention and (upon the other Party's request) the provision of
records and information which are reasonably relevant and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder.
(ii) Buyer, Parent, and their respective Subsidiaries
further agree, upon request, to use their best efforts without
incurring unreasonable cost or expense to obtain any certificate
or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed with respect to the transactions
contemplated hereby.
(iii) Buyer, Parent and their respective Subsidiaries
further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant
to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(iv) Buyer, Parent and their respective Subsidiaries shall
take all actions necessary to cause Buyer to replace PHC Utah as
the Tax Matters Partner for Sandy City ASC, LLC effective as of
the Closing Date.
5.4.7. Tax Sharing Agreements. All Tax allocation, sharing
agreements or similar agreements with respect to or relating to the
Transferred Corporation or (to the extent Parent or any of Parent's
Subsidiaries is a party to such Agreement) LLC Entity shall be terminated
as of the Closing Date and, after the Closing Date, the Transferred
Corporation or LLC Entity shall not be bound thereby or have any
liability thereunder.
5.4.8. Audits. Parent will promptly inform Buyer of any audit
commenced by a Taxing Authority with respect to a Tax Return filed
pursuant to Section 5.4.3, Section 5.4.4 or Section 5.4.5 above. Buyer
will promptly inform Parent of (a) any audit commenced by a Taxing
Authority with respect to a Tax Return filed pursuant to Section 5.4.5
above and (b) any issue raised with respect to an audit of a return filed
pursuant to Section 5.4.5 above which relates (i) to a transaction
occurring on or before the Closing Date or (ii) to an item or items which
cannot be specifically allocated to either the period ending on the
Closing Date or the period beginning on the day after the Closing Date or
52
<PAGE> 60
(iii) which would otherwise affect the amount of Tax allocated to the
period ending on the Closing Date. Parent shall have the right (but not
the obligation) to control that portion of the defense of any such audit
or resulting litigation (using counsel of its choice, paid for by
Parent), and to settle any such issue raised on any terms in its sole
discretion. Each Party shall cooperate with the other in the defense of
any such audit as such Party may reasonably request. Such cooperation
shall include the retention and (upon the other Party's request) the
provision of records and information which are reasonably relevant and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder.
5.4.9. Carrybacks. Except to the extent required by law, Parent
will not cause any Tax item or attribute of the Transferred Corporation
to be carried back from a tax period beginning after Closing to a tax
period ending on or before the Closing without the express written
permission of Buyer. Parent shall not file or cause to be filed any Tax
Return that includes any such carryback following receipt of permission
granted pursuant to the preceding sentence without the prior written
consent of Buyer. Parent, Buyer and their respective Subsidiaries shall
not file or cause to be filed any Tax Return with respect to any taxable
year or other taxable period beginning after the Closing Date which
reflects positions which are (i) inconsistent with the tax reporting
contemplated by sections 5.4.1 through 5.4.5 for the transactions
pursuant to this Agreement and (ii) could reasonably be expected
adversely to affect the liability of the other Party or any of its
Affiliates with respect to Taxes.
5.4.10. LLC Entity Tax Years Beginning Before and Ending After
Closing. The Taxable income or loss for an LLC Entity's Taxable year
which includes (but does not end on) the Closing Date shall be
apportioned between the Transferor (which owned the interest in the LLC
Entity prior to its transfer to Holdco) and Holdco in a manner mutually
acceptable to Buyer and Seller. If Buyer and Seller are unable to agree
on a method of allocation, (i) any income or loss associated with a
transaction outside the ordinary course of business and involving gross
proceeds in excess of $100,000 shall be allocated to the person who owned
the interest on the date the extraordinary transaction occurred and (ii)
the balance of the taxable income or loss shall be pro rated between the
Transferor and Holdco based on the number of days they owned the interest
in the LLC Entity; provided, however, that if the bases of an LLC
Entity's assets are changed as a result of the transfer of the interest
to Holdco or the Section 338(h)(10) election (i.e., there is an election
under Section 754 of the Code), depreciation deductions shall be
apportioned between the Transferor and Holdco based on a closing of the
books methodology.
5.4.11. Tax Indemnification.
(a) Notwithstanding anything in this Agreement to the contrary,
Parent and Seller, jointly and severally, shall indemnify the Buyer
Indemnitees and hold them harmless from and against and pay or reimburse
the Buyer Indemnitees for, any and all Losses resulting from or arising
out of: (i) all liability for Taxes with respect to Seller and any of its
Affiliates for all taxable periods ending on or prior to the Closing Date
and the portion of any Straddle Period ending on (and including) the
Closing Date ("Pre-
53
<PAGE> 61
Closing Tax Period"), including, without limitation, any liability for
Taxes imposed with respect to Holdco and its Subsidiaries pursuant to
Treas. Reg. Section 1.1502-6 (or a comparable provision under state or
local tax law), (ii) all liability for Taxes with respect to Seller and
any of its Affiliates imposed with respect to Holdco and its Subsidiaries
pursuant to Treas. Reg. Section 1.1502-6 (or a comparable provision under
state or local tax law) for a taxable year that includes, but does not
end on, the Closing Date, (iii) all liability for Taxes accruing on or
before the Closing Date which result from (A) the deemed sale of assets
pursuant to the election to be made by the Buyer and the Seller pursuant
to Section 338(h)(10) of the Code, as contemplated by Section 5.4.1 of
this Agreement and (B) the deemed sale of assets pursuant to any
comparable elections under state or local tax laws, and (iv) Seller's
share of all Taxes under Section 5.4.2 hereof.
(b) For purposes of this Section 5.4.11, the portion of any
Taxes for any Straddle Period which is attributable to the portion of the
Straddle Period ending on (and including) the Closing Date shall be
computed as set forth in Section 5.4.5.
5.4.12. Procedures Relating to Indemnification of Tax Claims.
(a) If a claim for Taxes shall be made by any Taxing Authority
in writing, which, if successful, might result in an indemnity payment
pursuant to Section 5.4.11, the Buyer ("Indemnified Party") shall, within
90 days of such written claim, notify the Seller ("Indemnifying Party")
in writing of such claim (a "Tax Claim").
(b) With respect to any Tax Claim which might result in an
indemnity payment to the Buyer Indemnitees thereof pursuant to Section
5.4.11, except as provided in the final sentence of this (b), Seller
shall control all proceedings taken in connection with such Tax Claim
and, without limiting the foregoing, may in its sole discretion and at
its sole expense pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with
respect thereto, and may, in its sole discretion, either pay the Tax
claimed and sue for a refund where applicable law permits such refund
suits or contest such Tax Claim. In connection with such proceedings, (i)
Seller shall keep the Buyer informed of all significant developments and
events relating to such Tax Claim and (ii) the Buyer shall have the right
to participate in (but not control) any such proceedings. The Buyer shall
cooperate with Seller and Holdco in contesting such Tax claim. The
contest of any Tax Claim that relates to (A) Taxes which are being shared
by the Seller and Buyer pursuant to Section 5.4.2, (B) Taxes for a
Straddle Period of the Transferred Corporation, or (C) Taxes for a
Straddle Period of a Transferor (other than Taxes with respect to a Tax
Return described in (a)(v) of Section 5.4.5) shall be jointly controlled
by the Buyer and Seller.
54
<PAGE> 62
ARTICLE VI.
CONDITIONS PRECEDENT
6.1. Conditions to Obligations of Each Party. The obligations of the
Parties to consummate the transactions contemplated hereby shall be subject to
the fulfillment or (to the extent permitted by Applicable Law) waiver on or
prior to the Closing Date of the following conditions:
6.1.1. HSR Action Notification. In respect of the notifications of
Buyer and Seller pursuant to the HSR Act, the applicable waiting period
and any extensions thereof shall have expired or been terminated.
6.1.2. No Injunction, etc. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction, decree
or judgment of any court or other Governmental Authority that shall have
become final and non-appealable. No court or other Governmental Authority
shall have determined any Applicable Law to make illegal the consummation
of the transactions contemplated hereby or by the Collateral Agreements,
and no Litigation or proceeding with respect to the application of any
such Applicable Law to such effect or seeking to restrain, enjoin or
otherwise prohibit the transactions contemplated hereby, shall be
pending.
6.1.3. Government Approvals. The Parties shall have obtained all
Governmental Approvals required to be obtained in order to permit
consummation of the transactions contemplated by this Agreement, in usual
and customary form or in such other form as may be satisfactory to each
of the Parties in its reasonable discretion.
6.2. Conditions to Obligations of the Buyer. The obligations of the
Buyer to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by the Buyer) on or prior to the Closing Date of the
following additional conditions, which the Seller agrees to use reasonable good
faith efforts to cause to be fulfilled:
6.2.1. Representations, Performance. The representations and
warranties of the Seller contained in this Agreement, without giving
effect to any revisions or supplements to the Schedules authorized by
Section 5.1.4., (i) shall be true and correct in all respects (in the
case of any representation or warranty containing any materiality or
Material Adverse Effect qualification) or in all material respects (in
the case of any representation or warranty without any materiality
qualification) at and as of the date hereof, and (ii) shall be repeated
and shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality or Material Adverse
Effect qualification) or in all material respects (in the case of any
representation or warranty without any materiality or Material Adverse
Effect qualification) on and as of the Closing Date with the same effect
as though made on and as of the Closing Date provided, however, that this
condition shall be deemed satisfied unless the failure or failures of
such representations and warranties to be so true and correct
(disregarding for this purpose all qualifications in such representations
and warranties relating to materiality, Material Adverse Effect and
knowledge), in the aggregate, would have a Material Adverse Effect.
Seller shall have duly performed and complied in all material respects
with all agreements, covenants and conditions required by
55
<PAGE> 63
this Agreement to be performed or complied with by it prior to or on the
Closing Date. Seller shall have delivered to the Buyer a certificate,
dated the Closing Date and signed by its duly authorized officers, to the
foregoing effect.
6.2.2. Collateral Agreements. Seller shall have delivered to Buyer
each of the Collateral Agreements to which Seller is a party.
6.2.3. Reorganization. Seller shall have consummated the
Pre-Closing Transactions as contemplated by Section 2.1 above.
6.2.4. No Material Adverse Effect. There shall not have been,
since the date of this Agreement, any event or occurrence which has had
or would reasonably be expected to result in a Material Adverse Effect on
Seller.
6.2.5. Title Commitment. Buyer shall have received the Title
Commitment and the Survey required pursuant to Section 5.1.7 hereof, each
in form and substance reasonably satisfactory to Buyer, and the Title
Company will have extended the effective date thereof to the Closing Date
and will be committed to issue its title insurance policy pursuant to
such Title Commitment.
6.2.6. Consents. Seller shall have provided to Buyer evidence, in
form and substance reasonably satisfactory to Buyer, that all material
Consents of third Persons, including, without limitation, any Consents
required to assign the Material Contracts, have been obtained or given in
accordance with this Agreement.
6.2.7. FIRPTA Affidavit. Seller shall have delivered to Buyer an
affidavit, in a form reasonably satisfactory to Buyer, stating under
penalties of perjury each of the Sellers' taxpayer identification numbers
and that none of the Sellers is a foreign person within the meaning of
Section 1445(b)(2) of the Code (the "FIRPTA Affidavit"); provided,
however, that if the Seller fails to provide the FIRPTA Affidavit, the
transaction shall nonetheless close and Buyer shall withhold and pay over
to the appropriate Taxing Authority the amount required to be withheld
under Section 1445 of the Code as determined by Buyer.
6.2.8. Financing. Provided Buyer has complied with Section 5.2.6
hereof, Buyer shall have received the proceeds under the Commitment
Letter or other financing agreements satisfactory to Buyer.
6.3. Conditions to Obligations of the Seller. The obligation of Seller
to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Seller), on or prior to the Closing Date, of the
following additional conditions, which Buyer agrees to use reasonable good faith
efforts to cause to be fulfilled.
6.3.1. Representations, Performance, etc. The representation and
warranties of Buyer contained in this Agreement and the Collateral
Agreements (i) shall be true and correct in all respects (in the case of
any representation or warranty containing any materiality or Material
Adverse Effect qualification) or in all material respects (in the case of
any representation or warranty without any materiality or Material
Adverse Effect
56
<PAGE> 64
qualification) at and as of the date hereof and (ii) shall be repeated
and shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality or Material Adverse
Effect qualification) or in all material respects (in the case of any
representation or warranty without any materiality or Material Adverse
Effect qualification) on and as of the Closing Date with the same effect
as though made at and as of such time provided, however, that this
condition shall be deemed satisfied unless the failure or failures of
such representations and warranties to be so true and correct
(disregarding for this purpose all qualifications in such representations
and warranties relating to materiality, Material Adverse Effect and
knowledge), in the aggregate, would have a Material Adverse Effect. Buyer
shall have duly performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement and the
Collateral Agreements to be performed or complied with by it prior to or
on the Closing Date. Buyer shall have delivered to Seller a certificate,
dated the Closing Date and signed by its duly authorized officer, to the
foregoing effect.
6.3.2. Collateral Agreements. Buyer shall have delivered to Seller
each of the Collateral Agreements to which Buyer is a party.
6.3.3. Letter of Credit. Buyer shall have replaced the Letter of
Credit and shall have caused Seller to be released from all liabilities
and obligations with respect thereto.
6.3.4. Buyer's Certificate. Buyer shall have delivered to Seller
the Buyer's Certificate.
ARTICLE VII.
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
7.1. Employment of Seller's Employees.
(a) Effective as of the Closing Date, Buyer shall offer
employment to all employees of each Seller engaged in the Business
or who are otherwise listed on SCHEDULE 7.1 hereto (the
"Offerees"), at wage or salary levels, as applicable, and with
employee benefits no less than those currently in effect for the
Offerees. Those employees who accept such offers of employment
effective as of the Closing Date shall be referred to herein as
the "Transferred Employees." Buyer acknowledges and agrees that
solely for purposes of the WARN Act, any person who is an employee
of Seller and who is engaged in the Business (other than part-time
employees as defined under the WARN Act) as of the Closing Date
shall be deemed an employee of Buyer for purposes of the WARN Act
on the Closing Date. With respect to such "deemed" employees,
Buyer further agrees and acknowledges that Buyer will be
responsible for all applicable notices and liabilities under the
WARN Act resulting from the termination of any such employees on
and after the Closing Date.
(b) As of the Closing Date, Buyer shall adopt and maintain
(without substantial changes except as may be required by
applicable law) for a period of at least one year from the Closing
Date the terms and conditions of Seller's policies
57
<PAGE> 65
providing for severance benefits described on SCHEDULE 4.1.22(a)
(hereinafter called the "Severance Plan") for the Transferred
Employees. For purposes of determining benefits under the
Severance Plan, the Transferred Employees will be credited with
all service with Seller or its Affiliates. On and after the
Closing Date, Buyer shall be solely responsible and liable for
benefits that are payable under the Severance Plan (but only if
severance occurs after the Closing Date), as modified as necessary
to reflect Buyer's adoption of the Severance Plan.
(c) As of the Closing Date, Buyer shall assume all of the
Seller's obligations with respect to accrued but unpaid vacation
for Transferred Employees as accrued on the books of Seller and
any accrued sick pay for Transferred Employees.
(d) Buyer will adopt an employee pension benefit plan (as
such term is defined in section 3(2) of ERISA ("Buyer's 401(k)
Plan") that is no less favorable to the Transferred Employees than
Seller's 401(k) Plan described on SCHEDULE 4.1.22(a) ("Seller's
401(k) Plan"). All Transferred Employees who were participants in
Seller's 401(k) Plan prior to Closing shall become participants in
Buyer's 401(k) Plan as of Closing. Subject to Buyer's completion
of due diligence with respect to Seller's 401(k) Plan, which shall
occur as soon as reasonably possible following the date hereof,
Buyer shall submit an application for a favorable determination
letter to the IRS on Buyer's 401(k) Plan and, contingent upon the
receipt of such favorable determination letter, Seller shall, upon
completion of the voluntary compliance audit with respect to the
Seller's plan under the IRS walk-in closing agreement program,
transfer all the assets attributable to the accounts (both vested
and unvested) of the Transferred Employees to Buyer's 401(k) Plan
in a manner that is in compliance with Section 414(l) of the Code.
Buyer's 401(k) Plan shall at all times be maintained in compliance
with the Code and ERISA. Seller will provide copies of all plan
documents, summary plan descriptions and other records pertaining
to Seller's 401(k) Plan which will be necessary for the
administration of Buyer's 401(k) Plan for the Transferred
Employees.
7.2. Welfare and Fringe Benefit Plans.
(a) Effective as of the Closing Date, Buyer shall assume,
with respect to the Transferred Employees and their dependents and
beneficiaries Seller's medical benefit plan described on SCHEDULE
4.1.22(a) (the "Medical Benefit Plan"). In addition, Buyer shall
provide the Transferred Employees and their dependents and
beneficiaries coverage commencing on the Closing Date under group
life, short-term disability and long-term disability plans
established by Buyer for such Persons who for all purposes of this
Section will be credited with all service with Seller or its
Affiliates, provided that, from and after the Closing Date, Seller
shall remain responsible for any and all Benefit Liabilities to or
in respect of the Employees or their beneficiaries or dependents
relating to or arising in connection with any claims for life,
disability, accidental death or dismemberment, supplemental
unemployment compensation, medical, dental, hospitalization, other
health or other welfare or fringe benefits or expense
58
<PAGE> 66
reimbursements, to the extent such claims relate to or are based
upon medical, dental, hospitalization or health services provided
prior to the Closing Date and are not included in Net Working
Capital or in connection with the requirements of Section 4980B of
the Code to provide continuation of health care coverage under any
Employee Benefit Plan in respect of Employees to the extent such
Benefit Liabilities relate to terminations of employment occurring
on or prior to the Closing Date. With respect to any Employee
Benefit Plan that is subject to Section 125 of the Code, Seller
shall transfer assets equal to the aggregate account balances of
all Transferred Employees, as of the Closing Date, to Buyer or
shall take other action mutually agreed to by Buyer and Seller to
avoid the loss by Transferred Employees of any part of such
balances.
(b) From and after the Closing Date, Buyer shall be
responsible for any and all Benefit Liabilities that relate to the
period from and after the Closing Date (other than any Excluded
Liabilities) relating to or arising in connection with the
requirements of Section 4980B of the Code to provide continuation
of health care coverage under any Employee Benefit Plan in respect
of Transferred Employees, including the former Employees set forth
on SCHEDULE 7.2, any other Employees whose employment with Seller
terminates between the date hereof and the Closing Date (a list of
whom shall be provided to Buyer at or prior to the Closing), and
the beneficiaries and covered dependents of any of the foregoing
persons.
(c) Buyer shall provide the appropriate notices required
under Section 4980B of the Code with respect to continuation of
health care coverage under any Employee Benefit Plan in respect of
Transferred Employees, their beneficiaries and covered dependents.
7.3. Workers' Compensation. From and after the Closing Date, Buyer
shall be responsible for any and all Benefit Liabilities to or in respect of any
Transferred Employee relating to or arising in connection with any and all
claims for workers' compensation benefits (or benefits for work-related injuries
or illnesses that are covered under any occupational benefits plan of Seller)
that relate to the period from and after the Closing Date.
7.4. Employment Taxes. To the extent permitted by law, Seller will and
Buyer will (i) treat Buyer as a "successor employer" and the Seller as a
"predecessor," within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the
Code, with respect to Transferred Employees who are employed by the Buyer for
purposes of Taxes imposed under the United States Federal Unemployment Tax Act
("FUTA") or the United States Federal Insurance Contributions Act ("FICA") and
(ii) and cooperate with each other to avoid, to the extent possible, the filing
of more than one IRS Form W-2 with respect to each such Transferred Employee for
the calendar year within which the Closing Date occurs.
7.5. No Continuing Obligation. Subject to Buyer's obligations pursuant
to Section 9.3 below, this Agreement (a) shall not require Buyer, Holdco or any
of their respective subsidiaries to employ any Employee on or after the Closing
Date or (b) constitute a guarantee of continuing employment to any Transferred
Employee.
59
<PAGE> 67
ARTICLE VIII.
TERMINATION
8.1. Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by the written agreement of Buyer and the Seller; or
(b) by either Seller or Buyer by written notice to the
other (a "Termination Notice") if the Closing has failed to occur
on or before 5:00 P.M. Houston, Texas time on November 30, 1999,
(or such later date as Seller and Buyer shall agree in writing),
except that neither Buyer nor Seller shall terminate this
Agreement by delivery of a Termination Notice while such Party is
in breach or default of its obligations hereunder.
8.2. Break-Up Fee. In the event that the Closing does not occur for any
reason other than as a result of (a) Seller's inability to satisfy the
conditions set forth in Sections 6.2.1 or 6.2.4 or (b) the inability of the
Parties to satisfy the conditions set forth in Sections 6.1.1, 6.1.2 or 6.1.3
(and provided Seller is ready, willing and able, assuming compliance by Buyer
with its obligations hereunder, to satisfy the conditions set forth in Sections
6.2.2, 6.2.3, 6.2.5 and 6.2.6), including any termination of this Agreement by
Buyer as a result thereof, then Buyer shall pay or cause to be paid to Seller,
in same day funds, upon demand, as liquidated damages and not as a penalty, the
sum of $7,500,000. The Parties acknowledge and agree that the actual damages
resulting from the failure of the Closing to occur for the reasons set forth
above, would be difficult or impracticable to calculate and that, in light of
the circumstances, the foregoing represents a reasonable approximation of such
damages and shall be in lieu of other damages in respect of such occurrence.
Upon payment of such amount, Buyer shall have no further obligation hereunder,
except as provided in Section 8.3 hereof.
8.3. Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 8.1, this Agreement shall become
void and have no effect, without any liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any Party hereto, or
any of its directors, officers, employees, agents, consultants, representatives,
advisers, stockholders or Affiliates, except for any liability resulting from
such Party's breach of this Agreement, provided, however, that the provisions of
Section 5.2.4, 5.3.4, 8.2 and 11.1 shall survive the termination of this
Agreement.
ARTICLE IX.
ADDITIONAL AGREEMENTS
9.1. Seller's Cost Reports. Seller will prepare and file all
terminating cost reports in connection with Current Program Receivables with the
applicable agencies and shall provide Buyer with a copy thereof (the "Seller
Cost Reports"). Such Seller Cost Reports shall be, in all material respects,
prepared and filed in accordance with all Applicable Laws. Buyer shall forward
to Seller any and all correspondence relating to the Seller Cost Reports within
three (3) Business Days after receipt by Buyer. Buyer shall retain all rights to
the Current Program Receivables and to the Seller Cost Reports including,
without limitation, the right to appeal
60
<PAGE> 68
any Medicare determinations relating to the Current Program Receivables and
Seller Cost Reports. Seller shall retain the originals of the Seller Cost
Reports, correspondence, work papers and other documents relating to Seller Cost
Reports and the Current Program Receivables. Seller will furnish copies of such
documents to Buyer prior to Closing.
9.2. Misdirected Payments. Seller and Buyer covenant and agree to
remit, within three (3) days after receipt, to the other any payments received,
which payments are on or in respect of accounts or notes receivable owned by (or
are otherwise payable to) the other.
9.3. WARN Act. Buyer agrees and acknowledges that the purchase of the
Assets constitutes the sale of one or more businesses within the meaning of the
WARN Act and the rules and regulations promulgated thereunder. Anything in this
Agreement to the contrary notwithstanding, Buyer agrees and acknowledges that
for purposes of the WARN Act, any person who is an employee of a Seller (other
than part-time employees as defined under the WARN Act) at a Facility as of the
Closing Date (which shall constitute the effective date of the sale within the
meaning of the WARN Act) shall be considered an employee of Buyer immediately
upon the Closing. With respect to such "deemed" employees, Buyer further agrees
and acknowledges that Buyer will be responsible for all applicable notices and
liabilities under the WARN Act resulting from the termination of any such
employees after the Closing Date.
9.4. Power of Attorney for D.E.A. Registration Number(s) and Utah
Pharmacy License(s). Buyer covenants that it shall promptly apply for all
necessary D.E.A. registration(s) or Utah Pharmacy License(s) with respect to the
Facilities as soon as possible. At or prior to Closing, Seller shall execute in
favor of Buyer one or more Powers of Attorney for Order Forms authorizing Buyer
or a representative of Buyer to execute applications for books of official order
forms and to sign such order forms, under Seller's D.E.A. Registration Number(s)
or Seller's Pharmacy License(s) as required for all necessary controlled
substances on an interim basis until such time as Buyer shall receive approval
of all necessary D.E.A. registration(s) or Utah Pharmacy License(s). Seller
covenants that it shall cooperate with Buyer and provide such information as
Buyer may reasonably request in making all such applications for registration or
licensing.
9.5. Covenant Not to Compete.
(a) Seller acknowledges that Buyer would be irreparably damaged
if the knowledge of Seller of the business and affairs, trade secrets or
confidential information of the Business were disclosed or utilized on
behalf of any person which is in, or contemplates entering into,
competition in any respect, directly or indirectly, with the Business. In
furtherance of this Section 9.5 and to secure the interest of Buyer
hereunder, Seller hereby covenants and agrees that, from and after the
Closing and until the third anniversary of the Closing Date, Seller shall
not, and shall cause each of its Affiliates not to, directly or
indirectly, participate in the ownership, management, operation or
control of, or be connected with or employed by, or act as a consultant
for, or have any financial interest in or aid or knowingly assist anyone
else in the conduct of, any business or entity which (i) is similar to
the Business in the Salt Lake City, Utah region, or (ii) is actively
pursuing the conduct of such business in such region; provided, however,
that this
61
<PAGE> 69
Agreement shall not restrict or prohibit Seller or its Affiliates from
(i) conducting any business of Seller or its Affiliates that is unrelated
to the Business, in substantially the same manner as presently conducted
(ii) owning, managing or operating the Excluded Assets, (iii) selling the
business of Parent, whether by merger, sale of stock or assets or (iv)
otherwise being the owner of up to 2% of any class of outstanding
securities of any public company or entity.
(b) From and after the Closing Date, Seller shall not use for
its benefit or disclose to any person, any proprietary information of the
Business or information with respect to customers, suppliers, employees
or financial affairs of the Business, or any other confidential matter,
obtained or developed by any of them prior to the Closing Date with
respect to any aspect of the Business.
(c) From and after the Closing Date until the third anniversary
of the Closing Date, neither Seller shall, nor shall it permit of its
Affiliates to, without the prior written consent of Buyer, solicit any
person who is a Transferred Employee and continues to be an employee of
the Business at the time of such proposed solicitation, or induce such
person to terminate his or her employment with Buyer; provided, however,
that Seller shall not be prohibited from conducting generalized
solicitation for employees (which solicitations are not specifically
targeted at Buyer employees) through the use of media advertisements,
professional search firms or otherwise.
(d) Seller acknowledges and agrees that if it were to breach
any provision of this Section 9.5, any remedy at law would be inadequate
and that Buyer, in addition to seeking monetary damages in connection
with any such breach, shall be entitled to specific performance, and
injunctive and other equitable relief, without the necessity of posting
any bond or other security, to prevent or restrain a breach of this
Section 9.5 or to enforce the provisions hereof.
(e) Seller and Buyer intend that the provisions of this Section
9.5 be enforced to the fullest extent permissible under the laws applied
in each jurisdiction in which enforcement is sought. If any provision of
this Section 9.5, or any part hereof, shall be held by a court of
competent jurisdiction to be invalid or unenforceable, this Section 9.5
shall be amended to revise the scope of such provision to make it
enforceable, if possible, or to delete such provision or such part.
ARTICLE X.
INDEMNIFICATION
10.1. Indemnification. For purposes of this Agreement, the term "Losses"
means, any and all claims, liabilities, obligations, losses, fines, interests,
penalties, costs, royalties, proceedings, deficiencies or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting from
third party claims), including out-of-pocket expenses and reasonable attorneys'
and accountants' fees incurred in the investigation or defense of any of the
same or in asserting any of their respective rights hereunder. To the extent any
Indemnification or Loss is governed by Section 5.4, this Section 10.1 shall not
apply.
62
<PAGE> 70
(a) By Parent and Seller. Parent and Seller jointly and
severally covenant and agree to defend, indemnify and hold harmless
Buyer, its officers, directors, employees, and Affiliates (collectively,
the "Buyer Indemnitees") from and against, and pay or reimburse the Buyer
Indemnitees for, any and all Losses resulting from or arising out of:
(i) any breach of any representation or warranty made by
the Seller herein or under any Collateral Agreement (or any facts
or circumstances constituting such breach);
(ii) any breach by Seller of its covenants or obligations
under this Agreement or under any Collateral Agreement other than
covenants or obligations to be performed by Holdco after the
Closing;
(iii) the Excluded Liabilities, other than those set forth
in Sections 2.5(j) and 2.5(m) or the Excluded Assets; or
(iv) the Excluded Liabilities set forth in Sections 2.5(j)
and 2.5(m).
(b) By Buyer and Holdco. Buyer, from and after the date hereof,
and Holdco, from and after the Closing, jointly and severally covenant
and agree to defend, indemnify and hold harmless Seller and its officers,
directors, employees, and Affiliates (collectively, the "Seller
Indemnitees") from and against, and pay or reimburse the Seller
Indemnitees for, any and all Losses resulting from or arising out of:
(i) any breach of any representation or warranty by the
Buyer made or contained in this Agreement or any Collateral
Agreement (or any facts or circumstances constituting such
breach);
(ii) any breach by Buyer of its covenants or obligations
under this Agreement or any Collateral Agreement;
(iii) the Assumed Liabilities assumed by Holdco pursuant to
Section 2.4 and any breach by Holdco or its Subsidiaries of any
covenants or obligations to be performed by any of them after the
Closing under this Agreement or any Collateral Agreement; or
(iv) the operation of the Business by Buyer or by Holdco or
its Subsidiaries or Buyer's or Holdco's or its Subsidiaries'
ownership, operation or use of the Assets following the Closing
Date, including, without limitation, (A) any Tax liabilities
arising in connection with operations of the Business after the
Closing Date and (B) any liabilities, including liabilities to
customers of the Business or users of its products, or to
employees, agents or contractors of the Business, in connection
with the operation of the Business following the Closing Date;
63
<PAGE> 71
it being understood that Holdco shall have no obligations or
liabilities with respect to these indemnification provisions prior
to the Closing or in the event that the Closing fails for any
reason to occur.
(c) Indemnification Procedures. In the case of any claim
asserted by a third party against a party entitled to
indemnification under this Agreement (the "Indemnified Party"),
notice shall be given by the Indemnified Party to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and the Indemnified
Party shall permit the Indemnifying Party (at the expense of such
Indemnifying Party) to assume the defense of any Litigation
resulting therefrom, provided that (i) the counsel for the
Indemnifying Party who shall conduct the defense of such
Litigation shall be reasonably satisfactory to the Indemnified
Party and (ii) the Indemnified Party may participate in such
defense at such Indemnified Party's expense. Except with the prior
written consent of the Indemnified Party which consent shall not
be unreasonably withheld, no Indemnifying Party, in the defense of
any such Litigation, shall consent to entry of any judgment or
enter into any settlement that (i) does not provide for the
unconditional release of the Indemnified Party from all liability
or (ii) provides that the Indemnified Party is subject to any
contractual obligations following such settlement. The
Indemnifying Party and the Indemnified Party shall cooperate in
the defense of any Litigation subject to this Section 10.1 and the
records of each shall be available to the other with respect to
such defense and the Indemnifying Party's defense.
(d) WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE
INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH
HEREIN, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION
HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF
WHETHER THE INDEMNIFIABLE LOSS GIVING RISE TO SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER
FAULT OR VIOLATION OF ANY LAW OF OR BY SUCH INDEMNIFIED PARTY. THE
PARTIES AGREE THAT THIS STATEMENT CONSTITUTES A CONSPICUOUS
LEGEND.
10.2. Survival of Representations and Warranties, etc. The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement for a period of two years from the
Closing Date, provided, however, that the representations and warranties set
forth in (i) Section 4.1.25 (Taxes), 4.1.8 (Government Program Participation),
4.1.9 (Cost Reports), 4.1.10 (JCAHO Accreditation), 4.1.12 (Fraud and Abuse) and
4.1.13 (Hill-Burton Loan) and 4.3.4 (Fraud and Abuse) hereof shall survive until
one year after the expiration of the statute of limitations applicable to legal
claims and causes of action arising from the matters referenced in such Section,
(ii) Sections 4.1.15 and 4.1.18 hereof (Title to Assets) shall survive
indefinitely and (iii) Section 4.1.22 (Employee Benefit Plans) shall survive for
a period of three years from the Closing Date.
64
<PAGE> 72
10.3. Limitations on Indemnification Provisions; Exclusive Remedy.
10.3.1. Limitation on Indemnification. No claim for
indemnification by Buyer or Seller against the other party hereto shall
be made unless: (i) each claim for Losses pursuant to Section 10.1(a)(i),
10.1(a)(iv) or 10.1(b)(i), as the case may be, resulting from a single
inaccuracy or breach (or, if more than one claim for Losses are
substantially similar in nature and arise from the same facts or
circumstances, then the sum of such claims) is for Losses in an amount
equal to or in excess of $250,000 (the "Minimum Claim Amount"), and (ii)
the aggregate amount of claims pursuant to Section 10.1(a)(i),
10.1(a)(iv) or 10.1(b)(i) that exceed the Minimum Claim Amount exceed
$2,500,000, at which time all claims pursuant to Section 10.1(a)(i),
10.1(a)(iv) or 10.1(b)(i), in excess of $2,500,000, including those used
to aggregate the floor of $2,500,000, shall be subject to indemnification
and recovery by the Indemnified Party to the extent herein provided.
Notwithstanding the foregoing, for purposes of determining whether any
breach or inaccuracy has occurred, all references to "Material Adverse
Effect" or other materiality qualifiers in Article III or Article IV, as
the case may be, shall be disregarded. No claim for indemnification
pursuant to Section 10.1(a)(i), 10.1(a)(iv) or 10.1(b)(i) shall be
effective unless such claim is made in writing and delivered to the
Indemnifying Party hereunder prior to expiration of the survival period
set forth in Section 10.2 hereof. The maximum amount of liability by
Seller and Buyer, for indemnification pursuant to Sections 10.1(a)(i),
and 10.1(b)(i) shall be an amount equal to 50% of the Transaction
Consideration. This Section 10.3.1 shall not apply to, and shall not
limit, any claim for indemnification under Section 5.4 hereof.
10.3.2. Waiver of Non-Compensatory Damages. No Indemnified Party
shall be entitled to recover from an Indemnifying Party for any losses,
costs, expenses, or damages as to which indemnification is provided under
this Agreement any amount in excess of the actual compensatory damages,
court costs and reasonable attorney's fees, suffered by such party; and
Buyer and Seller waive any right to recover punitive, special, exemplary
and consequential damages arising in connection with or with respect to
the indemnification provisions hereof.
10.3.3. Exclusive Remedy; Waiver and Release. The indemnifications
under this Article X shall be Buyer's and Seller's sole and exclusive
remedies, each against the other, with respect to matters arising under
this Agreement, of any kind or nature, or relating to the Business, the
ownership, operation, management, use or control of the Facilities. Buyer
and Seller hereby waive and release any other rights, remedies, causes of
action or claims that they have or that may arise against the other with
respect to matters arising under this Agreement, of any kind or nature,
or relating to the Business, the ownership, operation, management, use or
control of the Facilities.
ARTICLE XI.
MISCELLANEOUS
11.1. Expenses. Except as provided in Section 5.2.2, Seller, on the one
hand, and Buyer, on the other hand, shall bear their respective expenses, costs
and fees (including attorneys', auditors', investment bankers' or brokers and
financing commitment fees) in connection with the
65
<PAGE> 73
transaction contemplated hereby, including the preparation, execution and
delivery of this Agreement and compliance herewith (the "Transaction Expenses"),
whether or not the transactions contemplated hereby shall be consummated,
provided, however, that Seller shall bear all transfer, sales or excise Taxes
arising out of the consummation of the transactions contemplated hereby, and
Buyer and Seller shall each bear 50% of (i) the costs in connection with a
dispute pursuant to Section 3.4(a)(ii) hereof, and (ii) costs to apply for and
obtain Consents of Governmental Authorities required in connection with
consummation of the transactions contemplated hereby (including under the HSR
Act).
11.2. Severability. If any provision of this Agreement, including any
phrase, sentence, clause, Section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
11.3. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered personally,
(ii) mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, (iii) sent by next-day or overnight mail or
delivery, or (iv) sent by telecopy or telegram.
(i) if to the Buyer to,
JLL Hospital, LLC
c/o Joseph, Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Attention: Jeffrey Lightcap
Fax: (212) 286-8686
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1 Rodney Square
P. O. Box 636
Wilmington, Delaware 19899
Attention: Robert B. Pincus, Esq.
Fax: (302) 651-3001
(ii) if to the Seller,
Paracelsus Healthcare Corporation
515 W. Greens Road
Suite 800
Houston, TX 77067
Attn: President
Fax: (281) 774-5200
66
<PAGE> 74
with a copy to:
Diana M. Hudson
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
Fax: (713) 225-7047
or, in each case, at such other address as may be specified in writing to the
other Parties hereto.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (w) if by personal delivery on the date of such
delivery, (x) if by certified or registered mail, on the seventh business day
after the mailing thereof, (y) if by next-day or overnight mail or delivery, on
the day delivered, (z) if by telecopy or telegram, on the day on which such
telecopy or telegram was sent, provided that a copy is also sent by certified or
registered mail.
11.4. Miscellaneous.
11.4.1. Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
11.4.2. Entire Agreement. This Agreement (including the Schedules hereto)
and the Collateral Agreements (when executed and delivered) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
11.4.3. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
11.4.4. Governing Law, etc. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of Delaware, without giving effect to the conflict of laws
rules thereof.
11.4.5. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
11.4.6. Assignment. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
party hereto provided that (a) Buyer shall be permitted to assign its rights
hereunder to the lenders under its Credit Agreement or other financing source of
Buyer or its Subsidiaries or (b) Seller shall be permitted to assign its rights
hereunder to the lenders under the Senior Indebtedness.
11.4.7. No Third Party Beneficiaries. Except as provided in Section 10.1
with respect to indemnification of Indemnified Parties hereunder, nothing in
this Agreement shall
67
<PAGE> 75
confer any rights upon any person or entity other than the parties hereto and
their respective heirs, successors and permitted assigns.
11.4.8. Amendment; Waivers, etc. No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder.
11.4.9. Specific Performance. Each party hereto acknowledges that money
damages would be both incalculable and an insufficient remedy for any breach of
this Agreement by such party and that any such breach would cause the other
parties hereto irreparable harm. Accordingly, each party hereto also agrees
that, in the event of any breach or threatened breach of the provisions of this
Agreement by such party, the other parties hereto shall be entitled to equitable
relief without the requirement of posting a bond or other security, including in
the form of injunctions and orders for specific performance.
68
<PAGE> 76
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first above written.
PARENT: PARACELSUS HEALTHCARE CORPORATION
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: Interim Chief Executive Officer
----------------------------------
and Chief Financial Officer
----------------------------------
PHC/CHC HOLDINGS, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: President
----------------------------------
SELLER: PHC-SALT LAKE CITY, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: Vice President and Chief
----------------------------------
Financial Officer
----------------------------------
PARACELSUS PIONEER VALLEY HOSPITAL, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: Vice President and Chief
----------------------------------
Financial Officer
----------------------------------
69
<PAGE> 77
PHC-JORDAN VALLEY, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: Vice President and Chief
----------------------------------
Financial Officer
----------------------------------
PIONEER VALLEY HEALTH PLAN, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: Vice President
----------------------------------
PARACELSUS PHC REGIONAL MEDICAL CENTER, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: President
----------------------------------
PHC UTAH, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: Vice President and Chief
----------------------------------
Financial Officer
----------------------------------
PARACELSUS DAVIS HOSPITAL, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: Vice President and Chief
----------------------------------
Financial Officer
----------------------------------
70
<PAGE> 78
PHC/PSYCHIATRIC HEALTHCARE CORPORATION
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: President
----------------------------------
CLINICARE OF UTAH, INC.
By: /s/ James G. VanDevender
--------------------------------------
Name: James G. VanDevender
-----------------------------------
Title: President
----------------------------------
BUYER: JLL HOSPITAL, LLC
By: /s/ Jeffrey C. Lightcap
--------------------------------------
Name: Jeffrey C. Lightcap
-----------------------------------
Title: Authorized Person
----------------------------------
71
<PAGE> 1
EXHIBIT 2.2
ASSET SALE AGREEMENT
between
TENET HEALTHCARE CORPORATION,
a Nevada corporation
and
JLL HOSPITAL, LLC,
a Delaware limited liability company
DATED: August 15, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1
DEFINITIONS; SALE AND TRANSFER OF ASSETS;
CONSIDERATION; CLOSING..............................................................................1
1.1 Definitions.............................................................................1
1.2 Purchase and Sale of Assets; Purchase Price.............................................3
1.3 Inventory...............................................................................4
1.4 Post-Closing Adjustment to Purchase Price...............................................5
1.5 Closing Date............................................................................6
1.6 Items to be Delivered by Seller at Closing..............................................6
1.7 Items to be Delivered by Purchaser at Closing...........................................8
1.8 Prorations and Utilities................................................................9
1.9 Transfer of Seller Assets...............................................................9
1.10 Excluded Assets........................................................................11
1.11 Assumed Obligations....................................................................12
1.12 Excluded Liabilities...................................................................13
1.13 [Intentionally Omitted]................................................................15
1.14 Disclaimer of Warranties...............................................................15
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER...........................................................16
2.1 Authorization..........................................................................16
2.2 Binding Agreement......................................................................16
2.3 Organization and Good Standing; No Violation...........................................16
2.4 Contracts and Leases...................................................................17
2.5 Required Consents......................................................................17
2.6 Compliance With Laws and Contracts.....................................................18
2.7 Title; Sufficiency.....................................................................19
2.8 Certain Representations With Respect to the Hospitals..................................20
2.9 Brokers and Finders....................................................................21
2.10 Financial Statements...................................................................21
2.11 Legal Proceedings......................................................................21
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
2.12 Employee Benefits......................................................................22
2.13 Taxes and Tax Returns..................................................................23
2.14 Personnel..............................................................................24
2.15 Insurance..............................................................................24
2.16 Solvency...............................................................................24
2.17 No Untrue or Inaccurate Representations or Warranties..................................25
2.18 Absence of Undisclosed Liabilities.....................................................25
2.19 Y2K....................................................................................25
2.20 Capitalization of Beaumont Newco.......................................................25
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................................26
3.1 Authorization..........................................................................26
3.2 Binding Agreement......................................................................26
3.3 Organization and Good Standing.........................................................26
3.4 No Violation...........................................................................26
3.5 Brokers and Finders....................................................................26
3.6 Legal Proceedings......................................................................27
3.7 Solvency...............................................................................27
3.8 Intentionally Omitted..................................................................27
3.9 Intentionally Omitted..................................................................27
3.10 No Other Business or Operations........................................................27
ARTICLE 4
COVENANTS OF SELLER................................................................................27
4.1 Access and Information; Inspections....................................................27
4.2 Preserve Accuracy of Representations and Warranties....................................28
4.3 Conduct of Business....................................................................28
4.4 Negative Covenants.....................................................................28
4.5 Required Approvals.....................................................................29
4.6 Additional Financial Information.......................................................29
4.7 No-Shop................................................................................29
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
4.8 Seller's Efforts to Close; Audited Financial Statements................................30
4.9 Title Matters..........................................................................31
4.10 Termination of Hospitals' Employees....................................................31
4.11 Termination Cost Reports...............................................................31
4.12 Hart-Scott-Rodino Act Filings..........................................................31
4.13 Environmental Survey...................................................................32
4.14 Noncompetition.........................................................................32
4.15 Enforceability.........................................................................32
4.16 [Intentionally Omitted]................................................................33
4.17 Sale of Odessa Regional Hospital.......................................................33
4.18 Y2K Compliance Program.................................................................34
4.19 Supplements to Disclosure Schedule.....................................................34
4.20 Mesa Lease Adjustment..................................................................34
ARTICLE 5
COVENANTS OF PURCHASER.............................................................................35
5.1 Purchaser's Efforts to Close...........................................................35
5.2 Required Approvals.....................................................................35
5.3 Certain Employee Matters...............................................................35
5.4 Use of Business Names..................................................................37
5.5 Excluded Assets........................................................................37
5.6 Confidentiality........................................................................37
5.7 Enforceability.........................................................................38
5.8 Hart-Scott-Rodino Act Filings..........................................................38
5.9 Group Purchasing Contract..............................................................38
5.10 Acknowledgement Regarding Year 2000 Compliance.........................................38
5.11 Waiver of Bulk Sales Law Compliance....................................................39
5.12 Beaumont Assets........................................................................39
5.13 Preserve Accuracy of Representations and Warranties....................................39
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER......................................................39
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
6.1 Warranties True and Correct............................................................39
6.2 Signing and Delivery of Instruments....................................................39
6.3 Unfavorable Action or Proceeding.......................................................40
6.4 Performance of Covenants...............................................................40
6.5 Opinion of Counsel for Purchaser.......................................................40
6.6 Hart-Scott-Rodino Filings..............................................................40
6.7 Consents, Approvals and Authorizations.................................................40
6.8 Exhibits and Schedules.................................................................40
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER...................................................40
7.1 Warranties True........................................................................41
7.2 Consents, Approvals and Authorizations.................................................41
7.3 Signing and Delivery of Instruments....................................................41
7.4 Performance of Covenants...............................................................41
7.5 Unfavorable Action or Proceeding.......................................................41
7.6 Hart-Scott-Rodino Filings..............................................................41
7.7 Governmental Concurrences..............................................................41
7.8 Opinion of Counsel.....................................................................42
7.9 Exhibits and Schedules.................................................................42
7.10 Title Insurance Policy.................................................................42
7.11 Financing..............................................................................42
7.12 Material Adverse Change................................................................42
7.13 Audit..................................................................................42
7.14 Odessa Closing.........................................................................42
ARTICLE 8
TERMINATION........................................................................................43
8.1 Termination............................................................................43
8.2 Termination Consequences...............................................................43
8.3 Costs..................................................................................44
ARTICLE 9
</TABLE>
-iv-
<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
POST-CLOSING MATTERS...............................................................................44
9.1 Excluded Assets and Excluded Liabilities...............................................44
9.2 Preservation and Access to Records After the Closing...................................44
ARTICLE 10
SURVIVAL AND INDEMNIFICATION.......................................................................46
10.1 Survival...............................................................................46
10.2 Indemnification of Purchaser by Seller.................................................46
10.2.1 Indemnification................................................................46
10.2.2 Indemnification Limitations....................................................47
10.3 Indemnification of Seller by Purchaser.................................................48
10.3.1 Indemnification................................................................48
10.3.2 Indemnification Limitations....................................................48
10.4 Method of Asserting Claims.............................................................49
10.5 Exclusive..............................................................................52
10.6 Reduction of the Purchase Price........................................................52
ARTICLE 11
TAX AND COST REPORT MATTERS........................................................................52
11.1 Tax Matters; Allocation of Purchase Price..............................................52
11.2 Cost Report Matters....................................................................53
11.3 Transition Services....................................................................54
ARTICLE 12
MISCELLANEOUS PROVISIONS...........................................................................55
12.1 Further Assurances and Cooperation.....................................................55
12.2 Successors and Assigns.................................................................55
12.3 Governing Law..........................................................................55
12.4 Amendments.............................................................................56
12.5 Exhibits, Schedules and Disclosure Schedule............................................56
12.6 Notices................................................................................56
12.7 Headings...............................................................................57
12.8 Confidentiality and Publicity..........................................................57
</TABLE>
-v-
<PAGE> 7
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
12.9 Fair Meaning...........................................................................57
12.10 Gender and Number; Construction........................................................57
12.11 Third Party Beneficiary................................................................57
12.12 Expenses and Attorneys' Fees...........................................................57
12.13 Counterparts...........................................................................58
12.14 Entire Agreement.......................................................................58
12.15 No Waiver..............................................................................58
12.16 Severability...........................................................................59
12.17 Arbitration............................................................................59
12.17.1 Forum.........................................................................59
12.17.2 Law...........................................................................59
12.17.3 Selection.....................................................................59
12.17.4 Administration................................................................59
12.17.5 Rules.........................................................................59
12.17.6 Award.........................................................................59
12.18 Time is of the Essence.................................................................59
</TABLE>
-vi-
<PAGE> 8
LIST OF SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
A-1 Subsidiaries
A-2 Acute Care Hospitals
A-3 MOBs
A-4 Other Businesses
1.2(c) Interim Balance Sheet
1.9(a) Owned Real Property
1.9(b) Leased Real Property
1.9(c) Personal Property
1.9(d) Licenses
1.9(e) Leases
1.9(f) Contracts
1.9(g) Prepaids
1.9(m) Names of Hospitals
1.9(p) Equity Interests
1.10(d) Excluded Proprietary Assets
1.10(o) Other Excluded Assets
1.11(c) Capital Leases
1.11(i) Other Assumed Obligations
2.3(b) Governmental Notices and/or Approvals
2.4(a) Material Contracts
2.4(b) Incomplete Contracts
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
2.5 Required Consents
2.6(a) Compliance with Law
2.6(b) Compliance with Environmental Laws
2.7(a) Title to Real Property
2.7(b) Title; Sufficiency
2.8(a) Licenses Exceptions
2.8(b) JCAHO Accreditation Periods
2.8(c) Medicare and Medicaid Certification
2.8(d) Audit Periods
2.8(g) Medical Staff Matters
2.10 Financial Statements
2.11 Legal Proceedings
2.12 Employee Benefits
2.13 Taxes
2.13(c) Tax Liens
2.14 Personnel List
2.14 Insurance
2.18 Undisclosed Liabilities
2.19 Y2K Compliance
3.4 Third Party Consents - Purchaser
3.5 Brokers - Purchaser
3.7 Legal Proceedings - Purchaser
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
7.10 Permitted Title Exceptions
11.1(b) Allocation of Purchase Price
</TABLE>
<PAGE> 11
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
1.6.1 Bills of Sale
1.6.2 Real Estate Assignments
1.6.3 Limited Warranty Deeds
1.6.9 Transitional Services Agreements
-Information Technology Transition
Services Agreement
-License Agreement for Policy and
Procedure Manuals
-Management Services Agreement
1.6.10 Business Services Agreement
1.6.11 Employee Leasing Agreement
1.6.13 Landlord Estoppel Certificate
4.13 Environmental Survey
4.17 Odessa Asset Sale Agreement
5.9 Group Purchasing Contract
5.12 Beaumont Asset Sale Agreement
6.5 Opinion of Purchaser's Counsel
7.8 Opinion of Seller's In-House Counsel
7.11 Financing Letter
</TABLE>
<PAGE> 12
ASSET SALE AGREEMENT
This Asset Sale Agreement (the "Agreement") is made and entered into as of
the fifteenth (15th) day of August, 1999 (the "Effective Date") by and between
Tenet Healthcare Corporation, a Nevada corporation ("Seller"), and JLL Hospital,
LLC, a Delaware limited liability company ("Purchaser").
R E C I T A L S:
A. Through the wholly-owned subsidiary corporations and majority-owned
partnerships identified on Schedule A-1 (the "Subsidiaries"), Seller (I) engages
in the business of delivering acute care services to the public through the
acute care hospitals identified on Schedule A-2 (the "Acute Care Hospitals"),
(II) owns and operates certain medical office buildings incident to the
operation of the Acute Care Hospitals as specifically identified on Schedule A-3
(the "MOBs"), and (III) owns and operates other healthcare businesses incident
to the operation of the Acute Care Hospitals as specifically identified on
Schedule A-4 (the "Other Businesses") (the Acute Care Hospitals, MOBs and the
Other Businesses are referred to herein collectively as the "Hospitals").
B. Purchaser desires to purchase from the Subsidiaries, and Seller desires
to cause the Subsidiaries to sell to Purchaser, substantially all of the assets
with respect to the operation of the Hospitals, for the consideration and upon
the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants contained in this Agreement, and for their mutual
reliance, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS; SALE AND TRANSFER OF ASSETS;
CONSIDERATION; CLOSING
1.1 Definitions. The terms listed below are defined elsewhere in this
Agreement and, for ease of reference, the section containing the definition of
each such term is set forth opposite such term.
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Accounts Receivable..................................Section 1.10(l)
Acute Care Hospital..................................Recitals
Agency Settlement....................................Section 11.2(a)
Aggregate Amount.....................................Section 10.2.2(ix)
Agreement............................................Preamble
Assets...............................................Section 1.9
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
Assumed Capital Lease Obligations ...................Section 1.2(a)
Assumed Obligations..................................Section 1.11
Audit Periods........................................Section 2.8(d)
Beaumont Assets .....................................Section 5.12
Beaumont Newco.......................................Section 5.12
Beaumont Shares......................................Section 2.20
Bills of Sale........................................Section 1.6.1
Breaching Party......................................Section 8.1(b)
Cash Purchase Price..................................Section 1.2
CEO..................................................Section 2.10
Claim Notice.........................................Section 10.4(a)
Closing Date.........................................Section 1.5
Closing..............................................Section 1.5
Code.................................................Section 2.12(b)
Confidential Information ............................Section 5.6
Confidentiality Agreement............................Section 5.6
Consultants..........................................Section 4.13
Contracts............................................Section 1.9(f)
COO..................................................Section 2.10
Damages..............................................Section 10.2.1
Disclosure Schedule..................................Section 2
Document Retention Period............................Section 9.2(a)
DOJ..................................................Section 4.12
DON..................................................Section 2.10
Effective Date.......................................Preamble
Effective Time.......................................Section 1.5
Environmental Permits................................Section 2.6(b)
Environmental Survey.................................Section 4.13
Excluded Assets......................................Section 1.10
Excluded Liabilities.................................Section 1.12
Final Balance Sheet..................................Section 1.4
Financial Statements.................................Section 2.10
Fraction.............................................Section 11.3(a)
FTC..................................................Section 4.12
GAAP.................................................Section 1.2
Group Purchasing Contract............................Section 1.6.8
Hired Employees......................................Section 5.3(a)
Hospitals............................................Recitals
Hospitals' Employees.................................Section 5.3(a)
HSR Act..............................................Section 2.3(b)
Indemnified Party....................................Section 10.4
Indemnifying Party...................................Section 10.4(a)
Indemnity Notice.....................................Section 10.4(a)
Independent Auditor..................................Section 1.4
Interim Balance Sheet................................Section 1.2
Inventory............................................Section 1.9(h)
</TABLE>
2
<PAGE> 14
<TABLE>
<S> <C>
Leased Real Property...........................Section 1.9(b)
Leases.........................................Section 1.9(e)
Licenses.......................................Section 1.9(d)
Liens..........................................Section 1.2(a)
Meditrust Lease ...............................Section 5.14
Meditrust Real Property .......................Section 1.2
MOBs...........................................Recitals
Nondefaulting Party............................Section 8.1(b)
Notice Period..................................Section 10.4(a)
Odessa Asset Sale Agreement....................Section 4.17
Odessa Assets .................................Section 4.17
Odessa Partnership ............................Section 4.17
Odessa Right of First Refusal .................Section 4.17
Other Businesses...............................Recitals
Owned Real Property............................Section 1.9(a)
Permitted Exceptions...........................Section 7.10
Permitted Liens ...............................Section 2.7(b)
Personal Property..............................Section 1.9(c)
Post Closing Adjustment Date...................Section 1.4
Prepaids.......................................Section 1.9(g)
Purchase Price.................................Section 1.2
Purchaser......................................Preamble
Purchaser's Plan...............................Section 5.3(d)
Real Estate Assignments........................Section 1.6.2
Real Property..................................Section 1.9(b)
Receivable Records.............................Section 1.10(m)
Reconciliation.................................Section 11.3(a)
Relevant Claim.................................Section 10.2.2(ix)
Retained Management Employees..................Section 5.3(a)
Seller.........................................Preamble
Sick Pay Amount................................Section 1.2
Subsidiaries Cost Reports......................Section 11.2(a)
Subsidiaries...................................Recitals
Surveys........................................Section 4.9
Third Party Claim..............................Section 10.4(a)
Title Commitment...............................Section 4.9
Title Company..................................Section 4.9
Title Instruments..............................Section 4.9
Title Policy...................................Section 4.9
Transition Date................................Section 5.3(a)
Transition Services............................Section 11.3
Transitional Services Agreement................Section 1.6.9
</TABLE>
1.2 Purchase and Sale of Assets; Purchase Price.
(a) Subject to the terms and conditions of this Agreement, Seller
shall sell to Purchaser, and Purchaser shall purchase from Seller, the Assets,
free and clear of all liens,
3
<PAGE> 15
pledges, claims, charges, security interests or other encumbrances ("Liens")
other than Permitted Liens. Subject to the terms and conditions of this
Agreement, the aggregate purchase price to be paid by Purchaser to Seller for
the purchase of the Assets shall be (i) Four Hundred Five Million Two Hundred
Thousand Dollars ($405,200,000) (a) (the "Purchase Price"), plus or minus (ii)
the amount of Net Working Capital (as defined below) on the Closing Date, minus
(iii) the amount of Seller's capital lease obligations with respect to the
Hospitals, if any, that are assumed by Purchaser pursuant to Section 1.11 of
this Agreement (the "Assumed Capital Lease Obligations"), minus (iv) 16.17
percent (16.17%) of the Sick Pay Amount (the sum of (i), (ii), (iii), and (iv)
being referred to for purposes of this Agreement as the "Cash Purchase Price").
(b) For purposes of this Section 1.2, "Net Working Capital," as of any
date, shall be defined as an amount equal to the difference between the (i)
current assets of the Subsidiaries with respect to the operation of the
Hospitals, which for purposes of this calculation shall include only (a) the
value of the Prepaids, (b) the value of the Inventory, (c) other current assets
associated with the Hospitals to the extent they have value and are reflected on
the Financial Statements, and (d) notes receivable held by any Subsidiary as to
which the borrower thereunder is a physician providing professional medical
services at a Hospital, which notes are not otherwise included in Net Working
Capital as current assets under (a), (b) or (c) immediately above (the
"Physician Notes"), and (ii) the current liabilities of the Subsidiaries with
respect to the operation of the Hospitals, which for purposes of this
calculation shall only include, to the extent assumed, (a) Accounts Payable, (b)
Accrued Expenses, (c) Accrued Payroll, (d) Accrued Paid Time Off, and (e) Other
Current Liabilities (as such terms are utilized on the Interim Balance Sheet).
For purposes of this Section 1.2, "Sick Pay Amount" shall be defined as the
amount of accumulated sick pay and extended sick pay obligations of the
Subsidiaries to the Hired Employees.
(c) At least three (3) calendar days but no more than ten (10)
calendar days prior to the Closing Date, Seller shall prepare and deliver to
Purchaser the latest available unaudited balance sheet of the Subsidiaries with
respect to the operation of the Hospitals (the "Interim Balance Sheet"). The
Interim Balance Sheet shall (i) be prepared in conformity with generally
acceptable accounting principles consistently applied ("GAAP") to the extent
described in Section 2.10 of this Agreement, (ii) include a calculation of Net
Working Capital, Assumed Capital Lease Obligations and the Sick Pay Amount, and
(iii) shall be attached hereto as Schedule 1.2(c). The amounts set forth in the
Interim Balance Sheet shall be subject to adjustment as provided in Sections 1.3
and 1.4 below. The Cash Purchase Price shall be payable by wire transfer of
immediately available funds to Seller to the account(s) specified by Seller to
Purchaser in writing, subject to the terms of Section 1.7.1 below.
1.3 Inventory. Seller shall cause an inventory to be taken of the Inventory
by employees or representatives of Seller or its affiliates, with said inventory
to be taken in accordance with the Subsidiaries' respective policies and
procedures and the policies and procedures used in connection with determining
inventory for purposes of the preparation of the Financial Statements dated as
of May 31, 1999, as near in time as possible to the Closing Date and with the
results extended and adjusted through the Closing Date. Seller shall permit
representatives or employees of Purchaser to observe such inventory process. The
cost of conducting the inventory shall be borne by Seller. All inventory items
shall be valued at the lesser of cost or current market value. The parties
acknowledge that the inventory to be taken
4
<PAGE> 16
pursuant to this Section 1.3 will not be conducted until immediately prior to
the Closing Date and, as such, the results of such inventory will not be
available until some time after the Closing Date. Accordingly, the parties agree
that for purposes of the Interim Balance Sheet, Net Working Capital shall
include the value of the Inventory with respect to the operation of the
Hospitals as reflected by the latest available unaudited balance sheet of the
applicable Subsidiary. For purposes of the Final Balance Sheet, the portion of
Net Working Capital attributable to the Inventory shall be the value of the
Inventory as determined pursuant to this Section 1.3.
1.4 Post-Closing Adjustment to Purchase Price. Within ninety (90) calendar
days after the Closing Date, the final unaudited balance sheet of the Hospitals
as of the Closing Date (the "Final Balance Sheet"), which shall include a
calculation of Net Working Capital, Assumed Capital Lease Obligations and the
Sick Pay Amount as of the Closing Date, shall be prepared by Seller and
delivered to Purchaser. Purchaser, in connection with its review of the Final
Balance Sheet, shall be permitted to review workpapers of Seller or its
accountants with respect to the preparation of the Final Balance Sheet and the
books and records of Seller and its Subsidiaries reasonably related thereto. The
Interim Balance Sheet and the Final Balance Sheet shall be prepared in a manner
consistent with the terms of Section 2.10. If Purchaser disputes any entry on
the Final Balance Sheet that affects the calculation of Net Working Capital,
Purchaser shall notify Seller in writing (which writing shall contain
Purchaser's determination of the amount of the disputed entry) within thirty
(30) business days after Purchaser's receipt of the Final Balance Sheet from
Seller. If the difference between Seller's and Purchaser's respective
calculations of Net Working Capital is equal to or less than five percent (5%)
of the amount of Seller's calculation, Seller's calculation shall be conclusive
and binding as between Purchaser and Seller. If the difference between Seller's
and Purchaser's respective calculations is greater than five percent (5%) of
Seller's calculation, and Purchaser and Seller cannot resolve such dispute
within thirty (30) business days after Purchaser notifies Seller in writing of
such dispute, then the parties shall mutually select a "Big Six" financial
accounting firm other than the two firms then being used by the parties (the
"Independent Auditor"). The Independent Auditor shall review the matter in
dispute and, acting as experts and not as arbitrators, shall promptly decide the
proper amounts of such disputed entries (which decision shall also include a
final recalculation of the Purchase Price). Such decision of the Independent
Auditor shall be conclusive and binding as between Purchaser and Seller, and the
costs of such review shall be borne by both Seller and Purchaser in proportion
to the relevant amount each party's determination has been modified. In the
event that Purchaser disputes the Sick Pay Amount and/or the Assumed Capital
Lease Obligation, the parties shall resolve such dispute in substantially the
same manner as set forth in this Section 1.4.
Within thirty-five (35) business days after Purchaser's receipt of the
Final Balance Sheet from Seller or, if disputed by Purchaser, within five (5)
business days after the earlier of (a) the date Purchaser and Seller finally
resolve such dispute and recalculate the Purchase Price accordingly, or (b) the
date of receipt of a decision from the Independent Auditor (the "Post-Closing
Adjustment Date"), either (i) Seller shall pay Purchaser in cash or in other
immediately available funds the amount of any decrease in the Purchase Price, or
(ii) Purchaser shall pay Seller in cash or in other immediately available funds
the amount of any increase in the Purchase Price. If Purchaser or Seller, as the
case may be, shall fail to make such payment to the other on the Post-Closing
Adjustment Date, then the party failing to receive such amount due to it shall
be
5
<PAGE> 17
entitled to receive interest on such unpaid amount at a per annum rate equal to
the prime rate reported by the Wall Street Journal under "Money Rates" on the
Post-Closing Adjustment Date plus two percent (2%) (or the maximum rate allowed
by law, whichever is less) from such defaulting party, such interest accruing on
each calendar day after the Post-Closing Adjustment Date until payment of such
amount and all interest thereon is made.
1.5 Closing Date. The consummation of the transactions contemplated by this
Agreement ("Closing") shall take place at 9:00 a.m. on the later to occur of (i)
the twenty-eighth (28th) calendar day following the delivery of the audited
financial statements by Seller pursuant to Section 4.8(b) of this Agreement and
(ii) the forty-fifth (45th) calendar day following the Effective Date, at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York 10022 or
such other date, time and place as the parties shall mutually agree (the
"Closing Date"), provided that all conditions precedent and other matters
required to be completed as of the Closing Date have been or will be completed
on such date. In the event all conditions precedent and other matters required
to be completed as of the Closing Date have not been completed on such date, the
Closing Date shall occur on the third (3rd) business day following the last to
occur of such conditions or matters. The Closing with respect to the Hospitals
shall be deemed to have occurred and to be effective as between the parties as
of 12:01 a.m. (determined by reference to the local time zone in which such
Hospital is located) on the next day after the Closing Date (the "Effective
Time").
1.6 Items to be Delivered by Seller at Closing.
At or before the Closing, Seller shall cause each Subsidiary to
deliver to Purchaser the following, duly executed by Seller and such Subsidiary
where appropriate:
1.6.1 General Assignment, Bill of Sale and Assumption of Liabilities
in the form of Exhibit 1.6.1 attached hereto (the "Bills of Sale");
1.6.2 Assignment and Assumption of Real Estate Leases in the form of
Exhibit 1.6.2 attached hereto (the "Real Estate Assignments") with respect to
each Leased Real Property;
1.6.3 Limited Warranty Deed(s) (or such other deed comparable to
limited warranty deed(s) as is applicable to the jurisdiction at issue) in the
form of Exhibit 1.6.3 attached hereto;
1.6.4 favorable original certificates of good standing, or comparable
status, of Seller and the Subsidiary, issued by the State of Nevada with respect
to Seller and the respective states of incorporation and organization of such
Subsidiary, dated no earlier than a date which is seven (7) calendar days prior
to the Closing Date;
1.6.5 an opinion of Seller's in-house counsel in substantially the
form attached hereto as Exhibit 7.8;
1.6.6 a certificate of the President or any Vice President of Seller
certifying to Purchaser (i) the accuracy in all material respects of the
representations and warranties set forth in Article 2 hereof and compliance with
Seller's covenants set forth in this Agreement, (ii) that all material consents
and approvals that are required from any person, entity, governmental body
6
<PAGE> 18
or regulatory agency in connection with the consummation of the transactions
contemplated by this Agreement by Seller and the Subsidiaries have been
obtained, and (iii) that all of the conditions contained in Article 6 have been
satisfied or waived;
1.6.7 a certificate of the corporate Secretary of Seller (and of the
corporate Secretary of each Subsidiary and the corporate Secretary of each
general partner of any Subsidiary which is a partnership) certifying to
Purchaser (i) the incumbency of the officers of Seller (and of each Subsidiary
and of each such general partner) on the Effective Date and on the Closing Date
and bearing the authentic signatures of all such officers who shall execute this
Agreement and any additional documents contemplated by this Agreement and (ii)
the due adoption and text of the resolutions of the Board of Directors of
Seller, the sole director of each corporate Subsidiary, the sole director of the
general partner(s) of each partnership Subsidiary and of the shareholder(s)
and/or partners, as applicable of each Subsidiary authorizing (a) the transfer
of the Assets and Assumed Obligations by each Subsidiary to Purchaser and (b)
the execution, delivery and performance of this Agreement and all ancillary
documents and instruments by Seller and each Subsidiary, and that such
resolutions have not been amended or rescinded and remain in full force and
effect on the Closing Date;
1.6.8 the Group Purchasing Contract which, except as noted in Section
5.9, shall be substantially in the form of Exhibit 5.9 attached hereto (the
"Group Purchasing Contract");
1.6.9 if requested by Purchaser, the Transitional Services Agreements,
which shall be substantially in the form set forth on Exhibit 1.6.9 attached
hereto with respect to the License Agreement for Policy and Procedure Manuals,
and which are to be negotiated by the parties hereto within five (5) business
days of the Effective Date with respect to the Information Technology Transition
Services Agreement and the Management Services Agreement (the "Transitional
Services Agreements");
1.6.10 the Business Services Agreement, which shall be substantially
in the form of Exhibit 1.6.10 attached hereto (the "Business Services
Agreement"), pursuant to which Purchaser will bill Seller's accounts receivable
for sixty (60) days following the Closing Date;
1.6.11 the Employee Leasing Agreement, which shall be substantially in
the form of Exhibit 1.6.11 attached hereto (the "Employee Lease Agreement")
pursuant to which Seller shall lease the Hospital Employees to Purchaser, as
contemplated by Section 5.3(a) of this Agreement;
1.6.12 UCC termination statements for any and all financing statements
(which do not correspond to an Assumed Obligation) filed with respect to the
Assets;
1.6.13 an estoppel certificate from the landlord with respect to each
Real Property Lease of any Acute Care Hospital or an entire MOB (as opposed to
an office or unit in a MOB), or a Real Property Lease that constitutes a
material ground lease, as to which Seller or any Subsidiary is lessee in the
form of Exhibit 1.6.13 hereto;
1.6.14 a certificate of Seller to the extent required under the
Foreign Investment and Real Property Tax Act (FIRPTA); and
7
<PAGE> 19
1.6.15 such other instruments, certificates, consents or other
documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
1.7 Items to be Delivered by Purchaser at Closing.
At or before the Closing, Purchaser shall execute and deliver or cause
to be delivered to Seller the following, duly executed by Purchaser where
appropriate:
1.7.1 payment of the Cash Purchase Price based upon the Interim
Balance Sheet (subject to adjustment as described in Section 1.4), as adjusted
to reflect the prorations provided in Section 1.8 of this Agreement.
1.7.2 a certificate of the President or any Vice President of
Purchaser certifying to Seller (i) the accuracy in all material respects of the
representations and warranties set forth in Article 3 hereof and compliance with
Purchaser's covenants set forth in this Agreement, (ii) that all material
consents and approvals that are required from any person, entity, governmental
body or regulatory agency in connection with the consummation of the
transactions contemplated by this Agreement by Purchaser have been obtained, and
(iii) that all of the conditions contained in Article 7 have been satisfied or
waived;
1.7.3 a certificate of the Secretary of Purchaser certifying to Seller
(i) the incumbency of the officers of Purchaser on the Effective Date and on the
Closing Date and bearing the authentic signatures of all such officers who shall
execute this Agreement and any additional documents contemplated by this
Agreement and (ii) the due adoption and text of the resolutions of the governing
board of Purchaser authorizing the execution, delivery and performance of this
Agreement and all ancillary documents and instruments by Purchaser, and that
such resolutions have not been amended or rescinded and remain in full force and
effect on the Closing Date;
1.7.4 an opinion of Purchaser's counsel in substantially the form
attached hereto as Exhibit 6.5;
1.7.5 favorable original certificate of good standing, or comparable
status, of Purchaser, issued by the Delaware Secretary of State dated no earlier
than a date which is seven (7) calendar days prior to the Closing Date;
1.7.6 the Group Purchasing Contract;
1.7.7 if requested by Purchaser, the Transitional Services Agreements;
1.7.8 the Business Services Agreement;
1.7.9 the Employee Lease Agreement; and
1.7.10 such other instruments, certificates, consents or other
documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
8
<PAGE> 20
1.8 Prorations and Utilities. To the extent not otherwise prorated pursuant
to this Agreement, or as reflected in Net Working Capital on the Interim Balance
Sheet or the Final Balance Sheet (provided that any category of proration
reflected on the Interim Balance Sheet shall also be reflected on the Final
Balance Sheet), Purchaser and Seller shall prorate (as of the Effective Time),
if applicable, real estate and personal property lease payments, real estate and
personal property taxes, assessments and other similar charges against real
estate, plus all other income and expenses which are normally prorated upon the
sale of assets of a going concern. As to power and utility charges, "final
readings" as of the Closing Date shall be ordered from the utilities; the cost
of obtaining such "final readings," if any, to be paid for equally by Seller and
Purchaser.
1.9 Transfer of Seller Assets. On the Closing Date, Seller shall cause each
Subsidiary to assign, transfer, convey and deliver to Purchaser, and Purchaser
shall acquire, all of each Subsidiary's right, title and interest in and to only
the following assets and properties, free and clear of all Liens (other than
Permitted Liens) as such assets shall exist on the Closing Date with respect to
the operation of any Hospital, such transfer being deemed to be effective at the
Effective Time (collectively, the "Assets"):
(a) all of the real property that is owned by such Subsidiary and used
with respect to the operation of any Hospital that is described in Schedule
1.9(a) (such description to include a legal description and address), and
appurtenances belonging thereto (collectively, the "Owned Real Property");
(b) all of the real property that is leased by such Subsidiary and
used with respect to the operation of any Hospital that is described in Schedule
1.9(b) together with all buildings, improvements and fixtures located thereupon
and all construction in progress (collectively, the "Leased Real Property") (the
Owned Real Property and the Leased Real Property are collectively referred to
herein as the "Real Property");
(c) all of the tangible personal property owned by such Subsidiary
with respect to the operation of any Hospital, including all equipment,
furniture, fixtures, machinery, vehicles, office furnishings, and leasehold
improvements (the "Personal Property"), including, without limitation, the
Personal Property described in Schedule 1.9(c);
(d) all of such Subsidiary's rights, to the extent assignable or
transferable, to all licenses, permits, approvals, certificates of need,
certificates of exemption, franchises, accreditations and registrations and
other governmental licenses, permits or approvals issued to such Subsidiary with
respect to the operation of any Hospital (the "Licenses"), including, without
limitation, the Licenses described in Schedule 1.9(d);
(e) all of such Subsidiary's interest, to the extent assignable or
transferable, in and to all real property and personal property leases with
respect to the operation of any Hospital (the "Leases"), including, without
limitation, those leases described in Schedule 1.9(e);
(f) all of such Subsidiary's interest in and to all contracts and
agreements (including, but not limited to, purchase orders) with respect to the
operation of any Hospital (the "Contracts") including, without limitation, those
Contracts described in Schedule 1.9(f);
9
<PAGE> 21
provided, however, that with respect to multi-hospital contracts as to which one
or more of the three Acute Care Hospitals located in Arizona and one or more of
Seller's other acute care hospitals located in Arizona (collectively, the "Five
Arizona Hospitals") participate, the parties shall make a joint determination
whether it is appropriate to assign such contracts to Purchaser or allow them to
remain as is, provided in either case that the parties shall use commercially
reasonable efforts to cause the benefits of all such contracts to continue to be
realized following the Closing Date by all Five Arizona Hospitals in the same
manner as was realized prior to the Closing Date, subject to the concomitant
obligations of each of the Five Arizona Hospitals under the relevant
multi-hospital contracts;
(g) all of those advance payments, prepayments, prepaid expenses,
deposits and the like which exist as of the Closing Date, subject to the
prorations provided in Section 1.8 of this Agreement, which were made with
respect to the operation of any Hospital and with respect to which Purchaser
will receive the benefit after the Closing Date (the "Prepaids"), the current
categories and amounts of which are set forth on Schedule 1.9(g);
(h) except as excluded by Section 1.10(j), all inventories of
supplies, drugs, food, janitorial and office supplies and other disposables and
consumables located at any of the Hospitals, or used with respect to the
operation of any of the Hospitals (the "Inventory");
(i) all documents, records, operating manuals, files and computer
software with respect to the operation of any of the Hospitals, including,
without limitation, all patient records, medical records, employee records,
financial records with respect to the operation of any of the Hospitals,
equipment records, construction plans and specifications, and medical and
administrative libraries;
(j) to the extent assignable, all rights in all warranties of any
manufacturer or vendor in connection with the Personal Property;
(k) all goodwill of the businesses evidenced by the Assets;
(l) all insurance proceeds arising in connection with property damage
to the Assets occurring after the Effective Date and on or prior to the Closing
Date, to the extent not expended on the repair or restoration of the Assets;
(m) the names, symbols and telephone numbers used with respect to the
operation of any of the Hospitals, including, without limitation, the names of
the Hospitals set forth on Schedule 1.9(m) and all variants thereof;
(n) any current assets of the Subsidiaries with respect to the
operation of any of the Hospitals (which are not otherwise specifically
described above in this Section 1.9) which are included in Net Working Capital,
as determined pursuant to Sections 1.2 and 1.4;
(o) all claims of Seller or any Subsidiary against third parties with
respect to the Assets (whether known or unknown, contingent or otherwise)
arising after the Effective Date and on or prior to the Closing Date, other than
those claims as to which Seller or such Subsidiary has a right to money damages
based on a prior expenditure of money with respect to such Assets; and
10
<PAGE> 22
(p) all equity interests held by the Subsidiaries that are described
on Schedule 1.9(p), including the capital stock of Beaumont Newco as
contemplated by Section 5.12;
PROVIDED, HOWEVER, that the Assets shall not include the Excluded Assets as
defined in Section 1.10 below.
1.10 Excluded Assets. Notwithstanding anything to the contrary in Section
1.9, Seller and the Subsidiaries shall retain all assets owned directly or
indirectly by them (or any of their respective affiliates) which are not among
the Assets, including without limitation the following assets of Seller or any
Subsidiary (collectively, the "Excluded Assets"):
(a) cash and short-term investments;
(b) all intercompany receivables of Seller or any Subsidiary with any
of their affiliates;
(c) any current assets of the Subsidiaries with respect to the
operation of any of the Hospitals which are not included in Net Working Capital,
as determined pursuant to Sections 1.2 and 1.4;
(d) computer software, programs and hardware which is proprietary to
Seller, any Subsidiary and/or their respective affiliates, data processing
system manuals and licensed software materials, as more particularly described
in Schedule 1.10(d);
(e) all of Seller's, any Subsidiary's, or any affiliate of Seller's
proprietary manuals, marketing materials, policy and procedure manuals, standard
operating procedures and marketing brochures, data and studies or analyses;
(f) any asset which would revert to the employer upon the termination
of any Seller Plan, including assets representing a surplus or overfunding of
any Seller Plan, including, without limitation, any asset under the AMI defined
benefit plan;
(g) all national or regional contracts of Seller, any Subsidiary or
any respective affiliate thereof which are made available to any of the
Hospitals by virtue of the Hospitals being an affiliate of Seller;
(h) the names "Tenet Healthcare Corporation," "Tenet," "Tenet
HealthSystem," "OrNda HealthCorp," and any other names or symbols not used
primarily at any of the Hospitals, all abbreviations and variations thereof and
service marks, symbols and logos related thereto, together with any promotional
material, stationery, supplies or other items of inventory bearing such names or
symbols or abbreviations or variations thereof;
(i) all current contracts between any Subsidiary and any affiliate of
Seller with respect to the operation of any Hospital, except those approved in
writing by Seller and Purchaser to be assigned to Purchaser after the Closing
Date;
11
<PAGE> 23
(j) the portions of Inventory, Prepaids and other Assets disposed of,
expended or canceled, as the case may be, by any Subsidiary after the Effective
Date and on or prior to the Closing Date in the ordinary course of business;
(k) assets owned and provided by vendors of services or goods to any
of the Hospitals;
(l) all accounts, notes, interest and other receivables of Seller and
any Subsidiary (other than the Physician Notes), and all claims, rights,
interests and proceeds related thereto, including all accounts and other
receivables, and cost report settlements related thereto, arising from the
rendering of services to inpatients and outpatients at any Hospital, billed and
unbilled, recorded and unrecorded, for services provided by Seller or any
Subsidiary while owner of the Assets whether payable by private pay patients,
private insurance, third party payors, Medicare, Medicaid, CHAMPUS, Blue Cross,
or by any other source ("Accounts Receivable");
(m) all documents, records, correspondence, workpapers and other
documents relating to the Accounts Receivable, the Subsidiaries' Cost Reports or
Subsidiaries' Agency Settlements (the "Receivable Records");
(n) all claims, rights, interests and proceeds with respect to state
or local tax refunds (including but not limited to property tax) resulting from
periods ending on or before the Closing Date, and the right to pursue appeals of
same;
(o) any assets identified in Schedule 1.10(o); and
(p) any Contract identified by Purchaser as likely to present a
significant risk of noncompliance with applicable federal or state healthcare
laws, provided, however, that Seller shall be afforded reasonable notice of, and
an opportunity to cure, any such legal issues prior to Closing.
1.11 Assumed Obligations. On the Closing Date, Seller and the Subsidiaries
shall assign, and Purchaser shall assume and agree to discharge after the
Closing, the following liabilities and obligations of Seller and/or any
Subsidiary and only the following liabilities and obligations (collectively, the
"Assumed Obligations"):
(a) all current liabilities of the Subsidiaries with respect to the
operation of any of the Hospitals on or prior to the Closing Date to the extent
included in Net Working Capital, as determined pursuant to Sections 1.2 and 1.4;
(b) the Contracts, but only to the extent of the obligations arising
thereunder with respect to events or periods after the Closing Date; provided,
however, that with respect to multi-hospital contracts in which the Five Arizona
Hospitals participate, the parties shall make a joint determination whether it
is appropriate to assign such contracts to Purchaser or allow them to remain as
is, provided in either case that the parties shall use commercially reasonable
efforts to cause the benefits of all such contracts to continue to be realized
following the Closing Date by all Five Arizona Hospitals in the same manner as
was realized prior to the Closing Date, subject to the concomitant obligations
of each of the Five Arizona Hospitals under the relevant multi-hospital
contracts;
12
<PAGE> 24
(c) the Leases, including the capital lease obligations of Seller with
respect to the Hospitals listed on Schedule 1.11(c), but only to the extent of
the obligations arising thereunder with respect to events or periods after the
Closing Date;
(d) any and all obligations of Seller and the Subsidiaries under the
Worker Adjustment and Retraining Notification Act ("WARN") with respect to the
operation of the Hospitals as a result of (i) the acts of Purchaser or any
affiliate of Purchaser after the Transition Date or (ii) Purchaser's breach of
its covenant with respect to the Hired Employees as set forth in Section 5.3;
(e) the Sick Pay Amount, and all accrued vacation and holiday pay
liabilities of the Subsidiaries (and their respective affiliates) with respect
to the Hired Employees (the "Accrued Paid Time Off"); provided, however, that
with respect to the Accrued Paid Time Off, only to the extent accrued in Net
Working Capital;
(f) all utilities being furnished to the Assets, subject to the
prorations provided in Section 1.8;
(g) [INTENTIONALLY OMITTED]
(h) [INTENTIONALLY OMITTED]; and
(i) any other obligations and liabilities identified in Schedule
1.11(i).
1.12 Excluded Liabilities. Notwithstanding anything to the contrary in this
Agreement, Purchaser shall not assume or become responsible for any of Seller's
or the Subsidiaries' duties, obligations or liabilities that are not assumed by
Purchaser pursuant to the terms of this Agreement, the Bills of Sale or the Real
Estate Assignment(s), regardless of whether such obligation or liability is
known or unknown, fixed or contingent, and regardless of whether such liability
arises from contract, tort or otherwise (the "Excluded Liabilities"), and Seller
and the Subsidiaries shall remain fully and solely responsible for, and
indemnify Purchaser from and against in accordance with Section 10.2 of this
Agreement, all debts, liabilities, contract obligations, expenses, obligations
and claims of any nature whatsoever related to the Assets or the Hospitals
unless assumed by Purchaser under this Agreement, in the Bills of Sale or in the
Real Estate Assignment(s). The Excluded Liabilities shall include, without
limitation:
(a) any current liabilities of the Subsidiaries with respect to the
operation of any of the Hospitals on or prior to the Closing Date (i) which are
not included in Net Working Capital, as determined pursuant to Sections 1.2 and
1.4 and (ii) which are not otherwise specifically included in the Assumed
Obligations;
(b) all liabilities arising out of or relating to any act, omission,
event or occurrence connected with the use, ownership or operation of any of the
Hospitals or any of the Assets on or prior to the Closing Date (including,
without limitation, any liabilities arising from pre-Closing violations of
Environmental Laws or release of Hazardous Substances), other than as
specifically included in the Assumed Obligations;
13
<PAGE> 25
(c) other than as specifically included in the Assumed Obligations,
all liabilities arising out of or relating to any act, omission, event or
occurrence connected with Seller, the Subsidiaries or the operations or
activities of Seller or any of the Subsidiaries, (including all liabilities
arising out of or relating to any claim, proceeding or investigation
(collectively, "Litigation") arising out of or relating to any such act,
omission, event or occurrence including without limitation the Litigation set
forth on Schedule 2.11);
(d) all liabilities of Seller or any of the Subsidiaries in connection
with claims of professional malpractice to the extent arising out of or relating
to acts, omissions, events or occurrences on or prior to the Closing Date;
(e) subject to reimbursement by Purchaser to the extent contemplated
by the Employee Leasing Agreement, all liabilities of Seller or any of the
Subsidiaries for their respective shares of matching contributions for eligible
beneficiaries' 401(k) plans, Section 125 plans and other Seller Plans and all
administrative costs associated with such welfare benefit plans arising on or
prior to the Transition Date;
(f) all liabilities of Seller and/or any Subsidiary relating to the
Subsidiaries' Cost Reports with respect to periods ending on or prior to the
Closing Date;
(g) all liabilities of Seller or any of the Subsidiaries for
violations of any law, regulation or rule to the extent arising from acts or
omissions on or prior to the Closing Date, including, without limitation, those
pertaining to Medicare and Medicaid fraud or abuse;
(h) all liabilities of Seller or any of the Subsidiaries for
commissions or fees owed to any finder or broker in connection with the
transactions contemplated hereunder, or for any other expenses incurred
hereunder, except to the extent expressly provided in this Agreement to the
contrary (including but not limited to Section 12.12 of this Agreement);
(i) all liabilities due to third party payors, including without
limitation, private insurers, private pay parties, governmental payors,
including Medicare, Medicaid, CHAMPUS, FEHBA, RRRB or other third party payors
("Third Party Payors"), including cost report reimbursements and settlements,
repayments, fines or other liabilities or obligations, to the extent they relate
to the periods ending on or prior to and including the Closing Date, and any
liability arising pursuant to a Third Party Payor program as a result of the
consummation of the transactions contemplated herein, including, without
limitation, recapture of previously reimbursed expenses;
(j) subject to Sections 1.8 and 12.12 of this Agreement, all federal,
state, foreign or local tax liabilities or obligations of Seller or any of the
Subsidiaries, or attributable to any capital Asset, in respect of periods ending
on or prior to Closing, including, without limitation, any income tax, any
franchise tax, any tax recapture, any sales and/or use tax, any state and local
recording fees and taxes which may arise upon the consummation of the
transaction contemplated herein and any FICA, FUTA, workers' compensation and
any and all other taxes or amounts due and payable as a result of the exercise
by any of Seller's employees of such employees' right to vacation, sick leave
and holiday benefits accrued while in the employ of Seller (to the extent not
included in the Net Working Capital adjustment);
14
<PAGE> 26
(k) subject to reimbursement by Purchaser to the extent contemplated
by the Employee Leasing Agreement, all liability for any and all claims by or on
behalf of Seller's or any of the Subsidiaries' employees to the extent such
liability relates to the period ending on or prior to the Transition Date,
including, without limitation, liability for any pension, profit sharing,
deferred compensation or any other employee health and welfare benefit plans,
liability for any EEOC claim, wage and hour claim, unemployment compensation
claim or workers' compensation claim, and liability for all employee wages and
benefits, including, without limitation, accrued vacation, sick leave and
holiday pay and taxes or other liability related thereto in respect of Seller's
employees (to the extent not included in the Net Working Capital adjustment);
(l) all liabilities or obligations arising at any time under any
contract or commitment that is not assumed by Buyer;
(m) all liabilities or obligations arising out of Seller's breach of
any Contract prior to Closing; and
(n) any obligation or liability asserted under the federal Hill-Burton
program or other restricted grant and loan programs with respect to the
ownership or operation of the Hospitals.
1.13 [INTENTIONALLY OMITTED]
1.14 Disclaimer of Warranties. Except as expressly set forth in Article 2
hereof, the Assets transferred to Purchaser will be sold by Seller and the
Subsidiaries and purchased by Purchaser in their physical condition on the
Closing Date, "AS IS," WITH NO WARRANTY OF HABITABILITY OR FITNESS FOR
HABITATION, with respect to the Real Property, land, buildings and improvements,
and WITH NO WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, with respect to the
physical condition of the Personal Property and Inventory, any and all of which
warranties (both express and implied) Seller hereby disclaims. All of the
foregoing real and personal property shall be further subject to normal wear and
tear on the land, buildings, improvements and equipment and normal and customary
use of the inventory and supplies in the ordinary course of business up to the
Closing.
15
<PAGE> 27
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, Seller hereby
represents, warrants and covenants to Purchaser as to the following matters,
except as disclosed in the disclosure schedule as of the Effective Date, as
amended pursuant to the terms of this Agreement (the "Disclosure Schedule")
hereby delivered by Seller to Purchaser. Except as otherwise provided herein,
Seller shall be deemed to remake all of the following representations,
warranties and covenants as of the Closing:
2.1 Authorization. Seller has full corporate power and authority to enter
into this Agreement, and Seller has, and each Subsidiary has or will have prior
to the Closing, full power and authority to carry out the transactions
contemplated hereby.
2.2 Binding Agreement. All corporate and other actions required to be taken
by Seller and each Subsidiary to authorize their respective execution, delivery
and performance of this Agreement, all documents executed by each of Seller and
any Subsidiary which are necessary to give effect to this Agreement, and all
transactions contemplated hereby, have been duly and properly taken or obtained
by Seller, and have been taken or obtained or will be duly and properly taken or
obtained prior to the Closing Date, by each Subsidiary. No other corporate or
other action on the part of the Seller or any Subsidiary, as applicable, is
necessary to authorize the execution, delivery and performance of this
Agreement, all documents necessary to give effect to this Agreement and all
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Seller and, assuming due and valid execution by
Purchaser, this Agreement constitutes a valid and binding obligation of Seller
enforceable in accordance with its terms subject to (a) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect and (b) limitations on the
enforcement of equitable remedies.
2.3 Organization and Good Standing; No Violation.
(a) Except with respect to the Subsidiaries which are partnerships,
each of Seller and the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada with respect
to Seller and in the state of its incorporation (which is indicated in Schedule
A-1) with respect to each Subsidiary. Each Subsidiary which is a partnership is
duly organized and validly existing under the laws of the state of its
organization (which is indicated in Schedule A-1). Each of Seller and the
Subsidiaries has full power and authority to own, operate and lease its
properties and to carry on its businesses as now conducted.
(b) Neither the execution and delivery by Seller of this Agreement nor
the consummation of the transactions contemplated hereby by Seller or any of the
Subsidiaries nor compliance with any of the material provisions hereof by Seller
or any of the Subsidiaries, will (i) violate, conflict with or result in a
breach of any material provision of Seller's or any of the Subsidiaries'
articles of incorporation or bylaws, respectively or other organizational
documents
16
<PAGE> 28
with respect to Subsidiaries which are partnerships, (ii) violate any order,
writ, injunction, ruling or material law of any court or governmental authority,
United States or foreign, or cause the suspension or revocation of any
governmental license or authorization applicable to or binding upon or affecting
Seller, any of the Subsidiaries, any of the Assets or the operation of the
businesses of the Hospitals or (iii) except for the applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act"), and as otherwise described
in Section 2.3(b) of the Disclosure Schedule, require any material consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any governmental or regulatory authority.
2.4 Contracts and Leases.
(a) Schedule 2.4(a) sets forth each Contract to which Seller or any
Subsidiary with respect to the operations of the Hospitals) is a party or is
bound or by which any of the Assets is bound or subject, other than (i) such
Contracts as may be terminated by Purchaser at any time after the Closing
without liability, penalty or premium upon notice of thirty (30) days or less
and (ii) such Contracts which will not result in future annual expenditures or
receipts by the Hospitals at any time of $10,000 or more (the Contracts set
forth on Schedule 2.4(a) are referred to herein as "Material Contracts").
Notwithstanding the foregoing, each of the following Contracts is set forth on
Schedule 2.4(a):
(i) employment agreements and severance agreements
with individuals that are not physicians;
(ii) all agreements with physicians;
(iii) collective bargaining agreements and other
Contracts with any labor union;
(iv) covenants not to compete or restrictive covenants;
(v) equipment leases treated as capital leases for
financial accounting purposes;
(vi) leases relating to real property or interests in
real property as to which Seller or any Subsidiary
is lessee; or
(vii) joint ventures in the form of partnerships,
limited liability companies, corporations in which
Seller or any Subsidiary has at least a 20% equity
interest.
(b) Each Material Contract is in full force and effect and is the
valid and binding obligation of Seller or such Subsidiary and, to the knowledge
of Seller, of each other party thereto, except where a failure of the Material
Contracts to be in full force and effect is not material, individually or in the
aggregate, to the operation of any particular Hospital.
2.5 Required Consents. Neither Seller nor any Subsidiary is a party to or
bound by, nor are any of the Assets subject to, any mortgage, material Lien,
deed of trust, or any material
17
<PAGE> 29
lease, agreement or instrument, or any material order, judgment or decree which
(a) requires the consent of another to the execution of this Agreement, (b)
requires the consent of another to consummate the transactions contemplated by
this Agreement, or (c) makes unduly burdensome the consummation of the
transactions contemplated by this Agreement. For purposes of clause (b)
immediately above, "material" leases as to which Seller or a Subsidiary is
lessee shall include only those leases as to which Seller will deliver landlord
estoppels as contemplated by Section 1.6.13 of this Agreement. The consummation
of the transactions contemplated by this Agreement will not result in a breach
of any term or provision of, or constitute (with or without notice or lapse of
time or both) a default under, any material agreement or instrument to which
Seller or any Subsidiary is a party, or which is binding on Seller or any
Subsidiary, or to which the Assets are subject. The consummation of the
transactions contemplated by this Agreement will not give any other party to any
such material agreement or instrument a right to cancel or terminate the same, a
right to modify or amend the terms thereof, or result in an acceleration of the
maturity or performance of any obligation under any such material agreement or
instrument. No such breach, default, cancellation, termination, modification or
amendment or acceleration described in this Section 2.5 would prevent Seller or
any Subsidiary from consummating the transactions contemplated by this
Agreement, or would result in the creation of any lien, security interest,
encumbrance, charge, loss or liability on any material assets of Seller or any
Subsidiary, including without limitation the Assets.
2.6 Compliance With Laws and Contracts.
(a) Except as set forth in Schedule 2.6(a), with respect to the
operation of the Hospitals, Seller and each Subsidiary has the lawful authority
and all material state, federal, special or local governmental authorizations,
licenses or permits in good standing required to conduct their respective
businesses, and such businesses presently are being conducted in compliance with
all applicable laws, statutes, ordinances, orders, rules, regulations, policies,
guidelines, licenses, certificates, certificates of need, judgments or decrees
of all judicial or governmental authorities (federal, state, local, foreign or
otherwise), except where the failure to be in such compliance would not be
material to the operation of any particular Hospital. Neither Seller nor any
Subsidiary has, with respect to the operation of the Hospitals, been charged
with or given notice of, and to the best knowledge of Seller, neither Seller nor
any Subsidiary, with respect to the operation of the Hospitals, is under
investigation with respect to, any violation of, or any obligation to take
remedial action under, any applicable (i) material law, statute, ordinance,
rule, regulation, policy or guideline promulgated, (ii) material license,
certificate or certificate of need issued, or (iii) order, judgment or decree
entered, by any federal, state, local or foreign court or governmental authority
relating to any Hospital or the business of any particular Hospital.
(b) Seller's and each Subsidiary's ownership and operation of the
respective Hospitals and the Assets are and have been in compliance with all
Environmental Laws (as defined in Section 2.6(c) below), except where the
failure to be in such compliance would not be material to the operation of any
particular Hospital. Each Subsidiary has obtained all licenses, permits and
approvals necessary or required under all applicable Environmental Laws (the
"Environmental Permits") for the ownership and operation of its respective
Hospitals and the Assets. All such Environmental Permits are in effect and, to
Seller's knowledge, no action to revoke or modify any of such Environmental
Permits is pending. There is not now pending or, to
18
<PAGE> 30
Seller's knowledge, threatened, any claim, investigation or enforcement action
by any governmental authority (whether judicial, executive or administrative)
concerning Seller's or any Subsidiary's potential liability under Environmental
Laws in connection with the ownership or operation of the Hospitals or the
Assets. To Seller's knowledge, there has not been a release or threatened
release of any Hazardous Substance at, upon, in, under or from the Hospitals or
the Assets at any time. At no time during each Subsidiary's ownership of its
respective Real Property, and to Seller's knowledge at no time during others'
ownership of the Real Property, have any Hazardous Substances been present on
the Real Property except as may be utilized as a matter of course in hospital
operations and in accordance with applicable Environmental Laws.
(c) For the purposes of this Agreement, the term "Environmental Laws"
shall mean all state, federal or local laws, ordinances, codes or regulations
relating to Hazardous Substances or to the protection of the environment,
including, without limitation, laws and regulations relating to the storage,
treatment and disposal of medical and biological waste. For purposes of this
Agreement, the term "Hazardous Substances" shall mean (i) any hazardous or toxic
waste, substance, or material defined as such in (or for the purposes of) any
Environmental Laws, (ii) asbestos-containing material, (iii) medical and
biological waste, (iv) polychlorinated biphenyls, (v) petroleum products,
including gasoline, fuel oil, crude oil and other various constituents of such
products, and (vi) any other chemicals, materials or substances, exposure to
which is prohibited, limited or regulated by any Environmental Laws.
(d) Seller and each Subsidiary have performed all material obligations
relating to the Assets and the business of the Hospitals (including under all
Material Contracts), and are not in breach or default, nor do any circumstances
exist which with or without notice or lapse of time, or both, would result in
breach or default, nor to Seller's knowledge, is there any claim of such breach
or default with respect to any obligation to be performed, under any contract,
lease, guaranty, indenture, loan agreement, document or other agreement or
arrangement relating to the Assets or the business of the Hospitals, including
the Leases and Contracts, which breach or default or its consequences might be
material to the operation of any particular Hospital.
2.7 Title; Sufficiency.
(a) Each Subsidiary has good and marketable fee simple or leasehold
title, as the case may be, to its respective Real Property. Each Subsidiary has
good and valid title to its respective Personal Property, which individually or
in the aggregate is material to the condition (financial or otherwise),
operations or the business of any particular Hospital.
(b) The Real Property and the Personal Property is held by each
respective Subsidiary free and clear of all Liens, and is not, in the case of
the Real Property, subject to any rights-of-way, building or use restrictions,
exceptions, variances, reservations or limitations of any nature whatsoever
except, with respect to such properties, (i) liens for current real property
taxes and assessments not yet due and payable, (ii) mechanics', carriers',
workmen's, repairmen's and other statutory liens, rights of way, building or use
restrictions, exceptions, easements, covenants, variances, reservations and
other limitations of any kind, if any, which do not materially impair the
ordinary business operations of any particular Hospital or for which, in respect
of matters affecting title to the Real Property, title insurance coverage has
been obtained, and (iii) other such encumbrances as are set forth in Schedule
2.7(b) (collectively, "Permitted
19
<PAGE> 31
Liens"). None of the Real Property is subject to a pending, or to Seller's
knowledge threatened, condemnation or similar proceeding. None of the Real
Property is subject to any option, right of first refusal or other contractual
right to sell, dispose of or lease such Real Property, except as set forth in
Schedule 2.7(b).
(c) The Inventory with respect to each Hospital is, and at the Closing
will be, maintained in such quality and quantities as is consistent with such
Hospital's historical practices.
(d) The Assets and the Excluded Assets comprise substantially all of
the property, assets, licenses, rights and agreements used in the conduct of the
businesses and operation of the Hospitals.
2.8 Certain Representations With Respect to the Hospitals.
(a) [INTENTIONALLY OMITTED]
(b) The Hospitals are duly accredited by the Joint Commission on
Accreditation of Healthcare Organizations ("JCAHO") for the periods set forth in
Schedule 2.8(b). With respect to each Hospital, Seller has previously delivered
to Purchaser or will promptly deliver after the Effective Date, a true and
complete copy of the most recent JCAHO accreditation survey report and
deficiency list, if any; the most recent Statement and Deficiencies and Plan of
Correction on Form HCFA-2567; the most recent state licensing report and list of
deficiencies, if any; the most recent fire marshall's survey and deficiency
list, if any, and the corresponding plans of correction or other responses.
(c) The Hospitals are certified for participation in the Medicare,
Medicaid and CHAMPUS programs, have current and valid provider contracts with
each of such programs, are in substantial compliance with the conditions of
participation of each of such programs and have received all approvals or
qualifications necessary for capital reimbursement of the Assets. Neither Seller
nor any of the Subsidiaries have received notices from the regulatory
authorities which enforce the statutory or regulatory provisions in respect of
any of the Medicare, Medicaid or CHAMPUS programs of any pending or threatened
investigations with respect to the operation of the Hospitals. Neither Seller
nor the Subsidiaries have been excluded from the Medicare, Medicaid or CHAMPUS
programs or any state health care program, and there is no pending or, to
Seller's knowledge, threatened exclusion action against Seller or the
Subsidiaries.
(d) Seller has delivered or will promptly deliver to Purchaser true
and exact copies of (i) all cost reports which Seller or any of the Subsidiaries
filed with Medicare and Medicaid for the last three (3) years, as well as all
material correspondence and other material documents relating to any disputes
and/or settlements with Medicare or Medicaid within the last three (3) years.
Notices of Program Reimbursement have been issued by the applicable fiscal
intermediary with respect to the cost reports of the Hospitals for Medicare,
Medicaid (if required) and Blue Cross (if required) through the periods set
forth in Schedule 2.8(d) (the "Audit Periods"). Each of such reports was timely
filed. Neither Seller nor any Subsidiary has received notice of any material
dispute between any Hospital and the applicable governmental agency or private
entity, or their intermediaries or representatives, regarding such cost reports
for
20
<PAGE> 32
periods subsequent to the periods specified in Schedule 2.8(d) and, to the
knowledge of Seller, there are no pending or threatened material claims by any
of such programs against any Hospital with respect to the Audit Periods or any
period thereafter. To Seller's knowledge, none of Seller or the Subsidiaries is
subject to any pending but unassessed Medicare or Medicaid claim payment
adjustments, except to the extent Seller or the Subsidiaries have established
adequate reserves for such adjustments.
(e) With respect to the operation of the Hospitals, neither Seller nor
any Subsidiary has any outstanding loan, grant or loan guarantee pursuant to the
Hill-Burton Act (42 USC Section 291a, et seq.) and the transaction contemplated
hereby will not result in any obligation on the part of the Purchaser or the
Hospitals to repay any such loans, grants, or loan guarantee or provide
uncompensated care in consideration thereof.
(f) Seller has previously delivered to Purchaser, with respect to each
Hospital, a copy of the blank forms generally used with respect to medical staff
privilege and membership application or delineation or privilege; all current
medical staff bylaws, rules and regulations and amendments thereto; and all
written contracts with physicians, physicians groups, or other members of the
medical staff of each Hospital.
(g) Except as set forth in a writing delivered by Seller to Purchaser
which specifically makes reference to this Section, there are no material
pending or threatened disciplinary or corrective actions or appeals with respect
to the medical or other staff members of any Hospital. Schedule 2.8(g) sets
forth a complete and accurate list of (a) the name of each member of the medical
staff of the Hospitals as of the Effective Date, and (b) the specialty, if any,
of each medical staff member. Notwithstanding the foregoing provisions of this
Section 2.8(g), Seller shall not be required to disclose any information
pursuant to this Section 2.8(g) where such disclosure is prohibited by state
law.
2.9 Brokers and Finders. Other than Merrill Lynch, neither Seller, any
Subsidiary, nor any affiliate thereof, nor any officer or director thereof, has
engaged any finder or broker in connection with the transactions contemplated
hereunder.
2.10 Financial Statements. The unaudited financial statements of each
Subsidiary with respect to the operation of the Hospitals for the three years
ended May 31, 1999 attached as Schedule 2.10, the Interim Balance Sheet and the
Final Balance Sheet (collectively, the "Financial Statements") have been or will
be prepared from the books and records of each Subsidiary. The balance sheets
included in the Financial Statements fairly present, or will fairly present, the
financial position of each Subsidiary with respect to the operation of the
Hospitals as of the respective dates thereof and the other financial statements
included therein present or will present fairly the results of operations for
the periods indicated, in each case in conformity with generally accepted
accounting principles consistently applied during such periods, except that the
Financial Statements may not fully reflect federal, state and local income or
franchise taxes.
2.11 Legal Proceedings. There are no material claims, proceedings or
investigations ("Litigation") pending or, to the best knowledge of Seller,
threatened relating to or affecting Seller or any Subsidiary with respect to the
operation of the Hospitals or any of the Assets before any court or governmental
body (whether judicial, executive or administrative). Neither Seller
21
<PAGE> 33
nor any Subsidiary with respect to the operation of the Hospitals is subject to
any judgment, order, decree or other governmental restriction specifically (as
distinct from generically) applicable to it or its assets, including the Assets,
which would be material to the operation of any particular Hospital. There is no
claim, proceeding or investigation pending, or to the knowledge of Seller
threatened, which challenges the validity of this Agreement or which, if
adversely determined, could reasonably be expected to (i) adversely affect the
ability of Seller to consummate the transactions contemplated by this Agreement,
(ii) result in a material adverse effect on any of the Hospitals, or (iii)
impair the ability of Purchaser to operate the Hospitals or the Assets after the
Closing in substantially the same manner as they are presently conducted.
2.12 Employee Benefits.
(a) Schedule 2.12 contains a list of (i) each pension, profit sharing,
bonus, deferred compensation, or other retirement plan or arrangement of Seller
or any Subsidiary with respect to the operation of the Hospitals, whether oral
or written, which constitutes an "employee pension benefit plan" as defined in
Section 3(2) of ERISA, (ii) each medical, health, disability, insurance or other
plan or arrangement of Seller or any Subsidiary with respect to the operation of
the Hospitals, whether oral or written, which constitutes an "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, and (iii) each other employee
benefit or perquisite provided by Seller or any Subsidiary (with respect to the
operation of the Hospitals), in which any employee of Seller or any Subsidiary
participates in his capacity as such (collectively, the "Seller Plans"). Copies
of the summary plan descriptions and brochures with respect to the Seller Plans
have previously been furnished to Purchaser.
(b) Neither Seller nor any Subsidiary (with respect to the operation
of the Hospitals) is a participant in any multiemployer plan within the meaning
of Section 4001(a)(3) of ERISA in which employees of Seller or any Subsidiary
participate and no withdrawal liability has been incurred by or asserted against
Seller or any Subsidiary or an ERISA Affiliate with respect to a multiemployer
plan.
(c) With respect to each Seller Plan, to Seller's knowledge, neither
Seller nor any Subsidiary has any direct or indirect, actual or contingent
liability, other than to make payments for contributions, premiums or benefits
when due in the ordinary course, all of which payments that are due having been
made. Neither the Hospitals nor any of the Assets are subject to any lien under
ERISA or the Internal Revenue Code of 1986, as amended (the "Code").
(d) No amounts payable under any contract, agreement or arrangement
will fail to be deductible for federal income tax purposes by virtue of Section
280G of the Code. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, alone or in connection
with a related event, will (i) result in any material payment (including,
without limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any employee of Seller or any Subsidiary from the
Seller or any Subsidiary under any Seller Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Seller Plan or otherwise or
(iii) result in any acceleration of the time of payment or vesting of any such
benefits to any material extent.
22
<PAGE> 34
(e) All of the Seller Plans have been administered in material
compliance with ERISA and the applicable provisions of the Code. There are no
"accumulated funding deficiencies" within the meaning of ERISA or the Code or
any federal excise tax or other liability on account of any deficient fundings
in respect of the Seller Plans. No reportable event(s) (within the meaning of
ERISA) or prohibited transaction(s) (within the meaning of the Code), has
occurred in respect of any of the Seller Plans that would result in any material
liability to Seller or any Subsidiary. Other than claims for benefits, there are
not pending or, to Seller's knowledge, threatened any claims relating to the
Seller Plans by any employee of Seller or any Subsidiary with respect to the
operation of the Hospitals, alleging a breach or breaches of fiduciary duties or
violations of other applicable state or federal law which could result in
liability on the part of Seller, any Subsidiary or any of the Seller Plans under
ERISA or any other law that would have a material adverse effect on Seller or
any Subsidiary. To Seller's knowledge, none of the Seller Plans discriminates in
operation in favor of employees who are officers or who are highly compensated,
except as permitted under the Code and ERISA. To Seller's knowledge, all
material returns, reports, disclosure statements and premium payments required
to be made under ERISA and the Code with respect to any of the Seller Plans have
been timely filed or delivered. Except for routine random audits or submissions
by Seller to the Voluntary Compliance Resolution Program, none of the Seller
Plans have been audited or investigated by either the Internal Revenue Service,
the Department of Labor or the Pension Benefit Guaranty Corporation within the
last five (5) years, and there are no outstanding issues with reference to any
of the Seller Plans pending before such governmental agencies.
2.13 Taxes and Tax Returns.
(a) To Seller's knowledge, the Subsidiaries have duly filed all
federal, state, foreign and local tax returns required to be filed by them (all
of which are true and correct in all material respects) and have duly paid or
made provision for the payment of all taxes (including any interest or
penalties) which are due and payable, whether or not in connection with such
returns. Seller and the Subsidiaries (with respect to the operation of the
Hospitals) have withheld proper and accurate amounts from their employees'
compensation, and made deposits of all such withholdings, in material compliance
with all withholding and similar provisions of the Code and any and all other
applicable laws.
(b) Seller and the Subsidiaries (with respect to the operation of the
Hospitals) have complied in all material respects with all Applicable Laws
relating to withholding Taxes and have paid over to the proper governmental
entities all amounts required to be so withheld and paid over under all
Applicable Laws.
(c) There are no Liens for Taxes upon the Assets, except for statutory
Liens for current Taxes not yet due and payable or which may hereafter be paid
without penalty or which are being contested in good faith by appropriate
proceedings.
(d) For purposes of this Agreement, "Tax" or "Taxes" shall mean (i)
any tax of any kind, including, without limitation, all income, property, sales,
use, occupation, payroll, transfer, estimated, franchise, excise, value added,
employees' income withholding and social security taxes, and related to such
taxes, charges, fees, levies, penalties or other assessments of any kind,
together with any interest and penalties, addition to tax or additional amounts
imposed
23
<PAGE> 35
by any taxing authority, whether disputed or not, imposed by the United States
or by any foreign country, or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or by any other
taxing authority, and (ii) any interest thereon. For purposes of this Agreement,
"Tax Return" shall mean any return, report, information return or amendment or
other document (including any related or supporting information) with respect to
Taxes.
2.14 Personnel.
(a) Schedule 2.14 sets forth a complete list (as of the date set forth
therein) of names, positions and current annual salaries or wage rates, bonus
and other compensation and/or benefit arrangements, accrued sick and vacation
days, and period of service credited for vesting as of the date thereof of all
full-time and part-time employees of Seller and the Subsidiaries with respect to
the operation of the Hospitals and indicating whether such employee is a
part-time or full-time employee.
(b) Since May 31, 1998, there have been, and there are now, no labor
union or collective bargaining agreements in effect with respect to the
employees of Seller or the Subsidiaries with respect to the operation of the
Hospitals. There is no unfair labor practice complaint against Seller or any of
the Subsidiaries pending, or to the best knowledge of Seller threatened, before
the National Labor Relations Board with respect to the operation of the
Hospitals. Since May 31, 1998, there has been, and there is now, no labor
strike, arbitration, dispute, slowdown or stoppage, and no union organizing
campaign, pending, or to the best knowledge of Seller threatened by or involving
the employees of Seller or the Subsidiaries with respect to the operation of the
Hospitals.
(c) There is no charge or complaint pending or, to the knowledge of
Seller, threatened against Seller or the Subsidiaries relating to the Hospitals
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful employment practices.
2.15 Insurance. Seller and the Subsidiaries maintain, and have maintained,
without interruption, at all times during the Subsidiaries' respective ownership
of the Hospitals, self-insurance or policies or binders of insurance covering
such risks and events, including personal injury, property damage, malpractice
and general liability, to provide adequate and sufficient insurance coverage for
all the assets and operations of the Hospitals. Such insurance meets all
requirements of Applicable Law and the Contracts. Schedule 2.15 contains a list
of all such insurance maintained by Seller and the Subsidiaries with respect to
the operation of the Hospitals as of the Effective Date.
2.16 Solvency. Neither Seller nor any Subsidiary is insolvent and neither
Seller nor any Subsidiary will be rendered insolvent as a result of any of the
transactions contemplated by this Agreement. For purposes hereof, the term
"solvency" means that: (i) the fair salable value of Seller's and each
Subsidiary's tangible assets is in excess of the total amount of its respective
liabilities (including for purposes of this definition all liabilities, whether
or not reflected on a balance sheet prepared in accordance with generally
accepted accounting principles, and whether direct or indirect, fixed or
contingent, secured or unsecured, and disputed or undisputed); (ii) Seller and
each Subsidiary is able to pay its respective debts or obligations in the
ordinary
24
<PAGE> 36
course as they mature; and (iii) Seller and each Subsidiary has capital
sufficient to carry on its respective businesses and all businesses which it is
respectively about to engage.
2.17 No Untrue or Inaccurate Representations or Warranties. The
representations and warranties of Seller contained in this Agreement, and each
exhibit, schedule, certificate or other written statement delivered pursuant to
this Agreement or in connection with the transactions contemplated hereby, are
accurate, correct and complete, and in the aggregate do not contain any untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements and information contained therein not misleading.
References in this Agreement to "knowledge of Seller", the "best knowledge of
Seller", "known to Seller" or "upon Seller knowing" mean the actual knowledge of
the CEOs, CFOs, COOs and DONs of each Hospital and of Seller, without
independent investigation.
2.18 Absence of Undisclosed Liabilities. Except for liabilities and
obligations (i) set forth in Schedule 2.18 attached hereto, (ii) reflected on
the audited balance sheet for the year ended May 31, 1999 included in the
Financial Statements (the "1999 Balance Sheet") or (iii) incurred in the
ordinary course of business since the date of the 1999 Balance Sheet, neither
Seller nor any Subsidiary with respect to the operation of the Hospitals has any
material liabilities or obligations of whatsoever nature, direct or indirect,
whether accrued, fixed, contingent or otherwise.
2.19 Y2K. Within five business days following the Effective Date, Seller
shall deliver to Purchaser as Schedule 2.19 a list as of the Effective Date of
compliance procedures (a) taken, (b) being taken and (c) to be taken by Seller
to attempt to make or assure that the Assets are Y2K compliant. The procedures
described on Schedule 2.19 are consistent with procedures applicable to all
other hospitals operated by Seller. Seller shall update periodically and deliver
to Purchaser updates to Schedule 2.19; provided that such updates shall not for
any purpose be or be deemed to be a basis for indemnification of Purchaser by
Seller. Seller's Y2K compliance process includes taking out of service Assets
which Seller believes are not Y2K compliant by September 30, 1999. Seller does
not represent that its Y2K compliance process will make any Asset used in its
operations Y2K compliant.
2.20 Capitalization of Beaumont Newco. As of the Closing Date, all of the
shares of Beaumont Newco (the "Beaumont Shares") will have been duly authorized
and validly issued, will have been fully paid and nonassessable, and will have
been sold and delivered by Seller to Purchaser free of preemptive rights or
rights of first refusal and in compliance with all applicable federal and state
securities laws. There will be no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon
Purchaser for the purchase or acquisition of any of the Beaumont Shares or any
securities convertible or exchangeable for shares of Beaumont Newco capital
stock. No agreements or understandings will exist with respect to the voting or
sale of the Beaumont Shares. Seller will have and on the Closing Date Seller
shall transfer to Purchaser, good and marketable title to the Beaumont Shares
free and clear of all liens, pledges, security interest, rights of first
refusal, options, restrictions (other than those imposed by federal or state
securities laws), encumbrances and liabilities.
25
<PAGE> 37
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated by this Agreement, Purchaser hereby represents,
warrants and covenants to Seller as to the following matters as of the Effective
Date and, except as otherwise provided herein, shall be deemed to remake all of
the following representations, warranties and covenants as of the Closing:
3.1 Authorization. Purchaser has full power and authority to enter into
this Agreement and has full power and authority to carry out the transactions
contemplated hereby.
3.2 Binding Agreement. All actions required to be taken by Purchaser to
authorize the execution, delivery and performance of this Agreement, all
documents executed by Purchaser which are necessary to give effect to this
Agreement, and all transactions contemplated hereby, have been duly and properly
taken or obtained by Purchaser prior to the Closing Date. No other action on the
part of Purchaser is necessary to authorize the execution, delivery and
performance of this Agreement, all documents necessary to give effect to this
Agreement and all transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and, assuming due and valid
execution by Seller, this Agreement constitutes, or will constitute prior to
Closing, a valid and binding obligation of Purchaser enforceable in accordance
with its terms subject to (a) applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally from time to
time in effect and (b) limitations on the enforcement of equitable remedies.
3.3 Organization and Good Standing. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware, and has full power and authority to own, operate and
lease its properties and to carry on its business as now conducted.
3.4 No Violation. Neither the execution and delivery by Purchaser of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance with any of the material provisions hereof by Purchaser will (i)
violate, conflict with or result in a breach of any material provision of the
Articles of Organization, Operating Agreement or other organizational documents
of Purchaser, (ii) violate any order, writ, injunction, ruling or material law
of any court or governmental authority, United States or foreign, applicable to
Purchaser, or cause the suspension or revocation of any governmental license or
authorization applicable to or binding upon or affecting Purchaser, or (iii)
except for the applicable requirements of the HSR Act, and as otherwise
described on Schedule 3.4 attached hereto, require any material consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any governmental or regulatory authority.
3.5 Brokers and Finders. Except as described on Schedule 3.5, neither
Purchaser nor any controlled affiliate thereof nor any officer or director
thereof has engaged any finder or broker in connection with the transactions
contemplated hereunder.
26
<PAGE> 38
3.6 Legal Proceedings. Except as described on Schedule 3.7, there are no
claims, proceedings or investigations pending or, to the best knowledge of
Purchaser, threatened relating to or affecting Purchaser or any controlled
affiliate of Purchaser before any court or governmental body (whether judicial,
executive or administrative) in which an adverse determination would materially
adversely affect the properties, business condition (financial or otherwise) of
Purchaser or any controlled affiliate of Purchaser. Neither Purchaser nor any
controlled affiliate of Purchaser is subject to any judgment, order, decree or
other governmental restriction specifically (as distinct from generically)
applicable to Purchaser or any controlled affiliate of Purchaser which
materially adversely affects the condition (financial or otherwise), operations
or business of Purchaser or any controlled affiliate of Purchaser.
3.7 Solvency. Purchaser is not insolvent and will not be rendered insolvent
as a result of any of the transactions contemplated by this Agreement. For
purposes hereof, the term "solvency" means that: (i) the fair salable value of
Purchaser's tangible assets is in excess of the total amount of its liabilities
(including for purposes of this definition all liabilities, whether or not
reflected on a balance sheet prepared in accordance with generally accepted
accounting principles, and whether direct or indirect, fixed or contingent,
secured or unsecured, and disputed or undisputed); (ii) Purchaser is able to pay
its debts or obligations in the ordinary course as they mature; and (iii)
Purchaser has capital sufficient to carry on its businesses and all businesses
which it is about to engage.
3.8 INTENTIONALLY OMITTED.
3.9 INTENTIONALLY OMITTED.
3.10 No Other Business or Operations. Purchaser is engaged in no business
or operations at the time of execution of this Agreement, and immediately
following the Closing will be engaged in no business or operations other than as
is contemplated to be acquired pursuant to this Agreement or as disclosed to
Seller prior to the Effective Date.
ARTICLE 4
COVENANTS OF SELLER
4.1 Access and Information; Inspections. From the Effective Date until
Closing, Seller shall, and shall cause the Subsidiaries to, afford to the
officers and agents of Purchaser (which shall include accountants, attorneys,
bankers and other consultants and agents of Purchaser) full and complete access
during normal business hours to and the right to inspect the plants, properties,
books, accounts, records and all other relevant documents and information with
respect to the assets, liabilities and business of the Hospitals. From the
Effective Date until Closing, Seller shall, and shall cause the Subsidiaries to,
furnish Purchaser with such additional financial and operating data and other
information in Seller's or any Subsidiary's possession as to businesses and
properties of the Hospitals as Purchaser or its representatives may from time to
time reasonably request, without regard to where such information may be
located. Purchaser's right of access and inspection shall be exercised in such a
manner as not to interfere unreasonably with the operations of the Hospitals.
Such access may include consultations with the personnel of Seller or the
Subsidiaries. Further, Purchaser may, at its sole cost and expense
27
<PAGE> 39
(except as otherwise provided in Section 12.12), undertake environmental,
mechanical and structural surveys of the Hospitals. Purchaser acknowledges that
it shall coordinate its inspection activities contemplated by this Section 4.1
through David R. Mayeux or his designee.
4.2 Preserve Accuracy of Representations and Warranties. Seller shall, and
shall cause the Subsidiaries to, refrain from any action or inaction that would
render any representation or warranty contained in Article 2 of this Agreement
inaccurate as of the Closing Date.
4.3 Conduct of Business. On and after the Effective Date and prior to the
Closing, and except to the extent the prior written consent of Purchaser is
obtained in accordance with the procedures set forth in Section 4.4 below or
required by this Agreement, Seller shall, and shall cause each Subsidiary to,
with respect to the operation of the Hospitals:
(a) carry on its respective businesses with respect to the operation
of the Hospitals in substantially the same manner as presently conducted and not
make any material change in personnel, operations, finance, accounting policies,
or real or personal property;
(b) maintain each Hospital and all parts thereof and all other Assets
in operating condition in a manner consistent with past practices, ordinary wear
and tear excepted;
(c) perform all of its material obligations under agreements relating
to or affecting each Hospital, its respective operations or the Assets;
(d) keep in full force and effect present insurance policies or other
comparable self-insurance; and
(e) use its reasonable efforts to maintain and preserve its respective
business organizations intact, retain its respective present employees at each
Hospital and maintain its respective relationships with physicians, suppliers,
customers and others having business relationships with each Hospital and take
such actions as are necessary and use its reasonable efforts to cause the
smooth, efficient and successful transition of business operations and employee
and other relations to the Purchaser as of Closing.
4.4 Negative Covenants. From the Effective Date until Closing, with respect
to the operation of the Hospitals, Seller shall not, and Seller shall cause each
Subsidiary to not, without the prior written consent of Purchaser in accordance
with the procedures set forth below or except as may be required by law:
(a) amend or terminate any of the Contracts, enter into any new
contract or commitment, or incur or agree to incur any liability, except in the
ordinary course of business (which ordinary course of business shall include
renewals of any Contract), and in no event with respect to any such contract,
commitment or liability as to which the total to be paid in the future under the
contract, commitment or liability exceeds $50,000;
(b) increase compensation payable or to become payable or make any
bonus payment to or otherwise enter into one or more bonus agreements with any
employee, except in
28
<PAGE> 40
the ordinary course of business in accordance with Seller's and any Subsidiary's
customary personnel policies;
(c) create, assume or permit to exist any new debt, mortgage, deed of
trust, pledge or other lien or encumbrance upon any of the Assets;
(d) acquire (whether by purchase or lease) or sell, assign, lease, or
otherwise transfer or dispose of any property, plant or equipment, except in the
ordinary course of business with comparable replacement thereof;
(e) except with respect to previously budgeted expenditures, purchase
capital assets or incur costs in respect of construction in progress;
(f) take any action outside the ordinary course of business; or
(g) reduce Inventory except in the ordinary course of business.
For purposes of obtaining Purchaser's prior written consent under Sections 4.3
and 4.4 of this Agreement, Seller shall forward requests for such consent to
Frank Coyle at Purchaser. Such requests shall be deemed approved by Purchaser if
not specifically approved or denied by Purchaser with ten (10) business days of
delivery.
4.5 Required Approvals. Seller shall reasonably cooperate with Purchaser
and its representatives and attorneys: (i) in obtaining all consents, approvals,
authorizations, clearances, certificates of need and licenses required to carry
out the transactions contemplated by this Agreement (including, without
limitation, those of governmental and regulatory authorities) or which Purchaser
reasonably deems necessary or appropriate, and (ii) in the preparation of any
document or other material which may be required by any governmental agency as a
predicate to or result of the transactions contemplated herein; provided,
however, that it shall be Purchaser's responsibility to obtain the certificates
of need and licenses required to carry out the transactions contemplated by this
Agreement. As soon as practicable after the Effective Date, Seller will make all
governmental filings required to be made by it in order to consummate the
transactions contemplated herein (including all filings under the
Hart-Scott-Rodino Act, as more particularly described below).
4.6 Additional Financial Information. Within thirty (30) calendar days
following the end of each calendar month prior to Closing, Seller shall deliver
to Purchaser complete copies of the unaudited balance sheet and related
unaudited statements of income relating to each Subsidiary with respect to the
operation of the Hospitals for each month then ended, together with a
year-to-date compilation and the notes, if any, related thereto, which
presentation shall be consistent with the provisions of Section 2.10 which are
applicable to the Financial Statements.
4.7 No-Shop.
(a) From and after the Effective Date until the earlier of the Closing
or the termination of this Agreement, Seller shall not, and shall cause the
Subsidiaries to not, without the prior written consent of Purchaser: (i) offer
for sale or lease the assets of the Hospitals or the Assets (or any material
portion thereof) or of any stock or other securities or other interest owned
29
<PAGE> 41
by Seller or its affiliates in any Subsidiary; (ii) solicit offers to buy all or
any material portion of any of the Hospitals or the Assets, or any stock or
other securities or other interest owned by Seller or its affiliates in any
Subsidiary; (iii) hold discussions with any party (other than Purchaser) looking
toward such an offer or solicitation or looking toward a merger or consolidation
of any Subsidiary; or (iv) enter into any agreement with any party (other than
Purchaser) with respect to the sale or other disposition of any of the Hospitals
or the Assets or of any stock or other securities or other interest owned by
Seller or its affiliates in any Subsidiary, or with respect to any merger,
consolidation, or similar transaction involving any Subsidiary. Seller shall
promptly advise Purchaser of any inquiry, proposal, solicitation or
communication of any kind relating to, or contemplating any of the foregoing.
Notwithstanding the foregoing, this Section 4.7 shall not be construed to
prohibit Seller from engaging in discussions regarding corporate transactions
involving its or its affiliates' stock or securities, including macro-level
mergers, reorganizations or other transactions, so long as the terms thereof do
not contemplate the sale or lease or other disposition of the Hospitals or the
Assets or otherwise impair the ability of Seller or any of the Subsidiaries to
consummate the transactions contemplated herein.
(b) Any reference in this Agreement to an "affiliate" shall mean any
Person directly or indirectly controlling, controlled by or under common control
with a second Person; provided, however, an "affiliate" shall not include the
stockholders of Seller or any officer or director of any Person. The term
"control" (including the terms "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. A "Person" shall mean
any natural person, partnership, corporation, limited liability company,
association, trust or other legal entity.
4.8 Seller's Efforts to Close; Audited Financial Statements.
(a) Seller shall use its reasonable commercial efforts to promptly
satisfy all of the conditions precedent set forth in Articles 6 and 7 to its or
Purchaser's obligations under this Agreement to the extent that Seller's action
or inaction can control or influence the satisfaction of such conditions.
(b) As soon as reasonably practicable after the Effective Date, Seller
shall provide Purchaser with audited combined financial statements of the
Hospitals, which combined financial statements will include combined balance
sheets for the years ended May 31, 1999 and 1998, and combined statements of
operations, shareholder's equity and cash flows for each of the years in the
three year period ended May 31, 1999. The balance sheets included in such
financial statements will fairly present the financial position of each
Subsidiary with respect to the operation of the Hospitals as of the respective
dates thereof and the other financial statements included therein will present
fairly the results of operations for the periods indicated, in each case in
conformity with GAAP consistently applied. Such financial statements shall meet
the requirements of Regulation S-X promulgated under the Securities Exchange Act
of 1934, as amended, and shall be accompanied by the unqualified opinion of KPMG
Peat Marwick.
(c) Seller shall reasonably cooperate in Purchaser's efforts to obtain
financing and fund the Cash Purchase Price, and otherwise to consummate the
transaction contemplated by this Agreement. Notwithstanding the foregoing,
Purchaser shall indemnify, defend, and hold
30
<PAGE> 42
Seller harmless from all costs, damages, expenses or losses incurred by Seller
as a result of being named in any securities litigation involving Purchaser and
the financing contemplated by this Agreement, other than to the extent arising
out of any gross negligence, willful misconduct of Seller or its employees, or
false or intentionally misleading statements of Seller or its employees.
4.9 Title Matters. No less than twenty (20) days prior to the Closing Date,
Seller shall deliver to Purchaser (a) a preliminary binder or title
commitment(s) (the "Title Commitment") sufficient for the issuance of an
A.L.T.A. Extended Coverage Owner's Title Insurance Policy with respect to the
Owned Real Property and an A.L.T.A. Extended Coverage Leasehold Title Policy
with respect to that Leased Real Property as to which a ground lease is at issue
(the "Title Policy"), issued by Chicago Title Insurance Company (the "Title
Company"), together with true, correct and legible copies of all instruments
referred to therein as conditions or exceptions to title (the "Title
Instruments") and (b) A.L.T.A. surveys of the Owned Real Property complying with
the Minimum Standard Detail Requirements for ALTA/ASCM Land Title Surveys for
the Owned Real Property (the "Surveys"). Section 12.12 shall govern which party
or parties hereto shall bear the costs and expenses of the Title Commitment, the
Title Policy and the Surveys.
4.10 Termination of Hospitals' Employees. Effective on the Transition Date,
the Hospitals' Employees (other than the Retained Management Employees) shall
cease to be employees of Seller and Seller's affiliates including the
Subsidiaries, and shall be removed from such entities' respective payrolls.
Seller shall, and shall cause the Subsidiaries to, terminate effective as of the
Transition Date the active participation of all of the Hospitals' Employees
(other than the Retained Management Employees) in all of the Seller Plans, and
shall cause each Seller Plan to comply with all applicable laws. After the
Transition Date, Seller shall, and shall cause the Subsidiaries to, timely make
or cause to be made by their affiliates appropriate distributions to, or for the
benefit of, all of the Hospitals' Employees (other than the Retained Management
Employees) prior to the Transition Date in respect of the Seller Plans which are
in force and effect with respect to the Hospitals' Employees (other than the
Retained Management Employees) at the Hospitals immediately prior to the
Transition Date in accordance with ERISA, the Code and the terms and conditions
of the Seller Plans; provided, however, no such distribution shall be required
to the extent it is among the Assumed Obligations.
4.11 Termination Cost Reports. Seller shall, and shall cause the
Subsidiaries to, file all Medicare, Medicaid, CHAMPUS, Blue Cross and any other
termination cost reports required to be filed as a result of the consummation of
(a) the transfer of the Assets to Purchaser and (b) the transactions
contemplated by this Agreement. All such termination cost reports shall be filed
by Seller or the applicable Subsidiary in a manner that is consistent with
current laws, rules and regulations.
4.12 Hart-Scott-Rodino Act Filings. Seller will (a) take promptly all
actions necessary to make the filings required of Seller or its affiliates under
the HSR Act, (b) comply at the earliest practicable date with any request for
additional information received by Seller or its affiliates from the Federal
Trade Commission (the "FTC") or Antitrust Division of the Department of Justice
(the "DOJ") pursuant to the HSR Act, and (c) cooperate with Purchaser in
connection with Purchaser's filings under the HSR Act and in connection with
resolving any investigation or other regulatory inquiry concerning the
transactions contemplated by this
31
<PAGE> 43
Agreement commenced by either the FTC or the DOJ. Except as provided by Section
12.12, all fees and expenses of Seller incurred in connection with Seller's
filing under the HSR Act shall be borne by Seller.
4.13 Environmental Survey. Seller shall promptly obtain from an
environmental consulting firm (the "Consultant") a written environmental survey
of the Owned Real Property (the "Environmental Survey") and shall deliver the
Environmental Survey to Purchaser, which survey shall be identified on Exhibit
4.13 hereto. Section 12.12 shall govern which party or parties hereto shall bear
the costs and expenses of the Environmental Survey.
4.14 Noncompetition. As an inducement to Purchaser to enter into this
Agreement and to consummate the transactions contemplated hereby, neither
Seller, any Subsidiary, nor any of their affiliates, nor any of their
successors, shall, for a period of three (3) years following the Closing Date,
without the prior written consent of Purchaser, directly or indirectly, invest
in, own, manage, operate, control or participate in the ownership, management,
operation or control of, or serve as a consultant or lender to, any Competing
Business within the Seller Business Service Area. For purposes of this
Agreement, the term "Competing Business" means the business of owning and
operating general acute care hospitals, and the term "Seller Business Service
Area" means the area within a twenty-five (25) mile radius of any Hospital.
Notwithstanding the foregoing, the following shall be excluded from the
foregoing provisions of this Section 4.14: (a) the general acute care hospital
activities of Seller and its affiliates as of the Closing Date (other than the
activities of the Hospitals) and (b) Seller's or any affiliate of Seller's
acquisition and operation of a general acute care hospital within the Seller
Business Service Area after the Closing Date so long as such hospital was
acquired in a transaction in which the amount of consideration allocated to such
hospital is less than twenty percent (20%) of the total consideration necessary
to consummate such transaction. Seller shall not actively solicit any individual
Purchaser employee to remain or become an employee of Seller between the Closing
Date and the one year anniversary of the Closing Date; provided, however, that
at any time Seller may make a general solicitation not directed specifically at
Purchaser employees to recruit employees through any means and shall have the
right to hire Purchaser employees who respond to such permitted solicitation
efforts or seek such employment unsolicited by Seller. For a period of one year
after the Closing Date, Purchaser shall not actively solicit any individual
employee of Seller or affiliates thereof who had been a member of the senior
management (i.e., the "A Team") at a Hospital prior to the Effective Date, but
was not employed by Tenet at a Hospital as of the Effective Date. Seller shall
not, and shall use its reasonable commercial efforts to cause its directors,
officers, employees and agents to not, use for any purpose any confidential
information which specifically relates to any of the Hospitals. Seller shall
cause each of its affiliates, and any successors to its affiliates, to comply
with the obligations imposed by this Section 4.14. In the event that the
provisions contained in this Section 4.14 shall ever be deemed to exceed the
time or geographic limits or any other limitations permitted by applicable law
in any jurisdiction, then such provisions shall be deemed reformed in such
jurisdiction to the maximum extent permitted by applicable law.
4.15 Enforceability. Seller hereby acknowledges that the covenant contained
in Section 4.14 above is a condition precedent to Purchaser's entering into this
Agreement, and that such restrictions are reasonable and necessary to protect
the legitimate interests of Purchaser following the Closing. Seller also hereby
acknowledges that any violation of Section 4.14 would
32
<PAGE> 44
result in irreparable injury to Purchaser and the remedy at law for any breach
of Section 4.14 would be inadequate. Seller specifically acknowledges and agrees
that Purchaser shall be entitled to an equitable accounting of all earnings,
profits and other benefits arising from such breach and further agrees to pay
the reasonable fees and expenses, including attorneys' fees, incurred by
Purchaser in enforcing the restrictions contained in Section 4.14.
4.16 [INTENTIONALLY OMITTED]
4.17 Sale of Odessa Regional Hospital
(a) Purchaser and Seller agree and acknowledge that the sale of the
Assets to Purchaser hereunder, and the sale of Odessa Regional Hospital and
certain assets related thereto (collectively, the "Odessa Assets") by Odessa
Hospital Ltd., a Texas limited partnership (the "Odessa Partnership"), to
Purchaser pursuant to an asset sale agreement, as described below (the "Odessa
Asset Sale Agreement"), are part of the overall transaction between Seller and
Purchaser that is the subject of this Agreement. The Odessa Assets are owned by
the Odessa Partnership; Seller or a Subsidiary owns seventy-eight percent (78%)
of the ownership interest in the Odessa Partnership as general partner. The
limited partners in the Odessa Partnership have a right of first refusal (the
"Odessa Right of First Refusal") with respect to any sale of substantially all
of the assets of the Odessa Partnership; the Odessa Right of First Refusal will
be triggered by the proposed sale of the Odessa Assets to Purchaser.
(b) As required by the terms and conditions of the Odessa Right of
First Refusal, Seller intends to present the transaction contemplated by this
Agreement to the Odessa Partnership limited partners. If the Odessa Partnership
limited partners exercise the Odessa Right of First Refusal, Seller will convey
the Odessa Assets to the limited partners.
(c) In the event the limited partners of the Odessa Partnership do not
exercise the Odessa Right of First Refusal, Seller shall cause the Odessa
Partnership to convey the Odessa Assets to Purchaser pursuant to the Odessa
Asset Sale Agreement which will be attached as Exhibit 4.17 hereto. At the
request of Purchaser, Seller shall explore alternative structures for effecting
the sale of the Odessa Assets including but not limited to through a sale of
Seller's general partner interest in the Odessa Partnership to Purchaser;
provided, however, that Seller shall not be required to restructure the
acquisition of the Odessa Assets unless Seller determines, in its reasonable
discretion, that such alternative transaction structure would have no adverse
consequences to Seller.
(d) Within five (5) business days following execution of this
Agreement the parties shall in good faith negotiate, draft and enter into the
Odessa Asset Sale Agreement. The Odessa Sale Agreement shall be substantially in
the form of this Agreement, except: (i) the purchase price for the Odessa Assets
shall be Forty-Two Million Dollars ($42,000,000) plus or minus a net working
capital adjustment; (ii) the parties acknowledge that such sale and purchase is
subject to the Odessa Right of First Refusal held by the limited partners of the
Odessa Partnership, which right be waived or not exercised; (iii) Purchaser's
right to terminate the Odessa Sale Agreement for a material breach of
representations and warranties made by Seller shall be considered together with
all representations and warranties of Seller under this
33
<PAGE> 45
Agreement taken as a whole to determine materiality; and (iv) a condition to
closing the Odessa Sale Agreement shall be the concurrent completion of the
Closing hereunder.
4.18 Y2K Compliance Program. Seller shall continue to implement its Y2K
compliance program with respect to the Hospitals through January 1, 2000, and
beyond that date, consistent with implementation of such program for all of
Seller's (and its subsidiaries') hospitals. As part of Seller's continuing
implementation of such program, Seller shall:
(a) provide Purchaser reasonable access to and copies of all data
regarding Seller's Y2K compliance program being implemented at the Hospitals;
(b) continue to provide a corporate level coordinator and help desk
assistance in the same manner as is provided to all of Seller's (and its
subsidiaries') hospitals; and
(c) shall provide all such services without charge to Purchaser,
except for out of pocket costs for site visits.
4.19 Supplements to Disclosure Schedule. Seller shall have the continuing
obligation to promptly supplement or amend the Disclosure Schedule with respect
to any matter hereafter arising or discovered which, if existing or known at the
Effective Date, would have been required to have been set forth or described in
the Disclosure Schedule. No supplement or amendment of the Disclosure Schedule
after the Effective Date with respect to the events or circumstances existing
before the Effective Date or resulting from the transactions contemplated hereby
shall be deemed to have been disclosed as of the date of this Agreement unless
Purchaser specifically agrees thereto in writing. Notwithstanding the foregoing,
the parties agree that Seller shall have the right to attach Schedule 2.14(c)
and Schedule 2.19 within five (5) business days of the Effective Date, and
Schedule 7.10 within ten (10) business days of the Effective Date. Supplements
or amendments of the Disclosure Schedule with respect to events or circumstances
occurring after the Effective Date shall, for purposes of this Agreement and the
agreements contemplated (other than for the purpose of determining whether the
conditions set forth in Article 7 are satisfied), be deemed to have been
disclosed as of the date of this Agreement.
4.20 Mesa Lease Adjustment. The parties acknowledge that Seller is
currently renegotiating the current lease between Sierra Equities, Inc. and
Seller with respect to Mesa General Hospital (the "Mesa Lease") and the amount
of the lease payments required to be made thereunder. In connection therewith
and until the Mesa Lease is amended by the parties thereto to provide for a
revised lease payment, beginning on the Closing Date, Seller shall reimburse
Purchaser, on or before the fifth (5th) business day of each calendar month, for
the amount that is required to be paid by Purchaser as monthly "Fixed Rent"
pursuant to the Mesa Lease that is in excess of $118,668 (the aggregate of all
such payments being referred to herein as the "Excess Amount"). (The parties
shall pro rate Seller's obligation to pay such amount to reflect any partial
months.) Within ten (10) business days following the amendment of the Mesa Lease
by the parties thereto to provide for a revised lease payment (or a judgment or
settlement in litigation, or otherwise with the same effect), Seller shall pay
to Purchaser an amount, in cash, equal to (a) the product of (i) eight (8) and
(ii) the difference between (A) the annual rental
34
<PAGE> 46
payment required to be made pursuant to the Mesa Lease, as amended to reflect
the revised lease payment, and (B) $1,424,016, less (b) the Excess Amount.
ARTICLE 5
COVENANTS OF PURCHASER
5.1 Purchaser's Efforts to Close. Purchaser shall use its reasonable
commercial efforts to satisfy all of the conditions precedent set forth in
Articles 6 and 7 to Purchaser's or Seller's obligations under this Agreement to
the extent that Purchaser's action or inaction can control or influence the
satisfaction of such conditions.
5.2 Required Approvals. Purchaser (a) shall use its reasonable best efforts
to secure, as promptly as practicable, before the Closing Date, all consents,
approvals, authorizations, clearances, certificates of need and licenses
required to carry out the transactions contemplated by this Agreement
(including, without limitation, those of governmental and regulatory
authorities) and to cause all of its covenants and agreements to be performed,
satisfied and fulfilled; and (b) will provide such other information and
communications to governmental and regulatory authorities as Seller or such
authorities may reasonably request.
5.3 Certain Employee Matters.
(a) During the period (the "Transition Period") commencing at the
Effective Time and ending immediately prior to January 1, 2000 or such earlier
date as determined by Purchaser (such date being the "Transition Date"), each
Hospital Employee (as defined in paragraph (b) of this Section 5.3) shall remain
an employee of its employer as of the Effective Time (whether such employer is
Seller, one of the Subsidiaries or an affiliate of Seller), subject to normal
personnel actions occurring in the ordinary course of business. During the
Transition Period, or until such earlier time as any such Hospital Employee
ceases to be an employee of such employer, each such Hospital Employee shall be
leased by Purchaser from Seller or the employing Subsidiary or affiliate, on
substantially the terms and conditions as are set forth in the form of Employee
Leasing Agreement attached as Exhibit 1.6.11 hereto. During the Transition
Period, each leased Hospital Employee shall continue to participate in all
Seller Plans on the same basis as in effect immediately prior to the Effective
Time, subject to the terms of the Employee Leasing Agreement.
(b) Purchaser covenants and agrees that it shall make offers of
employment effective as of the Transition Date (in substantially equivalent
positions) to all of the persons who are employees of (i) the Subsidiaries with
respect to the operation of the Hospitals or (ii) any affiliate of Seller which
employs individuals at any of the Hospitals (whether such employees are full
time employees, part-time employees, on short-term or long-term disability or on
leave of absence pursuant to Seller's policies, or the Family and Medical Leave
Act of 1993 or other similar local law (such laws being collectively referred to
herein as the "FMLA") immediately prior to the Transition Date (the "Hospitals'
Employees"), provided, however, that no Hospital Employee who is on any
disability or leave of absence on the Transition Date other than Hospital
Employees on leave of absence to the extent required pursuant to the FMLA shall
become a Hired Employee unless and until such Hospital Employee reports back to
work in
35
<PAGE> 47
accordance with Seller's practices at such time. Notwithstanding the foregoing,
Purchaser acknowledges that Seller has the right, but is not required, to retain
any management-level Hospital Employee who does not accept Purchaser's
employment offer made under this Section 5.3(a), which individuals will remain
employed by Seller or its applicable affiliate as of Transition Date (the
"Retained Management Employees"); provided, however, that beginning on the
Effective Date, Seller shall not solicit management level Hospital Employees or
otherwise interfere with Purchaser's attempt to employ same until the fifteenth
(15th) day following the Transition Date. Any of the Hospitals' Employees who
accept an offer of employment with Purchaser as of or after the Transition Date
shall be referred to herein as the "Hired Employees." Purchaser covenants and
agrees that it shall continue to employ in comparable positions the Hired
Employees for a period of no less than ninety (90) calendar days following the
Closing Date, unless Purchaser sooner terminates the employment of any Hired
Employee for cause or any Hired Employee voluntarily resigns or retires.
Purchaser shall ensure that the terms and conditions of employment (including
level of compensation and benefits, including without limitation health
insurance plans containing a waiver of pre-existing conditions clause) for a
period of one year following the Closing Date for each of the Hired Employees
are no less favorable in the aggregate than those provided the Hospitals'
Employees as of the Effective Date.
(c) Purchaser shall give all Hired Employees full credit for
accumulated sick pay and for all of the accrued vacation and holiday pay of such
employees, either by (i) crediting such employees the accrued time off reflected
in the employment records of Seller as of day immediately prior to the
Transition Date or (ii) by making full payments to such employees of the amounts
which such employees would have received had they taken their accrued or
accumulated holiday or vacation time, provided, however, that no payment to such
employees shall be required with respect to accumulated sick time except to the
extent required by Seller's policies with respect to accumulated sick time.
Immediately following the Transition Date and as a result of the transactions
completed by this agreement, Purchaser shall assume liability and obligation to
make COBRA benefits available to former employees (and their dependants) who are
employed by Purchaser. Subject to reimbursement by Purchaser pursuant to the
Employee Leasing Agreement, Seller shall be responsible for any claims incurred
(whether or not reported) prior to the Transition Date by any Hospital Employee
under medical and health plans of Seller, its Subsidiaries and affiliates.
(d) On the Transition Date, Purchaser shall sponsor an employee health
benefit plan for the benefit of all Hired Employees with terms and conditions
that are no less favorable in the aggregate than the benefit plans enjoyed by
the Hired Employees immediately prior to Closing, and shall allow all Hired
Employees to participate therein immediately upon its adoption, with no waiting
period and no limitation on coverage for preexisting conditions. On and after
the Transition Date, Purchaser shall provide COBRA coverage under its own group
health plan referenced above to all Hospital Employees or dependents whose
qualifying event occurred after Closing and shall indemnify and hold Seller
harmless from any cost or liabilities with respect to same.
(e) Within two (2) years after Closing, Purchaser's Plan shall (i) be
amended to provide for a plan-to-plan transfer from Seller's (or its
affiliate's) plan with respect to the Hired Employees (other than the Retained
Management Employees) that is qualified under Section 401(a) and 401(k) of the
Code, (ii) accept a transfer of assets (both vested and unvested) from the
36
<PAGE> 48
above plan, (iii) file any required returns relating to the transfer with the
Internal Revenue Service, and (iv) be amended to provide protected withdrawal
and distribution rights relating to the transferred assets in accordance with
Section 411(d)(6) of the Code. For purposes of this Agreement, "Purchaser's
Plan" shall mean a retirement plan qualified under Section 401(a) of the Code
that is sponsored by Purchaser or one of its controlled group or affiliated
service group members, as defined in Section 414 of the Code.
(f) Any applicable employee of Seller or any Subsidiary with respect
to the operation of the Hospitals who is identified as a current or former
participant (and any eligible dependent thereof) of the Seller Plans who is
eligible to receive continuation coverage (within the meaning of Section 4980B
of the Code and Part 6 of Subtitle B of Title 1 of ERISA) will remain covered
through Seller's and its affiliates' COBRA provider. Immediately following the
Transition Date and as a result of the transactions contemplated by this
Agreement, Seller, its affiliates and the Subsidiaries shall not offer COBRA
benefits with respect to any of the Seller Plans to Hired Employees (and their
dependents) as of the date such Hired Employees become eligible for Purchaser's
medical and dental plans. Seller, its affiliates and the Subsidiaries will
thereby be released of COBRA responsibility and liability for such employees.
(g) After the Transition Date, Purchaser or Purchaser's representative
will give reasonable assistance to Seller's (and its affiliates') human
resources department with respect to Seller's, Seller's affiliates' and the
Subsidiaries' post-Closing administration of Seller's, Seller's affiliates' and
the Subsidiaries' pre-Closing employee pension benefit plans and employee health
or welfare benefit plans for the Hospitals' Employees (other than the Retained
Management Employees).
5.4 Use of Business Names. Purchaser covenants that it and its affiliates
shall not use in their respective trades or businesses the names "Tenet
Healthcare Corporation", "Tenet", "Tenet HealthSystem", "OrNda HealthCorp", and
any other names or symbols not used primarily at any of the Hospitals on or
prior to Closing, any abbreviations or variations thereof or service marks,
symbols or logos related thereto, nor any promotional material, stationery,
supplies or other items of inventory bearing either such names, symbols or
abbreviations or variations thereof.
5.5 Excluded Assets. As soon as practicable after the Closing, Purchaser
shall deliver to Seller or Seller's designee any Excluded Assets found at any of
the Hospitals after the Closing Date, without imposing any charge on Seller for
Purchaser's storage or holding of same after the Closing Date.
5.6 Confidentiality. From the Effective Date until the Closing Date,
Purchaser shall, and shall cause its employees, representatives and agents to,
hold in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of Purchaser's counsel, by other
requirements of law, all Confidential Information (as hereinafter defined), and
Purchaser shall not disclose the Confidential Information to any person, except
as otherwise may be reasonably necessary to carry out the transactions
contemplated by this Agreement, including any business or diligence review by or
on behalf of Purchaser. For the purposes hereof, "Confidential Information"
shall mean all information of any kind concerning Seller, any Subsidiary or the
business of the Hospitals, in connection with the transactions contemplated by
37
<PAGE> 49
this Agreement except information (i) ascertainable or obtained from public or
published information, (ii) received from a third party not known by Purchaser
to be under an obligation to Seller or any Subsidiary to keep such information
confidential, (iii) which is or becomes known to the public (other than through
a breach of this Agreement), or (iv) which was in Purchaser's possession prior
to disclosure thereof to Purchaser in connection herewith. The rights of Seller
under this Section 5.6 shall be in addition and not in substitution for the
rights of Seller under that certain Confidentiality Agreement between Seller and
Purchaser, dated February 18, 1999 (the "Confidentiality Agreement"), which
Confidentiality Agreement shall survive Closing.
5.7 Enforceability. Purchaser hereby acknowledges that the covenant
contained in Section 5.6 above is a condition precedent to Seller's entering
into this Agreement, and that such restrictions are reasonable and necessary to
protect the legitimate interests of Seller following the Closing. Purchaser also
hereby acknowledges that any violation of Section 5.6 would result in
irreparable injury to Seller and the remedy at law for any breach of Section 5.6
would be inadequate. Purchaser specifically acknowledges and agrees that Seller
shall be entitled to an equitable accounting of all earnings, profits and other
benefits arising from such breach and further agrees to pay the reasonable fees
and expenses, including attorneys' fees, incurred by Seller in enforcing the
restrictions contained in Section 5.6.
5.8 Hart-Scott-Rodino Act Filings. Purchaser shall (a) take promptly all
actions necessary to make the filings required of Purchaser or its affiliates
under the HSR Act, (b) comply at the earliest practicable date with any request
for additional information received by Purchaser or its affiliates from the FTC
or the DOJ pursuant to the HSR Act, and (c) cooperate with Seller in connection
with Seller's or its affiliates' filings under the HSR Act and in connection
with resolving any investigation or other regulatory inquiry concerning the
transactions contemplated by this Agreement commenced by either the FTC or the
DOJ.
5.9 Group Purchasing Contract. Following the Closing, Purchaser shall cause
the Hospitals to participate in specified national purchasing contracts of
Seller and its affiliates. Seller agrees that it will make available to
Purchaser the opportunity for other health care facilities owned or operated by
Purchaser or its affiliates to participate in such contracts. At Closing,
Purchaser shall execute a "Group Purchasing Contract" substantially in the form
of Exhibit 5.9 for such purpose; provided, however, that the assignment
provision and monthly information provision thereof remain subject to the mutual
reasonable agreement of both parties. The Group Purchasing Contract to be
executed by the parties shall provide, among other things, that either party
thereto may terminate such Contract without cause on sixty (60) days prior
written notice. Included as part of Exhibit 5.9 is a list of all of the national
purchasing contracts of Seller and its affiliates in effect as of the Effective
Date which do not preclude participation by persons or entities which are not
affiliates of Seller.
5.10 Acknowledgement Regarding Year 2000 Compliance. Subject to the
accuracy of the representation and warranties set forth in Section 2.19 and
Seller's compliance with its obligations under Section 4.18 of this Agreement,
Purchaser acknowledges that Purchaser assumes all liability with respect to Year
2000 compliance relating to the Assets. As used herein, the term "Year 2000
compliance" includes the ability to perform any of the following functions: (i)
to consistently handle date information before, at and after January 1, 2000,
including accepting date input, providing date output, and performing
calculations on dates or portions of
38
<PAGE> 50
dates; (ii) to function accurately without interruption (or disruption of other
software or systems) before, at and after January 1, 2000, without any change in
operations associated with the advent of the new century; (iii) to respond to
two-digit date input in a way that resolves any ambiguity as to century; and
(iv) to store and provide output of date information in ways that are
unambiguous as to century.
5.11 Waiver of Bulk Sales Law Compliance. Purchaser hereby waives
compliance by Seller and the Subsidiaries with the requirements, if any, of
Article 6 of the Uniform Commercial Code as in force in any state in which the
Assets are located and all other similar laws applicable to bulk sales and
transfers.
5.12 Beaumont Assets. Notwithstanding Section 1.9 of this Agreement,
Purchaser acknowledges that Seller has the right to effect the assignment,
transfer and conveyance of the Acute Care Hospitals known as Park Place Medical
Center and Mid-Jefferson Hospital, and certain Assets related thereto
(collectively, the "Beaumont Assets"), to Purchaser in accordance with this
Section 5.12. The parties intend that Seller shall transfer the Beaumont Assets
to Purchaser by contributing such Assets to a newly-formed wholly-owned
Subsidiary ("Beaumont Newco"), and then selling all issued and outstanding stock
of Beaumont Newco to Purchaser, pursuant to the terms of this Agreement. At the
request of Purchaser, Seller shall explore alternative structures for effecting
the sale of the Beaumont Assets including but not limited to through a
contribution of the Beaumont Assets into corporations that are themselves
partners in a newly-formed limited partnership; provided, however, that Seller
shall not be required to restructure the acquisition of the Beaumont Assets
unless Seller determines, in its reasonable discretion, that such alternative
transaction structure would have no adverse consequences to Seller.
5.13 Preserve Accuracy of Representations and Warranties. Purchaser shall
refrain from any action or inaction that would render any representation or
warranty contained in Article 3 inaccurate as of the Closing Date.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Seller's and the Subsidiaries' obligation to sell the Assets and to close
the transactions as contemplated by this Agreement shall be subject to the
satisfaction of each of the following conditions, as to the Assets taken as a
whole on or prior to the Closing Date unless specifically waived in writing by
Seller in whole or in part at or prior to the Closing:
6.1 Warranties True and Correct. The representations and warranties made by
Purchaser and set forth in this Agreement and in the exhibits and schedules
attached hereto shall be true and correct in all material respects, as to the
Assets taken as a whole, when made and as of the Closing Date.
6.2 Signing and Delivery of Instruments. Purchaser shall have executed and
delivered all documents, instruments and certificates required to be executed
and delivered pursuant to the provisions of this Agreement.
39
<PAGE> 51
6.3 Unfavorable Action or Proceeding. On the Closing Date, no orders,
decrees, judgments or injunctions of any court or governmental body shall be in
effect, and no claims, actions, suits, proceedings, arbitrations or
investigations shall be pending or threatened, which challenge or seek to
challenge, or which could prevent or cause the rescission of, the consummation
of the transactions contemplated in this Agreement.
6.4 Performance of Covenants. Purchaser shall have in all respects
performed or complied with each and all of the obligations, covenants,
agreements and conditions required to be performed or complied with by it on or
prior to Closing.
6.5 Opinion of Counsel for Purchaser. Seller shall have received the
favorable opinion of Purchaser's counsel, dated the Closing Date, in
substantially the form set forth in Exhibit 6.5 attached to this Agreement.
6.6 Hart-Scott-Rodino Filings. All filings required to be made and notices
required to be given pursuant to the HSR Act shall have been made, all approvals
or consents required thereby shall have been obtained and the waiting periods
required thereby, if any, shall have expired or terminated.
6.7 Consents, Approvals and Authorizations. The parties shall have obtained
all material consents, licenses, approvals, permits, certificates of need,
waivers and authorizations from governmental agencies or bodies and third
parties that are necessary or required for completion of the transactions
contemplated by this Agreement.
6.8 Exhibits and Schedules.
(a) The provisions of the exhibits and schedules that were not
attached to this Agreement at the Effective Date, or such later date as is
expressly contemplated by this Agreement, shall not be material as to the Assets
taken as a whole.
(b) To the extent the provisions of the exhibits and schedules
attached to this Agreement as of the Effective Date (or were deemed to be
attached to this Agreement as of the Effective Date pursuant to Section 4.19 of
this Agreement) were updated after the Effective Date (or the date on which
schedules and exhibits addressed by Section 4.19 were agreed upon by the
parties), such updates shall not be material as to the Assets taken as a whole.
6.9 Odessa Closing. In the event the Odessa Right of First Refusal shall
have been waived or expired unexercised, the parties hereto shall have effected
the sale and purchase contemplated by the Odessa Asset Sale Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Purchaser's obligation to purchase the Assets and to close the transactions
contemplated by this Agreement shall be subject to the satisfaction of each of
the following conditions as to the Assets and operations of the Hospitals taken
as a whole on or prior to the Closing Date unless specifically waived in writing
by Purchaser in whole or in part at or prior to the Closing.
40
<PAGE> 52
7.1 Warranties True. Each of the representations and warranties made by
Seller and set forth in this Agreement and in the Disclosure Schedule, exhibits
and schedules attached hereto shall be true and correct in all material
respects, as to the Assets taken as a whole, when made and as of the Closing
Date.
7.2 Consents, Approvals and Authorizations. The parties shall have obtained
all material consents, licenses, approvals, permits, certificates of need,
waivers and authorizations from governmental agencies or bodies and third
parties that are necessary or required for completion of the transactions
contemplated by this Agreement or the operation of the business of the Acute
Care Hospitals; provided, however that the landlord consents contemplated to be
obtained by Section 1.6.13 hereof shall be deemed the "material" landlord
consents for this purpose.
7.3 Signing and Delivery of Instruments. Seller and the Subsidiaries shall
have executed and delivered all documents, instruments and certificates required
to be executed and delivered pursuant to all of the provisions of this
Agreement.
7.4 Performance of Covenants. Seller and the Subsidiaries shall have in all
material respects performed or complied with the material obligations,
covenants, agreements and conditions required to be performed or complied with
by Seller and the Subsidiaries on or prior to Closing.
7.5 Unfavorable Action or Proceeding. On the Closing Date, no orders,
decrees, judgments or injunctions of any court or governmental body shall be in
effect, and no claims, actions, suits, proceedings, arbitrations or
investigations shall be pending or threatened, which challenge or seek to
challenge, or which could prevent or cause the rescission of, the consummation
of the transactions contemplated in this Agreement, or materially and adversely
impair Purchaser's rights to own or operate the Acute Care Hospitals, after the
Closing Date.
7.6 Hart-Scott-Rodino Filings. All filings required to be made and notices
required to be given pursuant to the HSR Act shall have been made, all approvals
or consents required thereby shall have been obtained and the waiting periods
required thereby, if any, shall have expired or terminated.
7.7 Governmental Concurrences. Purchaser shall have obtained assurances
from all of the necessary governmental authorities, in form and substance
reasonably satisfactory to Purchaser, that Purchaser will be granted all
material governmental approvals, licenses, clearances, certifications and/or
provider numbers necessary or appropriate for the continued, uninterrupted
operation of the Acute Care Hospitals following the Closing. Purchaser shall
have received approvals, consents or commitments from Medicare, Medicaid, and
the fiscal intermediary with respect to each Acute Care Hospital, to the extent
any such approvals, consents or commitments are reasonably needed, for
Purchaser's continued participation in each program and providing satisfactory
assurances that there shall be no material interruptions in program payments.
41
<PAGE> 53
7.8 Opinion of Counsel. Purchaser shall have received the favorable opinion
of Seller's in-house counsel dated the Closing Date, in substantially the form
attached hereto as Exhibit 7.8.
7.9 Exhibits and Schedules.
(a) The provisions of the exhibits and schedules that were not
attached to this Agreement at the Effective Date, or such later date as is
expressly contemplated by this Agreement, shall not be material as to the Assets
taken as a whole.
(b) To the extent the provisions of the Disclosure Schedule and the
exhibits and schedules attached to this Agreement as of the Effective Date (or
were deemed to be attached to this Agreement as of the Effective Date pursuant
to Section 4.19 of this Agreement) were updated after the Effective Date (or the
date on which schedules and exhibits addressed by Section 4.19 were agreed upon
by the parties), such updates shall not be material as to the Assets taken as a
whole.
7.10 Title Insurance Policy. Purchaser shall have received a fully
effective Title Policy issued to Purchaser by the Title Company covering the
Owned Real Property and of the Leased Real Property subject to ground leases in
the amount of the full insurable value of the Owned Real Property and such
Leased Real Property, respectively (which amount shall be set forth in Schedule
11.1(b)). The Title Policy shall show fee simple title to the Owned Real
Property vested in Purchaser, or valid leasehold title to the Leased Real
Property subject to ground leases, subject only to: (i) current real estate
taxes not yet due and payable; and (ii) the permitted title exceptions listed in
Schedule 7.10 hereto (the "Permitted Exceptions"). Purchaser's counsel has
reviewed the title commitments and identified certain issues related thereto
prior to the Effective Date; Purchaser's counsel shall use its commercially
reasonable efforts to identify any additional issues within ten (10) business
days following the Effective Date and bring such issues promptly to Seller's
attention. The Title Policy shall have all standard and general exceptions
deleted so as to afford full "extended form coverage" and include all
endorsements reasonably requested by Purchaser.
7.11 Financing. The Purchaser shall have available to it the proceeds of
the financing described in the letters included in Exhibit 7.11 attached hereto
or other financing agreements. The Purchaser shall use its best efforts to cause
all conditions in such letters and any related credit facility agreement to be
timely satisfied.
7.12 Material Adverse Change. Since May 31, 1999, (i) Seller shall have
operated the Hospitals and the Assets in the ordinary course of business,
consistent with past practice, and (ii) there shall not have occurred any event,
change or development which, individually or in the aggregate, could reasonably
be expected to have a material adverse effect on the consolidated business,
assets, financial condition or operation of the Hospitals taken as a whole.
7.13 Audit. Seller shall have delivered the Audit with respect to the
Financial Statements referred to in Section 4.8(b) hereto.
42
<PAGE> 54
7.14 Odessa Closing. In the event the Odessa Right of First Refusal shall
have been waived or expired unexercised, the parties hereto shall have effected
the sale and purchase contemplated by the Odessa Asset Sale Agreement.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to
Closing:
(a) by the mutual written consent of the parties;
(b) by either Purchaser or Seller (the "Nondefaulting Party") if a
material breach of any provision of this Agreement has been committed by the
other party (the "Breaching Party") and such breach has not been (i) waived in
writing by the Nondefaulting Party or (ii) cured by the Breaching Party to the
reasonable satisfaction of the Nondefaulting Party within fifteen (15) business
days after service by the Nondefaulting Party upon the Breaching Party of a
written notice which describes the nature of such breach;
(c) by Purchaser if any of the conditions in Article 7 have not been
satisfied as of the Closing Date or if satisfaction of any such condition is or
becomes impossible (other than through the failure of Purchaser to comply with
its obligations under this Agreement) and Purchaser has not waived such
condition in writing on or before the Closing Date;
(d) by Seller if any of the conditions in Article 6 have not been
satisfied as of the Closing Date or if satisfaction of any such condition is or
becomes impossible (other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such condition in
writing on or before the Closing Date;
(e) by either Purchaser or Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before November
30, 1999.
8.2 Termination Consequences.
(a) If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement shall terminate, except
that the obligations in Sections 5.6, 12.3, 12.8, and 12.12 shall survive;
provided, however, that nothing contained herein shall relieve any party from
liability for any intentional breach of this Agreement.
(b) If this Agreement is terminated by Seller pursuant to 8.1(b), and
at the time of such termination Seller is in material compliance with all of its
obligations hereunder, then Purchaser shall pay to Seller Twenty Million Dollars
($20,000,000) within 30 days following such termination. Said payment shall (x)
constitute liquidated damages, and not a penalty, which represents the
reasonable endeavor by the parties hereto to estimate a fair compensation to
Seller for the foreseeable and unforeseeable losses that might result to Seller
from the failure of the
43
<PAGE> 55
transactions contemplated by this Agreement to close and (y) constitute the full
settlement, accord and satisfaction of all or any claims which Seller may have
against Purchaser and its affiliates arising out of the failure of the
transactions contemplated by this Agreement to close.
8.3 Costs. In the event of a termination of this Agreement pursuant to
Section 8.1(a) or 8.1(c) through 8.1(e) hereof, (a) each party shall pay the
costs and expenses incurred by it in connection with this Agreement, except as
provided in Section 12.12, and (b) no party shall be liable to any other party
for any costs, expenses, damage or loss of anticipated profits hereunder other
than the liquidated damages provided to Seller pursuant to Section 8.2. In the
event of a termination of this Agreement pursuant to Section 8.1(b), except
under circumstances in which 8.2(b) would apply, then the parties shall have the
right to pursue all remedies available at law or in equity.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Excluded Assets and Excluded Liabilities. Subject to Section 11.2
hereof, any asset (including Accounts Receivable) or any liability, all other
remittances and all mail and other communications that are determined by the
parties' agreement, or, absent such agreement, determined by litigation, to be
or otherwise relate to an Excluded Asset or an Excluded Liability and that is or
comes into the possession, custody or control of Purchaser (or its successors in
interest or assigns, or its respective affiliates) shall forthwith be
transferred, assigned or conveyed by Purchaser (or its respective successors in
interest or assigns and its respective affiliates) to Seller at Seller's cost.
Until such transfer, assignment and conveyance, Purchaser (and its respective
successors in interest and assigns and its respective affiliates) shall not have
any right, title or interest in or obligation or responsibility with respect to
such asset or liability except that Purchaser shall hold such asset in trust for
the benefit of Seller. Purchaser (and its respective successors in interest and
assigns and its respective affiliates) shall have neither the right to offset
amounts payable to Seller under this Section 9.1 against, nor the right to
contest its obligation to transfer, assign and convey to Seller because of,
outstanding claims, liabilities or obligations asserted by Purchaser against
Seller including but not limited to pursuant to the post-Closing Purchase Price
adjustment of Section 1.4 and the indemnification provisions of Section 10.2.
The terms of this Article 9 shall not be subject to the time limitations
contained in Section 10.1 of this Agreement.
9.2 Preservation and Access to Records After the Closing.
(a) From the Closing Date until seven (7) years after the Closing or
such longer period as required by law (the "Document Retention Period"),
Purchaser shall keep and preserve all medical records, patient records, medical
staff records and other books and records of the Subsidiaries and the Hospitals
existing as of the Closing relating to tax or other liabilities of Seller prior
to the Closing, but excluding any records which are among the Excluded Assets.
Purchaser will afford to the representatives of Seller, including its counsel
and accountants, full and complete access to, and copies of, such records with
respect to time periods on or prior to the Closing Date (including, without
limitation, access to records of patients treated at the Hospitals on or prior
to the Closing Date) during normal business hours after the Closing Date, to the
44
<PAGE> 56
extent reasonably needed by Seller (or its affiliates) for business purposes.
Purchaser acknowledges that, as a result of entering into this Agreement and
operating the Hospitals, it will gain access to patient records and other
information which are subject to rules and regulations concerning
confidentiality. Purchaser shall abide by any such rules and regulations
relating to the confidential information it acquires. Purchaser shall maintain
the patient and medical staff records at the Hospitals in accordance with
applicable law and the requirements of relevant insurance carriers. After the
expiration of the Document Retention Period, if Purchaser intends to destroy or
otherwise dispose of any of the documents described in this Section 9.2(a),
Purchaser shall provide written notice to Seller of Purchaser's intention no
later than thirty (30) calendar days prior to the date of such intended
destruction or disposal. Seller shall have the right, at its sole cost, to take
possession of such documents during such forty-five (45) calendar day period. If
Seller does not take possession of such documents during such forty-five (45)
calendar day period, Purchaser shall be free to destroy or otherwise dispose of
such documentation upon the expiration of such forty-five (45) day period.
(b) Purchaser shall give reasonable cooperation to Seller and its
affiliates and its insurance carriers in respect of the defense of claims by
third parties against Seller or any Subsidiary, in respect of events occurring
on or prior to the Closing with respect to the operation of the Hospitals. Such
cooperation shall include, without limitation, making the Hired Employees
available for interviews, depositions, hearings and trials. Such cooperation
shall also include making all of its employees available to assist in the
securing and giving of evidence and in obtaining the presence and cooperation of
witnesses (all of which shall be done without payment of any fees or expenses to
Purchaser or to such employees). In addition, Seller and its affiliates shall be
entitled to access any such records, but only for purposes of pending litigation
involving the persons to whom such records refer, as certified in writing by
counsel retained by Seller or any of its affiliates in connection with such
litigation. Such records shall be, at Purchaser's option either (i) copied by
Purchase for Seller at Seller's expense or (ii) removed from the premises by
Seller, copied by Seller and promptly returned to Purchaser unless the originals
of such records must be introduced into evidence in which case Seller shall
return them as soon as practicable.
(c) In connection with (i) the transition of the Hospitals pursuant to
the transaction contemplated by this Agreement, (ii) Seller's and the
Subsidiaries' rights to the Excluded Assets, (iii) Seller's and the
Subsidiaries' obligations under the Excluded Liabilities and (iv) Seller's
preparation of the Final Balance Sheet pursuant to Section 1.4, Purchaser shall
after the Closing Date give Seller, Seller's affiliates and their respective
representatives reasonable access during normal business hours to Purchaser's
books, accounts and records and all other relevant documents and information
with respect to the assets, liabilities and business of the Hospitals as
representatives of Seller and Seller's affiliates may from time to time
reasonably request, all in such manner as not to unreasonably interfere with the
operations of the Hospitals. Seller acknowledges that it shall coordinate its
activities contemplated by this Section 9.2(c) through Frank Coyle, or his
designee.
(d) Purchaser and its representatives shall be given access by Seller
during normal business hours to the extent reasonably needed by Purchaser for
business purposes to all documents, records, correspondence, work papers and
other documents retained by Seller or any Subsidiary pertaining to any of the
Assets or with respect to the operation of the Hospitals on or
45
<PAGE> 57
prior to the Closing Date, all in such manner as to not interfere unreasonably
with Seller's and each Subsidiary's business. Such documents and other materials
shall be, at Seller's option, either (i) copied by Seller for Purchaser at
Purchaser's expense, or (ii) removed by Purchaser from the premises, copied by
Purchaser and promptly returned to Seller.
ARTICLE 10
SURVIVAL AND INDEMNIFICATION
10.1 Survival. Except as expressly set forth in this Agreement to the
contrary, all representations and warranties of Purchaser and Seller,
respectively, contained in this Agreement or in any document delivered pursuant
hereto shall be deemed to be material and to have been relied upon by Purchaser
and Seller, respectively, and shall continue to be fully effective and
enforceable following the Closing Date for two years, and shall thereafter be of
no further force and effect. Notwithstanding the foregoing, the representations
and warranties set forth in Section 2.7(a) and (b) and Section 2.13 shall
continue to be fully effective and enforceable following the Closing Date for
the applicable statutes of limitations periods, plus 30 days, and the
indemnification provisions contained in Sections 10.2.1(ii), (iii), (iv), (v),
(vi), (vii) and (viii), and 10.3.1(iv) shall continue to be fully effective and
enforceable following the Closing Date until the expiration of any applicable
statute of limitations period, or, if none, without any time limitation;
provided, however, that if there is an outstanding notice of a claim at the end
of any such applicable period in compliance with the terms of Section 10.4, such
applicable period shall not end in respect of such claim until such claim is
resolved. All covenants of Purchaser and Seller herein shall survive Closing in
accordance with their terms. The parties acknowledge and agree that the
provisions of Section 10.2.1(ii), (iii), (iv), (v), (vi), (vii) and (viii) shall
remain in full force and effect notwithstanding the expiration of any survival
period referred to in this Section 10.1 and that Purchaser's right to bring any
claims for damages under such provisions shall be unimpaired by the expiration
of any such survival period (notwithstanding the fact that such claims could
have been brought under Section 10.2.1(i).
10.2 Indemnification of Purchaser by Seller.
10.2.1 Indemnification. Seller shall keep and save Purchaser, its
controlled affiliates and their respective directors, officers, employees,
agents and other representatives (the "Purchaser Group"), forever harmless from
and shall indemnify and defend the Purchaser Group against any and all
obligations, judgments, liabilities, penalties, violations, fees, fines, claims,
losses, costs, demands, damages, liens, encumbrances and expenses including
reasonable attorneys' fees (collectively, "Damages"), whether direct or
consequential and no matter how arising, to the extent, connected with or
arising or resulting from or proximately related to (i) any breach of any
representation or warranty of Seller under this Agreement, (ii) any breach or
default by Seller of any covenant or agreement of Seller under this Agreement,
(iii) the Excluded Liabilities, (iv) the Excluded Assets, (v) all Taxes relating
to Seller or any Subsidiary or (for any period ending on or prior to the Closing
Date) the Assets ("Seller Tax Claims"), (vi) any professional or general
liability claim arising out of the business operations of the Hospitals on or
prior to the Closing Date, (vii) any act, conduct or omission of Seller or any
Subsidiary, or any event or circumstance pertaining to Seller, any Subsidiary or
the Assets, that has accrued, arisen, occurred or come into existence at any
time on or prior to the Closing Date, including without
46
<PAGE> 58
limitation failure to comply with bulk sales laws and (viii) the sale of the
Beaumont Assets. No provision in this Agreement shall prevent Seller from
pursuing any of its legal rights or remedies that may be granted to Seller by
law against any person or legal entity other than any other member of the
Purchaser Group.
10.2.2 Indemnification Limitations. (a) Seller shall be under no
liability to indemnify the Purchaser Group under Section 10.2.1 and no claim
under Section 10.2.1 of this Agreement shall:
(i) be made unless notice thereof shall have been
given by or on behalf of Purchaser to Seller in
the manner provided in Section 10.4, unless
failure to provide such notice in a timely manner
does not materially impair Seller's ability to
defend its rights, mitigate damages, seek
indemnification from a third party or otherwise
protect its interests;
(ii) be made to the extent that such claim relates to a
liability arising out of or relating to any act,
omission, event or occurrence connected with:
(A) the use, ownership or operation of any
of the Hospitals, or
(B) the use, ownership or operation of any
of the Assets,
after the Closing Date; other than as specifically
included in the Excluded Liabilities;
(iii) be made to the extent that such claim (or the
basis therefor) is set forth in the Disclosure
Schedule unless Seller's indemnification of
Purchaser is based on a provision hereof other
than Section 10.2.1(i);
(iv) be made if and to the extent that proper provision
or reserve was made for the matter giving rise to
the claim in Net Working Capital;
(v) be made to the extent such claim relates to an
obligation or liability for which Purchaser has
agreed to indemnify Seller pursuant to Section
10.3; and
(vi) to the extent such claim is made pursuant to
Section 10.2.1(i), accrue to Purchaser unless and
only to the extent that (A) Damages in respect of
any single claim under Section 10.2.1(i) exceeds
Five Thousand Dollars ($5,000) (a "Relevant
Claim") and (B) the total actual liability of
Seller in respect of all Relevant Claims in the
aggregate exceeds Three Million Six Hundred
Twenty-Eight Dollars ($3,628,000) (the "Aggregate
Amount"), in which event Purchaser shall be
entitled to seek indemnification under Section
47
<PAGE> 59
10.2.1(i) for all Relevant Claims only in an
amount of Damages which exceed the Aggregate
Amount; provided, however, that with respect
to claims made pursuant to Section 10.2.1(i)
based on Damages incurred as a result of any
breach of Section 2.4(a), any single claim or
series of related claims for amounts in excess
of $100,000 shall be paid in full by Seller
without regard to the provisions of this
clause (vi).
(b) Notwithstanding any other provision of this Agreement to the
contrary, the maximum aggregate liability of Seller to Purchaser under this
Agreement shall not exceed the Purchase Price.
(c) If Purchaser is entitled to recover any sum (whether by payment,
discount, credit or otherwise) from any third party (other than an insurance
carrier) in respect of any matter for which a claim of indemnity could be made
against Seller hereunder, Purchaser either shall, at its option, use its
reasonable endeavors to recover such sum from such third party and any sum
recovered will reduce the amount of the claim or shall assign to Seller the
right of Purchaser to pursue such third party. If Seller pays to Purchaser an
amount in respect of a claim, and Purchaser subsequently recovers from a third
party a sum which is referable to that claim, Purchaser shall forthwith repay to
Seller so much of the amount paid by it as does not exceed the sum recovered
from the third party less all reasonable costs, charges and expenses incurred by
Purchaser in obtaining payment in respect of that claim and in recovering that
sum from the third party.
10.3 Indemnification of Seller by Purchaser.
10.3.1 Indemnification. Purchaser shall keep and save Seller and the
Subsidiaries, and their respective directors, officers, employees, agents and
other representatives, forever harmless from and shall indemnify and defend
Seller and the Subsidiaries against any and all Damages, whether direct or
consequential and no matter how arising, in any way related to, connected with
or arising or resulting from (i) any breach of any representation or warranty of
Purchaser under this Agreement, (ii) any breach or default by Purchaser under
any covenant or agreement of Purchaser under this Agreement, (iii) cost reports
(and all claims with respect thereto) relating to Purchaser with respect to
Medicare, Medicaid, CHAMPUS or Blue Cross programs or any other third-party
payor for all periods beginning after the Closing Date, (iv) the Assumed
Obligations, (v) any professional or general liability claim arising out of the
business operations of the Hospitals after the Closing Date, (vi) any Assumed
Obligations, (vii) liabilities to the Hired Employees arising out of actions of
Purchaser based wholly or in part upon the contents of the personnel records of
such employees, and (viii) involuntary termination of the Hired Employees after
the Transition Date, which termination would constitute a "mass layoff" or a
"plant closing" within the meaning of WARN. No provision in this Agreement shall
prevent Purchaser from pursuing any of its legal rights or remedies that may be
granted to Purchaser by law against any person or legal entity other than Seller
or any affiliate of Seller.
10.3.2 Indemnification Limitations. (a) Purchaser shall be under no
liability to indemnify Seller under 10.3.1 and no claim under Section 10.3.1 of
this Agreement shall:
48
<PAGE> 60
(i) be made unless notice thereof shall have been
given by or on behalf of Seller to Purchaser in
the manner provided in Section 10.4, unless
failure to provide such notice in a timely manner
does not materially impair Seller's ability to
defend its rights, mitigate damages, seek
indemnification from a third party or otherwise
protect its interests;
(ii) be made to the extent that any loss may be
recovered under a policy of insurance in force on
the date of loss; provided, however, that this
Section 10.3.2(ii) shall not apply to the extent
that coverage under the applicable policy of
insurance is denied by the applicable insurance
carrier;
(iii) be made to the extent that such claim relates to a
liability arising out of or relating to any act,
omission, event or occurrence connected with:
(A) the use, ownership or operation of any
of the Hospitals, or
(B) the use, operation or ownership of any
of the Assets,
on or prior to the Closing Date, other than as
specifically included in the Assumed Obligations;
and
(iv) be made to the extent such claim relates
to an obligation or liability for which
Seller has agreed to indemnify Purchaser
pursuant to Section 10.2.
(b) If Seller or any Subsidiary is entitled to recover any sum
(whether by payment, discount, credit or otherwise) from any third party in
respect of any matter for which a claim of indemnity could be made against
Purchaser hereunder, Seller shall, and shall cause the applicable Subsidiary to,
use its reasonable endeavors to recover such sum from such third party and any
sum recovered will reduce the amount of the claim. If Purchaser pays to Seller
an amount in respect of a claim, and Seller or any Subsidiary subsequently
recovers from a third party a sum which is referable to that claim, Seller shall
forthwith repay to Purchaser so much of the amount paid by it as does not exceed
the sum recovered from the third party less all reasonable costs, charges and
expenses incurred by Seller or any Subsidiary in obtaining payment in respect of
that claim and in recovering that sum from the third party.
10.4 Method of Asserting Claims. All claims for indemnification by any
person entitled to indemnification hereunder (the "Indemnified Party") under
this Article 10 will be asserted and resolved as follows:
(a) In the event any claim or demand, for which a party hereto (an
"Indemnifying Party") would be liable for the Damages to an Indemnified Party,
is asserted against or sought to be collected from such Indemnified Party by a
person other than Seller, Purchaser or their affiliates (a "Third Party Claim"),
the Indemnified Party shall deliver a notice of its claim (a "Claim Notice") to
the Indemnifying Party within thirty (30) calendar days after the Indemnified
49
<PAGE> 61
Party receives notice of such Third Party Claim; provided, however, that notice
shall be provided to the Indemnifying Party within fifteen (15) calendar days
after receipt of a complaint, petition or institution of other formal legal
action by the Indemnified Party. If the Indemnified Party fails to provide the
Claim Notice within such applicable time period after the Indemnified Party
receives notice of such Third Party Claim and thereby materially impairs the
Indemnifying Party's ability to protect its interests, the Indemnifying Party
will not be obligated to indemnify the Indemnified Party with respect to such
Third Party Claim. The Indemnifying Party will notify the Indemnified Party
within thirty (30) calendar days after receipt of the Claim Notice (the "Notice
Period") whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Third Party
Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section
10.4(a), then, subject to the immediately succeeding sentence, the Indemnifying
Party will have the right to defend, at its sole cost and expense, such Third
Party Claim by all appropriate proceedings, which proceedings will be prosecuted
by the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party. To the extent the Claim is solely for
money damages, the Indemnifying Party will have full control of such defense and
proceedings, including any compromise or settlement thereof. Notwithstanding the
foregoing, the Indemnified Party may, at its sole cost and expense, file during
the Notice Period any motion, answer or other pleadings that the Indemnified
Party may deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and which is not prejudicial, in the reasonable judgment of
the Indemnifying Party, to the Indemnifying Party. Except as provided in Section
10.4(a)(ii) hereof, if an Indemnified Party takes any such action that is
prejudicial and causes a final adjudication that is adverse to the Indemnifying
Party, the Indemnifying Party will be relieved of its obligations hereunder with
respect to the portion of such Third Party Claim prejudiced by the Indemnified
Party's action. If requested by the Indemnifying Party, the Indemnified Party
agrees, at the sole cost and expense of the Indemnifying Party, to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
that the Indemnifying Party elects to contest, or, if appropriate and related to
the Third Party Claim in question, in making any counterclaim against the person
asserting the Third Party Claim, or any cross-complaint against any person
(other than the Indemnified Party or any of its affiliates). The Indemnified
Party may participate in, but not control, any defense or settlement of any
Third Party Claim controlled by the Indemnifying Party pursuant to this Section
10.4(a)(i), and except as specifically provided in this Section 10.4(a)(i), the
Indemnified Party will bear its own costs and expenses with respect to such
participation.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party pursuant to this Section 10.4(a), or if the Indemnifying Party
gives such notice but fails to prosecute diligently 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 to defend, at
the sole cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings will be promptly and reasonably
prosecuted by the Indemnified Party to a final conclusion or will be 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, however, that if requested by the Indemnified
50
<PAGE> 62
Party, the Indemnifying Party agrees, at the sole cost and expense of the
Indemnifying Party, to cooperate with the Indemnified Party and its counsel in
contesting any 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 against the person asserting the Third Party Claim, or any
cross-complaint against any person (other than the Indemnifying Party or any of
its affiliates). Notwithstanding the foregoing provisions of this Section
10.4(a)(ii), if the Indemnifying Party has notified the Indemnified Party with
reasonable promptness that the Indemnifying Party disputes its liability to the
Indemnified Party with respect to such Third Party Claim and if such dispute is
resolved 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 this Section 10.4(a)(ii) 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 reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation.
Subject to the above terms of this Section 10.4(a)(ii), the Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 10.4(a)(ii), and the Indemnifying
Party will bear its own costs and expenses with respect to such participation.
The Indemnified Party shall give sufficient prior notice to the Indemnifying
Party of the initiation of any discussions relating to the settlement of a Third
Party Claim to allow the Indemnifying Party to participate therein.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that either (i) does not involve a Third Party
Claim being asserted against or sought to be collected from the Indemnified
Party or (ii) is a Seller Tax Claim, the Indemnified Party shall deliver an
Indemnity Notice (as hereinafter defined) to the Indemnifying Party. (The term
"Indemnity Notice" shall mean written notification of a claim for indemnity
under Article 10 hereof (which claim does not involve a Third Party Claim or is
a Seller Tax Claim) by an Indemnified Party to an Indemnifying Party pursuant to
this Section 10.4, specifying the nature of and specific basis for such claim
and the amount or the estimated amount of such claim.) The failure by any
Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that an Indemnifying Party demonstrates
that it has been prejudiced thereby.
(c) If the Indemnifying Party does not notify the Indemnified Party
within thirty (30) calendar days following its receipt of a Claim Notice or an
Indemnity Notice that the Indemnifying Party disputes its liability to the
Indemnified Party hereunder, such claim specified by the Indemnified Party will
be conclusively deemed a liability of the Indemnifying Party hereunder and the
Indemnifying Party shall pay the amount of such liability to the Indemnified
Party on demand, or on such later date (i) in the case of a Third Party Claim,
as the Indemnified Party suffers the Damages in respect of such Third Party
Claim, (ii) in the case of an Indemnity Notice in which the amount of the claim
is estimated, when the amount of such claim becomes finally determined or (iii)
in the case of a Seller Tax Claim, within fifteen (15) calendar days following
final determination of the item giving rise to the claim for indemnity. If the
Indemnifying Party has timely disputed its liability with respect to such claim,
as provided above, the Indemnifying Party and the Indemnified Party agree to
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations, such dispute will be resolved pursuant to Section
12.17 hereof.
51
<PAGE> 63
(d) The Indemnified Party agrees to give the Indemnifying Party
reasonable access to the books and records and employees of the Indemnified
Party in connection with the matters for which indemnification is sought
hereunder, to the extent the Indemnifying Party reasonably deems necessary in
connection with its rights and obligations hereunder.
(e) The Indemnified Party shall assist and cooperate with the
Indemnifying Party in the conduct of litigation, the making of settlements and
the enforcement of any right of contribution to which the Indemnified Party may
be entitled from any person or entity in connection with the subject matter of
any litigation subject to indemnification hereunder. In addition, the
Indemnified Party shall, upon request by the Indemnifying Party or counsel
selected by the Indemnifying Party (without payment of any fees or expenses to
the Indemnified Party or an employee thereof), attend hearings and trials,
assist in the securing and giving of evidence, assist in obtaining the presence
or cooperation of witnesses, and make available its own personnel; and shall do
whatever else is necessary and appropriate in connection with such litigation.
The Indemnified Party shall not make any demand upon the Indemnifying Party or
counsel for the Indemnifying Party in connection with any litigation subject to
indemnification hereunder, except a general demand for indemnification as
provided hereunder. If the Indemnified Party shall fail to perform such
obligations as Indemnified Party hereunder or to cooperate fully with the
Indemnifying Party in Indemnifying Party's defense of any suit or proceeding,
such cooperation to include, without limitation, attendance at all relevant
depositions and the provision of all documents (subject to appropriate
privileges) relevant to the defense of any claim, then, except where such
failure does not materially impair the Indemnifying Party's defense of such
claims after notice from the Indemnified Party and 15 days to cure, the
Indemnifying Party shall be released from all of its obligations under this
Agreement with respect to that suit or proceeding and any other claims which had
been raised in such suit or proceeding.
(f) Following indemnification as provided for hereunder, the
Indemnifying Party shall be subrogated to all rights of the Indemnified Party
with respect to all persons or entities relating to the matter for which
indemnification has been made.
10.5 Exclusive. Other than claims for fraud or equitable relief, any
dispute arising under this Agreement or in connection with or as a result of the
transactions contemplated by this Agreement or any Damages or injury alleged to
be suffered by either party as a result of the actions or failure to act by any
other party shall, unless otherwise specifically stated in this Agreement, be
governed solely and exclusively by the provisions of this Article 10.
10.6 Reduction of the Purchase Price. If Seller pays any sum to Purchaser
in respect of a claim under Article 10, the Purchase Price and total
consideration received by Seller for the sale of the Assets shall be deemed to
be reduced by the amount of such payment.
ARTICLE 11
TAX AND COST REPORT MATTERS
11.1 Tax Matters; Allocation of Purchase Price.
52
<PAGE> 64
(a) After the Closing, the parties shall cooperate fully with each
other and shall make available to each other, as reasonably requested, all
information, records or documents relating to tax liabilities or potential tax
liabilities attributable to Seller or any Subsidiary with respect to the
operation of the Hospitals for all periods on or prior to the Closing Date and
shall preserve all such information, records and documents at least until the
expiration of any applicable statute of limitations or extensions thereof. The
parties shall also make available to each other as reasonably required, and at
the reasonable cost of the requesting party (for out-of-pocket costs and
expenses only), personnel responsible for preparing or maintaining information,
records and documents in connection with tax matters.
(b) The Purchase Price shall be allocated among each of the Assets
(or, where more practical, each category of Assets) and among each of the
Hospitals in accordance with Schedule 11.1(b), which will be agreed upon within
five (5) business days prior to the Closing Date by Seller and Purchaser. Seller
and Purchaser hereby agree to allocate the Purchase Price in accordance with
Schedule 11.1(b), to be bound by such allocations for all purposes, to account
for and report the purchase and sale of the Assets contemplated hereby for all
purposes (including, without limitation, financial reporting, accounting,
Medicare reimbursement and federal and state tax purposes) in accordance with
such allocations, and not to take any position (whether in financial statements,
cost reports, tax returns, cost report or tax audits, or otherwise), which is
inconsistent with such allocations without the prior written consent of the
other party.
11.2 Cost Report Matters.
(a) Seller shall, and shall cause the Subsidiaries to, prepare and
timely file all cost reports relating to the periods ending on or prior to the
Closing Date or required as a result of the consummation of the transactions
described herein, including, without limitation, those relating to Medicare,
Medicaid, Blue Cross and other third party payors which settle on a cost report
basis (the "Subsidiaries' Cost Reports"). Purchaser shall forward to Seller any
and all correspondence relating to the Accounts Receivable, the Subsidiaries'
Cost Reports or rights to settlements and retroactive adjustments on the
Subsidiaries' Cost Reports ("Agency Settlements") within five (5) business days
of receipt by Purchaser. Purchaser shall not reply to any such correspondence
without Seller's written approval. Purchaser shall remit any receipts relating
to the Accounts Receivable, the Subsidiaries' Cost Reports or the Agency
Settlements within five (5) business days after receipt by Purchaser (except
those receipts to be retained by Purchaser pursuant to Section 11.3) and will
forward any demand for payments within five (5) business days. Purchaser (and
its respective successors in interest and assigns and its respective affiliates)
shall have neither the right to offset amounts payable to Seller under this
Section 11.2 against, nor the right to contest its obligation to transfer,
assign and convey to Seller because of, outstanding claims, liabilities or
obligations asserted by Purchaser against Seller including but not limited to
pursuant to the post-closing Purchase Price adjustment of Section 1.4 and the
indemnification provisions of Section 10.2. Seller shall retain all rights to
the Subsidiaries' Cost Reports and to the Accounts Receivable including, without
limitation, any payables resulting therefrom or receivables relating thereto and
the right to appeal any Medicare determinations relating to the Agency
Settlements and the Subsidiaries' Cost Reports. Seller will furnish copies of
the Receivables Records to Purchaser upon request and allow Purchaser and its
representatives reasonable access to such documents.
53
<PAGE> 65
(b) Upon reasonable notice and during normal business office hours,
Purchaser will cooperate with Seller and the Subsidiaries in regard to the
preparation, filing, handling, and appeals of the Subsidiaries' Cost Reports.
Upon reasonable notice and during normal business office hours, Purchaser will
cooperate with Seller and the Subsidiaries in connection with any cost report
disputes and/or other claim adjudication matters relative to governmental
program reimbursement. Such cooperation shall include the providing of
statistics and obtaining files at the Hospitals and the coordination with Seller
and the Subsidiaries pursuant to adequate notice of Medicare and Medicaid exit
conferences or meetings. Purchaser will, upon reasonable notice, during normal
business office hours and at the sole cost and expense of Seller, and subject to
applicable law regarding confidentiality of patient records, provide Seller and
the Subsidiaries reasonable access to all records of the Hospitals and will
allow Seller, the Subsidiaries and their respective representatives to copy any
documents relating to the Subsidiaries' Cost Reports and appeals thereof.
11.3 Transition Services. To compensate Seller and the Subsidiaries for
services rendered and medicine, drugs, and supplies provided on or before the
Closing Date at any of the Hospitals (the "Transition Services") with respect to
patients whose medical care is paid for, in whole or in part, by Medicare,
Medicaid, CHAMPUS, Blue Cross or any other third party payor who pays on a DRG,
case rate or other similar arrangement, and who are admitted to any of the
Hospitals on or before the Closing Date but who are not discharged until after
the Closing Date ("Governmental Program Transition Patients"), the parties shall
take the following action:
(a) As soon as practicable after the Closing Date, Seller shall
deliver to Purchaser a statement itemizing the inpatient hospital Transition
Services provided by the Subsidiaries with respect to the operation of the
Hospitals on or prior to the Closing Date to Governmental Program Transition
Patients. For the Transition Services, Purchaser shall pay to Seller an amount
equal to the DRG and outlier payments, the case rate payment or other similar
payment received by Purchaser on behalf of a Governmental Program Transition
Patient, multiplied by a fraction (the "Fraction"), the numerator of which shall
be the total charges for the Transition Services provided to such Governmental
Program Transition Patient by Seller and the Subsidiaries and the denominator of
which shall be the sum of the total charges for the Transition Services provided
to such Governmental Program Transition Patient by Seller and the Subsidiaries
plus the total charges for the Transition Services provided to such Governmental
Program Transition Patient by Purchaser after the Closing Date. The parties
shall reconcile the payments within ninety (90) calendar days after both the
tentative and final Medicare cost report settlement and any other payor
settlement affecting the Governmental Program Transition Patients (the
"Reconciliation").
(b) Subject to Section 11.3(d), payments made pursuant to Section
11.3(a) shall be made to Seller monthly, on the twenty-fifth (25th) day of each
month, for payments received by Purchaser during the previous month, accompanied
by copies of remittances and other supporting documentation as is reasonably
requested by Seller. Any other payments required to be made by Seller to
Purchaser, or by Purchaser to Seller, as the case may be, as a result of (i) the
Reconciliation, (ii) a notice of program reimbursement with respect to the
operations of any Hospital or (iii) other notice from a governmental agency or
third party payor with respect to Transition Services shall be made within
thirty (30) calendar days after the Reconciliation or the receipt of any such
notice, as applicable. In the event that Purchaser and Seller are unable to
54
<PAGE> 66
agree on the amount to be paid to Seller or Purchaser, as the case may be, under
this Section 11.3, then such amount shall be determined by the Independent
Auditor at their joint expense.
(c) The parties acknowledge that all charges for outpatient and other
cost-based services shall be made (i) by Seller and the Subsidiaries for all
periods on or prior to the Closing Date and (ii) by Purchaser for all periods
after the Closing Date.
(d) Notwithstanding the first sentence of Section 11.3(b), Purchaser
shall make a distribution to Seller within three (3) business days if at any
time during the applicable calendar month the funds to be distributed to Seller
pursuant to Section 11.3(a) exceed One Hundred Fifty Thousand Dollars
($150,000). The amount of such distribution shall be all amounts payable to
Seller pursuant to Section 11.3(a) which have not been previously distributed to
Seller. All such distributions shall be made by wire transfer of immediately
available funds to Seller to the account(s) specified by Seller to Purchaser in
writing from time to time.
(e) Purchaser (and its respective successors in interest and assigns
and its respective affiliates) shall have neither the right to offset amounts
payable to Seller under this Section 11.3 against, nor the right to contest its
obligation to transfer, assign and convey to Seller because of, outstanding
claims, liabilities or obligations asserted by Purchaser against Seller
including but not limited to pursuant to the post-closing Purchase Price
adjustment of Section 1.4 and the indemnification provisions of Section 10.2.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Further Assurances and Cooperation. Seller shall, and shall cause the
Subsidiaries to, execute, acknowledge and deliver to Purchaser any and all other
assignments, consents, approvals, conveyances, assurances, documents and
instruments reasonably requested by Purchaser at any time and shall take any and
all other actions reasonably requested by Purchaser at any time for the purpose
of more effectively assigning, transferring, granting, conveying and confirming
to Purchaser, the Assets. After consummation of the transaction contemplated
herein, the parties agree to cooperate with each other in regards to all matters
arising from the transition of ownership of the Assets and the business of the
Hospitals from Seller and the Subsidiaries to Purchaser.
12.2 Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto;
provided, however, that no party hereto may assign any of its rights or delegate
any of its duties under this Agreement without the prior written consent of the
other party, except that Purchaser may assign any of its rights or delegate any
of its duties under this Agreement to any controlled affiliate of Purchaser upon
Seller's receipt of Purchaser's guaranty of such controlled affiliate's
obligations, in a form reasonably acceptable to Seller, and Purchaser may assign
its rights (but not its obligations) under this Agreement to any of its
financing sources.
55
<PAGE> 67
12.3 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York as applied to
contracts made and performed within the State of New York.
12.4 Amendments. This Agreement may not be amended other than by written
instrument signed by the parties hereto.
12.5 Exhibits, Schedules and Disclosure Schedule. The Disclosure Schedule
and all exhibits and schedules referred to in this Agreement shall be attached
hereto and are incorporated by reference herein. Any matter disclosed in this
Agreement or in the Disclosure Schedule with reference to any Section of this
Agreement shall be deemed a disclosure in respect of all sections as to which
the relevance of such disclosure is reasonably apparent.
12.6 Notices. Any notice, demand or communication required, permitted, or
desired to be given hereunder shall be deemed effectively given when personally
delivered, when received by telegraphic or other electronic means (including
facsimile) or overnight courier, or five (5) calendar days after being deposited
in the United States mail, with postage prepaid thereon, certified or registered
mail, return receipt requested, addressed as follows:
If to Seller: Tenet Healthcare Corporation
c/o Tenet HealthSystem
14001 Dallas Parkway
Dallas, Texas 75240
Attention: David R. Mayeux
Facsimile No.: (972) 789-2385
With a copy to: Tenet Healthcare Corporation
c/o Tenet HealthSystem
14001 Dallas Parkway
Dallas, Texas 75240
Attention: William A. Barrett, Esq.
Facsimile No.: (972) 789-6164
With a copy to: McDermott, Will & Emery
2049 Century Park East
Suite 3400
Los Angeles, California 90067
Attention: Ira J. Rappeport, Esq.
Facsimile No.: (310) 277-4730
If to Purchaser: JLL Hospital, LLC
Attn: Jeffrey C. Lightcap
450 Lexington Ave.
Suite 3350
New York, NY 10017
Facsimile No.: (212) 286-8626
56
<PAGE> 68
With copies to: Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899-0636
Attention: Robert Pincus
Facsimile No.: (302) 651-3001
Iasis Healthcare
104 Woodmont, Suite 101
Nashville, Tennessee 37205
Attention: Frank A. Coyle
(615) 846-3006
or at such other address as one party may designate by notice hereunder to the
other parties.
12.7 Headings. The section and other headings contained in this Agreement
and in the Disclosure Schedule, exhibits and schedules to this Agreement are
included for the purpose of convenient reference only and shall not restrict,
amplify, modify or otherwise affect in any way the meaning or interpretation of
this Agreement or the Disclosure Schedule, exhibits and schedules hereto.
12.8 Confidentiality and Publicity. The parties hereto shall hold in
confidence the information contained in this Agreement, and all information
related to this Agreement, which is not otherwise known to the public, shall be
held by each party hereto as confidential and proprietary information and shall
not be disclosed without the prior written consent of the other party.
Accordingly, Purchaser and Seller shall not discuss with, or provide nonpublic
information to, any third party (except for such party's attorneys, accountants,
directors, officers and employees, the directors, officers and employees of any
affiliate of any party hereto, and other consultants and professional advisors)
concerning this transaction prior to the Closing, except: (i) as required in
governmental filings or judicial, administrative or arbitration proceedings,
including without limitation the filings to be made by the parties with respect
to the HSR Act; (ii) pursuant to public announcements made with the prior
written approval of Seller and Purchaser; or (iii) as required in connection
with the Financing by Purchaser. The rights of Seller under this Section 12.8
shall be in addition and not in substitution for the rights of Seller under the
Confidentiality Agreement, which shall survive Closing.
12.9 Fair Meaning. This Agreement shall be construed according to its fair
meaning and as if prepared by all parties hereto.
12.10 Gender and Number; Construction. All references to the neuter gender
shall include the feminine or masculine gender and vice versa, where applicable,
and all references to the singular shall include the plural and vice versa,
where applicable. Unless otherwise expressly provided, the word "including"
followed by a listing does not limit the preceding words or terms and shall mean
"including, without limitation."
57
<PAGE> 69
12.11 Third Party Beneficiary. None of the provisions herein contained are
intended by the parties, nor shall they be deemed, to confer any benefit on any
person not a party to this Agreement.
12.12 Expenses and Attorneys' Fees. Except as otherwise provided in this
Agreement, each party shall bear and pay its own costs and expenses relating to
the preparation of this Agreement and to the transactions contemplated by, or
the performance of or compliance with any condition or covenant set forth in,
this Agreement, including without limitation, the disbursements and fees of
their respective attorneys, accountants, advisors, agents and other
representatives, incidental to the preparation and carrying out of this
Agreement, whether or not the transactions contemplated hereby are consummated.
The parties expressly agree that each of Seller and Purchaser shall bear 50
percent (50%) of the aggregate amount of the following categories of expenses:
(a) expenses relating to the preparation and delivery by Seller of the audited
combined financial statements of the Hospitals contemplated by Section 4.8(b) of
this Agreement (including the opinion of KPMG Peat Marwick with respect
thereto); (b) all costs of the Title Commitment and the Title Policy; (c) all
documentary transfer, sales and similar taxes and recording charges in
connection with the conveyance of the Assets to Purchaser; (d) all costs of the
Surveys; (e) all costs of the Environmental Survey; (f) the cost of an
environmental compliance audit to be conducted by Purchaser at the Hospitals;
and (g) all filing fees imposed in connection with Seller's and Purchaser's
filings under the HSR Act. As and when either party receives an invoice or other
evidence of incurrence or payment with respect to any expense described in the
foregoing categories, such party shall forward promptly to the other party a
copy of such invoice or other evidence. The parties shall each calculate the net
balance owed from one party to the other under this Section 12.12, exchange such
calculations and agree on such amount and to whom it is owed within fifteen (15)
business days of the first to occur of (i) the Closing Date or (ii) the
termination of this Agreement. The party owing such net balance shall deliver to
the party to whom the balance is owed the payor's check in payment of such net
balance within twenty-five (25) business days following the first to occur of
(i) the Closing Date or (ii) the termination of this Agreement. The covenants
set forth in the preceding sentence shall be binding upon the parties
notwithstanding failure to consummate the transaction contemplated hereby;
provided, however, that Seller agrees to reimburse Purchaser for any amounts
payable by it under this Section 12.12 to the extent attributable to a Hospital
or Hospitals sold by Seller within the twelve (12) months immediately following
the termination of this Agreement. Notwithstanding the foregoing, Seller shall
bear 100 percent (100%) of the amount of said expenses in excess of an aggregate
of Three Million Dollars ($3,000,000). If any action is brought by any party to
enforce any provision of this Agreement, the prevailing party shall be entitled
to recover its court costs, arbitration expenses and reasonable attorneys' fees.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement, binding on all of the
parties hereto.
12.14 Entire Agreement. This Agreement, the Disclosure Schedule, the
exhibits and schedules, and the documents referred to herein contain the entire
understanding between the parties with respect to the transactions contemplated
hereby and supersede all prior or contemporaneous agreements, understandings,
representations and statements, oral or written, between the parties on the
subject matter hereof, and shall be of no further force or effect.
58
<PAGE> 70
12.15 No Waiver. Any term, covenant or condition of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof but
only by a written notice signed by the party expressly waiving such term or
condition. The subsequent acceptance of performance hereunder by a party shall
not be deemed to be a waiver of any preceding breach by the other party of any
term, covenant or condition of this Agreement, other than the failure of such
party to perform the particular duties so accepted, regardless of such party's
knowledge of such preceding breach at the time of acceptance of such
performance. The waiver of any term, covenant or condition shall not be
construed as a waiver of any other term, covenant or condition of this
Agreement.
12.16 Severability. If any term, provision, condition or covenant of this
Agreement or the application thereof to any party or circumstance shall be held
to be invalid or unenforceable to any extent in any jurisdiction, then the
remainder of this Agreement and the application of such term, provision,
condition or covenant in any other jurisdiction or to persons or circumstances
other than those as to whom or which it is held to be invalid or unenforceable,
shall not be affected thereby, and each term, provision, condition and covenant
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law.
12.17 Arbitration. Any disagreement, dispute or claim arising out of or
relating to this Agreement which cannot be settled by the parties hereto shall
be settled by arbitration in accordance with the following provisions:
12.17.1 Forum. Forum for arbitration shall be Manhattan, New York.
12.17.2 Law. Governing law shall be the law of the State of New York.
12.17.3 Selection. The number of arbitrators shall be three (3),
unless the parties hereto are able to agree on a single arbitrator. In the
absence of such agreement within ten (10) business days after the initiation of
an arbitration proceeding, Seller shall select one (1) arbitrator and Purchaser
shall select one (1) arbitrator, and those two arbitrators shall then select,
within ten (10) business days, a third arbitrator. If those two (2) arbitrators
are unable to select a third arbitrator within such ten (10) business day
period, a third arbitrator shall be appointed by the commercial panel of the
American Arbitration Association. The decision in writing of at least two (2) of
the three (3) arbitrators shall be final and binding upon the parties.
12.17.4 Administration. Arbitration shall be administered by the
American Arbitration Association.
12.17.5 Rules. Rules of arbitration shall be the Commercial
Arbitration Rules of the American Arbitration Association, as modified by any
other instructions that the parties hereto may agree upon at the time, except
that each party hereto shall have the right to conduct discovery in any manner
and to the extent authorized by the Federal Rules of Civil Procedure as
interpreted by the federal courts in New York. The arbitrators shall not modify
the terms of this Agreement.
12.17.6 Award. The award rendered by arbitration shall be final and
binding upon the parties hereto, and judgment upon the award may be entered in
any court of competent jurisdiction in the United States.
59
<PAGE> 71
12.18 Time is of the Essence. Time is of the essence for all dates and time
periods set forth in this Agreement and each performance called for in this
Agreement.
60
<PAGE> 72
IN WITNESS WHEREOF, this Agreement has been entered into as of the day
and year first above written.
PURCHASER:
JLL Hospital, LLC, a Delaware limited
liability company
By: /s/ J.C. Lightcap
-----------------------------------
Name: Jeffrey C. Lightcap
---------------------------------
Its: Authorized Person
----------------------------------
SELLER:
TENET HEALTHCARE CORPORATION, a
Nevada corporation
By: /s/ David R. Mayeux
-----------------------------------
Name: David R. Mayeux
---------------------------------
Its: Executive Vice President
----------------------------------
61
<PAGE> 1
EXHIBIT 2.3
AMENDMENT NO. 1 TO ASSET SALE AGREEMENT
This Amendment No. 1 to Asset Sale Agreement (the "Amendment") is made
and entered into as of October 15, 1999, by and between Tenet Healthcare
Corporation, a Nevada corporation ("Seller") and Iasis Healthcare Corporation, a
Delaware corporation ("Purchaser") as successor in interest to JLL Hospital,
LLC, a Delaware limited liability company.
RECITALS
A. Seller and JLL Hospital, LLC entered into that certain Asset Sale
Agreement dated as of August 15, 1999 (the "Agreement") pursuant to which
Purchaser's permitted designees or assignees are acquiring substantially all of
the assets with respect to the operation of the Hospitals from the Subsidiaries.
B. Seller and Purchaser desire to amend the Agreement to address
certain matters that have arisen since the effective date of the Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants contained in this Amendment, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Except to the extent it is specifically indicated to
the contrary in this Amendment, defined terms used in this Amendment shall have
the same meanings ascribed to them in the Agreement.
2. Items to be Delivered by Purchaser at Closing.
(a) Section 1.7.1 of the Agreement is hereby deleted in its
entirety and replaced with the following:
1.7.1 payment of the Cash Purchase Price based upon the Interim
Balance Sheet (subject to adjustment as described in Section 1.4),
less Fifty Million Dollars ($50,000,000) (the "Escrow Amount"), as
adjusted to reflect the prorations provided in Section 1.8 of this
Agreement.
(b) A new Section 1.7.1.1 of the Agreement is hereby added as
follows after Section 1.7.1 of the Agreement:
1.7.1.1 payment of the Escrow Amount to the Chase Manhattan Bank,
as the Escrow Agent (the "Escrow Agent") by wire transfer of
immediately available funds, to be held in escrow subject to the
terms of the Escrow
<PAGE> 2
Agreement, dated the date hereof, by and among Seller, Purchaser
and the Escrow Agent;
3. Transfer of Seller Assets. Section 1.9(f) of the Agreement is
hereby deleted in its entirety and is replaced with the following:
(f) all of such Subsidiary's interest in and to all contracts and
agreements (including, but not limited to, purchase orders) with
respect to the operation of any Hospital (the "Contracts")
including, without limitation, those Contracts described in
Schedule 1.9(f); provided, however, that, subject to Section 9.3,
multi-hospital contracts as to which one or more of the Acute Care
Hospitals and one or more of Seller's other acute care hospitals
participate ("Multi-Facility Contracts") shall not be transferred
and conveyed at Closing and shall constitute Assets and Contracts
only to the extent attributable to the Acute Care Hospitals.
4. Excluded Assets.
(a) Section 1.10(p) of the Agreement is hereby deleted in its
entirety and replaced with the following:
(p) [Intentionally omitted];
(b) A new Section 1.10(q) of the Agreement is hereby added to
read as follows:
(q) those Contracts set forth in Schedule 1.10(q).
5. Assumed Obligations. Section 1.11(b) of the Agreement is hereby
deleted in its entirety and replaced with the following:
(b) the Contracts, but only to the extent of the
obligations arising thereunder with respect to events or periods
after the Closing Date; provided, however, that, subject to Section
9.3, Multi-Facility Contracts shall give rise to Assumed
Obligations only to the extent attributable to the Acute Care
Hospitals.
6. Excluded Liabilities. A new Section 1.12(o) of the Agreement is
hereby added to read as follows:
(o) all liabilities or obligations arising at any time
under those Contracts set forth in Schedule 1.10(q);
2
<PAGE> 3
7. Title; Sufficiency.
(a) The phrase "which are not otherwise marked with two stars
and (iv) the UCC Liens" is hereby inserted immediately after the
phrase "(iii) other such encumbrances as are set forth in Schedule
2.7(b)" contained in Section 2.7(b) of the Agreement.
(b) The phrase "and (v) the judgments as are set forth in
Schedule 2.7(b) which are marked with two stars therein" is hereby
inserted immediately after the phrase "(collectively, "Permitted
Liens")" contained in Section 2.7(b) of the Agreement.
8. Representations and Warranties of Seller. A new Section 2.21 of the
Agreement is hereby added to the Agreement to read as follows:
2.21 Managed Care Contracts To the best knowledge of the Tenet
Representatives (as defined below), no payor under any managed care
Contract has notified or otherwise informed Seller or the
Subsidiaries that it does not intend to, or will not, consent to
the transfer of such Contract to Purchaser as a result of the
transactions contemplated by the Agreement, as amended. For
purposes hereof, the term "Tenet Representatives" shall mean
Michael Murphy, Peggy Sanborne, William Barrett and Paul O'Neill.
9. Covenants of Seller.
(a) A new Section 4.21 of the Agreement is hereby added to read
as follows:
4.21 Certain Owned Real Property. Notwithstanding Section 1.9 of
this Agreement, the Owned Real Property listed on Schedule 4.21(a) (the
"6103 Webb Property"), Schedule 4.21(b) (the "Town & Country Condo
Property"), Schedule 4.21(c) (the "Memorial Condo Property"), Schedule
4.21(d) (the "Southwest Real Property"), and the Leased Real Property
listed on Schedule 4.21(e) (the "La Mesa Leased Real Property") shall
not be transferred and conveyed to Purchaser as of the Closing Date.
Instead, Seller shall transfer such Owned Real Property and Leased Real
Property to Purchaser after Closing in accordance with this Section
4.21.
(a) 6103 Webb Property. Seller and Purchaser shall agree on
the value of the 6103 Webb Property within thirty (30) days following
the Closing. If the Seller and Purchaser fail to agree on a value
within such thirty-day period, the parties shall retain an MAI
certified appraiser promptly thereafter to perform an appraisal of such
value with the cost of obtaining such appraisal to be split equally
between Seller and Purchaser. The appraisal shall be conducted using a
MAI or other valuation methodology that is mutually acceptable to the
parties. Following the determination of the value of the property in
such manner (the "Webb Property Value"), Seller shall use commercially
reasonable and expeditious efforts to either
3
<PAGE> 4
(i) acquire all of the partnership interests in that certain limited
partnership known as 6103 Webb Road, Ltd. or (ii) obtain the written
consent of Robert G. Sherrill, Jr., M.D. to the transfer of the 6103
Webb Property to Purchaser or Purchaser's designated affiliate. Seller
shall offer to acquire the partnership interest, or obtain the consent,
from Dr. Sherrill based on the Webb Property Value. Within ten (10)
days after the occurrence of either event set forth in clause (i) or
(ii) contained in the previous sentence, or as otherwise agreed to by
the parties to this Agreement, Seller shall cause fee title to the 6103
Webb Property to be conveyed to Purchaser or Purchaser's designated
affiliate and Seller shall cause the Title Company to issue a Title
Policy to Purchaser or Purchaser's designated affiliate with respect to
the 6103 Webb Property in the amount of the Webb Property Value. Such
Title Policy shall be issued consistent with the requirements set forth
in Section 7.10. If Seller, despite its commercially reasonable
efforts, is unable to transfer the 6103 Webb Property to Purchaser or
Purchaser's designated affiliate by December 15, 1999, Seller shall
have no obligation to transfer to Purchaser and Purchaser shall have no
obligation to acquire from Seller the 6103 Webb Property. In such
event, no later than December 31, 1999, Seller shall return to
Purchaser an amount equal to the Webb Property Value, which Seller and
Purchaser agree is the portion of the Purchase Price allocable to the
6103 Webb Property.
(b) Town & Country Condo Property and the Memorial Condo
Property. Promptly after the Closing Date, Seller shall use
commercially reasonable and expeditious efforts to obtain the
applicable condominium association's waiver of, or expiration of the
time period applicable to, its right of first refusal regarding the
conveyance of the Town & Country Condo Property and the Memorial Condo
Property to Purchaser or Purchaser's designated affiliate. Within ten
(10) days after the waiver of, or expiration of, each such applicable
right of first refusal, Seller shall cause fee title to the Town &
Country Condo Property and the Memorial Condo Property, respectively,
to be conveyed to Purchaser or Purchaser's designated affiliate. Seller
shall cause fee title to the Town & Country Condo Property and the
Memorial Condo Property, respectively, to be conveyed to Purchaser or
Purchaser's designated affiliate and Seller shall cause the Title
Company to issue a Title Policy to Purchaser or Purchaser's designated
affiliate with respect to the Town & Country Condo Property and the
Memorial Condo Property in the amount of (i) Sixty-Eight Dollars ($68),
multiplied by (ii) the square footage of the space at issue (the "Condo
Value"). Such Title Policy shall be issued consistent with the
requirements set forth in Section 7.10. If Seller, despite its
commercially reasonable efforts, is unable to transfer the Town &
Country Condo Property or the Memorial Condo Property to Purchaser or
Purchaser's designated affiliate by January 15, 2000, Seller shall have
no obligation to transfer to Purchaser and Purchaser shall have no
obligation to acquire from Seller the Town & Country Condo Property or
Memorial Condo Property, as the case may be. In such event no later
than January 31, 2000, Seller shall return to Purchaser (i) if the Town
& Country Condo Property or the Memorial Condo Property is not
conveyed, the Condo Value, which Seller and Purchaser agree is the
portion of the Purchase Price allocable to such properties.
4
<PAGE> 5
(c) (i) Southwest Real Property and La Mesa Leased Real
Property. Promptly after the Closing Date, Seller shall use
commercially reasonable and expeditious efforts to obtain a Survey and
Title Commitment with respect to the Southwest Real Property and the La
Mesa Leased Real Property. Within ten (10) business days after
Purchaser's receipt of the last of the Survey and Title Commitment with
respect to the Southwest Real Property and the La Mesa Leased Real
Property, respectively, Purchaser shall advise Seller in writing of any
matter disclosed in such Survey or Title Commitment that is
unacceptable to Purchaser in its reasonable discretion. Failure of
Purchaser to timely deliver to Seller such written notification shall
be deemed Purchaser's approval of the Survey and Title Commitment. For
purposes of this Section 4.21(c), "Permitted Exceptions" shall mean any
and all matters disclosed in a Survey and/or Title Commitment which are
reasonably approved or deemed approved by Purchaser. Subject to subpart
(c)(ii) next below, transfer of the Southwest Real Property or La Mesa
to Purchaser shall occur no later than forty five (45) business days
after the last of the Survey and Title Commitment with respect to the
applicable property have been delivered to Purchaser (each, a "Real
Property Closing Date").
(ii) In the event that Purchaser timely provides written
notice to Seller of any disapproved matter in the Survey or the Title
Commitment, Seller shall, by written notice to Purchaser (the "Seller
Title Notice"), which Seller shall give within ten (10) business days
of receipt of such notice from Purchaser, either (A) agree to use
reasonable commercial efforts to remove any such disapproved matter(s)
affecting title to the Southwest Real Property or La Mesa Leased Real
Property, or (B) refuse to remove such matter(s). If Seller refuses to
remove any such disapproved matter or if, despite reasonable commercial
efforts, is unable to remove any such disapproved matter by the
applicable Real Property Closing Date, Seller shall not be in default
hereunder and Purchaser shall elect either (Y) to acquire the Southwest
Real Property or La Mesa Leased Real Property, as applicable, subject
to such disapproved matter or (Z) not to acquire such Southwest Real
Property or La Mesa Leased Real Property. Purchaser shall by written
notice advise Seller of such election no later than ten (10) business
days after receipt of the Seller Title Notice with respect to
disapproved matters that Seller refuses or is deemed to have refused to
remove and ten (10) business days after Purchaser has been advised in
writing that Seller is unable to remove disapproved matters that Seller
has agreed to use commercially reasonable efforts to remove. Failure by
Purchaser to provide timely such written notice shall be deemed
Purchaser's election to acquire the Southwest Real Property or La Mesa
Leased Real Property, as applicable, subject to disapproved matters. If
Purchaser elects not to acquire the Southwest Real Property or La Mesa
Leased Real Property as provided in this clause (c), then Seller shall
no later than the date which is fifteen (15) business after such
written election by Purchaser has been delivered to Seller, return to
Purchaser the portion of the Purchase Price allocable to the Southwest
Real Property or La Mesa Leased Real Property, respectively, which
amount shall be determined pursuant to the MAI appraisal methodology
set forth at Section 4.21(a) above.
5
<PAGE> 6
(d) Subject to Section 4.21(a) hereof, Purchaser will succeed
to fee simple ownership of the 6103 Webb Property, the Town & Country
Condo Property, the Memorial Condo Property, the Southwest Real
Property, and a leasehold interest in the La Mesa Leased Real Property
at no additional cost or expense to Purchaser. Each such conveyance
shall occur in accordance with the terms and conditions of the
Agreement, except that the Closing Date shall be defined, for purposes
of the sale of the 6103 Webb Property, the Town & Country Condo
Property, the Memorial Condo Property and the Southwest Real Property
and assignment of the leasehold of the La Mesa Leased Real Property, as
the date of Purchaser's or Purchaser's designated affiliate's
acquisition of fee title or leasehold interest to each such property,
respectively.
10. UCC Termination Statements. A new Section 4.22 of the Agreement is
hereby added to read as follows:
4.22 UCC Terminations.After the Closing Date, Seller shall use
its reasonable commercial efforts to (a) obtain executed UCC
termination statements for the financing statements set forth on
Schedule 4.22 which are attached hereto (the "UCC Liens"), (b) file
such executed UCC termination statements with the appropriate
governmental agencies or authorities with respect to the UCC Liens
and (c) deliver such executed and filed UCC termination statements
to Purchaser. Seller's obligations under this Section 4.22 shall
continue to be fully effective and enforceable with respect to any
particular financing statement until the expiration of such
applicable financing statement set forth on Schedule 4.22.
11. Cooperation in Obtaining Consents. A new Section 4.23 of the
Agreement is hereby added to read as follows:
4.23 Cooperation on Obtaining Consents. For two (2) years after
the Closing Date, Seller and Purchaser shall each use reasonable
commercial efforts to obtain the consent to assignment from the
applicable third parties to any Contract or Lease, or to enter into
new contracts with respect to Multi-Facility Contracts for which
such consent was not obtained as of the Closing Date.
12. Misdirected Payments. A new Section 4.24 of the Agreement is
hereby added to read as follows:
4.24 Misdirected Payments. To the extent there are any
misdirected funds forwarded to Seller (or one of its subsidiaries)
by any third parties, which misdirected funds are paid in respect
of the performance of services by or on behalf of the Hospitals
from and after the Closing, including without limitation in respect
of any services provided by any of the physicians
6
<PAGE> 7
providing services at the Hospitals, Seller shall remit such
misdirected funds to Iasis Healthcare Corporation within ten (10)
business days after receipt thereof, to the account(s) designated
by Purchaser. Each of Seller and Purchaser further agree that, to
the extent that Purchaser has not obtained a provider number with
respect to any Hospital on or prior to the Closing Date, Purchaser
(or a subsidiary of Purchaser) shall be entitled to use the
provider number obtained by Hospital (or a Subsidiary of Seller)
prior to the Closing Date with respect to such Hospital.
Furthermore, Seller and Purchaser understand and agree that all
payments by third party payors in respect of such Licensed Provider
Numbers for goods and services provided after the Closing Date
("Post-Closing Payments") shall be solely for the account of
Purchaser. Seller (on its behalf and on behalf of its subsidiaries)
hereby irrevocably assigns to Purchaser all right, title and
interest it may have in respect of such Post-Closing Payments and
hereby agrees to remit to Purchaser such Post-Closing payments
within ten (10) business days after its receipt thereof.
13. Covenants of Purchaser. Purchaser agrees and acknowledges that the
Owned Real Property described in Section 4.21 of this Agreement shall not be
transferred and conveyed to Purchaser at the Closing, but shall be transferred
and conveyed to Purchaser, if at all, in accordance with Section 4.21.
14. Provision of Benefits. A new Section 9.3 of the Agreement is
hereby added to read as follows:
9.3 Provision of Benefits. If Seller is unable to obtain any
consent to the assignment of Seller's or any Subsidiary's interest
in a Contract or a Lease, or if Purchaser is unable to enter into a
new contract with respect to a Multi-Facility Contract, until such
consent or new contract is obtained, Seller shall use reasonable
commercial efforts to provide Purchaser the benefits of any such
Contract or Lease (including with respect to the Acute Care
Hospital portion of Multi-Facility Contracts), cooperate in any
reasonable and lawful arrangement designed to provide such benefits
to Purchaser, and allow Purchaser to directly enforce such
Contracts or Leases against third parties thereto. Purchaser shall
use reasonable commercial efforts to perform, on behalf of Seller,
the obligations of Seller thereunder or in connection therewith,
limited in the case of Multi-Facility Contracts to the Acute Care
Hospitals thereunder, but only to the extent that such action would
not result in a material default thereunder or in connection
therewith and such obligation would have been (a) an obligation of
Purchaser had it entered into a new contract on substantially
similar terms with respect to a Multi-Facility Contract or (b) an
Assumed Obligation but for the failure to obtain a consent.
7
<PAGE> 8
15. Indemnification of Purchaser by Seller. The following is hereby
inserted at the end of the first sentence of Section 10.2.1 of the Agreement:
and (ix) Seller's failure to comply with Section 4.22..
16. Change of Corporate and Fictitious Names. Within ten (10) business
days following the Closing Date, Seller shall change the corporate names of the
following entities owned by Seller, as well as any and all fictitious business
names used by any Subsidiary which is the same as or similar to the name of any
Hospital or other business sold to Purchaser. The changed names shall not use
the word or words uniquely related to the Hospital or other business so sold,
e.g., the name of Mesa General Hospital Medical Center, Inc. shall be changed to
eliminate at least the word "Mesa" and replace it (them) with a word or words
not the same as or confusingly similar to "Mesa". The actual names to be changed
are as follows:
(a) Mesa General Hospital Medical Center, Inc.;
(b) Health Choice Arizona, Inc.;
(c) Metro Surgery Center Limited Partnership;
(d) Memorial Hospital of Town & Country, Ltd.;
(e) Center for Quality Care, Inc.; and
(f) Pain Management Center of Town & Country, Inc.
17. Patient Scheduling. For a period of sixty (60) days after the
Closing Date, Seller shall cause Tenet Physician Services and/or all other
applicable affiliates or subsidiaries of Seller, by and through Seller's four
(4) dedicated employees as of the Closing Date, to continue to provide patient
scheduling services on behalf of Purchaser and its applicable affiliates for all
of Purchaser's and its affiliates employed physicians transferred to Purchaser
or its affiliates in connection with this Agreement who practice medicine in the
State of Arizona consistent with prior practices. Purchaser shall, and shall
cause its affiliates to, reasonably cooperate with Seller and its affiliates in
connection with the provision of such patient scheduling services. Seller shall
maintain and use during this sixty (60) day period all communication systems
that, prior to Closing, Seller used to support such patient scheduling services.
Seller and its affiliates shall perform such services for the benefit of
Purchaser without the payment to Seller or its affiliates of any fee by
Purchaser or its affiliates.
18. Collection Services. For a period of ninety (90) days after the
Closing Date, Purchaser shall, and shall cause its affiliates to, use their
reasonable commercial efforts to collect the Accounts Receivable of Seller and
its affiliates with respect to services rendered by the three (3) physician
practices located in Town & Country, Florida of Dr. Norris, Dr. Long and Dr.
Rosenberg which on or prior to the Closing Date were not managed by Tenet
Physician Services through its centralized computer billing and collection
systems located in Phoenix, Arizona. Seller shall, and shall cause its
affiliates to, reasonably cooperate with Purchaser and its affiliates in
connection with the provision of such collection services. Purchaser and its
affiliates shall perform such services without the payment to Purchaser or its
affiliates of any fee by Seller or its affiliates. Within ten (10) business days
after the collection of any Accounts Receivable that relate to services rendered
at such
8
<PAGE> 9
practices on or prior to the Closing Date, Purchaser shall, and shall cause its
affiliates to, remit such collected amounts to Seller at the following address:
Tenet HealthSystem, 14001 Dallas Parkway, Dallas, Texas 75240, Attention:
Violetta Mazella.
19. Schedules. Attached as Annex I hereto is Amendment No. 1 to the
Schedules to the Asset Sale Agreement dated as of the Closing Date. Except as
set forth therein, the Schedules attached to the Agreement remain in full force
and effect.
20. Osteomy Center. Seller hereby agrees to license to Purchaser and
its subsidiaries the right to distribute marketing materials relating to the
Osteomy Center at Palms of Pasadena (the "Center") for a period of one (1) year
commencing on the Closing Date, pursuant to the terms of the License Agreement
for Policy and Procedures Manuals; provided, however, that Purchaser shall be
entitled to terminate such license at any time upon thirty days' prior written
notice. Purchaser and its subsidiaries shall have access to the Center's Call
Center and database for one (1) year so long as Purchaser and its subsidiaries
enter into the standard form of contract which Seller utilizes in connection
with the Call Center.
21. Effect on Agreement; General Provisions. Except as set forth in
this Amendment, the terms and provisions of the Agreement are hereby ratified
and declared to be in full force and effect. This Amendment shall be governed by
the provisions of the Agreement regarding choice of law, attorneys' fees, and
successors and assigns. This Amendment shall become effective upon its
execution, which may occur in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Captions and paragraph headings are used herein for convenience
only, are not a part of this Amendment or the Agreement as amended by this
Amendment and shall not be used in construing either document. Other than the
reference to the Agreement contained in the first recital of this Amendment,
each reference to the Agreement and any agreement contemplated thereby or
executed in connection therewith, whether or not accompanied by reference to
this Amendment, shall be deemed a reference to the Agreement as amended by this
Amendment.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed in multiple originals by their authorized officers, all as of the day
and year first above written.
PURCHASER:
IASIS HEALTHCARE CORPORATION, a
Delaware corporation, as successor in interest
to JLL Hospital, LLC
By: /s/ Frank Coyle
--------------------------------
Name: Frank Coyle
------------------------------
Title: Secretary
-----------------------------
SELLER:
TENET HEALTHCARE CORPORATION, a
Nevada corporation
By: /s/ Paul O'Neill
--------------------------------
Name: Paul O'Neill
Title: Vice President
10
<PAGE> 1
EXHIBIT 2.4
AMENDMENT NO. 2 TO ASSET SALE AGREEMENT
This Amendment No. 2 to Asset Sale Agreement (the "Amendment") is
made and entered into effective as of October 15, 1999, by and between Tenet
Healthcare Corporation, a Nevada corporation ("Seller") and IASIS Healthcare
Corporation, a Delaware corporation ("Purchaser") as successor in interest to
JLL Hospital, LLC, a Delaware limited liability company.
R E C I T A L S
A. Seller and JLL Hospital, LLC entered into that certain Asset Sale
Agreement dated as of August 15, 1999, as amended by Amendment No. 1 to Asset
Sale Agreement dated as of October 15, 1999 (collectively, the "Agreement")
pursuant to which Purchaser's permitted designees or assignees are acquiring
substantially all of the assets with respect to the operation of the Hospitals
from the Subsidiaries.
B. Seller and Purchaser desire to amend the Agreement to address
certain matters that have arisen since the effective date of the Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants contained in this Amendment, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Except to the extent it is specifically indicated
to the contrary in this Amendment, defined terms used in this Amendment shall
have the same meanings ascribed to them in the Agreement.
2. Employed Physicians Transition Period. A new Section 9.4 of the
Agreement is hereby added to read as follows:
9.4 Employed Physicians Transition Period. Notwithstanding any
provision to the contrary contained in the Agreement:
(a) The Subsidiaries employ the physicians set forth on Schedule
9.4(a) hereto (the "Physicians") in the conduct of the
physician practices described on Schedule 9.4(a) hereto (the
"Practices"). Purchaser is in the process of establishing
billing systems and obtaining provider numbers which will
enable it and its affiliates to manage the operation of the
Practices beginning on January 1, 2000.
(b) Subject to the terms, requirements and termination
provisions of their respective employment contracts, from
October 15, 1999 through and including December 31, 1999
(the "Transition Period"), Seller shall
1
<PAGE> 2
cause the applicable Subsidiaries to continue to employ the
Physicians and operate the Practices. During the Transition
Period, Seller shall cause the Subsidiaries to continue to
pay the salaries, employee benefits and payroll taxes of the
Physicians and the accounts payable of the Practices and to
continue to bill, collect and charge against the accounts of
each such Physician for the payments, goods and services
associated with their respective medical practices, all in
accordance with the applicable Subsidiaries' past practice.
Any accounts receivable generated by, and any capitation
payments received with respect to the services of, the
Physicians during the Transition Period, as well as any
profit or loss attributable to the relationship between the
applicable Subsidiaries and the Physicians shall be for the
account of Purchaser. Purchaser shall reimburse Seller for
all of Seller's direct and indirect costs incurred during
the Transition Period pursuant to this Section 9.4 in
accordance with the terms contained in that certain Employee
Leasing Agreement between the parties.
(c) Purchaser and the Subsidiaries shall cooperate and consult
with each other during the Transition Period regarding the
hiring of any new staff personnel for any of the Practices.
Such cooperation shall include, without limitation,
sufficient advance notice to the other party of the hiring
of any new staff personnel. Notwithstanding the foregoing,
the Subsidiaries will not be obligated to hire any new
physician employees for any of the Practices.
(d) During the Transition Period, Seller shall cause the
Subsidiaries to, at Purchaser's expense, (i) process claims
for the Practices set forth in Schedule 9.4(d)(i), and (ii)
build new information databases for the Practices set forth
in Schedule 9.4(d)(ii).
(e) Purchaser shall use its reasonable commercial efforts to (i)
establish its physician billing systems, and (ii) obtain
provider numbers for the Physicians on or prior to January
1, 2000.
(f) On January 1, 2000, Seller shall cause the applicable
Subsidiaries to assign the Physicians' employment contracts
to Purchaser's designated affiliates.
3. Indemnification of Seller by Purchaser.
(a) The phrase "and 10.3.1(ix)" is hereby inserted in the second
sentence of Section 10.1 of the Agreement after the phrase
"10.3.1(iv)".
(b) The following is hereby inserted at the end of the first
sentence of Section 10.3.1 of the Agreement:
2
<PAGE> 3
"and (ix) Seller, the Subsidiaries' and any affiliate of
Seller's acts with respect to, and any obligations under,
Section 9.4, including, without limitation, (I) any tail
coverage obligations with respect to any Physician whose
contract expires or is otherwise terminated during or after
the Transition Period, (II) any bonuses payable to any
Physician which is wholly or in part attributable to
services performed during the Transition Period, (III) any
Damages related to any disability, medical or similar claim
of any of the Physicians which arises during, or is
otherwise attributable to, the Transition Period, (IV) any
employee benefit costs with respect to any of the Physicians
which is attributable to the Transition Period, and (V) any
Damages arising out of the mere existence of the arrangement
set forth in Section 9.4."
4. Effect on Agreement; General Provisions. Except as set forth in
this Amendment, the terms and provisions of the Agreement are hereby ratified
and declared to be in full force and effect. This Amendment shall be governed by
the provisions of the Agreement regarding choice of law, attorneys' fees, and
successors and assigns. This Amendment shall become effective upon its
execution, which may occur in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Captions and paragraph headings are used herein for convenience
only, are not a part of this Amendment or the Agreement as amended by this
Amendment and shall not be used in construing either document. Other than the
reference to the Agreement contained in the first recital of this Amendment,
each reference to the Agreement and any agreement contemplated thereby or
executed in connection therewith, whether or not accompanied by reference to
this Amendment, shall be deemed a reference to the Agreement as amended by this
Amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed in multiple originals by their authorized officers, all as of the day
and year first above written.
PURCHASER:
IASIS HEALTHCARE CORPORATION, a
Delaware corporation, as successor in interest
to JLL Hospital, LLC
By: /s/ Frank A. Coyle
----------------------------------
Name: Frank A. Coyle
--------------------------------
Title: Secretary
-------------------------------
SELLER:
TENET HEALTHCARE CORPORATION, a
3
<PAGE> 4
Nevada corporation
By: /s/ William A. Barrett
----------------------------------
Name: William A. Barrett
--------------------------------
Title: Vice President
-------------------------------
4
<PAGE> 1
EXHIBIT 2.5
ASSET SALE AGREEMENT
between
ODESSA HOSPITAL LTD.,
a Texas limited partnership
and
JLL HOSPITAL, LLC,
a Delaware limited liability company
Dated as of: August 15, 1999
<PAGE> 2
LIST OF SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
A-1 Subsidiaries
A-2 Hospital
A-3 MOBs
A-4 Other Businesses
1.2(c) Interim Balance Sheet
1.9(a) Owned Real Property
1.9(b) Leased Real Property
1.9(c) Personal Property
1.9(d) Licenses
1.9(e) Leases
1.9(f) Contracts
1.9(g) Prepaids
1.9(m) Names of Hospital
1.9(p) Equity Interests
1.10(d) Excluded Proprietary Assets
1.10(o) Other Excluded Assets
1.11(c) Capital Leases
1.11(i) Other Assumed Obligations
2.3(b) Governmental Notices and/or Approvals
2.4(a) Material Contracts
2.4(b) Incomplete Contracts
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
2.5 Required Consents
2.6(a) Compliance with Law
2.6(b) Compliance with Environmental Laws
2.7(a) Title to Real Property
2.7(b) Title; Sufficiency
2.8(a) Licenses Exceptions
2.8(b) JCAHO Accreditation Periods
2.8(c) Medicare and Medicaid Certification
2.8(d) Audit Periods
2.8(g) Medical Staff Matters
2.10 Financial Statements
2.11 Legal Proceedings
2.12 Employee Benefits
2.13 Taxes
2.13(c) Tax Liens
2.14 Personnel List
2.14 Insurance
2.18 Undisclosed Liabilities
2.19 Y2K Compliance
3.4 Third Party Consents - Purchaser
3.5 Brokers - Purchaser
3.7 Legal Proceedings - Purchaser
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
7.10 Permitted Title Exceptions
11.1(b) Allocation of Purchase Price
</TABLE>
<PAGE> 5
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
1.6.1 Bill of Sale
1.6.2 Real Estate Assignments
1.6.3 Limited Warranty Deeds
1.6.9 Transitional Services Agreements
-Information Technology Transition
Services Agreement
-License Agreement for Policy and
Procedure Manuals
-Management Services Agreement
1.6.10 Business Services Agreement
1.6.11 Employee Leasing Agreement
1.6.13 Landlord Estoppel Certificate
4.13 Environmental Survey
5.9 Group Purchasing Contract
6.5 Opinion of Purchaser's Counsel
7.8 Opinion of Seller's In-House Counsel
7.11 Financing Letter
</TABLE>
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS; SALE AND TRANSFER OF ASSETS;
CONSIDERATION; CLOSING...........................................................................8
1.1 Definitions.....................................................................................8
1.2 Purchase and Sale of Assets; Purchase Price....................................................10
1.3 Inventory......................................................................................11
1.4 Post-Closing Adjustment to Purchase Price......................................................11
1.5 Closing Date...................................................................................12
1.6 Items to be Delivered by Seller at Closing.....................................................12
1.7 Items to be Delivered by Purchaser at Closing..................................................14
1.8 Prorations and Utilities.......................................................................15
1.9 Transfer of Seller Assets......................................................................15
1.10 Excluded Assets................................................................................17
1.11 Assumed Obligations............................................................................18
1.12 Excluded Liabilities...........................................................................19
1.13 [Intentionally Omitted]........................................................................21
1.14 Disclaimer of Warranties.......................................................................21
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER........................................................21
2.1 Authorization..................................................................................21
2.2 Binding Agreement..............................................................................22
2.3 Organization and Good Standing; No Violation...................................................22
2.4 Contracts and Leases...........................................................................22
2.5 Required Consents..............................................................................23
2.6 Compliance With Laws and Contracts.............................................................23
2.7 Title; Sufficiency.............................................................................25
2.8 Certain Representations With Respect to the Hospital...........................................25
2.9 Brokers and Finders............................................................................27
2.10 Financial Statements...........................................................................27
2.11 Legal Proceedings..............................................................................27
2.12 Employee Benefits..............................................................................27
2.13 Taxes and Tax Returns..........................................................................28
</TABLE>
-i-
<PAGE> 7
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
2.14 Personnel......................................................................................29
2.15 Insurance......................................................................................29
2.16 Solvency.......................................................................................30
2.17 No Untrue or Inaccurate Representations or Warranties..........................................30
2.18 Absence of Undisclosed Liabilities.............................................................30
2.19 Y2K............................................................................................30
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................................................31
3.1 Authorization..................................................................................31
3.2 Binding Agreement..............................................................................31
3.3 Organization and Good Standing.................................................................31
3.4 No Violation...................................................................................31
3.5 Brokers and Finders............................................................................31
3.6 Legal Proceedings..............................................................................32
3.7 Solvency.......................................................................................32
3.8 Intentionally Omitted..........................................................................32
3.9 Intentionally Omitted..........................................................................32
3.10 No Other Business or Operations................................................................32
ARTICLE 4 COVENANTS OF SELLER.............................................................................32
4.1 Access and Information; Inspections............................................................32
4.2 Preserve Accuracy of Representations and Warranties............................................33
4.3 Conduct of Business............................................................................33
4.4 Negative Covenants.............................................................................33
4.5 Required Approvals.............................................................................34
4.6 Additional Financial Information...............................................................34
4.7 No-Shop........................................................................................34
4.8 Seller's Efforts to Close; Audited Financial Statements........................................35
4.9 Title Matters..................................................................................36
4.10 Termination of Hospital's Employees............................................................36
4.11 Termination Cost Reports.......................................................................36
4.12 Hart-Scott-Rodino Act Filings..................................................................36
</TABLE>
-ii-
<PAGE> 8
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
4.13 Environmental Survey...........................................................................37
4.14 Noncompetition.................................................................................37
4.15 Enforceability.................................................................................37
4.16 [Intentionally Omitted]........................................................................38
4.17 Y2K Compliance Program.........................................................................38
4.18 Supplements to Disclosure Schedule.............................................................38
ARTICLE 5 COVENANTS OF PURCHASER..........................................................................38
5.1 Purchaser's Efforts to Close...................................................................38
5.2 Required Approvals.............................................................................38
5.3 Certain Employee Matters.......................................................................39
5.4 Use of Business Names..........................................................................41
5.5 Excluded Assets................................................................................41
5.6 Confidentiality................................................................................41
5.7 Enforceability.................................................................................41
5.8 Hart-Scott-Rodino Act Filings..................................................................42
5.9 Group Purchasing Contract......................................................................42
5.10 Acknowledgement Regarding Year 2000 Compliance.................................................42
5.11 Waiver of Bulk Sales Law Compliance............................................................42
5.12 Preserve Accuracy of Representations and Warranties............................................43
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER...................................................43
6.1 Closing of Related Asset Sale Transaction......................................................43
6.2 Failure to Exercise Right of First Refusal.....................................................43
6.3 Warranties True and Correct....................................................................43
6.4 Signing and Delivery of Instruments............................................................43
6.5 Unfavorable Action or Proceeding...............................................................43
6.6 Performance of Covenants.......................................................................43
6.7 Opinion of Counsel for Purchaser...............................................................43
6.8 Hart-Scott-Rodino Filings......................................................................44
6.9 Consents, Approvals and Authorizations.........................................................44
6.10 Exhibits and Schedules.........................................................................44
</TABLE>
-iii-
<PAGE> 9
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER................................................44
7.1 Closing of Related Asset Sale Transaction......................................................44
7.2 Failure to Exercise Right of First Refusal.....................................................44
7.3 Warranties True................................................................................44
7.4 Consents, Approvals and Authorizations.........................................................45
7.5 Signing and Delivery of Instruments............................................................45
7.6 Performance of Covenants.......................................................................45
7.7 Unfavorable Action or Proceeding...............................................................45
7.8 Hart-Scott-Rodino Filings......................................................................45
7.9 Governmental Concurrences......................................................................45
7.10 Opinion of Counsel.............................................................................45
7.11 Exhibits and Schedules.........................................................................45
7.12 Title Insurance Policy.........................................................................46
7.13 Financing......................................................................................46
7.14 Material Adverse Change........................................................................46
7.15 Audit..........................................................................................46
ARTICLE 8 TERMINATION.....................................................................................46
8.1 Termination....................................................................................46
8.2 Termination Consequences.......................................................................47
8.3 Costs..........................................................................................47
ARTICLE 9 POST-CLOSING MATTERS............................................................................47
9.1 Excluded Assets and Excluded Liabilities.......................................................47
9.2 Preservation and Access to Records After the Closing...........................................48
ARTICLE 10 SURVIVAL AND INDEMNIFICATION....................................................................49
10.1 Survival.......................................................................................49
10.2 Indemnification of Purchaser by Seller.........................................................50
10.2.1 Indemnification.......................................................................50
10.2.2 Indemnification Limitations...........................................................50
10.3 Indemnification of Seller by Purchaser.........................................................52
10.3.1 Indemnification.......................................................................52
</TABLE>
-iv-
<PAGE> 10
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
10.3.2 Indemnification Limitations...........................................................52
10.4 Method of Asserting Claims.....................................................................53
10.5 Exclusive......................................................................................56
10.6 Reduction of the Purchase Price................................................................56
ARTICLE 11 TAX AND COST REPORT MATTERS.....................................................................56
11.1 Tax Matters; Allocation of Purchase Price......................................................56
11.2 Cost Report Matters............................................................................57
11.3 Transition Services............................................................................57
ARTICLE 12 MISCELLANEOUS PROVISIONS........................................................................59
12.1 Further Assurances and Cooperation.............................................................59
12.2 Successors and Assigns.........................................................................59
12.3 Governing Law..................................................................................59
12.4 Amendments.....................................................................................59
12.5 Exhibits, Schedules and Disclosure Schedule....................................................59
12.6 Notices........................................................................................59
12.7 Headings.......................................................................................61
12.8 Confidentiality and Publicity..................................................................61
12.9 Fair Meaning...................................................................................61
12.10 Gender and Number; Construction................................................................61
12.11 Third Party Beneficiary........................................................................61
12.12 Expenses and Attorneys' Fees...................................................................61
12.13 Counterparts...................................................................................62
12.14 Entire Agreement...............................................................................62
12.15 No Waiver......................................................................................62
12.16 Severability...................................................................................62
12.17 Arbitration....................................................................................63
12.17.1 Forum.................................................................................63
12.17.2 Law...................................................................................63
12.17.3 Selection.............................................................................63
12.17.4 Administration........................................................................63
</TABLE>
-v-
<PAGE> 11
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
12.17.5 Rules.................................................................................63
12.17.6 Award.................................................................................63
12.18 Time is of the Essence.........................................................................63
</TABLE>
-vi-
<PAGE> 12
ASSET SALE AGREEMENT
[Odessa Hospital Assets]
This Asset Sale Agreement (the "Agreement") is made and entered into as
of the (15th) day of August, 1999 (the "Effective Date") by and between Odessa
Hospital Ltd., a Texas limited partnership ("Seller"), and JLL Hospital, LLC, a
Delaware limited liability company ("Purchaser").
R E C I T A L S:
A. Seller (I) engages in the business of delivering acute care
services to the public through the acute care hospital known as Odessa Regional
Hospital (the "Hospital"), (II) owns and operates certain medical office
buildings incident to the operation of the Hospital as specifically identified
on Schedule A-3 (the "MOBs"), and (III) owns and operates other healthcare
businesses incident to the operation of the Hospital as specifically identified
on Schedule A-4 (the "Other Businesses") (the Hospital, MOBs and the Other
Businesses are referred to herein collectively as the "Hospital").
B. Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser, substantially all of the assets with respect to the operation
of the Hospital, for the consideration and upon the terms and conditions
contained in this Agreement.
C. Purchaser has entered into an agreement with Tenet Healthcare
Corporation, a Nevada corporation ("Tenet") pursuant to which Purchaser intends
to purchase and wholly-owned subsidiary corporations and majority-owned
partnerships of Tenet intends to sell, substantially all of the assets with
respect to the operation of various Tenet hospitals in the States of Florida,
Texas and Arizona.
D. The parties acknowledge that the sale of the Assets is subject
to a right of first refusal held by the limited partners of Seller.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants contained in this Agreement, and for their mutual
reliance, the parties hereto agree as follows:
-7-
<PAGE> 13
ARTICLE 1
DEFINITIONS; SALE AND TRANSFER OF ASSETS;
CONSIDERATION; CLOSING
1.1 Definitions. The terms listed below are defined elsewhere in
this Agreement and, for ease of reference, the section containing the definition
of each such term is set forth opposite such term.
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Accounts Receivable..................................................................Section 1.10(l)
Hospital.............................................................................Recitals
Agency Settlement....................................................................Section 11.2(a)
Aggregate Amount.....................................................................Section 10.2.2(ix)
Agreement............................................................................Preamble
Assets...............................................................................Section 1.9
Assumed Capital Lease Obligations ...................................................Section 1.2(a)
Assumed Obligations..................................................................Section 1.11
Audit Periods........................................................................Section 2.8(d)
Bill of Sale.........................................................................Section 1.6.1
Breaching Party......................................................................Section 8.1(b)
Cash Purchase Price..................................................................Section 1.2
CEO..................................................................................Section 2.10
Claim Notice.........................................................................Section 10.4(a)
Closing Date.........................................................................Section 1.5
Closing..............................................................................Section 1.5
Code.................................................................................Section 2.12(b)
Confidential Information ............................................................Section 5.6
Confidentiality Agreement............................................................Section 5.6
Consultants..........................................................................Section 4.13
Contracts............................................................................Section 1.9(f)
COO..................................................................................Section 2.10
Damages..............................................................................Section 10.2.1
Disclosure Schedule..................................................................Section 2
Document Retention Period............................................................Section 9.2(a)
DOJ..................................................................................Section 4.12
DON..................................................................................Section 2.10
Effective Date.......................................................................Preamble
Effective Time.......................................................................Section 1.5
Environmental Permits................................................................Section 2.6(b)
Environmental Survey.................................................................Section 4.13
Excluded Assets......................................................................Section 1.10
Excluded Liabilities.................................................................Section 1.12
Final Balance Sheet..................................................................Section 1.4
Financial Statements.................................................................Section 2.10
</TABLE>
-8-
<PAGE> 14
<TABLE>
<S> <C>
Fraction.............................................................................Section 11.3(a)
FTC..................................................................................Section 4.12
GAAP.................................................................................Section 1.2
Group Purchasing Contract............................................................Section 1.6.8
Hired Employees......................................................................Section 5.3(a)
Hospital.............................................................................Recitals
Hospital's Employees.................................................................Section 5.3(a)
HSR Act..............................................................................Section 2.3(b)
Indemnified Party....................................................................Section 10.4
Indemnifying Party...................................................................Section 10.4(a)
Indemnity Notice.....................................................................Section 10.4(a)
Independent Auditor..................................................................Section 1.4
Interim Balance Sheet................................................................Section 1.2
Inventory............................................................................Section 1.9(h)
Leased Real Property.................................................................Section 1.9(b)
Leases...............................................................................Section 1.9(e)
Licenses.............................................................................Section 1.9(d)
Liens................................................................................Section 1.2(a)
Meditrust Lease .....................................................................Section 5.14
MOBs.................................................................................Recitals
Nondefaulting Party..................................................................Section 8.1(b)
Notice Period........................................................................Section 10.4(a)
Other Businesses.....................................................................Recitals
Owned Real Property..................................................................Section 1.9(a)
Permitted Exceptions.................................................................Section 7.10
Permitted Liens .....................................................................Section 2.7(b)
Personal Property....................................................................Section 1.9(c)
Post Closing Adjustment Date.........................................................Section 1.4
Prepaids.............................................................................Section 1.9(g)
Purchase Price.......................................................................Section 1.2
Purchaser............................................................................Preamble
Purchaser's Plan.....................................................................Section 5.3(d)
Real Estate Assignments..............................................................Section 1.6.2
Real Property........................................................................Section 1.9(b)
Receivable Records...................................................................Section 1.10(m)
Reconciliation.......................................................................Section 11.3(a)
Related Asset Sale Agreement.........................................................Section 6.1
Relevant Claim.......................................................................Section 10.2.2(ix)
Retained Management Employees........................................................Section 5.3(a)
Seller...............................................................................Preamble
Sick Pay Amount......................................................................Section 1.2
Seller's Cost Reports................................................................Section 11.2(a)
Surveys..............................................................................Section 4.9
Third Party Claim....................................................................Section 10.4(a)
Title Commitment.....................................................................Section 4.9
</TABLE>
-9-
<PAGE> 15
<TABLE>
<S> <C>
Title Company........................................................................Section 4.9
Title Instruments....................................................................Section 4.9
Title Policy.........................................................................Section 4.9
Transition Date......................................................................Section 5.3(a)
Transition Services..................................................................Section 11.3
Transitional Services Agreement......................................................Section 1.6.9
</TABLE>
1.2 Purchase and Sale of Assets; Purchase Price.
(a) Subject to the terms and conditions of this Agreement,
Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, the
Assets, free and clear of all liens, pledges, claims, charges, security
interests or other encumbrances ("Liens") other than Permitted Liens. Subject to
the terms and conditions of this Agreement, the aggregate purchase price to be
paid by Purchaser to Seller for the purchase of the Assets shall be (i) Forty
Two Million Dollars ($42,000,000) (a) (the "Purchase Price"), plus or minus (ii)
the amount of Net Working Capital (as defined below) on the Closing Date, minus
(iii) the amount of Seller's capital lease obligations with respect to the
Hospital, if any, that are assumed by Purchaser pursuant to Section 1.11 of this
Agreement (the "Assumed Capital Lease Obligations"), minus (iv) 16.17 percent
(16.17%) of the Sick Pay Amount (the sum of (i), (ii), (iii), and (iv) being
referred to for purposes of this Agreement as the "Cash Purchase Price").
(b) For purposes of this Section 1.2, "Net Working
Capital," as of any date, shall be defined as an amount equal to the difference
between the (i) current assets of Seller with respect to the operation of the
Hospital, which for purposes of this calculation shall include only (a) the
value of the Prepaids, (b) the value of the Inventory, (c) other current assets
associated with the Hospital to the extent they have value and are reflected on
the Financial Statements, and (d) notes receivable held by Seller as to which
the borrower thereunder is a physician providing professional medical services
at the Hospital, which notes are not otherwise included in Net Working Capital
as current assets under (a), (b) or (c) immediately above (the "Physician
Notes"), and (ii) the current liabilities of Seller with respect to the
operation of the Hospital, which for purposes of this calculation shall only
include, to the extent assumed, (a) Accounts Payable, (b) Accrued Expenses, (c)
Accrued Payroll, (d) Accrued Paid Time Off, and (e) Other Current Liabilities
(as such terms are utilized on the Interim Balance Sheet). For purposes of this
Section 1.2, "Sick Pay Amount" shall be defined as the amount of accumulated
sick pay and extended sick pay obligations of Seller to the Hired Employees.
(c) At least three (3) calendar days but no more than ten
(10) calendar days prior to the Closing Date, Seller shall prepare and deliver
to Purchaser the latest available unaudited balance sheet of Seller with respect
to the operation of the Hospital (the "Interim Balance Sheet"). The Interim
Balance Sheet shall (i) be prepared in conformity with generally acceptable
accounting principles consistently applied ("GAAP") to the extent described in
Section 2.10 of this Agreement, (ii) include a calculation of Net Working
Capital, Assumed Capital Lease Obligations and the Sick Pay Amount, and (iii)
shall be attached hereto as Schedule 1.2(c). The amounts set forth in the
Interim Balance Sheet shall be subject to adjustment as provided in Sections 1.3
and 1.4 below. The Cash Purchase Price shall be payable
-10-
<PAGE> 16
by wire transfer of immediately available funds to Seller to the account(s)
specified by Seller to Purchaser in writing, subject to the terms of Section
1.7.1 below.
1.3 Inventory. Seller shall cause an inventory to be taken of the
Inventory by employees or representatives of Seller or its affiliates, with said
inventory to be taken in accordance with Seller's policies and procedures and
the policies and procedures used in connection with determining inventory for
purposes of the preparation of the Financial Statements dated as of May 31,
1999, as near in time as possible to the Closing Date and with the results
extended and adjusted through the Closing Date. Seller shall permit
representatives or employees of Purchaser to observe such inventory process. The
cost of conducting the inventory shall be borne by Seller. All inventory items
shall be valued at the lesser of cost or current market value. The parties
acknowledge that the inventory to be taken pursuant to this Section 1.3 will not
be conducted until immediately prior to the Closing Date and, as such, the
results of such inventory will not be available until some time after the
Closing Date. Accordingly, the parties agree that for purposes of the Interim
Balance Sheet, Net Working Capital shall include the value of the Inventory with
respect to the operation of the Hospital as reflected by the latest available
unaudited balance sheet of Seller. For purposes of the Final Balance Sheet, the
portion of Net Working Capital attributable to the Inventory shall be the value
of the Inventory as determined pursuant to this Section 1.3.
1.4 Post-Closing Adjustment to Purchase Price. Within ninety (90)
calendar days after the Closing Date, the final unaudited balance sheet of the
Hospital as of the Closing Date (the "Final Balance Sheet"), which shall include
a calculation of Net Working Capital, Assumed Capital Lease Obligations and the
Sick Pay Amount as of the Closing Date, shall be prepared by Seller and
delivered to Purchaser. Purchaser, in connection with its review of the Final
Balance Sheet, shall be permitted to review workpapers of Seller or its
accountants with respect to the preparation of the Final Balance Sheet and the
books and records of Seller reasonably related thereto. The Interim Balance
Sheet and the Final Balance Sheet shall be prepared in a manner consistent with
the terms of Section 2.10. If Purchaser disputes any entry on the Final Balance
Sheet that affects the calculation of Net Working Capital, Purchaser shall
notify Seller in writing (which writing shall contain Purchaser's determination
of the amount of the disputed entry) within thirty (30) business days after
Purchaser's receipt of the Final Balance Sheet from Seller. If the difference
between Seller's and Purchaser's respective calculations of Net Working Capital
is equal to or less than five percent (5%) of the amount of Seller's
calculation, Seller's calculation shall be conclusive and binding as between
Purchaser and Seller. If the difference between Seller's and Purchaser's
respective calculations is greater than five percent (5%) of Seller's
calculation, and Purchaser and Seller cannot resolve such dispute within thirty
(30) business days after Purchaser notifies Seller in writing of such dispute,
then the parties shall mutually select a "Big Six" financial accounting firm
other than the two firms then being used by the parties (the "Independent
Auditor"). The Independent Auditor shall review the matter in dispute and,
acting as experts and not as arbitrators, shall promptly decide the proper
amounts of such disputed entries (which decision shall also include a final
recalculation of the Purchase Price). Such decision of the Independent Auditor
shall be conclusive and binding as between Purchaser and Seller, and the costs
of such review shall be borne by both Seller and Purchaser in proportion to the
relevant amount each party's determination has been modified. In the event that
Purchaser
-11-
<PAGE> 17
disputes the Sick Pay Amount and/or the Assumed Capital Lease Obligation, the
parties shall resolve such dispute in substantially the same manner as set forth
in this Section 1.4.
Within thirty-five (35) business days after Purchaser's receipt of the
Final Balance Sheet from Seller or, if disputed by Purchaser, within five (5)
business days after the earlier of (a) the date Purchaser and Seller finally
resolve such dispute and recalculate the Purchase Price accordingly, or (b) the
date of receipt of a decision from the Independent Auditor (the "Post-Closing
Adjustment Date"), either (i) Seller shall pay Purchaser in cash or in other
immediately available funds the amount of any decrease in the Purchase Price, or
(ii) Purchaser shall pay Seller in cash or in other immediately available funds
the amount of any increase in the Purchase Price. If Purchaser or Seller, as the
case may be, shall fail to make such payment to the other on the Post-Closing
Adjustment Date, then the party failing to receive such amount due to it shall
be entitled to receive interest on such unpaid amount at a per annum rate equal
to the prime rate reported by the Wall Street Journal under "Money Rates" on the
Post-Closing Adjustment Date plus two percent (2%) (or the maximum rate allowed
by law, whichever is less) from such defaulting party, such interest accruing on
each calendar day after the Post-Closing Adjustment Date until payment of such
amount and all interest thereon is made.
1.5 Closing Date. The consummation of the transactions contemplated
by this Agreement ("Closing") shall take place at 9:00 a.m. on the later to
occur of (i) the twenty eighth (28th) calendar day following the delivery of the
audited financial statements by Seller pursuant to Section 4.8(b) of this
Agreement and (ii) the forty fifth (45th) calendar day following the Effective
Date, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York 10022 or such other date, time and place as the parties shall mutually
agree (the "Closing Date"), provided that all conditions precedent and other
matters required to be completed as of the Closing Date have been or will be
completed on such date. In the event all conditions precedent and other matters
required to be completed as of the Closing Date have not been completed on such
date, the Closing Date shall occur on the third (3rd) business day following the
last to occur of such conditions or matters. The Closing with respect to the
Hospital shall be deemed to have occurred and to be effective as between the
parties as of 12:01 a.m. (determined by reference to the local time zone in
which the Hospital is located) on the next day after the Closing Date (the
"Effective Time").
1.6 Items to be Delivered by Seller at Closing.
At or before the Closing, Seller shall deliver to Purchaser the
following, duly executed by Seller where appropriate:
1.6.1 General Assignment, Bill of Sale and Assumption of
Liabilities in the form of Exhibit 1.6.1 attached hereto (the "Bill of Sale");
1.6.2 Assignment and Assumption of Real Estate Leases in the
form of Exhibit 1.6.2 attached hereto (the "Real Estate Assignment") with
respect to each Leased Real Property;
-12-
<PAGE> 18
1.6.3 Limited Warranty Deed(s) (or such other deed comparable
to limited warranty deed(s) as is applicable to the jurisdiction at issue) in
the form of Exhibit 1.6.3 attached hereto;
1.6.4 favorable original certificates of good standing, or
comparable status, of Seller, issued by the State of Texas with respect to
Seller, dated no earlier than a date which is seven (7) calendar days prior to
the Closing Date;
1.6.5 an opinion of Seller's general partner's in-house
counsel in substantially the form attached hereto as Exhibit 7.8;
1.6.6 a certificate of the general partner of Seller
certifying to Purchaser (i) the accuracy in all material respects of the
representations and warranties set forth in Article 2 hereof and compliance with
Seller's covenants set forth in this Agreement, (ii) that all material consents
and approvals that are required from any person, entity, governmental body or
regulatory agency in connection with the consummation of the transactions
contemplated by this Agreement by Seller have been obtained, and (iii) that all
of the conditions contained in Article 6 have been satisfied or waived;
1.6.7 a certificate of the corporate Secretary of the general
partner of Seller certifying to Purchaser (i) the incumbency of the officers of
the general partner of Seller on the Effective Date and on the Closing Date and
bearing the authentic signatures of all such officers who shall execute this
Agreement and any additional documents contemplated by this Agreement and (ii)
the due adoption and text of the resolutions of the partners of Seller,
authorizing (a) the transfer of the Assets and Assumed Obligations by Seller to
Purchaser and (b) the execution, delivery and performance of this Agreement and
all ancillary documents and instruments by Seller, and that such resolutions
have not been amended or rescinded and remain in full force and effect on the
Closing Date;
1.6.8 the Group Purchasing Contract which, except as noted in
Section 5.9, shall be substantially in the form of Exhibit 5.9 attached hereto
(the "Group Purchasing Contract");
1.6.9 if requested by Purchaser, the Transitional Services
Agreements, which shall be substantially in the form of Exhibit 1.6.9 (the
"Transitional Services Agreements");
1.6.10 the Business Services Agreement, which shall be
substantially in the form of Exhibit 1.6.10 attached hereto (the "Business
Services Agreement"), pursuant to which Purchaser will bill Seller's accounts
receivable for sixty (60) days following the Closing Date;
1.6.11 the Employee Leasing Agreement, which shall be
substantially in the form of Exhibit 1.6.11 attached hereto (the "Employee Lease
Agreement") pursuant to which Seller shall lease the Hospital Employees to
Purchaser, as contemplated by Section 5.3(a) of this Agreement;
-13-
<PAGE> 19
1.6.12 UCC termination statements for any and all financing
statements (which do not correspond to an Assumed Obligation) filed with respect
to the Assets; and such other instruments, certificates, consents or other
documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
1.6.13 an estoppel certificate from the landlord with respect
to each Real Property Lease of the Hospital or an entire MOB (as opposed to an
office or unit of a MOB), or a Real Property Lease that constitutes a material
ground lease, as to which Seller is lessee in the form of Exhibit 1.6.13 hereto;
1.6.14 a certificate of Seller to the extent required under
the Foreign Investment and Real Property Tax Act (FIRPTA); and
1.6.15 such other instruments, certificates, consents or other
documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
1.7 Items to be Delivered by Purchaser at Closing.
At or before the Closing, Purchaser shall execute and deliver
or cause to be delivered to Seller the following, duly executed by Purchaser
where appropriate:
1.7.1 payment of the Cash Purchase Price based upon the
Interim Balance Sheet (subject to adjustment as described in Section 1.4), as
adjusted to reflect the prorations provided in Section 1.8 of this Agreement.
1.7.2 a certificate of the President or any Vice President of
Purchaser certifying to Seller (i) the accuracy in all material respects of the
representations and warranties set forth in Article 3 hereof and compliance with
Purchaser's covenants set forth in this Agreement, (ii) that all material
consents and approvals that are required from any person, entity, governmental
body or regulatory agency in connection with the consummation of the
transactions contemplated by this Agreement by Purchaser have been obtained, and
(iii) that all of the conditions contained in Article 7 have been satisfied or
waived;
1.7.3 a certificate of the Secretary of Purchaser certifying
to Seller (i) the incumbency of the officers of Purchaser on the Effective Date
and on the Closing Date and bearing the authentic signatures of all such
officers who shall execute this Agreement and any additional documents
contemplated by this Agreement and (ii) the due adoption and text of the
resolutions of the governing board of Purchaser authorizing the execution,
delivery and performance of this Agreement and all ancillary documents and
instruments by Purchaser, and that such resolutions have not been amended or
rescinded and remain in full force and effect on the Closing Date;
1.7.4 an opinion of Purchaser's counsel in substantially the
form attached hereto as Exhibit 6.5;
-14-
<PAGE> 20
1.7.5 favorable original certificate of good standing, or
comparable status, of Purchaser, issued by the Delaware Secretary of State dated
no earlier than a date which is seven (7) calendar days prior to the Closing
Date;
1.7.6 the Group Purchasing Contract;
1.7.7 if requested by Purchaser, the Transitional Services
Agreements;
1.7.8 the Business Services Agreement;
1.7.9 the Employee Lease Agreement; and
1.7.10 such other instruments, certificates, consents or other
documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
1.8 Prorations and Utilities. To the extent not otherwise prorated
pursuant to this Agreement, or as reflected in Net Working Capital on the
Interim Balance Sheet or the Final Balance Sheet (provided that any category of
proration reflected on the Interim Balance Sheet shall also be reflected on the
Final Balance Sheet), Purchaser and Seller shall prorate (as of the Effective
Time), if applicable, real estate and personal property lease payments, real
estate and personal property taxes, assessments and other similar charges
against real estate, plus all other income and expenses which are normally
prorated upon the sale of assets of a going concern. As to power and utility
charges, "final readings" as of the Closing Date shall be ordered from the
utilities; the cost of obtaining such "final readings," if any, to be paid for
equally by Seller and Purchaser.
1.9 Transfer of Seller Assets. On the Closing Date, Seller shall
assign, transfer, convey and deliver to Purchaser, and Purchaser shall acquire,
all of Seller's right, title and interest in and to only the following assets
and properties, free and clear of all Liens (other than Permitted Liens) as such
assets shall exist on the Closing Date with respect to the operation of the
Hospital, such transfer being deemed to be effective at the Effective Time
(collectively, the "Assets"):
(a) all of the real property that is owned by Seller and
used with respect to the operation of the Hospital that is described in Schedule
1.9(a) (such description to include a legal description and address), and
appurtenances belonging thereto (collectively, the "Owned Real Property");
(b) all of the real property that is leased by Seller and
used with respect to the operation of the Hospital that is described in Schedule
1.9(b) together with all buildings, improvements and fixtures located thereupon
and all construction in progress (collectively, the "Leased Real Property") (the
Owned Real Property and the Leased Real Property are collectively referred to
herein as the "Real Property");
-15-
<PAGE> 21
(c) all of the tangible personal property owned by Seller
with respect to the operation of the Hospital, including all equipment,
furniture, fixtures, machinery, vehicles, office furnishings, and leasehold
improvements (the "Personal Property"), including, without limitation, the
Personal Property described in Schedule 1.9(c);
(d) all of Seller's rights, to the extent assignable or
transferable, to all licenses, permits, approvals, certificates of need,
certificates of exemption, franchises, accreditations and registrations and
other governmental licenses, permits or approvals issued to Seller with respect
to the operation of the Hospital (the "Licenses"), including, without
limitation, the Licenses described in Schedule 1.9(d);
(e) all of Seller's interest, to the extent assignable or
transferable, in and to all real property and personal property leases with
respect to the operation of the Hospital (the "Leases"), including, without
limitation, those leases described in Schedule 1.9(e);
(f) all of Seller's interest in and to all contracts and
agreements (including, but not limited to, purchase orders) with respect to the
operation of the Hospital (the "Contracts") including, without limitation, those
Contracts described in Schedule 1.9(f);
(g) all of those advance payments, prepayments, prepaid
expenses, deposits and the like which exist as of the Closing Date, subject to
the prorations provided in Section 1.8 of this Agreement, which were made with
respect to the operation of the Hospital and with respect to which Purchaser
will receive the benefit after the Closing Date (the "Prepaids"), the current
categories and amounts of which are set forth on Schedule 1.9(g);
(h) except as excluded by Section 1.10(j), all inventories
of supplies, drugs, food, janitorial and office supplies and other disposables
and consumables located at the Hospital, or used with respect to the operation
of the Hospital (the "Inventory");
(i) all documents, records, operating manuals, files and
computer software with respect to the operation of the Hospital, including,
without limitation, all patient records, medical records, employee records,
financial records with respect to the operation of the Hospital, equipment
records, construction plans and specifications, and medical and administrative
libraries;
(j) to the extent assignable, all rights in all warranties
of any manufacturer or vendor in connection with the Personal Property;
(k) all goodwill of the businesses evidenced by the Assets;
(l) all insurance proceeds arising in connection with
property damage to the Assets occurring after the Effective Date and on or prior
to the Closing Date, to the extent not expended on the repair or restoration of
the Assets;
(m) the names, symbols and telephone numbers used with
respect to the operation of the Hospital, including, without limitation, the
name of the Hospital set forth on Schedule 1.9(m) and all variants thereof;
-16-
<PAGE> 22
(n) any current assets of Seller with respect to the
operation of the Hospital (which are not otherwise specifically described above
in this Section 1.9) which are included in Net Working Capital, as determined
pursuant to Sections 1.2 and 1.4;
(o) all claims of Seller against third parties with respect
to the Assets (whether known or unknown, contingent or otherwise) arising after
the Effective Date and on or prior to the Closing Date, other than those claims
as to which Seller has a right to money damages based on a prior expenditure of
money with respect to such Assets; and
(p) all equity interests held by Seller that are described
on Schedule 1.9(p);
PROVIDED, HOWEVER, that the Assets shall not include the Excluded Assets as
defined in Section 1.10 below.
1.10 Excluded Assets. Notwithstanding anything to the contrary in
Section 1.9, Seller shall retain all assets owned directly or indirectly by it
(or any of its affiliates) which are not among the Assets, including without
limitation the following assets of Seller (collectively, the "Excluded Assets"):
(a) cash and short-term investments;
(b) all intercompany receivables of Seller or any
affiliates of Seller;
(c) any current assets of Seller with respect to the
operation of the Hospital which are not included in Net Working Capital, as
determined pursuant to Sections 1.2 and 1.4;
(d) computer software, programs and hardware which is
proprietary to Seller or any affiliates of Seller, data processing system
manuals and licensed software materials, as more particularly described in
Schedule 1.10(d);
(e) all of Seller's or any affiliate of Seller's
proprietary manuals, marketing materials, policy and procedure manuals, standard
operating procedures and marketing brochures, data and studies or analyses;
(f) any asset which would revert to the employer upon the
termination of any Seller Plan, including assets representing a surplus or
overfunding of any Seller Plan, including, without limitation, any asset under
the AMI defined benefit plan;
(g) all national or regional contracts of Seller, or any
affiliate of Seller which are made available to the Hospital by virtue of the
Hospital being an affiliate of Tenet;
(h) the names "Tenet Healthcare Corporation," "Tenet,"
"Tenet HealthSystem," "OrNda HealthCorp," and any other names or symbols not
used primarily at the Hospital, all abbreviations and variations thereof and
service marks, symbols and logos related thereto, together with any promotional
material, stationery, supplies or other items of inventory bearing such names or
symbols or abbreviations or variations thereof;
-17-
<PAGE> 23
(i) all current contracts between Seller and any affiliate
of Seller with respect to the operation of the Hospital, except those approved
in writing by Seller and Purchaser to be assigned to Purchaser after the Closing
Date;
(j) the portions of Inventory, Prepaids and other Assets
disposed of, expended or canceled, as the case may be, by Seller after the
Effective Date and on or prior to the Closing Date in the ordinary course of
business;
(k) assets owned and provided by vendors of services or
goods to any of the Hospital;
(l) all accounts, notes, interest and other receivables of
Seller (other than the Physician Notes), and all claims, rights, interests and
proceeds related thereto, including all accounts and other receivables, and cost
report settlements related thereto, arising from the rendering of services to
inpatients and outpatients at the Hospital, billed and unbilled, recorded and
unrecorded, for services provided by Seller while owner of the Assets whether
payable by private pay patients, private insurance, third party payors,
Medicare, Medicaid, CHAMPUS, Blue Cross, or by any other source ("Accounts
Receivable");
(m) all documents, records, correspondence, workpapers and
other documents relating to the Accounts Receivable, the Seller's Cost Reports
or Seller's Agency Settlements (the "Receivable Records");
(n) all claims, rights, interests and proceeds with respect
to state or local tax refunds (including but not limited to property tax)
resulting from periods ending on or before the Closing Date, and the right to
pursue appeals of same;
(o) any assets identified in Schedule 1.10(o); and
(p) any Contract identified by Purchaser as likely to
present a significant risk of noncompliance with applicable federal or state
healthcare laws, provided, however, that Seller shall be afforded reasonable
notice of, and an opportunity to cure, any such legal issues prior to Closing.
1.11 Assumed Obligations. On the Closing Date, Seller shall assign,
and Purchaser shall assume and agree to discharge after the Closing, the
following liabilities and obligations of Seller and only the following
liabilities and obligations (collectively, the "Assumed Obligations"):
(a) all current liabilities of Seller with respect to the
operation of the Hospital on or prior to the Closing Date to the extent included
in Net Working Capital, as determined pursuant to Sections 1.2 and 1.4;
(b) the Contracts, but only to the extent of the
obligations arising thereunder with respect to events or periods after the
Closing Date;
-18-
<PAGE> 24
(c) the Leases, including the capital lease obligations of
Seller with respect to the Hospital listed on Schedule 1.11(c), but only to the
extent of the obligations arising thereunder with respect to events or periods
after the Closing Date;
(d) any and all obligations of Seller under the Worker
Adjustment and Retraining Notification Act ("WARN") with respect to the
operation of the Hospital as a result of (i) the acts of Purchaser or any
affiliate(s) of Purchaser after the Closing Date or (ii) Purchaser's breach of
its covenant with respect to the Hired Employees as set forth in Section 5.3;
(e) the Sick Pay Amount, and all accrued vacation and
holiday pay liabilities of Seller (and any affiliates of Seller) with respect to
the Hired Employees (the "Accrued Paid Time Off"); provided, however, that with
respect to the Accrued Paid Time Off, only to the extent accrued in Net Working
Capital;
(f) all utilities being furnished to the Assets, subject to
the prorations provided in Section 1.8;
(g) [INTENTIONALLY OMITTED]
(h) [INTENTIONALLY OMITTED]; and
(i) any other obligations and liabilities identified in
Schedule 1.11(i).
1.12 Excluded Liabilities. Notwithstanding anything to the contrary
in this Agreement, Purchaser shall not assume or become responsible for any of
Seller's duties, obligations or liabilities that are not assumed by Purchaser
pursuant to the terms of this Agreement, the Bill of Sale or the Real Estate
Assignment(s), regardless of whether such obligation or liability is known or
unknown, fixed or contingent, and regardless of whether such liability arises
from contract, tort or otherwise (the "Excluded Liabilities"), and Seller shall
remain fully and solely responsible for, and indemnify Purchaser from and
against in accordance with Section 10.2 of this Agreement, all debts,
liabilities, contract obligations, expenses, obligations and claims of any
nature whatsoever related to the Assets or the Hospital unless assumed by
Purchaser under this Agreement, in the Bill of Sale or in the Real Estate
Assignment(s). The Excluded Liabilities shall include, without limitation:
(a) any current liabilities of Seller with respect to the
operation of the Hospital on or prior to the Closing Date (i) which are not
included in Net Working Capital, as determined pursuant to Sections 1.2 and 1.4
and (ii) which are not otherwise specifically included in the Assumed
Obligations;
(b) all liabilities arising out of or relating to any act,
omission, event or occurrence connected with the use, ownership or operation of
the Hospital or any of the Assets on or prior to the Closing Date (including,
without limitation, any liabilities arising from pre-Closing violations of
Environmental Laws or release of Hazardous Substances), other than as
specifically included in the Assumed Obligations;
-19-
<PAGE> 25
(c) other than as specifically included in the Assumed
Obligations, all liabilities arising out of or relating to any act, omission,
event or occurrence connected with Seller, or the operations or activities of
Seller (including all liabilities arising out of or relating to any claim,
proceeding or investigation, collectively, "Litigation") arising out of or
relating to any such act, omission, event or occurrence including without
limitation the Litigation set forth on Schedule 2.11);
(d) all liabilities of Seller in connection with claims of
professional malpractice to the extent arising out of or relating to acts,
omissions, events or occurrences on or prior to the Closing Date;
(e) subject to reimbursement by Purchaser to the extent
contemplated by the Employee Leasing Agreement, all liabilities of Seller for
its matching contributions for eligible beneficiaries' 401(k) plans, Section 125
plans and other Seller Plans and all administrative costs associated with such
welfare benefit plans arising on or prior to the Closing Date;
(f) all liabilities of Seller relating to the Seller's Cost
Reports with respect to periods ending on or prior to the Closing Date;
(g) all liabilities of Seller for violations of any law,
regulation or rule to the extent arising from acts or omissions on or prior to
the Closing Date, including, without limitation, those pertaining to Medicare
and Medicaid fraud or abuse;
(h) all liabilities of Seller for commissions or fees owed
to any finder or broker in connection with the transactions contemplated
hereunder, or for any other expenses incurred hereunder, except to the extent
expressly provided in this Agreement to the contrary (including but not limited
to Section 12.12 of this Agreement);
(i) all liabilities due to third party payors, including
without limitation, private insurers, private pay parties, governmental payors,
including Medicare, Medicaid, CHAMPUS, FEHBA, RRRB or other third party payors
("Third Party Payors"), including cost report reimbursements and settlements,
repayments, fines or other liabilities or obligations, to the extent they relate
to the periods ending on or prior to and including the Closing Date, and any
liability arising pursuant to a Third Party Payor program as a result of the
consummation of the transactions contemplated herein, including, without
limitation, recapture of previously reimbursed expenses;
(j) subject to Sections 1.8 and 12.12 of this Agreement,
all federal, state, foreign or local tax liabilities or obligations of Seller or
attributable to any capital Asset, in respect of periods ending on or prior to
Closing, including, without limitation, any income tax, any franchise tax, any
tax recapture, any sales and/or use tax, any state and local recording fees and
taxes which may arise upon the consummation of the transaction contemplated
herein and any FICA, FUTA, workers' compensation and any and all other taxes or
amounts due and payable as a result of the exercise by any of Seller's employees
of such employees' right to vacation, sick leave and holiday benefits accrued
while in the employ of Seller (to the extent not included in the Net Working
Capital adjustment);
-20-
<PAGE> 26
(k) subject to reimbursement by Purchaser to the extent
contemplated by the Employee Leasing Agreement, all liability for any and all
claims by or on behalf of Seller to the extent such liability relates to the
period ending on or prior to the Closing Date, including, without limitation,
liability for any pension, profit sharing, deferred compensation or any other
employee health and welfare benefit plans, liability for any EEOC claim, wage
and hour claim, unemployment compensation claim or workers' compensation claim,
and liability for all employee wages and benefits, including, without
limitation, accrued vacation, sick leave and holiday pay and taxes or other
liability related thereto in respect of Seller's employees (to the extent not
included in the Net Working Capital adjustment);
(l) all liabilities or obligations arising at any time
under any contract or commitment that is not assumed by Buyer;
(m) all liabilities or obligations arising out of Seller's
breach of any Contract prior to Closing; and
(n) any obligation or liability asserted under the federal
Hill-Burton program or other restricted grant and loan programs with respect to
the ownership or operation of the Hospital.
1.13 [INTENTIONALLY OMITTED]
1.14 Disclaimer of Warranties. Except as expressly set forth in
Article 2 hereof, the Assets transferred to Purchaser will be sold by Seller and
purchased by Purchaser in their physical condition on the Closing Date, "AS IS,"
WITH NO WARRANTY OF HABITABILITY OR FITNESS FOR HABITATION, with respect to the
Real Property, land, buildings and improvements, and WITH NO WARRANTIES,
INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE, with respect to the physical condition of the Personal
Property and Inventory, any and all of which warranties (both express and
implied) Seller hereby disclaims. All of the foregoing real and personal
property shall be further subject to normal wear and tear on the land,
buildings, improvements and equipment and normal and customary use of the
inventory and supplies in the ordinary course of business up to the Closing.
-21-
<PAGE> 27
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, Seller hereby
represents, warrants and covenants to Purchaser as to the following matters,
except as disclosed in the disclosure schedule as of the Effective Date, as
amended pursuant to the terms of this Agreement (the "Disclosure Schedule")
hereby delivered by Seller to Purchaser. Except as otherwise provided herein,
Seller shall be deemed to remake all of the following representations,
warranties and covenants as of the Closing:
2.1 Authorization. Seller has full power and authority to enter into
this Agreement and to carry out the transactions contemplated hereby.
2.2 Binding Agreement. All actions required to be taken by Seller to
authorize the execution, delivery and performance of this Agreement, all
documents executed by Seller which are necessary to give effect to this
Agreement, and all transactions contemplated hereby, have been duly and properly
taken or obtained by Seller. No other action on the part of the Seller is
necessary to authorize the execution, delivery and performance of this
Agreement, all documents necessary to give effect to this Agreement and all
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Seller and, assuming due and valid execution by
Purchaser, this Agreement constitutes a valid and binding obligation of Seller
enforceable in accordance with its terms subject to (a) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect and (b) limitations on the
enforcement of equitable remedies.
2.3 Organization and Good Standing; No Violation.
(a) Seller is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Texas. Seller has
full power and authority to own, operate and lease its properties and to carry
on its businesses as now conducted.
(b) Neither the execution and delivery by Seller of this
Agreement nor the consummation of the transactions contemplated hereby by Seller
nor compliance with any of the material provisions hereof by Seller, will (i)
violate, conflict with or result in a breach of any material provision of
Seller's organizational documents, (ii) violate any order, writ, injunction,
ruling or material law of any court or governmental authority, United States or
foreign, or cause the suspension or revocation of any governmental license or
authorization applicable to or binding upon or affecting Seller, any of the
Assets or the operation of the business of the Hospital or (iii) except for the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules and regulations promulgated thereunder (the "HSR Act"), and
as otherwise described in Section 2.3(b) of the Disclosure Schedule, require any
material consent, approval or authorization of, or notice to, or declaration,
filing or registration with, any governmental or regulatory authority.
-22-
<PAGE> 28
2.4 Contracts and Leases.
(a) Schedule 2.4(a) sets forth each Contract to which
Seller with respect to the operation of the Hospital) is a party or is bound or
by which any of the Assets is bound or subject, other than (i) such Contracts as
may be terminated by Purchaser at any time after the Closing without liability,
penalty or premium upon notice of thirty (30) days or less and (ii) such
Contracts which will not result in future annual expenditures or receipts by the
Hospital at any time of $10,000 or more (the Contracts set forth on Schedule
2.4(a) are referred to herein as "Material Contracts"). Notwithstanding the
foregoing, each of the following Contracts is set forth on Schedule 2.4(a):
(i) employment agreements and severance
agreements with individuals that are not
physicians;
(ii) all agreements with physicians;
(iii) collective bargaining agreements and other
Contracts with any labor union;
(iv) covenants not to compete or restrictive
covenants;
(v) equipment leases treated as capital leases
for financial accounting purposes;
(vi) leases relating to real property or
interests in real property as to which
Seller is lessee; or
(vii) joint ventures in the form of partnerships,
limited liability companies, corporations in
which Seller has at least a 20% equity
interest.
(b) Each Material Contract is in full force and effect and
is the valid and binding obligation of Seller and, to the knowledge of Seller,
of each other party thereto, except where a failure of the Material Contracts to
be in full force and effect is not material, individually or in the aggregate,
to the operation of the Hospital.
2.5 Required Consents. Seller is not a party to or bound by, nor are
any of the Assets subject to, any mortgage, material Lien, deed of trust, or any
material lease, agreement or instrument, or any material order, judgment or
decree which (a) requires the consent of another to the execution of this
Agreement, (b) requires the consent of another to consummate the transactions
contemplated by this Agreement, or (c) makes unduly burdensome the consummation
of the transactions contemplated by this Agreement. For purposes of clause (b)
immediately above, "material" leases as to which Seller is lessee shall include
only those leases as to which Seller will deliver landlord estoppels as
contemplated by Section 1.6.13 of this Agreement. The consummation of the
transactions contemplated by this Agreement will not result in a breach of any
term or provision of, or constitute (with or without notice or lapse of time or
both) a default under, any material agreement or instrument to which Seller is a
party, or
-23-
<PAGE> 29
which is binding on Seller, or to which the Assets are subject. The consummation
of the transactions contemplated by this Agreement will not give any other party
to any such material agreement or instrument a right to cancel or terminate the
same, a right to modify or amend the terms thereof, or result in an acceleration
of the maturity or performance of any obligation under any such material
agreement or instrument. No such breach, default, cancellation, termination,
modification or amendment or acceleration described in this Section 2.5 would
prevent Seller from consummating the transactions contemplated by this
Agreement, or would result in the creation of any lien, security interest,
encumbrance, charge, loss or liability on any material assets of Seller,
including without limitation the Assets.
2.6 Compliance With Laws and Contracts.
(a) Except as set forth in Schedule 2.6(a), with respect to
the operation of the Hospital, Seller has the lawful authority and all material
state, federal, special or local governmental authorizations, licenses or
permits in good standing required to conduct its business, and such business
presently is being conducted in compliance with all applicable laws, statutes,
ordinances, orders, rules, regulations, policies, guidelines, licenses,
certificates, certificates of need, judgments or decrees of all judicial or
governmental authorities (federal, state, local, foreign or otherwise), except
where the failure to be in such compliance would not be material to the
operation of the Hospital. Seller has not, with respect to the operation of the
Hospital, been charged with or given notice of, and to the best knowledge of
Seller, Seller with respect to the operation of the Hospital, is not under
investigation with respect to, any violation of, or any obligation to take
remedial action under, any applicable (i) material law, statute, ordinance,
rule, regulation, policy or guideline promulgated, (ii) material license,
certificate or certificate of need issued, or (iii) order, judgment or decree
entered, by any federal, state, local or foreign court or governmental authority
relating to the Hospital or the business of the Hospital.
(b) Seller's ownership and operation of the Hospital and
the Assets are and have been in compliance with all Environmental Laws (as
defined in Section 2.6(c) below), except where the failure to be in such
compliance would not be material to the operation of the Hospital. Seller has
obtained all licenses, permits and approvals necessary or required under all
applicable Environmental Laws (the "Environmental Permits") for the ownership
and operation of the Hospital and the Assets. All such Environmental Permits are
in effect and, to Seller's knowledge, no action to revoke or modify any of such
Environmental Permits is pending. There is not now pending or, to Seller's
knowledge, threatened, any claim, investigation or enforcement action by any
governmental authority (whether judicial, executive or administrative)
concerning Seller's potential liability under Environmental Laws in connection
with the ownership or operation of the Hospital or the Assets. To Seller's
knowledge, there has not been a release or threatened release of any Hazardous
Substance at, upon, in, under or from the Hospital or the Assets at any time. At
no time during Seller's ownership of the Real Property, and to Seller's
knowledge at no time during others' ownership of the Real Property, have any
Hazardous Substances been present on the Real Property except as may be utilized
as a matter of course in hospital operations and in accordance with applicable
Environmental Laws.
-24-
<PAGE> 30
(c) For the purposes of this Agreement, the term
"Environmental Laws" shall mean all state, federal or local laws, ordinances,
codes or regulations relating to Hazardous Substances or to the protection of
the environment, including, without limitation, laws and regulations relating to
the storage, treatment and disposal of medical and biological waste. For
purposes of this Agreement, the term "Hazardous Substances" shall mean (i) any
hazardous or toxic waste, substance, or material defined as such in (or for the
purposes of) any Environmental Laws, (ii) asbestos-containing material, (iii)
medical and biological waste, (iv) polychlorinated biphenyls, (v) petroleum
products, including gasoline, fuel oil, crude oil and other various constituents
of such products, and (vi) any other chemicals, materials or substances,
exposure to which is prohibited, limited or regulated by any Environmental Laws.
(d) Seller has performed all material obligations relating
to the Assets and the business of the Hospital (including under all Material
Contracts), and is not in breach or default, nor do any circumstances exist
which with or without notice or lapse of time, or both, would result in breach
or default, nor to Seller's knowledge, is there any claim of such breach or
default with respect to any obligation to be performed, under any contract,
lease, guaranty, indenture, loan agreement, document or other agreement or
arrangement relating to the Assets or the business of the Hospital, including
the Leases and Contracts, which breach or default or its consequences might be
material to the operation of the Hospital.
2.7 Title; Sufficiency.
(a) Seller has good and marketable fee simple or leasehold
title, as the case may be, to the Real Property. Seller has good and valid title
to the Personal Property, which individually or in the aggregate is material to
the condition (financial or otherwise), operations or the business of the
Hospital.
(b) The Real Property and the Personal Property is held by
Seller free and clear of all Liens, and is not, in the case of the Real
Property, subject to any rights-of-way, building or use restrictions,
exceptions, variances, reservations or limitations of any nature whatsoever
except, with respect to such properties, (i) liens for current real property
taxes and assessments not yet due and payable, (ii) mechanics', carriers',
workmen's, repairmen's and other statutory liens, rights of way, building or use
restrictions, exceptions, easements, covenants, variances, reservations and
other limitations of any kind, if any, which do not materially impair the
ordinary business operations of the Hospital or for which, in respect of matters
affecting title to the Real Property, title insurance coverage has been
obtained, and (iii) other such encumbrances as are set forth in Schedule 2.7(b)
(collectively, "Permitted Liens"). None of the Real Property is subject to a
pending, or to Seller's knowledge threatened, condemnation or similar
proceeding. None of the Real Property is subject to any option, right of first
refusal or other contractual right to sell, dispose of or lease such Real
Property, except as set forth in Schedule 2.7(b).
(c) The Inventory with respect to the Hospital is, and at
the Closing will be, maintained in such quality and quantities as is consistent
with the Hospital's historical practices.
-25-
<PAGE> 31
(d) The Assets and the Excluded Assets comprise
substantially all of the property, assets, licenses, rights and agreements used
in the conduct of the businesses and operation of the Hospital.
2.8 Certain Representations With Respect to the Hospital.
(a) [INTENTIONALLY OMITTED]
(b) The Hospital is duly accredited by the Joint Commission
on Accreditation of Healthcare Organizations ("JCAHO") for the periods set forth
in Schedule 2.8(b). With respect to the Hospital, Seller has previously
delivered to Purchaser or will promptly deliver after the Effective Date, a true
and complete copy of the most recent JCAHO accreditation survey report and
deficiency list, if any; the most recent Statement and Deficiencies and Plan of
Correction on Form HCFA-2567; the most recent state licensing report and list of
deficiencies, if any; the most recent fire marshall's survey and deficiency
list, if any, and the corresponding plans of correction or other responses.
(c) The Hospital is certified for participation in the
Medicare, Medicaid and CHAMPUS programs, has current and valid provider
contracts with each of such programs, is in substantial compliance with the
conditions of participation of each of such programs and has received all
approvals or qualifications necessary for capital reimbursement of the Assets.
Seller has not received notices from the regulatory authorities which enforce
the statutory or regulatory provisions in respect of any of the Medicare,
Medicaid or CHAMPUS programs of any pending or threatened investigations with
respect to the operation of the Hospital. Seller has not been excluded from the
Medicare, Medicaid or CHAMPUS programs or any state health care program, and
there is no pending or, to Seller's knowledge, threatened exclusion action
against Seller.
(d) Seller has delivered or will promptly deliver to
Purchaser true and exact copies of (i) all cost reports which Seller filed with
Medicare and Medicaid for the last three (3) years, as well as all material
correspondence and other material documents relating to any disputes and/or
settlements with Medicare or Medicaid within the last three (3) years. Notices
of Program Reimbursement have been issued by the applicable fiscal intermediary
with respect to the cost reports of the Hospital for Medicare, Medicaid (if
required) and Blue Cross (if required) through the periods set forth in Schedule
2.8(d) (the "Audit Periods"). Each of such reports was timely filed. Seller has
not received notice of any material dispute between the Hospital and the
applicable governmental agency or private entity, or their intermediaries or
representatives, regarding such cost reports for periods subsequent to the
periods specified in Schedule 2.8(d) and, to the knowledge of Seller, there are
no pending or threatened material claims by any of such programs against the
Hospital with respect to the Audit Periods or any period thereafter. To Seller's
knowledge, Seller is not subject to any pending but unassessed Medicare or
Medicaid claim payment adjustments, except to the extent Seller has established
adequate reserves for such adjustments.
-26-
<PAGE> 32
(e) With respect to the operation of the Hospital, Seller
does not have any outstanding loan, grant or loan guarantee pursuant to the
Hill-Burton Act (42 USC Section 291a, et seq.) and the transaction contemplated
hereby will not result in any obligation on the part of the Purchaser or the
Hospital to repay any such loans, grants, or loan guarantee or provide
uncompensated care in consideration thereof.
(f) Seller has previously delivered to Purchaser, with
respect to the Hospital, a copy of the blank forms generally used with respect
to medical staff privilege and membership application or delineation or
privilege; all current medical staff bylaws, rules and regulations and
amendments thereto; and all written contracts with physicians, physicians
groups, or other members of the medical staff of the Hospital.
(g) Except as set forth in a writing delivered by Seller to
Purchaser which specifically makes reference to this Section, there are no
material pending or threatened disciplinary or corrective actions or appeals
with respect to the medical or other staff members of the Hospital. Schedule
2.8(g) sets forth a complete and accurate list of (a) the name of each member of
the medical staff of the Hospital as of the Effective Date, and (b) the
specialty, if any, of each medical staff member. Notwithstanding the foregoing
provisions of this Section 2.8(g), Seller shall not be required to disclose any
information pursuant to this Section 2.8(g) where such disclosure is prohibited
by state law.
2.9 Brokers and Finders. Other than Merrill Lynch, neither Seller,
nor any affiliate of Seller, nor any officer or director thereof, has engaged
any finder or broker in connection with the transactions contemplated hereunder.
2.10 Financial Statements. The unaudited financial statements of
Seller with respect to the operation of the Hospital for the three years ended
May 31, 1999 attached as Schedule 2.10, the Interim Balance Sheet and the Final
Balance Sheet (collectively, the "Financial Statements") have been or will be
prepared from the books and records of Seller. The balance sheets included in
the Financial Statements fairly present, or will fairly present, the financial
position of Seller with respect to the operation of the Hospital as of the
respective dates thereof and the other financial statements included therein
present or will present fairly the results of operations for the periods
indicated, in each case in conformity with generally accepted accounting
principles consistently applied during such periods, except that the Financial
Statements may not fully reflect federal, state and local income or franchise
taxes.
2.11 Legal Proceedings. There are no material claims, proceedings or
investigations ("Litigation") pending or, to the best knowledge of Seller,
threatened relating to or affecting Seller with respect to the operation of the
Hospital or any of the Assets before any court or governmental body (whether
judicial, executive or administrative). Seller with respect to the operation of
the Hospital is not subject to any judgment, order, decree or other governmental
restriction specifically (as distinct from generically) applicable to it or its
assets, including the Assets, which would be material to the operation of the
Hospital. There is no claim, proceeding or investigation pending, or to the
knowledge of Seller threatened, which challenges the validity of this Agreement
or which, if adversely determined, could reasonably be expected to (i) adversely
affect the ability of Seller to consummate the transactions contemplated by this
-27-
<PAGE> 33
Agreement, (ii) result in a material adverse effect on the Hospital, or (iii)
impair the ability of Purchaser to operate the Hospital or the Assets after the
Closing in substantially the same manner as they are presently conducted.
2.12 Employee Benefits.
(a) Schedule 2.12 contains a list of (i) each pension,
profit sharing, bonus, deferred compensation, or other retirement plan or
arrangement of Seller with respect to the operation of the Hospital, whether
oral or written, which constitutes an "employee pension benefit plan" as defined
in Section 3(2) of ERISA, (ii) each medical, health, disability, insurance or
other plan or arrangement of Seller with respect to the operation of the
Hospital, whether oral or written, which constitutes an "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, and (iii) each other employee
benefit or perquisite provided by Seller (with respect to the operation of the
Hospital), in which any employee of Seller participates in his capacity as such
(collectively, the "Seller Plans"). Copies of the summary plan descriptions and
brochures with respect to the Seller Plans have previously been furnished to
Purchaser.
(b) Seller (with respect to the operation of the Hospital)
is not a participant in any multiemployer plan within the meaning of Section
4001(a)(3) of ERISA in which employees of Seller participate and no withdrawal
liability has been incurred by or asserted against Seller or an ERISA Affiliate
with respect to a multiemployer plan.
(c) With respect to each Seller Plan, to Seller's
knowledge, Seller does not have any direct or indirect, actual or contingent
liability, other than to make payments for contributions, premiums or benefits
when due in the ordinary course, all of which payments that are due having been
made. Neither the Hospital nor any of the Assets are subject to any lien under
ERISA or the Internal Revenue Code of 1986, as amended (the "Code").
(d) No amounts payable under any contract, agreement or
arrangement will fail to be deductible for federal income tax purposes by virtue
of Section 280G of the Code. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby, alone or
in connection with a related event, will (i) result in any material payment
(including, without limitation, severance, unemployment compensation, golden
parachute or otherwise) becoming due to any employee of Seller from the Seller
under any Seller Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Seller Plan or otherwise or (iii) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent.
(e) All of the Seller Plans have been administered in material
compliance with ERISA and the applicable provisions of the Code. There are no
"accumulated funding deficiencies" within the meaning of ERISA or the Code or
any federal excise tax or other liability on account of any deficient fundings
in respect of the Seller Plans. No reportable event(s) (within the meaning of
ERISA) or prohibited transaction(s) (within the meaning of the Code), has
occurred in respect of any of the Seller Plans that would result in any material
liability to Seller. Other than claims for benefits, there are not pending or,
to Seller's knowledge, threatened any claims relating to the Seller Plans by any
employee of Seller with respect to the
-28-
<PAGE> 34
operation of the Hospital, alleging a breach or breaches of fiduciary duties or
violations of other applicable state or federal law which could result in
liability on the part of Seller or any of the Seller Plans under ERISA or any
other law that would have a material adverse effect on Seller. To Seller's
knowledge, none of the Seller Plans discriminates in operation in favor of
employees who are officers or who are highly compensated, except as permitted
under the Code and ERISA. To Seller's knowledge, all material returns, reports,
disclosure statements and premium payments required to be made under ERISA and
the Code with respect to any of the Seller Plans have been timely filed or
delivered. Except for routine random audits or submissions by Seller to the
Voluntary Compliance Resolution Program, none of the Seller Plans have been
audited or investigated by either the Internal Revenue Service, the Department
of Labor or the Pension Benefit Guaranty Corporation within the last five (5)
years, and there are no outstanding issues with reference to any of the Seller
Plans pending before such governmental agencies.
2.13 Taxes and Tax Returns.
(a) To Seller's knowledge, Seller has duly filed all
federal, state, foreign and local tax returns required to be filed by it (all of
which are true and correct in all material respects) and has duly paid or made
provision for the payment of all taxes (including any interest or penalties)
which are due and payable, whether or not in connection with such returns.
Seller (with respect to the operation of the Hospital) has withheld proper and
accurate amounts from its employees' compensation, and made deposits of all such
withholdings, in material compliance with all withholding and similar provisions
of the Code and any and all other applicable laws.
(b) Seller (with respect to the operation of the Hospital)
has complied in all material respects with all Applicable Laws relating to
withholding Taxes and has paid over to the proper governmental entities all
amounts required to be so withheld and paid over under all Applicable Laws.
(c) There are no Liens for Taxes upon the Assets, except for
statutory Liens for current Taxes not yet due and payable or which may hereafter
be paid without penalty or which are being contested in good faith by
appropriate proceedings.
(d) For purposes of this Agreement, "Tax" or "Taxes" shall mean
(i) any tax of any kind, including, without limitation, all income, property,
sales, use, occupation, payroll, transfer, estimated, franchise, excise, value
added, employees' income withholding and social security taxes, and related to
such taxes, charges, fees, levies, penalties or other assessments of any kind,
together with any interest and penalties, addition to tax or additional amounts
imposed by any taxing authority, whether disputed or not, imposed by the United
States or by any foreign country, or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or by any other
taxing authority, and (ii) any interest thereon. For purposes of this Agreement,
"Tax Return" shall mean any return, report, information return or amendment or
other document (including any related or supporting information) with respect to
Taxes.
-29-
<PAGE> 35
2.14 Personnel.
(a) Schedule 2.14 sets forth a complete list (as of the
date set forth therein) of names, positions and current annual salaries or wage
rates, bonus and other compensation and/or benefit arrangements, accrued sick
and vacation days, and period of service credited for vesting as of the date
thereof of all full-time and part-time employees of Seller with respect to the
operation of the Hospital and indicating whether such employee is a part-time or
full-time employee.
(b) Since May 31, 1998, there have been, and there are now,
no labor union or collective bargaining agreements in effect with respect to the
employees of Seller with respect to the operation of the Hospital. There is no
unfair labor practice complaint against Seller pending, or to the best knowledge
of Seller threatened, before the National Labor Relations Board with respect to
the operation of the Hospital. Since May 31, 1998, there has been, and there is
now, no labor strike, arbitration, dispute, slowdown or stoppage, and no union
organizing campaign, pending, or to the best knowledge of Seller threatened by
or involving the employees of Seller with respect to the operation of the
Hospital.
(c) There is no charge or complaint pending or, to the
knowledge of Seller, threatened against Seller relating to the Hospital before
the Equal Employment Opportunity Commission or any state, local or foreign
agency responsible for the prevention of unlawful employment practices.
2.15 Insurance. Seller maintains, and has maintained, without
interruption, at all times during its ownership of the Hospital, self-insurance
or policies or binders of insurance covering such risks and events, including
personal injury, property damage, malpractice and general liability, to provide
adequate and sufficient insurance coverage for all the assets and operations of
the Hospital. Such insurance meets all requirements of Applicable Law and the
Contracts. Schedule 2.15 contains a list of all such insurance maintained by
Seller with respect to the operation of the Hospital as of the Effective Date.
2.16 Solvency. Seller is not insolvent and Seller will not be
rendered insolvent as a result of any of the transactions contemplated by this
Agreement. For purposes hereof, the term "solvency" means that: (i) the fair
salable value of Seller's tangible assets is in excess of the total amount of
its liabilities (including for purposes of this definition all liabilities,
whether or not reflected on a balance sheet prepared in accordance with
generally accepted accounting principles, and whether direct or indirect, fixed
or contingent, secured or unsecured, and disputed or undisputed); (ii) Seller is
able to pay its debts or obligations in the ordinary course as they mature; and
(iii) Seller has capital sufficient to carry on its business and all businesses
which it is about to engage.
2.17 No Untrue or Inaccurate Representations or Warranties. The
representations and warranties of Seller contained in this Agreement, and each
exhibit, schedule, certificate or other written statement delivered pursuant to
this Agreement or in connection with the transactions contemplated hereby, are
accurate, correct and complete, and in the aggregate do not contain any untrue
statement of material fact or omit to state a material fact necessary in order
to make the
-30-
<PAGE> 36
statements and information contained therein not misleading. References in this
Agreement to "knowledge of Seller", the "best knowledge of Seller", "known to
Seller" or "upon Seller knowing" mean the actual knowledge of the CEO, CFO, COO
and DON of each the Hospital and of Seller, without independent investigation.
2.18 Absence of Undisclosed Liabilities. Except for liabilities and
obligations (i) set forth in Schedule 2.18 attached hereto, (ii) reflected on
the audited balance sheet for the year ended May 31, 1999 included in the
Financial Statements (the "1999 Balance Sheet") or (iii) incurred in the
ordinary course of business since the date of the 1999 Balance Sheet, Seller
with respect to the operation of the Hospital does not have any material
liabilities or obligations of whatsoever nature, direct or indirect, whether
accrued, fixed, contingent or otherwise.
2.19 Y2K. Seller has delivered to Purchaser as Schedule 2.19 a list
as of the Effective Date of compliance procedures (a) taken, (b) being taken and
(c) to be taken by Seller to attempt to make or assure that the Assets are Y2K
compliant. The procedures described on Schedule 2.19 are consistent with
procedures applicable to all other hospitals operated by Tenet. Seller shall
update periodically and deliver to Purchaser updates to Schedule 2.19; provided
that such updates shall not for any purpose be or be deemed to be a basis for
indemnification of Purchaser by Seller. Seller's Y2K compliance process includes
taking out of service Assets which Seller believes are not Y2K compliant by
September 30, 1999. Seller does not represent that its Y2K compliance process
will make any Asset used in its operations Y2K compliant.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, Purchaser hereby
represents, warrants and covenants to Seller as to the following matters as of
the Effective Date and, except as otherwise provided herein, shall be deemed to
remake all of the following representations, warranties and covenants as of the
Closing:
3.1 Authorization. Purchaser has full power and authority to enter
into this Agreement and has full power and authority to carry out the
transactions contemplated hereby.
3.2 Binding Agreement. All actions required to be taken by Purchaser
to authorize the execution, delivery and performance of this Agreement, all
documents executed by Purchaser which are necessary to give effect to this
Agreement, and all transactions contemplated hereby, have been duly and properly
taken or obtained by Purchaser prior to the Closing Date. No other action on the
part of Purchaser is necessary to authorize the execution, delivery and
performance of this Agreement, all documents necessary to give effect to this
Agreement and all transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and, assuming due and valid
execution by Seller, this Agreement constitutes, or will constitute prior to
Closing, a valid and binding obligation of Purchaser enforceable in accordance
-31-
<PAGE> 37
with its terms subject to (a) applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally from time to
time in effect and (b) limitations on the enforcement of equitable remedies.
3.3 Organization and Good Standing. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware, and has full power and authority to own, operate and
lease its properties and to carry on its business as now conducted.
3.4 No Violation. Neither the execution and delivery by Purchaser of
this Agreement nor the consummation of the transactions contemplated hereby nor
compliance with any of the material provisions hereof by Purchaser will (i)
violate, conflict with or result in a breach of any material provision of the
Articles of Organization, Operating Agreement or other organizational documents
of Purchaser, (ii) violate any order, writ, injunction, ruling or material law
of any court or governmental authority, United States or foreign, applicable to
Purchaser, or cause the suspension or revocation of any governmental license or
authorization applicable to or binding upon or affecting Purchaser, or (iii)
except for the applicable requirements of the HSR Act, and as otherwise
described on Schedule 3.4 attached hereto, require any material consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any governmental or regulatory authority.
3.5 Brokers and Finders. Except as described on Schedule 3.5,
neither Purchaser nor any controlled affiliate thereof nor any officer or
director thereof has engaged any finder or broker in connection with the
transactions contemplated hereunder.
3.6 Legal Proceedings. Except as described on Schedule 3.6, there
are no claims, proceedings or investigations pending or, to the best knowledge
of Purchaser, threatened relating to or affecting Purchaser or any controlled
affiliate of Purchaser before any court or governmental body (whether judicial,
executive or administrative) in which an adverse determination would materially
adversely affect the properties, business condition (financial or otherwise) of
Purchaser or any controlled affiliate of Purchaser. Neither Purchaser nor any
controlled affiliate of Purchaser is subject to any judgment, order, decree or
other governmental restriction specifically (as distinct from generically)
applicable to Purchaser or any controlled affiliate of Purchaser which
materially adversely affects the condition (financial or otherwise), operations
or business of Purchaser or any controlled affiliate of Purchaser.
3.7 Solvency. Purchaser is not insolvent and will not be rendered
insolvent as a result of any of the transactions contemplated by this Agreement.
For purposes hereof, the term "solvency" means that: (i) the fair salable value
of Purchaser's tangible assets is in excess of the total amount of its
liabilities (including for purposes of this definition all liabilities, whether
or not reflected on a balance sheet prepared in accordance with generally
accepted accounting principles, and whether direct or indirect, fixed or
contingent, secured or unsecured, and disputed or undisputed); (ii) Purchaser is
able to pay its debts or obligations in the ordinary course as they mature; and
(iii) Purchaser has capital sufficient to carry on its businesses and all
businesses which it is about to engage.
-32-
<PAGE> 38
3.8 INTENTIONALLY OMITTED.
3.9 INTENTIONALLY OMITTED.
3.10 No Other Business or Operations. Purchaser is engaged in no
business or operations at the time of execution of this Agreement, and
immediately following the Closing will be engaged in no business or operations
other than as is contemplated to be acquired pursuant to this Agreement, the
Related Asset Sale Agreement or as disclosed to Seller prior to the Effective
Date.
ARTICLE 4
COVENANTS OF SELLER
4.1 Access and Information; Inspections. From the Effective Date
until Closing, Seller shall afford to the officers and agents of Purchaser
(which shall include accountants, attorneys, bankers and other consultants and
agents of Purchaser) full and complete access during normal business hours to
and the right to inspect the plants, properties, books, accounts, records and
all other relevant documents and information with respect to the assets,
liabilities and business of the Hospital. From the Effective Date until Closing,
Seller shall furnish to Purchaser with such additional financial and operating
data and other information in Seller's possession as to businesses and
properties of the Hospital as Purchaser or its representatives may from time to
time reasonably request, without regard to where such information may be
located. Purchaser's right of access and inspection shall be exercised in such a
manner as not to interfere unreasonably with the operations of the Hospital.
Such access may include consultations with the personnel of Seller. Further,
Purchaser may, at its sole cost and expense (except as otherwise provided in
Section 12.12), undertake environmental, mechanical and structural surveys of
the Hospital. Purchaser acknowledges that it shall coordinate its inspection
activities contemplated by this Section 4.1 through David R. Mayeux or his
designee.
4.2 Preserve Accuracy of Representations and Warranties. Seller
shall refrain from any action or inaction that would render any representation
or warranty contained in Article 2 of this Agreement inaccurate as of the
Closing Date.
4.3 Conduct of Business. On and after the Effective Date and prior
to the Closing, and except to the extent the prior written consent of Purchaser
is obtained in accordance with the procedures set forth in Section 4.4 below or
required by this Agreement, Seller shall, with respect to the operation of the
Hospital:
(a) carry on its business with respect to the operation of
the Hospital in substantially the same manner as presently conducted and not
make any material change in personnel, operations, finance, accounting policies,
or real or personal property;
(b) maintain the Hospital and all parts thereof and all
other Assets in operating condition in a manner consistent with past practices,
ordinary wear and tear excepted;
-33-
<PAGE> 39
(c) perform all of its material obligations under
agreements relating to or affecting the Hospital, its operations or the Assets;
(d) keep in full force and effect present insurance
policies or other comparable self-insurance; and
(e) use its reasonable efforts to maintain and preserve its
business organization intact, retain its present employees at the Hospital and
maintain its relationships with physicians, suppliers, customers and others
having business relationships with the Hospital and take such actions as are
necessary and use its reasonable efforts to cause the smooth, efficient and
successful transition of business operations and employee and other relations to
the Purchaser as of Closing.
4.4 Negative Covenants. From the Effective Date until Closing, with
respect to the operation of the Hospital, Seller shall not, without the prior
written consent of Purchaser in accordance with the procedures set forth below
or except as may be required by law:
(a) amend or terminate any of the Contracts, enter into any
new contract or commitment, or incur or agree to incur any liability, except in
the ordinary course of business (which ordinary course of business shall include
renewals of any Contract), and in no event with respect to any such contract,
commitment or liability as to which the total to be paid in the future under the
contract, commitment or liability exceeds $50,000;
(b) increase compensation payable or to become payable or
make any bonus payment to or otherwise enter into one or more bonus agreements
with any employee, except in the ordinary course of business in accordance with
Seller's customary personnel policies;
(c) create, assume or permit to exist any new debt,
mortgage, deed of trust, pledge or other lien or encumbrance upon any of the
Assets;
(d) acquire (whether by purchase or lease) or sell, assign,
lease, or otherwise transfer or dispose of any property, plant or equipment,
except in the ordinary course of business with comparable replacement thereof;
(e) except with respect to previously budgeted
expenditures, purchase capital assets or incur costs in respect of construction
in progress;
(f) take any action outside the ordinary course of
business; or
(g) reduce Inventory except in the ordinary course of
business.
For purposes of obtaining Purchaser's prior written consent under Sections 4.3
and 4.4 of this Agreement, Seller shall forward requests for such consent to
Frank Coyle at Purchaser. Such requests shall be deemed approved by Purchaser if
not specifically approved or denied by Purchaser with ten (10) business days of
delivery.
-34-
<PAGE> 40
4.5 Required Approvals. Seller shall reasonably cooperate with
Purchaser and its representatives and attorneys: (i) in obtaining all consents,
approvals, authorizations, clearances, certificates of need and licenses
required to carry out the transactions contemplated by this Agreement
(including, without limitation, those of governmental and regulatory
authorities) or which Purchaser reasonably deems necessary or appropriate, and
(ii) in the preparation of any document or other material which may be required
by any governmental agency as a predicate to or result of the transactions
contemplated herein; provided, however, that it shall be Purchaser's
responsibility to obtain the certificates of need and licenses required to carry
out the transactions contemplated by this Agreement. As soon as practicable
after the Effective Date, Seller will make all governmental filings required to
be made by it in order to consummate the transactions contemplated herein
(including all filings under the Hart-Scott-Rodino Act, as more particularly
described below).
4.6 Additional Financial Information. Within thirty (30) calendar
days following the end of each calendar month prior to Closing, Seller shall
deliver to Purchaser complete copies of the unaudited balance sheet and related
unaudited statements of income with respect to the operation of the Hospital for
each month then ended, together with a year-to-date compilation and the notes,
if any, related thereto, which presentation shall be consistent with the
provisions of Section 2.10 which are applicable to the Financial Statements.
4.7 No-Shop.
(a) Subject to compliance with its right of first refusal
obligations described in Section 6.2 below, from and after the Effective Date
until the earlier of the Closing or the termination of this Agreement, Seller
and its general partner shall not, without the prior written consent of
Purchaser: (i) offer for sale or lease the assets of the Hospital or the Assets
(or any material portion thereof) or of any stock or other securities or other
interest owned by Seller; (ii) solicit offers to buy all or any material portion
of the Hospital or the Assets, or any stock or other securities or other
interest owned by Seller; (iii) hold discussions with any party (other than
Purchaser) looking toward such an offer or solicitation or looking toward a
merger or consolidation of Seller; or (iv) enter into any agreement with any
party (other than Purchaser) with respect to the sale or other disposition of
any of the Hospital or the Assets or of any stock or other securities or other
interest owned by Seller, or with respect to any merger, consolidation, or
similar transaction involving Seller. Seller and its general partner shall
promptly advise Purchaser of any inquiry, proposal, solicitation or
communication of any kind relating to, or contemplating any of the foregoing.
Notwithstanding the foregoing, this Section 4.7 shall not be construed to
prohibit Seller from engaging in discussions regarding transactions involving
its or its affiliates' partnership interests, stock or other securities,
including macro-level mergers, reorganizations or other transactions, so long as
the terms thereof do not contemplate the sale or lease or other disposition of
the Hospital or the Assets or otherwise impair the ability of Seller to
consummate the transactions contemplated herein.
(b) Any reference in this Agreement to an "affiliate" shall
mean any Person directly or indirectly controlling, controlled by or under
common control with a second Person; provided, however, an "affiliate" shall not
include any officer or director of any Person. The term "control" (including the
terms "controlled by" and "under common control with") means the
-35-
<PAGE> 41
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
interests, by contract or otherwise. A "Person" shall mean any natural person,
partnership, corporation, limited liability company, association, trust or other
legal entity.
4.8 Seller's Efforts to Close; Audited Financial Statements.
(a) Seller shall use its reasonable commercial efforts to
promptly satisfy all of the conditions precedent set forth in Articles 6 and 7
to its or Purchaser's obligations under this Agreement to the extent that
Seller's action or inaction can control or influence the satisfaction of such
conditions.
(b) As soon as reasonably practicable after the Effective
Date, Seller shall provide Purchaser with audited financial statements of the
Hospital, which financial statements will include balance sheets for the years
ended May 31, 1999 and 1998, and combined statements of operations and cash
flows for each of the years in the three year period ended [May 31, 1999]. The
balance sheets included in such financial statements will fairly present the
financial position of Seller with respect to the operation of the Hospital as of
the respective dates thereof and the other financial statements included therein
will present fairly the results of operations for the periods indicated, in each
case in conformity with GAAP consistently applied. Such financial statements
shall meet the requirements of Regulation S-X promulgated under the Securities
Exchange Act of 1934, as amended, and shall be accompanied by the unqualified
opinion of KPMG Peat Marwick.
(c) Seller shall reasonably cooperate in Purchaser's
efforts to obtain financing and fund the Cash Purchase Price, and otherwise to
consummate the transaction contemplated by this Agreement. Notwithstanding the
foregoing, Purchaser shall indemnify, defend, and hold Seller harmless from all
costs, damages, expenses or losses incurred by Seller as a result of being named
in any securities litigation involving Purchaser and the financing contemplated
by this Agreement, other than to the extent arising out of any gross negligence,
willful misconduct of Seller or its employees, or false or intentionally
misleading statements of Seller or its employees.
4.9 Title Matters. No less than twenty (20) days prior to the
Closing Date, Seller shall deliver to Purchaser (a) a preliminary binder or
title commitment(s) (the "Title Commitment") sufficient for the issuance of an
A.L.T.A. Extended Coverage Owner's Title Insurance Policy with respect to the
Owned Real Property and an A.L.T.A. Extended Coverage Leasehold Title Policy
with respect to that Leased Real Property as to which a ground lease is at issue
(the "Title Policy"), issued by Chicago Title Insurance Company (the "Title
Company"), together with true, correct and legible copies of all instruments
referred to therein as conditions or exceptions to title (the "Title
Instruments") and (b) A.L.T.A. surveys of the Owned Real Property complying with
the Minimum Standard Detail Requirements for ALTA/ASCM Land Title Surveys for
the Owned Real Property (the "Surveys"). Section 12.12 shall govern which party
or parties hereto shall bear the costs and expenses of the Title Commitment, the
Title Policy and the Surveys.
-36-
<PAGE> 42
4.10 Termination of Hospital's Employees. Effective on the Transition
Date, the Hospital's Employees (other than the Retained Management Employees)
shall cease to be employees of Seller and Seller's affiliates, and shall be
removed from such entities' respective payrolls. Seller shall terminate
effective as of the Transition Date the active participation of all of the
Hospital's Employees (other than the Retained Management Employees) in all of
the Seller Plans, and shall cause each Seller Plan to comply with all applicable
laws. After the Transition Date, Seller shall timely make or cause to be made
appropriate distributions to, or for the benefit of, all of the Hospital's
Employees (other than the Retained Management Employees) prior to the Transition
Date in respect of the Seller Plans which are in force and effect with respect
to the Hospital's Employees (other than the Retained Management Employees) at
the Hospital immediately prior to the Transition Date in accordance with ERISA,
the Code and the terms and conditions of the Seller Plans; provided, however, no
such distribution shall be required to the extent it is among the Assumed
Obligations.
4.11 Termination Cost Reports. Seller shall file all Medicare,
Medicaid, CHAMPUS, Blue Cross and any other termination cost reports required to
be filed as a result of the consummation of (a) the transfer of the Assets to
Purchaser and (b) the transactions contemplated by this Agreement. All such
termination cost reports shall be filed by Seller in a manner that is consistent
with current laws, rules and regulations.
4.12 Hart-Scott-Rodino Act Filings. Seller will (a) take promptly all
actions necessary to make the filings required of Seller or its affiliates under
the HSR Act, (b) comply at the earliest practicable date with any request for
additional information received by Seller or its affiliates from the Federal
Trade Commission (the "FTC") or Antitrust Division of the Department of Justice
(the "DOJ") pursuant to the HSR Act, and (c) cooperate with Purchaser in
connection with Purchaser's filings under the HSR Act and in connection with
resolving any investigation or other regulatory inquiry concerning the
transactions contemplated by this Agreement commenced by either the FTC or the
DOJ. Except as provided by Section 12.12, all fees and expenses of Seller
incurred in connection with Seller's filing under the HSR Act shall be borne by
Seller.
4.13 Environmental Survey. Seller shall promptly obtain from an
environmental consulting firm (the "Consultant") a written environmental survey
of the Owned Real Property (the "Environmental Survey") and shall deliver the
Environmental Survey to Purchaser, which survey shall be identified on Exhibit
4.13 hereto. Section 12.12 shall govern which party or parties hereto shall bear
the costs and expenses of the Environmental Survey.
4.14 Noncompetition. As an inducement to Purchaser to enter into this
Agreement and to consummate the transactions contemplated hereby, neither
Seller, nor Seller's general partner, nor the affiliates of such general
partner, nor any of their successors, shall, for a period of three (3) years
following the Closing Date, without the prior written consent of Purchaser,
directly or indirectly, invest in, own, manage, operate, control or participate
in the ownership, management, operation or control of, or serve as a consultant
or lender to, any Competing Business within the Seller Business Service Area.
For purposes of this Agreement, the term "Competing Business" means the business
of owning and operating general acute care hospitals, and the term "Seller
Business Service Area" means the area within a twenty-five (25) mile radius of
the Hospital.
-37-
<PAGE> 43
Notwithstanding the foregoing, the following shall be excluded from the
foregoing provisions of this Section 4.14: (a) the general acute care hospital
activities of Seller and its affiliates as of the Closing Date (other than the
activities of the Hospital) and (b) Seller's or any affiliate of Seller's
acquisition and operation of a general acute care hospital within the Seller
Business Service Area after the Closing Date so long as such hospital was
acquired in a transaction in which the amount of consideration allocated to such
hospital is less than twenty percent (20%) of the total consideration necessary
to consummate such transaction. Seller, Seller's general partner and such
general partner's affiliates shall not actively solicit any individual Purchaser
employee to remain or become an employee of Seller between the Closing Date and
the one year anniversary of the Closing Date; provided, however, that at any
time Seller may make a general solicitation not directed specifically at
Purchaser employees to recruit employees through any means and shall have the
right to hire Purchaser employees who respond to such permitted solicitation
efforts or seek such employment unsolicited by Seller. For a period of one year
after the Closing Date, Purchaser shall not actively solicit any individual
employee of Seller or affiliates thereof who had been a member of the senior
management (i.e., the "A Team") at the Hospital prior to the Effective Date, but
was not employed by Tenet at the Hospital as of the Effective Date. Seller,
Seller's general partner and such general partner's affiliates shall not, and
shall use its reasonable commercial efforts to cause its directors, officers,
employees and agents to not, use for any purpose any confidential information
which specifically relates to the Hospital. Seller shall cause its general
partner, affiliates of its general partner and any successors to its general
partner, to comply with the obligations imposed by this Section 4.14. In the
event that the provisions contained in this Section 4.14 shall ever be deemed to
exceed the time or geographic limits or any other limitations permitted by
applicable law in any jurisdiction, then such provisions shall be deemed
reformed in such jurisdiction to the maximum extent permitted by applicable law.
4.15 Enforceability. Seller hereby acknowledges that the covenant
contained in Section 4.14 above is a condition precedent to Purchaser's entering
into this Agreement, and that such restrictions are reasonable and necessary to
protect the legitimate interests of Purchaser following the Closing. Seller also
hereby acknowledges that any violation of Section 4.14 would result in
irreparable injury to Purchaser and the remedy at law for any breach of Section
4.14 would be inadequate. Seller specifically acknowledges and agrees that
Purchaser shall be entitled to an equitable accounting of all earnings, profits
and other benefits arising from such breach and further agrees to pay the
reasonable fees and expenses, including attorneys' fees, incurred by Purchaser
in enforcing the restrictions contained in Section 4.14.
4.16 [INTENTIONALLY OMITTED]
4.17 Y2K Compliance Program. Seller shall and shall use its best
efforts to cause Tenet to continue to implement its Y2K compliance program with
respect to the Hospital through January 1, 2000, and beyond that date,
consistent with implementation of such program for all of Tenet's (and its
subsidiaries') hospitals. As part of Seller's continuing implementation of such
program, Seller shall:
(a) provide Purchaser reasonable access to and copies of
all data regarding Tenet's Y2K compliance program being implemented at the
Hospital;
-38-
<PAGE> 44
(b) continue to provide a corporate level coordinator and
help desk assistance in the same manner as is provided to all of Tenet's (and
its subsidiaries') hospitals; and
(c) shall provide all such services without charge to
Purchaser, except for out of pocket costs for site visits.
4.18 Supplements to Disclosure Schedule. Seller shall have the
continuing obligation to promptly supplement or amend the Disclosure Schedule
with respect to any matter hereafter arising or discovered which, if existing or
known at the Effective Date, would have been required to have been set forth or
described in the Disclosure Schedule. No supplement or amendment of the
Disclosure Schedule after the Effective Date with respect to the events or
circumstances existing before the Effective Date or resulting from the
transactions contemplated hereby shall be deemed to have been disclosed as of
the date of this Agreement unless Purchaser specifically agrees thereto in
writing. Supplements or amendments of the Disclosure Schedule with respect to
events or circumstances occurring after the Effective Date shall, for purposes
of this Agreement and the agreements contemplated (other than for the purpose of
determining whether the conditions set forth in Article 7 are satisfied), be
deemed to have been disclosed as of the date of this Agreement.
ARTICLE 5
COVENANTS OF PURCHASER
5.1 Purchaser's Efforts to Close. Purchaser shall use its reasonable
commercial efforts to satisfy all of the conditions precedent set forth in
Articles 6 and 7 to Purchaser's or Seller's obligations under this Agreement to
the extent that Purchaser's action or inaction can control or influence the
satisfaction of such conditions.
5.2 Required Approvals. Purchaser (a) shall use its reasonable best
efforts to secure, as promptly as practicable, before the Closing Date, all
consents, approvals, authorizations, clearances, certificates of need and
licenses required to carry out the transactions contemplated by this Agreement
(including, without limitation, those of governmental and regulatory
authorities) and to cause all of its covenants and agreements to be performed,
satisfied and fulfilled; and (b) will provide such other information and
communications to governmental and regulatory authorities as Seller or such
authorities may reasonably request.
5.3 Certain Employee Matters.
(a) During the period (the "Transition Period") commencing
at the Effective Time and ending immediately prior to January 1, 2000 or such
earlier date as determined by Purchaser (such date being the "Transition Date"),
each Hospital Employee (as defined in paragraph (b) of this Section 5.3) shall
remain an employee of its employer as of the Effective Time (whether such
employer is Seller or an affiliate of Seller), subject to normal personnel
actions occurring in the ordinary course of business. During the Transition
Period, or until such earlier time as any such Hospital Employee ceases to be an
employee of such employer, each such Hospital Employee shall be leased by
Purchaser from Seller or the employing affiliate, on
-39-
<PAGE> 45
substantially the terms and conditions as are set forth in the form of Employee
Leasing Agreement attached as Exhibit 1.6.11 hereto. During the Transition
Period, each leased Hospital Employee shall continue to participate in all
Seller Plans on the same basis as in effect immediately prior to the Effective
Time, subject to the terms of the Employee Leasing Agreement.
(b) Purchaser covenants and agrees that it shall make
offers of employment effective as of the Transition Date (in substantially
equivalent positions) to all of the persons who are employees of (i) Seller with
respect to the operation of the Hospital or (ii) any affiliate of Seller which
employs individuals at the Hospital (whether such employees are full time
employees, part-time employees, on short-term or long-term disability or on
leave of absence pursuant to Seller's policies, or the Family and Medical Leave
Act of 1993 or other similar local law (such laws being collectively referred to
herein as the "FMLA") immediately prior to the Transition Date (the "Hospital's
Employees"), provided, however, that no Hospital Employee who is on any
disability or leave of absence on the Transition Date other than Hospital
Employees on leave of absence to the extent required pursuant to the FMLA shall
become a Hired Employee unless and until such Hospital Employee reports back to
work in accordance with Seller's practices at such time. Notwithstanding the
foregoing, Purchaser acknowledges that Seller has the right, but is not
required, to retain any management-level Hospital Employee who does not accept
Purchaser's employment offer made under this Section 5.3(a), which individuals
will remain employed by Seller or its applicable affiliate as of Transition Date
(the "Retained Management Employees"); provided, however, that beginning on the
Effective Date, Seller shall not solicit management level Hospital Employees or
otherwise interfere with Purchaser's attempt to employ same until the fifteenth
(15th) day following the Transition Date. Any of the Hospital's Employees who
accept an offer of employment with Purchaser as of or after the Transition Date
shall be referred to herein as the "Hired Employees." Purchaser covenants and
agrees that it shall continue to employ in comparable positions the Hired
Employees for a period of no less than ninety (90) calendar days following the
Closing Date, unless Purchaser sooner terminates the employment of any Hired
Employee for cause or any Hired Employee voluntarily resigns or retires.
Purchaser shall ensure that the terms and conditions of employment (including
level of compensation and benefits, including without limitation health
insurance plans containing a waiver of pre-existing conditions clause) for a
period of one year following the Closing Date for each of the Hired Employees
are no less favorable in the aggregate than those provided the Hospital's
Employees as of the Effective Date.
(c) Purchaser shall give all Hired Employees full credit for
accumulated sick pay and for all of the accrued vacation and holiday pay of such
employees, either by (i) crediting such employees the accrued time off reflected
in the employment records of Seller as of day immediately prior to the
Transition Date or (ii) by making full payments to such employees of the amounts
which such employees would have received had they taken their accrued or
accumulated holiday or vacation time, provided, however, that no payment to such
employees shall be required with respect to accumulated sick time except to the
extent required by Seller's policies with respect to accumulated sick time.
Immediately following the Transition Date and as a result of the transactions
completed by this agreement, Purchaser shall assume liability and obligation to
make COBRA benefits available to former employees (and their dependants) who
-40-
<PAGE> 46
are employed by Purchaser. Subject to reimbursement by Purchaser pursuant to the
Employee Leasing Agreement, Seller shall be responsible for any claims incurred
(whether or not reported) prior to the Transition Date by any Hospital Employee
under medical and health plans of Seller, or any of Seller's affiliates.
(d) On the Transition Date, Purchaser shall sponsor an
employee health benefit plan for the benefit of all Hired Employees with terms
and conditions that are no less favorable in the aggregate than the benefit
plans enjoyed by the Hired Employees immediately prior to Closing, and shall
allow all Hired Employees to participate therein immediately upon its adoption,
with no waiting period and no limitation on coverage for preexisting conditions.
On and after the Transition Date, Purchaser shall provide COBRA coverage under
its own group health plan referenced above to all Hospital Employees or
dependents whose qualifying event occurred after Closing and shall indemnify and
hold Seller harmless from any cost or liabilities with respect to same.
(e) Within two (2) years after Closing, Purchaser's Plan
shall (i) be amended to provide for a plan-to-plan transfer from Seller's (or
its affiliate's) plan with respect to the Hired Employees (other than the
Retained Management Employees) that is qualified under Section 401(a) and 401(k)
of the Code, (ii) accept a transfer of assets (both vested and unvested) from
the above plan, (iii) file any required returns relating to the transfer with
the Internal Revenue Service, and (iv) be amended to provide protected
withdrawal and distribution rights relating to the transferred assets in
accordance with Section 411(d)(6) of the Code. For purposes of this Agreement,
"Purchaser's Plan" shall mean a retirement plan qualified under Section 401(a)
of the Code that is sponsored by Purchaser or one of its controlled group or
affiliated service group members, as defined in Section 414 of the Code.
(f) Any applicable employee of Seller with respect to the
operation of the Hospital who is identified as a current or former participant
(and any eligible dependent thereof) of the Seller Plans who is eligible to
receive continuation coverage (within the meaning of Section 4980B of the Code
and Part 6 of Subtitle B of Title 1 of ERISA) will remain covered through
Seller's and its affiliates' COBRA provider. Immediately following the
Transition Date and as a result of the transactions contemplated by this
Agreement, Seller, and its affiliates shall not offer COBRA benefits with
respect to any of the Seller Plans to Hired Employees (and their dependents) as
of the date such Hired Employees become eligible for Purchaser's medical and
dental plans. Seller and its affiliates will thereby be released of COBRA
responsibility and liability for such employees.
(g) After the Transition Date, Purchaser or Purchaser's
representative will give reasonable assistance to Seller's (and its affiliates')
human resources department with respect to Seller's, and Seller's affiliates'
post-Closing administration of Seller's and Seller's affiliates' pre-Closing
employee pension benefit plans and employee health or welfare benefit plans for
the Hospital's Employees (other than the Retained Management Employees).
5.4 Use of Business Names. Purchaser covenants that it and its
affiliates shall not use in their respective trades or businesses the names
"Tenet Healthcare Corporation", "Tenet", "Tenet HealthSystem", "OrNda
HealthCorp", and any other names or symbols not used primarily
-41-
<PAGE> 47
at the Hospital on or prior to Closing, any abbreviations or variations thereof
or service marks, symbols or logos related thereto, nor any promotional
material, stationery, supplies or other items of inventory bearing either such
names, symbols or abbreviations or variations thereof.
5.5 Excluded Assets. As soon as practicable after the Closing,
Purchaser shall deliver to Seller or Seller's designee any Excluded Assets found
at the Hospital after the Closing Date, without imposing any charge on Seller
for Purchaser's storage or holding of same after the Closing Date.
5.6 Confidentiality. From the Effective Date until the Closing Date,
Purchaser shall, and shall cause its employees, representatives and agents to,
hold in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of Purchaser's counsel, by other
requirements of law, all Confidential Information (as hereinafter defined), and
Purchaser shall not disclose the Confidential Information to any person, except
as otherwise may be reasonably necessary to carry out the transactions
contemplated by this Agreement, including any business or diligence review by or
on behalf of Purchaser. For the purposes hereof, "Confidential Information"
shall mean all information of any kind concerning Seller or the business of the
Hospital, in connection with the transactions contemplated by this Agreement
except information (i) ascertainable or obtained from public or published
information, (ii) received from a third party not known by Purchaser to be under
an obligation to Seller to keep such information confidential, (iii) which is or
becomes known to the public (other than through a breach of this Agreement), or
(iv) which was in Purchaser's possession prior to disclosure thereof to
Purchaser in connection herewith. The rights of Seller under this Section 5.6
shall be in addition and not in substitution for the rights of Seller under that
certain Confidentiality Agreement between Seller and Purchaser, dated February
18, 1999 (the "Confidentiality Agreement"), which Confidentiality Agreement
shall survive Closing.
5.7 Enforceability. Purchaser hereby acknowledges that the covenant
contained in Section 5.6 above is a condition precedent to Seller's entering
into this Agreement, and that such restrictions are reasonable and necessary to
protect the legitimate interests of Seller following the Closing. Purchaser also
hereby acknowledges that any violation of Section 5.6 would result in
irreparable injury to Seller and the remedy at law for any breach of Section 5.6
would be inadequate. Purchaser specifically acknowledges and agrees that Seller
shall be entitled to an equitable accounting of all earnings, profits and other
benefits arising from such breach and further agrees to pay the reasonable fees
and expenses, including attorneys' fees, incurred by Seller in enforcing the
restrictions contained in Section 5.6.
5.8 Hart-Scott-Rodino Act Filings. Purchaser shall (a) take promptly
all actions necessary to make the filings required of Purchaser or its
affiliates under the HSR Act, (b) comply at the earliest practicable date with
any request for additional information received by Purchaser or its affiliates
from the FTC or the DOJ pursuant to the HSR Act, and (c) cooperate with Seller
in connection with Seller's or its affiliates' filings under the HSR Act and in
connection with resolving any investigation or other regulatory inquiry
concerning the transactions contemplated by this Agreement commenced by either
the FTC or the DOJ.
-42-
<PAGE> 48
5.9 Group Purchasing Contract. Following the Closing, Purchaser
shall cause the Hospital to participate in specified national purchasing
contracts of Seller and its affiliates. Seller agrees that it will make
available to Purchaser the opportunity for other health care facilities owned or
operated by Purchaser or its affiliates to participate in such contracts. At
Closing, Purchaser shall execute a "Group Purchasing Contract" substantially in
the form of Exhibit 5.9 for such purpose; provided, however, that the assignment
provision and monthly information provision thereof remain subject to the mutual
reasonable agreement of both parties. The Group Purchasing Contract to be
executed by the parties shall provide, among other things, that either party
thereto may terminate such Contract without cause on sixty (60) days prior
written notice. Included as part of Exhibit 5.9 is a list of all of the national
purchasing contracts of Seller and its affiliates in effect as of the Effective
Date which do not preclude participation by persons or entities which are not
affiliates of Seller.
5.10 Acknowledgement Regarding Year 2000 Compliance. Subject to the
accuracy of the representation and warranties set forth in Section 2.19 and
Seller's compliance with its obligations under Section 4.18 of this Agreement,
Purchaser acknowledges that Purchaser assumes all liability with respect to Year
2000 compliance relating to the Assets. As used herein, the term "Year 2000
compliance" includes the ability to perform any of the following functions: (i)
to consistently handle date information before, at and after January 1, 2000,
including accepting date input, providing date output, and performing
calculations on dates or portions of dates; (ii) to function accurately without
interruption (or disruption of other software or systems) before, at and after
January 1, 2000, without any change in operations associated with the advent of
the new century; (iii) to respond to two-digit date input in a way that resolves
any ambiguity as to century; and (iv) to store and provide output of date
information in ways that are unambiguous as to century.
5.11 Waiver of Bulk Sales Law Compliance. Purchaser hereby waives
compliance by Seller and the Subsidiaries with the requirements, if any, of
Article 6 of the Uniform Commercial Code as in force in any state in which the
Assets are located and all other similar laws applicable to bulk sales and
transfers.
5.12 Preserve Accuracy of Representations and Warranties. Purchaser
shall refrain from any action or inaction that would render any representation
or warranty contained in Article 3 inaccurate as of the Closing Date.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Seller's obligation to sell the Assets and to close the transactions as
contemplated by this Agreement shall be subject to the satisfaction of each of
the following conditions, as to the Assets taken as a whole on or prior to the
Closing Date unless specifically waived in writing by Seller in whole or in part
at or prior to the Closing:
-43-
<PAGE> 49
6.1 Closing of Related Asset Sale Transaction. Concurrent with
Closing the transactions contemplated by this Agreement, Purchaser and Tenet
shall close the Asset Sale Agreement between Tenet and Purchaser (the "Related
Asset Sale Agreement") pursuant to which Purchaser shall have purchased and
wholly-owned subsidiary corporations and majority-owned partnerships of Tenet
shall have sold substantially all of the assets with respect to the operation of
various Tenet hospitals in the States of Florida, Texas and Arizona (the
"Related Assets").
6.2 Failure to Exercise Right of First Refusal. The limited partners
of Seller shall not have exercised their right to purchase Seller's assets
pursuant to Section 2.2(a) of that certain Restated Articles of Limited
Partnership, dated November 7, 1989.
6.3 Warranties True and Correct. The representations and warranties
made by Purchaser and set forth in this Agreement and in the exhibits and
schedules attached hereto shall be true and correct in all material respects, as
to the Assets taken as a whole, when made and as of the Closing Date.
6.4 Signing and Delivery of Instruments. Purchaser shall have
executed and delivered all documents, instruments and certificates required to
be executed and delivered pursuant to the provisions of this Agreement.
6.5 Unfavorable Action or Proceeding. On the Closing Date, no
orders, decrees, judgments or injunctions of any court or governmental body
shall be in effect, and no claims, actions, suits, proceedings, arbitrations or
investigations shall be pending or threatened, which challenge or seek to
challenge, or which could prevent or cause the rescission of, the consummation
of the transactions contemplated in this Agreement.
6.6 Performance of Covenants. Purchaser shall have in all respects
performed or complied with each and all of the obligations, covenants,
agreements and conditions required to be performed or complied with by it on or
prior to Closing.
6.7 Opinion of Counsel for Purchaser. Seller shall have received the
favorable opinion of Purchaser's counsel, dated the Closing Date, in
substantially the form set forth in Exhibit 6.5 attached to this Agreement.
6.8 Hart-Scott-Rodino Filings. All filings required to be made and
notices required to be given pursuant to the HSR Act shall have been made, all
approvals or consents required thereby shall have been obtained and the waiting
periods required thereby, if any, shall have expired or terminated.
6.9 Consents, Approvals and Authorizations. The parties shall have
obtained all material consents, licenses, approvals, permits, certificates of
need, waivers and authorizations from governmental agencies or bodies and third
parties that are necessary or required for completion of the transactions
contemplated by this Agreement.
-44-
<PAGE> 50
6.10 Exhibits and Schedules.
(a) The provisions of the exhibits and schedules that were
not attached to this Agreement at the Effective Date, or such later date as is
expressly contemplated by this Agreement, shall not be material as to the Assets
taken as a whole.
(b) To the extent the provisions of the exhibits and
schedules attached to this Agreement as of the Effective Date (or were deemed to
be attached to this Agreement as of the Effective Date pursuant to Section 4.19
of this Agreement) were updated after the Effective Date (or the date on which
schedules and exhibits addressed by Section 4.19 were agreed upon by the
parties), such updates shall not be material as to the Assets taken as a whole.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Purchaser's obligation to purchase the Assets and to close the
transactions contemplated by this Agreement shall be subject to the satisfaction
of each of the following conditions as to the Assets and operations of the
Hospital taken as a whole on or prior to the Closing Date unless specifically
waived in writing by Purchaser in whole or in part at or prior to the Closing.
7.1 Closing of Related Asset Sale Transaction. Concurrent with
Closing the transactions contemplated by this Agreement, Purchaser and Tenet
shall close the Related Asset Sale Agreement pursuant to which Purchaser shall
have purchased and wholly-owned subsidiary corporations and majority-owned
partnerships of Tenet shall have sold the Related Assets.
7.2 Failure to Exercise Right of First Refusal. The limited partners of
Seller shall not have exercised their right to purchase Seller's assets pursuant
to Section 2.2(a) of that certain Restated Articles of Limited Partnership,
dated November 7, 1989.
7.3 Warranties True. Each of the representations and warranties made
by Seller and set forth in this Agreement and in the Disclosure Schedule,
exhibits and schedules attached hereto shall be true and correct in all material
respects when considered together with the representations and warranties made
by Tenet and set forth in the Related Asset Sale Agreement and in the disclosure
schedule, exhibits and schedules attached thereto, as to the Assets and the
Related Assets taken as a whole, when made and as of the Closing Date.
7.4 Consents, Approvals and Authorizations. The parties shall have
obtained all material consents, licenses, approvals, permits, certificates of
need, waivers and authorizations from governmental agencies or bodies and third
parties that are necessary or required for completion of the transactions
contemplated by this Agreement or the operation of the business of the Hospital;
provided, however that the landlord consents contemplated to be obtained by
Section 1.6.13 hereof shall be deemed the "material" landlord consents for this
purpose.
7.5 Signing and Delivery of Instruments. Seller shall have executed
and delivered all documents, instruments and certificates required to be
executed and delivered pursuant to all of the provisions of this Agreement.
-45-
<PAGE> 51
7.6 Performance of Covenants. Seller shall have in all material
respects performed or complied with the material obligations, covenants,
agreements and conditions required to be performed or complied with by Seller on
or prior to Closing.
7.7 Unfavorable Action or Proceeding. On the Closing Date, no
orders, decrees, judgments or injunctions of any court or governmental body
shall be in effect, and no claims, actions, suits, proceedings, arbitrations or
investigations shall be pending or threatened, which challenge or seek to
challenge, or which could prevent or cause the rescission of, the consummation
of the transactions contemplated in this Agreement, or materially and adversely
impair Purchaser's rights to own or operate the Hospital after the Closing Date.
7.8 Hart-Scott-Rodino Filings. All filings required to be made and
notices required to be given pursuant to the HSR Act shall have been made, all
approvals or consents required thereby shall have been obtained and the waiting
periods required thereby, if any, shall have expired or terminated.
7.9 Governmental Concurrences. Purchaser shall have obtained
assurances from all of the necessary governmental authorities, in form and
substance reasonably satisfactory to Purchaser, that Purchaser will be granted
all material governmental approvals, licenses, clearances, certifications and/or
provider numbers necessary or appropriate for the continued, uninterrupted
operation of the Hospital following the Closing. Purchaser shall have received
approvals, consents or commitments from Medicare, Medicaid, and the fiscal
intermediary with respect to the Hospital, to the extent any such approvals,
consents or commitments are reasonably needed, for Purchaser's continued
participation in each program and providing satisfactory assurances that there
shall be no material interruptions in program payments.
7.10 Opinion of Counsel. Purchaser shall have received the favorable
opinion of Seller's in-house counsel dated the Closing Date, in substantially
the form attached hereto as Exhibit 7.8.
7.11 Exhibits and Schedules.
(a) The provisions of the exhibits and schedules that were
not attached to this Agreement at the Effective Date, or such later date as is
expressly contemplated by this Agreement, shall not be material as to the Assets
taken as a whole.
(b) To the extent the provisions of the Disclosure Schedule
and the exhibits and schedules attached to this Agreement as of the Effective
Date (or were deemed to be attached to this Agreement as of the Effective Date
pursuant to Section 4.19 of this Agreement) were updated after the Effective
Date (or the date on which schedules and exhibits addressed by Section 4.19 were
agreed upon by the parties), such updates shall not be material as to the Assets
taken as a whole.
7.12 Title Insurance Policy. Purchaser shall have received a fully
effective Title Policy issued to Purchaser by the Title Company covering the
Owned Real Property and of the Leased Real Property subject to ground leases in
the amount of the full insurable value of the Owned
-46-
<PAGE> 52
Real Property and such Leased Real Property, respectively (which amount shall be
set forth in Schedule 11.1(b)). The Title Policy shall show fee simple title to
the Owned Real Property vested in Purchaser, or valid leasehold title to the
Leased Real Property subject to ground leases, subject only to: (i) current real
estate taxes not yet due and payable; and (ii) the permitted title exceptions
listed in Schedule 7.10 hereto (the "Permitted Exceptions"). Purchaser's counsel
has reviewed the title commitments and identified certain issues related thereto
prior to the Effective Date; Purchaser's counsel shall use its commercially
reasonable efforts to identify any additional issues within ten (10) business
days following the Effective Date and bring such issues promptly to Seller's
attention. The Title Policy shall have all standard and general exceptions
deleted so as to afford full "extended form coverage" and include all
endorsements reasonably requested by Purchaser.
7.13 Financing. The Purchaser shall have available to it the proceeds
of the financing described in the letters included in Exhibit 7.11 attached
hereto or other financing agreements. The Purchaser shall use its best efforts
to cause all conditions in such letters and any related credit facility
agreement to be timely satisfied.
7.14 Material Adverse Change. Since May 31, 1999, (i) Seller shall
have operated the Hospital and the Assets in the ordinary course of business,
consistent with past practice, and (ii) there shall not have occurred any event,
change or development which, individually or in the aggregate, could reasonably
be expected to have a material adverse effect on the business, assets, financial
condition or operation of the Hospital.
7.15 Audit. Seller shall have delivered the Audit with respect to the
Financial Statements referred to in Section 4.8(b) hereto.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior
to Closing:
(a) by the mutual written consent of the parties;
(b) by either Purchaser or Seller (the "Nondefaulting
Party") if a material breach of any provision of this Agreement has been
committed by the other party (the "Breaching Party") and such breach has not
been (i) waived in writing by the Nondefaulting Party or (ii) cured by the
Breaching Party to the reasonable satisfaction of the Nondefaulting Party within
fifteen (15) business days after service by the Nondefaulting Party upon the
Breaching Party of a written notice which describes the nature of such breach;
(c) by Purchaser if any of the conditions in Article 7 have
not been satisfied as of the Closing Date or if satisfaction of any such
condition is or becomes impossible (other than through the failure of Purchaser
to comply with its obligations under this Agreement) and Purchaser has not
waived such condition in writing on or before the Closing Date;
-47-
<PAGE> 53
(d) by Seller if any of the conditions in Article 6 have
not been satisfied as of the Closing Date or if satisfaction of any such
condition is or becomes impossible (other than through the failure of Seller to
comply with its obligations under this Agreement) and Seller has not waived such
condition in writing on or before the Closing Date;
(e) by either Purchaser or Seller if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before November 30, 1999.
8.2 Termination Consequences. If this Agreement is terminated
pursuant to Section 8.1, all further obligations of the parties under this
Agreement shall terminate, except that the obligations in Sections 5.6, 12.3,
12.8, and 12.12 shall survive; provided, however, that nothing contained herein
shall relieve any party from liability for any intentional breach of this
Agreement.
8.3 Costs. In the event of a termination of this Agreement pursuant
to Section 8.1(a) or 8.1(c) through 8.1(e) hereof, (a) each party shall pay the
costs and expenses incurred by it in connection with this Agreement, except as
provided in Section 12.12, and (b) no party shall be liable to any other party
for any costs, expenses, damage or loss of anticipated profits hereunder other
than the liquidated damages provided to Seller pursuant to Section 8.2. In the
event of a termination of this Agreement pursuant to Section 8.1(b), then the
parties shall have the right to pursue all remedies available at law or in
equity.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Excluded Assets and Excluded Liabilities. Subject to Section
11.2 hereof, any asset (including Accounts Receivable) or any liability, all
other remittances and all mail and other communications that are determined by
the parties' agreement, or, absent such agreement, determined by litigation, to
be or otherwise relate to an Excluded Asset or an Excluded Liability and that is
or comes into the possession, custody or control of Purchaser (or its successors
in interest or assigns, or its respective affiliates) shall forthwith be
transferred, assigned or conveyed by Purchaser (or its respective successors in
interest or assigns and its respective affiliates) to Seller at Seller's cost.
Until such transfer, assignment and conveyance, Purchaser (and its respective
successors in interest and assigns and its respective affiliates) shall not have
any right, title or interest in or obligation or responsibility with respect to
such asset or liability except that Purchaser shall hold such asset in trust for
the benefit of Seller. Purchaser (and its respective successors in interest and
assigns and its respective affiliates) shall have neither the right to offset
amounts payable to Seller under this Section 9.1 against, nor the right to
contest its obligation to transfer, assign and convey to Seller because of,
outstanding claims, liabilities or obligations asserted by Purchaser against
Seller including but not limited to pursuant to the post-Closing Purchase Price
adjustment of Section 1.4 and the indemnification provisions of Section 10.2.
The terms of this Article 9 shall not be subject to the time limitations
contained in Section 10.1 of this Agreement.
-48-
<PAGE> 54
9.2 Preservation and Access to Records After the Closing.
(a) From the Closing Date until seven (7) years after the
Closing or such longer period as required by law (the "Document Retention
Period"), Purchaser shall keep and preserve all medical records, patient
records, medical staff records and other books and records of Seller and the
Hospital existing as of the Closing relating to tax or other liabilities of
Seller prior to the Closing, but excluding any records which are among the
Excluded Assets. Purchaser will afford to the representatives of Seller,
including its counsel and accountants, full and complete access to, and copies
of, such records with respect to time periods on or prior to the Closing Date
(including, without limitation, access to records of patients treated at the
Hospital on or prior to the Closing Date) during normal business hours after the
Closing Date, to the extent reasonably needed by Seller (or its affiliates) for
business purposes. Purchaser acknowledges that, as a result of entering into
this Agreement and operating the Hospital, it will gain access to patient
records and other information which are subject to rules and regulations
concerning confidentiality. Purchaser shall abide by any such rules and
regulations relating to the confidential information it acquires. Purchaser
shall maintain the patient and medical staff records at the Hospital in
accordance with applicable law and the requirements of relevant insurance
carriers. After the expiration of the Document Retention Period, if Purchaser
intends to destroy or otherwise dispose of any of the documents described in
this Section 9.2(a), Purchaser shall provide written notice to Seller of
Purchaser's intention no later than thirty (30) calendar days prior to the date
of such intended destruction or disposal. Seller shall have the right, at its
sole cost, to take possession of such documents during such forty-five (45)
calendar day period. If Seller does not take possession of such documents during
such forty-five (45) calendar day period, Purchaser shall be free to destroy or
otherwise dispose of such documentation upon the expiration of such forty-five
(45) day period.
(b) Purchaser shall give reasonable cooperation to Seller
and its affiliates and its insurance carriers in respect of the defense of
claims by third parties against Seller, in respect of events occurring on or
prior to the Closing with respect to the operation of the Hospital. Such
cooperation shall include, without limitation, making the Hired Employees
available for interviews, depositions, hearings and trials. Such cooperation
shall also include making all of its employees available to assist in the
securing and giving of evidence and in obtaining the presence and cooperation of
witnesses (all of which shall be done without payment of any fees or expenses to
Purchaser or to such employees). In addition, Seller and its affiliates shall be
entitled to access any such records, but only for purposes of pending litigation
involving the persons to whom such records refer, as certified in writing by
counsel retained by Seller or any of its affiliates in connection with such
litigation. Such records shall be, at Purchaser's option either (i) copied by
Purchase for Seller at Seller's expense or (ii) removed from the premises by
Seller, copied by Seller and promptly returned to Purchaser unless the originals
of such records must be introduced into evidence in which case Seller shall
return them as soon as practicable.
(c) In connection with (i) the transition of the Hospital
pursuant to the transaction contemplated by this Agreement, (ii) Seller's rights
to the Excluded Assets, (iii) Seller's obligations under the Excluded
Liabilities and (iv) Seller's preparation of the Final Balance Sheet pursuant to
Section 1.4, Purchaser shall after the Closing Date give Seller, Seller's
affiliates and their respective representatives reasonable access during normal
business hours to
-49-
<PAGE> 55
Purchaser's books, accounts and records and all other relevant documents and
information with respect to the assets, liabilities and business of the Hospital
as representatives of Seller and Seller's affiliates may from time to time
reasonably request, all in such manner as not to unreasonably interfere with the
operations of the Hospital. Seller acknowledges that it shall coordinate its
activities contemplated by this Section 9.2(c) through Frank Coyle, or his
designee.
(d) Purchaser and its representatives shall be given access
by Seller during normal business hours to the extent reasonably needed by
Purchaser for business purposes to all documents, records, correspondence, work
papers and other documents retained by Seller pertaining to any of the Assets or
with respect to the operation of the Hospital on or prior to the Closing Date,
all in such manner as to not interfere unreasonably with Seller's business. Such
documents and other materials shall be, at Seller's option, either (i) copied by
Seller for Purchaser at Purchaser's expense, or (ii) removed by Purchaser from
the premises, copied by Purchaser and promptly returned to Seller.
ARTICLE 10
SURVIVAL AND INDEMNIFICATION
10.1 Survival. Except as expressly set forth in this Agreement to the
contrary, all representations and warranties of Purchaser and Seller,
respectively, contained in this Agreement or in any document delivered pursuant
hereto shall be deemed to be material and to have been relied upon by Purchaser
and Seller, respectively, and shall continue to be fully effective and
enforceable following the Closing Date for two years, and shall thereafter be of
no further force and effect. Notwithstanding the foregoing, the representations
and warranties set forth in Section 2.7(a) and (b) and Section 2.13 shall
continue to be fully effective and enforceable following the Closing Date for
the applicable statutes of limitations periods, plus 30 days, and the
indemnification provisions contained in Sections 10.2.1(ii), (iii), (iv), (v),
(vi), (vii) and (viii), and 10.3.1(iv) shall continue to be fully effective and
enforceable following the Closing Date until the expiration of any applicable
statute of limitations period, or, if none, without any time limitation;
provided, however, that if there is an outstanding notice of a claim at the end
of any such applicable period in compliance with the terms of Section 10.4, such
applicable period shall not end in respect of such claim until such claim is
resolved. All covenants of Purchaser and Seller herein shall survive Closing in
accordance with their terms. The parties acknowledge and agree that the
provisions of Section 10.2.1(ii), (iii), (iv), (v), (vi), (vii) and (viii) shall
remain in full force and effect notwithstanding the expiration of any survival
period referred to in this Section 10.1 and that Purchaser's right to bring any
claims for damages under such provisions shall be unimpaired by the expiration
of any such survival period (notwithstanding the fact that such claims could
have been brought under Section 10.2.1(i).
10.2 Indemnification of Purchaser by Seller.
10.2.1 Indemnification. Seller shall keep and save Purchaser,
its controlled affiliates and their respective directors, officers, employees,
agents and other representatives (the "Purchaser Group"), forever harmless from
and shall indemnify and defend the Purchaser Group
-50-
<PAGE> 56
against any and all obligations, judgments, liabilities, penalties, violations,
fees, fines, claims, losses, costs, demands, damages, liens, encumbrances and
expenses including reasonable attorneys' fees (collectively, "Damages"), whether
direct or consequential and no matter how arising, to the extent, connected with
or arising or resulting from or proximately related to (i) any breach of any
representation or warranty of Seller under this Agreement, (ii) any breach or
default by Seller of any covenant or agreement of Seller under this Agreement,
(iii) the Excluded Liabilities, (iv) the Excluded Assets, (v) all Taxes relating
to Seller or (for any period ending on or prior to the Closing Date) the Assets
("Seller Tax Claims"), (vi) any professional or general liability claim arising
out of the business operations of the Hospital on or prior to the Closing Date
and (vii) any act, conduct or omission of Seller, or any event or circumstance
pertaining to Seller or the Assets, that has accrued, arisen, occurred or come
into existence at any time on or prior to the Closing Date, including without
limitation failure to comply with bulk sales laws. No provision in this
Agreement shall prevent Seller from pursuing any of its legal rights or remedies
that may be granted to Seller by law against any person or legal entity other
than any other member of the Purchaser Group.
10.2.2 Indemnification Limitations. (a) Seller shall be
under no liability to indemnify the Purchaser Group under Section 10.2.1 and no
claim under Section 10.2.1 of this Agreement shall:
(i) be made unless notice thereof shall have
been given by or on behalf of Purchaser to
Seller in the manner provided in Section
10.4, unless failure to provide such notice
in a timely manner does not materially
impair Seller's ability to defend its
rights, mitigate damages, seek
indemnification from a third party or
otherwise protect its interests;
(ii) be made to the extent that such claim
relates to a liability arising out of or
relating to any act, omission, event or
occurrence connected with:
(A) the use, ownership or operation of any
of the Hospital, or
(B) the use, ownership or operation of any
of the Assets,
after the Closing Date; other than as
specifically included in the Excluded
Liabilities;
-51-
<PAGE> 57
(iii) be made to the extent that such claim (or
the basis therefor) is set forth in the
Disclosure Schedule unless Seller's
indemnification of Purchaser is based on a
provision hereof other than Section
10.2.1(i);
(iv) be made if and to the extent that proper
provision or reserve was made for the matter
giving rise to the claim in Net Working
Capital;
(v) be made to the extent such claim relates to
an obligation or liability for which
Purchaser has agreed to indemnify Seller
pursuant to Section 10.3; and
(vi) to the extent such claim is made pursuant to
Section 10.2.1(i), accrue to Purchaser
unless and only to the extent that (A)
Damages in respect of any single claim under
Section 10.2.1(i) exceeds Five Thousand
Dollars ($5,000) (a "Relevant Claim") and
(B) the total actual liability of Seller in
respect of all Relevant Claims in the
aggregate exceeds Three Hundred Seventy Two
Thousand Dollars ($372,000) (the "Aggregate
Amount"), in which event Purchaser shall be
entitled to seek indemnification under
Section 10.2.1(i) for all Relevant Claims
only in an amount of Damages which exceed
the Aggregate Amount; provided, however,
that with respect to claims made pursuant to
Section 10.2.1(i) based on Damages incurred
as a result of any breach of Section 2.4(a),
any single claim or series of related claims
for amounts in excess of $100,000 shall be
paid in full by Seller without regard to the
provisions of this clause (vi).
(b) Notwithstanding any other provision of this Agreement
to the contrary, the maximum aggregate liability of Seller to Purchaser under
this Agreement shall not exceed the Purchase Price.
(c) If Purchaser is entitled to recover any sum (whether
by payment, discount, credit or otherwise) from any third party (other than an
insurance carrier) in respect of any matter for which a claim of indemnity could
be made against Seller hereunder, Purchaser either shall, at its option, use its
reasonable endeavors to recover such sum from such third party and any sum
recovered will reduce the amount of the claim or shall assign to Seller the
right of Purchaser to pursue such third party. If Seller pays to Purchaser an
amount in respect of a claim, and Purchaser subsequently recovers from a third
party a sum which is referable to that claim, Purchaser shall forthwith repay to
Seller so much of the amount paid by it as does not exceed the sum recovered
from the third party less all reasonable costs, charges and expenses incurred by
Purchaser in obtaining payment in respect of that claim and in recovering that
sum from the third party.
-52-
<PAGE> 58
10.3 Indemnification of Seller by Purchaser.
10.3.1 Indemnification. Purchaser shall keep and save Seller,
and their respective directors, officers, employees, agents and other
representatives, forever harmless from and shall indemnify and defend Seller
against any and all Damages, whether direct or consequential and no matter how
arising, in any way related to, connected with or arising or resulting from (i)
any breach of any representation or warranty of Purchaser under this Agreement,
(ii) any breach or default by Purchaser under any covenant or agreement of
Purchaser under this Agreement, (iii) cost reports (and all claims with respect
thereto) relating to Purchaser with respect to Medicare, Medicaid, CHAMPUS or
Blue Cross programs or any other third-party payor for all periods beginning
after the Closing Date, (iv) the Assumed Obligations, (v) any professional or
general liability claim arising out of the business operations of the Hospital
after the Closing Date, (vi) any Assumed Obligations, (vii) liabilities to the
Hired Employees arising out of actions of Purchaser based wholly or in part upon
the contents of the personnel records of such employees, and (viii) involuntary
termination of the Hired Employees after the Transition Date, which termination
would constitute a "mass layoff" or a "plant closing" within the meaning of
WARN. No provision in this Agreement shall prevent Purchaser from pursuing any
of its legal rights or remedies that may be granted to Purchaser by law against
any person or legal entity other than Seller or any affiliate of Seller.
10.3.2 Indemnification Limitations. (a) Purchaser shall be
under no liability to indemnify Seller under 10.3.1 and no claim under Section
10.3.1 of this Agreement shall:
(i) be made unless notice thereof shall have
been given by or on behalf of Seller to
Purchaser in the manner provided in Section
10.4, unless failure to provide such notice
in a timely manner does not materially
impair Seller's ability to defend its
rights, mitigate damages, seek
indemnification from a third party or
otherwise protect its interests;
(ii) be made to the extent that any loss may be
recovered under a policy of insurance in
force on the date of loss; provided,
however, that this Section 10.3.2(ii) shall
not apply to the extent that coverage under
the applicable policy of insurance is denied
by the applicable insurance carrier;
(iii) be made to the extent that such claim
relates to a liability arising out of or
relating to any act, omission, event or
occurrence connected with:
(A) the use, ownership or operation of any
of the Hospital, or
(B) the use, operation or ownership of any
of the Assets,
on or prior to the Closing Date, other than
as specifically included in the Assumed
Obligations; and
-53-
<PAGE> 59
(iv) be made to the extent such claim relates to
an obligation or liability for which Seller
has agreed to indemnify Purchaser pursuant
to Section 10.2.
(b) If Seller is entitled to recover any sum (whether by
payment, discount, credit or otherwise) from any third party in respect of any
matter for which a claim of indemnity could be made against Purchaser hereunder,
Seller shall use its reasonable endeavors to recover such sum from such third
party and any sum recovered will reduce the amount of the claim. If Purchaser
pays to Seller an amount in respect of a claim, and Seller subsequently recovers
from a third party a sum which is referable to that claim, Seller shall
forthwith repay to Purchaser so much of the amount paid by it as does not exceed
the sum recovered from the third party less all reasonable costs, charges and
expenses incurred by Seller in obtaining payment in respect of that claim and in
recovering that sum from the third party.
10.4 Method of Asserting Claims. All claims for indemnification by
any person entitled to indemnification hereunder (the "Indemnified Party") under
this Article 10 will be asserted and resolved as follows:
(a) In the event any claim or demand, for which a party
hereto (an "Indemnifying Party") would be liable for the Damages to an
Indemnified Party, is asserted against or sought to be collected from such
Indemnified Party by a person other than Seller, Purchaser or their affiliates
(a "Third Party Claim"), the Indemnified Party shall deliver a notice of its
claim (a "Claim Notice") to the Indemnifying Party within thirty (30) calendar
days after the Indemnified Party receives notice of such Third Party Claim;
provided, however, that notice shall be provided to the Indemnifying Party
within fifteen (15) calendar days after receipt of a complaint, petition or
institution of other formal legal action by the Indemnified Party. If the
Indemnified Party fails to provide the Claim Notice within such applicable time
period after the Indemnified Party receives notice of such Third Party Claim and
thereby materially impairs the Indemnifying Party's ability to protect its
interests, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim. The Indemnifying Party
will notify the Indemnified Party within thirty (30) calendar days after receipt
of the Claim Notice (the "Notice Period") whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section
10.4(a), then, subject to the immediately succeeding sentence, the Indemnifying
Party will have the right to defend, at its sole cost and expense, such Third
Party Claim by all appropriate proceedings, which proceedings will be prosecuted
by the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party. To the extent the Claim is solely for
money damages, the Indemnifying Party will have full control of such defense and
proceedings, including any compromise or settlement thereof. Notwithstanding the
foregoing, the Indemnified Party may, at its sole cost and expense, file during
the Notice Period any motion, answer or other pleadings that the Indemnified
Party may deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and which is not prejudicial, in the reasonable judgment of
the Indemnifying
-54-
<PAGE> 60
Party, to the Indemnifying Party. Except as provided in Section 10.4(a)(ii)
hereof, if an Indemnified Party takes any such action that is prejudicial and
causes a final adjudication that is adverse to the Indemnifying Party, the
Indemnifying Party will be relieved of its obligations hereunder with respect to
the portion of such Third Party Claim prejudiced by the Indemnified Party's
action. If requested by the Indemnifying Party, the Indemnified Party agrees, at
the sole cost and expense of the Indemnifying Party, to cooperate with the
Indemnifying Party and its counsel in contesting any Third Party Claim that the
Indemnifying Party elects to contest, or, if appropriate and related to the
Third Party Claim in question, in making any counterclaim against the person
asserting the Third Party Claim, or any cross-complaint against any person
(other than the Indemnified Party or any of its affiliates). The Indemnified
Party may participate in, but not control, any defense or settlement of any
Third Party Claim controlled by the Indemnifying Party pursuant to this Section
10.4(a)(i), and except as specifically provided in this Section 10.4(a)(i), the
Indemnified Party will bear its own costs and expenses with respect to such
participation.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Notice Period that the Indemnifying Party desires
to defend the Indemnified Party pursuant to this Section 10.4(a), or if the
Indemnifying Party gives such notice but fails to prosecute diligently 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 to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
promptly and reasonably prosecuted by the Indemnified Party to a final
conclusion or will be 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, however, that if
requested by the Indemnified Party, the Indemnifying Party agrees, at the sole
cost and expense of the Indemnifying Party, to cooperate with the Indemnified
Party and its counsel in contesting any 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 against the person asserting the Third
Party Claim, or any cross-complaint against any person (other than the
Indemnifying Party or any of its affiliates). Notwithstanding the foregoing
provisions of this Section 10.4(a)(ii), if the Indemnifying Party has notified
the Indemnified Party with reasonable promptness that the Indemnifying Party
disputes its liability to the Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved 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 this Section 10.4(a)(ii) 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
reasonable costs and expenses incurred by the Indemnifying Party in connection
with such litigation. Subject to the above terms of this Section 10.4(a)(ii),
the Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
10.4(a)(ii), and the Indemnifying Party will bear its own costs and expenses
with respect to such participation. The Indemnified Party shall give sufficient
prior notice to the Indemnifying Party of the initiation of any discussions
relating to the settlement of a Third Party Claim to allow the Indemnifying
Party to participate therein.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that either (i) does not involve a
Third Party Claim being asserted
-55-
<PAGE> 61
against or sought to be collected from the Indemnified Party or (ii) is a Seller
Tax Claim, the Indemnified Party shall deliver an Indemnity Notice (as
hereinafter defined) to the Indemnifying Party. (The term "Indemnity Notice"
shall mean written notification of a claim for indemnity under Article 10 hereof
(which claim does not involve a Third Party Claim or is a Seller Tax Claim) by
an Indemnified Party to an Indemnifying Party pursuant to this Section 10.4,
specifying the nature of and specific basis for such claim and the amount or the
estimated amount of such claim.) The failure by any Indemnified Party to give
the Indemnity Notice shall not impair such party's rights hereunder except to
the extent that an Indemnifying Party demonstrates that it has been prejudiced
thereby.
(c) If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) calendar days following its receipt of a
Claim Notice or an Indemnity Notice that the Indemnifying Party disputes its
liability to the Indemnified Party hereunder, such claim specified by the
Indemnified Party will be conclusively deemed a liability of the Indemnifying
Party hereunder and the Indemnifying Party shall pay the amount of such
liability to the Indemnified Party on demand, or on such later date (i) in the
case of a Third Party Claim, as the Indemnified Party suffers the Damages in
respect of such Third Party Claim, (ii) in the case of an Indemnity Notice in
which the amount of the claim is estimated, when the amount of such claim
becomes finally determined or (iii) in the case of a Seller Tax Claim, within
fifteen (15) calendar days following final determination of the item giving rise
to the claim for indemnity. If the Indemnifying Party has timely disputed its
liability with respect to such claim, as provided above, the Indemnifying Party
and the Indemnified Party agree to proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations, such
dispute will be resolved pursuant to Section 12.17 hereof.
(d) The Indemnified Party agrees to give the Indemnifying
Party reasonable access to the books and records and employees of the
Indemnified Party in connection with the matters for which indemnification is
sought hereunder, to the extent the Indemnifying Party reasonably deems
necessary in connection with its rights and obligations hereunder.
(e) The Indemnified Party shall assist and cooperate with
the Indemnifying Party in the conduct of litigation, the making of settlements
and the enforcement of any right of contribution to which the Indemnified Party
may be entitled from any person or entity in connection with the subject matter
of any litigation subject to indemnification hereunder. In addition, the
Indemnified Party shall, upon request by the Indemnifying Party or counsel
selected by the Indemnifying Party (without payment of any fees or expenses to
the Indemnified Party or an employee thereof), attend hearings and trials,
assist in the securing and giving of evidence, assist in obtaining the presence
or cooperation of witnesses, and make available its own personnel; and shall do
whatever else is necessary and appropriate in connection with such litigation.
The Indemnified Party shall not make any demand upon the Indemnifying Party or
counsel for the Indemnifying Party in connection with any litigation subject to
indemnification hereunder, except a general demand for indemnification as
provided hereunder. If the Indemnified Party shall fail to perform such
obligations as Indemnified Party hereunder or to cooperate fully with the
Indemnifying Party in Indemnifying Party's defense of any suit or proceeding,
such cooperation to include, without limitation, attendance at all relevant
depositions and the provision of all documents (subject to appropriate
privileges) relevant to the defense of
-56-
<PAGE> 62
any claim, then, except where such failure does not materially impair the
Indemnifying Party's defense of such claims after notice from the Indemnified
Party and 15 days to cure, the Indemnifying Party shall be released from all of
its obligations under this Agreement with respect to that suit or proceeding and
any other claims which had been raised in such suit or proceeding.
(f) Following indemnification as provided for hereunder,
the Indemnifying Party shall be subrogated to all rights of the Indemnified
Party with respect to all persons or entities relating to the matter for which
indemnification has been made.
10.5 Exclusive. Other than claims for fraud or equitable relief, any
dispute arising under this Agreement or in connection with or as a result of the
transactions contemplated by this Agreement or any Damages or injury alleged to
be suffered by either party as a result of the actions or failure to act by any
other party shall, unless otherwise specifically stated in this Agreement, be
governed solely and exclusively by the provisions of this Article 10.
10.6 Reduction of the Purchase Price. If Seller pays any sum to
Purchaser in respect of a claim under Article 10, the Purchase Price and total
consideration received by Seller for the sale of the Assets shall be deemed to
be reduced by the amount of such payment.
ARTICLE 11
TAX AND COST REPORT MATTERS
11.1 Tax Matters; Allocation of Purchase Price.
(a) After the Closing, the parties shall cooperate fully
with each other and shall make available to each other, as reasonably requested,
all information, records or documents relating to tax liabilities or potential
tax liabilities attributable to Seller with respect to the operation of the
Hospital for all periods on or prior to the Closing Date and shall preserve all
such information, records and documents at least until the expiration of any
applicable statute of limitations or extensions thereof. The parties shall also
make available to each other as reasonably required, and at the reasonable cost
of the requesting party (for out-of-pocket costs and expenses only), personnel
responsible for preparing or maintaining information, records and documents in
connection with tax matters.
(b) The Purchase Price shall be allocated among each of the
Assets (or, where more practical, each category of Assets) in accordance with
Schedule 11.1(b), which will be agreed upon within five (5) business days prior
to the Closing Date by Seller and Purchaser. Seller and Purchaser hereby agree
to allocate the Purchase Price in accordance with Schedule 11.1(b), to be bound
by such allocations for all purposes, to account for and report the purchase and
sale of the Assets contemplated hereby for all purposes (including, without
limitation, financial reporting, accounting, Medicare reimbursement and federal
and state tax purposes) in accordance with such allocations, and not to take any
position (whether in financial statements, cost reports, tax returns, cost
report or tax audits, or otherwise), which is inconsistent with such allocations
without the prior written consent of the other party.
-57-
<PAGE> 63
11.2 Cost Report Matters.
(a) Seller shall prepare and timely file all cost reports
relating to the periods ending on or prior to the Closing Date or required as a
result of the consummation of the transactions described herein, including,
without limitation, those relating to Medicare, Medicaid, Blue Cross and other
third party payors which settle on a cost report basis (the "Subsidiaries' Cost
Reports"). Purchaser shall forward to Seller any and all correspondence relating
to the Accounts Receivable, Seller's Cost Reports or rights to settlements and
retroactive adjustments on the Seller's Cost Reports ("Agency Settlements")
within five (5) business days of receipt by Purchaser. Purchaser shall not reply
to any such correspondence without Seller's written approval. Purchaser shall
remit any receipts relating to the Accounts Receivable, the Seller's Cost
Reports or the Agency Settlements within five (5) business days after receipt by
Purchaser (except those receipts to be retained by Purchaser pursuant to Section
11.3) and will forward any demand for payments within five (5) business days.
Purchaser (and its respective successors in interest and assigns and its
respective affiliates) shall have neither the right to offset amounts payable to
Seller under this Section 11.2 against, nor the right to contest its obligation
to transfer, assign and convey to Seller because of, outstanding claims,
liabilities or obligations asserted by Purchaser against Seller including but
not limited to pursuant to the post-closing Purchase Price adjustment of Section
1.4 and the indemnification provisions of Section 10.2. Seller shall retain all
rights to the Seller's Cost Reports and to the Accounts Receivable including,
without limitation, any payables resulting therefrom or receivables relating
thereto and the right to appeal any Medicare determinations relating to the
Agency Settlements and the Seller's Cost Reports. Seller will furnish copies of
the Receivables Records to Purchaser upon request and allow Purchaser and its
representatives reasonable access to such documents.
(b) Upon reasonable notice and during normal business
office hours, Purchaser will cooperate with Seller in regard to the preparation,
filing, handling, and appeals of the Seller's Cost Reports. Upon reasonable
notice and during normal business office hours, Purchaser will cooperate with
Seller in connection with any cost report disputes and/or other claim
adjudication matters relative to governmental program reimbursement. Such
cooperation shall include the providing of statistics and obtaining files at the
Hospital and the coordination with Seller pursuant to adequate notice of
Medicare and Medicaid exit conferences or meetings. Purchaser will, upon
reasonable notice, during normal business office hours and at the sole cost and
expense of Seller, and subject to applicable law regarding confidentiality of
patient records, provide Seller reasonable access to all records of the Hospital
and will allow Seller and its respective representatives to copy any documents
relating to the Seller's Cost Reports and appeals thereof.
-58-
<PAGE> 64
11.3 Transition Services. To compensate Seller for services rendered
and medicine, drugs, and supplies provided on or before the Closing Date at any
of the Hospital (the "Transition Services") with respect to patients whose
medical care is paid for, in whole or in part, by Medicare, Medicaid, CHAMPUS,
Blue Cross or any other third party payor who pays on a DRG, case rate or other
similar arrangement, and who are admitted to the Hospital on or before the
Closing Date but who are not discharged until after the Closing Date
("Governmental Program Transition Patients"), the parties shall take the
following action:
(a) As soon as practicable after the Closing Date, Seller
shall deliver to Purchaser a statement itemizing the inpatient hospital
Transition Services provided by Seller with respect to the operation of the
Hospital on or prior to the Closing Date to Governmental Program Transition
Patients. For the Transition Services, Purchaser shall pay to Seller an amount
equal to the DRG and outlier payments, the case rate payment or other similar
payment received by Purchaser on behalf of a Governmental Program Transition
Patient, multiplied by a fraction (the "Fraction"), the numerator of which shall
be the total charges for the Transition Services provided to such Governmental
Program Transition Patient by Seller and the denominator of which shall be the
sum of the total charges for the Transition Services provided to such
Governmental Program Transition Patient by Seller plus the total charges for the
Transition Services provided to such Governmental Program Transition Patient by
Purchaser after the Closing Date. The parties shall reconcile the payments
within ninety (90) calendar days after both the tentative and final Medicare
cost report settlement and any other payor settlement affecting the Governmental
Program Transition Patients (the "Reconciliation").
(b) Subject to Section 11.3(d), payments made pursuant to
Section 11.3(a) shall be made to Seller monthly, on the twenty-fifth (25th) day
of each month, for payments received by Purchaser during the previous month,
accompanied by copies of remittances and other supporting documentation as is
reasonably requested by Seller. Any other payments required to be made by Seller
to Purchaser, or by Purchaser to Seller, as the case may be, as a result of (i)
the Reconciliation, (ii) a notice of program reimbursement with respect to the
operations of the Hospital or (iii) other notice from a governmental agency or
third party payor with respect to Transition Services shall be made within
thirty (30) calendar days after the Reconciliation or the receipt of any such
notice, as applicable. In the event that Purchaser and Seller are unable to
agree on the amount to be paid to Seller or Purchaser, as the case may be, under
this Section 11.3, then such amount shall be determined by the Independent
Auditor at their joint expense.
(c) The parties acknowledge that all charges for outpatient
and other cost-based services shall be made (i) by Seller for all periods on or
prior to the Closing Date and (ii) by Purchaser for all periods after the
Closing Date.
(d) Notwithstanding the first sentence of Section 11.3(b),
Purchaser shall make a distribution to Seller within three (3) business days if
at any time during the applicable calendar month the funds to be distributed to
Seller pursuant to Section 11.3(a) exceed Fifty Thousand Dollars ($50,000). The
amount of such distribution shall be all amounts payable to Seller pursuant to
Section 11.3(a) which have not been previously distributed to Seller. All such
-59-
<PAGE> 65
distributions shall be made by wire transfer of immediately available funds to
Seller to the account(s) specified by Seller to Purchaser in writing from time
to time.
(e) Purchaser (and its respective successors in interest
and assigns and its respective affiliates) shall have neither the right to
offset amounts payable to Seller under this Section 11.3 against, nor the right
to contest its obligation to transfer, assign and convey to Seller because of,
outstanding claims, liabilities or obligations asserted by Purchaser against
Seller including but not limited to pursuant to the post-closing Purchase Price
adjustment of Section 1.4 and the indemnification provisions of Section 10.2.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Further Assurances and Cooperation. Seller shall execute,
acknowledge and deliver to Purchaser any and all other assignments, consents,
approvals, conveyances, assurances, documents and instruments reasonably
requested by Purchaser at any time and shall take any and all other actions
reasonably requested by Purchaser at any time for the purpose of more
effectively assigning, transferring, granting, conveying and confirming to
Purchaser, the Assets. After consummation of the transaction contemplated
herein, the parties agree to cooperate with each other in regards to all matters
arising from the transition of ownership of the Assets and the business of the
Hospital from Seller to Purchaser.
12.2 Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto;
provided, however, that no party hereto may assign any of its rights or delegate
any of its duties under this Agreement without the prior written consent of the
other party, except that Purchaser may assign any of its rights or delegate any
of its duties under this Agreement to any controlled affiliate of Purchaser upon
Seller's receipt of Purchaser's guaranty of such controlled affiliate's
obligations, in a form reasonably acceptable to Seller, and Purchaser may assign
its rights (but not its obligations) under this Agreement to any of its
financing sources.
12.3 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York as applied to
contracts made and performed within the State of New York.
12.4 Amendments. This Agreement may not be amended other than by
written instrument signed by the parties hereto.
12.5 Exhibits, Schedules and Disclosure Schedule. The Disclosure
Schedule and all exhibits and schedules referred to in this Agreement shall be
attached hereto and are incorporated by reference herein. Any matter disclosed
in this Agreement or in the Disclosure Schedule with reference to any Section of
this Agreement shall be deemed a disclosure in respect of all sections as to
which the relevance of such disclosure is reasonably apparent.
-60-
<PAGE> 66
12.6 Notices. Any notice, demand or communication required,
permitted, or desired to be given hereunder shall be deemed effectively given
when personally delivered, when received by telegraphic or other electronic
means (including facsimile) or overnight courier, or five (5) calendar days
after being deposited in the United States mail, with postage prepaid thereon,
certified or registered mail, return receipt requested, addressed as follows:
If to Seller: Odessa Hospital Ltd.
c/o Tenet HealthSystem
14001 Dallas Parkway
Dallas, Texas 75240
Attention: David R. Mayeux
Facsimile No.: (972) 789-2385
With a copy to: Tenet Healthcare Corporation
c/o Tenet HealthSystem
14001 Dallas Parkway
Dallas, Texas 75240
Attention: William A. Barrett, Esq.
Facsimile No.: (972) 789-6164
With a copy to: McDermott, Will & Emery
2049 Century Park East
Suite 3400
Los Angeles, California 90067
Attention: Ira J. Rappeport, Esq.
Facsimile No.: (310) 277-4730
If to Purchaser: JLL Hospital, LLC
Attn: Jeffrey C. Lightcap
450 Lexington Ave.
Suite 3350
New York, NY 10017
Facsimile No.: (212) 286-8626
With copies to: Skadden, Arps, Slate, Meagher &
Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899-0636
Attention: Robert Pincus
Facsimile No.: (302) 651-3001
Iasis Healthcare
104 Woodmont, Suite 101
Nashville, Tennessee 37205
Attention: Frank A. Coyle
-61-
<PAGE> 67
(615) 846-3006
or at such other address as one party may designate by notice hereunder to the
other parties.
12.7 Headings. The section and other headings contained in this
Agreement and in the Disclosure Schedule, exhibits and schedules to this
Agreement are included for the purpose of convenient reference only and shall
not restrict, amplify, modify or otherwise affect in any way the meaning or
interpretation of this Agreement or the Disclosure Schedule, exhibits and
schedules hereto.
12.8 Confidentiality and Publicity. The parties hereto shall hold in
confidence the information contained in this Agreement, and all information
related to this Agreement, which is not otherwise known to the public, shall be
held by each party hereto as confidential and proprietary information and shall
not be disclosed without the prior written consent of the other party.
Accordingly, Purchaser and Seller shall not discuss with, or provide nonpublic
information to, any third party (except for such party's attorneys, accountants,
directors, officers and employees, the directors, officers and employees of any
affiliate of any party hereto, and other consultants and professional advisors)
concerning this transaction prior to the Closing, except: (i) as required in
governmental filings or judicial, administrative or arbitration proceedings,
including without limitation the filings to be made by the parties with respect
to the HSR Act; (ii) pursuant to public announcements made with the prior
written approval of Seller and Purchaser; or (iii) as required in connection
with the Financing by Purchaser. The rights of Seller under this Section 12.8
shall be in addition and not in substitution for the rights of Seller under the
Confidentiality Agreement, which shall survive Closing.
12.9 Fair Meaning. This Agreement shall be construed according to
its fair meaning and as if prepared by all parties hereto.
12.10 Gender and Number; Construction. All references to the neuter
gender shall include the feminine or masculine gender and vice versa, where
applicable, and all references to the singular shall include the plural and vice
versa, where applicable. Unless otherwise expressly provided, the word
"including" followed by a listing does not limit the preceding words or terms
and shall mean "including, without limitation."
12.11 Third Party Beneficiary. None of the provisions herein contained
are intended by the parties, nor shall they be deemed, to confer any benefit on
any person not a party to this Agreement.
12.12 Expenses and Attorneys' Fees. Except as otherwise provided in
this Agreement, each party shall bear and pay its own costs and expenses
relating to the preparation of this Agreement and to the transactions
contemplated by, or the performance of or compliance with any condition or
covenant set forth in, this Agreement, including without limitation, the
disbursements and fees of their respective attorneys, accountants, advisors,
agents and other representatives, incidental to the preparation and carrying out
of this Agreement, whether or not the transactions contemplated hereby are
consummated. The parties expressly agree that each of Seller and Purchaser shall
bear 50 percent (50%) of the aggregate amount of the following
-62-
<PAGE> 68
categories of expenses: (a) expenses relating to the preparation and delivery by
Seller of the audited combined financial statements of the Hospital contemplated
by Section 4.8(b) of this Agreement (including the opinion of KPMG Peat Marwick
with respect thereto); (b) all costs of the Title Commitment and the Title
Policy; (c) all documentary transfer, sales and similar taxes and recording
charges in connection with the conveyance of the Assets to Purchaser; (d) all
costs of the Surveys; (e) all costs of the Environmental Survey; (f) the cost of
an environmental compliance audit to be conducted by Purchaser at the Hospital;
and (g) all filing fees imposed in connection with Seller's and Purchaser's
filings under the HSR Act. As and when either party receives an invoice or other
evidence of incurrence or payment with respect to any expense described in the
foregoing categories, such party shall forward promptly to the other party a
copy of such invoice or other evidence. The parties shall each calculate the net
balance owed from one party to the other under this Section 12.12, exchange such
calculations and agree on such amount and to whom it is owed within fifteen (15)
business days of the first to occur of (i) the Closing Date or (ii) the
termination of this Agreement. The party owing such net balance shall deliver to
the party to whom the balance is owed the payor's check in payment of such net
balance within twenty-five (25) business days following the first to occur of
(i) the Closing Date or (ii) the termination of this Agreement. The covenants
set forth in the preceding sentence shall be binding upon the parties
notwithstanding failure to consummate the transaction contemplated hereby;
provided, however, that Seller agrees to reimburse Purchaser for any amounts
payable by it under this Section 12.12 to the extent attributable to the
Hospital within the twelve (12) months immediately following the termination of
this Agreement. Notwithstanding the foregoing, Seller shall bear 100 percent
(100%) of the amount of said expenses in excess of an aggregate of Three Million
Dollars ($3,000,000) minus the aggregate expenses payable under Section 12.12 of
the Related Asset Sale Agreement. If any action is brought by any party to
enforce any provision of this Agreement, the prevailing party shall be entitled
to recover its court costs, arbitration expenses and reasonable attorneys' fees.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement, binding on all of the
parties hereto.
12.14 Entire Agreement. This Agreement, the Disclosure Schedule, the
exhibits and schedules, and the documents referred to herein contain the entire
understanding between the parties with respect to the transactions contemplated
hereby and supersede all prior or contemporaneous agreements, understandings,
representations and statements, oral or written, between the parties on the
subject matter hereof, and shall be of no further force or effect.
12.15 No Waiver. Any term, covenant or condition of this Agreement may
be waived at any time by the party which is entitled to the benefit thereof but
only by a written notice signed by the party expressly waiving such term or
condition. The subsequent acceptance of performance hereunder by a party shall
not be deemed to be a waiver of any preceding breach by the other party of any
term, covenant or condition of this Agreement, other than the failure of such
party to perform the particular duties so accepted, regardless of such party's
knowledge of such preceding breach at the time of acceptance of such
performance. The waiver of any term, covenant or condition shall not be
construed as a waiver of any other term, covenant or condition of this
Agreement.
-63-
<PAGE> 69
12.16 Severability. If any term, provision, condition or covenant of
this Agreement or the application thereof to any party or circumstance shall be
held to be invalid or unenforceable to any extent in any jurisdiction, then the
remainder of this Agreement and the application of such term, provision,
condition or covenant in any other jurisdiction or to persons or circumstances
other than those as to whom or which it is held to be invalid or unenforceable,
shall not be affected thereby, and each term, provision, condition and covenant
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law.
12.17 Arbitration. Any disagreement, dispute or claim arising out of
or relating to this Agreement which cannot be settled by the parties hereto
shall be settled by arbitration in accordance with the following provisions:
12.17.1 Forum. Forum for arbitration shall be Manhattan,
New York.
12.17.2 Law. Governing law shall be the law of the State of
New York.
12.17.3 Selection. The number of arbitrators shall be three
(3), unless the parties hereto are able to agree on a single arbitrator. In the
absence of such agreement within ten (10) business days after the initiation of
an arbitration proceeding, Seller shall select one (1) arbitrator and Purchaser
shall select one (1) arbitrator, and those two arbitrators shall then select,
within ten (10) business days, a third arbitrator. If those two (2) arbitrators
are unable to select a third arbitrator within such ten (10) business day
period, a third arbitrator shall be appointed by the commercial panel of the
American Arbitration Association. The decision in writing of at least two (2) of
the three (3) arbitrators shall be final and binding upon the parties.
12.17.4 Administration. Arbitration shall be administered by
the American Arbitration Association.
12.17.5 Rules. Rules of arbitration shall be the Commercial
Arbitration Rules of the American Arbitration Association, as modified by any
other instructions that the parties hereto may agree upon at the time, except
that each party hereto shall have the right to conduct discovery in any manner
and to the extent authorized by the Federal Rules of Civil Procedure as
interpreted by the federal courts in New York. The arbitrators shall not modify
the terms of this Agreement.
12.17.6 Award. The award rendered by arbitration shall be final
and binding upon the parties hereto, and judgment upon the award may be entered
in any court of competent jurisdiction in the United States.
-64-
<PAGE> 70
12.18 Time is of the Essence. Time is of the essence for all dates and
time periods set forth in this Agreement and each performance called for in this
Agreement.
IN WITNESS WHEREOF, this Agreement has been entered into as of the day
and year first above written.
PURCHASER:
JLL Hospital, LLC, a Delaware limited liability
company
By: /s/ J. C. Lightcap
-------------------------------
Name: Jeffrey C. Lightcap
-----------------------------
Its: Authorized Person
-------------------------------
SELLER:
ODESSA HOSPITAL LTD., a Texas limited
partnership
By: /s/ David R. Mayeux
-------------------------------
Name: /s/ David R. Mayeux
-----------------------------
Its: Executive Vice President
-------------------------------
-65-
<PAGE> 1
EXHIBIT 2.6
AMENDMENT NO. 1 TO ASSET SALE AGREEMENT
This Amendment No. 1 to Asset Sale Agreement (the "Amendment") is
made and entered into as of October 15, 1999, by and between Odessa Hospital,
Ltd., a Texas limited partnership ("Seller") and Iasis Healthcare Corporation, a
Delaware corporation ("Purchaser") as successor in interest to JLL Hospital,
LLC, a Delaware limited liability company.
RECITALS
A. Seller and JLL Hospital, LLC entered into that certain Asset
Sale Agreement dated as of August 15, 1999 (the "Agreement") pursuant to which
Purchaser's permitted designees or assignees are acquiring substantially all of
the assets with respect to the operation of the Hospital from Seller and the
Subsidiaries.
B. Seller and Purchaser desire to amend the Agreement to address
certain matters that have arisen since the effective date of the Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants contained in this Amendment, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Except to the extent it is specifically indicated
to the contrary in this Amendment, defined terms used in this Amendment shall
have the same meanings ascribed to them in the Agreement.
2. Transfer of Seller Assets. Section 1.9(f) of the Agreement is
hereby deleted in its entirety and is replaced with the following:
(f) all of such Subsidiary's interest in and to all contracts
and agreements (including, but not limited to, purchase orders)
with respect to the operation of the Hospital (the "Contracts")
including, without limitation, those Contracts described in
Schedule 1.9(f); provided, however, that, subject to Section
9.3, multi-hospital contracts as to which one or more of the
Acute Care Hospitals and one or more of Seller's other acute
care hospitals participate ("Multi-Facility Contracts") shall
not be transferred and conveyed at Closing and shall constitute
Assets and Contracts only to the extent attributable to the
Acute Care Hospitals.
<PAGE> 2
3. Excluded Assets.
(a) Section 1.10(p) of the Agreement is hereby deleted in its
entirety and replaced with the following:
(p) [Intentionally omitted];
(b) A new Section 1.10(q) of the Agreement is hereby added to
read as follows:
(q) those Contracts set forth in Schedule 1.10(q).
4. Assumed Obligations. Section 1.11(b) of the Agreement is hereby
deleted in its entirety and replaced with the following:
(b) the Contracts, but only to the extent of the
obligations arising thereunder with respect to events or periods
after the Closing Date; provided, however, that, subject to
Section 9.3, Multi-Facility Contracts shall give rise to Assumed
Obligations only to the extent attributable to the Acute Care
Hospitals.
5. Excluded Liabilities. A new Section 1.12(o) of the Agreement
is hereby added to read as follows:
(o) all liabilities or obligations arising at any time under
those Contracts set forth in Schedule 1.10(q);
2
<PAGE> 3
6. Title; Sufficiency.
(a) The phrase "which are not otherwise marked with two stars
and (iv) the UCC Liens" is hereby inserted immediately after the
phrase "(iii) other such encumbrances as are set forth in
Schedule 2.7(b)" contained in Section 2.7(b) of the Agreement.
(b) The phrase "and (v) the judgments as are set forth in
Schedule 2.7(b) which are marked with two stars therein" is
hereby inserted immediately after the phrase "(collectively,
"Permitted Liens")" contained in Section 2.7(b) of the
Agreement.
7. Representations and Warranties of Seller. A new Section 2.20 of
the Agreement is hereby added to the Agreement to read as follows:
2.20 Managed Care Contracts To the best knowledge of the Tenet
Representatives (as defined below), no payor under any managed
care Contract has notified or otherwise informed Seller or the
Subsidiaries that it does not intend to, or will not, consent to
the transfer of such Contract to Purchaser as a result of the
transactions contemplated by the Agreement, as amended. For
purposes hereof, the term "Tenet Representatives" shall mean
Michael Murphy, Peggy Sanborne, William Barrett and Paul
O'Neill.
8. UCC Termination Statements. A new Section 4.19 of the
Agreement is hereby added to read as follows:
4.19 UCC Terminations. After the Closing Date, Seller shall use
its reasonable commercial efforts to (a) obtain executed UCC
termination statements for the financing statements set forth on
Schedule 4.19 which are attached hereto (the "UCC Liens"), (b)
file such executed UCC termination statements with the
appropriate governmental agencies or authorities with respect to
the UCC Liens and (c) deliver such executed and filed UCC
termination statements to Purchaser. Seller's obligations under
this Section 4.19 shall continue to be fully effective and
enforceable with respect to any particular financing statement
until the expiration of such applicable financing statement set
forth on Schedule 4.19.
9. Cooperation in Obtaining Consents. A new Section 4.20 of the
Agreement is hereby added to read as follows:
4.20 Cooperation on Obtaining Consents. For two (2) years after
the Closing Date, Seller and Purchaser shall each use reasonable
commercial efforts to obtain the consent to assignment from the
applicable third parties to any Contract or Lease, or to enter
into new contracts with respect to Multi-Facility Contracts for
which such consent was not obtained as of the Closing Date.
3
<PAGE> 4
10. Misdirected Payments. A new Section 4.21 of the Agreement is
hereby added to read as follows:
4.21 Misdirected Payments. To the extent there are any
misdirected funds forwarded to Seller (or one of its
subsidiaries) by any third parties, which misdirected funds are
paid in respect of the performance of services by or on behalf
of the Hospital from and after the Closing, including without
limitation in respect of any services provided by any of the
physicians providing services at the Hospital, Seller shall
remit such misdirected funds to Iasis Healthcare Corporation
within ten (10) business days after receipt thereof, to the
account(s) designated by Purchaser. Each of Seller and Purchaser
further agree that, to the extent that Purchaser has not
obtained a provider number with respect to the Hospital on or
prior to the Closing Date, Purchaser (or a subsidiary of
Purchaser) shall be entitled to use the provider number obtained
by the Hospital (or a Subsidiary of Seller) prior to the Closing
Date with respect to the Hospital. Furthermore, Seller and
Purchaser understand and agree that all payments by third party
payors in respect of such Licensed Provider Numbers for goods
and services provided after the Closing Date ("Post-Closing
Payments") shall be solely for the account of Purchaser. Seller
(on its behalf and on behalf of its subsidiaries) hereby
irrevocably assigns to Purchaser all right, title and interest
it may have in respect of such Post-Closing Payments and hereby
agrees to remit to Purchaser such Post-Closing payments within
ten (10) business days after its receipt thereof.
11. Provision of Benefits. A new Section 9.3 of the Agreement is
hereby added to read as follows:
9.3 Provision of Benefits. If Seller is unable to obtain any
consent to the assignment of Seller's or any Subsidiary's
interest in a Contract or a Lease, or if Purchaser is unable to
enter into a new contract with respect to a Multi-Facility
Contract, until such consent or new contract is obtained, Seller
shall use reasonable commercial efforts to provide Purchaser the
benefits of any such Contract or Lease (including with respect
to the Acute Care Hospital portion of Multi-Facility Contracts),
cooperate in any reasonable and lawful arrangement designed to
provide such benefits to Purchaser, and allow Purchaser to
directly enforce such Contracts or Leases against third parties
thereto. Purchaser shall use reasonable commercial efforts to
perform, on behalf of Seller, the obligations of Seller
thereunder or in connection therewith, limited in the case of
Multi-Facility Contracts to the Acute Care Hospitals thereunder,
but only to the extent that such action would not result in a
material default thereunder or in connection therewith and such
obligation would have been (a) an obligation of Purchaser had it
entered into a new contract on substantially similar terms with
respect to a Multi-
4
<PAGE> 5
Facility Contract or (b) an Assumed Obligation but for the
failure to obtain a consent.
12. Indemnification of Purchaser by Seller. The following is hereby
inserted at the end of the first sentence of Section 10.2.1 of the Agreement:
and (viii) Seller's failure to comply with Section 4.19.
13. Schedules. Attached as Annex I hereto is Amendment No. 1 to the
Schedules to the Asset Sale Agreement dated as of the Closing Date. Except as
set forth therein, the Schedules attached to the Agreement remain in full force
and effect.
14. Effect on Agreement; General Provisions. Except as set forth in
this Amendment, the terms and provisions of the Agreement are hereby ratified
and declared to be in full force and effect. This Amendment shall be governed by
the provisions of the Agreement regarding choice of law, attorneys' fees, and
successors and assigns. This Amendment shall become effective upon its
execution, which may occur in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Captions and paragraph headings are used herein for convenience
only, are not a part of this Amendment or the Agreement as amended by this
Amendment and shall not be used in construing either document. Other than the
reference to the Agreement contained in the first recital of this Amendment,
each reference to the Agreement and any agreement contemplated thereby or
executed in connection therewith, whether or not accompanied by reference to
this Amendment, shall be deemed a reference to the Agreement as amended by this
Amendment.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed in multiple originals by their authorized officers, all as of the day
and year first above written.
PURCHASER:
IASIS HEALTHCARE CORPORATION, a
Delaware corporation, as successor in interest
to JLL Hospital, LLC
By: /s/ Frank Coyle
-----------------------------
Name: Frank Coyle
---------------------------
Title: Secretary
--------------------------
SELLER:
ODESSA HOSPITAL, LTD., a
Texas limited partnership
By: Tenet Healthcare, Ltd.,
a Texas limited partnership, its General
Partner
By: Lifemark Hospitals, Inc., a Delaware
corporation, the General Partner of Tenet
Healthcare, Ltd.
By: /s/ Paul O'Neill
-----------------------------
Name: Paul O'Neill
Title: Vice President
6
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PHC/PSYCHIATRIC HEALTHCARE CORPORATION
------------------
Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware
------------------
PHC/Psychiatric Healthcare Corporation, a Delaware corporation
(hereinafter called the "Corporation"), does hereby certify as follows:
1. The name of the Corporation is PHC/Psychiatric Healthcare
Corporation.
2. The Corporation was originally incorporated under the name
of CHC-PHC, Inc. The Corporation changed its name to PHC/Psychiatric Healthcare
Corporation on August 7, 1996. The date of the filing of its original
certificate of incorporation with the Secretary of State of the State of
Delaware was September 30, 1994.
3. This Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors of the Corporation and adopted by the
sole stockholder of the Corporation in accordance with Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware.
<PAGE> 2
4. Upon the filing with the Secretary of State of the State of
Delaware this Amended and Restated Certificate of Incorporation, the
Corporation's Certificate of Incorporation, is hereby amended, restated and
integrated to read in its entirety as follows:
FIRST: The name of the Corporation is IASIS Healthcare
Corporation (hereinafter, the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is five million (5,000,000) shares of
Common Stock, each having a par value of one penny ($.01), and five hundred and
fifty thousand (550,000) shares of Preferred Stock, each having a par value of
one penny ($.01).
The Board of Directors is expressly authorized to provide for
the issuance of all or any shares of the Preferred Stock in one or more classes
or series, and to fix for each such class or series such voting powers, full or
limited, or no voting powers, and such distinctive designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the GCL, including, without limitation, the authority to provide that any such
class or series may be (i) subject to redemption at such time or times and at
such price or prices; (ii) entitled to receive dividends (which may be
cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or
2
<PAGE> 3
upon any distribution of the assets of, the Corporation; or (iv) convertible
into, or exchangeable for, shares of any other class or classes of stock, or of
any other series of the same or any other class or classes of stock, of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments; all as may be stated in such resolution or resolutions.
FIFTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
1. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors of the
Corporation.
2. The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
3. The number of directors of the Corporation shall be not
less than three (3) nor more than eighteen (18) members, the exact
number of which shall be fixed from time to time by the Board of
Directors. Election of directors need not be by written ballot unless
the By-Laws so provide.
4. No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the GCL or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this
Article FIFTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
5. In addition to the powers and authority herein or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the
3
<PAGE> 4
GCL, this Amended and Restated Certificate of Incorporation of the
Corporation, and any By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid
if such By-Laws had not been adopted.
6. The Corporation elects not to be governed by Section 203 of
the GCL.
SIXTH: Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
SEVENTH: The Corporation shall indemnify its directors and
officers to the fullest extent authorized or permitted by the GCL, as the same
exists or may hereafter be amended, and such right to indemnification shall
continue as to a person who has ceased to be a director or officer of the
Corporation and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except for proceedings to enforce
rights to indemnification, the Corporation shall not be obligated to indemnify
any director or officer (or his or her heirs, executors or administrators) in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Article SEVENTH
shall include the right to be paid by the Corporation the expenses incurred in
defending or otherwise participating in any proceeding in advance of its final
disposition.
The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation who are not
directors or officers similar to those conferred in this Article SEVENTH to
directors and officers of the Corporation.
The rights to indemnification and to the advancement of
expenses conferred in this Article SEVENTH shall not be exclusive of any other
right which any person may have or hereafter acquire under this Amended and
Restated Certifi-
4
<PAGE> 5
cate of Incorporation, the By-Laws, any statute, agreement, vote of stockholders
or disinterested directors, or otherwise.
Any repeal or modification of this Article SEVENTH by the
stock holders of the Corporation shall not adversely affect any rights to
indemnification and advancement of expenses of a director or officer of the
Corporation existing pursuant to this Article SEVENTH with respect to any acts
or omissions occurring prior to such repeal or modification.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE> 6
IN WITNESS WHEREOF, PHC/Psychiatric Healthcare Corporation has
caused this Amended and Restated Certificate of Incorporation to be duly
executed this 8th day of October, 1999.
PHC/PSYCHIATRIC HEALTHCARE CORPORATION
By: /s/ Frank Coyle
---------------------------------
Name: Frank Coyle
Title: Assistant Secretary
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK
OF
IASIS HEALTHCARE CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned, Frank A. Coyle, Secretary and General Counsel of
IASIS Healthcare Corporation (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, pursuant
to Section 151(g) thereof and in accordance with the provisions of Section 103
thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
of the Corporation (the "Board of Directors") by the Certificate of
Incorporation of the Corporation, the Board of Directors on October 15, 1999
adopted the following resolution creating a series of 500,000 shares of
preferred stock, par value $.01 per share, designated as Series A Preferred
Stock:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors in accordance with the provisions of its Certificate of
Incorporation, a series of preferred stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
<PAGE> 2
1. Liquidation Preference; Rank.
The maximum number of shares of Series A Preferred Stock shall be
500,000 and no more. The Series A Preferred Stock shall have a liquidation
preference of $1,000 per share (the "Series A Stated Amount"), plus any
dividends accrued but not paid on the Series A Preferred Stock pursuant to
Section 2 hereof, whether or not earned or declared, to the date fixed for
Liquidation (as hereinafter defined in Section 4(a) hereof) of the Corporation
(the "Series A Liquidation Preference").
The Series A Preferred Stock ranks, with respect to rights to receive
dividends and distributions upon Liquidation: (a) senior to the Corporation's
Common Stock and any class or series of preferred stock issued by the
Corporation whose terms provide specifically that such class or series will
rank junior to the Series A Preferred Stock with respect to rights to receive
payment of dividends and distributions upon Liquidation or fail to specify the
ranking of such class or series relative to the Series A Preferred Stock with
respect to rights to receive payment of dividends and distributions upon
Liquidation (together with the Common Stock, the "Junior Securities"); (b) on a
parity with any class or series of preferred stock issued by the Corporation,
including, without limitation, the Series B Preferred Stock, par value $.01 per
share of the Corporation (the "Series B Preferred Stock"), whose terms provide
specifically that such class or series shall rank on a parity with the Series A
Preferred Stock with respect to rights to receive payment of dividends and
distributions upon Liquidation (the "Parity Securities"); and (c) junior to any
class or series of preferred stock issued by the Corporation whose terms
provide specifically that such class or series shall rank senior to the Series
A Preferred Stock with respect to rights to receive payment of dividends and
distributions upon Liquidation (the "Senior Securities").
2. Dividends.
(a) Each holder of Series A Preferred Stock shall be entitled to
receive, out of the funds of the Corporation legally available therefor,
cumulative dividend payments, payable in accordance with this Section 2.
2
<PAGE> 3
(b) Dividends on each share of Series A Preferred Stock (the
"Series A Dividend") shall be payable in cash on October 15th and April 15th of
each year when, as and if declared by the Board of Directors of the
Corporation, at a rate of 16% of the Series A Stated Amount per annum. Series
A Dividends payable on the Series A Preferred Stock for any period less than a
full year shall be computed on the basis of the actual number of days elapsed
and the actual number of days for such year.
(c) Series A Dividends shall accrue and be cumulative from the
date of original issuance of the Series A Preferred Stock whether or not the
Corporation has earnings or profits, whether or not there are funds legally
available for the payment of such Series A Dividends and whether or not Series
A dividends are declared or paid.
(d) Series A Dividends shall be paid to the holders of record of
shares of Series A Preferred Stock as each appears in the stock register of the
Corporation at the close of business on the record date therefor, which record
date shall be set by the Board of Directors of the Corporation, in its sole
discretion, subject to the requirements of applicable law.
(e) Notwithstanding the foregoing, no dividends shall be paid on
the shares of Series A Preferred Stock, unless an amount equal to the per share
dividend of the Series A Preferred Stock is concurrently paid on each then
outstanding share of Series B Preferred Stock.
3. Redemption.
(a) Redemption at the Option of the Corporation. The Series A
Preferred Stock may be redeemed at the option of the Corporation, in whole or
in part, at any time or from time to time, out of funds legally available
therefor. If less than all of the outstanding Series A Preferred Stock are to
be redeemed, the Corporation shall either (i) redeem a pro rata portion of the
shares of Series A Preferred Stock held by each holder, based on the number of
shares held by each holder or (ii) select the shares to be redeemed by lot.
The Corporation
3
<PAGE> 4
may redeem the Series A Preferred Stock by payment in cash, for each share of
Series A Preferred Stock to be redeemed, in an amount (the "Series A Optional
Redemption Payment") equal to the Series A Stated Amount, together with an
amount equal to all accrued and unpaid Series A Dividends on such shares
through the date upon which such shares are redeemed (the "Series A Optional
Redemption Date"). Any redemption pursuant to this Section 3(a) shall be made
upon not less than thirty (30) days' prior written notice (which notice shall
comply with the provisions of Section 3(c) hereof ) mailed to each holder of
Series A Preferred Stock at such holder's address as shown in the stock
register of the Corporation. Notwithstanding the foregoing, no redemption of
the Series A Preferred Stock may be made pursuant to this Section 3(a), unless
concurrently therewith an equal percentage of the then outstanding shares of
Series B Preferred Stock are redeemed.
(b) Mandatory Redemption. Except as may be, and solely
to the extent, prohibited by any instrument relating to indebtedness of
the Corporation then outstanding (a "Loan Agreement"), on October 15,
2010 or as soon thereafter as not prohibited by any such Loan Agreement
(the "Series A Mandatory Redemption Date"), the Corporation shall
redeem, out of funds legally available therefor, all of the then
outstanding shares of Series A Preferred Stock. The redemption
pursuant to this Section 3(b) shall be made upon not less than thirty
(30) days' prior notice (which notice shall comply with the provisions
of Section 3(c) hereof) mailed to each holder of Series A Preferred
Stock at such holder's address as shown in the stock register of the
Corporation; provided, however, that the Corporation's failure to give
such notice shall in no way affect its obligation to redeem the shares
of Series A Preferred Stock as provided in this Section 3(b). The
redemption price for each share of Series A Preferred Stock redeemed
pursuant to this Section 3(b) shall be equal to the Series A Stated
Amount per share, together with an amount equal to all accrued and
unpaid Series A Dividends on such share through the Series A Mandatory
Redemption Date (the "Series A Mandatory Redemption Payment").
(c) Redemption Notices. Notice of redemption (a "Series A
Redemption Notice") of shares of Series A Preferred
4
<PAGE> 5
Stock pursuant to Section 3(a) or 3(b) hereof shall be given by the Corporation
by mailing a copy of such notice to each holder of record of the shares of
Series A Preferred Stock to be redeemed at such holder's address appearing in
the stock register of the Corporation. The Series A Redemption Notice shall
specify the amount of the Series A Optional Redemption Payment or the Series A
Mandatory Redemption Payment, as the case may be, and the Series A Optional
Redemption Date or the Series A Mandatory Redemption Date, as the case may be,
on which the shares of Series A Preferred Stock to be redeemed will, upon
presentation and surrender of the certificates of stock evidencing such shares,
be redeemed. From and after the Series A Optional Redemption Payment or the
Series A Mandatory Redemption Date, as the case may be, unless default shall be
made by the Corporation in providing monies at the time and place specified for
the payment of the Series A Optional Redemption Payment or the Series A
Mandatory Redemption Payment, as the case may be, pursuant to said notice, all
Series A Dividends on the shares of Series A Preferred Stock to be redeemed
shall cease to accrue and all rights of the holders thereof as stockholders of
the Corporation, except the right to receive the Series A Optional Redemption
Payment or the Series A Mandatory Redemption Payment, as the case may be, shall
cease and terminate. In addition, all Series A Dividends shall be deemed to
have ceased accruing or cumulating from and after the Series A Optional
Redemption Date or the Series A Mandatory Redemption Date on any shares of
Series A Preferred Stock to be redeemed, unless default shall be made by the
Corporation in providing monies at the time and place specified for the payment
of the Series A Optional Redemption Payment or the Series A Mandatory
Redemption Payment pursuant to terms hereof and the Series A Redemption Notice
delivered in connection therewith. All shares of Series A Preferred Stock
redeemed by the Corporation shall be retired and cancelled and shall not
thereafter be reissued.
(d) Insufficient Funds for Redemption or Loan Agreement Block.
If the funds of the Corporation legally available (or available pursuant to the
terms of any Loan Agreement) for redemption of the Series A Preferred Stock on
the Series A Mandatory Redemption Date in respect of its redemption obligations
pursuant to Section 3(b) hereof are insufficient to redeem the shares of Series
A
5
<PAGE> 6
Preferred Stock to be so redeemed pursuant to Section 3(b) hereof, each holder
of the Series A Preferred Stock shall share ratably in any funds legally
available (or available pursuant to the terms of any Loan Agreement) for
redemption of such shares according to the amount which would be payable with
respect to the number of shares owned by such holder if the shares to be so
redeemed on such Series A Mandatory Redemption Date were redeemed in full. The
shares of Series A Preferred Stock not redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time
thereafter, when additional funds of the Corporation are legally available (or
available under the terms of any Loan Agreement) for the redemption of such
shares of Series A Preferred Stock to be redeemed, such funds will be used, as
soon as practicable but no later than the end of the next succeeding fiscal
quarter, to redeem the balance of such shares, or such portion thereof for
which funds are then legally available (or available under the terms of any
Loan Agreement), on the basis set forth above.
4. Liquidation Rights; Priority.
(a) In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or involuntary (a
"Liquidation"), the holders of shares of Series A Preferred Stock shall be
entitled to receive, after payment or provision for payment of the debts and
other liabilities of the Corporation and after payment of the liquidation
preference of any Senior Securities, out of the remaining net assets of the
Corporation, whether such assets are capital or surplus and whether or not any
dividends as such are declared, the Series A Liquidation Preference per share
(and the pro rata portion thereof in the case of fractional shares), before any
distribution shall be made with respect to any Junior Securities. In the event
of any change in the Corporation's Series A Preferred Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the Series A Liquidation Preference per share of Series A
Preferred Stock shall be appropriately adjusted by the Board of Directors so as
to protect the rights of the holders of shares of Series A Preferred Stock.
(b) Except as otherwise provided in this Section 4, holders of
Series A Preferred Stock shall not be entitled to any partici-
6
<PAGE> 7
pation in any distribution of assets in the event of any Liquidation. For
purposes of this Section 4, neither the voluntary sale, lease, conveyance,
exchange or transfer (for cash, securities or other consideration) of all or
substantially all of the assets of the Corporation, nor the consolidation or
merger of the Corporation with one or more Persons (as defined in Section 8
hereof), shall be deemed to be a voluntary or involuntary Liquidation.
(c) If, upon any Liquidation, the Series A Liquidation
Preference is not paid in full, the holders of Series A Preferred Stock shall
share pro rata in such distribution with other Parity Securities. If, upon any
Liquidation, the amounts payable with respect to the Series A Preferred Stock
and any Parity Securities are not paid in full, holders of the Series A
Preferred Stock and holders of any Parity Securities will share ratably in any
distribution of the assets of the Corporation in proportion to the respective
amounts that would be payable per share if such assets were sufficient to
permit payment in full of such amounts.
(d) Written notice of any Liquidation stating a payment date and
the place where the Series A Liquidation Preference shall be payable, shall be
given by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to each holder of record of the Series A Preferred Stock at his
address as the same shall appear in the stock register of the Corporation.
(e) The amount payable upon Liquidation with respect to each
fractional share of the Series A Preferred Stock outstanding shall be equal to
a ratably proportionate amount of the Series A Liquidation Preference.
5. Restricted Payments.
The Corporation may not directly or indirectly declare, pay or set
apart for payment dividends on, or make any payment on account of, or set apart
for payment money for a sinking or other similar fund for the purchase,
redemption or other acquisition of, or make any distribution in respect of,
whether in cash, obligations or shares of the Corporation or other property,
any Junior Securities (or options, rights
7
<PAGE> 8
or warrants to acquire shares of Junior Securities) if at the time of such
action, the Corporation is in arrears in the payment of Series A Dividends,
meaning that the amount of accrued and cumulated dividends determined in
accordance with Section 2(b) hereof on the Series A Preferred Stock has not, in
full, been declared and paid in cash. None of the foregoing restrictions shall
apply to: (i) the acquisition of Junior Securities (or options, rights or
warrants to acquire shares of Junior Securities) in exchange for or upon
conversion thereof into shares of Capital Stock (as defined in Section 8
hereof) of the Corporation (other than Parity Securities or Senior Securities)
or upon the exercise of options, rights or warrants to acquire such shares;
(ii) the repurchase of Capital Stock of the Corporation from employees or
former employees of the Corporation pursuant to employee benefit plans,
employment agreements or securityholder agreements; (iii) the acquisition of
any shares of Capital Stock of the Corporation or options, rights or warrants
to acquire such shares in connection with a purchase price adjustment arising
out of acquisitions by the Corporation pursuant to which such shares of Capital
Stock or options, rights or warrants to acquire such shares were issued; (iv)
the rescission of any agreement by the Corporation pursuant to which shares of
Capital Stock of the Corporation or options, rights or warrants to acquire such
shares were issued; or (v) a dividend on Junior Securities at any time in
additional shares of the Junior Security.
6. Business Combinations.
(a) Without the prior approval of the holders of at least a
majority of the then outstanding shares of Series A Preferred Stock and Series
B Preferred Stock, voting together as a single class, the Corporation will not
consummate a Business Combination or permit a Business Combination to occur
unless the Corporation shall have redeemed (a "Business Combination Purchase
Offer") all of the outstanding shares of (i) Series A Preferred Stock for cash
at a purchase price equal to the Series A Stated Amount per share (and the pro
rata portion thereof in the case of fractional shares), together with an amount
equal to accrued and unpaid Series A Dividends through the date of such
purchase (the "Series A Business Combination Amount") prior to or at the
closing of such Business Combination in accordance with the procedures set
forth in Section 6(b) hereof and (ii) all of the
8
<PAGE> 9
Series B Preferred Stock for the Series B Business Combination Amount (as such
term is defined in the Certificate of Designations relating to the Series B
Preferred Stock (the "Series B Certificate") prior to or at the Closing of the
Business Combination in accordance with the procedures set forth in the Series
B Certificate.
(b) At the commencement of a Business Combination Purchase, a
written notice (the "Business Combination Purchase Notice") of such Business
Combination Purchase shall be mailed to each holder of record of shares of
Series A Preferred Stock addressed to such holder at such holder's mailing
address as it appears in the stock register of the Corporation. Each such
Business Combination Purchase Notice shall contain all instructions and
materials necessary to enable such holder of Series A Preferred Stock to submit
such holder's shares for redemption pursuant to the Business Combination
Purchase and shall state:
(i) that the Business Combination Purchase is being made
pursuant to this Section 6 hereof and that all shares of Series A Preferred
Stock will be redeemed;
(ii) the parties to the Business Combination and the terms
and timing of the Business Combination;
(iii) the aggregate Series A Business Combination Amount of
all of the outstanding shares of Series A Preferred Stock;
(iv) the Series A Business Combination Amount per share and
the date (the "Business Combination Purchase Date") on which the Corporation
shall redeem shares pursuant to the Business Combination Purchase;
(v) that, unless the Corporation defaults in making the
payment pursuant to the Business Combination Purchase, all shares of Series A
Preferred Stock shall cease to accrue and cumulate Series A Dividends from and
after the Business Combination Purchase Date;
9
<PAGE> 10
(vi) that holders of Series A Preferred Stock will be
required to surrender the certificate or certificates representing such shares,
together with a form entitled "Option of Stockholder to Elect Purchase" (or
other appropriate form letter of transmittal) to be mailed to the holders with
such Business Combination Purchase Notice, to the Corporation at the address
specified in the Business Combination Purchase Notice prior to the close of
business on the Business Day next preceding the Business Combination Purchase
Date; and
(vii) such other information as the Corporation, in its sole
discretion, deems appropriate.
(c) In the event of a change in the parties to, or any material
change in the terms or the timing of, any Business Combination, the Corporation
shall give the holders of the Series A Preferred Stock written notice in
accordance with Section 6(b) hereof describing such change at least ten (10)
Business Days prior to the Business Combination Purchase Date (subject, with
respect to such ten Business Day limitation, to any applicable law or
regulation requiring a longer notice or waiting period).
(d) The Business Combination Purchase Date shall be a date
occurring no earlier than ten (10) Business Days and no later than forty (40)
Business Days after the mailing of the Business Combination Purchase Notice
(subject, with respect to such limitations, to Section 6(c) hereof and any
applicable law or regulation requiring a longer notice or waiting period).
(e) On the Business Combination Purchase Date, the Corporation
shall (i) redeem shares of the Series A Preferred Stock pursuant to the
Business Combination Purchase Offer and (ii) set aside in a separate account,
for the benefit of holders of shares of Series A Preferred Stock, at a
federally insured bank or savings institution doing business in the Borough of
Manhattan in the City of New York and having consolidated capital and surplus
of not less than $100 million, money sufficient to pay the aggregate Series A
Business Combination Amount of all outstanding shares of Series A Preferred
Stock. The Corporation shall promptly mail or deliver to the holders of Series
A
10
<PAGE> 11
Preferred Stock so redeemed, payment in an amount equal to the purchase price
payable in respect of such shares owned by such holders.
7. Voting.
Except as required by the General Corporate Law of the State of
Delaware or as otherwise provided herein, the holders of shares of Series A
Preferred Stock shall not be entitled to any voting rights.
8. Recapitalization.
In the event of any recapitalization of the outstanding shares of
capital stock of the Corporation, whether by merger or otherwise (including in
a Business Combination) and subject to Section 6 hereof, shares of Series A
Preferred Stock and Series B Preferred Stock shall be exchanged for or
converted into the identical consideration, except that the shares of Series A
Preferred Stock and shares of Series B Preferred Stock may each be converted
into or exchanged for shares of the surviving or resulting corporation having
identical terms to the Series A Preferred Stock and Series B Preferred Stock,
respectively.
9. Certain Definitions.
For purposes of this Section 9 of this Article FIFTH, the following
terms shall have the meanings set forth below:
"Affiliate" means, when used with reference to any Person, any Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with that Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct or cause the direction of the management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
11
<PAGE> 12
"Business Combination" means any consolidation, merger, share exchange
or other similar transaction, involving the Corporation or any Subsidiary of
the Corporation, or the transfer (by lease, assignment, sale or otherwise) of
all or substantially all of the properties and assets of the Corporation, in a
single transaction or through a series of related transactions, to another
Person or group of affiliated Persons, or the entering into any such
transaction or transactions by the Corporation or any Subsidiary of the
Corporation if such transaction or transactions in the aggregate would result
in a sale, transfer or other disposition of (i) Capital Stock having more than
50% of the voting power of the Corporation or (ii) all or substantially all of
the assets of the Corporation and its Subsidiaries on a consolidated basis.
"Business Day" means any day other than a Saturday, a Sunday, any day
on which the New York Stock Exchange is closed or any other day on which
banking institutions in New York, New York are authorized or required by law to
be closed.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock or any and all
equivalent ownership interests in a Person.
"Person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Subsidiary" means, with respect to any Person, any corporation,
limited or general partnership, limited liability company, trust, association
or other business entity of which an aggregate of 50% or more of the
outstanding Capital Stock or other interests entitled to vote in the election
of the board of directors of such corporation (irrespective of whether, at the
time, Capital Stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency),
managers, trustees or other controlling Persons, or an equivalent controlling
interest therein, of such Person is, at the time, directly or indirectly, owned
by such Person and/or one or more Affiliates of such Person.
[SIGNATURE PAGE FOLLOWS]
12
<PAGE> 13
IN WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true under the penalties of
perjury this 15th day of October, 1999.
By: /s/ Frank A.Coyle
---------------------------------
Name: Frank A. Coyle
Title: Secretary and General Counsel
13
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES B PREFERRED STOCK
OF
IASIS HEALTHCARE CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned, Frank A. Coyle, Secretary and General Counsel of
IASIS Healthcare Corporation (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, pursuant
to Section 151(g) thereof and in accordance with the provisions of Section 103
thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
of the Corporation (the "Board of Directors") by the Certificate of
Incorporation of the Corporation, the Board of Directors on October 15, 1999
adopted the following resolution creating a series of 50,000 shares of
preferred stock, par value $.01 per share, designated as Series B Preferred
Stock:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors in accordance with the provisions of its Certificate of
Incorporation, a series of preferred stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
<PAGE> 2
1. Liquidation Preference; Rank.
The maximum number of shares of Series B Preferred Stock shall be
50,000 and no more. The Series B Preferred Stock shall have a liquidation
preference of $1,000 per share (the "Series B Stated Amount"), plus any
dividends accrued but not paid on the Series B Preferred Stock pursuant to
Section 2 hereof, whether or not earned or declared, to the date fixed for
Liquidation (as hereinafter defined in Section 4(a) hereof) of the Corporation
(the "Series B Liquidation Preference").
The Series B Preferred Stock ranks, with respect to rights to receive
dividends and distributions upon Liquidation: (a) senior to the Corporation's
Common Stock and any class or series of preferred stock issued by the
Corporation whose terms provide specifically that such class or series will
rank junior to the Series B Preferred Stock with respect to rights to receive
payment of dividends and distributions upon Liquidation or fail to specify the
ranking of such class or series relative to the Series B Preferred Stock with
respect to rights to receive payment of dividends and distributions upon
Liquidation (together with the Common Stock, the "Junior Securities"); (b) on a
parity with any class or series of preferred stock issued by the Corporation,
including, without limitation, the Series A Preferred Stock, par value $.01 per
share of the Corporation (the "Series A Preferred Stock"), whose terms provide
specifically that such class or series shall rank on a parity with the Series B
Preferred Stock with respect to rights to receive payment of dividends and
distributions upon Liquidation (the "Parity Securities"); and (c) junior to any
class or series of preferred stock issued by the Corporation whose terms
provide specifically that such class or series shall rank senior to the Series
B Preferred Stock with respect to rights to receive payment of dividends and
distributions upon Liquidation (the "Senior Securities").
2. Dividends.
(a) Each holder of Series B Preferred Stock shall be
entitled to receive, out of the funds of the Corporation legally
available therefor, cumulative dividend payments, payable in accordance
with this Section 2.
2
<PAGE> 3
(b) Dividends on each share of Series B Preferred Stock (the
"Series B Dividend") shall be payable in cash on October 15th and April 15th of
each year when, as and if declared by the Board of Directors of the
Corporation, commencing April 15, 2000 at a rate of 16% of the Series B Stated
Amount per annum. Series B Dividends payable on the Series B Preferred Stock
for any period less than a full year shall be computed on the basis of the
actual number of days elapsed and the actual number of days for such year.
(c) Series B Dividends shall accrue and be cumulative from
the date of original issuance of the Series B Preferred Stock whether or not
the Corporation has earnings or profits, whether or not there are funds legally
available for the payment of such Series B Dividends and whether or not Series
B dividends are declared or paid.
(d) Series B Dividends shall be paid to the holders of record
of shares of Series B Preferred Stock as each appears in the stock register of
the Corporation at the close of business on the record date therefor, which
record date shall be set by the Board of Directors of the Corporation, in its
sole discretion, subject to the requirements of applicable law.
(e) Notwithstanding the foregoing, no dividends shall be paid
on the shares of Series B Preferred Stock, unless an amount equal to the per
share dividend of the Series B Preferred Stock is concurrently paid on each
then outstanding share of Series A Preferred Stock.
3. Redemption.
(a) Redemption at the Option of the Corporation. The Series B
Preferred Stock may be redeemed at the option of the Corporation, in whole or
in part, at any time or from time to time, out of funds legally available
therefor. If less than all of the outstanding Series B Preferred Stock are to
be redeemed, the Corporation shall either (i) redeem a pro rata portion of the
shares of Series B Preferred Stock held by each holder, based on the number of
shares held by each holder or (ii) select the shares to be redeemed by lot. The
Corporation may redeem the Series B Preferred Stock by payment in cash, for
each share of Series B Preferred Stock to be redeemed, in an amount (the
3
<PAGE> 4
"Series B Optional Redemption Payment") equal to the Series B Stated Amount,
together with an amount equal to all accrued and unpaid Series B Dividends on
such shares through the date upon which such shares are redeemed (the "Series B
Optional Redemption Date"). Any redemption pursuant to this Section 3(a) shall
be made upon not less than thirty (30) days' prior written notice (which notice
shall comply with the provisions of Section 3(c) hereof ) mailed to each holder
of Series B Preferred Stock at such holder's address as shown in the stock
register of the Corporation. Notwithstanding the foregoing, no redemption of
the Series B Preferred Stock may be made pursuant to this Section 3(a), unless
concurrently therewith an equal percentage of the then outstanding shares of
Series A Preferred Stock are redeemed.
(b) Mandatory Redemption. Except as may be, and solely to the
extent, prohibited by any instrument relating to indebtedness of the
Corporation then outstanding (a "Loan Agreement"), on October 15, 2020 or as
soon thereafter as not prohibited by any such Loan Agreement (the "Series B
Mandatory Redemption Date"), the Corporation shall redeem, out of funds legally
available therefor, all of the then outstanding shares of Series B Preferred
Stock. The redemption pursuant to this Section 3(b) shall be made upon not less
than thirty (30) days' prior notice (which notice shall comply with the
provisions of Section 3(c) hereof) mailed to each holder of Series B Preferred
Stock at such holder's address as shown in the stock register of the
Corporation; provided, however, that the Corporation's failure to give such
notice shall in no way affect its obligation to redeem the shares of Series B
Preferred Stock as provided in this Section 3(b). The redemption price for each
share of Series B Preferred Stock redeemed pursuant to this Section 3(b) shall
be equal to the Series B Stated Amount per share, together with an amount equal
to all accrued and unpaid Series B Dividends on such share through the Series B
Mandatory Redemption Date (the "Series B Mandatory Redemption Payment").
(c) Redemption Notices. Notice of redemption (a "Series B
Redemption Notice") of shares of Series B Preferred Stock pursuant to Section
3(a) or 3(b) hereof shall be given by the Corporation by mailing a copy of such
notice to each holder of record of the shares of Series B Preferred Stock to be
redeemed at such holder's address appearing in the stock register of the
Corporation.
4
<PAGE> 5
The Series B Redemption Notice shall specify the amount of the Series B
Optional Redemption Payment or the Series B Mandatory Redemption
Payment, as the case may be, and the Series B Optional Redemption Date
or the Series B Mandatory Redemption Date, as the case may be, on which
the shares of Series B Preferred Stock to be redeemed will, upon
presentation and surrender of the certificates of stock evidencing such
shares, be redeemed. From and after the Series B Optional Redemption
Payment or the Series B Mandatory Redemption Date, as the case may be,
unless default shall be made by the Corporation in providing monies at
the time and place specified for the payment of the Series B Optional
Redemption Payment or the Series B Mandatory Redemption Payment, as the
case may be, pursuant to said notice, all Series B Dividends on the
shares of Series B Preferred Stock to be redeemed shall cease to accrue
and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the Series B Optional
Redemption Payment or the Series B Mandatory Redemption Payment, as the
case may be, shall cease and terminate. In addition, all Series B
Dividends shall be deemed to have ceased accruing or cumulating from
and after the Series B Optional Redemption Date or the Series B
Mandatory Redemption Date on any shares of Series B Preferred Stock to
be redeemed, unless default shall be made by the Corporation in
providing monies at the time and place specified for the payment of the
Series B Optional Redemption Payment or the Series B Mandatory
Redemption Payment pursuant to terms hereof and the Series B Redemption
Notice delivered in connection therewith. All shares of Series B
Preferred Stock redeemed by the Corporation shall be retired and
cancelled and shall not thereafter be reissued.
(d) Insufficient Funds for Redemption or Loan
Agreement Block. If the funds of the Corporation legally available (or
available pursuant to the terms of any Loan Agreement) for redemption
of the Series B Preferred Stock on the Series B Mandatory Redemption
Date in respect of its redemption obligations pursuant to Section 3(b)
hereof are insufficient to redeem the shares of Series B Preferred
Stock to be so redeemed pursuant to Section 3(b) hereof, each holder of
the Series B Preferred Stock shall share ratably in any funds legally
available (or available pursuant to the terms of any Loan Agreement)
for redemption of such shares according to the amount which would be
payable with respect to the number of shares owned
5
<PAGE> 6
by such holder if the shares to be so redeemed on such Series B Mandatory
Redemption Date were redeemed in full. The shares of Series B Preferred Stock
not redeemed shall remain outstanding and entitled to all rights and
preferences provided herein. At any time thereafter, when additional funds of
the Corporation are legally available (or available under the terms of any Loan
Agreement) for the redemption of such shares of Series B Preferred Stock to be
redeemed, such funds will be used, as soon as practicable but no later than the
end of the next succeeding fiscal quarter, to redeem the balance of such
shares, or such portion thereof for which funds are then legally available (or
available under the terms of any Loan Agreement), on the basis set forth above.
4. Liquidation Rights; Priority.
(a) In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or involuntary (a
"Liquidation"), the holders of shares of Series B Preferred Stock shall be
entitled to receive, after payment or provision for payment of the debts and
other liabilities of the Corporation and after payment of the liquidation
preference of any Senior Securities, out of the remaining net assets of the
Corporation, whether such assets are capital or surplus and whether or not any
dividends as such are declared, the Series B Liquidation Preference per share
(and the pro rata portion thereof in the case of fractional shares), before any
distribution shall be made with respect to any Junior Securities. In the event
of any change in the Corporation's Series B Preferred Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the Series B Liquidation Preference per share of Series B
Preferred Stock shall be appropriately adjusted by the Board of Directors so as
to protect the rights of the holders of shares of Series B Preferred Stock.
(b) Except as otherwise provided in this Section 4, holders of
Series B Preferred Stock shall not be entitled to any participation in any
distribution of assets in the event of any Liquidation. For purposes of this
Section 4, neither the voluntary sale, lease, conveyance, exchange or transfer
(for cash, securities or other consideration) of all or substantially all of
the assets of the Corporation, nor the consolidation or merger of the
Corporation with one or more Persons
6
<PAGE> 7
(as defined in Section 8 hereof), shall be deemed to be a voluntary or
involuntary Liquidation.
(c) If, upon any Liquidation, the Series B Liquidation
Preference is not paid in full, the holders of Series B Preferred Stock shall
share pro rata in such distribution with other Parity Securities. If, upon any
Liquidation, the amounts payable with respect to the Series B Preferred Stock
and any Parity Securities are not paid in full, holders of the Series B
Preferred Stock and holders of any Parity Securities will share ratably in any
distribution of the assets of the Corporation in proportion to the respective
amounts that would be payable per share if such assets were sufficient to
permit payment in full of such amounts.
(d) Written notice of any Liquidation stating a payment date and
the place where the Series B Liquidation Preference shall be payable, shall be
given by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to each holder of record of the Series B Preferred Stock at his
address as the same shall appear in the stock register of the Corporation.
(e) The amount payable upon Liquidation with respect to each
fractional share of the Series B Preferred Stock outstanding shall be equal to
a ratably proportionate amount of the Series B Liquidation Preference.
5. Restricted Payments.
The Corporation may not directly or indirectly declare, pay or set
apart for payment dividends on, or make any payment on account of, or set apart
for payment money for a sinking or other similar fund for the purchase,
redemption or other acquisition of, or make any distribution in respect of,
whether in cash, obligations or shares of the Corporation or other property,
any Junior Securities (or options, rights or warrants to acquire shares of
Junior Securities) if at the time of such action, the Corporation is in arrears
in the payment of Series B Dividends, meaning that the amount of accrued and
cumulated dividends determined in accordance with Section 2(b) hereof on the
Series B Preferred Stock has not, in full, been declared and paid in cash. None
of the foregoing restrictions shall apply to: (i) the acquisition of Junior
7
<PAGE> 8
Securities (or options, rights or warrants to acquire shares of Junior
Securities) in exchange for or upon conversion thereof into shares of Capital
Stock (as defined in Section 8 hereof) of the Corporation (other than Parity
Securities or Senior Securities) or upon the exercise of options, rights or
warrants to acquire such shares; (ii) the repurchase of Capital Stock of the
Corporation from employees or former employees of the Corporation pursuant to
employee benefit plans, employment agreements or securityholder agreements;
(iii) the acquisition of any shares of Capital Stock of the Corporation or
options, rights or warrants to acquire such shares in connection with a
purchase price adjustment arising out of acquisitions by the Corporation
pursuant to which such shares of Capital Stock or options, rights or warrants
to acquire such shares were issued; (iv) the rescission of any agreement by the
Corporation pursuant to which shares of Capital Stock of the Corporation or
options, rights or warrants to acquire such shares were issued; or (v) a
dividend on Junior Securities at any time in additional shares of the Junior
Security.
6. Business Combinations.
(a) Without the prior approval of the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock and Series
A Preferred Stock, voting together as a single class, the Corporation will not
consummate a Business Combination or permit a Business Combination to occur
unless the Corporation shall have redeemed (a "Business Combination Purchase
Offer") all of the outstanding shares of (i) Series B Preferred Stock for cash
at a purchase price equal to the Series B Stated Amount per share (and the pro
rata portion thereof in the case of fractional shares), together with an amount
equal to accrued and unpaid Series B Dividends through the date of such
purchase (the "Series B Business Combination Amount") prior to or at the
closing of such Business Combination in accordance with the procedures set
forth in Section 6(b) hereof and (ii) all of the Series A Preferred Stock for
the Series A Business Combination Amount (as such term is defined in the
Certificate of Designations relating to the Series A Preferred Stock (the
"Series A Certificate") prior to or at the Closing of the Business Combination
in accordance with the procedures set forth in the Series A Certificate.
8
<PAGE> 9
(b) At the commencement of a Business Combination Purchase, a
written notice (the "Business Combination Purchase Notice") of such Business
Combination Purchase shall be mailed to each holder of record of shares of
Series B Preferred Stock addressed to such holder at such holder's mailing
address as it appears in the stock register of the Corporation. Each such
Business Combination Purchase Notice shall contain all instructions and
materials necessary to enable such holder of Series B Preferred Stock to submit
such holder's shares for redemption pursuant to the Business Combination
Purchase and shall state:
(i) that the Business Combination Purchase is being made
pursuant to this Section 6 hereof and that all shares of Series B Preferred
Stock will be redeemed;
(ii) the parties to the Business Combination and the terms
and timing of the Business Combination;
(iii) the aggregate Series B Business Combination Amount of
all of the outstanding shares of Series B Preferred Stock;
(iv) the Series B Business Combination Amount per share
and the date (the "Business Combination Purchase Date") on which the
Corporation shall redeem shares pursuant to the Business Combination Purchase;
(v) that, unless the Corporation defaults in making the
payment pursuant to the Business Combination Purchase, all shares of Series B
Preferred Stock shall cease to accrue and cumulate Series B Dividends from and
after the Business Combination Purchase Date;
(vi) that holders of Series B Preferred Stock will be
required to surrender the certificate or certificates representing such shares,
together with a form entitled "Option of Stockholder to Elect Purchase" (or
other appropriate form letter of transmittal) to be mailed to the holders with
such Business Combination Purchase Notice, to the Corporation at the address
specified in the Business Combination Purchase Notice prior to the close of
business on the
9
<PAGE> 10
Business Day next preceding the Business Combination Purchase Date; and
(vii) such other information as the Corporation, in its
sole discretion, deems appropriate.
(c) In the event of a change in the parties to, or any material
change in the terms or the timing of, any Business Combination, the Corporation
shall give the holders of the Series B Preferred Stock written notice in
accordance with Section 6(b) hereof describing such change at least ten (10)
Business Days prior to the Business Combination Purchase Date (subject, with
respect to such ten Business Day limitation, to any applicable law or
regulation requiring a longer notice or waiting period).
(d) The Business Combination Purchase Date shall be a date
occurring no earlier than ten (10) Business Days and no later than forty (40)
Business Days after the mailing of the Business Combination Purchase Notice
(subject, with respect to such limitations, to Section 6(c) hereof and any
applicable law or regulation requiring a longer notice or waiting period).
(e) On the Business Combination Purchase Date, the Corporation
shall (i) redeem shares of the Series B Preferred Stock pursuant to the
Business Combination Purchase Offer and (ii) set aside in a separate account,
for the benefit of holders of shares of Series B Preferred Stock, at a
federally insured bank or savings institution doing business in the Borough of
Manhattan in the City of New York and having consolidated capital and surplus
of not less than $100 million, money sufficient to pay the aggregate Series B
Business Combination Amount of all outstanding shares of Series B Preferred
Stock. The Corporation shall promptly mail or deliver to the holders of Series
B Preferred Stock so redeemed, payment in an amount equal to the purchase price
payable in respect of such shares owned by such holders.
10
<PAGE> 11
7. Voting.
Except as required by the General Corporate Law of the State of
Delaware or as otherwise provided herein, the holders of shares of
Series B Preferred Stock shall not be entitled to any voting rights.
8. Recapitalization.
In the event of any recapitalization of the outstanding shares
of capital stock of the Corporation, whether by merger or otherwise
(including in a Business Combination) and subject to Section 6 hereof,
shares of Series B Preferred Stock and Series A Preferred Stock shall be
exchanged for or converted into the identical consideration, except that
the shares of Series B Preferred Stock and shares of Series A Preferred
Stock may each be converted into or exchanged for shares of the
surviving or resulting corporation having identical terms to the Series
B Preferred Stock and Series A Preferred Stock, respectively.
9. Certain Definitions.
For purposes of this Section 9 of this Article FIFTH, the
following terms shall have the meanings set forth below:
"Affiliate" means, when used with reference to any Person, any
Person directly or indirectly controlling, controlled by, or under
direct or indirect common control with that Person. For the purposes of
this definition, "control," when used with respect to any specified
Person, means the power to direct or cause the direction of the
management or policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Business Combination" means any consolidation, merger, share
exchange or other similar transaction, involving the Corporation or any
Subsidiary of the Corporation, or the transfer (by lease, assignment,
sale or otherwise) of all or substantially all of the properties and
assets of the Corporation, in a single transaction or through a series
of related transactions, to another Person or group of affiliated
Persons, or the entering into any such transaction or transactions by
the Corpora-
11
<PAGE> 12
tion or any Subsidiary of the Corporation if such transaction or transactions
in the aggregate would result in a sale, transfer or other disposition of (i)
Capital Stock having more than 50% of the voting power of the Corporation or
(ii) all or substantially all of the assets of the Corporation and its
Subsidiaries on a consolidated basis.
"Business Day" means any day other than a Saturday, a Sunday, any day
on which the New York Stock Exchange is closed or any other day on which
banking institutions in New York, New York are authorized or required by law to
be closed.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock or any and all
equivalent ownership interests in a Person.
"Person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Subsidiary" means, with respect to any Person, any corporation,
limited or general partnership, limited liability company, trust, association
or other business entity of which an aggregate of 50% or more of the
outstanding Capital Stock or other interests entitled to vote in the election
of the board of directors of such corporation (irrespective of whether, at the
time, Capital Stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency),
managers, trustees or other controlling Persons, or an equivalent controlling
interest therein, of such Person is, at the time, directly or indirectly, owned
by such Person and/or one or more Affiliates of such Person.
[SIGNATURE PAGE FOLLOWS]
12
<PAGE> 13
IN WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true under the penalties of
perjury this 15th day of October, 1999.
By: /s/ Frank A. Coyle
--------------------------------------
Name: Frank A. Coyle
Title: Secretary
13
<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED
BY-LAWS
OF
IASIS HEALTHCARE CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
Section 2. Annual Meetings. The Annual Meetings of
Stockholders for the election of directors shall be held on such date and at
such time as shall be
<PAGE> 2
designated from time to time by the Board of Directors. Any other proper
business may be transacted at the Annual Meeting of Stockholders.
Section 3. Special Meetings. Unless otherwise required by law
or by the certificate of incorporation of the Corporation, as amended and
restated from time to time (the "Certificate of Incorporation"), Special
Meetings of Stockholders, for any purpose or purposes, may be called by either
(i) the Chairman, if there be one, or (ii) the President, (iii) any Vice
President, if there be one, (iv) the Secretary or (v) any Assistant Secretary,
if there be one, and shall be called by any such officer at the request in
writing of (i) the Board of Directors, (ii) a committee of the Board of
Directors that has been duly designated by the Board of Directors and whose
powers and authority include the power to call such meetings or (iii)
stockholders owning a majority of the capital stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. At a Special Meeting of Stockholders, only
such business shall be conducted as shall be specified in the notice of meeting
(or any supplement thereto).
Section 4. Notice. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise required by law, the written notice of any meeting
shall be given not less than ten nor
2
<PAGE> 3
more than sixty days before the date of the meeting to each stockholder entitled
to vote at such meeting.
Section 5. Adjournments. Any meeting of the stockholders may
be adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 6. Quorum. Unless otherwise required by law or the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn
3
<PAGE> 4
the meeting from time to time, in the manner provided in Section 5, until a
quorum shall be present or represented.
Section 7. Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-laws, any question brought before any
meeting of stockholders, other than the election of directors, shall be decided
by the vote of the holders of a majority of the total number of votes of the
capital stock represented and entitled to vote thereat, voting as a single
class. Unless otherwise provided in the Certificate of Incorporation, and
subject to Section 5 of Article V hereof, each stockholder represented at a
meeting of stockholders shall be entitled to cast one vote for each share of the
capital stock entitled to vote thereat held by such stockholder. Such votes may
be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in such officer's discretion, may require that any
votes cast at such meeting shall be cast by written ballot.
Section 8. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be
4
<PAGE> 5
signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or an officer or
agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. Every written consent shall bear the date of signature of
each stockholder who signs the consent and no written consent shall be effective
to take the corporate action referred to therein unless, within sixty days of
the earliest dated consent delivered in the manner required by this Section 8 to
the Corporation, written consents signed by a sufficient number of holders to
take action are delivered to the Corporation by delivery to its registered
office in the state of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing and who, if the
action had been taken at a meeting, would have been entitled to notice of the
meeting if the record date for such meeting had
5
<PAGE> 6
been the date that written consents signed by a sufficient number of holders to
take the action were delivered to the Corporation as provided above in this
section.
Section 9. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder of the Corporation who is present.
Section 10. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 9 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 11. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of
6
<PAGE> 7
the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) the determination of when the polls
shall open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at or participation in the meeting
to stockholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (v) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (vi) limitations on the time allotted to questions or
comments by participants.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. Unless otherwise
required by the Certificate of Incorporation, the Board of Directors shall
consist of
7
<PAGE> 8
not less than three nor more than eighteen members, the exact number of which
shall initially be fixed from time to time by the Board of Directors. Except as
provided in Section 2 of this Article III, directors shall be elected by a
plurality of the votes cast at the Annual Meetings of Stockholders and each
director so elected shall hold office until the next Annual Meeting of
Stockholders and until such director's successor is duly elected and qualified,
or until such director's earlier death, resignation or removal. Any director may
resign at any time upon written notice to the Corporation. Directors need not be
stockholders.
Section 2. Vacancies. Unless otherwise required by law or the
Certificate of Incorporation, vacancies arising through death, resignation,
removal, an increase in the number of directors or otherwise may be filled only
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal.
Section 3. Duties and Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws required to be exercised or done by the stockholders.
8
<PAGE> 9
Section 4. Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Regular meetings of the Board of Directors may be held without notice at such
time and at such place as may from time to time be determined by the Board of
Directors. Special meetings of the Board of Directors may be called by the
Chairman, if there be one, the President, or by any director. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight (48) hours before the date of the
meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
Section 5. Quorum. Except as otherwise required by law or the
Certificate of Incorporation, at all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting of the time and
place of the adjourned meeting, until a quorum shall be present.
Section 6. Actions by Written Consent. Unless otherwise
provided in the Certificate of Incorporation, or these By-Laws, any action
required or permitted
9
<PAGE> 10
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided in the Certificate of Incorporation, members of the Board of
Directors of the Corporation, or any committee thereof, may participate in a
meeting of the Board of Directors or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 7 shall constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a designation
by the Board of Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously
10
<PAGE> 11
appoint another member of the Board of Directors to act at the meeting in the
place of any absent or disqualified member. Any committee, to the extent
permitted by law and provided in the resolution establishing such committee,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it. Each committee shall keep regular minutes and report to the Board of
Directors when required.
Section 9. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director, payable in cash or securities. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of
11
<PAGE> 12
Directors or committee thereof which authorizes the contract or transaction, or
solely because the director or officer's vote is counted for such purpose if (i)
the material facts as to the director or officer's relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to the director or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, also may choose a Chairman
of the Board of
12
<PAGE> 13
Directors (who must be a director) and one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices may
be held by the same person, unless otherwise prohibited by law or the
Certificate of Incorporation. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors, at its first
meeting held after each Annual Meeting of Stockholders (or action by written
consent of stockholders in lieu of the Annual Meeting of Stockholders), shall
elect the officers of the Corporation who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors; and all officers of the
Corporation shall hold office until their successors are chosen and qualified,
or until their earlier death, resignation or removal. Any officer elected by the
Board of Directors may be removed at any time by the affirmative vote of the
Board of Directors. Any vacancy occurring in any office of the Corporation shall
be filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and
13
<PAGE> 14
on behalf of the Corporation by the President or any Vice President or any other
officer authorized to do so by the Board of Directors and any such officer may,
in the name of and on behalf of the Corporation, take all such action as any
such officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Corporation, unless the
Board of Directors designates the President as the Chief Executive Officer, and,
except where by law the signature of the President is required, the Chairman of
the Board of Directors shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board of Directors. During the absence or disability of the
President, the Chairman of the Board of Directors shall exercise all the powers
and discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such
14
<PAGE> 15
other powers as may from time to time be assigned by these By-Laws or by the
Board of Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the Corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall execute all bonds, mortgages, contracts
and other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-Laws, the Board of Directors or
the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings of
the stockholders and the Board of Directors. If there be no Chairman of the
Board of Directors, or if the Board of Directors shall otherwise designate, the
President shall be the Chief Executive Officer of the Corporation. The President
shall also perform such other duties and may exercise such other powers as may
from time to time be assigned to such officer by these By-Laws or by the Board
of Directors.
Section 6. Vice Presidents. At the request of the President or
in the President's absence or in the event of the President's inability or
refusal to act (and if
15
<PAGE> 16
there be no Chairman of the Board of Directors), the Vice President, or the Vice
Presidents if there is more than one (in the order designated by the Board of
Directors), shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If there
be no Chairman of the Board of Directors and no Vice President, the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the President or in the event of the inability or refusal of the President to
act, shall perform the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for committees of the Board of
Directors when required. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, the Chairman of the Board of Directors or the President, under
whose supervision the Secretary shall be. If the Secretary shall be unable or
shall refuse to cause to be given notice of all meetings of
16
<PAGE> 17
the stockholders and special meetings of the Board of Directors, and if there be
no Assistant Secretary, then either the Board of Directors or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest to the affixing by such officer's signature.
The Secretary shall see that all books, reports, statements, certificates and
other documents and records required by law to be kept or filed are properly
kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all transactions as Treasurer and of the financial
17
<PAGE> 18
condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the office of the Treasurer and for the restoration
to the Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Secretary, and in the absence of the
Secretary or in the event of the Secretary's disability or refusal to act, shall
perform the duties of the Secretary, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of the Treasurer's disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions
18
<PAGE> 19
upon the Treasurer. If required by the Board of Directors, an Assistant
Treasurer shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the office of Assistant Treasurer and for the
restoration to the Corporation, in case of the Assistant Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the Assistant Treasurer's
possession or under the Assistant Treasurer's control belonging to the
Corporation.
Section 11. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary
19
<PAGE> 20
of the Corporation, certifying the number of shares owned by such stockholder in
the Corporation.
Section 2. Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or the owner's legal representative, to advertise the
same in such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed or the issuance of such new certificate.
20
<PAGE> 21
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be issued. No transfer of stock shall be valid as
against the Corporation for any purpose until it shall have been entered in the
stock records of the Corporation by an entry showing from and to whom
transferred.
Section 5. Record Date.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders
21
<PAGE> 22
shall apply to any adjournment of the meeting; providing, however, that the
Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date shall not be more than ten days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery to its registered office in this
State, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in
22
<PAGE> 23
writing without a meeting shall be at the close of business on the day on which
the Board of Directors adopts the resolutions taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 6. Record Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise required by
law.
ARTICLE VI
23
<PAGE> 24
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required
by law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance of
a person at a meeting, present in person or represented by proxy, shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting at the beginning of the meeting
to the transaction of any business because the meeting is not lawfully called or
convened.
24
<PAGE> 25
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the requirements of the DGCL and the provisions of the
Certificate of Incorporation, if any, may be declared by the Board of Directors
at any regular or special meeting of the Board of Directors (or any action by
written consent in lieu thereof in accordance with Section 6 of Article III
hereof), and may be paid in cash, in property, or in shares of the Corporation's
capital stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
25
<PAGE> 26
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 1. Power to Indemnify in Actions, Suits or Proceedings
other than Those by or in the Right of the Corporation. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or
26
<PAGE> 27
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim,
27
<PAGE> 28
issue or matter as to which such person shall have been adjudged to be liable to
the Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iv) by the stockholders. Such
determination shall be made, with respect to former directors and officers, by
any person or persons having the authority to act on the matter on behalf of the
Corporation. To the extent, however, that a present or former
28
<PAGE> 29
director or officer of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith, without the necessity of authorization in
the specific case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article VIII, a person shall be deemed to
have acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
such person's conduct was unlawful, if such person's action is based on the
records or books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation or
another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent.
29
<PAGE> 30
The provisions of this Section 4 shall not be deemed to be exclusive or to limit
in any way the circumstances in which a person may be deemed to have met the
applicable standard of conduct set forth in Section 1 or 2 of this Article VIII,
as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery in the State of Delaware
for indemnification to the extent otherwise permissible under Sections 1 and 2
of this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
30
<PAGE> 31
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation, any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
31
<PAGE> 32
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power or
the obligation to indemnify such person against such liability under the
provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent
32
<PAGE> 33
corporation if its separate existence had continued. For purposes of this
Article VIII, references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for proceedings
to enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer in connection with a
33
<PAGE> 34
proceeding (or part thereof) initiated by such person unless such proceeding (or
part thereof) was authorized or consented to by the Board of Directors of the
Corporation.
Section 12. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses
to employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
----------
Section 1. Amendments. These By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice of
such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case may
be. All such amendments must be approved by either the holders of a majority of
the outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article
IX and in these By-Laws generally, the term "entire Board of Directors" means
the total number of directors which the Corporation would have if there were no
vacancies.
34
<PAGE> 35
* * *
Adopted as of: 10/8/99
<PAGE> 1
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
OF
BAPTIST JOINT VENTURE HOLDINGS, INC.
FIRST: The name of the Corporation is Baptist Joint Venture
Holdings, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 1st day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF INCORPORATION
OF
BEAUMONT HOSPITAL HOLDINGS, INC.
FIRST: The name of the Corporation is Beaumont Hospital
Holdings, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 4th day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.7
CERTIFICATE OF INCORPORATION
OF
BILTMORE SURGERY CENTER, INC.
FIRST: The name of the Corporation is Biltmore Surgery Center,
Inc. (hereinafter, the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 1st day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.8
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
BILTMORE SURGERY CENTER, INC.
------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
------------------------------------------
The Biltmore Surgery Center, Inc., a Delaware corporation (hereinafter
called the "Corporation"), does hereby certify as follows:
FIRST: Article FIRST of the Corporation's Certificate of Incorporation is
hereby amended to read in its entirety as set fort below:
"FIRST: The name of the corporation is Biltmore Surgery Center Holdings,
Inc. "(hereinafter the "Corporation")."
SECOND: The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed in its corporate name this 31st day of October, 1999.
Biltmore Surgery Center, Inc.
By: /s/ Frank A. Coyle
------------------------
Name: Frank A. Coyle
Title: Secretary
<PAGE> 1
EXHIBIT 3.9
CERTIFICATE OF INCORPORATION
OF
CLINICARE OF UTAH, INC.
FIRST: The name of the Corporation is CliniCare of Utah, Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 23rd day of September, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.10
CERTIFICATE OF INCORPORATION
OF
DAVIS HOSPITAL & MEDICAL CENTER, INC.
FIRST: The name of the Corporation is Davis Hospital & Medical
Center, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 23rd day of September, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.11
CERTIFICATE OF INCORPORATION
OF
DAVIS SURGICAL CENTER HOLDINGS, INC.
FIRST: The name of the Corporation is Davis Surgical Center
Holdings, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
<PAGE> 2
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
2
<PAGE> 3
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 1st day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.12
CERTIFICATE OF INCORPORATION
OF
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
FIRST: The name of the Corporation is First Choice Physicians
Network Holdings, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 1st day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.13
CERTIFICATE OF INCORPORATION
OF
HEALTH CHOICE ARIZONA, INC.
FIRST: The name of the Corporation is Health Choice Arizona,
Inc. (hereinafter, the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 1st day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.14
CERTIFICATE OF INCORPORATION
OF
IASIS HEALTHCARE HOLDINGS, INC.
FIRST: The name of the Corporation is IASIS Healthcare
Holdings, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the GCL or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of
2
<PAGE> 3
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 23rd day of September, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.15
CERTIFICATE OF INCORPORATION
OF
IASIS MANAGEMENT COMPANY
FIRST: The name of the Corporation is IASIS Management
Company (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
Deborah M. Reusch
P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
<PAGE> 2
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the GCL or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 4th day of October, 1999.
/s/ Deborah M. Reusch
---------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.16
CERTIFICATE OF INCORPORATION
OF
JORDAN VALLEY HOSPITAL, INC.
FIRST: The name of the Corporation is Jordan Valley Hospital,
Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except as is expressly provided
by the GCL, as the same exists or may hereafter be amended to further
limit or eliminate such liability. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my hand
this 23rd day of September, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.17
CERTIFICATE OF INCORPORATION
OF
METRO AMBULATORY SURGERY CENTER, INC.
FIRST: The name of the Corporation is Metro Ambulatory Surgery
Center, Inc. (hereinafter, the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as is expressly provided by the GCL,
as the same exists or may hereafter be amended to further limit or
eliminate such liability. Any repeal or modification of this Article SIXTH
by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
1st day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.18
CERTIFICATE OF INCORPORATION
OF
PIONEER VALLEY HEALTH PLAN, INC.
FIRST: The name of the Corporation is Pioneer Valley Health Plan,
Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
<PAGE> 2
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as is expressly provided by the GCL,
as the same exists or may hereafter be amended to further limit or
eliminate such liability. Any repeal or modification of this Article SIXTH
by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
2
<PAGE> 3
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
23rd day of September, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.19
CERTIFICATE OF INCORPORATION
OF
PIONEER VALLEY HOSPITAL, INC.
FIRST: The name of the Corporation is Pioneer Valley Hospital, Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
<PAGE> 2
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as is expressly provided by the GCL,
as the same exists or may hereafter be amended to further limit or
eliminate such liability. Any repeal or modification of this Article SIXTH
by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
2
<PAGE> 3
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
23rd day of September, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.20
CERTIFICATE OF INCORPORATION
OF
ROCKY MOUNTAIN MEDICAL CENTER, INC.
FIRST: The name of the Corporation is Rocky Mountain Medical
Center, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
<PAGE> 2
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as is expressly provided by the GCL,
as the same exists or may hereafter be amended to further limit or
eliminate such liability. Any repeal or modification of this Article SIXTH
by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
2
<PAGE> 3
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
23rd day of September, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.21
CERTIFICATE OF INCORPORATION
OF
SALT LAKE REGIONAL MEDICAL CENTER, INC.
FIRST: The name of the Corporation is Salt Lake Regional Medical
Center, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
<PAGE> 2
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as is expressly provided by the GCL,
as the same exists or may hereafter be amended to further limit or
eliminate such liability. Any repeal or modification of this Article SIXTH
by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
2
<PAGE> 3
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
23rd day of September, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.22
CERTIFICATE OF INCORPORATION
OF
SANDY CITY HOLDINGS, INC.
FIRST: The name of the Corporation is Sandy City Holdings, Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
<PAGE> 2
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as is expressly provided by the GCL,
as the same exists or may hereafter be amended to further limit or
eliminate such liability. Any repeal or modification of this Article SIXTH
by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
2
<PAGE> 3
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
1st day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.23
CERTIFICATE OF INCORPORATION
OF
SOUTHRIDGE PLAZA HOLDINGS, INC.
FIRST: The name of the Corporation is Southridge Plaza Holdings,
Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
<PAGE> 2
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as is expressly provided by the GCL,
as the same exists or may hereafter be amended to further limit or
eliminate such liability. Any repeal or modification of this Article SIXTH
by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
2
<PAGE> 3
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
1st day of October, 1999.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.24
CERTIFICATE OF INCORPORATION
OF
SSJ ST. PETERSBURG HOLDINGS, INC.
FIRST: The name of the Corporation is SSJ St. Petersburg Holdings,
Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
<PAGE> 2
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as is expressly provided by the GCL,
as the same exists or may hereafter be amended to further limit or
eliminate such liability. Any repeal or modification of this Article SIXTH
by the stockholders of the Corporation shall not adversely affect any
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
2
<PAGE> 3
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
1st day of October, 1999.
/s/Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
3
<PAGE> 1
EXHIBIT 3.25
BY-LAWS
OF
[ ]
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
<PAGE> 2
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
Section 2. Annual Meetings. The Annual Meetings of Stockholders for the
election of directors shall be held on such date and at such time as shall be
designated from time to time by the Board of Directors. Any other proper
business may be transacted at the Annual Meeting of Stockholders.
Section 3. Special Meetings. Unless otherwise required by law or by the
certificate of incorporation of the Corporation, as amended and restated from
time to time (the "Certificate of Incorporation"), Special Meetings of
Stockholders, for any purpose or purposes, may be called by either (i) the
Chairman, if there be one, or (ii) the President, (iii) any Vice President, if
there be one, (iv) the Secretary or (v) any Assistant Secretary, if there be
one, and shall be called by any such officer at the request in writing of (i)
the Board of Directors, (ii) a committee of the Board of Directors that has
been duly designated by the Board of Directors and whose powers and authority
include the power to call such meetings or (iii) stockholders owning a majority
of the capital stock of the Corporation issued and outstanding and entitled to
2
<PAGE> 3
vote. Such request shall state the purpose or purposes of the proposed meeting.
At a Special Meeting of Stockholders, only such business shall be conducted as
shall be specified in the notice of meeting (or any supplement thereto).
Section 4. Notice. Whenever stockholders are required or permitted to
take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called.
Unless otherwise required by law, the written notice of any meeting shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
Section 5. Adjournments. Any meeting of the stockholders may be adjourned
from time to time to reconvene at the same or some other place, and notice need
not be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
3
<PAGE> 4
Section 6. Quorum. Unless otherwise required by law or the Certificate of
Incorporation, the holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. A quorum, once established, shall not be broken by the
withdrawal of enough votes to leave less than a quorum. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, in the manner
provided in Section 5, until a quorum shall be present or represented.
Section 7. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-laws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the
vote of the holders of a majority of the total number of votes of the capital
stock represented and entitled to vote thereat, voting as a single class.
Unless otherwise provided in the Certificate of Incorporation, and subject to
Section 5 of Article V hereof, each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such stockholder. Such votes may be cast
in person or by proxy but no proxy shall be voted on or after three years from
its date, unless such proxy provides for a longer period. The Board
4
<PAGE> 5
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in such officer's discretion, may require that any
votes cast at such meeting shall be cast by written ballot.
Section 8. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted and shall be delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to therein unless,
within sixty days of the earliest dated consent delivered in the manner
required by this Section 8 to the Corporation, written consents signed by a
sufficient number of holders to take action
5
<PAGE> 6
are delivered to the Corporation by delivery to its registered office in the
state of Delaware, its principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing and who, if the action had
been taken at a meeting, would have been entitled to notice of the meeting if
the record date for such meeting had been the date that written consents signed
by a sufficient number of holders to take the action were delivered to the
Corporation as provided above in this section.
Section 9. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
6
<PAGE> 7
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 10. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 9 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 11. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) the determination of when the polls
shall open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at or participation in the
meeting to stockholders of record of the corporation, their duly authorized
7
<PAGE> 8
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (v) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (vi) limitations on the time allotted to
questions or comments by participants.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of not less than one nor more than fifteen members, the exact
number of which shall initially be fixed by the Incorporator and thereafter
from time to time by the Board of Directors. Except as provided in Section 2 of
this Article III, directors shall be elected by a plurality of the votes cast
at the Annual Meetings of Stockholders and each director so elected shall hold
office until the next Annual Meeting of Stockholders and until such director's
successor is duly elected and qualified, or until such director's earlier
death, resignation or removal. Any director may resign at any time upon written
notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Unless otherwise required by law or the
Certificate of Incorporation, vacancies arising through death, resignation,
removal, an increase in the number of directors or otherwise may be filled only
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election
8
<PAGE> 9
and until their successors are duly elected and qualified, or until their
earlier death, resignation or removal.
Section 3. Duties and Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws required to be exercised or done by the
stockholders.
Section 4. Meetings. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman, if
there be one, the President, or by any director. Notice thereof stating the
place, date and hour of the meeting shall be given to each director either by
mail not less than forty-eight (48) hours before the date of the meeting, by
telephone or telegram on twenty-four (24) hours' notice, or on such shorter
notice as the person or persons calling such meeting may deem necessary or
appropriate in the circumstances.
Section 5. Quorum. Except as otherwise required by law or the
Certificate of Incorporation, at all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business
9
<PAGE> 10
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present.
Section 6. Actions by Written Consent. Unless otherwise provided in the
Certificate of Incorporation, or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided in the Certificate of Incorporation, members of the Board of Directors
of the Corporation, or any committee thereof, may participate in a meeting of
the Board of Directors or such committee by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
this Section 7 shall constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
10
<PAGE> 11
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to
the extent permitted by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director, payable in cash or securities. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensa-
11
<PAGE> 12
tion therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because the director or
officer's vote is counted for such purpose if (i) the material facts as to the
director or officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to the director or officer's relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified by the Board of Directors, a committee thereof
12
<PAGE> 13
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, also may choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless otherwise prohibited by law or
the Certificate of Incorporation. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors, at its first meeting held
after each Annual Meeting of Stockholders (or action by written consent of
stockholders in lieu of the Annual Meeting of Stockholders), shall elect the
officers of the Corporation who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the
13
<PAGE> 14
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier death,
resignation or removal. Any officer elected by the Board of Directors may be
removed at any time by the affirmative vote of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President or any
other officer authorized to do so by the Board of Directors and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the Board
of Directors, if there be one, shall preside at all meetings of the stockholders
14
<PAGE> 15
and of the Board of Directors. The Chairman of the Board of Directors shall be
the Chief Executive Officer of the Corporation, unless the Board of Directors
designates the President as the Chairman of the Board, and, except where by law
the signature of the President is required, the Chairman of the Board of
Directors shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized
by the Board of Directors. During the absence or disability of the President,
the Chairman of the Board of Directors shall exercise all the powers and
discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as may from time to time be assigned by these By-Laws or by the Board of
Directors.
Section 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of
Directors, have general supervision of the business of the Corporation and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The President shall execute all bonds, mortgages, contracts and
other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-Laws, the Board of Directors
or the President. In the absence or disability of the
15
<PAGE> 16
Chairman of the Board of Directors, or if there be none, the President shall
preside at all meetings of the stockholders and the Board of Directors. If
there be no Chairman of the Board of Directors, or if the Board of Directors
shall otherwise designate, the President shall be the Chief Executive Officer
of the Corporation. The President shall also perform such other duties and may
exercise such other powers as may from time to time be assigned to such officer
by these By-Laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or in the
President's absence or in the event of the President's inability or refusal to
act (and if there be no Chairman of the Board of Directors), the Vice
President, or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors), shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Each Vice President shall perform such
other duties and have such other powers as the Board of Directors from time to
time may prescribe. If there be no Chairman of the Board of Directors and no
Vice President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
16
<PAGE> 17
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for committees of the Board of
Directors when required. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the
Board of Directors, the Chairman of the Board of Directors or the President,
under whose supervision the Secretary shall be. If the Secretary shall be
unable or shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board of Directors, and if there be no
Assistant Secretary, then either the Board of Directors or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest to the affixing by such officer's
signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or
filed are properly kept or filed, as the case may be.
17
<PAGE> 18
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of the office of the Treasurer and for the restoration to the
Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property
of whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Secretary, and in the absence of the Secretary or in
the event of
18
<PAGE> 19
the Secretary's disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in
the event of the Treasurer's disability or refusal to act, shall perform the
duties of the Treasurer, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the Treasurer. If required by the Board
of Directors, an Assistant Treasurer shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of Assistant
Treasurer and for the restoration to the Corporation, in case of the Assistant
Treasurer's death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in the
Assistant Treasurer's possession or under the Assistant Treasurer's control
belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors
19
<PAGE> 20
may delegate to any other officer of the Corporation the power to choose such
other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by such stockholder in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate may
be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an
20
<PAGE> 21
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the
certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be issued. No transfer of stock shall be valid as
against the Corporation for any purpose until it shall have been entered in the
stock records of the Corporation by an entry showing from and to whom
transferred.
Section 5. Record Date.
(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
21
<PAGE> 22
thereof, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date shall not be more than
sixty nor less than ten days before the date of such meeting. If no record date
is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; providing, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by law, shall be the first
22
<PAGE> 23
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in this State, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to a corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by law, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolutions taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
23
<PAGE> 24
Section 6. Record Owners. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise required by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any director,
24
<PAGE> 25
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a person at a
meeting, present in person or represented by proxy, shall constitute a waiver
of notice of such meeting, except where the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the requirements of the DGCL and the provisions of the
Certificate of Incorporation, if any, may be declared by the Board of Directors
at any regular or special meeting of the Board of Directors (or any action by
written consent in lieu thereof in accordance with Section 6 of Article III
hereof), and may be paid in cash, in property, or in shares of the
Corporation's capital stock. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corpora-
25
<PAGE> 26
tion, or for any proper purpose, and the Board of Directors may modify or
abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is
26
<PAGE> 27
or was a director or officer of the Corporation, or is or was a director or
officer of the Corporation serving at the request of the Corporation as a
director or officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that such
27
<PAGE> 28
person is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation;
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made, with respect to a person who
28
<PAGE> 29
is a director or officer at the time of such determination, (i) by a majority
vote of the directors who are not parties to such action, suit or proceeding,
even though less than a quorum, or (ii) by a committee of such directors
designated by a majority vote of such directors, even though less than a
quorum, or (iii) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion or (iv) by the
stockholders. Such determination shall be made, with respect to former
directors and officers, by any person or persons having the authority to act on
the matter on behalf of the Corporation. To the extent, however, that a present
or former director or officer of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith, without the
necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Corporation, or, with respect to any criminal
action or proceeding, to have had no reasonable cause to believe such person's
conduct was unlawful, if such person's action is based on the records or books
of account of the Corporation or another enterprise, or on information supplied
to such person by the officers of the
29
<PAGE> 30
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise of which such person is or was serving at the
request of the Corporation as a director, officer, employee or agent. The
provisions of this Section 4 shall not be deemed to be exclusive or to limit in
any way the circumstances in which a person may be deemed to have met the
applicable standard of conduct set forth in Section 1 or 2 of this Article
VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article
30
<PAGE> 31
VIII, as the case may be. Neither a contrary determination in the specific case
under Section 3 of this Article VIII nor the absence of any determination
thereunder shall be a defense to such application or create a presumption that
the director or officer seeking indemnification has not met any applicable
standard of conduct. Notice of any application for indemnification pursuant to
this Section 5 shall be given to the Corporation promptly upon the filing of
such application. If successful, in whole or in part, the director or officer
seeking indemnification shall also be entitled to be paid the expense of
prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a director
or officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
the Certificate of Incorporation, any By-Law, agreement, vote of stockholders
31
<PAGE> 32
or disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power or the
obligation to indemnify such person against such liability under the provisions
of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a
32
<PAGE> 33
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers, so that
any person who is or was a director or officer of such constituent corporation,
or is or was a director or officer of such constituent corporation serving at
the request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall stand in the same position under the
provisions of this Article VIII with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued. For purposes of this
Article VIII, references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or
33
<PAGE> 34
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Any repeal or modification of this Article
VIII shall not adversely affect any right of indemnity of a present or former
director or officer of the Corporation existing hereunder at the time of such
repeal or modification with respect to acts or omissions occurring prior to
such repeal or modification.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
34
<PAGE> 35
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice of
such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case
may be. All such amendments must be approved by either the holders of a
majority of the outstanding capital stock entitled to vote thereon or by a
majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no
vacancies.
* * *
Adopted as of: _____________________
Last Amended as of: ________________
35
<PAGE> 1
EXHIBIT 3.26
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MEMORIAL HOSPITAL OF TAMPA, LP
The undersigned, General Partner, being the only general partner of
Memorial Hospital of Tampa, LP, and desiring to form a limited partnership
pursuant to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is Memorial Hospital of
Tampa, LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
--------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.27
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MESA GENERAL HOSPITAL, LP
The undersigned, General Partner, being the only general partner of
Mesa General Hospital, LP, and desiring to form a limited partnership pursuant
to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is Mesa General Hospital, LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
----------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.28
CERTIFICATE OF LIMITED PARTNERSHIP
OF
ODESSA REGIONAL HOSPITAL, LP
The undersigned, General Partner, being the only general partner of
Odessa Regional Hospital, LP, and desiring to form a limited partnership
pursuant to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is Odessa Regional Hospital,
LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
--------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.29
CERTIFICATE OF LIMITED PARTNERSHIP
OF
PALMS OF PASADENA HOSPITAL, LP
The undersigned, General Partner, being the only general partner of
Palms of Pasadena Hospital, LP, and desiring to form a limited partnership
pursuant to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is Palms of Pasadena
Hospital, LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
---------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.30
CERTIFICATE OF LIMITED PARTNERSHIP
OF
SOUTHWEST GENERAL HOSPITAL, LP
The undersigned, General Partner, being the only general partner of
Southwest General Hospital, LP, and desiring to form a limited partnership
pursuant to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is Southwest General
Hospital, LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
------------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.31
CERTIFICATE OF LIMITED PARTNERSHIP
OF
ST. LUKE'S BEHAVIORAL HOSPITAL, LP
The undersigned, General Partner, being the only general partner of
St. Luke's Behavioral Hospital, LP, and desiring to form a limited partnership
pursuant to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is St. Luke's Medical Center,
LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
---------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.32
CERTIFICATE OF LIMITED PARTNERSHIP
OF
ST. LUKE'S MEDICAL CENTER, LP
The undersigned, General Partner, being the only general partner of
St. Luke's Medical Center, LP, and desiring to form a limited partnership
pursuant to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is St. Luke's Medical Center,
LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
---------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.33
CERTIFICATE OF LIMITED PARTNERSHIP
OF
TEMPE ST. LUKE'S HOSPITAL, LP
The undersigned, General Partner, being the only general partner of
Tempe St. Luke's Hospital, LP, and desiring to form a limited partnership
pursuant to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is Tempe St. Luke's Hospital,
LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
---------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.34
CERTIFICATE OF LIMITED PARTNERSHIP
OF
TOWN & COUNTRY HOSPITAL, LP
The undersigned, General Partner, being the only general partner of
Town & Country Hospital, LP, and desiring to form a limited partnership pursuant
to the laws of the State of Delaware, certifies as follows:
1. The name of the Limited Partnership is Town & Country Hospital,
LP.
2. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
3. The name and address of its General Partner is IASIS Healthcare
Holdings, Inc., 450 Lexington Avenue, Suite 3350, New York, New York 10017.
IASIS Healthcare Holdings, Inc.
By: /s/ Frank A. Coyle
---------------------------------
Name: Frank A. Coyle
Title: Secretary
Dated: September 24, 1999
<PAGE> 1
EXHIBIT 3.35
This LIMITED PARTNERSHIP AGREEMENT (this "Agreement") is made and entered
into as of September 24, 1999, by and among IASIS HEALTHCARE HOLDINGS, INC., a
Delaware corporation ("Holdings"), as the general partner (the "General
Partner"), and IASIS HEALTHCARE LP, INC., a Delaware corporation, as the limited
partner, and each other person (as hereinafter defined) who subsequently becomes
a signatory to this agreement as a limited partner (collectively, the "Limited
Partners"). References in this Agreement to "Partner" or "Partners" shall be
references to one or more parties to this Agreement.
ARTICLE I
FORMATION and ORGANIZATION
Section 1.1 Formation. The Partners hereby associate as, form and
organize a limited partnership (the "Partnership") under and pursuant to the
Delaware Revised Uniform Limited Partnership Act (the "Act") and other relevant
laws of the state of Delaware and in accordance with and subject to the terms
and conditions set forth in this Agreement. A certificate of limited partnership
of the Partnership (the "Certificate") has been filed in conformity with the
Act.
Section 1.2 Name. The name of the Partnership shall be
"[ ]".
Section 1.3 Principal Place of Business. The Partnership's principal
place of business shall be at such place or places as the General Partner shall
from time to time determine.
Section 1.4 Purpose. The purpose of the Partnership shall be to engage
in any business or activity in which a limited partnership may engage under the
Act.
Section 1.5 Duration. The Partnership shall commence upon the filing
of the Certificate as specified in Section 17-201 of the Act and shall continue
until dissolved pursuant to Section 8.1.
<PAGE> 2
Section 1.6 General and Limited Partners. The Partnership shall
consist of the General Partner and the Limited Partners. Except as otherwise
expressly provided in this Agreement, the Limited Partners in their capacity as
such shall neither participate in making the decisions of the Partnership nor
have the power to manage or transact any Partnership business or act for or in
the name of, or otherwise bind, the Partnership. No Limited Partner shall ever
be personally liable for any part of the debts or other obligations of the
Partnership or any General Partner, or be obligated to make contributions to the
Partnership in excess of the Capital Contributions (as defined in Section 2.2)
required to be made by it pursuant to this Agreement.
Section 1.7 Indemnification of General Partner. The Partnership, its
receivers or its trustee, shall indemnify, hold harmless and pay all judgments
and claims against the General Partner, its officers, directors, shareholders,
employees, agents, subsidiaries and assigns from any liability, loss or damage
incurred by reason of any act performed, or omitted to be performed in
connection with the Partnership business, including reasonable costs, attorney
fees and any amount expended in the settlement of any claims of liability, loss
or damage, unless the loss, liability or damage was caused by the intentional
misconduct, gross negligence or knowing violation of law by the indemnified
person.
Section 1.8 Statutory Compliance. All real and personal property owned
by the Partnership shall be deemed owned by the Partnership as an entity and
held in its name, and no Partner shall have any ownership interests in any such
property in its individual name. The General Partner shall execute and, as
appropriate, file any and all documents and instruments as they may reasonably
deem necessary or appropriate with respect to the conduct of business by the
Partnership.
Section 1.9 No Obligation to Replenish Negative Capital Account.
Except as required under the Act, no Partner shall have any obligation at any
time to contribute any funds to replenish any negative balance in its Capital
Account (as defined in Section 2.4).
Section 1.10 Registered Office and Registered Agent. The address of
the registered office of the Partnership in the State of Delaware shall be
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, and
the name of the Partnership's registered agent at such address shall be The
Corporation Trust Company.
2
<PAGE> 3
ARTICLE II
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
Section 2.1 Initial Partnership Interests
The Partnership interests (the "Interests") as of the date of this
Agreement shall be as set forth in Exhibit A hereto. Exhibit A hereto may be
adjusted from time to time pursuant to the terms of this Agreement to reflect
(a) the admission of additional Limited Partners, (b) any sale, transfer,
assignment or other disposition of all or any part of any Interests of any
Partner or (c) any additional Capital Contributions (as hereinafter defined) of
any of the Partners. An Interest means, with respect to any Partner at any time,
such Partner's entire beneficial ownership interest in the Partnership at such
time, including such Partner's Capital Account, voting rights, and right to
share in profits, losses, cash distributions and all other benefits of the
Partnership as specified in this Agreement, together with such Partner's
obligations to comply with all of the terms of this Agreement.
Section 2.2 Initial Capital Contributions. Each Partner shall
contribute an amount of money or property to the Partnership as its capital
contribution ("Capital Contribution"), as set forth opposite the name of such
Partner on Exhibit A hereto.
Section 2.3 Additional Capital Contributions. The General Partner, in
its discretion, may make additional cash Capital Contributions to the
Partnership for purposes of paying Partnership expenses. Except as required by
the Act or otherwise provided in Section 2.2 and this Section 2.3, no Partner
shall have any obligations to make any Capital Contributions to the Partnership.
Section 2.4 Capital Accounts. Each Partner shall have a capital
account (a "Capital Account") which account shall be (a) increased by the amount
of cash and the fair market value of any property (net of liabilities assumed by
the Partnership and liabilities to which the property is subject) contributed by
such Partner, plus all items of income and gain of the Partnership allocated to
such Partner, (b) decreased by the amount of distributions to such Partner of
cash or other property (net of liabilities assumed by the Partner and
liabilities to which the property is subject), plus all items of loss and
deduction of the Partnership allocated to such Partner. The provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulation Section 1.704-1(b), and shall be inter-
3
<PAGE> 4
preted and applied in a manner consistent with such Treasury Regulations. Any
allocations pursuant to this Agreement shall comply with the qualified income
offset requirements of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and the
nonrecourse deduction or minimum gain chargeback requirements of Treasury
Regulation Section 1.704-2.
ARTICLE III
PROFITS AND LOSSES
All items of income, gain, loss, deduction and credit of the
Partnership shall be allocated for accounting and tax purposes as follows: one
percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited
Partners to be shared among them in proportion to their Interests.
ARTICLE IV
CONDUCT OF PARTNERSHIP AFFAIRS
Section 4.1 General Partners
(a) The General Partner shall have the right to, and shall
be fully responsible for, the management and control over the business of the
Partnership. The General Partner shall make all decisions affecting the business
of the Partnership, except if consent or approval of other Partners are required
under the Act or pursuant to the terms of this Agreement. Powers granted to the
General Partner hereunder include but not by way of limitation the power to
assign duties, to sign deeds, notes, deeds of trust, contracts and leases and to
assume direction of business operations. The General Partner shall have all
rights, powers and authority generally conferred by the Act or as otherwise
provided by law or necessary, advisable or consistent with accomplishing the
purposes of the Partnership. Further, without limiting the generality of the
foregoing, the General Partner have the right:
(i) to cause this Partnership to enter into other
partnerships as a general or limited partner and to exercise the authority and
to perform the duties required of this Partnership as a partner of any other
partnership;
4
<PAGE> 5
(ii) to protect and preserve the title to and the
interest of the Partnership in all of its property and assets, real, personal
and mixed;
(iii) to acquire, hold and dispose of property or
any interest in it;
(iv) to borrow money on behalf of the Partnership
and to encumber the Partnership assets or place title in the name of a nominee
for purposes of obtaining financing;
(v) to employ from time to time, at the expense of
the Partnership, consultants, accountants and attorneys;
(vi) to pay all expenses incurred in the operation
of this Partnership and all taxes, assessments, rents and other impositions
applicable to the Partnership or any part thereof; and
(vii) to assume any and all overall duties imposed
on a General Partner by the Act.
(b) Notwithstanding any other provision of this Agreement to
the contrary, without the prior written consent of all the Partners, the General
Partner shall have no authority to:
(i) do any act in contravention of this Agreement;
(ii) do any act which would make it impossible to
carry on the ordinary business of the Partnership, except as otherwise provided
in this Agreement;
(iii) knowingly perform any act that would subject
any other Partner to liability as a general partner in any jurisdiction;
(iv) dissolve, liquidate, consolidate or merge the
Partnership or authorize or agree to any of the foregoing;
(v) sell or lease, or otherwise dispose of, all or
substantially all of the assets of the Partnership, other than in its ordinary
course of business, or authorize or agree to any of the foregoing; and
5
<PAGE> 6
(vi) amend this Agreement.
Section 4.2 Tax Matters Partner. Holdings shall, in its capacity as a
General Partner of the Partnership, be the Tax Matters Partner for purposes of
Section 6231(a)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"). Holdings shall cause to be prepared and shall sign all returns of the
Partnership, make any election which is available to the Partnership, and
monitor any governmental tax authority in any audit that such authority may
conduct of the Partnership's books and records or other documents.
Each Partner shall take all actions required to cause the Limited
Partner to be (and continue as) such Tax Matters Partner and, as requested by
the Limited Partner, to otherwise authorize and appoint the Limited Partner as
that party with the sole authority to handle all tax matters of the Partnership.
Each Partner agrees to execute, certify, deliver, file and record at appropriate
public offices or deliver to the Limited Partner such documents as may be
requested by the Limited Partner to facilitate the handling of any tax matter as
the Limited Partner, in its sole discretion, deems necessary.
Section 4.3 Limited Partners.
(a) No Management and Control: The Limited Partner shall
take no part in the control, conduct or operation of the Partnership and shall
have no right or authority to act for or bind the Partnership including during
the winding up period following dissolution of the Partnership. If the General
Partner has been removed and the Partnership has been dissolved, one or more
Limited Partners may act for and bind the Partnership during the winding up
period, as approved by a majority of all Partners.
(b) Limitations: No Limited Partner shall have the right or
power to: (i) withdraw any part of its Capital Contribution except as a result
of the dissolution of the Partnership as provided in Article VIII or as
otherwise provided by law; (ii) bring an action for partition against the
Partnership; (iii) cause the termination and dissolution of the Partnership,
except as set forth in this Agreement; or (iv) demand or receive (x) interest on
its Capital Contributions or (y) any property from the Partnership other than
cash except as provided in Article VI. No Limited Partner shall have priority
over any other Limited Partner either as to the return of Capital Contributions
or as to items of Partnership income, gain, loss, deduction and
6
<PAGE> 7
credit, or distributions. Other than upon dissolution of the Partnership as
provided by this Agreement, there has been no time agreed upon when the Capital
Contribution of each Limited Partner may be returned.
Section 4.4 Compensation of Partners and Affiliates. No Partner shall
receive any compensation for its services to the Partnership, except (i)
reimbursement to the General Partner for costs and expenses reasonably incurred
by it on behalf of the Partnership, and (iii) compensation paid to Partners and
Affiliates of Partners which are engaged on behalf of the Partnership to provide
services or materials that are, in the reasonable judgment of the General
Partners, necessary or desirable for the Partnership.
Section 4.5 Good Faith Actions. No Partner, nor any of its officers,
directors, shareholders, constituent partners, trustees, representatives, agents
or employees, shall be liable to the Partnership or to any of the other Partners
for any action taken (or any failure to act) by it in good faith on behalf of
the Partnership and reasonably believed by it to be authorized or within the
scope of its authority hereunder, unless such action (or failure to act)
constitutes fraud, gross negligence or willful breach hereof or other willful
misconduct.
Section 4.6 Meetings of Partners. Meetings of Partners shall be held
at the Partnership's principal place of business as determined in Section 1.3,
or any other place agreed upon by the Partners. Meetings shall be held only when
called by a General Partner.
ARTICLE V
BOOKS and RECORDS
Section 5.1 Books and Records.
The General Partner shall keep complete and appropriate records and
books of account of all transactions and other matters related to the
Partnership's business. Except as otherwise expressly provided herein, such
books and records shall be maintained in accordance with generally accepted
accounting principles, consistently applied, and shall reflect the allocations
made pursuant to Article III. All such books and records shall be made available
at the principal office of the Partnership and shall be open to the reasonable
inspection and examination of the
7
<PAGE> 8
Partners or their duly authorized representatives during normal business hours.
Each Partner has the right to inspect, and copy during normal business hours,
the Partnership's records required to be maintained pursuant to this Section
5.1, and to obtain from the General Partners, promptly after becoming available,
a copy of the Limited Partnership's federal, state and local income tax or
information returns for each year.
ARTICLE VI
DISTRIBUTIONS
Section 6.1 Withdrawal. No Partner shall have the right to withdraw or
demand distributions of any amount in its Capital Account.
Section 6.2 Distributions. Distributions shall be made by the
Partnership to the Partners in the sole discretion of Holdings in its capacity
as a General Partner, to the extent of available cash, after servicing all
Partnership debt and provision of reasonable reserves for expenses and
contingencies, which distributions shall be made among the Partners in the
following proportion: one percent (1%) to the General Partner and ninety-nine
percent (99%) to the Limited Partners, to be allocated among them in accordance
with their respective partnership interests.
ARTICLE VII
TRANSFERS OF PARTNERSHIP INTERESTS
Section 7.1 Transfers by General Partners. No General Partner may
sell, transfer, assign, hypothecate, pledge or otherwise dispose of or encumber
all or any part of its Interest in the Partnership (whether voluntarily,
involuntarily or by operation of law), provided, however, that a General Partner
may pledge its Interest in the Partnership to secure the obligations of such
General Partner (as guarantor or otherwise) in respect of any bank financings,
and any purchaser of such Interest from the pledgee thereof in a sale which is
consummated in accordance with the Uniform Commercial Code shall be entitled to
all of the rights and benefits in respect of such Interest as such General
Partner had immediately prior to such sale.
8
<PAGE> 9
Section 7.2 Transfers by Limited Partners; Substitute Limited
Partners. No Limited Partner may sell, transfer, assign, hypothecate, pledge or
otherwise dispose of or encumber all or any part of its Interest except with the
written consent of the General Partner, provided, however, that a Limited
Partner may pledge its Interest in the Partnership to secure the obligations of
such Limited Partner (as guarantor or otherwise) in respect of any bank
financings, and any purchaser of such Interest from the pledgee thereof in a
sale which is consummated in accordance with the Uniform Commercial Code shall
be entitled to all of the rights and benefits in respect of such Interest as
such Limited Partner had immediately prior to such sale. Except as provided in
the preceding sentence, a Person to whom an Interest is disposed may be admitted
to the Company as a Limited Partner only with the consent of the General
Partner; and the General Partner's consent may be given or withheld in the
General Partner's sole discretion.
Section 7.3 Void Assignments. Any purported sale, transfer,
assignment, hypothecation, pledge or other disposition or encumbrance by a
Partner of any Interest in the Partnership not made strictly in accordance with
the provisions of this Article VII or otherwise permitted by this Agreement
shall be entirely null and void.
Section 7.4 Admission of Additional Limited Partners. The General
Partner may admit persons to the Partnership as additional Limited Partners on
such terms as all of the Partners shall determine; provided, that (a) each such
person shall execute a counterpart of this Agreement (as modified or amended
from time to time) and such other instruments necessary to admit such person to
the Partnership and to confirm the undertaking of such person to be bound by all
terms and provisions of this Agreement and (b) such person shall have paid or
cause to be paid all of the reasonable expenses of the Partnership connected
with such admission.
ARTICLE VIII
DISSOLUTION AND LIQUIDATION
Section 8.1 Dissolution. The Partnership shall be dissolved only upon
the first to occur of any one or more of the following:
(a) The agreement of the General Partner and Limited
Partners owning more than 66 2/3% of the outstanding interests to dissolve the
Partnership;
9
<PAGE> 10
(b) The sale, transfer or other disposition of all or
substantially all of the assets of the Partnership (not including a pledge,
assignment or transfer as collateral security for the performance by the
Partnership of its obligations with respect to any loans made for the purpose of
developing, constructing or operating the Project) or destruction thereof (if
the Partners decide not to rebuild such assets and continue the business of the
Partnership), unless all Partners agree to continue the Partnership for the
purpose of the receipt and collection of any payments or other consideration due
to it or for the fulfillment of any continuing obligations it may have, in which
event the Partnership shall be dissolved as soon as it has fulfilled any such
continuing obligations or has collected all such payments or consideration, or
the General Partner has reasonably determined that there is no material
likelihood that any further payments or consideration will be collected by the
Partnership;
(c) The acquisition by a Partner of all of the Interests of
all other Partners;
(d) The occurrence of an event specified under the laws of
Delaware as one effecting such dissolution, except that if, under the terms of
this Agreement, the Partnership is not required to terminate, and the
requirements for reconstituting the Partnership have been satisfied, then the
Partnership shall immediately be reconstituted and reformed pursuant to all the
applicable terms, conditions and provisions of this Agreement.
Section 8.2 Winding Up Affairs and Distribution of Assets.
(a) Upon dissolution of the Partnership (except dissolution
pursuant to Section 8.1(c)), and in the absence of an election to continue the
business of the Partnership pursuant to Section 8.1(b), Section 8.2, or its
reconstitution under Section 8.1(d), the General Partner or, if there is no
General Partner, a person who shall be designated for such purposes by unanimous
vote of the other Partners (a General Partner or the person so designated
hereinafter referred to as the "Liquidating Agent"), shall as soon as
practicable, wind up the affairs of the Partnership and sell and/or distribute
the assets of the Partnership. The Liquidating Agent shall have all of the
rights and powers with respect to the assets and liabilities of the Partnership
in connection with the liquidation and termination of the Partnership that the
General Partner would have with respect to the assets and liabilities of the
Partnership during the term of the Partnership, and the Liquidating Agent is
hereby expressly authorized
10
<PAGE> 11
and empowered to execute any and all documents necessary or desirable to
effectuate the liquidation and termination of the Partnership and the transfer
of any assets. The Liquidating Agent shall apply and distribute the proceeds of
the sale or liquidation of the assets and property of the Partnership in the
following order of priority, unless otherwise required by mandatory provisions
of applicable law:
(i) to pay (or to make provision for the payment
of) all creditors of the Partnership (including Partners who are creditors of
the Partnership), in the order of priority provided by law or otherwise, in
satisfaction of all debts, liabilities or obligations of the Partnership due
such creditors;
(ii) after the payment (or the provision for
payment) of all debts, liabilities and obligations of the Partnership in
accordance with clause (i) above, any balance remaining shall be distributed to
the Partners having positive Capital Accounts in relative proportion to those
Capital Accounts.
(b) The Liquidating Agent shall have sole discretion to
determine whether to liquidate all or any portion of the assets and property of
the Partnership and the consideration to be received therefor.
Section 8.3 Termination. Upon compliance with the distribution plan
set forth in Section 8.2(a), the Partnership shall cease to exist as a
Partnership, and the Liquidating Agent shall execute, acknowledge and cause to
be filed an appropriate certificate evidencing dissolution and termination of
the Partnership.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. Any notice to be given pursuant to this Agreement
shall be given in writing and shall be delivered personally, electronically,
telegraphically or by express, certified or registered mail (i) to the
Partnership at its principal place of business set forth in Section 1.3, and
(ii) to a Partner at its address set forth on Exhibit A hereto, or at such other
address as such Partner may hereafter designate in writing to the other
Partners.
11
<PAGE> 12
Section 9.2 Entire Agreement. This Agreement supersedes all prior
agreements and understandings among the Partners with respect to the subject
hereof.
Section 9.3 Modification. This Agreement may be modified only upon the
prior written consent of each Partner.
Section 9.4 Waivers. No waiver or any breach of any of the terms of
this Agreement shall be effective unless such waiver is in writing and signed by
the Partner against whom such waiver or breach is claimed. No waiver of or any
breach shall be deemed a waiver of any other subsequent breach.
Section 9.5 Severability. If any provision of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, unless such provision was fundamental to the objectives of
this Agreement.
Section 9.6 Further Assurances. Each Partner shall execute such deeds,
assignments, endorsements and other instruments and documents and shall give
such further assurances as shall be reasonably necessary to perform its
obligations hereunder.
Section 9.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Delaware and without reference to any
conflict of law or choice of law principles thereof.
Section 9.8 Counterparts. This Agreement may be executed in any number
of counterparts or with counterpart signature pages, each of which shall be
deemed an original, but all of which shall constitute one and the same
instrument.
Section 9.9 Remedies Not Exclusive. Whenever the Partnership or any
Partner exercises one or more of the remedies provided for herein, such exercise
shall not preclude the exercise of any one or more remedies otherwise available
to it hereunder (unless this Agreement expressly provides otherwise), under
contract, at law, in equity or otherwise.
Section 9.10 Power of Attorney. Each Partner constitutes and appoints
each General Partner its true and lawful attorney with full power of
substitution to make, execute, sign, acknowledge and file a certificate of
limited partnership
12
<PAGE> 13
and/or amendments thereto expressly authorized hereby, and upon the
Partnership's termination, a certificate of dissolution of the Partnership. The
grant of a power of attorney hereunder is coupled with an interest and shall
survive a Partner's disability, incompetence, death or assignment by such
Partner of its Interest pursuant to this Agreement.
Section 9.11 Successors and Assigns. Except as expressly provided to
the contrary herein, this Agreement shall be binding upon and inure to the
benefit of the Partners and their respective successors and permitted assigns.
Section 9.12 Exhibits. All exhibits referenced in this Agreement shall
be incorporated herein by such reference and shall be deemed to be an integral
part hereof.
[SIGNATURE PAGES FOLLOW]
13
<PAGE> 14
IN WITNESS WHEREOF, the undersigned Partners have duly executed this
Agreement as of the day and year first above written.
GENERAL PARTNER:
IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ Frank A. Coyle
------------------------------
Name: Frank A. Coyle
Title: Secretary
LIMITED PARTNER:
IASIS HEALTHCARE LP, INC.
By: /s/ Frank A. Coyle
------------------------------
Name: Frank A. Coyle
Title: Secretary
<PAGE> 15
IN WITNESS WHEREOF, the undersigned Limited Partner has duly executed
this Agreement as of the 11th day of October, 1999.
LIMITED PARTNER:
IASIS HEALTHCARE CORPORATION
By: /s/ Frank A. Coyle
------------------------------
Name: Frank A. Coyle
Title: General Counsel and Secretary
<PAGE> 16
EXHIBIT A
PARTNERS' PERCENTAGE INTEREST
AS OF SEPTEMBER 24, 1999
<TABLE>
<CAPTION>
Percentage Capital
Partner Interest Contribution
- ------- -------- ------------
General Partner
- ---------------
<S> <C> <C>
IASIS Healthcare Holdings, Inc. 1.00% $1.00
104 Woodmont Blvd.
Suite 101
Nashville, TN 37205
Facsimile: (615) 846-3006
Limited Partner
- ---------------
IASIS Healthcare LP, Inc. 99.00% $99.00
104 Woodmont Blvd. ------ ------
Suite 101
Nashville, TN 37205
Facsimile: (615) 846-3006
Total 100.00% $100.00
</TABLE>
<PAGE> 17
EXHIBIT A
PARTNERS' PERCENTAGE INTEREST
AS OF OCTOBER 11, 1999
<TABLE>
<CAPTION>
Percentage Capital
Partner Interest Contribution
- ------- -------- ------------
General Partner
- ---------------
<S> <C> <C>
IASIS Healthcare Holdings, Inc. 1.00% $1.00
104 Woodmont Blvd.
Suite 101
Nashville, TN 37205
Facsimile: (615) 846-3006
Limited Partner
- ---------------
IASIS Healthcare Corporation 99.00% $99.00
104 Woodmont Blvd. ------ ------
Suite 101
Nashville, TN 37205
Facsimile: (615) 846-3006
Total 100.00% $100.00
</TABLE>
i
<PAGE> 1
EXHIBIT 3.36
ARTICLE OF INCORPORATION
OF
Biltmore Surgery Center, Inc.
------------------------------------------------------------
(An Arizona Business Corporation*)
1. Name.
The name of the Corporation is Biltmore Surgery Center, Inc.
2. Purpose
The purpose for which this Corporation is organized is the
transaction of any or all lawful business for which corporations may be
incorporated under the laws of Arizona, as they may be amended from time to
time.
3. Initial Business.
The Corporation initially intends to conduct the business of
Health Care Services
- -------------------------------------------------------------------------------
4. Authorized Capital.
The Corporation shall have authority to issue 1000 shares of Common
Stock.
5. Known Place of Business. (in Arizona)
The street address of the known place of business of the Corporation
is:
1800 East Van Buren
---------------------------------
Phoenix, Arizona 85006
---------------------------------
---------------------------------
*Incorporated under and subject to Articles 1 through 17 of Title 10, Arizona
Revised Statutes, eff. 1/1/96.
<PAGE> 2
6. Statutory Agents. (In Arizona)
The name and address of the statutory agent of the Corporation is:
CT Corporation System
---------------------------------
3225 North Central Avenue
---------------------------------
Phoenix, AZ 85012
---------------------------------
---------------------------------
7. Board of Directors. (Minimum of one.)
The initial board of directors shall consist of 3 director(s). The
name(s) and address(es) of the person(s) who is(are) to serve as the director(s)
until the first annual meeting of shareholders or until his (her) (their)
successor(s) is(are) elected and qualifies is(are):
William L. Hough Keith B. Pitts
- ------------------------------------- ----------------------------------------
3401 West End Ave. Ste 700 3401 West End Avenue Ste 700
- ------------------------------------- ----------------------------------------
Nashville, TN 37203 Nashville, TN 37203
- ------------------------------------- ----------------------------------------
Kenneth K. Westbrook
- ------------------------------------- ----------------------------------------
3401 West End Ave. Ste 700
- ------------------------------------- ----------------------------------------
Nashville, TN 37203
- ------------------------------------- ----------------------------------------
The number of persons to serve on the board of directors thereafter
shall be fixed by the Bylaws.
8. Officers.
The initial officer(s) of the Corporation who shall serve at the
pleasure of the board of directors is (are):
William L. Hough, President Ronald P. Soltman, Secretary
- ---------------- -----------------
Keith B. Pitts, Vice President Russell F. Tonnies, Treasurer
- -------------- --------------- ------------------ ----------
(Title) (Title)
<PAGE> 3
9. Incorporators. (Minimum of one.)
The name(s) and address(es) of the incorporators is (are):
Gail H. McKinnon Karen H. Abbott
------------------------------- ----------------------------------------
3401 West End Ave. Ste 700 3401 West End Ave. Ste 700
------------------------------- ----------------------------------------
Nashville, TN 37203 Nashville, TN 37203
------------------------------- ----------------------------------------
All powers, duties and responsibilities of the incorporators shall
cease at the time of delivery of these Articles of Incorporation to the Arizona
Corporation Commission.
10. Indemnification of Officers, Directors, Employers and Agents.
The Corporation shall indemnify any person who incurs expenses or
liabilities by reason of the fact he or she is or was an officer, director,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise. This indemnification
shall be mandatory in all circumstances in which indemnification is permitted by
law.
11. Limitation of Liability.
To the fullest extent permitted by the Arizona Revised Statutes as
the same exists or may hereafter be amended, a director of the Corporation shall
not be liable to the Corporation or its stockholders for monetary damages for
any action taken or any failure to take any action as a director. No repeal,
amendment or modification of this article, whether direct or indirect, shall
eliminate or reduce its effect with respect to any act or omission of a director
of the Corporation occurring prior to such repeal, amendment or modification.
EXECUTED this 19th day of September, 1996 by all of the
incorporators.
Signed: /s/ Gail H. McKinnon /s/ Karen H. Abbott
----------------------------- ----------------------------------------
Gail H. McKinnon Karen H. Abbott
----------------------------- ----------------------------------------
[Print Name Here] [Print Name Here]
Acceptance of Appointment By Statutory Agent
The undersigned hereby acknowledges and accepts the appointment as statutory
agent of the above-named corporation effective this 20th day of September, 1996.
Signed /s/ Allan Farnell
--------------------------------------------
Allan Farnell, Asst. Secy.
--------------------------------------------
[Print Name Here]
<PAGE> 1
EXHIBIT 3.37
CORPORATE
BOARD OF DIRECTORS
BYLAWS
for
BILTMORE SURGERY CENTER, INC.
a Arizona corporation
Dated as of January 30, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I CORPORATE PURPOSE........................................... 1
Section 1. Purpose................................................. 1
ARTICLE II OFFICES..................................................... 1
Section 1. Principal Office........................................ 1
Section 2. Other Offices........................................... 1
ARTICLE III SHAREHOLDERS................................................ 1
Section 1. Place of Meetings....................................... 1
Section 2. Annual Meeting.......................................... 1
Section 3. Special Meetings........................................ 1
Section 4. Action Without a Meeting................................ 1
Section 5. Quorum of Shareholders.................................. 2
Section 6. Majority Vote Requirements.............................. 2
Section 7. Voting Rights........................................... 2
ARTICLE IV DIRECTORS................................................... 2
Section 1. Powers.................................................. 2
Section 2. Number of Qualification................................. 2
Section 3. Vacancies............................................... 2
Section 4. Action by Directors Without a Meeting................... 3
Section 5. Quorum.................................................. 3
Section 6. Resignations and Removal................................ 3
Section 7. Conduct of Meetings..................................... 3
ARTICLE V NOTICES..................................................... 3
Section 1. Written Notices......................................... 3
Section 2. Waivers................................................. 3
Section 3. Timely and Proper Notice................................ 4
i
<PAGE> 3
ARTICLE VI OFFICERS.................................................... 4
Section 1. Officers................................................ 4
Section 2. Authority of Certain Officers........................... 4
a. Chairman of the Board................................ 4
b. President............................................ 4
c. Vice President....................................... 4
d. Secretary............................................ 4
e. Treasurer............................................ 5
ARTICLE VII ADMINISTRATOR............................................... 5
Section 1. Appointment............................................. 5
Section 2. Responsibilities........................................ 5
ARTICLE VIII GOVERNING BOARD............................................. 6
Section 1. Appointment of Governing Board.......................... 6
Section 2. Governing Board Bylaws; Functions and Duties
of Governing Board...................................... 6
Section 3. Composition of Governing Board.......................... 7
ARTICLE IX OTHER PROVISIONS............................................ 7
Section 1. Checks and Drafts....................................... 7
Section 2. Execution of Contracts.................................. 7
Section 3. Annual Report to Shareholders........................... 7
ARTICLE X INDEMNIFICATION............................................. 7
Section 1. Indemnification of Officers and Directors............... 7
Section 2. Indemnification Insurance............................... 8
Section 3. Indemnification Agreements.............................. 8
ARTICLE XI AMENDMENTS.................................................. 8
ii
<PAGE> 4
BYLAWS
OF
BILTMORE SURGERY CENTER, INC.
a Arizona corporation
ARTICLE I
CORPORATE PURPOSE
Section 1. Purpose. This corporation may engage in any lawful activity,
including but not limited to, owning and operating health care facilities,
including all related departments and activities associated therewith.
ARTICLE II
OFFICES
Section 1. Principal Office. The principal office of the Corporation is
hereby fixed and located at: 3820 State Street, Santa Barbara, California,
93105. The Board of Directors (hereinafter the "Board") is hereby granted full
power and authority to change said principal office from one location to
another.
Section 2. Other Offices. Regional, branch or subordinate offices may be
established at any time by the Board at any other place or places, within or
outside of the United States of America.
ARTICLE III
SHAREHOLDERS
Section 1. Place of Meetings. Meetings of the Shareholders of this
Corporation shall be held either at the principal executive office of the
Corporation, or at any other place which may be designated either by the Board
or by the written consent of the Shareholders, given either before or after the
meeting and filed with the Secretary of the Corporation.
Section 2. Annual Meeting. The annual meeting of the Shareholders shall be
held on such date and at such time as may be fixed by the Board or the
Shareholders.
Section 3. Special Meetings. Special meetings of the Shareholders, for any
purpose or purposes whatsoever, may be called at any time by the Board, the
President or the Shareholders.
Section 4. Action without a Meeting. Any action(s) which may be taken at a
meeting of the Shareholders may be taken without a meeting by a written consent
to such action(s) signed by the Shareholders, which document shall be inserted
in the Minute Book of the corporation.
1
<PAGE> 5
Section 5. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at meetings of Shareholders except as otherwise provided by statute or by the
Articles of Incorporation. If, however, a quorum shall not be present or
represented at any meeting of the Shareholders, the Shareholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting, at which a quorum
shall be present or represented, any business may be transacted that might have
been transacted at the meeting as originally called.
Section 6. Majority Vote Requirements. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the Shareholders,
except that in elections of members of the Board those receiving the greatest
number of votes shall be deemed elected even though not receiving a majority
unless the vote of a greater number of voting by classes is required by law or
the Articles of Incorporation.
Section 7. Voting Rights. Each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
Shareholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by the Articles of Incorporation and
except as the Articles of Incorporation may confer on the holders of shares of
any particular class or series the right to more than one vote per share, either
generally or on particular matters. At each election for Directors, every
Shareholder entitled to vote at such election shall have the right to vote, in
person or by proxy, the number of shares owned by him/her for whose election
he/she has a right to vote.
ARTICLE IV
DIRECTORS
Section 1. Powers. Subject to limitations of the Articles of
Incorporation, these Bylaws, and the laws of the State as to action required to
be approved by the Shareholders, the business and affairs of the Corporation
shall be managed and all corporate powers shall be exercised by or under the
direction of the Board.
Section 2. Number and Qualification. The authorized number of directors
shall not be less than one (1) nor more than the maximum authorized by law. The
exact number of directors may be fixed, from time to time, by the Board or the
Shareholders. The number of directors shall be one (1) until changed as provided
in this Section.
Section 3. Vacancies. If any vacancy shall occur among the Directors by
reason of death, resignation, disqualification, removal or otherwise, such
vacancy may be filled by a majority vote of the remaining Directors, so long as
such remaining Directors constitute a quorum. Any such vacancy may be filled by
the Shareholders, and all vacancies where the number of remaining Directors is
less than a quorum must be filled by the Shareholders. If the number of
Directors shall be increased by vote of the Shareholders or the Directors, the
additional Directors authorized by such increase shall be elected by the votes
of a majority of the Directors in office at the time of such increase, or by the
Shareholders of the Corporation. In the event of a conflict between the Board
and
2
<PAGE> 6
the Shareholders, the decision by the Shareholders shall prevail. Each director
so elected shall hold office until his/her successor is elected at an annual
meeting of the Shareholders or at a special meeting called for that purpose.
Section 4. Action by Directors Without a Meeting. Any action(s) that may
be taken at a meeting of the Board may be taken without a meeting if authorized
by a writing signed by all of the members of the Board, which document shall be
inserted in the Minute Book of the Corporation.
Section 5. Quorum. A majority of the number of Directors shall constitute
a quorum for the transaction of business. The act of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board. If a quorum shall not be present at any meeting of the Board, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 6. Resignations and Removal. Any Director may be removed, without
cause, at any time by the majority vote of the Shareholders.
Section 7. Conduct of Meetings. The Directors may be paid their expenses,
if any, for attendance at each meeting of the Board and may be paid a fixed sum
for attendance at each meeting of the Board or a stated salary as Director. No
such payment shall preclude any Director from serving the Corporation or any
company controlling or controlled by the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE V
NOTICES
Section 1. Written Notices. Written or printed notice stating the place,
day and hour of the meeting, and, in case of a special meeting, the purpose or
purposes for which the meeting is called shall be given not less than three (3)
or more than fifty (50) days before the meeting. Notices may be personally
delivered or delivered by mail, telegram, Federal Express, or other reliable
overnight delivery service, by or at the direction of the President, the
Secretary or the officer calling the meeting to each Director, or Shareholder of
record, as the case may be, entitled to vote at such meeting. Such notice shall
be deemed to be given upon the earlier of (a) actual receipt or (b) three (3)
days after deposit with the applicable deliverer addressed to the Director or
Shareholder of record, as the case may be, at the address that appears on the
records of the Corporation, with the postage thereon prepaid.
Section 2. Waivers. Whenever any notice of any meeting for any purpose is
required to be given to any Shareholder or Director under the provisions of the
statutes or of the Articles of Incorporation or of these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice.
3
<PAGE> 7
Section 3. Timely and Proper Notice. A Shareholder or Director who attends
meeting shall be deemed to have had timely and proper notice of the meeting,
whether or not a written waiver is signed, unless he/she attends for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
ARTICLE VI
OFFICERS
Section 1. Officers. The officers of the Corporation shall be selected and
removed by the Board in its discretion and shall consist of a President, a
Secretary, and a Treasurer and may include, at the discretion of the Board,
without limitation, a Chairman of the Board, any number of Vice Presidents,
Assistant Secretaries and Assistant Treasurers and such other officers as the
Corporation may require. Each such officer shall hold their respective office
for such period, have such authority, and perform such duties as the Board may
from time to time determine.
Section 2. Authority of Certain Officers. Anything herein to the contrary
notwithstanding, the following described officers shall have the authority set
forth after their respective designation:
a. Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the Shareholders and the Board. Except where, by law, the
signature of the President is required, the Chairman shall possess the same
power as the President to sign all certificates, contracts and other instruments
of this Corporation that may be authorized hereby or by the Board.
b. President. The President shall be the general manager and chief
executive officer of the Corporation and shall have responsibility for, subject
to the control of the Board, general supervision, direction, and control of the
business and affairs of the Corporation. The President shall preside at all
meetings of the Shareholders and at all meetings of the Board. The President
shall have the general powers and duties of management usually vested in the
office of president and general manager of a corporation and such other powers
and duties as may be prescribed by the Board.
c. Vice President. In the absence or disability of the President,
any Vice President so designated by the Board shall perform all the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. All Vice Presidents, if any, shall
have such powers and perform such duties as from time to time may be prescribed
by the Board.
d. Secretary. The Secretary shall keep or cause to be kept, at the
principal executive office or such other place as the Board may order, (i) a
book containing minutes of all meetings of the Shareholders and the Board, and
(ii) a share register or a duplicate share register. The Secretary shall give,
or cause to be given, notice of all the meetings of the Shareholders and of the
Board required by these Bylaws or by law to be given, shall keep the seal of the
Corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board.
4
<PAGE> 8
e. Treasurer. The Treasurer shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation. Such officer shall send or cause to be
sent to the Shareholders such financial statements and reports as are by law or
these Bylaws required to be sent to said Shareholder. The books of account shall
at all times be open to inspection by any director. Such officer shall cause all
moneys and other valuables to be deposited in the name and to the credit of the
Corporation. Such officer shall (i) disburse or cause to be disbursed the funds
of the Corporation as may be ordered by the Board, (ii) render to the President
and the directors, whenever they request it, an account of all transactions and
of the financial condition of the Corporation, and (iii) have such other powers
and perform such other duties as may be prescribed by the Board.
ARTICLE VII
ADMINISTRATOR
Section 1. Appointment. If applicable, the Board or its designee may, for
each facility deemed appropriate by the Board, appoint a chief executive officer
(hereinafter "Administrator") for such facility. In making such appointment, the
Board shall consult with the Governing Board, if any, of the facility. The
Administrator may be an officer of the Corporation and shall be responsible for
the day-to-day management of the respective facility.
Section 2. Responsibilities. The Administrator shall represent the
facility in all aspects of its operations. The Administrator shall make periodic
reports to the Governing Board, if any, but his/her line of authority shall
derive from the Board. The duties of the Administrator shall include but not be
limited to the following:
a. Implementing policies of the Board and the Governing Board as
approved by the Board or its designee, especially those relating to the physical
and financial resources of the facility.
b. Acting as liaison among the Board, Governing Board,
administrative staff and Medical Staff (if any), and between the facility and
the local community.
c. Organizing and managing the facility and its services,
departments and subdivisions, delegation of duties and establishment of formal
means of accountability of subordinates.
d. Taking reasonable steps to the end that the facility complies
with applicable laws, rules and regulations.
e. Reporting to the Governing Board, if any, on the overall
activities of, and developments and inspections affecting, the facility.
5
<PAGE> 9
ARTICLE VIII
GOVERNING BOARD
Section 1. Appointment of Governing Board. For each facility deemed
appropriate by the Board of Directors, the Board of Directors or its designee
may appoint a local governing body, to be known as the Governing Board.
Notwithstanding any other provision of these Bylaws, each reference in these
Bylaws to the "Governing Board" shall refer to each respective Governing Board
so appointed by the Board of Directors, and each reference to the "Medical
Staff" shall refer to each respective Medical Staff organized pursuant to the
Governing Board Bylaws.
Section 2. Governing Board Bylaws; Functions and Duties of Governing
Board.
a. The functions, authority and duties of the Governing Board shall
be as directed from time to time by the Board of Directors and as set forth in
the Governing Board Bylaws. The Board of Directors must approve the Governing
Board Bylaws, Medical Staff bylaws, if any, all rules and regulations
established by the Governing Board or Medical Staff and all amendments,
modifications, restatements, replacements and revisions of any thereof. No
provision of the Governing Board Bylaws or any rules and regulations established
by the Governing Board shall have any force or effect unless approved in writing
by the Board of Directors. The Board of Directors, in its sole discretion, at
any time and from time to time may amend or repeal all or any part of the
Governing Board Bylaws, Medical Staff bylaws, if any, any rule and regulations
established by the Governing Board or Medical Staff and all amendments,
modifications, restatements, replacements and revisions of any thereof.
b. The functions, authority and duties of the Governing Board shall
be consistent with the Articles of Incorporation, these Bylaws, applicable laws
and regulations and the standards of the Joint Commission on Accreditation of
Healthcare Organizations ("JCAHO") and any successor or similar organizations
with whose standards a facility is or elects to be governed. Subject to the
foregoing provisions of this Article VIII, the functions, authority and duties
delegated to the Governing Board may include, without limitation, the following,
all in accordance with the Governing Board Bylaws: (i) appointing the Medical
Staff, (ii) granting clinical privileges, (iii) reappointing the Medical Staff
(iv) establishing Medical Staff hearing and appeal procedures and making final
determinations in hearings and appeals conducted pursuant to such procedures,
(v) establishing overall policies for the Governing Board and the operation of
the facility, (vi) establishing procedures for resolving disputes between the
Governing Board and the Medical Staff Executive Committee, (vii) establishing
policies with respect to medical care evaluation, utilization review, peer
review and other matters relating to the quality of care at the facility, (viii)
taking reasonable and necessary steps to comply with applicable laws, rules and
regulations and applicable JCAHO and similar organizations' accreditation
standards, establishing and submitting to the Board of Directors short-term and
long-term plans, including annual capital and operating budgets and a long-range
master plan, to the end that the facility may effectively service its community,
(ix) establishing and reviewing personnel policies, (x) reviewing the quality of
service rendered by hospital-based physicians and other professional service
contractors and (xi) establishing policies, practices and procedures concerning
the Medical Staff's members' observation of all legal and ethical
6
<PAGE> 10
principles of their profession. The Governing Board shall have the authority to
incur expenses of individual items than do not exceed limits set by the Board of
Directors from time to time.
Section 3. Composition of Governing Board. The Governing Board shall be
composed as set forth in the Governing Board Bylaws. The appointment of each
member of the Governing Board must be approved in writing by the Board of
Directors. The Board of Directors may remove any member or all members of the
Governing Board at any time, with or without cause, without any prior notice.
ARTICLE IX
OTHER PROVISIONS
Section 1. Checks and Drafts. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board.
Section 2. Execution of Contracts. The Board may authorize any officers or
agent or agents to enter into any contract or execute any instrument in the name
and on behalf of the Corporation. Such authority may be general or confined to
specific instances. Unless so authorized by the Board, no officers, agent,
employee or other person shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit, or to render
it liable for any purpose or amount.
Section 3. Annual Report to Shareholders. Annual reports to the
Shareholders are expressly waived, but nothing herein shall be interpreted as
precluding the issuance of annual or other periodic reports to the Shareholders.
ARTICLE X
INDEMNIFICATION
Section 1. Indemnification of Officers and Directors. Each person who
was or is a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he/she,
or a person of whom he/she is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, fiduciary or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action or inaction in an official capacity or in any
other capacity while serving as a director, officer, employee, fiduciary or
agent may in the sole discretion of the Board, be indemnified and held harmless
by the corporation to the fullest extend permitted by the laws of the State, as
the same exist or may hereafter be amended against all costs, charges,
expenses, liabilities and losses (including, without limitation attorneys'
fees, judgments, fines, employee benefit plan excercise taxes or penalties in
connection therewith, and such indemnification, if any, shall continue as to a
person who
7
<PAGE> 11
has ceased to be a director, officer, employee, fiduciary or agent and shall
inure to the benefit his/her heirs, executors and administrators; provided,
however that unless otherwise determined by the Board, the Corporation may
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in this Article X may include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the laws of the State require, the
payment of such expenses incurred by a director or officer in his/her capacity
as a director or officer (and not in any other capacity in which service was or
is rendered by such person while a director or officer, including, without
limitation, service to any employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section 10.1 or otherwise.
The Corporation may, by action of the Board, provide indemnification to employee
and agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
Section 2. Indemnification Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any director, officer,
employee, fiduciary or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the laws of
the State.
Section 3. Indemnification Agreements. The Corporation may enter into
agreements with any director, officer, employee, fiduciary or agent of the
Corporation providing for indemnification to the full extent permitted by the
laws of the State.
ARTICLE XI
AMENDMENTS
These Bylaws may be amended or repealed either by the Shareholders or as
otherwise authorized under the laws of the State.
8
<PAGE> 1
EXHIBIT 3.38
ARTICLES OF ORGANIZATION
OF
IASIS HEALTHCARE MSO SUB OF SALT LAKE CITY, LLC
--------------------------
The undersigned, desiring to form a limited liability company (hereinafter
referred to as the "Company") pursuant to the provisions of the laws of the
State of Utah, executes the following Articles of Organization:
Article I: The name of the company is IASIS HEALTHCARE MSO SUB OF SALT
LAKE CITY, LLC.
Article II: The period of duration of the Company is until September 30,
2050.
Article III: The specific purpose or purposes for which the Company is
organized is the management of physician practices and the transaction of any or
all lawful business for which such companies may be organized under the
provisions of the Utah Limited Liability Company Act, as they may be amended
from time to time.
Article IV: The name and Utah address of the company's registered agent
and office are National Registered Agents, Inc., 77 West 200 South, Suite 420,
Salt Lake City, Utah 84101.
Article V: The management of the business and affairs of the company is
vested in a manager. The name and address of the manager is as follows:
NAME ADDRESS
---- -------
IASIS HEALTHCARE HOSPITAL OF 2120 South, 1300 East, Suite 200
SALT LAKE CITY, LLC Salt Lake City, Utah 84106
Executed on this 2nd day of October, 1998.
IASIS HEALTHCARE HOSPITAL OF SALT
LAKE CITY, LLC, Manager of IASIS
HEALTHCARE MSO SUB OF SALT LAKE
CITY, LLC
By: /s/ Frank Aaron Coyle
--------------------------
Frank Aaron Coyle, Secretary
-1-
<PAGE> 2
The undersigned hereby accepts appointments as
registered agent for the above named limited liability
company.
By: /s/ Robert D. Pischer
----------------------------------------
Registered Agent
Robert D. Pischer -- Asst. Secretary
-2-
<PAGE> 1
EXHIBT 3.39
OPERATING AGREEMENT
OF
IASIS HEALTHCARE MSO SUB OF SALT LAKE CITY, LLC
<PAGE> 2
This OPERATING AGREEMENT (this "Agreement") entered into by IASIS
Healthcare Hospital of Salt Lake City, LLC, as sole member (the "Initial
Member") is made and entered into as of October 26th 1999, to be effective as of
October 5, 1998.
ARTICLE I
FORMATION
1.1 Formation. The Initial Member previously formed a limited liability
company pursuant to the Utah Limited Liability Company Act (the "Act").
1.2 Name. The name of the limited liability company is IASIS Healthcare
MSO Sub of Salt Lake City, LLC (the "Company").
1.3 Articles of Organization. The Articles of Organization of the Company
(the "Articles"), as filed with the Secretary of State of the State of Utah on
October 5, 1998, are adopted and ratified by the Initial Member. In the event of
a conflict between the terms of this Agreement and the terms of the Articles,
the terms of the Articles shall prevail.
1.4 Definitions. Capitalized terms not otherwise defined in this Agreement
shall have the meaning set forth in the Act.
ARTICLE II
PURPOSE AND POWERS
2.1 Purpose. The purpose of the Company shall be to engage in any lawful
business.
2.2 Powers. In furtherance of the foregoing purpose, the Company shall
have the full power and authority to conduct its business as provided by the Act
and applicable law.
ARTICLE III
CAPITAL
3.1 Capital Accounts. A capital account shall be established on the books
of the Company for the Initial Member and each member that is admitted to the
Company pursuant to Section 7.6 of this Agreement (individually, a "Member" and
collectively, the "Members").
3.2 Capital Contributions. Each Member has made the contributions to the
capital of the Company in the amounts set forth on Schedule A attached hereto.
3.3 Additional Capitol Contributions. No additional capital contributions
shall be required of any Member. No Member may contribute additional capital to
the Company without the prior written consent of all the Members.
<PAGE> 3
3.4 No Right to Withdraw Capital. No Member shall have the right to demand
the return of, or otherwise withdraw the Member's capital or to receive any
specific property of the Company, except as specifically provided in this
Agreement. No Member shall have the right to demand and receive property other
than cash in return for his capital.
3.5 No Interest on Capital. No interest shall be paid on capital
contributions or on balances of capital accounts.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTION OF CASH FLOW
4.1 Allocations of Profits and Losses. All Company net profits and net
losses, and each item of income and expense related to net profits and net
losses, from whatever source derived (except for items relating to property
contributed to the Company by a Member, which shall be allocated pursuant to
Section 704(c) of the Internal Revenue Code of 1986, as amended from time to
tune (the "Code"), and the regulations under it), shall be allocated to the
Members pro rata based upon their respective "Percentage Interests." The term
"Percentage Interest" with respect to each Member shall mean the percentage
interest of each Member in the profits, losses, distributions, capital and
assets of the Company. The initial Percentage Interests of the Members are set
forth on Schedule A attached hereto. The Secretary shall keep accurate records
to reflect any and all changes which may occur in the Percentage Interests of
the Members.
4.2 Distribution of Cash Flow. Cash flow generated from Company operations
may be distributed to the Members in the amounts that the Members determine. All
distributions of cash flow shall be made in accordance with the Percentage
Interests of the Members.
ARTICLE V
MANAGEMENT OF THE COMPANY
5.1 Member-Managed. The management and control of the Company shall rest
with the Members. The Members shall have all the rights and powers that may be
possessed by Members under the Act (as modified by this Agreement or the
Articles).
2
<PAGE> 4
ARTICLE VI
OFFICERS
6.1 Officers. The Company shall at all times have at least two officers,
those being the President and the Secretary. The Company may have additional
officers who shall perform any duties prescribed by the Members upon their
election.
6.2 Duties of the Person Holding the Office of President. The President
shall have the duty to manage the day-to-day operations of the Company and to
perform other duties customarily performed by a chief executive officer.
6.3 Duties of the Person Holding the Office of Secretary. The Secretary
shall have the duty to maintain the records of all proceedings of the Members
and to perform other duties customarily performed by a secretary.
6.4 Election of Officers. All officers, including the President and the
Secretary, shall be elected by the Members.
6.5 Initial Officers. The initial officers of the Company shall be as
follows:
Office Name
------ ----
President, Chief Executive Officer Wayne Gower
Vice President, Treasurer Kenneth W. Perry
Vice President Roberta A. Kale
Vice President Linda Hishcke
Secretary Frank A. Coyle
6.6 Compensation of Officers. No officer shall receive any compensation
from the Company without the prior approval of the Members.
6.7 Removal and Resignation of Officers. The Members may remove any
officer, including the President and the Secretary, with or without cause. The
Members may eliminate any officer position other than that of the President and
the Secretary. Any officer may resign upon 30 days' prior written notice to the
Members. Upon the death, resignation or removal of the President, the Members
shall immediately vote to appoint another President. Upon the death, resignation
or removal of the Secretary, the Members shall immediately vote to appoint
another Secretary.
6.8 Other Activities. Any officer or Member may engage in other
activities, including those of a nature which are the same as or similar to the
business of the Company, without any duty or obligation to account to the
Company in connection with the other activities.
3
<PAGE> 5
ARTICLE VII
MEMBERS AND VOTING RIGHTS
7.1 Membership Voting Power. Each Member shall have voting power equal to
the Member's Percentage Interest. At any meeting of the Members, each Member
present (in person or by proxy) and entitled to vote shall have a number of
votes equal to the Member's Percentage Interest. At any meeting of the Members
at which a quorum is present (in person or by proxy), a majority of the
membership voting power present (in person or by proxy) at the time the vote is
taken is required to take action on a matter unless a vote of greater proportion
is otherwise required by this Agreement, the Articles or the Act.
7.2 Meetings. Meetings of all Members may be called by the President, the
Secretary or any Member by mailing notice to all Members no fewer than ten days
nor more than two months before the meeting date, stating the purpose or
purposes of the meeting. Meetings shall be held at the principal place of
business of the Company or any other place designated in the notice. When any
notice is required to be given to any Member, a waiver of notice in writing
signed by the person entitled to the notice, whether before, at, or after the
time stated in the notice, shall be equivalent to the giving of the notice.
Attendance by a Member at a meeting is a waiver of notice of the meeting, except
if the Member objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened and does not
otherwise participate in the consideration of any matter at the meeting. A
meeting may take place by telephone conference call or any other form of
electronic communication through which the Members may simultaneously hear each
other. Such meeting shall be deemed to be held at the principal executive office
of the Company or at the place properly named in the notice calling the meeting.
7.3 Quorum Requirements for Meetings. The Members present (in person or by
proxy) and holding a majority of the membership voting power at any meeting
shall constitute a quorum for the transaction of business. Once a Member is
represented at any meeting, the Member is deemed to be present for the remainder
of that meeting and for any adjournment. A meeting may be adjourned, and notice
of an adjourned meeting is not necessary if the date, time and place to which
the meeting is adjourned are announced at the meeting at which the adjournment
is taken.
7.4 Action Without a Meeting. Action required or permitted to be taken at
a meeting of the Members may be taken without a meeting if the action is
evidenced by one or more written consents describing the action taken, signed by
the Members holding a majority of the membership voting power entitled to vote
and delivered to the Secretary of the Company for filing with the Company
records.
7.5 Statements of Percentage Interests. Upon the written request of any
Member, the Secretary shall promptly advise the Member of the particular
Percentage Interest owned by the Member as of the date the written statement is
issued by the Secretary. The written statement of Percentage Interest shall not
be deemed to be a certificated security, a negotiable instrument, nor a
4
<PAGE> 6
bond or stock and shall not be a vehicle by which any transfer of any Member's
interest in the Company may be effected.
7.6 Admission of New Members. No other person shall be made a Member
without the written approval of all of the Members.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Company shall indemnify all Members and
employees to the fullest extent of and in accordance with the Act as now in
effect or as amended in the future.
ARTICLE IX
FISCAL MATTERS
9.1 Books and Records. Full and accurate books and records of the Company
shall be maintained at its principal executive office showing all receipts and
expenditures, assets and liabilities, profits and losses, and all other records
necessary for recording the Company's business, operations and affairs. All
Members shall have access at reasonable times to the books and records of the
Company, during regular business hours, at the Company's principal executive
office.
9.2 Fiscal Year. The fiscal year of the Company shall end on December 31
of each year.
9.3 Tax Status; Elections. Solely for purposes of the United States
federal income tax laws, each of the Members recognizes that the Company will be
subject to all provisions of Subchapter K of Chapter 1 of Subtitle A of the
Code. The filing of U.S. Partnership Returns of Income, however, shall not be
construed to extend the purposes of the Company or expand the obligations or
liabilities of the Members.
9.4 Bank Accounts. All funds of the Company shall be deposited in its name
at its principal financial institution, or at any other financial institutions
approved by the Members.
9.5 Tax Matters Member. The Initial Member shall be the initial Tax
Matters Member ("TMM"). The TMM shall promptly give notice to all Members of any
administrative or judicial proceeding pending before the Internal Revenue
Service involving any Company item and the progress of all proceedings. The TMM
shall have all the powers provided to a tax matters partner under Sections 6221
through 6233 of Code, including the specific power to extend the statute of
limitations with respect to any matter which is attributable to any Company item
or affecting any item pending before the Internal Revenue Service and to select
the forum to litigate any tax issue or liability arising from Company items. The
TMM may resign the position by giving 30 days written notice to all Members,
whereupon the Members shall promptly vote to designate a new TMM. The
5
<PAGE> 7
Members may, without cause, remove the TMM, whereupon the Members shall promptly
vote to designate a new TMM. The TMM shall be entitled to reimbursement for any
and all reasonable expenses incurred with respect to any administrative and/or
judicial proceedings affecting the Company.
ARTICLE X
TERMINATION OF MEMBERSHIP INTEREST
10.1 Termination of Interest. A Member's membership in the Company shall
terminate upon the:
(a) death of a Member;
(b) retirement of a Member;
(c) resignation or withdrawal of a Member;
(d) acquisition of a Member's complete Percentage Interest by the
Company;
(e) assignment of the Member's rights as a member of the Company
other than Financial Rights (as defined below) or the right to
assign Financial Rights (the "Governance Rights"), which
leaves a Member with no Governance Rights;
(f) expulsion of a Member;
(g) bankruptcy of a Member;
(h) dissolution of a Member;
(i) mental incapacity of a Member, if such Member is a natural
person;
(j) a merger in which the Company is not the surviving
organization; or
(k) the occurrence of any other event that terminates the
continued membership of a Member in the Company.
10.2 Effect of Termination of Membership. If for any reason the Percentage
Interest of a Member is terminated, then;
(a) if the business of the Company is continued pursuant to Section
12.3, the Member whose membership is terminated forfeits any and all
Governance Rights and will
6
<PAGE> 8
be considered merely an assignee of the Member's rights to share in the
profits, losses and distributions of the Company to the extent provided in
this Agreement (the "Financial Rights") owned before the termination; and
(b) if the business of the Company is not continued pursuant to
Section 12.3, the Member whose membership terminated retains all
Governance Rights owned before the termination and may exercise these
through the dissolution and winding up of the Company.
ARTICLE XI
ASSIGNMENT OF MEMBERSHIP INTEREST
11.1 Restrictions on Assignment. Except with the consent of all other
Members, no Member shall assign his Percentage Interest, Financial Rights or
Governance Rights, except as expressly permitted in this Article XI. The Members
acknowledge and agree that the restrictions on assignment in this Article XI are
not manifestly unreasonable.
11.2 Definition of "Assignment." For purposes of this Article XI, the
words "assign" or "assignment" shall include any transfer, alienation, sale,
assignment, pledge, hypothecation or other incumbrance or other disposition of a
Percentage Interest, Financial Rights, or Governance Rights, whether voluntarily
or by operation of law.
11.3 Assignments to Existing Members. Any Member may assign (during life
or at death) all or any part of the Member's interest in the Company (including
the Member's Financial Rights and Governance Rights) to or for the benefit of
any other Member.
11.4 Assignments upon the death of a Member or by Operation of Law.
Transfers occurring by reason of the death of a Member or by operation of law
shall be effective, but the transfers shall constitute only an assignment of the
transferring Member's Financial Rights in the Company unless (i) the admission
of the transferee as a Member is approved by all of the Members, and (ii) the
transferee signs this Agreement and agrees to be bound by the terms of it.
ARTICLE XII
TERM, DISSOLUTION, WINDING UP, TERMINATION
12.1 Term. The term of the Company commenced on the date as of which this
Agreement became effective and shall continue until September 30, 2050 unless
earlier terminated in accordance with the provisions of this Agreement or as
provided by law.
7
<PAGE> 9
12.2 Events Causing Dissolution. The Company shall be dissolved and its
affairs wound up:
(a) upon the expiration of the term of the Company stated in Section
12.1;
(b) upon the sale of all or substantially all of the assets of the
Company;
(c) upon the termination of a Member's membership pursuant to
Section 10.1, unless the remaining Members continue the Company as
provided in Section 12.3; or
(d) as may be otherwise provided by law.
12.3 Procedure Upon the Occurrence of an Event of Dissolution. Upon the
occurrence of an event of dissolution as set forth in Section 12.2, the
provisions of Section 12.4 shall apply, unless the existence of the Company is
continued upon the consent of at least a majority of the remaining Members.
Consent must be obtained no later than 90 days after the occurrence of the event
of dissolution.
12.4 Winding Up Affairs Upon Dissolution. Upon dissolution of the Company,
the officers or the other persons required or permitted by law to carry out the
winding up of the affairs of the Company shall:
(a) promptly notify all Members of the dissolution and proceed to
wind up the affairs of the Company;
(b) prepare and file all instruments or documents required by law to
be filed to reflect the dissolution of the Company;
(c) pay all outstanding liabilities and expenses of the Company;
(d) establish appropriate reserves for unknown or contingent
liabilities; and
(e) distribute any remaining assets to the Members in accordance
with their respective capital accounts (after giving effect to the
allocation of all net profits or net losses).
12.5 Liquidating Distributions in Kind. In the event of a distribution of
assets in kind (in whole or in part) pursuant to Section 12.4(e), the fair
market value of such assets shall be determined. Each Member shall receive an
undivided interest in the assets of the Company equal in value to the portion of
the proceeds to which the Member would have been entitled if the assets had been
sold or otherwise converted to cash at the asset's fair market value and the
distribution had been solely in the form of a cash distribution. Division of
property may be made on a non pro rata
8
<PAGE> 10
basis upon the consent of all of the Members, so that certain Members own
certain assets while other Members own other assets.
12.6 Termination. The Company shall be terminated when its affairs have
been wound up and the distribution of its assets has been completed.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Waiver of Right to Partition. As a material inducement to each Member
to execute this Agreement, each Member covenants and represents to each other
Member that, during the existence of the Company, no Member, nor his or her
heirs, representatives, successors, transferees or assigns, shall attempt to
make any partition of any Company assets, whether now owned or acquired in the
future, and each Member waives all rights of partition provided by statute or
principles of law or equity, including partition in kind or partition by sale.
13.2 Notices. All notices, consents, waivers, directions, requests, votes
or other instruments or communications provided for under this Agreement shall
be in writing, signed by the party taking the action, and shall be deemed
properly given three business days after mailing if sent by hand delivery or by
United States mail, postage prepaid, addressed:
(a) in the case of the Company, to:
IASIS Healthcare MSO Sub of Salt Lake City, LLC
2120 South 1300 East, Suite 200
Salt Lake City, Utah 84106
Attention: President
(b) in the case of any Member, to the address set forth on Schedule
A, or to any address a Member specifies in writing to the other parties.
13.3 Integration. This Agreement embodies the entire agreement and
understanding among the Members and supersedes all prior agreements and
understandings, if any, among and between the Members relating to the subject
matter of it.
13.4 Applicable Law. This Agreement and the rights of the Members shall be
governed by and construed and enforced in accordance with the laws of the State
of Utah.
13.5 Severability. In case any one or more of the provisions contained in
this Agreement or any application of it or them shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions and any other application of it or
9
<PAGE> 11
them shall not in any way be affected or impaired by such invalidity,
illegality, or unenforceability.
13.6 Binding Effect. Except as otherwise provided in this Agreement to the
contrary, this Agreement shall be binding upon, and inure to the benefit of, the
Members and their respective heirs, executors, administrators, successors,
transferees and assigns.
13.7 Arbitration. Members agree that any dispute relating to or in respect
of this Agreement shall be submitted to, and resolved pursuant to, arbitration
in accordance with the Arbitration Rules of the American Arbitration
Association.
13.8 Terminology. As the context may require, the singular shall include
the plural, as appropriate. Titles of Articles and Sections are for convenience
only, and neither limit nor amplify the provisions of this Agreement itself.
13.9 Amendment. This Agreement may be amended, modified or supplemented
only by a writing executed by all Members.
IASIS HEALTHCARE CORPORATION,
Sole Member
/s/ Frank Coyle
-------------------------------------------
By: Frank Coyle
Title: General Counsel and Secretary
<PAGE> 12
SCHEDULE A
TO
OPERATING AGREEMENT
Members
<TABLE>
<CAPTION>
Cash Contributed
or Agreed Value
Percentage of Other Property or
Name, Address, SS# Interest Services Contributed
------------------ -------- --------------------
<S> <C> <C>
IASIS Healthcare Corporation 100% $100.00
104 Woodmont Blvd.
Nashville, Tennessee 37205
FEIN# 76-0450619
</TABLE>
<PAGE> 1
EXHIBIT 4.1
================================================================================
IASIS HEALTHCARE CORPORATION
$230,000,000
13% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
------------------------------------------------------
Dated as of October 15, 1999
------------------------------------------------------
THE BANK OF NEW YORK
Trustee
--------------
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture Act Section
<TABLE>
<CAPTION>
Indenture Section
<S> <C>
310(a)(1)......................................................... 7.10
(a)(2) ........................................................... 7.10
(a)(3)............................................................ N.A.
(a)(4)............................................................ N.A.
(a)(5)............................................................ 7.10
(b) .............................................................. 7.10
(c) .............................................................. N.A.
311(a)............................................................ 7.11
(b)............................................................... 7.11
(i)(c)............................................................ N.A.
312(a)............................................................ 2.05
(b)............................................................... 13.03
(c)............................................................... 13.03
313(a)............................................................ 7.06
(b)(2)............................................................ 7.07
(c)............................................................... 7.06; 13.02
(d)............................................................... 7.06
314(a)............................................................ 4.03; 13.02
(c)(1)............................................................ 13.04
(c)(2)............................................................ 13.04
(c)(3)............................................................ N.A.
(e)............................................................... 13.05
(f)............................................................... N.A.
315(a)............................................................ 7.01
(b) .............................................................. 7.05; 13.02
(A)(c)............................................................ 7.01
(d)............................................................... 7.01
(e)............................................................... 6.11
316(a)(last sentence)............................................. 2.09
(a)(1)(A)......................................................... 6.05
(a)(1)(B)......................................................... 6.04
(a)(2)............................................................ N.A.
(b) .............................................................. 6.07
(c)............................................................... 2.12
317(a)(1)......................................................... 6.08
(a)(2)............................................................ 6.09
(b) .............................................................. 2.04
318(a)............................................................ 13.01
(b)............................................................... N.A.
(c)............................................................... 12.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE.................. 1
Section 1.01 DEFINITIONS......................................... 1
Section 1.02 OTHER DEFINITIONS................................... 29
Section 1.03 TRUST INDENTURE ACT DEFINITIONS..................... 29
Section 1.04 RULES OF CONSTRUCTION............................... 30
ARTICLE 2 THE NOTES................................................... 30
Section 2.01 FORM AND DATING..................................... 30
Section 2.02 EXECUTION AND AUTHENTICATION........................ 32
Section 2.03 REGISTRAR AND PAYING AGENT.......................... 32
Section 2.04 PAYING AGENT TO HOLD MONEY IN TRUST................. 33
Section 2.05 HOLDER LISTS........................................ 33
Section 2.06 TRANSFER AND EXCHANGE............................... 33
Section 2.07 REPLACEMENT NOTES................................... 47
Section 2.08 OUTSTANDING NOTES................................... 47
Section 2.09 TREASURY NOTES...................................... 48
Section 2.10 TEMPORARY NOTES..................................... 48
Section 2.11 CANCELLATION........................................ 48
Section 2.12 DEFAULTED INTEREST.................................. 48
Section 2.13 CUSIP NUMBERS....................................... 49
ARTICLE 3 REDEMPTION AND PREPAYMENT................................... 49
Section 3.01 NOTICES TO TRUSTEE.................................. 49
Section 3.02 SELECTION OF NOTES TO BE REDEEMED................... 49
Section 3.03 NOTICE OF REDEMPTION................................ 50
Section 3.04 EFFECT OF NOTICE OF REDEMPTION...................... 50
Section 3.05 DEPOSIT OF REDEMPTION PRICE......................... 51
Section 3.06 NOTES REDEEMED IN PART.............................. 51
Section 3.07 OPTIONAL REDEMPTION................................. 51
Section 3.08 MANDATORY REDEMPTION................................ 52
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS
PROCEEDS............................................ 52
ARTICLE 4 COVENANTS................................................... 54
Section 4.01 PAYMENT OF NOTES.................................... 54
Section 4.02 MAINTENANCE OF OFFICE OR AGENCY..................... 54
Section 4.03 REPORTS............................................. 55
Section 4.04 COMPLIANCE CERTIFICATE.............................. 55
Section 4.05 TAXES............................................... 56
Section 4.06 STAY, EXTENSION AND USURY LAWS...................... 56
Section 4.07 RESTRICTED PAYMENTS................................. 57
Section 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.............................. 60
Section 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK..................................... 61
Section 4.10 ASSET SALES......................................... 65
Section 4.11 TRANSACTIONS WITH AFFILIATES........................ 67
Section 4.12 LIENS............................................... 69
Section 4.13 CORPORATE EXISTENCE................................. 70
Section 4.14 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.......... 70
Section 4.15 NO SENIOR SUBORDINATED DEBT......................... 71
Section 4.16 ADDITIONAL SUBSIDIARY GUARANTEES.................... 72
Section 4.17 BUSINESS ACTIVITIES................................. 72
Section 4.18 DESIGNATION OF RESTRICTED AND UNRESTRICTED
SUBSIDIARIES........................................ 72
ARTICLE 5 SUCCESSORS.................................................. 72
Section 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS............ 72
Section 5.02 SUCCESSOR CORPORATION SUBSTITUTED................... 73
ARTICLE 6 DEFAULTS AND REMEDIES....................................... 74
Section 6.01 EVENTS OF DEFAULT................................... 74
Section 6.02 ACCELERATION........................................ 75
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 6.03 OTHER REMEDIES...................................... 76
Section 6.04 WAIVER OF PAST DEFAULTS............................. 77
Section 6.05 CONTROL BY MAJORITY................................. 77
Section 6.06 LIMITATION ON SUITS................................. 77
Section 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT....... 78
Section 6.08 COLLECTION SUIT BY TRUSTEE.......................... 78
Section 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.................... 78
Section 6.10 PRIORITIES.......................................... 79
Section 6.11 UNDERTAKING FOR COSTS............................... 79
ARTICLE 7 TRUSTEE..................................................... 79
Section 7.01 DUTIES OF TRUSTEE................................... 79
Section 7.02 RIGHTS OF TRUSTEE................................... 81
Section 7.03 INDIVIDUAL RIGHTS OF TRUSTEE........................ 81
Section 7.04 TRUSTEE'S DISCLAIMER................................ 82
Section 7.05 NOTICE OF DEFAULTS.................................. 82
Section 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.......... 82
Section 7.07 COMPENSATION AND INDEMNITY.......................... 82
Section 7.08 REPLACEMENT OF TRUSTEE.............................. 83
Section 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.................... 84
Section 7.10 ELIGIBILITY; DISQUALIFICATION....................... 84
Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY............................................. 85
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE.................... 85
Section 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.......................................... 85
Section 8.02 LEGAL DEFEASANCE AND DISCHARGE...................... 85
Section 8.03 COVENANT DEFEASANCE................................. 86
Section 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.......... 86
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS....... 88
Section 8.06 REPAYMENT TO COMPANY................................ 88
Section 8.07 REINSTATEMENT....................................... 89
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER............................ 89
Section 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES................. 89
Section 9.02 WITH CONSENT OF HOLDERS OF NOTES.................... 90
Section 9.03 COMPLIANCE WITH TRUST INDENTURE ACT................. 91
Section 9.04 REVOCATION AND EFFECT OF CONSENTS................... 91
Section 9.05 NOTATION ON OR EXCHANGE OF NOTES.................... 92
Section 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC..................... 92
ARTICLE 10 SUBORDINATION.............................................. 92
Section 10.01 AGREEMENT TO SUBORDINATE............................ 92
Section 10.02 CERTAIN DEFINITIONS................................. 92
Section 10.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY................ 93
Section 10.04 DEFAULT ON DESIGNATED SENIOR DEBT................... 94
Section 10.05 ACCELERATION OF NOTES............................... 95
Section 10.06 WHEN DISTRIBUTION MUST BE PAID OVER................. 95
Section 10.07 NOTICE BY COMPANY................................... 95
Section 10.08 SUBROGATION......................................... 96
Section 10.09 RELATIVE RIGHTS..................................... 96
Section 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY........ 96
Section 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE............ 96
Section 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT.................. 97
Section 10.13 AUTHORIZATION TO EFFECT SUBORDINATION............... 97
Section 10.14 AMENDMENTS.......................................... 97
ARTICLE 11 SUBSIDIARY GUARANTEES...................................... 97
Section 11.01 SUBSIDIARY GUARANTEE................................ 97
Section 11.02 SUBORDINATION OF SUBSIDIARY GUARANTEE............... 99
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 11.03 LIMITATION ON GUARANTOR LIABILITY................... 99
Section 11.04 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE...... 99
Section 11.05 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN
TERMS............................................... 100
Section 11.06 RELEASES FOLLOWING SALE OF ASSETS................... 100
ARTICLE 12 SATISFACTION AND DISCHARGE................................. 101
Section 12.01 SATISFACTION AND DISCHARGE OF INDENTURE............. 101
Section 12.02 APPLICATION OF TRUST MONEY.......................... 102
ARTICLE 13 MISCELLANEOUS.............................................. 102
Section 13.01 TRUST INDENTURE ACT CONTROLS........................ 102
Section 13.02 NOTICES............................................. 102
Section 13.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER
HOLDERS OF NOTES.................................... 104
Section 13.04 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT........................................... 104
Section 13.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION....... 104
Section 13.06 RULES BY TRUSTEE AND AGENTS......................... 104
Section 13.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND SHAREHOLDERS.......................... 105
Section 13.08 GOVERNING LAW....................................... 105
Section 13.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS....... 105
Section 13.10 SUCCESSORS.......................................... 105
Section 13.11 SEVERABILITY........................................ 105
Section 13.12 COUNTERPART ORIGINALS............................... 105
Section 13.13 TABLE OF CONTENTS, HEADINGS, ETC.................... 105
</TABLE>
v
<PAGE> 8
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit E FORM OF NOTATION OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
<PAGE> 9
INDENTURE dated as of October 15, 1999 by and among IASIS Healthcare
Corporation, a Delaware corporation (the "Company"), the Guarantors named on the
signature pages hereto and The Bank of New York, a New York banking corporation
as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 13% Senior Subordinated Notes due 2009 (the "Series A Notes") and the 13%
Series B Senior Subordinated Notes due 2009 (the "Series B Notes" and, together
with the Series A Notes, the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other
Person is merged or consolidated with or into or became a Subsidiary of such
specified Person, whether or not such Indebtedness is incurred in connection
with, or in contemplation of, such other Person merging with or into, or
becoming a Subsidiary of, such specified Person; and
(ii) Indebtedness secured by a Lien encumbering any asset acquired
by such specified Person.
"Additional Notes" means Notes (other than the Initial Notes) issued
under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part
of the same series as the Initial Notes.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings. No Person (other than the Company or any
Subsidiary of the Company) in whom a Receivables Subsidiary makes an
<PAGE> 10
Investment in connection with a Qualified Receivables Transaction will be deemed
to be an Affiliate of the Company or any of its Subsidiaries solely by reason of
such Investment.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedelbank that apply to such
transfer or exchange.
"Asset Sale" means:
(i) the sale, lease, conveyance or other disposition of any assets
or rights; provided that the sale, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole shall be governed by the provisions of Section 4.14 hereof
and/or the provisions of Section 5.01 hereof and not by the provisions of
Section 4.10 hereof; and
(ii) the issuance of Equity Interests by any of the Company's
Restricted Subsidiaries or the sale of Equity Interests in any of the Company's
Subsidiaries.
Notwithstanding the preceding, the following items shall not be
deemed to be Asset Sales:
(i) any single transaction or series of related transactions that
involves assets having a fair market value of less than the greater of (a) $1.0
million and (b) a 1% of Consolidated Cash Flow;
(ii) a sale or transfer of assets between or among the Company
and its Restricted Subsidiaries;
(iii) an issuance of Equity Interests by a Restricted Subsidiary
to the Company or to another Restricted Subsidiary;
(iv) the sale or lease of equipment, inventory, accounts receivable
or other assets in the ordinary course of business;
(v) the sale or other disposition of cash or Cash Equivalents;
(vi) a Restricted Payment or Permitted Investment that is permitted
by the provisions of Section 4.07 hereof;
(vii) the sale, lease, conveyance, disposition or other transfer of
(a) the Capital Stock of or any Investment in any Unrestricted Subsidiary or (b)
Permitted Investments made pursuant to clause (xvi) of the definition thereof;
(viii) surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind;
2
<PAGE> 11
(ix) the licensing of intellectual property in the ordinary course
of business;
(x) granting of Liens not otherwise prohibited by this Indenture;
(xi) leases or subleases to third persons in the ordinary course of
business that do not interfere in any material respect with the business of the
Company or any of its Restricted Subsidiaries.
(xii) sales of accounts receivable and related assets of the type
specified in the definition of Qualified Receivables Transaction to a
Receivables Subsidiary for the fair market value thereof, less amounts required
to be established as reserves and customary discounts pursuant to contractual
agreements with entities that are not Affiliates of the Company entered into as
part of a Qualified Receivables Transaction;
(xiii) transfers of accounts receivable and related assets of the
type specified in the definition of Qualified Receivables Transaction (or a
fractional undivided interest therein) by a Receivables Subsidiary in a
Qualified Receivables Transaction; and
(xiv) the substantially contemporaneous sale and leaseback of an
asset acquired after the date of this Indenture; provided that such sale and
leaseback occurs within 180 days after the date of the acquisition of such asset
by the Company and its Restricted Subsidiaries.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as that term is used in Section
13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition. For purposes of this definition, the terms "Beneficially Owns" and
"Beneficially Owned" shall have corresponding meanings.
"Board of Directors" means:
(i) with respect to a corporation, the board of directors of the
corporation;
(ii) with respect to a partnership, the Board of Directors of the
general partner of the partnership; and
(iii) with respect to any other Person, the board or committee of
such Person serving a similar function.
"Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Business Day" means any day other than a Legal Holiday.
3
<PAGE> 12
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(i) United States dollars;
(ii) securities issued or directly and fully guaranteed or insured
by the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than one year from the date of
acquisition;
(iii) certificates of deposit, demand and time deposits, eurodollar
time deposits, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case, with any lender party to the Credit
Agreement or with any domestic commercial bank having capital and surplus in
excess of $500.0 million;
(iv) repurchase obligations with a term of not more than one year
for underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above;
(v) commercial paper having one of the two highest ratings
obtainable from Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Rating Services ("S&P") and in each case maturing within one year after the date
of acquisition;
(vi) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof having one of the two highest ratings obtainable from
Moody's and S&P and maturing within one year from the date of acquisition
thereof; and
(vii) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through (vi)
of this definition.
4
<PAGE> 13
"Cedelbank" means Cedelbank, a limited liability company (a societe
anonyme) organized under Luxembourg law.
"Change of Control" means the occurrence of any of the following:
(i) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets
of the Company and its Restricted Subsidiaries taken as a whole to any "person"
(as that term is used in Section 13(d)(3) of the Exchange Act) other than to a
Principal or a Related Party of a Principal;
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the Beneficial Owner, directly or indirectly, of more than 50%
of the Voting Stock of the Company, measured by voting power rather than number
of shares; or
(iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company has been
approved by the Principals or a majority of the directors then still in office
who either were directors at the beginning of such period or whose election or
recommendation for election was previously so approved) cease to constitute a
majority of the Board of Directors of the Company.
"Company" means IASIS Healthcare Corporation, and any and all
successors thereto.
"Consolidated Cash Flow" means, with respect to any specified Person
for any period, the Consolidated Net Income of such Person for such period plus:
(i) an amount equal to any extraordinary gain or loss and any net
gain or loss realized by such Person or any of its Restricted Subsidiaries in
connection with an Asset Sale, to the extent that such gains or losses were
utilized in computing such Consolidated Net Income; plus
(ii) provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income; plus
(iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest
5
<PAGE> 14
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the extent that
any such expense was deducted in computing such Consolidated Net Income; plus
(iv) fees, costs, charges and expenses incurred in connection with
the Paracelsus Recapitalization and the Tenet Acquisition; plus
(v) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses and items (excluding
any such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash expenses and items were deducted in computing such
Consolidated Net Income; minus
(vi) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of business, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, the interest expense of, and the depreciation and amortization and
other non-cash items of, a Restricted Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent and
in the same proportion that Net Income of that Restricted Subsidiary was
included in calculating the Consolidated Net Income of that Person.
"Consolidated Net Income" means, with respect to any specified
Person for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP (before dividends on Preferred Stock); provided that:
(i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted Subsidiary
thereof;
(ii) the Net Income of any Restricted Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary or its stockholders;
(iii) solely for purposes of determining the aggregate amount
available for Restricted Payments under Section 4.07(iii)(A) hereof, the Net
Income of any Person acquired in
6
<PAGE> 15
a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded;
(iv) the cumulative effect of a change in accounting principles
shall be excluded;
(v) there shall be added to the Net Income of such Person the amount
of any decrease in the deferred tax asset for such period relating to the actual
cash tax benefit realized by the Company (or the consolidated tax group of which
the Company is a member) resulting from the election under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended, in respect of the Paracelsus
Recapitalization;
(vi) the fees, costs and expenses of the Transactions shall be
excluded;
(vii) income or losses attributable to discontinued operations
(including, without limitation, operations disposed of during such period
whether or not such operations were classified as discontinued) shall be
excluded;
(viii) all extraordinary gains and losses, non-recurring cumulative
effects of accounting changes and, without duplication, non-recurring or unusual
gains and losses and all restructuring charges shall be excluded;
(ix) any non-cash charges attributable to applying the purchase
method of accounting in accordance with GAAP shall be excluded; and
(x) non-cash charges relating to employee benefit or other
management compensation plans of the Company or a Restricted Subsidiary
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of a
prepaid cash expense incurred in a prior period) to the extent that such
non-cash charges are deducted in computing such Consolidated Net Income;
provided, further that if the Company or any Restricted Subsidiary of the
Company makes a cash payment in respect of such non-cash charge in any period,
such cash payment shall (without duplication) be deducted from the Consolidated
Net Income of the Company for such period.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 13.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement, dated as of
the date hereof by and among the Company and Morgan Guaranty Trust Company of
New York, as administrative agent, and the other lenders party thereto, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder or adding Subsidiaries
of the Company as additional borrowers or
7
<PAGE> 16
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders.
"Credit Facilities" means one or more debt facilities (including,
without limitation, the Credit Agreement) or commercial paper facilities, in
each case with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced, or refinanced in whole
or in part from time to time.
"Default" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name
of the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Preferred Stock" means Preferred Stock (not constituting
Disqualified Stock) of the Company (excluding any Preferred Stock issued prior
to the date of this Indenture and any Preferred Stock issued in exchange or
substitution therefor) that is designated as Designated Preferred Stock on or
after the date of issuance thereof pursuant to an Officers' Certificate
delivered to the Trustee on the designation thereof, the cash proceeds of which
are excluded from the calculation set forth in Section 4.07(iii)(B) hereof.
"Designated Senior Debt" means:
(1) any Indebtedness under or in respect of the Credit Agreement;
and
(2) any other Senior Debt permitted under this Indenture the
principal amount of which is $25.0 million or more and that has been designated
by the Company in the instrument or agreement relating to the same as
"Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature (other than for Capital Stock which is not
Disqualified Stock). Notwithstanding the preceding sentence, (a) any Capital
Stock that would constitute Disqualified Stock solely because
8
<PAGE> 17
the holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a change of control or an asset sale shall
not constitute Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption complies with Section 4.07
hereof, and (b) any Capital Stock that would constitute Disqualified Stock
solely because such Capital Stock is issued pursuant to any plan for the benefit
of employees of the Company or Subsidiaries of the Company or by any such plan
to such employees and may be required to be repurchased by the Company in order
to satisfy applicable statutory or regulatory obligations shall not constitute
Disqualified Stock. The amount of Disqualified Stock shall be its mandatory
maximum redemption price or liquidation preference, as applicable, plus accrued
dividends.
"Domestic Subsidiary" means any Restricted Subsidiary that was
formed under the laws of the United States or any state thereof or the District
of Columbia or that guarantees or otherwise provides direct credit support for
any Indebtedness of the Company or any Guarantor.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a sale by the Company of shares of its
Capital Stock (however designated and whether voting or non-voting) (other than
Disqualified Stock) and any and all rights, warrants or options to acquire such
Capital Stock.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Series B Notes issued in the Exchange
Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of this Indenture.
"Fixed Charges" means, with respect to any specified Person for any
period, the sum, without duplication, of:
(i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued, including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
9
<PAGE> 18
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings and net of the effect of all payments made or
received pursuant to Hedging Obligations and excluding amortization of deferred
financing costs; plus
(ii) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries, whether or
not such Guarantee or Lien is called upon; plus
(iv) the product of (A) all dividends paid (whether or not in cash),
on any series of Disqualified Stock or Designated Preferred Stock of such Person
or any of its Restricted Subsidiaries, other than dividends on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company, times (B) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified
Person for any period, the ratio of the Consolidated Cash Flow of such Person
and its Restricted Subsidiaries for such period to the Fixed Charges of such
Person and its Restricted Subsidiaries for such period. In the event that the
specified Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary
working capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated and on or prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
In addition, for purposes of calculating the Fixed Charge Coverage
Ratio:
(i) acquisitions that have been made by the specified Person or any
of its Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be given pro forma effect as if they had occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated on a pro forma basis in accordance with Regulation
S-X under the Securities Act, but without giving effect to clause (iii) of the
proviso set forth in the definition of Consolidated Net Income;
(ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
10
<PAGE> 19
(iii) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
specified Person or any of its Restricted Subsidiaries following the Calculation
Date.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 or A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantors" means each Restricted Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of this Indenture and
their respective successors and assigns; provided that upon the release of such
Subsidiary Guarantee pursuant to this Indenture, such Person shall cease to be a
Guarantor.
"Hedging Obligations" means, with respect to any specified Person,
the obligations of such Person under:
(i) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(ii) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates, currency exchange rates or
commodity prices.
"Holder" means a Person in whose name a Note is registered.
11
<PAGE> 20
"Hospital" means a hospital, outpatient clinic, long-term care
facility, medical office building or other facility, business or other asset
that is used or useful in or related to the provision of healthcare services.
"Hospital Swap" means an exchange of assets and, to the extent
necessary to equalize the value of the assets being exchanged, cash by the
Company or a Restricted Subsidiary of the Company for one or more Hospitals
and/or one or more Related Businesses or for 100% of the Capital Stock of any
Person owning or operating one or more Hospitals and/or one or more Related
Businesses, provided that cash does not exceed 20% of the sum of the amount of
the cash and the fair market value of the Capital Stock or assets received or
given by the Company or a Restricted Subsidiary of the Company in such
transaction, unless such excess cash is applied in accordance with the
requirements of the third paragraph of Section 4.10 hereof.
"IAI Global Note" means the global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"IASIS Merger" means the merger of Iasis Healthcare, a Tennessee
corporation, into the Company on or prior to the date of this Indenture.
"Indebtedness" means, without duplication with respect to any
specified Person, any indebtedness of such Person, whether or not contingent, in
respect of:
(i) borrowed money;
(ii) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(iii) banker's acceptances;
(iv) representing Capital Lease Obligations;
(v) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable; or
(vi) representing the net obligations under any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
12
<PAGE> 21
The amount of any Indebtedness outstanding as of any date shall be:
(i) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; or
(ii) the principal amount thereof in the case of all other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $230.0 million in aggregate principal amount
of Notes issued under this Indenture on the date hereof.
"Initial Purchaser" means J.P. Morgan Securities Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who is not also a QIB.
"Investments" means, with respect to any Person, all direct or
indirect investments by such Person in other Persons (including Affiliates) in
the forms of loans (including Guarantees or other obligations), advances or
capital contributions (excluding commission, travel, relocation, payroll,
entertainment and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof. The acquisition by the Company or any Subsidiary of the
Company of a Person that holds an Investment in a third Person shall be deemed
to be an Investment by the Company or such Subsidiary in such third Person in an
amount equal to the fair market value of the Investment held by the acquired
Person in such third Person in an amount determined as provided in the final
paragraph of Section 4.07 hereof. The outstanding amount of any Investment shall
be the original cost thereof, reduced by all returns on such Investment
(including dividends, interest, distributions, returns of principal and profits
on sale.
"JLL Hospital Merger" means the merger of JLL Hospital, LLC into the
Company on or prior to the date of this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or
13
<PAGE> 22
executive order to remain closed. If a payment date is a Legal Holiday at a
place of payment, payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue on such payment for
the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with any Qualified Receivables
Transaction, any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any specified Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(i) any gain or loss, together with any related provision for taxes
on such gain or loss, realized in connection with: (A) any Asset Sale; or (B)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries; and
(ii) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any Restricted Subsidiary of the Company in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, and amounts required to
be applied to the repayment of Indebtedness, other than Indebtedness under a
Credit Facility, secured by a Lien on the asset or assets that were the subject
of such Asset Sale and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
14
<PAGE> 23
"Non-Recourse Debt" means Indebtedness:
(i) as to which neither the Company nor any Restricted Subsidiary of
the Company (A) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness) (other than the
pledge of stock of an Unrestricted Subsidiary; provided that such pledge
otherwise constitutes Non-Recourse Debt, (B) is directly or indirectly liable as
a guarantor or otherwise, or (C) constitutes the lender;
(ii) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any
other Indebtedness (other than the Notes) of the Company or any Restricted
Subsidiary of the Company to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(iii) as to which the lenders of such Indebtedness have been
notified in writing or have agreed in writing (in the agreement relating thereto
or otherwise) that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Initial Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company, that meets the requirements of Section 13.05 hereof.
15
<PAGE> 24
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
13.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Other Hedging Agreements" means any foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency or
commodity values.
"Paracelsus Recapitalization" means the recapitalization of the
Company, which at the time of such recapitalization was a wholly owned
Subsidiary of Paracelsus Healthcare Corporation that owned certain hospital
assets located in Utah, pursuant to that certain Recapitalization Agreement
dated as of August 16, 1999.
"Participant" means, with respect to the Depositary, Euroclear or
Cedelbank, a Person who has an account with the Depositary, Euroclear or
Cedelbank, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Cedelbank).
"Permitted Business" means any business (i) which is the same,
similar, ancillary or related to any of the businesses that the Company and its
Restricted Subsidiaries are engaged in on the date of this Indenture or (ii) in
the healthcare industry.
"Permitted Investments" means:
(i) any Investment in (including Guarantees of the obligations of)
the Company or in a Restricted Subsidiary of the Company;
(ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (A) such Person
becomes a Restricted Subsidiary of the Company or (B) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company;
(iv) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof;
(v) any acquisition of assets (including Capital Stock) solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company;
(vi) Hedging Obligations;
(vii) loans and advances made to and guarantees provided for the
benefit of officers and employees of the Company and its Restricted Subsidiaries
in the ordinary course of business not to exceed $5.0 million in the aggregate
at any one time outstanding;
16
<PAGE> 25
(viii) Investments in prepaid expenses, negotiable instruments held
for collection and lease, utility and workers compensation, performance and
similar deposits entered into as a result of the operations of the business in
the ordinary course of business;
(ix) Investments in securities of trade debtors or customers
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers or in good faith
settlement of delinquent obligations of such trade debtors or customers;
(x) obligations of one or more officers or other employees of the
Company or any of its Restricted Subsidiaries in connection with such officer's
or employee's acquisition of shares of common stock of the Company so long as no
cash or other assets are paid by the Company or any of its Restricted
Subsidiaries to such officers or employees in connection with the acquisition of
any such obligations;
(xi) Investments in any of the Notes;
(xii) receivables owing to the Company or any Restricted Subsidiary
created in the ordinary course of business;
(xiii) the acquisition by a Receivables Subsidiary in connection
with a Qualified Receivables Transaction of Equity Interests of a trust or other
Person established by such Receivables Subsidiary to effect such Qualified
Receivables Transaction; and any other Investment by the Company or a Subsidiary
of the Company in a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person in connection with a Qualified Receivables
Transaction customary for such transactions;
(xiv) Physician Support Obligations;
(xv) in the event the Company or a Restricted Subsidiary shall
establish a Subsidiary for the purpose of insuring the healthcare businesses or
facilities owned or operated by the Company, any Subsidiary, any physician
employed by or on the medical staff of any such business or facility (the
"Insurance Subsidiary"), Investments in an amount which do not exceed the
minimum amount of capital required under the laws of the jurisdiction in which
the Insurance Subsidiary is formed, and any Investment by such Insurance
Subsidiary which is a legal investment for an insurance company under the laws
of the jurisdiction in which the Insurance Subsidiary is formed and made in the
ordinary course of business and rated in one of the four highest rating
categories;
(xvi) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (xvi) that are at the time
outstanding not to exceed an amount equal to the greater of (x) $30.0 million
and (y) 3% of Total Assets; and
(xvii) Investments in connection with Hospital Swaps.
17
<PAGE> 26
"Permitted Junior Securities" means debt or equity securities of the
Company or any successor corporation issued pursuant to a plan of reorganization
or readjustment of the Company that are subordinated to the payment of all then
outstanding Senior Debt of the Company at least to the same extent that the
Notes are subordinated to the payment of all Senior Debt of the Company on the
date of this Indenture, so long as:
(i) the effect of the use of this defined term in Article 10 is not
to cause the Notes to be treated as part of:
(A) the same class of claims as the Senior Debt of the Company; or
(B) any class of claims pari passu with, or senior to, the Senior
Debt of the Company for any payment or distribution in any case or proceeding or
similar event relating to the liquidation, insolvency, bankruptcy, dissolution,
winding up or reorganization of the Company; and
(ii) to the extent that any Senior Debt of the Company outstanding
on the date of consummation of any such plan of reorganization or readjustment
is not paid in full in cash or Cash Equivalents (other than Cash Equivalents of
the type referred to in clauses (iii) and (iv) of the definition thereof) on
such date, either:
(A) the holders of any such Senior Debt not so paid in full in cash
or Cash Equivalents (other than Cash Equivalents of the type referred to in
clauses (iii) and (iv) of the definition thereof) have consented to the terms of
such plan of reorganization or readjustment; or
(B) such holders receive securities which constitute Senior Debt of
the Company (which are guaranteed pursuant to guarantees constituting Senior
Debt of each Guarantor) and which have been determined by the relevant court to
constitute satisfaction in full in money or money's worth of any Senior Debt of
the Company (and any related Senior Debt of the Guarantors) not paid in full in
cash or Cash Equivalents (other than Cash Equivalents of the type referred to in
clauses (iii) and (iv) of the definition thereof).
"Permitted Liens" means:
(i) Liens of the Company and any Guarantor securing Senior Debt that
was permitted by the terms of this Indenture to be incurred;
(ii) Liens in favor of the Company or the Guarantors;
(iii) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with, or is acquired by, the Company or
any of its Subsidiaries; provided that such Liens were in existence prior to the
contemplation of such merger, consolidation or acquisition and do not extend to
any assets other than those of the Person merged into, consolidated with or
acquired by the Company or its Subsidiaries;
18
<PAGE> 27
(iv) Liens on property existing at the time of acquisition thereof
by the Company or any of its Subsidiaries, provided that such Liens were in
existence prior to the contemplation of such acquisition;
(v) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the second paragraph of Section 4.09
hereof covering only the assets acquired, constructed or improved with such
Indebtedness;
(vii) Liens existing on the date of this Indenture;
(viii) Liens for taxes, assessments or governmental charges or
claims that (i) are not yet delinquent or (ii) are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
provided that in the case of clause (ii) any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor;
(ix) Liens incurred in the ordinary course of business of the
Company or any of its Subsidiaries with respect to obligations that do not
exceed $5.0 million at any one time outstanding;
(x) security for the payment of workers' compensation, unemployment
insurance, other social security benefits or other insurance-related obligations
(including, but not limited to, in respect of deductibles, self-insured
retention amounts and premiums and adjustments thereto) entered into in the
ordinary course of business;
(xi) deposits or pledges in connection with bids, tenders, leases
and contracts (other than contracts for the payment of money) entered into in
the ordinary course of business;
(xii) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created, assumed
or permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee), none of which
interferes in any material respect with the ordinary conduct of the business of
the Company or any of its Subsidiaries or materially impairs the use of any
parcel of property;
(xiii) deposits or pledges to secure public or statutory
obligations, progress payments, surety and appeal bonds or other obligations of
like nature incurred in the ordinary course of business;
(xiv) survey title exceptions, title defects, encumbrances,
easements, reservations of, or rights of others for, rights of way, sewers,
electric lines, telegraph or telephone lines and other similar purposes or
zoning or other restrictions as to the use of real property not
19
<PAGE> 28
materially interfering with the ordinary conduct of the business of the Company
and its Subsidiaries taken as a whole;
(xv) Liens arising by operation of law in favor of landlords,
mechanics, carriers, warehousemen, materialmen, laborers, employees, suppliers
or the like, incurred in the ordinary course of business for sums which are not
yet delinquent or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof;
(xvi) leases, subleases, licenses or sublicenses to third parties
entered into in the ordinary course of business;
(xvii) Liens securing any Permitted Refinancing Indebtedness so long
as the Lien securing such Permitted Refinancing Indebtedness is limited to all
or part of the same property or assets (plus improvements, accessions, proceeds
or dividends or distributions in respect thereof) that secured (or under such
written arrangements could secure) the original Indebtedness; or incurred in
respect of any Indebtedness secured by, or securing any refinancing, refunding,
extension, renewal or replacement (in whole or in part) of any other obligation
secured by, any other Permitted Liens, provided that any such new Lien is
limited to all or part of the same property or assets (plus improvements,
accessions, proceeds or dividends or distributions in respect thereof) that
secured (or, under the written arrangements under which the original Lien arose
could secure) the obligations to which such Liens relate;
(xviii) Liens securing Hedging Obligations;
(xix) Liens arising out of judgments, decrees, orders or awards in
respect of which the Company shall in good faith be prosecuting an appeal or
proceedings for review which appeal or proceedings shall not have been finally
terminated, or if the period within which such appeal or proceedings may be
initiated shall not have expired;
(xx) Liens on Capital Stock of an Unrestricted Subsidiary that
secure Indebtedness or other obligation of such Unrestricted Subsidiary; and
(xxi) Liens incurred in connection with a Qualified Receivables
Transaction (which in the case of the Company and its Restricted Subsidiaries
(other than Receivables Subsidiaries) shall be limited to receivables and
related assets referred to in the definition of Qualified Receivables
Transaction).
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all
20
<PAGE> 29
accrued interest thereon and the amount of all fees, commissions, discounts,
costs, expenses and premiums incurred in connection therewith);
(ii) if such Indebtedness is not Senior Debt, either (a) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded or (b) all
scheduled payments on or in respect of such Permitted Refinancing Indebtedness
(other than interest payments) shall be at least 91 days following the final
scheduled maturity of the Notes; and if such Indebtedness is Senior Debt and has
a final stated maturity later than the final stated maturity of the Notes, such
Permitted Refinancing Indebtedness has a final stated maturity later than the
final stated maturity of the Notes;
(iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness is subordinated in right of payment to,
the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(iv) such Indebtedness is incurred either by the Company or any
Guarantor or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
limited liability company or government or other entity.
"Physician Support Obligation" means a loan to or on behalf of, or a
guarantee of indebtedness of, a physician or healthcare professional providing
service to patients in the service area of a Hospital or other healthcare
facility operated by the Company or any of its Restricted Subsidiaries made or
given by the Company or any Subsidiary of the Company (a) in the ordinary course
of its business and (b) pursuant to a written agreement having a period not to
exceed five years.
"Principals" means Joseph Littlejohn & Levy, Inc. ("JLL"),
investment funds managed by JLL, partners of JLL, an entity controlled by any of
the foregoing and/or by a trust of the type described hereafter, and/or a trust
for the benefit of any of the foregoing.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Qualified Receivables Transaction" means any transaction or series
of transactions entered into by the Company or any of its Subsidiaries pursuant
to which the
21
<PAGE> 30
Company or any of its Subsidiaries sells, conveys or otherwise transfers to (i)
a Receivables Subsidiary (in the case of a transfer by the Company or any of its
Subsidiaries, which transfer may be effected through the Company or one or more
Subsidiaries) and (ii) any other Person (in the case of a transfer by a
Receivables Subsidiary), or grants a security interest in, any accounts
receivable, instruments, chattel paper, general intangibles and similar assets
(whether now existing or arising in the future, the "Receivables") of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such Receivables, all contracts,
contract rights and all guarantees or other obligations in respect of such
Receivables, proceeds of such Receivables and any other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions of such
type;
provided that a Receivables Subsidiary participating in a Qualified Receivables
Transaction shall meet the requirements set forth in the definition of
"Receivables Subsidiary."
"Recapitalization Refinancing" means the debt refinancing in
connection with the Paracelsus Recapitalization and Tenet Acquisition.
"Receivables Subsidiary" means a Subsidiary of the Company which
engages in no activities other than in connection with the financing of accounts
receivable and that is designated by the Board of Directors of the Company (as
provided below) as a Receivables Subsidiary (A) no portion of the Indebtedness
or any other Obligations (contingent or otherwise) of which:
(i) is guaranteed by the Company or any Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of,
and interest on, Indebtedness) pursuant to representations,
warranties, covenants and indemnities entered into in the ordinary
course of business in connection with a Qualified Receivables
Transaction);
(ii) is recourse to or obligates the Company or any Subsidiary of the
Company in any way other than pursuant to representations,
warranties, covenants and indemnities customarily entered into in
connection with a Qualified Receivables Transaction; or
(iii) subjects any property or asset of the Company or any Subsidiary of
the Company (other than accounts receivable and related assets as
provided in the definition of "Qualified Receivables Transaction"),
directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations,
warranties, covenants and indemnities customarily entered into in
connection with a Qualified Receivables Transaction;
(B) with which neither the Company nor any Subsidiary of the Company has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to the Company or such Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company, other
than as may be customary in a Qualified Receivables
22
<PAGE> 31
Transaction including for fees payable in the ordinary course of business in
connection with servicing accounts receivable; and (C) with which neither the
Company nor any Subsidiary of the Company has any obligation to maintain or
preserve such Subsidiary's financial condition or cause such Subsidiary to
achieve certain levels of operating results. Any such designation by the Board
of Directors of the Company will be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Refinancing Disqualified Stock" means any Disqualified Stock of the
Company issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace or refund other Disqualified Stock of the Company;
provided that:
(i) the amount of such Refinancing Disqualified Stock does not exceed
the amount of the Disqualified Stock so extended, refinanced,
renewed, replaced or refunded (plus all accrued dividends thereon
and the amount of all fees, commissions, discounts, costs, expenses
and premiums incurred in connection therewith); and
(ii) either (A) such Refinancing Disqualified Stock by its terms, or
upon the happening of any event, matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise at
the option of the holder thereof, in whole or in part, on or
later than the final maturity date of, or date that by its terms,
or upon the happening of any event, matures, or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise at
the option of the holder thereof, in whole or in part, of, the
Disqualified Stock being extended, refinanced, renewed, replaced
or refunded or (B) all scheduled payments on or in respect of
such Refinancing Disqualified Stock (other than dividend
payments) shall be at least 91 days following the final scheduled
maturity of the Notes.
"Refinancing Preferred Stock" means any preferred stock of the
Company issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace or refund other preferred stock of the Company;
provided that:
(i) the amount of such Refinancing Preferred Stock does not exceed the
amount of the preferred stock so extended, refinanced, renewed,
replaced or refunded (plus all accrued dividends thereon and the
amount of all fees, commissions, discounts, costs, expenses and
premiums incurred in connection therewith); and
(ii) such Refinancing Preferred Stock is not Disqualified Stock.
"Refinancing Subsidiary Preferred Stock" means any preferred stock
of any Restricted Subsidiary of the Company issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace or refund other
preferred stock of such Restricted Subsidiary; provided that:
23
<PAGE> 32
(i) the amount of such Refinancing Subsidiary Preferred Stock does not
exceed the amount of the preferred stock so extended, refinanced,
renewed, replaced or refunded (plus all accrued dividends thereon
and the amount of all fees, commissions, discounts, costs, expenses
and premiums incurred in connection therewith); and
(ii) such Refinancing Subsidiary Preferred Stock is not Disqualified
Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global
Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note
in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note
in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Business" means a healthcare business affiliated or
associated with a Hospital or any business related or ancillary to the provision
of healthcare services or information or the investment in, or the management,
leasing or operation of, a Hospital.
"Related Party" means:
(i) any controlling stockholder, 80% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any Principal; or
(ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of any one or more Principals
and/or such other Persons referred to in the immediately preceding clause (i).
24
<PAGE> 33
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; provided that if,
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt.
"Responsible Officer," means, when used with respect to the Trustee,
any officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as defined
in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means:
(i) all Indebtedness outstanding under all Credit Facilities, all
Hedging Obligations (including guarantees thereof) with respect
thereto of the Company and the Guarantors, whether outstanding on
the date of this Indenture or thereafter incurred;
25
<PAGE> 34
(ii) any other Indebtedness incurred by the Company and the Guarantors,
unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in
right of payment to the Notes or the Subsidiary Guarantees, as the
case may be; and
(iii) all Obligations with respect to the items listed in the preceding
clauses (i) and (ii) (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest
is an allowed claim under applicable law).
Notwithstanding anything to the contrary in the preceding, Senior Debt will not
include:
(i) any liability for federal, state, local or other taxes owed or owing
by the Company or the Guarantors;
(ii) any Indebtedness of the Company or any Guarantor to any of its
Subsidiaries;
(iii) any trade payables; or
(iv) the portion of any Indebtedness that is incurred in violation of
this Indenture (but only to the extent so incurred).
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(i) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof); and
(ii) any partnership (A) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (B)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
26
<PAGE> 35
"Subsidiary Guarantee" means the Guarantee of the Notes by a
Guarantor.
"Tax Sharing Agreement" means the Tax Sharing Agreement among JLL
Healthcare, the Company and Subsidiaries of the Company as in effect on the date
of this Indenture, with such amendments and modifications thereto, or may be
made from time to time which are not materially disadvantageous to the Holders
of the Notes.
"Tenet Acquisition" means the acquisition of certain acute care
hospitals located in Arizona, Florida and Texas, from Tenet Healthcare
Corporation, by the Company, pursuant to that certain Asset Sale Agreement dated
as of August 15, 1999.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this InDenture is
qualified under the TIA, except as provided in Section 9.03.
"Total Assets" means the total consolidated assets of the Company
and its Restricted Subsidiaries, as set forth on the most recent consolidated
balance sheet of the Company and its Restricted Subsidiaries.
"Transactions" means the Paracelsus Recapitalization, the
Recapitalization Refinancing, the Tenet Acquisition, the JLL Hospital Merger
and the IASIS Merger.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that
is designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a Board Resolution, but only to the extent that such Subsidiary:
(i) has no Indebtedness other than Non-Recourse Debt;
(ii) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company;
27
<PAGE> 36
(iii).is a Person with respect to which neither the Company nor any
of its Restricted Subsidiaries has any direct or indirect obligation (A) to
subscribe for additional Equity Interests or (B) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and
(iv) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries.
except in the case of clause (iii) or (iv), to the extent
(A) that the Company or such Restricted Subsidiary could otherwise
provide such a guarantee or incur such Indebtedness (other than as
Permitted Debt) pursuant to Section 4.09 hereof, and
(B) the provision of such guarantee and the incurrence of such
indebtedness otherwise would be permitted under Section 4.07 hereof.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted under Section 4.07 hereof. If, at any
time, any Unrestricted Subsidiary would fail to meet the preceding requirements
as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company shall be in
default of Section 4.09. The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (x) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period and (y) no Default or Event of Default would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(i) the sum of the products obtained by multiplying (A) the amount
of each then remaining installment, sinking fund, serial maturity or other
required payments of principal,
28
<PAGE> 37
including payment at final maturity, in respect thereof, by (B) the number of
years (calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment; by
(ii) the then outstanding principal amount of such Indebtedness.
Section 1.02 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Acceleration Notice"......................... 6.02
"Affiliate Transaction"....................... 4.11
"Asset Sale Offer"............................ 3.09
"Authentication Order"........................ 2.02
"Change of Control Offer"..................... 4.14
"Change of Control Payment"................... 4.14
"Change of Control Payment Date".............. 4.14
"Covenant Defeasance"......................... 8.03
"Designated Senior Debt"...................... 10.02
"DTC"......................................... 2.03
"Event of Default"............................ 6.01
"Excess Proceeds"............................. 4.10
"incur"....................................... 4.09
"Legal Defeasance"............................ 8.02
"Offer Amount"................................ 3.09
"Offer Period"................................ 3.09
"Paying Agent"................................ 2.03
"Payment Blockage Notice"..................... 10.04
"Payment Default"............................. 6.01
"Permitted Debt".............................. 4.09
"Permitted Junior Securities"................. 10.02
"Purchase Date"............................... 3.09
"Registrar"................................... 2.03
"Restricted Payments"......................... 4.07
"Revocation".................................. 4.07
</TABLE>
Section 1.03 TRUST INDENTURE ACT DEFINITIONS.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
29
<PAGE> 38
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes or the Subsidiary Guarantees means the
Company and the Guarantors, respectively and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01 FORM AND DATING.
(a) General.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1 and A-2 hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
30
<PAGE> 39
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of Euroclear or Cedelbank, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedelbank certifying that they have received certification of
non-United States beneficial ownership of 100% of the aggregate principal amount
of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or an IAI Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
from the Company. Following the termination of the Restricted Period, beneficial
interests in the Regulation S Temporary Global Note shall be exchanged for
beneficial interests in Regulation S Permanent Global Notes pursuant to the
Applicable Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Note. The aggregate principal amount of the Regulation S Temporary Global
Note and the Regulation S Permanent Global Notes may from
31
<PAGE> 40
time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
(d) Euroclear and Cedelbank Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedelbank" and "Customer Handbook" of Cedelbank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or Cedelbank.
Section 2.02 EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by one
Officer (an "Authentication Order"), authenticate Notes for original issue up to
the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails
32
<PAGE> 41
to appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Company or any of its Subsidiaries may act as Paying
Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Note Custodian with respect to the Global Notes.
The Trustee is authorized to enter into a letter of representations
with DTC in the form provided to the Trustee by the Company and to act in
accordance with such letter.
Section 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will promptly notify the Trustee in writing of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for the money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
Section 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
Section 2.06 TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes..
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, the Depositary or any such
nominee to a successor Depositary or a nominee of such successor Depositary. All
Global Notes will be exchanged by the Company for Definitive Notes if (i) the
Company delivers to the Trustee written notice from the Depositary
33
<PAGE> 42
that it is unwilling or unable to continue to act as Depositary or that it is no
longer a clearing agency registered under the Exchange Act and, in either case,
a successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect to
the Trustee; provided that in no event shall the Regulation S Temporary Global
Note be exchanged by the Company for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of any
certificates determined by the Company to be required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes.
The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial interests
in the Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in the same
Restricted Global Note in accordance with the transfer restrictions set forth in
the Private Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests
in any Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note. No
written orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor of
such beneficial interest must deliver to the Depositary either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to credit or
cause to be credited a beneficial interest in another Global Note in an amount
equal to the
34
<PAGE> 43
beneficial interest to be transferred or exchanged and (2) instructions given in
accordance with the Applicable Procedures containing information regarding the
Participant account to be credited with such increase or (B) (1) a written order
from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause to
be issued a Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange referred
to in (1) above, provided that in no event shall Definitive Notes be issued upon
the transfer or exchange of beneficial interests in the Regulation S Temporary
Global Note prior to (x) the expiration of the Restricted Period and (y) the
receipt by the Registrar of any certificates determined by the Company to be
required pursuant to Rule 903 under the Securities Act. Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied
upon receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act, the
Trustee shall adjust the principal amount of the relevant Global Note(s)
pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be transferred to
a Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements of
Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted
35
<PAGE> 44
Global Note may be exchanged by any holder thereof for a beneficial interest in
an Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note if
the exchange or transfer complies with the requirements of Section 2.06(b)(ii)
above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal or via the
Depositary's book-entry system that it is not (1) a broker-dealer,
(2) a Person participating in the distribution of the Exchange Notes
or (3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
36
<PAGE> 45
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
37
<PAGE> 46
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through written instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such
Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be subject to
all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
determined by the Company to be required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule 903 or
Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted
Global Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
38
<PAGE> 47
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note
that does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for a
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Definitive Note, then, upon satisfaction of
the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a
39
<PAGE> 48
certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (c) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and
40
<PAGE> 49
the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange such
Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time. Upon
receipt of a request for such an exchange or transfer, the Trustee shall cancel
the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest in a Global Note is effected pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above at a time when an
41
<PAGE> 50
Unrestricted Global Note has not yet been issued, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02 hereof,
the Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Definitive Notes so
transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note if
the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A, then
the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
42
<PAGE> 51
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of an Unrestricted Definitive Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably acceptable
to the Company to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note. Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from the
Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal or via the Depositary's book-entry system that
(x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Notes and (z) they are not affiliates (as defined
in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and
(ii) Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company
43
<PAGE> 52
shall execute and the Trustee shall authenticate and make available for delivery
to the Persons designated by the Holders of Definitive Notes so accepted
Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE
DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED UNDER THE INDENTURE PURSUANT TO
WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE
THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF
THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER
IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION
44
<PAGE> 53
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTION SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON
AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND
(IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH
THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular Global Note
have been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Note shall be returned to or retained and canceled by the Trustee in accordance
with Section 2.11 hereof. At any time prior to such
45
<PAGE> 54
cancellation, if any beneficial interest in a Global Note is exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note or for Definitive Notes, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10,
4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of
transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the opening of
business 15 days before the day of the mailing of notice of redemption under
Section 3.02 hereof and ending at the close of business on such day, (B) to
register the transfer of or to exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a record
date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and for
all other purposes, and none of the Trustee, any Agent or the Company shall be
affected by notice to the contrary.
46
<PAGE> 55
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
Section 2.07 REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon receipt of
an Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. An indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(ii) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser or protected purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
47
<PAGE> 56
Section 2.09 TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that a Responsible Officer of the Trustee actually knows are so owned
shall be so disregarded.
Section 2.10 TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
Section 2.11 CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall dispose of
the canceled Notes in its customary manner (subject to the record retention
requirements of the Exchange Act). The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
48
<PAGE> 57
Section 2.13 CUSIP NUMBERS.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or the
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP
numbers of the Notes to be redeemed.
Section 3.02 SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. No
Notes of $1,000 or less shall be redeemed in part. In the event of partial
redemption by lot, the particular Notes to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Trustee from the outstanding Notes not previously called
for redemption.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
49
<PAGE> 58
Section 3.03 NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes (including CUSIP number(s)) to
be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price;
(iii) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(iv) the name and address of the Paying Agent;
(v) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(vi) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(vii) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(viii) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
Section 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
50
<PAGE> 59
Section 3.05 DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
Section 3.06 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon receipt of an Authentication Order, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
Section 3.07 OPTIONAL REDEMPTION.
(i) Except as provided below, the Notes shall not be redeemable at
the Company's option prior to October 15, 2004. Thereafter, the Company may
redeem all or a part of the Notes upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on October 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2004............................................................. 106.500%
2005............................................................. 104.875%
2006............................................................. 103.250%
2007............................................................. 101.625%
2008 and thereafter.............................................. 100.000%
</TABLE>
(ii) Notwithstanding the foregoing, at any time prior to October 15,
2002, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of Notes issued under this Indenture at a redemption
price of 113.000% of the principal
51
<PAGE> 60
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with the net cash proceeds of one or more Equity
Offerings; provided that: (A) at least 65% of the aggregate principal amount of
Notes issued under this Indenture remains outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company and its
Subsidiaries); and (B) the redemption must occur within 90 days of the date of
the closing of such Equity Offering.
(iii) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08 MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Section 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(i) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(ii) the Offer Amount, the purchase price and the Purchase Date;
52
<PAGE> 61
(iii) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(iv) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(v) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(vi) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer the Note by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(vii) that Holders shall be entitled to withdraw their election if
the Company, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(viii) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(ix) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. on the Purchase Date, the Company shall, to
the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, the Offer Amount or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
53
<PAGE> 62
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01 PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest and Liquidated Damages, if any, on the Notes on the dates
and in the manner provided in the Notes. Principal, premium, if any, and
interest and Liquidated Damages, if any, shall be considered paid on the date
due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest and Liquidated Damages, if any,
then due. The Company shall pay all Liquidated Damages, if any, in the same
manner on the dates and in the amounts set forth in the Registration Rights
Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
54
<PAGE> 63
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof.
Section 4.03 REPORTS.
Whether or not required by the SEC, so long as any Notes are
outstanding, the Company shall furnish to the Holders of Notes and the Trustee,
within the time periods specified in the SEC's rules and regulations: (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report on the annual financial statements by the
Company's certified independent accountants; and (ii) all current reports that
would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports. In addition, following the consummation of the
Exchange Offer contemplated by the Registration Rights Agreement, whether or not
required by the SEC, the Company shall file a copy of all the information and
reports referred to in clauses (i) and (ii) above with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company and the Subsidiary Guarantors have agreed
that, for so long as any Notes remain outstanding, they shall furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
If the Company has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual financial information
required by the preceding paragraph shall include a reasonably detailed
presentation, either on the face of the financial statements or in the footnotes
thereto, and in Management's Discussion and Analysis of Financial Condition and
Results of Operations, of the financial condition and results of operations of
the Company and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of the
Company. Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 4.04 COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor shall (to the extent that such
Guarantor is so required under the TIA) deliver to the Trustee within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing
55
<PAGE> 64
such certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto. For
purposes of this paragraph, such compliance shall be determined without regard
to any period of grace or requirement of notice provided under this Indenture.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) hereof shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05 TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06 STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
56
<PAGE> 65
Section 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or payable to the Company or a Restricted
Subsidiary of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company;
(iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees, except a payment of
interest or principal at or after the Stated Maturity thereof; or
(iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted
Payment:
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(ii) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(iii) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted Payments
permitted by clauses (ii) through (x) of the next succeeding paragraph and the
aggregate amount of outstanding Permitted Investments allowed pursuant to clause
(xvi) of the definition of Permitted Investments), is less than the sum, without
duplication, of:
(A) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the
first fiscal quarter ending after the date of this Indenture to the
end of the
57
<PAGE> 66
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus
(B) 100% of the aggregate net cash proceeds received by the
Company since the date of this Indenture as a contribution to its
equity capital (other than Disqualified Stock) or from the issue or
sale of Equity Interests of the Company (other than Disqualified
Stock) or from the issue or sale of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt securities of
the Company that have been converted into or exchanged for such
Equity Interests (other than Equity Interests (or Disqualified Stock
or debt securities) sold to a Subsidiary of the Company), plus
(C) the lesser of (x) all cash returns (including dividends,
interest, distributions, returns of principal and profits on sale)
on Restricted Investments that were made after the date of this
Indenture (less the cost of disposition, if any); provided that the
amount of cash return on such Restricted Investment shall be
excluded from Consolidated Net Income for purposes of calculating
clause (iii)(A) above on an after tax basis to the extent included
in Consolidated Net Income, and (y) the initial amount of such
Restricted Investment, plus
(D) upon redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary not in violation of this Indenture, the fair
market value of the net assets of such Subsidiary.
The preceding provisions shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any Guarantor or
of any Equity Interests of the Company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, Equity Interests of the Company (other than
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (iii)(B) of the preceding
paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
58
<PAGE> 67
(iv) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its common Equity Interests on a pro rata basis;
(v) the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of the Company issued after the date of this
Indenture in accordance with Section 4.09 hereof;
(vi) the declaration and payment of regularly accruing dividends to
holders of any class or series of Designated Preferred Stock of the Company
issued on or after the date of this Indenture; provided that at the time of the
designation of such Preferred Stock as Designated Preferred Stock, and after
giving effect to such designation on a pro forma basis (for purposes of making
determinations on a pro forma basis pursuant to this clause (vi), treating all
dividends which will accrue on such Designated Preferred Stock during the four
full fiscal quarters immediately following such issuance, as well as all other
Designated Preferred Stock then outstanding, as if the same will in fact be, or
have in fact been, paid in cash), the Company would have been able to incur at
least $1.00 of additional Indebtedness (other than Permitted Debt) in accordance
with Section 4.09 hereof;
(vii) the retirement of any shares of Disqualified Stock of the
Company by conversion into, or by exchange for, shares of Refinancing
Disqualified Stock of the Company, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Refinancing Disqualified Stock of the Company;
(viii) payments to JLL Healthcare LLC in an amount not to exceed
$500,000 per annum to pay its operating and administrative expenses incurred in
the ordinary course of business;
(ix) payments pursuant to the Tax Sharing Agreement; and
(x) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Restricted Subsidiary of
the Company held by any member of the Company's (or any of its Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of this Indenture;
provided that the aggregate price paid (excluding the cancellation of debt owing
by such management member) for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $2.0 million in any twelve-month
period.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this Section 4.07 shall be determined by the Board of Directors.
For purposes of determining compliance with this Section 4.07, in
the event that a Restricted Payment meets the criteria of more than one of the
types of Restricted Payments described in the above clauses, the Company, in its
sole discretion, may order and classify, and
59
<PAGE> 68
from time to time may reorder and reclassify, such Restricted Payment if it
would have been permitted at the time such Restricted Payment was made and at
the time of any such reclassification.
Section 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital
Stock to the Company or any of its Restricted Subsidiaries, or with respect to
any other interest or participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries;
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(iii) transfer any of its properties or assets to the Company or any
of its Restricted Subsidiaries.
However, the preceding restrictions shall not apply to encumbrances
or restrictions existing under or by reasons of:
(i) Existing Indebtedness as in effect on the date of this Indenture
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in such Existing Indebtedness, as in effect on the date of this
Indenture;
(ii) this Indenture, the Notes and the Subsidiary Guarantees;
(iii) applicable law;
(iv) any contract or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such contract was entered into in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person and its Subsidiaries, or the property or assets of the
Person and its Subsidiaries, so acquired, provided that, in the case of any such
contract evidencing Indebtedness, such Indebtedness was permitted by the terms
of this Indenture to be incurred;
(v) customary non-assignment provisions in leases or other
agreements entered into in the ordinary course of business and consistent with
past practices;
60
<PAGE> 69
(vi) customary restrictions in Capital Lease Obligations, security
agreements or mortgages securing Indebtedness of the Company or a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such Capital Lease Obligations, security agreements and mortgages;
(vii) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(viii) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced;
(ix) Liens securing Indebtedness that limit the right of the debtor
to dispose of the assets subject to such Lien;
(x) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, asset sale agreements, stock
sale agreements and other similar agreements entered into in the ordinary course
of business;
(xi) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(xii) contracts entered into in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in the aggregate,
detract from the value of property or assets of the Company or any Restricted
Subsidiary in any manner material to the Company or any Restricted Subsidiary;
(xiii) customary provisions restricting dispositions of real
property interests set forth in any reciprocal easement agreements of the
Company or any Restricted Subsidiary;
(xiv) Indebtedness or other contractual requirements of a
Receivables Subsidiary in connection with a Qualified Receivables Transaction,
provided that such restrictions apply only to such Receivables Subsidiary; and
(xv) restrictions on the transfer of property or assets required by
any regulatory authority having jurisdiction over the Company or any Restricted
Subsidiary or any of their businesses.
Section 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company shall not issue any Disqualified Stock
61
<PAGE> 70
and shall not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; provided, however, that the Company may incur Indebtedness
(including Acquired Debt) or issue Disqualified Stock, and the Guarantors may
incur Indebtedness or issue preferred stock, if the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.0 to 1, if such additional
Indebtedness is incurred or such Disqualified Stock or preferred stock is issued
on or prior to October 15, 2002, or 2.25 to 1, if such additional Indebtedness
is incurred or such Disqualified Stock or preferred stock is issued thereafter,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
preferred stock or Disqualified Stock had been issued, as the case may be, at
the beginning of such four-quarter period;
The first paragraph of this Section 4.09 shall not prohibit any of
the following (collectively, "Permitted Debt"):
(i) the incurrence by the Company and any Guarantor of additional
Indebtedness and letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause (i) (with letters
of credit being deemed to have a principal amount equal to the face amount
thereof) not to exceed $330.0 million plus the greater of (x) $125.0 million and
(y) the amount equal to 85% of the net book value of receivables and 65% of the
net book value of inventory of the Company and its Restricted Subsidiaries on a
consolidated basis at the time such Indebtedness is incurred, as determined in
accordance with GAAP, less the aggregate amount of all scheduled repayments and
mandatory prepayments, of the principal amount of any term Indebtedness under a
Credit Facility (other than repayments that are concurrently reborrowed) that
have actually been made since the date of this Indenture and less the aggregate
amount of all Net Proceeds of Asset Sales that have actually been applied by the
Company or any of its Restricted Subsidiaries since the date of this Indenture
to repay revolving credit Indebtedness to the extent that the corresponding
revolving credit commitments have been permanently reduced under a Credit
Facility pursuant to Section 4.10 hereof (provided that such amount shall be
reduced to the extent of any reduction or elimination of any commitment under
any Credit Facility resulting from or relating to the consummation of any
Qualified Receivables Transaction; provided that such reduction shall apply only
for so long as such Qualified Receivables Transaction is in effect);
(ii) the incurrence by the Company and its Restricted Subsidiaries
of the Existing Indebtedness;
(iii) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes and the related Subsidiary Guarantees to
be issued on the date of this Indenture and the Exchange Notes and the related
Subsidiary Guarantees to be issued pursuant to the Registration Rights
Agreement;
62
<PAGE> 71
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the Company
or such Restricted Subsidiary, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (iv), not to exceed the greater of
$25.0 million and 3% of Total Assets at any time outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted by this Indenture to be
incurred under the first paragraph of this Section 4.09 or clauses (ii), (iii),
(iv), (v), (xiv) or (xviii) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries; provided, however, that:
(A) if the Company or any Guarantor is the obligor on such
Indebtedness, unless such Indebtedness is owing to the Company or
another Guarantor, such Indebtedness must be expressly subordinated
to the prior payment in full in cash of all Obligations with respect
to the Notes, in the case of the Company, or the Subsidiary
Guarantee, in the case of a Guarantor; and
(B) (x) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof and
(y) any sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Restricted Subsidiary thereof;
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (vi);
(vii) the issuance by any Restricted Subsidiary of preferred stock
to the Company and any of its Restricted Subsidiaries; provided, however, that
(a) any subsequent issuance or transfer of Equity Interests that results in any
such preferred stock being held by a Person other than the Company or a
Restricted Subsidiary thereof and (b) any sale or other transfer of any such
preferred stock to a Person that is not either the Company or a Restricted
Subsidiary thereof; shall be deemed, in each case, to constitute an issuance of
such preferred stock by such Restricted Subsidiary that was not permitted by
this clause (vii);
(viii) the issuance of Refinancing Disqualified Stock, Refinancing
Preferred Stock and Refinancing Subsidiary Preferred Stock;
63
<PAGE> 72
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing
or hedging (x) interest rate risk with respect to any floating or fixed rate
Indebtedness that is permitted by the terms of this Indenture to be outstanding
or (y) fluctuations in foreign currency exchange rates or commodity prices, with
respect to currencies or commodities used by the Company or its Restricted
Subsidiaries in the ordinary course of business;
(x) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this Section 4.09;
(xi) the accrual of interest, the accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this Section 4.09; provided, in
each such case, that the amount thereof is included in Fixed Charges of the
Company as accrued;
(xii) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of business;
provided, that such Indebtedness is extinguished within five business days of
incurrence;
(xiii) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the Company or
such Restricted Subsidiary, as the case may be, including, without limitation,
in order to provide security for workers' compensation claims or payment
obligations in connection with self-insurance and other Indebtedness with
respect to workers' compensation claims, self-insurance and similar obligations
of the Company or any Restricted Subsidiary;
(xiv) the incurrence by the Company of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable) (which amount may,
but need not be, incurred in whole or in part under the Credit Facilities) at
any time outstanding, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (xiv), not to exceed $65.0 million;
(xv) Indebtedness arising from any agreement entered into by the
Company or any of its Restricted Subsidiaries providing for indemnification,
purchase price adjustment, holdback, contingency payment obligations based on
the performance of the acquired or disposed assets or similar obligations (other
than Guarantees of Indebtedness) incurred by any Person in connection with the
acquisition or disposition of assets permitted by this Indenture;
(xvi) trade letters of credit, performance and surety bonds,
completion guarantees or similar arrangements of the Company or any of its
Restricted Subsidiaries in the ordinary course of business;
64
<PAGE> 73
(xvii) Physician Support Obligations incurred by the Company
or any of its Restricted Subsidiaries;
(xviii) Acquired Debt of Restricted Subsidiaries acquired or
assumed by the Company or another Restricted Subsidiary of the Company, or
resulting from the merger or consolidation of one or more Persons into or with
one or more Restricted Subsidiaries of the Company; provided, that (a) such
Acquired Debt is not incurred in contemplation of the respective acquisition,
merger or consolidation, and (b) after giving effect to any Acquired Debt
acquired or assumed pursuant to this clause (xviii), the Company would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of this
Section 4.09; and
(xix) the incurrence by a Receivables Subsidiary of
Indebtedness in a Qualified Receivables Transaction.
For purposes of determining compliance with this Section 4.09,
in the event that an item of proposed Indebtedness meets the criteria of more
than one of the categories of Permitted Debt described in clauses (i) through
(xix) above, or is entitled to be incurred pursuant to the first paragraph of
this Section 4.09, the Company shall be permitted to classify such item of
Indebtedness on the date of its incurrence, or from time to time reclassify all
or a portion of such item of Indebtedness, in any manner that complies with this
Section 4.09. Indebtedness under Credit Facilities outstanding on the date on
which Notes are first issued and authenticated under this Indenture shall be
deemed to have been incurred on such date in reliance on the exception provided
by clause (i) of the definition of Permitted Debt.
Section 4.10 ASSET SALES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(i) the Company (or the Restricted Subsidiary, as the case may
be) receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(ii) such fair market value is determined by the Company's
Board of Directors and evidenced by a resolution of the Board of Directors; and
(iii) at least 75% of the consideration therefor received by
the Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents other than in the case where the Company or such Restricted
Subsidiary is undertaking a Hospital Swap. For purposes of this provision, each
of the following shall be deemed to be cash:
(A) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet), of the Company or
any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
Subsidiary Guarantee)
65
<PAGE> 74
that are assumed by the transferee of any such assets pursuant to a
novation agreement that releases the Company or such Restricted
Subsidiary from further liability; and
(B) any securities, notes or other obligations received
by the Company or any such Restricted Subsidiary from such transferee
that are (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the
cash received in that conversion) within 180 days of the applicable
Asset Sale.
Notwithstanding the foregoing, the 75% limitation referred to
in clause (iii) shall not apply to any Asset Sale in which the cash or Cash
Equivalents portion of the consideration received therefrom, determined in
accordance with the foregoing provision, is equal to or greater than what the
after-tax proceeds would have been had such Asset Sale complied with the
aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds at its option:
(i) to repay Senior Debt and, if the Senior Debt repaid is
revolving credit Indebtedness, to correspondingly reduce commitments with
respect thereto;
(ii) to acquire all or substantially all of the assets of, or
the Voting Stock of, another Permitted Business;
(iii) to make capital expenditures; or
(iv) to acquire other assets that are used or useful in a
Permitted Business;
provided that the requirements of clauses (ii)-(iv) above shall be deemed to be
satisfied if an agreement (including a lease, whether a capital lease or an
operating lease) committing to make the acquisitions or expenditures referred to
therein is entered into by the Company or its Restricted Subsidiary within 365
days after the receipt of such Net Proceeds and such Net Proceeds are applied in
accordance with such agreement.
Notwithstanding the foregoing, in the event that a Restricted
Subsidiary dividends or distributes to all of its stockholders on a pro rata
basis any proceeds of an Asset Sale to the Company or another Restricted
Subsidiary, the Company or such Restricted Subsidiary need only apply its share
of such proceeds in accordance with the preceding clauses (i) through (iv).
Pending the final application of any such Net Proceeds, the
Company may temporarily reduce revolving credit borrowings or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the preceding paragraph will constitute "Excess
Proceeds." When the aggregate amount of
66
<PAGE> 75
Excess Proceeds exceeds $10.0 million, the Company shall make an Asset Sale
Offer to all Holders of Notes and all holders of other Indebtedness that is pari
passu with the Notes containing provisions similar to those set forth in this
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum principal amount of Notes and such other
pari passu Indebtedness that may be purchased out of the Excess Proceeds. The
offer price in any Asset Sale Offer will be equal to 100% of principal amount
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Indenture. If the aggregate
principal amount of Notes and such other pari passu Indebtedness tendered into
such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes and such other pari passu Indebtedness to be purchased on a pro
rata basis based on the principal amount of Notes and such other pari passu
Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sales
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Asset Sale provisions of this Indenture by virtue of such
conflict.
The agreements governing the Company's outstanding Senior Debt
currently prohibit the Company from purchasing any Notes, and also provides that
certain change of control or asset sale events with respect to the Company would
constitute a default under these agreements. Any future credit agreements or
other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control or Asset Sale occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its senior lenders to
the purchase of Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company shall remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under this Indenture which would, in turn, constitute a default under
such Senior Debt. In such circumstances, the subordination provisions in this
Indenture would likely restrict payments to the Holders of Notes.
Section 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
67
<PAGE> 76
(i) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee:
(A) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with this Section 4.11 and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors; and
(B) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as to the fairness to the Holders
of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the provisions of the prior
paragraph:
(i) reasonable fees and compensation paid to, and indemnity
and similar arrangements provided on behalf of, officers, directors or employees
of the Company or any Restricted Subsidiary of the Company as determined in good
faith by the Company's Board of Directors or senior management;
(ii) transactions between or among the Company and/or its
Restricted Subsidiaries;
(iii) the payment of management fees to any Affiliate of the
Company not to exceed in the aggregate to all Affiliates, in any twelve-month
period, the greater of (a) $1.0 million and (b) an amount equal to 1% of
Consolidated Cash Flow and the reimbursement of expenses incurred by Affiliates
from time to time in the course of providing management, investment banking,
commercial banking, or financial advisory services to, or monitoring their
investments in, the Company;
(iv) Restricted Payments that are permitted by the provisions
of Section 4.07;
(v) loans and advances to officers and employees of the
Company or any of its Restricted Subsidiaries for bona fide business purposes in
the ordinary course of business;
(vi) transactions between the Company and any of its
Affiliates involving investment banking, commercial banking, financial advisory
and related activities;
68
<PAGE> 77
(vii) issuances of securities or payments or distributions in
connection with employment incentive plans, employee stock plans, employees
stock option plans and similar plans and arrangements approved by the Board of
Directors of the Company;
(viii) sales and issuances of the Capital Stock of the Company
(other than Disqualified Stock) to the extent otherwise permitted under this
Indenture;
(ix) any agreements or arrangements in effect on, or entered
into on or prior to, the date of this Indenture (including the Tax Sharing
Agreement), or any amendment, modification, or supplement thereto or any
replacement thereof, so long as any such amendment, modification, supplement or
replacement agreement is not materially more disadvantageous to the Holders of
the Notes than the original agreements as in effect on the date of this
Indenture, and any transactions contemplated by any of the foregoing agreements
or arrangements;
(x) the existence of, or the performance by the Company or any
of its Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement, partnership agreement or limited liability company
members agreement (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the date of this
Indenture and any similar agreements which it may enter into thereafter, in each
case subject to compliance with the other provisions of this Indenture;
provided, however, that the existence, or the performance by the Company or any
of its Restricted Subsidiaries of obligations under any future amendment to any
such existing agreement or under any similar agreement entered into after the
date of this Indenture shall only be permitted by this clause (x) to the extent
that the terms (taken as a whole) of any such amendment or new agreement are not
otherwise materially disadvantageous to the holders of the Notes;
(xi) payments in respect of fees, costs and expenses incurred
in connection with the Transactions; and
(xii) transactions between or among the Company and/or its
Subsidiaries or transactions between a Receivables Subsidiary and any Person in
which the Receivables Subsidiary has an Investment.
Section 4.12 LIENS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind securing Indebtedness or trade payables on
any asset now owned or hereafter acquired, except Permitted Liens, unless:
(i) if such Lien secures Indebtedness which is subordinated to
the Notes, any such Lien shall be subordinated to the Lien granted to the
holders of the Notes to the same extent as such Indebtedness is subordinated to
the Notes; and
(ii) in all other cases, the Notes are equally and ratably
secured.
69
<PAGE> 78
SECTION 4.13 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.14 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) If a Change of Control occurs, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of that Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") on the terms set forth in
this Section 4.14. In the Change of Control Offer, the Company shall offer
payment in cash equal to 101% of the aggregate principal amount of Notes
repurchased plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of purchase (the "Change of Control Payment"). Within 30
days following any Change of Control, the Company shall mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes on the Change of Control Payment Date
specified in such notice (the "Change of Control Payment Date"), which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed, pursuant to the procedures required by this Indenture and
described in such notice. The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control. To the
extent that the provisions of any securities laws or regulations conflict with
the provisions of this Section 4.14, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the provisions of this Section 4.14 by virtue of
such conflict.
On the Change of Control Payment Date, the Company shall, to
the extent lawful:
(i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all Notes or portions thereof so
tendered; and
70
<PAGE> 79
(iii) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the Company.
(b) The Paying Agent shall promptly mail to each Holder of
Notes so tendered the Change of Control Payment for such Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof.
(c) Prior to complying with any of the provisions of this
Section 4.14, but in any event within 90 days following a Change of Control, the
Company shall either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by this Section 4.14. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(d) The Company shall first comply with the covenant in the
first sentence in the immediately preceding paragraph before it shall be
required to repurchase Notes pursuant to the provisions described above. The
Company's failure to comply with the covenant described in the immediately
preceding sentence may (with notice and lapse of time) constitute an Event of
Default described under clause (ii) under Section 6.01.
(e) The provisions described above that require the Company to
make a Change of Control Offer following a Change of Control will be applicable
regardless of whether any other provisions of this Indenture are applicable.
Except as described above with respect to a Change of Control, this Indenture
does not contain provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
(f) Notwithstanding anything to the contrary in this Section
4.14, the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.14 and Section 3.09 hereof and all other provisions of this
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.15 NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of the Company and senior in any respect in
right of payment to the Notes. No Guarantor shall incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to the Senior Debt of such Guarantor and senior in
any respect in right of payment to such Guarantor's Subsidiary Guarantee.
71
<PAGE> 80
SECTION 4.16 ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Restricted Subsidiaries acquires
or creates another Domestic Subsidiary or if any Restricted Subsidiary becomes a
Domestic Subsidiary of the Company after the date of this Indenture, then that
newly acquired or created Domestic Subsidiary must become a Guarantor and
execute a supplemental indenture and deliver an Opinion of Counsel to the
Trustee; provided, that no such Domestic Subsidiary shall be required to become
a Guarantor, execute a supplemental indenture and deliver an Opinion of Counsel
(a) for so long as a Credit Agreement shall be in effect, if it is not an
obligor thereunder and is not required to deliver a Guarantee under such Credit
Agreement of the obligations of the Company thereunder or (b) if such Domestic
Subsidiary is a Receivables Subsidiary.
SECTION 4.17 BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses, except to
such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole. Any Receivables Subsidiary and any Subsidiary
thereof may engage in a business related or ancillary to a Qualified Receivables
Transaction.
SECTION 4.18 DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if that designation would not cause a Default.
If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated shall be deemed
to be an Investment made as of the time of such designation and shall either
reduce the amount available for Restricted Payments under the first paragraph of
Section 4.07 hereof or reduce the amount available for future Investments under
one or more clauses of the definition of Permitted Investments, as the Company
shall determine. That designation shall only be permitted if such Investment
would be permitted at that time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a Default.
ARTICLE 5
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not, directly or indirectly: (1) consolidate
or merge with or into another Person (whether or not the Company is the
surviving corporation); or (2) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
and its Restricted Subsidiaries taken as a whole, in one or more related
transactions, to another Person; unless:
72
<PAGE> 81
(i) either: (A) the Company is the surviving corporation; or
(B) the Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
(ii) the Person formed by or surviving any such consolidation
or merger (if other than the Company) or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of the Company under the Notes, this Indenture and
the Registration Rights Agreement pursuant to agreements reasonably satisfactory
to the Trustee;
(iii) immediately after such transaction no Default or Event
of Default exists; and
(iv) the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made,
shall, on the date of such transaction after giving pro forma effect thereto and
any related financing transactions as if the same had occurred at the beginning
of the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof.
In addition, the Company shall not, directly or indirectly,
lease all or substantially all of its properties or assets, in one or more
related transactions, to any other Person. This Section 5.01 shall not apply to
(x) a merger, consolidation, sale, assignment, transfer, conveyance or other
disposition of assets between or among the Company and any Guarantor or (y)
transfers of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" (or a fractional undivided
interest therein) by a Receivables Subsidiary in a Qualified Receivables
Transaction.
Notwithstanding the foregoing clause (iv), the Company may
merge with an Affiliate incorporated or organized solely either (A) for the
purpose of reincorporating or reorganizing the Company in another jurisdiction
or (B) to realize tax benefits without complying with the foregoing clause (iv)
provided, that, immediately after giving effect to such transaction on a pro
forma basis, either (x) the surviving entity could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under Section 4.09
hereof and (y) the Fixed Charge Coverage Ratio of the surviving entity is not
less than the Fixed Charge Coverage Ratio of the Company immediately prior to
such transaction and the surviving entity conducts no business other than a
Permitted Business except to such extent as would not be material to such
surviving entity and its Restricted Subsidiaries taken as a whole.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in
73
<PAGE> 82
accordance with Section 5.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
Each of the following is an Event of Default:
(i) default for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes (whether or not prohibited
by Article 10 hereof);
(ii) default in payment when due of the principal of, or
premium, if any, on the Notes (whether or not prohibited by Article 10 hereof);
(iii) failure by the Company or any of its Restricted
Subsidiaries to comply with Sections 4.10 or 5.01 hereof;
(iv) failure by the Company or any of its Subsidiaries to
comply with any of the other covenants in this Indenture for a period of 60
consecutive days after written notice by the Trustee or by the Holders of at
least 25% in principal amount of the Notes;
(v) default under any mortgage, indenture or instrument under
which there is issued and outstanding any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of this
Indenture, if that default:
(A) is caused by a failure to pay principal at the final
stated maturity of such Indebtedness (a "Payment Default"); or
(B) results in the acceleration of such Indebtedness prior to
its express maturity,
in the case of both clauses (A) and (B), only if the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under
74
<PAGE> 83
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(vi) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $10.0 million (net of any amounts
covered by insurance or indemnity arrangements provided by a reputable and
creditworthy insurance company or other Person), which judgments are not paid,
discharged or stayed for a period of 60 consecutive days after such judgments
become final and non-appealable;
(vii) the Company or any of its Significant Subsidiaries or
any group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(D) makes a general assignment for the benefit of its creditors, or
(E) generally is not paying its debts as they become due; or
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
(B) appoints a custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all of
the property of the Company or any of its Significant Subsidiaries or
any group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary; or
(C) orders the liquidation of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days
SECTION 6.02 ACCELERATION.
In the case of an Event of Default arising from an Event of
Default specified in clauses (vii) and (viii) of Section 6.01 hereof, with
respect to the Company, all outstanding Notes will become due and payable
immediately without further action or notice. If any other Event of
75
<PAGE> 84
Default occurs and is continuing, the Trustee (upon request of Holders of at
least 25% in principal amount of the Notes then outstanding) or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that such notice is a
"notice of acceleration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) if there are any amounts outstanding
under the Credit Agreement, shall become immediately due and payable upon the
first to occur of an acceleration under the Credit Agreement or five Business
Days after receipt by the Company and the Representative under the Credit
Agreement of such Acceleration Notice but only if such Event of Default is then
continuing. The Holders of a majority in aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of all of the
Holders rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after October 15, 2004, by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company in bad faith with the intention of avoiding payment of the
premium that the Company would have had to pay if the Company then had elected
to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of
the Notes, an equivalent premium shall also become and be immediately due and
payable, to the extent permitted by law, anything in this Indenture or in the
Notes to the contrary notwithstanding. If an Event of Default occurs prior to
October 15, 2004, by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company in bad faith with the intention of
avoiding the prohibition on redemption of the Notes prior to October 15, 2004,
then, upon acceleration of the Notes, an additional premium shall also become
and be immediately due and payable in an amount, for each of the years beginning
on each of the years set forth below, as set forth below (expressed as a
percentage of the aggregate principal amount to the date of payment that would
otherwise be due but for the provisions of this sentence):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000.......................................................................113.000%
2001.......................................................................111.375%
2002.......................................................................109.750%
2003.......................................................................108.125%
2004.......................................................................106.500%
2005.......................................................................104.875%
</TABLE>
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
76
<PAGE> 85
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(i) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(ii) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(iii) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
77
<PAGE> 86
(v) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization,
78
<PAGE> 87
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any, and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders
of more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
79
<PAGE> 88
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, in the
case of any certificates or opinions required to be provided to the Trustee by
any provision hereof the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this Indenture but
need not confirm or investigate the accuracy of mathematical calculations or
other facts stated therein.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
80
<PAGE> 89
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel of its selection and the written advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection
from liability in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request, order, or
direction of any of the Holders unless such Holders shall have offered to the
Trustee security or indemnity satisfactory to the Trustee against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction.
(g) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the Trustee has
actual knowledge thereof or unless written notice of any event which is in fact
such a default is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Notes and this Indenture.
(h) The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee
81
<PAGE> 90
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each September 15 beginning with the
September 15 following the date of this Indenture, and for so long as Notes
remain outstanding, the Trustee shall mail to the Holders of the Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange and of any delisting thereof.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company and each Guarantor, jointly and severally,
covenant and agree to pay to the Trustee from time to time such reasonable
compensation as shall be agreed in writing for its acceptance of this Indenture
and services hereunder. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company and each
Guarantor, jointly and severally covenant and agree to reimburse the Trustee
promptly upon
82
<PAGE> 91
addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company and each Guarantor, jointly and severally,
covenant and agree to indemnify each of the Trustee or any predecessor Trustee
for, and to hold them harmless against, any and all loss, damage, claims,
liability or expense, including taxes (other than taxes based upon, measured by
or determined by the income of the Trustee), arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim (whether
asserted by the Company, or any Guarantor, or any Holder or any other Person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent that such loss, claim, liability or
expense is due to its own negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company or any Guarantor
of its obligations hereunder. The Company and each Guarantor covenant and agree
to defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company and each Guarantor, jointly and
severally, covenant and agree to pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
The obligations of the Company and each Guarantor, jointly and
severally, under this Section 7.07 shall survive the satisfaction and discharge
of this Indenture.
To secure the Company's and each Guarantor's payment
obligations in this Section, the Trustee shall have a Lien prior to the Notes on
all money or property held or collected by the Trustee, except that held in
trust to pay principal and interest on particular Notes. Such Lien shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(vii) or (viii) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of a majority in principal amount of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Company in writing. The
Company may remove the Trustee if:
83
<PAGE> 92
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of at least 10% in principal amount of the then
outstanding Notes may petition any, at the expense of the Company, court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10 hereof, such
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or
84
<PAGE> 93
examination by federal or state authorities and that has a combined capital and
surplus of at least $50 million as set forth in its most recent published annual
report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its Obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all of its obligations
under such Notes and this Indenture (and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise
terminated or discharged hereunder:
(i) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section 8.04, payments in respect of the principal of and
premium, interest and Liquidated Damages, if any, on such Notes when such
payments are due;
(ii) the Company's obligations with respect to such Notes
under Article 2 and Section 4.02 hereof;
85
<PAGE> 94
(iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's obligations in connection therewith; and
(iv) this Article 8.
Subject to compliance with this Article 8, the Company may
exercise its option under this Section 8.02 notwithstanding the prior exercise
of its option under Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company and each Guarantor shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from their respective obligations under the covenants contained in
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and
4.19 hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(iii) through 6.01(vii) hereof shall not constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
(i) the Company must irrevocably deposit, with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, or interest and premium and Liquidated
Damages, if any, on the outstanding Notes on the stated maturity thereof or on
the applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(ii) in the case of Legal Defeasance, the Company must deliver
to the Trustee an Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that
86
<PAGE> 95
(A) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that, the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(iii) in the case of Covenant Defeasance, the Company must
deliver to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture but in any event including
the Credit Agreement) to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries is bound;
(vi) the Company must deliver to the Trustee an Opinion of
Counsel in the United States to the effect that, assuming no intervening
bankruptcy of the Company or any Guarantor between the date of deposit and the
91st day following the deposit and assuming that no Holder is an "insider" of
the Company under applicable bankruptcy law, after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights and remedies generally;
(vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of the Notes over other creditors of the Company, or
with the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(viii) the Company must deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating that
all conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
87
<PAGE> 96
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company and each Guarantor, jointly and severally,
covenant and agree to pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(ii) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
interest or Liquidated Damages, if any, on any Note and remaining unclaimed for
two years after such principal, and premium, if any, or interest has become due
and payable shall be paid to the Company on its written request or (if then held
by the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as a secured creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times (national edition) and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification or publication, any unclaimed balance
of such money then remaining will be repaid to the Company.
88
<PAGE> 97
SECTION 8.07 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's and each Guarantor's
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 hereof, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Notes or
the Subsidiary Guarantees without the consent of any Holder of a Note:
(i) to cure any ambiguity, defect, error or inconsistency;
(ii) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(iii) to provide for the assumption of the Company's or any
Guarantor's obligations to the Holders of the Notes by a successor to the
Company or a Guarantor pursuant to Article 5 or Article 11 hereof;
(iv) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Note;
(v) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA;
(vi) to provide for the issuance of Additional Notes in
accordance with the provisions set forth in this Indenture as of the date
hereof; or
(vii) to allow any Guarantor to execute a supplemental
indenture and/or a Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental indenture, and upon
89
<PAGE> 98
receipt by the Trustee of the documents described in Section 7.02 hereof, the
Trustee shall join with the Company and the Guarantors in the execution of any
amended or supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company,
the Guarantors and the Trustee may amend or supplement this Indenture (including
Section 3.09, 4.10 and 4.14 hereof), the Notes or the Subsidiary Guarantees with
the consent of the Holders of at least a majority in principal amount Notes
(including Additional Notes, if any) then outstanding voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Notes or the
Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including Additional
Notes, if any) voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes). Section 2.08 hereof shall determine which Notes are considered to be
"outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental indenture unless such amended or supplemental indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class may waive
compliance in a particular
90
<PAGE> 99
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of
any Note or alter or waive any of the provisions with respect to the redemption
of the Notes, (other than provisions relating to Sections 3.09, 4.10 or 4.14
hereof);
(iii) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(iv) waive a Default or Event of Default in the payment of
principal of or premium or Liquidated Damages, if any, or interest on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes (including
Additional Notes, if any) and a waiver of the payment default that resulted from
such acceleration);
(v) make any Note payable in money other than that stated in
the Notes;
(vi) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, interest or Liquidated Damages, if
any, on the Notes;
(vii) waive a redemption payment with respect to any Note,
(other than a payment required by Section 3.09, 4.10 or 4.14 hereof);
(viii) make any change in the foregoing amendment and waiver
provisions; or
(ix) release any Guarantor from any of its obligations under
its Subsidiary Guarantee or this Indenture, except in accordance with the terms
of this Indenture.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental indenture that complies with the
TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective.
91
<PAGE> 100
An amendment, supplement or waiver becomes effective in accordance with its
terms and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon an Officers' Certificate and an Opinion
of Counsel stating that the execution of such amended or supplemental indenture
is authorized or permitted by this Indenture and that such amendment is the
legal, valid and binding obligation of the Company and any Guarantors,
enforceable against them in accordance with their terms, subject to customary
exceptions, and complies with the provisions hereof (including Section 9.03).
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note
agrees, that the principal of and premium, interest and Liquidated Damages, if
any, and any other Obligations on, or relating to the Notes are subordinated in
right of payment, to the extent and in the manner provided in this Article 10,
to the prior payment in full in cash or Cash Equivalents (other than Cash
Equivalents of the type referred to in clauses (iii) and (iv) of the definition
thereof) of all Senior Debt of the Company (whether outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Debt.
SECTION 10.02 CERTAIN DEFINITIONS.
"Designated Senior Debt" means:
(i) any Indebtedness under or in respect of the Credit
Agreement; and
92
<PAGE> 101
(ii) any other Senior Debt permitted under this Indenture the
principal amount of which is $25.0 million or more and that has been designated
by the Company in the instrument or agreement relating to the same as
"Designated Senior Debt."
"Permitted Junior Securities" means debt or equity securities
of the Company or any successor corporation issued pursuant to a plan of
reorganization or readjustment of the Company that are subordinated to the
payment of all then outstanding Senior Debt of the Company at least to the same
extent that the Notes are subordinated to the payment of all Senior Debt of the
Company on the date of this Indenture, so long as:
(i) the effect of the use of this defined term in the
provisions of Article 10 hereof is not to cause the Notes to be treated as part
of (A) the same class of claims as the Senior Debt of the Company or (B) any
class of claims pari passu with, or senior to, the Senior Debt of the Company
for any payment or distribution in any case or proceeding or similar event
relating to the liquidation, insolvency, bankruptcy, dissolution, winding up or
reorganization of the Company; and
(ii) to the extent that any Senior Debt of the Company
outstanding on the date of consummation of any such plan of reorganization or
readjustment is not paid in full in cash or Cash Equivalents (other than Cash
Equivalents of the type referred to in clauses (iii) and (iv) of the definition
thereof) on such date, either (A) the holders of any such Senior Debt not so
paid in full in cash or Cash Equivalents (other than Cash Equivalents of the
type referred to in clauses (iii) and (iv) of the definition thereof) have
consented to the terms of such plan of reorganization or readjustment or (B)
such holders receive securities which constitute Senior Debt of the Company
(which are guaranteed pursuant to guarantees constituting Senior Debt of each
Guarantor) and which have been determined by the relevant court to constitute
satisfaction in full in money or money's worth of any Senior Debt of the Company
(and any related Senior Debt of the Guarantors) not paid in full in cash or Cash
Equivalents (other than Cash Equivalents of the type referred to in clauses
(iii) and (iv) of the definition thereof).
A "distribution" may consist of cash, securities or other
property, by set-off or otherwise.
SECTION 10.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company, in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or in any marshalling of
the Company's assets and liabilities:
(i) holders of Senior Debt shall be entitled to receive
payment in full in cash or Cash Equivalents (other than Cash Equivalents of the
type referred to in clauses (iii) and (iv) of the definition thereof) of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt, whether or not such interest is an allowable claim) before Holders
of the Notes shall be entitled to receive any payment or distribution of any
kind or character with respect to any Obligations on, or relating to, the Notes
(except that Holders may receive and retain
93
<PAGE> 102
(A) Permitted Junior Securities and (B) payments and other distributions made
from any defeasance trust created pursuant to Article 8 hereof, so long as the
trust was created in accordance with all relevant conditions specified in
Article 8 hereof); and
(ii) until all Obligations with respect to Senior Debt (as
provided in subsection (i) above) are paid in full, any distribution to which
Holders would be entitled but for this Article 10 shall be made to holders of
Senior Debt (except that Holders of Notes may receive (A) Permitted Junior
Securities and (B) payments and other distributions made from any defeasance
trust created pursuant to Article 8 hereof), as their interests may appear.
SECTION 10.04 DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution of any
kind or character to the Trustee or any Holder with respect to any Obligations
on, or relating to, the Notes and may not acquire from the Trustee or any Holder
any Notes for cash or property (other than (x) Permitted Junior Securities and
(y) payments and other distributions made from any defeasance trust created
pursuant to Article 8 hereof, so long as the trust was created in accordance
with all relevant conditions specified in Article 8 hereof) until all principal
and other Obligations with respect to the Senior Debt have been paid in full in
cash or Cash Equivalents (other than Cash Equivalents of the type referred to in
clauses (iii) and (iv) of the definition thereof) if:
(i) a default in the payment when due, whether at maturity,
upon redemption, declaration or otherwise, of any principal of, interest on,
unpaid drawings for letters of credit issued in respect of, or any other
Obligations with respect to any Designated Senior Debt of the Company occurs and
is continuing; or
(ii) a default, other than a default referred to in clause (i)
of this Section 10.04, on Designated Senior Debt of the Company occurs and is
continuing that then permits holders of such Designated Senior Debt to
accelerate its maturity and the Trustee receives a written notice of such
default (a "Payment Blockage Notice") from the holders or a Representative of
such Designated Senior Debt. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for purposes of
this Section 10.04 unless and until at least 360 days shall have elapsed since
the effectiveness of the immediately prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been waived
for a period of not less than 90 consecutive days.
The Company may and shall resume payments on and distributions
with respect to any Obligations on, or with respect to, the Notes and may
acquire them upon the earlier of:
(i) in the case of a default referred to in clause (i) of the
immediately preceding paragraph, the date upon which the default is cured or
waived, or
94
<PAGE> 103
(ii) in the case of a default referred to in clause (ii) of
the immediately preceding paragraph, the earlier of (A) the date on which all
nonpayment defaults are cured or waived, (B) 179 days after the date of delivery
of the applicable Payment Blockage Notice or (C) the date on which the Trustee
receives notice from the Representative for such Designated Senior Debt
rescinding the Payment Blockage Notice, unless the maturity of any such
Designated Senior Debt has been accelerated.
SECTION 10.05 ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
SECTION 10.06 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any
payment or distribution of any kind or character, whether in cash, properties or
securities, in respect of any Obligations with respect to the Notes (other than
(x) Permitted Junior Securities and (y) payments and other distributions made
from any defeasance trust created pursuant to Article 8 hereof) at a time when
such payment is prohibited by Section 10.03 or 10.04 hereof, such payment shall
be held by the Trustee or such Holder, in trust for the benefit of, and shall be
paid forthwith over and delivered, upon written request, (on a pro rata basis
based on the aggregate principal amount of the Senior Debt), to the holders of
Senior Debt or their Representative under the indenture or other agreement (if
any) pursuant to which such Senior Debt may have been issued for application to
the payment of all Obligations with respect to Senior Debt remaining unpaid to
the extent necessary to pay such Obligations in full in accordance with their
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
If any Holder or the Trustee is required by any court or
otherwise to deliver payments it received by the Company or Guarantor to a
holder of Senior Debt, any amount so paid to the extent theretofore discharged,
shall be reinstated in full force and effect.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Trustee.
SECTION 10.07 NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent in writing of any facts known to the Company that would cause a payment of
any Obligations with respect to the Notes to violate this Article 10, but
failure to give such notice shall not affect the subordination of the Notes to
the Senior Debt as provided in this Article 10.
95
<PAGE> 104
SECTION 10.08 SUBROGATION.
After all Senior Debt is paid in full and until the Notes are
paid in full, Holders of Notes shall be subrogated (equally and ratably with all
other Indebtedness pari passu with the Notes) to the rights of holders of Senior
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
SECTION 10.09 RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of
Notes and holders of Senior Debt. Nothing in this Indenture shall:
(i) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay principal
of and interest and Liquidated Damages, if any, on the Notes in accordance with
their terms;
(ii) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders of
Senior Debt; or
(iii) prevent the Trustee or any Holder of Notes from
exercising its available remedies upon a Default or Event of Default, subject to
the rights of holders and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure shall
nevertheless be a Default or Event of Default.
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders of Notes shall be
entitled to conclusively rely upon any order or decree made by any court of
competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of the
96
<PAGE> 105
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights.
SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the Representatives are hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
SECTION 10.14 AMENDMENTS
Without the consent of at least 75% in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for, or purchase of, the Notes), no waiver or amendment
to this Indenture may make any change in the provisions of this Article 10 that
adversely affects the rights of any Holder of Notes.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01 SUBSIDIARY GUARANTEE.
Subject to this Article 11, each of the Guarantors hereby,
jointly and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the obligations of the Company hereunder or thereunder, that:
97
<PAGE> 106
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration, redemption
or otherwise, and interest on the overdue principal of and interest on the
Notes, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same immediately. Each Guarantor agrees that
this is a guarantee of payment and not a guarantee of collection. The Guarantors
hereby agree that their obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenant
that this Subsidiary Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (i) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (ii) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantee.
98
<PAGE> 107
SECTION 11.02 SUBORDINATION OF SUBSIDIARY GUARANTEE.
The Obligations of each Guarantor under its Subsidiary
Guarantee pursuant to this Article 11 shall be junior and subordinated to the
Senior Debt of such Guarantor on the same basis as the Notes are junior and
subordinated to Senior Debt of the Company. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any of the Guarantors only at such times as they may receive
and/or retain payments in respect of the Notes pursuant to this Indenture,
including Article 10 hereof.
SECTION 11.03 LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder,
hereby confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
SECTION 11.04 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section
11.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by an Officer
thereof.
Each Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.
99
<PAGE> 108
In the event that the Company creates or acquires any other
Domestic Subsidiaries subsequent to the date of this Indenture, or if any
current or future Subsidiaries become Domestic Subsidiaries subsequent to the
date of this Indenture, if required by Section 4.17 hereof, the Company shall
cause such Subsidiaries to execute supplemental indentures to this Indenture in
accordance with Section 4.17 hereof, and this Article 11, to the extent
applicable.
SECTION 11.05 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another corporation,
Person or entity whether or not affiliated with such Guarantor unless:
(i) subject to Section 11.06 hereof, the Person formed by or
surviving any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
the Notes, this Indenture, the Registration Rights Agreement and the Subsidiary
Guarantee on the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and
notwithstanding clauses (i) and (ii) above, nothing contained in this Indenture
or in any of the Notes shall prevent any consolidation or merger of a Guarantor
with or into the Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
SECTION 11.06 RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of
100
<PAGE> 109
merger, consolidation or otherwise, of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture, including without
limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of
an Officers' Certificate and an Opinion of Counsel to the effect that such sale
or other disposition was made by the Company in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its Subsidiary
Guarantee.
Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
ARTICLE 12
SATISFACTION AND DISCHARGE
SECTION 12.01 SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall be discharged and shall cease to be of
further effect as to all Notes issued hereunder, when
(a) either:
(i) all Notes that have been authenticated (except lost,
stolen or destroyed Notes that have been replaced or paid and Notes for whose
payment money has theretofore been deposited in trust and thereafter repaid to
the Company) have been delivered to the Trustee for cancellation; or
(ii) all Notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the making of a notice of
redemption or otherwise or will become due and payable within one year and the
Company or any Guarantor has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust solely for the benefit of the Holders,
cash in U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient without consideration of any
reinvestment of interest, to pay and discharge the entire indebtedness on the
Notes not delivered to the Trustee for cancellation for principal, premium and
Liquidated Damages, if any, and accrued interest to the date of maturity or
redemption;
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company or any
Guarantor is a party or by which the Company or any Guarantor is bound;
101
<PAGE> 110
(c) the Company or any Guarantor has paid or caused to be paid
all sums payable by it under the Indenture; and
(d) the Company has delivered irrevocable instructions to the
Trustee under the Indenture to apply the deposited money toward the payment of
the Notes at maturity or the redemption date, as case may be.
In addition, the Company must deliver an Officers' Certificate
and an Opinion of Counsel to the Trustee stating that all conditions precedent
to satisfaction and discharge have been satisfied.
SECTION 12.02 APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section
4.19 hereof, all money deposited with the Trustee pursuant to Section 12.01
hereof shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to Persons entitled thereto, of the principal (and
premium, if any), interest and Liquidated Damages, if any, for whose payment
such money has been deposited with the Trustee.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 12.01 hereof by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though such deposit had occurred pursuant to
Section 11.01 hereof; provided that if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 13.02 NOTICES.
Any notice or communication by the Company, any Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
102
<PAGE> 111
If to the Company and/or any Guarantor:
IASIS Healthcare Corporation
104 Woodmont Boulevard, Suite 101
Nashville, Tennessee 37205
Telecopier No.: (618) 846-3006
Attention: General Counsel
With a copy to:
Skadden Arps Slate Meagher & Flom LLP
One Rodney Square, 7th Floor
Wilmington, DE 19801
Telecopier No.: (302) 681-3001
Attention: Robert B. Pincus
If to the Trustee:
The Bank of New York
101 Barclay Street
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
The Company, or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
103
<PAGE> 112
SECTION 13.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 13.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, after the date hereof, the Company
shall furnish to the Trustee:
(i) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 13.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(i) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(iii) a statement that, in the opinion of such Person, he or
she has or they have made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(iv) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 13.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
104
<PAGE> 113
SECTION 13.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
SHAREHOLDERS.
No past, present or future director, officer, employee,
incorporator or shareholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such Guarantor under the
Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
SECTION 13.08 GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
SECTION 13.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.10 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 13.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 13.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 13.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
105
<PAGE> 114
[Indenture signature page]
Company:
DATED: October 15, 1999 IASIS HEALTHCARE CORPORATION
BY: /s/ Wayne Gower
--------------------------------------
Name: Wayne Gower
Title: President and Chief Executive Officer
Guarantors:
BAPTIST JOINT VENTURE HOLDINGS, INC.
BEAUMONT HOSPITAL HOLDINGS, INC.
BILTMORE SURGERY CENTER, INC.
CLINICARE OF UTAH, INC.
DAVIS HOSPITAL & MEDICAL CENTER, INC.
DAVIS SURGICAL CENTER HOLDINGS, INC.
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
HEALTH CHOICE ARIZONA, INC.
IASIS HEALTHCARE HOLDINGS, INC.
IASIS MANAGEMENT COMPANY
JORDAN VALLEY HOSPITAL, INC.
METRO AMBULATORY SURGERY CENTER, INC.
PIONEER VALLEY HEALTH PLAN, INC.
PIONEER VALLEY HOSPITAL, INC.
ROCKY MOUNTAIN MEDICAL CENTER, INC.
SALT LAKE REGIONAL MEDICAL CENTER, INC.
SANDY CITY HOLDINGS, INC.
SOUTHRIDGE PLAZA HOLDINGS, INC.
SSJ ST. PETERSBURG HOLDINGS, INC.
BY: /s/ Wayne Gower
--------------------------------------
Name: Wayne Gower
Title: President and Chief Executive Officer
<PAGE> 115
MEMORIAL HOSPITAL OF TAMPA, LP
MESA GENERAL HOSPITAL, LP
ODESSA REGIONAL HOSPITAL, LP
PALMS OF PASADENA HOSPITAL, LP
SOUTHWEST GENERAL HOSPITAL, LP
ST. LUKE'S BEHAVIORAL HOSPITAL, LP
ST. LUKE'S MEDICAL CENTER, LP
TEMPE ST. LUKE'S HOSPITAL, LP
TOWN & COUNTRY HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
BY: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President and Chief Executive Officer
THE BANK OF NEW YORK,
as Trustee
BY: /s/ Marie Trimboli
----------------------------------------
Authorized Signatory
<PAGE> 116
EXHIBIT A-1
(Face of Note)
================================================================================
CUSIP____________
13% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
No. _________ $ ___________
IASIS HEALTHCARE CORPORATION
promises to pay to _____________________________________________________________
or registered assigns, the principal sum of ____________________________________
Dollars on October 15, 2009.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
IASIS HEALTHCARE CORPORATION
BY:_______________________________
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK,
as Trustee
By: ________________________________ Dated: ___________, ____
Authorized Signatory
================================================================================
A-1-1
<PAGE> 117
(Back of Note)
13% [Series A] Senior Subordinated Notes due 2009
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE
PROVISIONS OF THE INDENTURE]
[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE
PROVISIONS OF THE INDENTURE]
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. IASIS Healthcare Corporation, a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 13% per annum from October 15, 1999 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on April 15 and October 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be April 15, 2000. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1.0% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 1 or October 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
shall be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders;
provided, that payment by wire transfer of immediately available funds shall be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which own at
least $1 million in aggregate principal amount of Notes and shall have provided
wire transfer instructions prior to the record date to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the
A-1-2
<PAGE> 118
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New
York, the Trustee under the Indenture, shall act as Paying Agent and Registrar.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of October 15, 1999 ("Indenture") among the Company, the Guarantors and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"). The Notes are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Company limited to $230.0 million in aggregate principal amount plus amounts, if
any, issued to pay Liquidated Damages on outstanding Notes as set forth in
Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as provided below, the Notes will not be redeemable
at the Company's option prior to October 15, 2004. Thereafter, the Company may
redeem all or a part of the Notes upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on October 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2004............................................................. 106.500%
2005............................................................. 104.875%
2006............................................................. 103.250%
2007............................................................. 101.625%
2008 and thereafter.............................................. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to
October 15, 2002, the Company may on any one or more occasions redeem up to 35%
of the aggregate principal amount of Notes issued under the Indenture at a
redemption price of 113.000% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of one or more Equity Offerings; provided that: (A)
at least 65% of the aggregate principal amount of Notes issued under the
Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and (B)
the redemption must occur within 90 days of the date of the closing of such
Equity Offering.
A-1-3
<PAGE> 119
Any redemption pursuant to this provision shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $10 million, the
Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
fixed for the closing of such offer, in accordance with the procedures set forth
in the Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
(or such Subsidiary) may use such deficiency for general corporate purposes. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase will receive an Asset Sale Offer from the Company prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The
A-1-4
<PAGE> 120
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company need not exchange or register the transfer of any Note or portion of
a Note selected for redemption, except for the unredeemed portion of any Note
being redeemed in part. Also, the Company need not exchange or register the
transfer of any Notes for a period of 15 days before the mailing of a notice of
redemption of Notes to be redeemed or during the period between a record date
and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes under the Indenture.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes and Additional Notes, if any,
voting as a single class, and any existing default or compliance with any
provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Subsidiary
Guarantees or the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
or Subsidiary Guarantor's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the Indenture,
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Note Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES.
(a) Events of Default under the Indenture include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Subsidiaries to comply with the provisions of Sections 4.10 and 5.01 of the
Indenture; (iv) failure by the Company or any of its Subsidiaries for 30 days
after notice by the Trustee or by the Holders of at least 25% in principal
amount of Notes to comply with any of its other agreements in the Indenture; (v)
default under any mortgage, indenture or instrument under which there is issued
and outstanding any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of
A-1-5
<PAGE> 121
the Indenture, if that default (a) is caused by a failure to pay principal at
the final stated maturity of such Indebtedness (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$25.0 million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $25.0 million,
which judgments are not paid, discharged or stayed for a period of 90 days;
(vii) except as permitted by the Indenture, any Subsidiary Guarantee by a
Guarantor that is a Significant Subsidiary shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor that is a Significant Subsidiary, or any
Person acting on behalf of any Guarantor that is a Significant Subsidiary, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries.
(b) If any Event of Default occurs and is continuing, the
Trustee, upon request of the Holders of at least 25% in principal amount of the
Notes then outstanding, or the Holders of at least 25% in principal amount of
the Notes then outstanding may declare all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that such notice is an Acceleration Notice, and the same (i)
shall become immediately due and payable or (ii) if there are any accounts
outstanding under the Credit Agreement, shall become immediately due and payable
upon the first to occur of (x) an acceleration under the Credit Agreement or (y)
five Business Days after receipt by the Company and the Representative under the
Credit Agreement of such Acceleration Notice but only if such Event of Default
is then continuing. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect to
the Company, all outstanding Notes shall become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture,
except a continuing Default or Event of Default in the payment of interest on,
or principal of, the Notes. The Company shall deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company, upon
becoming aware of any Default or Event of Default, deliver to the Trustee a
statement specifying such Default or Event of Default.
13. SUBORDINATION. Each Holder by accepting a Note agrees that
the Indebtedness evidenced by the Note is subordinated in right of payment, to
the extent and in the manner provided in Article 10 of the Indenture, prior to
the payment in full in cash or Cash
A-1-6
<PAGE> 122
Equivalents (other than Cash Equivalents of the type referred to in clauses
(iii) and (iv) of the definition thereof) of all Senior Debt (whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed), and that the subordination is for the benefit of the
holders of Senior Debt.
14. SUBSIDIARY GUARANTEES. The payment of principal of,
premium, and interest and Liquidated Damages, if any, on the Notes are
unconditionally guaranteed, jointly and severally, on a senior subordinated
basis by the Guarantors.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or shareholder, of the Company or any Guarantor, as such, shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entirety), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Initial Notes shall have all the rights
set forth in the Registration Rights Agreement or, in the case of Additional
Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall
have the rights set forth in one or more registration rights agreements, if any,
between the Company and the other parties thereto, relating to rights given by
the Company to the purchasers of any Additional Notes.
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-1-7
<PAGE> 123
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
IASIS Heathcare Corporation
104 Woodmont Boulevard
Suite 101
Nashville, Tennessee 37205
Telecopier No.: (615) 846-3006
Attention: General Counsel
21. GOVERNING LAW. This Indenture, the Notes and the
Subsidiary Guarantees shall be governed by, and construed in accordance with,
the laws of the state of New York, without regard to conflicts of law principals
thereof.
A-1-8
<PAGE> 124
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: _________________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:______________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
A-1-9
<PAGE> 125
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state
the amount you elect to have purchased: $________
Date: _____________________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:______________________
SIGNATURE GUARANTEE:
__________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
A-1-10
<PAGE> 126
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized signatory
Amount of this Amount of this decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Note Custodian
- ---------------- ------------------ ------------------ ------------------- --------------------
</TABLE>
- ----------
(1) Include only if Note is issued in Global Form.
A-1-11
<PAGE> 127
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP _________
13% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
No. _____________ $ __________
IASIS HEALTHCARE CORPORATION
promises to pay to _____________________________________________________
or registered assigns, the principal sum of __________________________________
Dollars on October 15, 2009.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
IASIS HEALTHCARE CORPORATION
BY:_________________________________
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK
as Trustee
By:________________________________ Dated: _________, ____
Authorized Signatory
================================================================================
A-2-1
<PAGE> 128
(Back of Regulation S Temporary Global Note)
13 % [Series A] [Series B] Senior Subordinated Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF
ANY REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER
OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
A-2-2
<PAGE> 129
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION
OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTION SET FORTH IN (A) ABOVE.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. IASIS Healthcare Corporation, a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 13% per annum from October 15, 1999 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on April 15 and October 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be April 15, 2000. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1.0% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.
A-2-3
<PAGE> 130
Until this Regulation S Temporary Global Note is exchanged for
one or more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 1 or October 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
shall be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders;
provided, that payment by wire transfer of immediately available funds shall be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which own at
least $1 million in aggregate principal amount of Notes and shall have provided
wire transfer instructions prior to the record date to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New
York, the Trustee under the Indenture, shall act as Paying Agent and Registrar.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of October 15, 1999 ("Indenture") among the Company, the Guarantors and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"). The Notes are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Company limited to $230.0 million in aggregate principal amount plus amounts, if
any, issued to pay Liquidated Damages on outstanding Notes as set forth in
Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as provided below, the Notes will not be redeemable
at the Company's option prior to October 15, 2004. Thereafter, the Company may
redeem all or a part of the Notes upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest
A-2-4
<PAGE> 131
and Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on October 15 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2004.............................................................. 106.500%
2005.............................................................. 104.875%
2006.............................................................. 103.250%
2007.............................................................. 101.625%
2008 and thereafter............................................... 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to
October 15, 2002, the Company may on any one or more occasions redeem up to 35%
of the aggregate principal amount of Notes issued under the Indenture at a
redemption price of 113.000% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of one or more Equity Offerings; provided that: (A)
at least 65% of the aggregate principal amount of Notes issued under the
Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and (B)
the redemption must occur within 90 days of the date of the closing of such
Equity Offering.
Any redemption pursuant to this provision shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $10 million, the
Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
fixed for the
A-2-5
<PAGE> 132
closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before the mailing of a notice of redemption a selection
of Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes under the Indenture.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes and Additional Notes, if any,
voting as a single class, and any existing default or compliance with any
provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Subsidiary
Guarantees or the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
or Subsidiary Guarantor's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that
A-2-6
<PAGE> 133
does not adversely affect the legal rights under the Indenture of any such
Holder, to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, to
provide for the Issuance of Additional Notes in accordance with the limitations
set forth in the Indenture, or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Note Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES.
(a) Events of Default under the Indenture include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Subsidiaries to comply with the provisions of Sections 4.10 and 5.01 of the
Indenture; (iv) failure by the Company or any of its Subsidiaries for 30 days
after notice by the Trustee or by the Holders of at least 25% in principal
amount of Notes to comply with any of its other agreements in the Indenture; (v)
default under any mortgage, indenture or instrument under which there is issued
and outstanding any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, if that default (a) is
caused by a failure to pay principal at the final stated maturity of such
Indebtedness (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $25.0 million or more; (vi) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $25.0 million, which judgments are not paid, discharged
or stayed for a period of 90 days; (vii) except as permitted by the Indenture,
any Subsidiary Guarantee by a Guarantor that is a Significant Subsidiary shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor that is a
Significant Subsidiary, or any Person acting on behalf of any Guarantor that is
a Significant Subsidiary, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries.
(b) If any Event of Default occurs and is continuing, the
Trustee, upon request of the Holders of at least 25% in principal amount of the
Notes then outstanding, or the Holders of at least 25% in principal amount of
the Notes then outstanding may declare all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that such notice is an Acceleration Notice, and the same (i)
shall become immediately due and payable or (ii) if there are any accounts
outstanding under the Credit Agreement, shall become immediately due and payable
upon the first to occur of (x) an acceleration under the Credit Agreement or (y)
five Business Days after receipt by the Company and the Representative under the
Credit Agreement of such Acceleration Notice but only if such
A-2-7
<PAGE> 134
Event of Default is then continuing. Notwithstanding the foregoing, in the case
of an Event of Default arising from certain events of bankruptcy or insolvency
with respect to the Company, all outstanding Notes shall become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the then
outstanding Notes by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its consequences
under the Indenture, except a continuing Default or Event of Default in the
payment of interest on, or principal of, the Notes. The Company shall deliver to
the Trustee annually a statement regarding compliance with the Indenture, and
the Company, upon becoming aware of any Default or Event of Default, deliver to
the Trustee a statement specifying such Default or Event of Default.
13. SUBORDINATION. Each Holder by accepting a Note agrees that
the Indebtedness evidenced by the Note is subordinated in right of payment, to
the extent and in the manner provided in Article 10 of the Indenture, prior to
the payment in full in cash or Cash Equivalents (other than Cash Equivalents of
the type referred to in clauses (iii) and (iv) of the definition thereof) of all
Senior Debt (whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
14. SUBSIDIARY GUARANTEES. The payment of principal of,
premium, and interest and Liquidated Damages, if any, on the Notes are
unconditionally guaranteed, jointly and severally, on a senior subordinated
basis by the Guarantors.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or shareholder, of the Company or any Guarantor, as such, shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
A-2-8
<PAGE> 135
18. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entirety), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Initial Notes shall have all the rights
set forth in the Registration Rights Agreement or, in the case of Additional
Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall
have the rights set forth in one or more registration rights agreements, if any,
between the Company and the other parties thereto, relating to rights given by
the Company to the purchasers of any Additional Notes.
20. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
IASIS Healthcare Corporation
104 Woodmont Boulevard
Suite 101
Nashville, Tennessee 37205
Telecopier No.: (615) 846-3006
Attention: General Counsel
21. GOVERNING LAW. This Indenture, the Notes and the
Subsidiary Guarantees shall be governed by, and construed in accordance with,
the law of the state of New York, without regard to conflicts of law principals
thereof.
A-2-9
<PAGE> 136
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date:___________________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:______________________
SIGNATURE GUARANTEE:
__________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
A-2-10
<PAGE> 137
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate
box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state
the amount you elect to have purchased: $___________
Date:_________________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:______________________
SIGNATURE GUARANTEE:
________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
A-2-11
<PAGE> 138
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized signatory
Amount of this Amount of this decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Note Custodian
- ---------------- ------------------ ------------------ ------------------- --------------------
</TABLE>
A-2-12
<PAGE> 139
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
IASIS Healthcare Corporation
104 Woodmont Boulevard
Suite 101
Nashville, Tennessee 37205
Attention: General Counsel
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: 13% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of October
15, 1999 (the "Indenture"), among IASIS Healthcare Corporation, as issuer (the
"Company"), the Guarantors and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
B-1
<PAGE> 140
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor and
any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in,
on or through the facilities of a designated offshore securities market and
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) / / such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
B-2
<PAGE> 141
(d) / / such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance
B-3
<PAGE> 142
with the transfer restrictions contained in the Indenture and any applicable
blue sky securities laws of any State of the United States and (ii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes or Restricted Definitive Notes and
in the Indenture.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
Dated: ___________________, _______
___________________________________
[Insert Name of Transferor]
By:________________________________
Name:
Title:
B-4
<PAGE> 143
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ______), or
(ii) / / Regulation S Global Note (CUSIP ______), or
(iii) / / IAI Global Note (CUSIP ______); or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ______), or
(ii) / / Regulation S Global Note (CUSIP ______), or
(iii) / / IAI Global Note (CUSIP ______); or
(iv) / / Unrestricted Global Note (CUSIP ______); or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE> 144
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
IASIS Healthcare Corporation
104 Woodmont Boulevard
Suite 101
Nashville, Tennessee 37205
Attention: General Counsel
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: 13% Senior Subordinated Notes due 2009
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of October
15, 1999 (the "Indenture"), among IASIS Healthcare Corporation, as issuer (the
"Company"), the Guarantors and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [GRAPHIC OMITTED]CHECK IF EXCHANGE IS FROM BENEFICIAL
INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED
GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest
in a Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the United
States Securities Act of 1933, as amended (the "Securities Act"), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities
C-1
<PAGE> 145
Act and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired
C-2
<PAGE> 146
for the Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Note issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Note and in the Indenture and the Securities Act.
C-3
<PAGE> 147
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] / / 144A Global Note, / / Regulation S Global Note, / / IAI
Global Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
___________________________________
[Insert Name of Owner]
By: _______________________________
Name:
Title:
Dated: __________, ____
C-4
<PAGE> 148
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
IASIS Healthcare Corporation
104 Woodmont Boulevard
Suite 101
Nashville, Tennessee 37205
Attention: General Counsel
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: 13% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of October
15, 1999 (the "Indenture"), among IASIS Healthcare Corporation, as issuer (the
"Company"), the Guarantors and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with our proposed purchase of
$____________ aggregate principal amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or
any interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such
D-1
<PAGE> 149
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if such transfer is in respect of a principal amount of Notes, at the time
of transfer of less than $250,000, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such transfer is in compliance with
the Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A) through (E) of
this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
___________________________________
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: __________________, ____
D-2
<PAGE> 150
EXHIBIT E
FORM OF NOTATION OF SUBSIDIARY GUARANTEE ON NOTE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of October 15, 1999 (the
"Indenture") among IASIS Healthcare Corporation, the Guarantors signatories
thereto and The Bank of New York, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest on the Notes
(as defined in the Indenture), whether at maturity, by acceleration, redemption
or otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes the Trustee, on behalf of such
Holder, to make such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
E-1
<PAGE> 151
BAPTIST JOINT VENTURE HOLDINGS, INC.
BEAUMONT HOSPITAL HOLDINGS, INC.
BILTMORE SURGERY CENTER, INC.
CLINICARE OF UTAH, INC.
DAVIS HOSPITAL & MEDICAL CENTER, INC.
DAVIS SURGICAL CENTER HOLDINGS, INC.
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
HEALTH CHOICE ARIZONA, INC.
IASIS HEALTHCARE HOLDINGS, INC.
IASIS MANAGEMENT COMPANY
JORDAN VALLEY HOSPITAL, INC.
METRO AMBULATORY SURGERY CENTER, INC.
PIONEER VALLEY HEALTH PLAN, INC.
PIONEER VALLEY HOSPITAL, INC.
ROCKY MOUNTAIN MEDICAL CENTER, INC.
SALT LAKE REGIONAL MEDICAL CENTER, INC.
SANDY CITY HOLDINGS, INC.
SOUTHRIDGE PLAZA HOLDINGS, INC.
SSJ ST. PETERSBURG HOLDINGS, INC.
By:__________________________________________
Name:
Title:
E-2
<PAGE> 152
MEMORIAL HOSPITAL OF TAMPA, LP
MESA GENERAL HOSPITAL, LP
ODESSA REGIONAL HOSPITAL, LP
PALMS OF PASADENA HOSPITAL, LP
SOUTHWEST GENERAL HOSPITAL, LP
ST. LUKE'S BEHAVIORAL HOSPITAL, LP
ST. LUKE'S MEDICAL CENTER, LP
TEMPE ST. LUKE'S HOSPITAL, LP
TOWN & COUNTRY HOSPITAL, LP
BY: IASIS HEALTHCARE HOLDINGS, INC.
By:_____________________________________
Name:
Title:
E-3
<PAGE> 153
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated
as of ____________________, among _____________________ (the "Guaranteeing
Subsidiary"), a subsidiary of IASIS Healthcare Corporation (or its successor), a
corporation organized under the laws of Delaware (the "Company"), and The Bank
of New York, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of October 15, 1999,
providing for the issuance of an aggregate principal amount at maturity of
$230,000,000 of 13% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "Subsidiary
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a
Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that:
F-1
<PAGE> 154
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and
thereof; and
(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce
the same or any other circumstance which might
otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(c) The following is hereby waived: diligence
presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first
against the Company, protest, notice and all demands
whatsoever.
(d) This Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations
contained in the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations
F-2
<PAGE> 155
guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture
for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of this Subsidiary
Guarantee.
(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as
the exercise of such right does not impair the rights
of the Holders under the Guarantee.
(i) The obligations hereunder shall be subject to the
subordination provisions of the Indenture.
3. Execution and Delivery. Each Guaranteeing Subsidiary
agrees that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on
Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) subject to Section 11.05 of the Indenture, the Person
formed by or surviving any such consolidation or
merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the
Subsidiary Guarantee on the terms set forth herein or
therein; and
(ii) immediately after giving effect to such transaction,
no Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the Subsidiary
Guarantee endorsed upon the Notes and the due and punctual
F-3
<PAGE> 156
performance of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such successor
corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein
as a Guarantor. Such successor corporation thereupon may cause
to be signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and
benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms
of the Indenture as though all of such Subsidiary Guarantees
had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained
in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another
Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the
capital stock of any Guarantor, then such Guarantor (in the
event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary
Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount
of principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided
in Article 11 of the Indenture.
F-4
<PAGE> 157
6. No Recourse Against Others. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver is against
public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
F-5
<PAGE> 158
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: _______________, ____
[Guaranteeing Subsidiary]
By:_____________________________________
Name:
Title
THE BANK OF NEW YORK,
as Trustee
By:_____________________________________
Name:
Title
F-6
<PAGE> 1
EXHIBIT 4.2
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of
October 25, 1999, among IASIS Healthcare Corporation, a Delaware corporation
(the "Company"), the Guarantors named in the Indenture referred to below,
Biltmore Surgery Center, Inc., an Arizona Corporation, a subsidiary of the
Company (or its successor) (the "Guaranteeing Subsidiary") and The Bank of New
York, a New York banking corporation, as trustee under the Indenture referred to
below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture, dated as of October 15, 1999, providing for the issuance
of an aggregate principal amount at maturity of $230,000,000 of 13% Senior
Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
agrees as follows:
<PAGE> 2
a. Along with all Guarantors named in the Indenture, to jointly
and severally guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the
validity and enforceability of the Indenture, the Notes or
the obligations of the Company hereunder or thereunder,
that:
i. the principal of and interest on the Notes will be
promptly paid in full when due, whether at
maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal
of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
ii. in case of any extension of time of payment or
renewal of any Notes or any of such other
obligations, that same will be promptly paid in
full when due or performed in accordance with the
terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so
guaranteed or any performance so guaranteed for
whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same
immediately.
b. The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability
of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the
Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or
defense of a Guarantor.
c. The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right
to
2
<PAGE> 3
require a proceeding first against the Company, protest,
notice and all demands whatsoever.
d. This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the
Notes and the Indenture.
e. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or the Guarantors,
any amount paid by either to the Trustee or such Holder,
this Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
f. The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect
of any obligations guaranteed hereby until payment in full
of all obligations guaranteed hereby.
g. As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided
in Article 6 of the Indenture for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the event
of any declaration of acceleration of such obligations as
provided in Article 6 of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due
and payable by the Guarantors for the purpose of this
Subsidiary Guarantee.
h. The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of
such right does not impair the rights of the Holders under
the Guarantee.
i. The obligations hereunder shall be subject to the
subordination provisions of the Indenture.
3
<PAGE> 4
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees
that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain
Terms.
a. The Guaranteeing Subsidiary may not consolidate with or
merge with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity
whether or not affiliated with such Guarantor unless:
i. subject to Section 11.05 of the Indenture, the
Person formed by or surviving any such
consolidation or merger (if other than a Guarantor
or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the
Notes, the Indenture and the Subsidiary Guarantee
on the terms set forth herein or therein; and
ii. immediately after giving effect to such
transaction, no Default or Event of Default
exists.
b. In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the
Trustee, of the Subsidiary Guarantee endorsed upon the Notes
and the due and punctual performance of all of the covenants
and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and
be substituted for the Guarantor with the same effect as if
it had been named herein as a Guarantor. Such successor
corporation thereupon may cause to be signed any or all of
the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee. All
the Subsidiary Guarantees so
4
<PAGE> 5
issued shall in all respects have the same legal rank and
benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the
terms of the Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution
hereof.
c. Except as set forth in Articles 4 and 5 of the Indenture,
and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or
into the Company or another Guarantor, or shall prevent any
sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the Company or
another Guarantor.
5. Releases.
a. In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the
capital stock of any Guarantor, then such Guarantor (in the
event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property
(in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by
the Company to the Trustee of an Officers' Certificate and
an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the
release of any Guarantor from its obligations under its
Subsidiary Guarantee.
5
<PAGE> 6
b. Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount
of principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided
in Article 11 of the Indenture or the Supplemental
Indenture.
6. No Recourse Against Others. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver is against
public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: October 25, 1999
IASIS HEALTHCARE CORPORATION
By: /s/ Wayne Gower
---------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
BAPTIST JOINT VENTURE HOLDINGS, INC.
BEAUMONT HOSPITAL HOLDINGS, INC.
BILTMORE SURGERY CENTER, INC.,
a Delaware Corporation
BILTMORE SURGERY CENTER, INC.,
an Arizona Corporation
CLINICARE OF UTAH, INC.
DAVIS HOSPITAL & MEDICAL CENTER, INC.
DAVIS SURGICAL CENTER HOLDINGS, INC.
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
HEALTH CHOICE ARIZONA, INC.
IASIS HEALTHCARE HOLDINGS, INC.
IASIS MANAGEMENT COMPANY
JORDAN VALLEY HOSPITAL, INC.
METRO AMBULATORY SURGERY CENTER, INC.
PIONEER VALLEY HEALTH PLAN, INC.
PIONEER VALLEY HOSPITAL, INC.
ROCKY MOUNTAIN MEDICAL CENTER, INC.
SALT LAKE REGIONAL MEDICAL CENTER, INC.
SANDY CITY HOLDINGS, INC.
SOUTHRIDGE PLAZA HOLDINGS, INC.
SSJ ST. PETERSBURG HOLDINGS, INC.
By: /s/ Wayne Gower
---------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
<PAGE> 8
MEMORIAL HOSPITAL OF TAMPA, LP
MESA GENERAL HOSPITAL, LP
ODESSA REGIONAL HOSPITAL, LP
PALMS OF PASADENA HOSPITAL, LP
SOUTHWEST GENERAL HOSPITAL, LP
ST. LUKE'S MEDICAL CENTER, LP
ST. LUKE'S BEHAVIORAL HOSPITAL, LP
TEMPE ST. LUKE'S HOSPITAL, LP
TOWN & COUNTRY HOSPITAL, LP
By IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ Wayne Gower
---------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Robert A.Massimillo
---------------------------------------------
Name: Robert A. Massimillo
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 4.3
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of
November 4, 1999, among IASIS Healthcare Corporation, a Delaware corporation
(the "Company"), the Guarantors named in the Indenture referred to below, IASIS
Healthcare MSO Sub of Salt Lake City, LLC, a Utah limited liability company, a
subsidiary of the Company (or its successor) (the "Guaranteeing Subsidiary") and
The Bank of New York, a New York banking corporation, as trustee under the
Indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture, dated as of October 15, 1999, providing for the issuance
of an aggregate principal amount at maturity of $230,000,000 of 13% Senior
Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
agrees as follows:
<PAGE> 2
a. Along with all Guarantors named in the Indenture, to jointly
and severally guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the
validity and enforceability of the Indenture, the Notes or
the obligations of the Company hereunder or thereunder,
that:
i. the principal of and interest on the Notes will be
promptly paid in full when due, whether at
maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal
of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
ii. in case of any extension of time of payment or
renewal of any Notes or any of such other
obligations, that same will be promptly paid in
full when due or performed in accordance with the
terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so
guaranteed or any performance so guaranteed for
whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same
immediately.
b. The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability
of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the
Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or
defense of a Guarantor.
c. The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right
to
2
<PAGE> 3
require a proceeding first against the Company, protest,
notice and all demands whatsoever.
d. This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the
Notes and the Indenture.
e. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or the Guarantors,
any amount paid by either to the Trustee or such Holder,
this Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
f. The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect
of any obligations guaranteed hereby until payment in full
of all obligations guaranteed hereby.
g. As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided
in Article 6 of the Indenture for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the event
of any declaration of acceleration of such obligations as
provided in Article 6 of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due
and payable by the Guarantors for the purpose of this
Subsidiary Guarantee.
h. The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of
such right does not impair the rights of the Holders under
the Guarantee.
i. The obligations hereunder shall be subject to the
subordination provisions of the Indenture.
3
<PAGE> 4
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees
that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain
Terms.
a. The Guaranteeing Subsidiary may not consolidate with or
merge with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity
whether or not affiliated with such Guarantor unless:
i. subject to Section 11.05 of the Indenture, the
Person formed by or surviving any such
consolidation or merger (if other than a Guarantor
or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the
Notes, the Indenture and the Subsidiary Guarantee
on the terms set forth herein or therein; and
ii. immediately after giving effect to such
transaction, no Default or Event of Default
exists.
b. In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the
Trustee, of the Subsidiary Guarantee endorsed upon the Notes
and the due and punctual performance of all of the covenants
and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and
be substituted for the Guarantor with the same effect as if
it had been named herein as a Guarantor. Such successor
corporation thereupon may cause to be signed any or all of
the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee. All
the Subsidiary Guarantees so
4
<PAGE> 5
issued shall in all respects have the same legal rank and
benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the
terms of the Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution
hereof.
c. Except as set forth in Articles 4 and 5 of the Indenture,
and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or
into the Company or another Guarantor, or shall prevent any
sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the Company or
another Guarantor.
5. Releases.
a. In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the
capital stock of any Guarantor, then such Guarantor (in the
event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property
(in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by
the Company to the Trustee of an Officers' Certificate and
an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the
release of any Guarantor from its obligations under its
Subsidiary Guarantee.
5
<PAGE> 6
b. Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount
of principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided
in Article 11 of the Indenture or the Supplemental
Indenture.
6. No Recourse Against Others. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver is against
public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: November 4, 1999
IASIS HEALTHCARE CORPORATION
By: /s/ Wayne Gower
---------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
BAPTIST JOINT VENTURE HOLDINGS, INC.
BEAUMONT HOSPITAL HOLDINGS, INC.
BILTMORE SURGERY CENTER, INC.,
a Delaware Corporation
BILTMORE SURGERY CENTER, INC.,
an Arizona Corporation
CLINICARE OF UTAH, INC.
DAVIS HOSPITAL & MEDICAL CENTER, INC.
DAVIS SURGICAL CENTER HOLDINGS, INC.
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
HEALTH CHOICE ARIZONA, INC.
IASIS HEALTHCARE HOLDINGS, INC.
IASIS MANAGEMENT COMPANY
JORDAN VALLEY HOSPITAL, INC.
METRO AMBULATORY SURGERY CENTER, INC.
PIONEER VALLEY HEALTH PLAN, INC.
PIONEER VALLEY HOSPITAL, INC.
ROCKY MOUNTAIN MEDICAL CENTER, INC.
SALT LAKE REGIONAL MEDICAL CENTER, INC.
SANDY CITY HOLDINGS, INC.
SOUTHRIDGE PLAZA HOLDINGS, INC.
SSJ ST. PETERSBURG HOLDINGS, INC.
By: /s/ Wayne Gower
---------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
<PAGE> 8
MEMORIAL HOSPITAL OF TAMPA, LP
MESA GENERAL HOSPITAL, LP
ODESSA REGIONAL HOSPITAL, LP
PALMS OF PASADENA HOSPITAL, LP
SOUTHWEST GENERAL HOSPITAL, LP
ST. LUKE'S MEDICAL CENTER, LP
ST. LUKE'S BEHAVIORAL HOSPITAL, LP
TEMPE ST. LUKE'S HOSPITAL, LP
TOWN & COUNTRY HOSPITAL, LP
By IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ Wayne Gower
---------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
IASIS HEALTHCARE MSO SUB OF SALT LAKE CITY, LLC
By IASIS HEALTHCARE CORPORATION,
Sole Member
By: /s/ Wayne Gower
---------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Robert A.Massimillo
---------------------------------------------
Name: Robert A. Massimillo
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 4.4
SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of October 15, 1999 (the
"Indenture") among IASIS Healthcare Corporation, the Guarantors signatories
thereto and The Bank of New York, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest on the Notes
(as defined in the Indenture), whether at maturity, by acceleration, redemption
or otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes the Trustee, on behalf of such
Holder, to make such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
<PAGE> 2
BAPTIST JOINT VENTURE HOLDINGS, INC.
BEAUMONT HOSPITAL HOLDINGS, INC.
BILTMORE SURGERY CENTER, INC.
CLINICARE OF UTAH, INC.
DAVIS HOSPITAL & MEDICAL CENTER, INC.
DAVIS SURGICAL CENTER HOLDINGS, INC.
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
HEALTH CHOICE ARIZONA, INC.
IASIS HEALTHCARE HOLDINGS, INC.
IASIS MANAGEMENT COMPANY
JORDAN VALLEY HOSPITAL, INC.
METRO AMBULATORY SURGERY CENTER, INC.
PIONEER VALLEY HEALTH PLAN, INC.
PIONEER VALLEY HOSPITAL, INC.
ROCKY MOUNTAIN MEDICAL CENTER, INC.
SALT LAKE REGIONAL MEDICAL CENTER, INC.
SANDY CITY HOLDINGS, INC.
SOUTHRIDGE PLAZA HOLDINGS, INC.
SSJ ST. PETERSBURG HOLDINGS, INC.
By: /s/ Wayne Gower
-----------------------------------------
Name: Wayne Gower
Title: President and Chief Executive Officer
<PAGE> 3
MEMORIAL HOSPITAL OF TAMPA, LP
MESA GENERAL HOSPITAL, LP
ODESSA REGIONAL HOSPITAL, LP
PALMS OF PASADENA HOSPITAL, LP
SOUTHWEST GENERAL HOSPITAL, LP
ST. LUKE'S BEHAVIORAL HOSPITAL, LP
ST. LUKE'S MEDICAL CENTER, LP
TEMPE ST. LUKE'S HOSPITAL, LP
TOWN & COUNTRY HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President and Chief Executive
Officer
<PAGE> 1
EXHIBIT 4.5
SUBSIDIARY GUARANTEE
For value received, Biltmore Surgery Center, Inc., an Arizona corporation
(the "Guarantor", which term includes any successor Person under the Indenture
referred to below) has, jointly and severally, unconditionally guaranteed, to
the extent set forth in the Indenture and subject to the provisions in the
Indenture dated as of October 15, 1999 (the "Indenture") among the Company, the
Guarantors signatories thereto and The Bank of New York, as trustee (the
"Trustee"), (a) the due and punctual payment of the principal of, premium, if
any, and interest on the Notes (as defined in the Indenture), whether at
maturity, by acceleration, redemption or otherwise, the due and punctual payment
of interest on overdue principal and premium, and, to the extent permitted by
law, interest, and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee all in accordance with the terms of
the Indenture and (b) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise. The
obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth
in Article 11 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes the Trustee, on behalf of such Holder, to make such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such
purpose; provided, however, that the Indebtedness evidenced by this Subsidiary
Guarantee shall cease to be so subordinated and subject in right of payment upon
any defeasance of this Note in accordance with the provisions of the Indenture.
<PAGE> 2
BILTMORE SURGERY CENTER, INC.
By: /s/ Wayne Gower
--------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
<PAGE> 1
EXHIBIT 4.6
SUBSIDIARY GUARANTEE
For value received, IASIS Healthcare MSO Sub of Salt Lake City, LLC, a Utah
limited liability company (the "Guarantor", which term includes any successor
Person under the Indenture referred to below) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of October 15, 1999, as supplemented
by the supplemental indenture dated as of October 25, 1999 (the "Indenture"),
among the Company, the Guarantors signatories thereto and The Bank of New York,
as trustee (the "Trustee"), (a) the due and punctual payment of the principal
of, premium, if any, and interest on the Notes (as defined in the Indenture),
whether at maturity, by acceleration, redemption or otherwise, the due and
punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee all in accordance
with the terms of the Indenture and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set
forth in Article 11 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes the Trustee, on behalf of such Holder, to make such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; provided, however, that the Indebtedness evidenced by
this Subsidiary Guarantee shall cease to be so subordinated and subject in right
of payment upon any defeasance of this Note in accordance with the provisions of
the Indenture.
<PAGE> 2
IASIS HEALTHCARE MSO SUB OF SALT LAKE CITY, LLC
By: /s/ Wayne Gower
---------------------------------------------
Name: C. Wayne Gower
Title: President and Chief Executive Officer
<PAGE> 1
EXHIBIT 4.7
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of October 15, 1999
by and among
IASIS HEALTHCARE CORPORATION,
The Guarantors Signatories Hereto
and
J.P. Morgan Securities Inc.
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of October 15, 1999, by and among IASIS Healthcare Corporation,
a Delaware corporation (the "Company"), the subsidiaries of the Company listed
on the signature pages hereof (the "Guarantors") and J.P. Morgan Securities Inc.
(the "Initial Purchaser"), who has agreed to purchase the Company's 13% Senior
Subordinated Notes due 2009 (the "Series A Notes") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
October 13, 1999 (the "Purchase Agreement"), by and among the Company, the
Guarantors and the Initial Purchaser. In order to induce the Initial Purchaser
to purchase the Series A Notes, the Company and the Guarantors have agreed to
provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchaser set forth in Section 6 of the Purchase Agreement. Capitalized terms
used herein and not otherwise defined shall have the meaning assigned to them in
the Indenture, dated as of the date hereof, by and among the Company, the
Guarantors and The Bank of New York, as Trustee (the "Trustee"), relating to the
Series A Notes and the Series B Notes (as defined below) (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day in the
City of New York on which banks are authorized or ordered to close.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of such Exchange Offer open for a period not less than the
minimum period required pursuant to Section 3(b) hereof and (c) the delivery by
the Company to the Registrar under the Indenture of Series B Notes to be
registered in the same aggregate principal amount as the aggregate principal
amount of Series A Notes tendered by the Holders thereof pursuant to the
Exchange Offer.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
<PAGE> 3
Exchange Act: The Securities Exchange Act of 1934, as amended and the
rules and regulations of the Commission promulgated thereunder.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Guarantors: The Guarantors defined in the preamble hereto and any
Person which becomes a guarantor of Notes after the date hereof pursuant to the
terms of the Indenture.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indemnified Party: As defined in Section 8(c) hereof.
Indemnifying Party: As defined in Section 8(c) hereof.
Liquidated Damages: As defined in Section 5 hereof.
Notes: Series A Notes and Series B Notes (including guarantees thereof
by the Guarantors).
Person: An individual, partnership, limited liability company,
corporation, trust, unincorporated organization, or a government or agency or
political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and
the Guarantors relating to (a) an offering of any Series B Notes (including
guarantees thereof by the Guarantors) pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
2
<PAGE> 4
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 13% Series B Senior Notes due 2009 to be
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Series A Note, until the earliest
to occur of (a) the date on which such Series A Note is exchanged in an Exchange
Offer for a Series B Note and entitled to be resold to the public by the Holder
thereof without complying with the prospectus delivery requirements of the Act,
(b) the date on which such Series A Note has been disposed of in accordance with
a Shelf Registration Statement (and the purchasers thereof have been issued
Series B Notes), and (c) the date on which such Series B Note is disposed of by
a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by an
Exchange Offer Registration Statement (including the delivery of the Prospectus
contained therein) or (d) the date which such Series A Note is distributed to
the public pursuant to Rule 144 under the Act (and the purchasers thereof have
been issued Series B Notes).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law or policy of the Commission (after the procedures set forth in
Section 6(a)(i) below have been complied with), the Company and the Guarantors
shall (i) cause the Exchange Offer Registration Statement to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 90 days after the Closing Date (such 90th day being the "Filing Deadline"),
(ii) use their commercially reasonable efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but in
no event later than 180 days after the Closing Date (such 180th day being the
"Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Series B Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, use their commercially reasonable efforts
to commence and
3
<PAGE> 5
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the Series B Notes to be offered in exchange for
the Series A Notes that are Transfer Restricted Securities and to permit resales
of Series B Notes by any Broker-Dealer that tendered into the Exchange Offer for
Series A Notes that such Broker-Dealer acquired for its own account as a result
of market making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their commercially
reasonable efforts to cause the Exchange Offer Registration Statement to be
effective continuously, and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The Company and the
Guarantors shall cause the Exchange Offer to comply with all applicable federal
and state securities laws. No securities other than the Series B Notes and the
guarantees thereof shall be included in the Exchange Offer Registration
Statement. The Company and the Guarantors shall use their commercially
reasonable efforts to cause the Exchange Offer to be Consummated on or prior to
the date that is 30 Business Days after the Exchange Offer Registration
Statement has become effective, or longer, if required by the federal securities
laws.
(c) The Company and the Guarantors shall include a "Plan of
Distribution" section in the Prospectus contained in the Exchange Offer
Registration Statement and indicate therein that any Broker-Dealer who holds
Transfer Restricted Securities that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities (other than Series A Notes acquired directly from the Company or any
Affiliate of the Company), may exchange such Transfer Restricted Securities
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer
and that the Prospectus contained in the Exchange Offer Registration Statement
may be used to satisfy such prospectus delivery requirement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement.
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, the
Company and the Guarantors agree to use their commercially reasonable efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Sections 6(a) and (c)
hereof and in conformity with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of 180 days from the date on which the Exchange Offer is
Consummated, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold
pursuant thereto. The Company and the Guarantors shall promptly provide
sufficient copies of
4
<PAGE> 6
the latest version of such Prospectus to such Broker-Dealers promptly upon
request, and in no event later than one day after such request, at any time
during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law or policy of the Commission (after the Company and the Guarantors
have complied with the procedures set forth in Section 6(a)(i) below) or (ii)
any Holder of Transfer Restricted Securities shall notify the Company in writing
within 20 Business Days following the Consummation of the Exchange Offer that
(A) upon advice of counsel such Holder was prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder may not
resell the Series B Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
such Holder or (C) such Holder is a Broker-Dealer and holds Series A Notes
acquired directly from the Company or any of its Affiliates, then the Company
and the Guarantors shall:
(x) use their commercially reasonable efforts to cause to be filed, on or
prior to 30 days after the earlier of (i) the date on which the Company
determines that the Exchange Offer Registration Statement cannot be filed as a
result of clause (a)(i) above and (ii) the date on which the Company receives
the notice specified in clause (a)(ii) above, (such earlier date, the "Filing
Deadline"), a shelf registration statement pursuant to Rule 415 under the Act
(which may be an amendment to the Exchange Offer Registration Statement (the
"Shelf Registration Statement")), relating to all Transfer Restricted Securities
of Holders which shall have provided the information required pursuant to
Section 4(b) hereof, and
(y) use their commercially reasonable efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline (such 90th day the "Effectiveness Deadline").
If, after the Company and the Guarantors have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer is not permitted under applicable
federal law or policy of the Commission (i.e., clause (a)(i) above), then the
filing of the Exchange Offer Registration Statement shall be deemed to satisfy
the requirements of clause (x) above; provided that, in such event, the Company
and the Guarantors shall remain obligated to meet the Effectiveness Deadline set
forth in clause (y).
The Company and the Guarantors shall use their commercially reasonable
efforts to keep any Shelf Registration Statement required by this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a) and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Sections 6(c)(i) and (d))
following the Closing Date, or such shorter period as will
5
<PAGE> 7
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information (it being understood that Liquidated Damages shall not accrue for
the benefit of any Holder until such Holder provides such information). Each
selling Holder agrees to promptly furnish to the Company additional information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Exchange Offer Registration Statement is first declared effective by the
Commission or (iv) subject to Section 6(c)(i) any Registration Statement
required by this Agreement is filed and declared effective but thereafter ceases
to be effective or fails to be usable for its intended purpose without being
succeeded immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself declared effective
immediately (each such event referred to in clauses (i) through (iv), a
"Registration Default"), then, subject to Section 4(b), the Company and the
Guarantors hereby jointly and severally agree to pay to each Holder of Transfer
Restricted Securities affected thereby liquidated damages ("Liquidated
Damages"), with respect to the first 90-day period immediately following the
occurrence of the first Registration Default, in an amount equal to a per annum
rate of 0.50% on the principal amount of Transfer Restricted Securities held by
such Holder. The amount of Liquidated Damages described in the preceding
sentence shall increase by an additional per annum rate of 0.25% with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages for all Registration Defaults of
2.00% per annum on the principal amount of Notes constituting Transfer
Restricted Securities; provided that the Company and the Guarantors shall in no
event be required to pay Liquidated Damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the Liquidated
Damages payable with
6
<PAGE> 8
respect to the Transfer Restricted Securities as a result of such clause (i),
(ii), (iii) or (iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use their commercially
reasonable efforts to effect such exchange and to permit the resale of Series B
Notes by any Broker-Dealer that tendered in the Exchange Offer Series A Notes
that such Broker-Dealer acquired for its own account as a result of its market
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and (z)
comply with all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Company and the Guarantors
hereby agree to seek a no-action letter or other favorable decision
from the Commission allowing the Company and the Guarantors to
Consummate an Exchange Offer for such Transfer Restricted Securities.
The Company and the Guarantors hereby agree to pursue the issuance of
such a decision to the Commission staff level. In connection with the
foregoing, the Company and the Guarantors hereby agree to take all such
other actions as may be requested by the Commission or otherwise
required in connection with the issuance of such decision, including
without limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is
acquiring the Series B Notes in its ordinary course of business. Each
Holder using the Exchange Offer to participate in a distribution of the
Series B Notes
7
<PAGE> 9
hereby acknowledges and agrees that, if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes acquired
directly from the Company or an Affiliate thereof, it (1) could not,
under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley and
Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply with
the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor any Guarantor has entered
into any arrangement or understanding with any Person to distribute the
Series B Notes to be received in the Exchange Offer and that, to the
best of the Company's and each Guarantor's information and belief, each
Holder participating in the Exchange Offer is acquiring the Series B
Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer and (C) any other
undertaking or representation required by the Commission as set forth
in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their commercially reasonable
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their commercially reasonable efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the
8
<PAGE> 10
period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain an untrue
statement of a material fact or omits to state any material fact
necessary to make the statements therein not misleading or (B) not to
be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company and the
Guarantors shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use their commercially reasonable efforts to cause such
amendment to be declared effective as soon as practicable.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that it is in the best interests of the
Company and the Guarantors not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction or
other material development involving the Company or the Guarantors, the
Company and the Guarantors may allow the Shelf Registration Statement
to fail to be effective or the Prospectus contained therein to be
unusable as a result of such nondisclosure for up to ninety (90) days
in any year during the two-year period of effectiveness required by
Section 4 hereof;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) with respect to a Shelf Registration Statement, advise
the selling Holders promptly and, if requested by such Person, confirm
such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement under the Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by
reference therein untrue, or that requires the making of any additions
to or changes in the Registration Statement in order to make the
statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue
any stop order
9
<PAGE> 11
suspending the effectiveness of the Registration Statement, or any
state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from qualification
of the Transfer Restricted Securities under state securities or Blue
Sky laws, the Company and the Guarantors shall use their commercially
reasonable efforts to obtain the withdrawal or lifting of such order at
the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) with respect to a Shelf Registration Statement, furnish to
the Initial Purchaser and each selling Holder named in any Registration
Statement or Prospectus in connection with such sale, if any, before
filing with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such Holders in connection with such sale, if any, for a period of
at least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus (including all such
documents incorporated by reference) to which the selling Holders of
the Transfer Restricted Securities covered by such Registration
Statement in connection with such sale, if any, shall reasonably object
within five Business Days after the receipt thereof. A selling Holder
shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains an untrue statement of a
material fact or omits to state any material fact necessary to make the
statements therein not misleading or fails to comply with the
applicable requirements of the Act;
(vi) with respect to a Shelf Registration Statement, promptly
prior to the filing of any document that is to be incorporated by
reference into a Registration Statement or Prospectus, provide copies
of such document to the selling Holders in connection with such sale,
if any, make the Company's and the Guarantors' representatives
available for discussion of such document and other customary due
diligence matters, and include such information in such document prior
to the filing thereof as such selling Holders may reasonably request;
(vii) with respect to a Shelf Registration Statement, make
available at reasonable times for inspection by the selling Holders
participating in any disposition pursuant to such Registration
Statement and any attorney or accountant retained by such selling
Holders, all financial and other records, pertinent corporate documents
of the Company and the Guarantors and cause the Company's and the
Guarantors' officers, directors and employees
10
<PAGE> 12
to supply all information reasonably requested by any such selling
Holder, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the
filing thereof and prior to its effectiveness;
(viii) with respect to a Shelf Registration Statement, if
requested by any selling Holders in connection with such sale, if any,
promptly include in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such
information as such selling Holders may reasonably request to have
included therein, including, without limitation, information relating
to the "Plan of Distribution" of the Transfer Restricted Securities;
and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(ix) with respect to a Shelf Registration Statement, furnish
to each selling Holder in connection with such sale, if any, without
charge, at least one copy of the Registration Statement, as first filed
with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) with respect to a Shelf Registration Statement, deliver to
each selling Holder, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company and the
Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each of the
selling Holders in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) with respect to a Shelf Registration Statement, upon the
request of any selling Holder, enter into such agreements (including
underwriting agreements containing customary terms) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities in
connection with any sale or resale pursuant to any applicable
Registration Statement. In such connection, the Company and the
Guarantors shall:
(A) upon request of any selling Holder, furnish (or in the
case of paragraphs (2) and (3), use its commercially reasonable
efforts to cause to be furnished) to each selling Holder, upon the
effectiveness of the Shelf Registration Statement:
(1) a certificate, dated such date, signed on behalf of
the Company and each Guarantor by (x) the President or any
Vice President and (y) a principal financial or accounting
officer of the Company and such Guarantor, confirming, as of
the date thereof, the matters, to the extent applicable, set
forth in paragraphs (a) and (b) of Section 6 of the Purchase
Agreement and such other similar matters as the selling
Holders may reasonably request;
11
<PAGE> 13
(2) an opinion, dated the date of effectiveness of the
Shelf Registration Statement of counsel for the Company and
the Guarantors covering matters similar to those set forth in
Section 6(e) of the Purchase Agreement (as to the Registration
Statement rather than the Offering Memorandum and excepting
the clauses (vi), (vii), (viii), (x), (xii), (xiii), and
(xviii) of Section 6(e) of the Purchase Agreement) and such
other matters as the selling Holders may reasonably request,
and in any event including a statement to the effect that such
counsel has participated in conferences with officers and
other representatives of the Company and the Guarantors,
representatives of the independent public accountants for the
Company and the Guarantors and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing
(relying as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date, contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial data included in any Registration
Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated the date of
effectiveness of the Shelf Registration Statement from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 6(f) of the Purchase
Agreement;
(B) set forth in full or incorporated by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with clause (A) above and with any customary conditions contained in
any agreement entered into by the Company and the Guarantors
pursuant to this clause (xii);
12
<PAGE> 14
If at any time the representations and warranties of the
Company and each of the Guarantors set forth in the certificate
contemplated in clause (A)(1) above cease to be true and correct, the
Company shall so advise the Initial Purchaser and the underwriters, if
any, and each selling Holder promptly and, if requested by such
Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that neither
the Company nor any Guarantor shall be required to register or qualify
as a foreign corporation where it is not now so qualified or to take
any action that would subject it to the service of process in suits or
to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered to the
Company by such Holder in exchange therefor or being sold by such
Holder, such Series B Notes to be registered in the name of such Holder
or in the name of the purchaser(s) of such Series B Notes; in return,
the Series A Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at
least two Business Days prior to such sale of Transfer Restricted
Securities;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvi) otherwise use their commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
13
<PAGE> 15
(xvii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use their commercially
reasonable efforts to cause the Trustee to execute, all documents that
may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(i) or Section 6(c)(iii)(D) hereof (in each
case, a "Suspension Notice"), such Holder will forthwith discontinue disposition
of Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder
is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus (in each case, the
"Recommencement Date"). Each Holder receiving a Suspension Notice hereby agrees
that it will either (i) destroy any Prospectuses, other than permanent file
copies, then in such Holder's possession which have been replaced by the Company
with more recently dated Prospectuses or (ii) deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of the Suspension Notice. The
time period regarding the effectiveness of such Registration Statement set forth
in Section 3 or 4 hereof, as applicable, shall be extended by a number of days
equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company
and the Guarantors, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses; (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Series B Notes to be issued in the Exchange Offer
and printing of Prospectuses), messenger and delivery services and telephone;
(iv) all fees and disbursements of counsel for the Company and the Guarantors;
(v) all application and filing fees in connection with listing the Series B
Notes on a national securities exchange or automated quotation system pursuant
to the requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
14
<PAGE> 16
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchaser and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel (not to exceed
$25,000), who shall be Latham & Watkins, unless another firm shall be chosen by
the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each Holder and (ii) each Person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners and employees of any Holder or any
controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Holder"), from and against any and
all losses, claims, damages, liabilities, judgments, (including without
limitation, any legal or other expenses reasonably incurred in connection with
investigating or defending any matter, including any action that could give rise
to any such losses, claims, damages, liabilities or judgments) caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary prospectus or Prospectus (or any amendment
or supplement thereto) provided by the Company to any Holder or any prospective
purchaser of Series B Notes or registered Series A Notes, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to any of the Holders furnished
in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors to the same extent as the foregoing indemnity from
the Company and the Guarantors to each of the Indemnified Holders, but only with
reference to information relating to such Indemnified Holder furnished in
writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement. In no event shall any Indemnified Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnified Holder with respect to its sale of Transfer
15
<PAGE> 17
Restricted Securities pursuant to a Registration Statement exceeds the amount
paid by such Indemnified Holder for such Transfer Restricted Securities.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) hereof
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying person") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), an Indemnified Holder shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Indemnified Holder). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by a majority of the Indemnified Holders, in
the case of the parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action effected with its written consent. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the
16
<PAGE> 18
relative benefits received by the Company and the Guarantors, on the one hand,
and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company and the Guarantors, on the one hand, and of the Indemnified
Holder, on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative fault of the Company
and the Guarantors, on the one hand, and of the Indemnified Holder, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or such Guarantor, on the one hand, or by the Indemnified Holder, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
judgments referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with investigating
or defending any action or claim.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
of Transfer Restricted Securities held by each Holder hereunder and not joint.
The agreements contained in this Section 8 shall survive the sale of
the Transfer Restricted Securities pursuant to a Registration Statement and
shall remain in full force and effect regardless of any termination or
cancellation of this Agreement.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company or
17
<PAGE> 19
such Guarantor is not subject to Section 13 or 15(d) of the Exchange Act, to
make available, upon request of any Holder of Transfer Restricted Securities, to
any Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchaser or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchaser or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor any of the
Guarantors shall take any action, or permit any change to occur, with respect to
the Notes that would materially and adversely affect the ability of the Holders
to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose securities are being tendered pursuant to the Exchange Offer,
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer, may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(e) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the
18
<PAGE> 20
Initial Purchaser, on the other hand, and shall have the right to enforce such
agreements directly to the extent they may deem such enforcement necessary or
advisable to protect its rights or the rights of Holders hereunder.
(f) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
IASIS Healthcare Corporation
104 Woodmark Boulevard
Suite 101
Nashville, TN 37205
Telecopier No.: (615) 846-3006
Attention: Chief Financial Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square, 7th Floor
Wilmington, DE 19801
Telecopier No.: (302) 651-3001
Attention: Robert B. Pincus
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to the Initial
Purchaser in the form attached hereto as Exhibit A.
(g) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or of the
Purchase Agreement or the Indenture. If any transferee of any Holder shall
acquire Transfer Restricted Securities in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding
19
<PAGE> 21
such Transfer Restricted Securities such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF. EACH OF THE PARTIES HERETO AGREES TO SUBMIT
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[Signature page follows]
20
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
IASIS HEALTHCARE CORPORATION
By: /s/ Wayne Gower
----------------------------------------
Name: Wayne Gower
Title: President and Chief Executive Officer
BAPTIST JOINT VENTURE HOLDINGS, INC.
BEAUMONT HOSPITAL HOLDINGS, INC.
BILTMORE SURGERY CENTER, INC.
CLINICARE OF UTAH, INC.
DAVIS HOSPITAL & MEDICAL CENTER, INC.
DAVIS SURGICAL CENTER HOLDINGS, INC.
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
HEALTH CHOICE ARIZONA, INC.
IASIS HEALTHCARE HOLDINGS, INC.
IASIS MANAGEMENT COMPANY
JORDAN VALLEY HOSPITAL, INC.
METRO AMBULATORY SURGERY CENTER, INC.
PIONEER VALLEY HEALTH PLAN, INC.
PIONEER VALLEY HOSPITAL, INC.
ROCKY MOUNTAIN MEDICAL CENTER, INC.
SALT LAKE REGIONAL MEDICAL CENTER, INC.
SANDY CITY HOLDINGS, INC.
SOUTHRIDGE PLAZA HOLDINGS, INC.
SSJ ST. PETERSBURG HOLDINGS, INC.
By: /s/ Wayne Gower
----------------------------------------
Name: Wayne Gower
Title: President and Chief Executive Officer
<PAGE> 23
MEMORIAL HOSPITAL OF TAMPA, LP
MESA GENERAL HOSPITAL, LP
ODESSA REGIONAL HOSPITAL, LP
PALMS OF PASADENA HOSPITAL, LP
SOUTHWEST GENERAL HOSPITAL, LP
ST. LUKE'S BEHAVIORAL HOSPITAL, LP
ST. LUKE'S MEDICAL CENTER, LP
TEMPE ST. LUKE'S HOSPITAL, LP
TOWN & COUNTRY HOSPITAL, LP
By: IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President and Chief Executive
Officer
Accepted as of the date written above:
J.P. MORGAN SECURITIES INC.
By: /s/ Steve Tulip
---------------------------
Name: Steve Tulip
Title: Vice President
<PAGE> 24
EXHIBIT A
NOTICE OF FILING OF
EXCHANGE OFFER REGISTRATION STATEMENT
To: J.P. Morgan Securities Inc.
60 Wall Street
New York, NY 10260
Attn: Syndicate Department
Fax: (212) 648-5560
From: IASIS Healthcare Corporation
104 Woodmark Boulevard, Suite 101
Nashville, TN 37205
Fax: (615) 846-3006
Re: 13% Senior Subordinated Notes Due 2009
Date: ________________, 199__
For your information only (NO ACTION REQUIRED):
Today, ________________, 199__, we filed [an Exchange
Registration Statement] [a Shelf Registration Statement] with the Securities and
Exchange Commission. We currently expect this registration statement to be
declared effective within __ business days of the date hereof.
<PAGE> 1
EXHIBIT 4.9
CUSIP __________
13% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
No. __
IASIS HEALTHCARE CORPORATION
promises to pay to Cede & Co., or registered assigns, the principal sum of
_______________________ (_________________) Dollars on October 15, 2009.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Dated: _____________, 2000
IASIS HEALTHCARE CORPORATION
By:____________________________
Name:
Title:
This is one of the
Global Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK,
as Trustee
By:________________________________
Name:
Title:
<PAGE> 2
(Back of Note)
13% Series B Senior Subordinated Notes due 2009
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. IASIS Healthcare Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 13% per annum from October 15, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on April 15 and October 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be April 15, 2000. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1.0% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 1 or October 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
shall be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth
<PAGE> 3
in the register of Holders; provided, that payment by wire transfer of
immediately available funds shall be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Notes the Holders of which own at least $1 million in aggregate principal amount
of Notes and shall have provided wire transfer instructions prior to the record
date to the Company or the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, shall act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of October 15, 1999 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"). The Notes are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Company limited to $230.0 million in aggregate principal amount plus amounts, if
any, issued to pay Liquidated Damages on outstanding Notes as set forth in
Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as provided below, the Notes will not be redeemable at
the Company's option prior to October 15, 2004. Thereafter, the Company may
redeem all or a part of the Notes upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on October 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2004............................................................. 106.500%
2005............................................................. 104.875%
2006............................................................. 103.250%
2007............................................................. 101.625%
2008 and thereafter.............................................. 100.000%
</TABLE>
<PAGE> 4
(b) Notwithstanding the foregoing, at any time prior to October 15,
2002, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of Notes issued under the Indenture at a redemption
price of 113.000% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date, with
the net cash proceeds of one or more Equity Offerings; provided that: (a) at
least 65% of the aggregate principal amount of Notes issued under the Indenture
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and (b) the
redemption must occur within 90 days of the date of the closing of such Equity
Offering.
Any redemption pursuant to this provision shall be made pursuant to
the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required
to make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, when
the aggregate amount of Excess Proceeds exceeds $10 million, the Company shall
commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant to
Section 3.09 of the Indenture to purchase the maximum principal amount of Notes
that may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date fixed for the
closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed
<PAGE> 5
in part but only in whole multiples of $1,000, unless all of the Notes held by a
Holder are to be redeemed. On and after the redemption date interest ceases to
accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before the mailing of a notice of redemption a selection of Notes to be redeemed
or during the period between a record date and the corresponding Interest
Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes under the Indenture.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes and Additional Notes, if any, voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
and Additional Notes, if any, voting as a single class. Without the consent of
any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes may
be amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or Subsidiary Guarantor's
obligations to Holders of the Notes in case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act, to provide for the Issuance of Additional Notes in accordance
with the limitations set forth in the Indenture, or to allow any Guarantor to
execute a supplemental indenture to the Indenture and/or a Note Guarantee with
respect to the Notes.
12. DEFAULTS AND REMEDIES.
(a) Events of Default under the Indenture include: (i) default for
30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Subsidiaries to comply with the provisions of Sections 4.10 and 5.01 of the
Indenture; (iv) failure by the Company or any of its Subsidiaries for 30 days
after notice by the Trustee or by the Holders of at least 25% in principal
amount of Notes to comply with any of its other agreements in the
<PAGE> 6
Indenture; (v) default under any mortgage, indenture or instrument under which
there is issued and outstanding any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, if that default (a) is caused by a failure to pay principal at the
final stated maturity of such Indebtedness (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$25.0 million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $25.0 million,
which judgments are not paid, discharged or stayed for a period of 90 days;
(vii) except as permitted by the Indenture, any Subsidiary Guarantee by a
Guarantor that is a Significant Subsidiary shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor that is a Significant Subsidiary, or any
Person acting on behalf of any Guarantor that is a Significant Subsidiary, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries.
(b) If any Event of Default occurs and is continuing, the Trustee,
upon request of the Holders of at least 25% in principal amount of the Notes
then outstanding, or the Holders of at least 25% in principal amount of the
Notes then outstanding may declare all the Notes to be due and payable by notice
in writing to the Company and the Trustee specifying the respective Event of
Default and that such notice is an Acceleration Notice, and the same (i) shall
become immediately due and payable or (ii) if there are any accounts outstanding
under the Credit Agreement, shall become immediately due and payable upon the
first to occur of (x) an acceleration under the Credit Agreement or (y) five
Business Days after receipt by the Company and the Representative under the
Credit Agreement of such Acceleration Notice but only if such Event of Default
is then continuing. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect to
the Company, all outstanding Notes shall become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture,
except a continuing Default or Event of Default in the payment of interest on,
or principal of, the Notes. The Company shall deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company, upon
becoming aware of any Default or Event of Default, deliver to the Trustee a
statement specifying such Default or Event of Default.
13. SUBORDINATION. Each Holder by accepting a Note agrees that the
Indebtedness evidenced by the Note is subordinated in right of payment, to the
extent and in the manner provided in Article 10 of the Indenture, prior to the
payment in full in cash or Cash
<PAGE> 7
Equivalents (other than Cash Equivalents of the type referred to in clauses
(iii) and (iv) of the definition thereof) of all Senior Debt (whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed), and that the subordination is for the benefit of the
holders of Senior Debt.
14. SUBSIDIARY GUARANTEES. The payment of principal of, premium, and
interest and Liquidated Damages, if any, on the Notes are unconditionally
guaranteed, jointly and severally, on a senior subordinated basis by the
Guarantors.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or shareholder, of the Company or any Guarantor, as such, shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entirety), JT TEN (= joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Initial Notes shall have all the rights
set forth in the Registration Rights Agreement or, in the case of Additional
Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall
have the rights set forth in one or more registration rights agreements, if any,
between the Company and the other parties thereto, relating to rights given by
the Company to the purchasers of any Additional Notes.
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
<PAGE> 8
IASIS Heathcare Corporation
113 Seaboard Lane
Suite A-200
Franklin, Tennessee 37067
Telecopier No.: (615) 846-3006
Attention: General Counsel
21. GOVERNING LAW. This Indenture, the Notes and the Subsidiary
Guarantees shall be governed by, and construed in accordance with, the law of
the state of New York, without regard to conflicts of law principals thereof.
<PAGE> 9
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
_______________________________________________________________________________
Date: ______________
Your Signature: ___________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No: ____________________
SIGNATURE GUARANTEE:
________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
<PAGE> 10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$__________
Date: ___________
Your Signature:____________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:_____________________
SIGNATURE GUARANTEE:
_____________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
<PAGE> 11
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized signatory
Amount of this Amount of this decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Note Custodian
- ---------------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.1
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of
October 8, 1999, is among IASIS Healthcare Corporation, a Delaware
corporation (formerly known as PHC/Psychiatric Healthcare Corporation) (the
"Company"), JLL Healthcare, LLC, a Delaware limited liability company ("JLL
Healthcare"), Paracelsus Healthcare Corporation, a California corporation
("PHC"), Triumph Partners III, L.P., a Delaware limited partnership ("Triumph
Partners"), Triumph III Investors, L.P., a Delaware limited partnership
("Triumph Investors" and, together with Triumph Partners, "Triumph"), and
General Electric Capital Corporation, a New York corporation ("GECC" and,
together with Triumph, the "Outside Investors"), each of the former equity
holders of IASIS Healthcare Corporation, a Tennessee corporation ("IHC"), who
are listed on Schedule I hereto and subsequently become a signatory to this
Agreement (the "IHC Investors"), those members of management of the Company who
subsequently become signatories to this Agreement (the "Management Investors"),
and each other Person (as hereinafter defined) who subsequently becomes a
signatory to this Agreement (each, an "Investor" and, collectively, the
"Investors") (JLL Healthcare, Paracelsus, each of the Outside Investors, each of
the IHC Investors, each of the Management Investors and each of the Investors
being referred to herein as a "Stockholder" and, collectively, being referred to
herein as the "Stockholders").
W I T N E S S E T H
-------------------
WHEREAS, JLL Hospital, LLC, a Delaware limited liability
company ("JLL Hospital"), the Company, PHC and certain subsidiaries of PHC have
entered into a Recapitalization Agreement dated as of August 16, 1999 (the
"Recapitalization Agreement");
WHEREAS, prior to the date hereof, JLL Hospital assigned all
of its rights and interests under the Recapitalization Agreement to JLL
Healthcare, Triumph and GECC;
WHEREAS, pursuant to the Recapitalization Agreement, on the
date hereof, PHC has, among other things, (i) transferred, or caused to be
transferred, certain assets, subject to certain liabilities, to the Company and
(ii) caused the Company to be recapitalized (collectively, the "Recapitalization
Transactions"), all in accordance with the terms and conditions of the
Recapitalization Agreement;
<PAGE> 2
WHEREAS, in connection with the Recapitalization Transactions,
JLL Healthcare and the Outside Investors are acquiring Common Stock (as
hereinafter defined);
WHEREAS, pursuant to a merger agreement to be entered into
(the "IASIS Merger Agreement) among IHC, the Company and IASIS Management
Company, a Delaware corporation and a wholly owned subsidiary of the Company
("IMC"), IHC will be merged with and into IMC in accordance with the Tennessee
Business Corporation Act and the Delaware General Corporation Law (the "IASIS
Merger"), with IMC as the surviving entity;
WHEREAS, upon consummation of the IASIS Merger, the issued and
outstanding capital stock of IHC will be converted into shares of Common Stock
and Series B Preferred Stock (as hereinafter defined), in accordance with the
terms of the IASIS Merger Agreement;
WHEREAS, pursuant to a merger agreement to be entered into,
JLL Hospital is being merged with and into the Company in accordance with the
Delaware General Corporation Law, with the Company as the surviving entity (the
"Hospital Merger");
WHEREAS, JLL Hospital and Tenet Healthcare Corporation, a
California corporation, have entered into an Asset Sale Agreement dated as of
August 15, 1999 (the "Asset Sale Agreement");
WHEREAS, in order to finance, in part, the transactions
contemplated by the Asset Sale Agreement, JLL Healthcare and the Outside
Investors are acquiring Series A Preferred Stock (as hereinafter defined);
WHEREAS, as soon as practical after the date hereof, the Board
of Directors of the Company will adopt a Management Option Plan of the Company
(the "Management Option Plan") pursuant to which certain members of management
of the Company shall be granted options to acquire shares of Common Stock
("Options");
WHEREAS, following the date hereof, certain members of
management will be entitled to acquire shares of Common Stock and, upon such
purchase or any exercise of Options, such members of management will execute
this
2
<PAGE> 3
Agreement and the Common Stock to be held by them will become subject to the
terms of this Agreement;
WHEREAS, as a result of the transactions contemplated by the
Recapitalization Agreement, the Asset Sale Agreement, the IASIS Merger and the
Hospital Merger (collectively, the "Transactions"): (i) on the date hereof, each
Stockholder owns the number of shares of Common Stock set forth in Annex I
hereto; and (ii) upon the closing of the transactions contemplated by the Asset
Sale Agreement and the IASIS Merger, each Stockholder will own the number of
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock
set forth in columns A, B and C, respectively, of Annex II hereto; and
WHEREAS, in connection with the Transactions, the Company and
each Stockholder desire to enter into this Agreement, all in accordance with the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
Certain Definitions
-------------------
For purposes of this Agreement, the following terms shall have
the following meanings:
(a) The term "Affiliate" shall have the meaning set
forth in Rule 405 promulgated under the Securities Act.
(b) The term "Board" shall mean the Board of Directors
of the Company.
(c) The term "Business Day" shall mean any day other
than a Saturday, Sunday or day upon which banks in the City of New York are
authorized or required to be closed.
(d) The term "Change in Control" shall mean (A) at such
time as the Stockholders, directly or indirectly, shall fail to own an aggregate
of at least 50% of the voting equity securities of the Company, and any other
Person or
3
<PAGE> 4
"group" of Persons (within the meaning of Section 13(d) of the Exchange Act)
shall acquire, beneficially or of record, a greater percentage of the
outstanding voting equity securities of the Company than the percentage of the
outstanding voting equity securities of such entity owned, directly or
indirectly, by the Stockholders, in the aggregate or (B) upon a sale of all or
substantially all of the assets of the Company.
(e) The term "Commission" shall mean the United States
Securities and Exchange Commission or any successor agency.
(f) The term "Common Stock" shall mean the common stock,
par value $.01 per share, of the Company.
(g) The term "Credit Agreement" means that certain
Credit Agreement, dated as of October 15, 1999 by and among the Company, and
Morgan Guaranty Trust Company of New York, as administrative agent, and the
other lenders that are a party thereto, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended, (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder or adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
(h) The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
(i) The term "Fair Market Value" shall mean the fair
market value of the Common Stock determined by such methods or procedures as
shall be established from time to time by the Board. Unless otherwise determined
by the Board in good faith, the per share Fair Market Value of Common Stock as
of a particular date shall mean (i) the closing sales price per share of the
Common Stock on the national securities exchange on which the Common Stock is
principally traded, for the last preceding date on which there was a sale of
such Common Stock on such exchange, or (ii) if the shares of Common Stock are
then traded in an over-the-counter market, the average of the closing bid and
asked prices for the shares of Common Stock in such over-the-counter market for
the last preceding date on which there was a sale of such Common Stock in such
market, or (iii) if the shares of Common Stock are not then listed on a national
securities exchange or traded in an over-the-counter market, such value as the
Board, in its reasonable discretion, shall determine.
(j) The term "Initial Public Offering" shall mean the
first Public Offering of shares of Common Stock.
4
<PAGE> 5
(k) The term "Permitted Transferee" shall mean, with
respect to each Stockholder bound by the terms of this Agreement, (i) any
descendant, Affiliate or Associate (as defined in Rule 405 of the Securities
Act) of such Stockholder or any Permitted Transferee of such Affiliate; (ii) the
Company; (iii) in the event of the dissolution, liquidation or winding up, or
other distribution of assets, of any such Stockholder that is a partnership,
limited liability company or corporation, the partners of a partnership that is
such Stockholder, the members of a limited liability company that is such
Stockholder, the stockholders of a corporation that is such Stockholder or a
successor partnership, limited liability company or corporation all of the
partners, members or stockholders of which are the Persons who were the partners
of such partnership, members of such limited liability company or stockholders
of such corporation immediately prior to the dissolution, liquidation or winding
up of such Stockholder; (iv) a transferee by testamentary or intestate
disposition; (v) a transferee by inter vivos transfer to the transferring
Person's spouse, children and/or other lineal descendants; (vi) a trust
transferee by inter vivos transfer, the only beneficiaries of which are the
transferring Person, spouse, children and/or other lineal descendants; (vii) a
successor nominee or trustee for the beneficial owner of the Shares for which
such Person acts as nominee or trustee, as the case may be; (viii) an
institutional lender for money borrowed pursuant to a bona fide pledge of or the
granting of a security interest in such Stockholder's Shares, including, without
limitation, the lenders (or an agent acting on behalf of the lenders) under the
Credit Agreement pursuant to a pledge as security for the obligations of the
Company and its subsidiaries under the Credit Agreement and interest rate,
commodity and currency hedging agreements; (ix) any transferee of an
institutional lender described in (viii) above which transferee acquires such
Shares in connection with a foreclosure sale of such Shares; it being understood
that in the event that JLL Healthcare distributes Shares or other exercise of
remedies with respect thereto; provided, however, that such transferee as
described in this subsection (ix) shall not be required to acquire such Shares
subject to the terms of this Agreement, and shall take such Shares free of any
of the provisions hereof unless such transferee elects in writing to be bound by
the terms of this Agreement to its Members, the definition of Permitted
Transferee shall be amended to include all categories of "Permitted Transferees"
under the Operating Agreement of JLL Healthcare.
(l) The term "Person" shall mean any individual, firm,
corporation, partnership, limited liability company, trust or other entity, and
shall include any successor (by merger or otherwise) of such entity.
(m) The term "Preferred Stock" shall mean the Series A
Preferred Stock and the Series B Preferred Stock.
(n) The term "Public Offering" shall mean a public
offering of equity securities of the Company pursuant to an effective
registration statement under the Securities Act (other than (i) a registration
statement filed under Regulation A or on form S-4 or any successor form or (ii)
a registration statement filed on Form S-8 or any successor form).
5
<PAGE> 6
(o) The term "Registrable Securities" shall mean (i) the
shares of Common Stock owned by each Stockholder on the date hereof as set forth
opposite each Stockholder's name on Annex I hereto, (ii) additional shares of
Common Stock acquired by one or more Stockholders after the date hereof, (iii)
the shares of Preferred Stock owned by each Stockholder on the date hereof as
set forth opposite each Stockholder's name on Annex I hereto and (iv) additional
shares of Preferred Stock acquired by one or more Stockholders after the date
hereof. As to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when (i) a registration statement registering such
securities under the Securities Act has been declared effective and such
securities have been sold or otherwise transferred by the holder thereof
pursuant to such effective registration statement, or (ii) such securities are
sold in accordance with Rule 144 (or any successor provision) promulgated under
the Securities Act, or (iii) such securities are transferred under circumstances
in which any legend borne by the certificates for such securities relating to
restrictions on transferability thereof, under the Securities Act or otherwise,
is removed by the Company and any stop transfer instructions issued by the
Company to any transfer agent for such securities are rescinded by the Company.
(p) The term "Registration Period" shall mean the period
from and after 180 days following an Initial Public Offering of Common Stock of
the Company.
(q) The term "Requisite Amount" shall mean Registrable
Securities having an aggregate Fair Market Value as of the date of any Demand
(as hereinafter defined) following an Initial Public Offering of at least $10
million.
(r) The term "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(s) The term "Series A Preferred Stock" shall mean the
series A preferred stock, par value $.01 per share, of the Company.
(t) The term "Series B Preferred Stock" shall mean the
series B preferred stock, par value $.01 per share, of the Company.
(u) The term "Shares" shall mean (i) the shares of
Company Common Stock owned by each Stockholder on the date hereof, as set forth
opposite each Stockholder's name on Annex I hereto, and additional shares of
Common Stock acquired by one or more Stockholders after the date hereof,
6
<PAGE> 7
including shares of Common Stock acquired by one or more Stockholders as a
result of a subsequent purchase, conversion, reorganization, recapitalization,
reclassification, stock dividend, split-up, sale of assets, distribution or
redemption of securities and (ii) the shares of Preferred Stock to be owned by
each Stockholder following consummation of the Transactions, as set forth
opposite each Stockholder's name on Annex II hereto, and additional shares of
Preferred Stock acquired by one or more Stockholders after the date hereof.
(v) The term "Transfer" shall mean any voluntary or
involuntary attempt to, directly or indirectly through the transfer of interests
in controlled Affiliates or otherwise, offer, sell, assign, transfer, pledge or
otherwise dispose of any Shares, or the consummation of any such transactions,
or the soliciting of any offers to purchase or otherwise acquire, or taking a
pledge of, any of the Shares; provided, however, that the transfer of an
interest in any of the Stockholders shall not be deemed to be a transfer.
ARTICLE II
Representations and Warranties and Covenants
--------------------------------------------
Section 2.01 Representations and Warranties of the Company.
The Company represents and warrants to each Stockholder, as of the
date hereof, as follows:
(a) Authority. The Company has full power and authority
to execute, deliver and perform this Agreement;
(b) Due Authorization. This Agreement has been duly and
validly authorized, executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that (i) the enforceability hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting creditors' rights, (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the court before
which any proceedings therefor may be brought, and (iii) the rights to indemnity
hereunder may be limited by federal or state securities laws or the public
policy underlying such laws; and
7
<PAGE> 8
(c) No Conflict. The execution, delivery and performance
of this Agreement by the Company do not violate or conflict with or constitute a
default under (i) the Company's certificate of incorporation and by-laws, (ii)
any judgment, order or decree or statute, law, ordinance, rule or regulation of
any governmental entity applicable to the Company or (iii) any material
agreement to which it is a party or by which it or its property is bound.
Section 2.02 Representations and Warranties of the Stockholders.
Each Stockholder individually represents and warrants to each
other Stockholder and the Company, as of the date hereof, as follows:
(a) Corporate Authority. The Stockholder has full power,
capacity and authority to execute, deliver and perform this Agreement;
(b) Due Authorization. This Agreement has been duly and
validly authorized, executed and delivered by the Stockholder and constitutes a
valid and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except that (i) the enforceability
hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting creditors' rights, (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to certain equitable defenses and to the discretion of the
court before which any proceedings therefor may be brought, and (iii) the rights
to indemnity and contribution hereunder may be limited by federal or state
securities laws or the public policy underlying such laws;
(c) No Conflict. The execution, delivery and performance
of this Agreement by the Stockholder do not violate or conflict with or
constitute a default under (i) the Stockholder's organizational documents,
provided that this clause (i) is inapplicable to any Stockholder that is an
individual, (ii) any judgment, order or decree or statute, law ordinance, rule
or regulation of any governmental entity applicable to the Stockholder, or (iii)
any material agreement to which the Stockholder is a party or by which it or its
property is bound; and
(d) Acquisition of Shares for Investment.
(i) Each Stockholder will be acquiring the Shares
for investment purposes only, without any intention of distributing or
selling such Shares in violation of federal, state or other securities
laws. If such Stockholder should in the future decide
8
<PAGE> 9
to dispose of any of such Shares, such Stockholder understands and
agrees that it may do so only in compliance with the terms of Article
IV hereof and the Securities Act and applicable state securities laws,
as then in effect. Such Stockholder agrees to the imprinting, so long
as required by law, of legends on certificates representing all of the
Shares to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF ("TRANSFERRED") EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE TERMS OF THE STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER __, 1999
AND MAY NOT BE TRANSFERRED UNLESS SUCH TRANSFER COMPLIES WITH THE
PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT. A COPY OF SUCH STOCKHOLDERS
AGREEMENT IS ON FILE WITH THE SECRETARY OF IASIS HEALTHCARE CORPORATION
AND IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES
TO BE BOUND BY ALL OF THE PROVISIONS OF THE AFORESAID AGREEMENT.
(ii) Each Stockholder which is acquiring Shares on
or after the date hereof understands that the Shares will not be
registered at the time of their issuance under the Securities Act for
the reason that the issuance of the Shares is exempt under the
Securities Act and that the reliance of the Company on such exemption
is predicated in part on such Stockholder's representations set forth
herein. Each Stockholder represents that either (a) it is experienced
in evaluating companies such as the Company, has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment and has the ability
to suffer the total loss of its investment or (b) such
9
<PAGE> 10
Stockholder is an "Accredited Investor" within the meaning of Rule 501
of Regulation D under the Securities Act, as presently in effect. Each
Stockholder further represents that it has had the opportunity to
conduct due diligence on the Company, to ask questions of and receive
answers from the Company concerning the terms and conditions of the
offering and to obtain additional information to such Stockholder's
satisfaction.
Section 2.03 Covenants.
(a) The Company covenants to each Stockholder that it
will, from and after the Initial Public Offering, timely file all reports
required to be filed by it under the Exchange Act, and if at any time the
Company is not required to file such reports, it will take such further action
as a Stockholder may reasonably require, including, without limitation, supply
and make publicly available any other information in the possession of or
reasonably obtainable by the Company, with the purpose of allowing such
stockholder, subject to the terms and conditions hereof, to avail itself of Rule
144 of the Securities Act or any other rule or regulation of the Commission
allowing it to sell securities without registration under the Securities Act.
Upon the request of any Stockholder, the Company will deliver to such
Stockholder a written statement as to its compliance with such filing
requirements;
(b) Prior to the Initial Public Offering and (i) with
respect to PHC, for so long as PHC owns at least twenty-five percent (25%) of
the number of shares of Common Stock held by PHC on the date hereof, or (ii)
with respect to any Stockholder other than PHC, for so long as such Stockholder
and its Affiliates own at least three percent (3%) of the then outstanding
shares of Common Stock, the Company will deliver to PHC or such other
Stockholder the following documents, at the same time as required to be
furnished to the lenders under the Credit Agreement:
(i) Annual audited consolidated financial statements
and quarterly unaudited consolidated financial statements of the
Company and its subsidiaries;
(ii) Monthly financial reports furnished to the
lenders under the Credit Agreement, if any;
(iii) Copies of reports, if any, submitted to the
Company by independent accountants in connection with each
10
<PAGE> 11
annual or interim audit of the books of the Company made by such
accountants;
(iv) Copies of required covenant compliances and
information regarding events of default under any agreement with the
lenders under the Credit Agreement; and
(v) Promptly upon the occurrence thereof, notice of
any waiver of any event of default or compliance with any covenant in
the Company's senior secured loan agreements or subordinated agreements
or any amendment or modification of any such agreements;
(c) The Company agrees that it shall permit each
Stockholder, or member of a Stockholder, which is entitled to designate (or
cause to be designated) a director to the Board or an observer to the Board,
reasonable inspection rights, during normal business hours, of the books and
records of the Company and reasonable access to the Company's senior executives
and to the Company's premises; and
(d) Unless otherwise required by law, each Stockholder
agrees that it shall (i) hold in confidence and cause its lenders to hold in
confidence all non-public information furnished to such Stockholder by the
Company and (ii) not use or disclose any such information to any third party
without the Company's prior written consent.
ARTICLE III
Board of Directors
------------------
Section 3.01 Composition of Board of Directors.
(a) The Board shall initially consist of thirteen (13)
members, of which: (i) ten (10) members shall be designees of JLL Healthcare;
(ii) one member shall be the Chairman of the Board of the Company; (iii) one
member shall be the Chief Executive Officer of the Company; and (iv) one member
shall be an independent physician recommended by the Chief Executive Officer of
the Company and reasonably acceptable to the other Board members. During the
term of this Agreement, the size of the Board may be increased and the Board
shall have the authority to appoint individuals to fill the vacancies created by
such new
11
<PAGE> 12
director positions; provided, however, that so long as JLL Healthcare owns a
majority of the voting power of the Company, JLL Healthcare shall have the right
to designate a majority of the directors on the Board. During the term of this
Agreement and subject to the fiduciary duties of the Board, the Company shall
use its best efforts and shall exercise all authority under applicable law to
nominate for election and cause to be elected or appointed, as the case may be,
as directors of the Company, a slate of directors consisting of individuals
meeting the requirements of the previous sentence.
(b) No Voting Agreement. Each of the Stockholders
acknowledges and agrees that nothing contained in this Agreement shall
constitute a voting agreement or require any Stockholder to vote its shares of
Common Stock in any manner other than as it deems fit.
(c) Observation Rights. Notwithstanding any other
provision of this Agreement, so long as Triumph owns more than three percent
(3%) of the issued and outstanding shares of Common Stock, it shall be entitled
to have a representative attend and observe all meetings of the Board; provided
that such individual shall not be entitled to vote upon any matter before the
Board and shall not be counted for purposes of determining if a quorum of
directors is present at such meeting. Such representative shall be bound by the
provisions of Section 2.03(d) hereof.
ARTICLE IV
Transfer of Shares
------------------
Section 4.01 General Restrictions.
(a) Except as set forth in clause (b) below and Sections
4.04 and 5.02 hereof, during the Term of this Agreement, no Stockholder (other
than JLL Healthcare) may Transfer any Shares, without the prior written approval
of JLL Healthcare, which approval shall not be unreasonably withheld, except for
Transfers (i) to any of its Permitted Transferees; provided, however, that prior
to any such Transfer of Shares, such Permitted Transferee (other than a
Permitted Transferee described in subsection (ix) of the definition of Permitted
Transferee, which shall acquire such Shares free of the provisions of this
Agreement) shall agree in writing to take such Shares subject to, and to comply
with, all of the provisions of this Agreement, a copy of which agreement shall
be filed with the Secretary of the Company and shall include the address of such
Permitted Transferee to which notices hereunder shall be sent, (ii) pursuant to
any offer, including a tender or exchange offer, by any Person (including the
Company) to purchase all of the outstanding Shares, which offer has
12
<PAGE> 13
been approved by the Board, or (iii) pursuant to any transaction requiring the
approval of the holders of at least a majority of the issued and outstanding
voting securities of the Company and as to which the requisite approval of the
Board and the Stockholders shall have been obtained. Each Stockholder agrees
that it shall provide the Company with prior written notice of any proposed
Transfer of Shares.
(b) Notwithstanding the provisions of Section 4.01(a),
following the first anniversary of the closing of the transactions contemplated
by the Recapitalization Agreement, PHC may Transfer its Shares to any Person;
provided, however, that prior to any Transfer of Shares that occurs prior to the
third anniversary of the closing of the transactions contemplated by the
Recapitalization Agreement, such Person shall agree in writing to take such
Shares subject to, and to comply with, all of the provisions of this Agreement,
a copy of which agreement shall be filed with the Secretary of the Company and
shall include the address of such Person to which notices hereunder shall be
sent. Subject to compliance with the preceding sentence by any Person to whom
PHC proposes to Transfer its Shares, upon such Transfer, such Person shall be
deemed a Stockholder hereunder and the Shares so Transferred shall continue to
be Registrable Securities.
Section 4.02 Compliance with Securities Laws. Each Stockholder
agrees that every Transfer of its Shares shall comply with all federal, state
and local securities laws applicable to such Transfer. At the request of the
Company, the transferring Stockholder shall deliver to the Company an opinion of
counsel, which counsel and opinion shall be reasonably satisfactory to the
Company, to the effect that the Transfer satisfies this Section 4.02.
Section 4.03 Transfers Not In Compliance. In the event of any
purported or attempted Transfer of Shares by a Stockholder that does not comply
with this Agreement, the purported transferee or successor by operation of law
shall not be deemed to be a stockholder of the Company for any purpose and shall
not be entitled to any of the rights of a stockholder, including, without
limitation, the right to vote the Shares or to receive a certificate for the
Shares or any dividends or other distributions on or with respect to the Shares.
Section 4.04 Tag-Along Rights.
(a) Except as provided below, if, at any time prior to
the Initial Public Offering, JLL Healthcare or any Affiliate to which it
Transferred Shares, proposes to Transfer, directly or indirectly, any of its
Shares to a Person (other than (i) to an Affiliate of JLL Healthcare or (ii)
pursuant to a distribution to a
13
<PAGE> 14
member of JLL Healthcare), JLL Healthcare shall provide each other Stockholder
(each, a "Notice Recipient") and the Company with not less than twenty (20)
Business Days' prior written notice (the "Sale Notice") of such proposed
Transfer, which notice shall include all of the terms and conditions of such
proposed Transfer and which shall identify such purchaser; and each Notice
Recipient shall have the option, exercisable by written notice to JLL Healthcare
within ten (10) Business Days after the receipt of the Sale Notice, to require
JLL Healthcare to arrange for such purchaser or purchasers to purchase the same
percentage (the "Percentage") of the Shares then owned by such Notice Recipient
as the ratio of the total number of Shares which are to be Transferred by JLL
Healthcare and/or such Affiliate pursuant to the proposed Transfer to the total
number of Shares owned by JLL Healthcare and such Affiliate immediately prior to
such Transfer, or any lesser amount of Shares as such Notice Recipient shall
desire, together with JLL Healthcare's Shares at the same time as, and upon the
same terms and conditions (including all direct or indirect consideration or
compensation) at which, JLL Healthcare and/or such Affiliate sells its Shares.
If a Notice Recipient shall so elect, JLL Healthcare agrees that it shall either
(a) arrange for the proposed purchaser or purchasers to purchase all or a
portion (as such Notice Recipient shall specify) of the same Percentage of the
Shares then owned by such Notice Recipient at the same time as, and upon the
same terms and conditions at which, JLL Healthcare sells its Shares; provided,
however, that no Stockholder will be required to sign a covenant not to compete
or similar restriction in connection with such sale and, provided further, that
any indemnification obligations of such Notice Recipient in connection with such
sale shall be borne ratably by the Stockholders participating in such sale and
shall not exceed the lesser of (x) such Stockholder's ratable share of any loss
and (y) the net proceeds received by such Notice Recipient in connection with
such sale; and, provided further, that if such purchaser or purchasers shall
elect to purchase less than the aggregate number of Shares originally agreed
with JLL Healthcare and the number of shares to be sold by all Notice Recipients
electing to participate in the proposed Transfer, then the number of Shares to
be sold by JLL Healthcare and all Notice Recipients electing to participate in
the proposed Transfer shall be reduced pro rata to such aggregate number, or (b)
JLL Healthcare may elect not to effect the proposed Transfer to such purchaser
or purchasers. In the event that a Notice Recipient does not exercise its right
to participate in such Transfer or declines to so participate, JLL Healthcare
shall have 180 days from the date of such Sale Notice to consummate the
transaction on the terms set forth therein without being required to provide an
additional Sale Notice to the other Stockholders and comply with the terms of
this Section 4.04.
(b) Notwithstanding any other provision hereof to the
contrary, the provisions of this Section 4.04 shall not apply to any Transfer
unless
14
<PAGE> 15
and until JLL Healthcare shall or will have Transferred, in one or more
transactions, including the proposed transaction, an aggregate of at least two
percent (2%) of the number of Shares held by it on the date hereof.
Section 4.05 Effect of Notices. Notwithstanding any provision
hereof to the contrary, the giving to any Stockholder of any Sale Notice shall
not obligate JLL Healthcare to consummate or effect any transaction referred to
therein, and JLL Healthcare shall be free to abandon any such transaction prior
to the effectiveness thereof. If any such transaction is so abandoned, each
Stockholder shall continue to be subject to the terms of this Article IV with
respect to the Shares included in such Sale Notice.
Section 4.06 Transfers of JLL Healthcare Common Interests
Notwithstanding any other provision hereof, in the event that Joseph Littlejohn
& Levy Fund III, L.P. Transfers any of its Interests in JLL Healthcare, the
provisions of Section 4.04 hereof shall be applicable to such Transfer in a
manner that fairly and equitably preserves the original rights thereunder, and
each of the other Stockholders shall have such rights and obligations
thereunder, as if such Transfer were a Transfer of the Shares held by JLL
Healthcare.
ARTICLE V
Registration Rights
-------------------
Section 5.01 Demand Registrations.
(a) Requests for Registration. At any time after 180
days following the consummation of the Initial Public Offering, subject to the
conditions set forth herein and subject to the prior written approval of JLL
Healthcare, which approval shall not be unreasonably withheld, any Stockholder
meeting the requirements set forth in paragraph (b) below shall be entitled to
make a written request of the Company (a "Demand") for registration under the
Securities Act of all or part of the Registrable Securities (a "Demand
Registration"). Such Demand shall specify: (i) the aggregate number of
Registrable Securities requested to be registered, (ii) the intended method of
distribution in connection with such Demand Registration to the extent then
known and (iii) the identity of each Stockholder (a "Demanding holder")
requesting such Demand. Within ten (10) Business Days after receipt of a Demand,
the Company shall give written notice of such Demand to all other Stockholders
and shall include in such registration all Registrable Securities with respect
to which the Company has received a written request for inclusion
15
<PAGE> 16
therein within twenty (20) days after the receipt by such Stockholder of the
Company's notice required by this paragraph; provided, however, that the Company
shall not be required to file any registration statement covering Registrable
Securities with a Fair Market Value of less than the Requisite Amount.
(b) Number of Demands. JLL Healthcare shall be entitled
to eight (8) Demand Registrations; each other Stockholder, together with its
Permitted Transferees and Affiliates, owning more than five percent (5%) of the
then outstanding shares of Common Stock shall be entitled to two (2) Demand
Registrations; and each Stockholder, together with its Permitted Transferees and
Affiliates, owning more than three percent (3%) and less than five percent (5%)
of the then outstanding shares of Common Stock shall be entitled to one (1)
Demand Registration; provided, however, that each Stockholder who is identified
as a Demanding holder in any Demand Registration shall be deemed to have made a
demand with respect to such Demand Registration.
(c) Satisfaction of Obligations. Subject to Section
5.03, a registration shall not be treated as a permitted Demand for a Demand
Registration until (i) the applicable registration statement under the
Securities Act has been filed with the Commission with respect to such Demand
Registration (which shall include any registration statement that is not
withdrawn by holders of Registrable Securities in the circumstances contemplated
by Section 5.03), and (ii) such registration statement shall have been
maintained continuously effective for a period of at least ninety (90) days or
such shorter period during which all Registrable Securities included therein
have been disposed of thereunder in accordance with the method of distribution
set forth in such registration statement.
(d) Availability of Short Form Registrations. The
Company shall use its best efforts to comply with the requirements for use of
short form registration for the sale of Registrable Securities under the
Securities Act.
(e) Restrictions on Demand Registrations. The Company
shall not be obligated (i) in the case of a Demand Registration, to maintain the
effectiveness of a registration statement under the Securities Act, for a period
longer than ninety (90) days or (ii) to effect any Demand Registration within
one hundred eighty (180) days after the effective date of (A) a "firm
commitment" underwritten registration in which all Stockholders were given
"piggyback" rights pursuant to Section 5.02 hereof (provided that, with respect
to such a registration in which such piggyback rights were exercised, each such
Stockholder exercising such piggyback rights was permitted to include in such
registration 50% of the Registrable Securities
16
<PAGE> 17
that such Stockholder sought to include therein) or (B) any other Demand
Registration. In addition, the Company shall be entitled to postpone (upon
written notice to all Stockholders) for up to ninety (90) days the filing or the
effectiveness of a registration statement in respect of a Demand (but no more
than once in any period of twelve (12) consecutive months) if the Board
determines in good faith and in its reasonable judgment that effecting the
Demand Registration in respect of such Demand would have a material adverse
affect on any proposal or plan by the Company to engage in any debt or equity
offering, material acquisition or disposition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer or other
similar transaction. In the event of a postponement by the Company of the filing
or effectiveness of a registration statement in respect of a Demand, the
Demanding holders shall have the right to withdraw such Demand in accordance
with Section 5.03 hereof.
(f) Participation in Demand Registrations. The Company
shall not include any securities other than Registrable Securities in a Demand
Registration, except with the written consent of the holders of the majority of
the Registrable Securities sought to be registered pursuant to such Demand
Registration held by all the Demanding holders. If, in connection with a Demand
Registration, any managing underwriter (or, if such Demand Registration is not
an underwritten offering, a nationally recognized independent underwriter
selected by the Demanding holders of a majority of the Registrable Securities
held by all the Demanding holders (which such underwriter shall be reasonably
acceptable to the Company and whose fees and expenses shall be borne solely by
the Company)) advises the Company and the Demanding holders of a majority of the
Registrable Securities held by all the Demanding holders in writing that, in its
opinion, the inclusion of all the Registrable Securities and, if authorized
pursuant to this Article V, other securities of the Company, in each case,
sought to be registered in connection with such Demand Registration would
adversely affect the marketability of the Registrable Securities sought to be
sold pursuant thereto, then the Company shall furnish each such Demanding holder
with a copy of such opinion and a notice of the number of Registrable Securities
held by such Demanding holder to be included in the registration statement and
shall include in the registration statement applicable to such Demand
Registration only such securities as the Company and the holders of Registrable
Securities sought to be registered therein ("Demanding Sellers") are advised by
such underwriter can be sold without such an effect (the "Maximum Demand
Number"), as follows and in the following order of priority:
(i) first, the number of Registrable Securities
sought to be registered by each Demanding Seller and
17
<PAGE> 18
PHC, pro rata in proportion to the number of Registrable Securities
sought to be registered by all such sellers; and
(ii) second, if the number of Registrable Securities
to be included under clause (i) above is less than the Maximum Demand
Number, the number of securities sought to be included by each other
seller, pro rata in proportion to the number of securities sought to be
sold by all such other sellers, which in the aggregate, when added to
the number of securities to be included pursuant to clause (i) above,
equals the Maximum Demand Number.
(g) Selection of Underwriters. If the Demanding holders
of a majority of the Registrable Securities held by all the Demanding holders
request that such Demand Registration be an underwritten offering, then the
Company shall select a nationally recognized underwriter or underwriters to
manage and administer such offering, such underwriter or underwriters, as the
case may be, to be subject to the approval of the Demanding holders of a
majority of the Registrable Securities held by all the Demanding holders, which
approval shall not be unreasonably withheld or delayed.
(h) Other Registrations. If the Company has received a
Demand and if the applicable registration statement in respect of such Demand
has not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (other than a registration relating to the Company employee
benefit plans, exchange offers by the Company or a merger or acquisition of a
business or assets by the Company, including, without limitation, a registration
on Form S-4 or S-8 or any successor form), whether on its own behalf or at the
request of any holder or holders of such securities, until a period of at least
ninety (90) days has elapsed from the effective date of any Demand Registration,
unless a shorter period of time is approved by the Demanding holders of a
majority of the Registrable Securities held by all the Demanding holders.
Notwithstanding the foregoing, the Company shall be entitled to postpone any
such Demand Registration and may file or cause to be effected such other
registration in accordance with the terms of Section 5.01(e) hereof.
18
<PAGE> 19
Section 5.02 Piggyback Registrations.
(a) Right to Piggyback. At any time after 180 days
following the consummation of the Initial Public Offering, whenever the Company
proposes to register any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (other than a registration relating to the Company employee benefit plans,
exchange offers by the Company or a merger or acquisition of a business or
assets by the Company including, without limitation, a registration on Form S-4
or Form S-8 or any successor form) (a "Piggyback Registration"), subject to the
conditions set forth herein, the Company shall give all Stockholders prompt
written notice thereof (but not less than ten (10) Business Days prior to the
filing by the Company with the Commission of any registration statement with
respect thereto). Such notice (a "Piggyback Notice") shall specify, at a
minimum, the number of securities proposed to be registered, the proposed date
of filing of such registration statement with the Commission, the proposed
method of distribution, the proposed managing underwriter or underwriters (if
any and if known), and a good faith estimate by the Company of the proposed
minimum offering price of such securities. Upon the written request of a
Stockholder given within ten (10) Business Days of such Stockholder's receipt of
the Piggyback Notice (which written request shall specify the number of
Registrable Securities intended to be disposed of by such Stockholder and the
intended method of distribution thereof), the Company shall include in such
registration all Registrable Securities with respect to which the Company has
received such written requests for inclusion.
(b) Priority on Piggyback Registrations. If, in
connection with a Piggyback Registration, any managing underwriter (or, if such
Piggyback Registration is not an underwritten offering, a nationally recognized
independent underwriter selected by the Company (reasonably acceptable to the
holders of a majority of the Registrable Securities sought to be included in
such Piggyback Registration and whose fees and expenses shall be borne solely by
the Company)) advises the Company and the holders of the Registrable Securities
sought to be included in such Piggyback Registration, that, in its opinion, the
inclusion of all the securities sought to be included in such Piggyback
Registration by the Company, any Persons who have sought to have shares
registered thereunder pursuant to rights to demand (other than pursuant to
"piggyback" or other incidental or participation registration rights) such
registration (such demand rights being "Other Demand Rights" and such Persons
being "Other Demanding Sellers"), any holders of Registrable Securities seeking
to sell such securities in such Piggyback Registration
19
<PAGE> 20
("Piggyback Sellers") and any other proposed sellers, in each case, if any,
would adversely affect the marketability of the securities sought to be sold
pursuant thereto, then the Company shall include in the registration statement
applicable to such Piggyback Registration only such securities as the Company,
the Other Demanding Sellers, and the Piggyback Sellers are so advised by such
underwriter can be sold without such an effect (the "Maximum Piggyback Number"),
as follows and in the following order of priority:
(i) if the Piggyback Registration is an offering on
behalf of the Company and not any Person exercising Other Demand Rights
(whether or not other Persons seek to include securities therein
pursuant to "piggyback" or other incidental or participatory
registration rights) (a "Primary Offering"), then (A) first, such
number of securities to be sold by the Company as the Company, in its
reasonable judgment and acting in good faith and in accordance with
sound financial practice, shall have determined, and (B) second, if the
number of securities to be included under clause (A) above is less than
the Maximum Piggyback Number, the number of Registrable Securities
sought to be registered by each Piggyback Seller and other proposed
seller, pro rata in proportion to the number of Registrable Securities
sought to be registered by all the Piggyback Sellers and all other
proposed sellers, which, in the aggregate, when added to the number of
securities to be registered under clause (A) above, equals the Maximum
Piggyback Number; and
(ii) if the Piggyback Registration is an offering
other than pursuant to a Primary Offering, then (A) first, such number
of securities sought to be registered by each Other Demanding Seller,
pro rata in proportion to the number of securities sought to be
registered by all such Other Demanding Sellers, and (B) second, if the
number of securities to be included under clause (A) above is less than
the Maximum Piggyback Number, the number of Registrable Securities
sought to be registered by each Piggyback Seller and other proposed
seller, pro rata in proportion to the number of Registrable Securities
sought to be registered by all the Piggyback Sellers and all other
proposed sellers, which, in the aggregate, when added to the number of
securities to be registered under clause (A) above, equals the Maximum
Piggyback Number.
20
<PAGE> 21
(c) Withdrawal by the Company. If, at any time after
giving written notice of its intention to register any of its securities as set
forth in Section 5.02 and prior to time the registration statement filed in
connection with such registration is declared effective, the Company shall
determine for any reason not to register such securities, the Company may, at
its election, give written notice of such determination to each Stockholder and
thereupon shall be relieved of its obligation to register any Registrable
Securities in connection with such particular withdrawn or abandoned
registration (but not from its obligation to pay the Registration Expenses (as
defined below) in connection therewith as provided herein). In the event that
the Piggyback Sellers of such a registration hold the Requisite Amount of
Registrable Securities, such holders may continue the registration as a Demand
Registration if the requirements of Section 5.01(b) are met. The continuation of
such registration shall be counted as a Demand for one Stockholder, which meets
the requirements of Section 5.01(b), and continues as a participant in such
registration. The Stockholder having a Demand right with the largest number of
Registrable Securities included in such registration among all Stockholders
having such right shall be deemed to be the Demanding holder.
Section 5.03 Withdrawal Rights. Any Stockholder having notified or
directed the Company to include any or all of its Registrable Securities in a
registration statement under the Securities Act shall have the right to withdraw
any such notice or direction with respect to any or all of the Registrable
Securities designated for registration thereby by giving written notice to such
effect to the Company at least five (5) Business Days prior to the effective
date of such registration statement. In the event of any such withdrawal, the
Company shall not include such Registrable Securities in the applicable
registration and such Registrable Securities shall continue to be Registrable
Securities hereunder. No such withdrawal shall affect the obligations of the
Company with respect to the Registrable Securities not so withdrawn; provided
that in the case of a Demand Registration, if such withdrawal shall reduce the
number of Registrable Securities sought to be included in such registration
below the Requisite Amount, then the Company shall as promptly as practicable
give each holder of Registrable Securities sought to be registered notice to
such effect, referring to this Agreement and summarizing this Section 5.03, and
within five (5) Business Days following the effectiveness of such notice, either
the Company or the holders of a majority of the Registrable Securities sought to
be registered may, by written notices made to each holder of Registrable
Securities sought to be registered and the Company, respectively, elect that
such registration statement not be filed or, if theretofore filed, be withdrawn.
During such five (5) Business Day period, the Company shall not file such
registration statement if not theretofore filed or, if such registration
statement
21
<PAGE> 22
has been theretofore filed, the Company shall not seek, and shall use its best
efforts to prevent, the effectiveness thereof. Any registration statement
withdrawn or not filed (i) in accordance with an election by the Company, (ii)
in accordance with an election by the holders of the majority of the Registrable
Securities sought to be registered pursuant to such Demand Registration held by
all the Demanding holders, (iii) in accordance with an election by the holders
of the majority of the Registrable Securities sought to be registered pursuant
to such Demand Registration held by all the Demanding holders prior to the
effectiveness of the applicable Demand Registration Statement or (iv) in
accordance with an election by the holders of the majority of the Registrable
Securities sought to be registered pursuant to such Demand Registration held by
all the Demanding holders subsequent to the effectiveness of the applicable
Demand Registration Statement, if any post-effective amendment or supplement to
the applicable Demand Registration Statement contains adverse information
regarding the Company shall not be counted as a Demand. Except as set forth in
clause (iv) of the previous sentence, any Demand withdrawn in accordance with an
election by the Demanding holders subsequent to the effectiveness of the
applicable Demand Registration Statement shall be counted as a Demand unless the
Stockholders reimburse the Company for its reasonable out-of-pocket expenses
(but not including any Internal Expenses, as defined below) related to the
preparation and filing of such registration statement (in which event such
registration statement shall not be counted as a Demand hereunder). Upon the
written request of a majority of the Stockholders, the Company shall promptly
prepare a definitive statement of such out-of-pocket expenses in connection with
such registration statement in order to assist such holders with a determination
in accordance with the next preceding sentence.
Section 5.04 Holdback Agreements. Each Stockholder agrees not to
effect any public sale or distribution (including, without limitation, sales
pursuant to Rule 144) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during the
ten (10) day period prior to the date which the Company has notified the
Stockholders that it or any Demanding holders intend to commence an underwritten
Public Offering through the sixty (60) day period immediately following the
effective date of any Demand Registration or any Piggyback Registration (in each
case, except as part of such registration), or, in each case, if later, the date
of any underwriting agreement with respect thereto; provided, however, that the
Stockholders shall not be obligated to comply with this Section 5.04 on more
than one (1) occasion in any nine (9) month period.
22
<PAGE> 23
Section 5.05 Registration Procedures.
(a) Whenever the Stockholders have requested that any
Registrable Securities be registered pursuant to this Agreement (whether
pursuant to Demand Registration or Piggyback Registration), the Company (subject
to its right to withdraw such registration as contemplated by Section 5.02(c))
shall use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of distribution
thereof and, in connection therewith, the Company shall as expeditiously as
possible:
(i) prepare and file with the Commission a
registration statement with respect to such Registrable
Securities on any form for which the Company then qualifies
and is available for the sale of Registrable Securities to be
registered thereunder in accordance with the intended method
of distribution and use its best efforts to cause such
registration statement to become effective within ninety (90)
days of the date thereof;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a
continuous period of not less than ninety (90) days (or, if
earlier, until all Registrable Securities included in such
registration statement have been sold thereunder in accordance
with the method of distribution set forth therein) and comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement during such period in accordance with the intended
methods of disposition by the sellers thereof as set forth in
such registration statement (including, without limitation, by
incorporating in a prospectus supplement or post-effective
amendment, at the request of a seller of Registrable
Securities, the terms of the sale of such Registrable
Securities);
(iii) before filing with the Commission any such
registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to counsel
selected by the Demanding holders of a majority of the
Registrable Securities held by the Demanding holders, counsel
for the underwriter or sales
23
<PAGE> 24
or placement agent, if any, and any other counsel for holders
of Registrable Securities, if any, in connection therewith,
drafts of all such documents proposed to be filed and provide
such counsel with a reasonable opportunity for review thereof
and comment thereon, such review to be conducted and such
comments to be delivered with reasonable promptness;
(iv) promptly (i) notify each seller of Registrable
Securities of each of (x) the filing and effectiveness of the
registration statement and prospectus and any amendment or
supplements thereto, (y) the receipt of any comments from the
Commission or any state securities law authorities or any
other governmental authorities with respect to any such
registration statement or prospectus or any amendments or
supplements thereto, and (z) any oral or written stop order
with respect to such registration, any suspension of the
registration or qualification of the sale of such Registrable
Securities in any jurisdiction or any initiation or threat of
any proceedings with respect to any of the foregoing and (ii)
use its reasonable best efforts to obtain the withdrawal of
any order suspending the registration or qualification (or the
effectiveness thereof) or suspending or preventing the use of
any related prospectus in any jurisdiction with respect
thereto;
(v) furnish to each seller of Registrable Securities,
the underwriters and the sales or placement agent, if any, and
counsel for each of the foregoing, a conformed copy of such
registration statement and each amendment and supplement
thereto (in each case, including all exhibits thereto and
documents incorporated by reference therein) and such
additional number of copies of such registration statement,
each amendment and supplement thereto (in such case without
such exhibits and documents), the prospectus (including each
preliminary prospectus) included in such registration
statement and prospectus supplements and all exhibits thereto
and documents incorporated by reference therein and such other
documents as such seller, underwriter, agent or counsel may
reasonably request in order to facilitate the disposition of
the Registrable Securities owned by each such seller;
(vi) if requested by the managing underwriter or
underwriters of any registration or by the Demanding
24
<PAGE> 25
holders of a majority of the Registrable Securities held by
the Demanding holders, subject to approval of counsel to the
Company in its reasonable judgment, promptly incorporate in a
prospectus, supplement or post-effective amendment to the
registration statement such information concerning
underwriters and the plan of distribution of the Registrable
Securities as such managing underwriter or underwriters or
such holders shall reasonably furnish to the Company in
writing and request be included therein, including, without
limitation, with respect to the number of Registrable
Securities being sold by such holders to such underwriter or
underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other
terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required
filings of such prospectus, supplement or post-effective
amendment as soon as possible after being notified of the
matters to be incorporated in such prospectus, supplement or
post-effective amendment;
(vii) use its best efforts to register or qualify
such Registrable Securities under such securities or "blue
sky" laws of such jurisdictions as the holders of a majority
of Registrable Securities sought to be registered reasonably
request and do any and all other acts and things which may be
reasonably necessary or advisable to enable the holders of a
majority of Registrable Securities sought to be registered to
consummate the disposition in such jurisdictions of the
Registrable Securities owned by such holders and keep such
registration or qualification in effect for so long as the
registration statement remains effective under the Securities
Act (provided that the Company shall not be required to (x)
qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
paragraph, (y) subject itself to taxation in any such
jurisdiction where it would not otherwise be subject to
taxation but for this paragraph or (z) consent to the general
service of process in any jurisdiction where it would not
otherwise be subject to general service of process but for
this paragraph);
(viii) notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon the
discovery that, or of
25
<PAGE> 26
the happening of any event as a result of which, the
registration statement covering such Registrable Securities,
as then in effect, contains an untrue statement of a material
fact or omits to state any material fact required to be stated
therein or any fact necessary to make the statements therein
not misleading, and promptly prepare and furnish to each such
seller a supplement or amendment to the prospectus contained
in such registration statement so that such registration
statement shall not, and such prospectus as thereafter
delivered to the purchasers of such Registrable Securities
shall not, contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein
or any fact necessary to make the statements therein not
misleading;
(ix) cause all such Registrable Securities to be
listed on the New York Stock Exchange and/or any other
securities exchange and included in each established
over-the-counter market on which or through which similar
securities of the Company are listed or traded and, if not so
listed or traded, to be listed on the NASD automated quotation
system ("Nasdaq") and if listed on Nasdaq, use its reasonable
efforts to secure designation of all such Registrable
Securities covered by such registration statement as a Nasdaq
"national market system security" within the meaning of Rule
11Aa2- 1 under the Securities Exchange Act of 1934, as
amended, or, failing that, to secure Nasdaq authorization for
such Registrable Securities;
(x) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement, and any
attorney, accountant or other agent retained by any such
seller or underwriter all financial and other records,
pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees,
attorneys and independent accountants to supply all
information reasonably requested by any such sellers,
underwriters, attorneys, accountants or agents in connection
with such registration statement. Information which the
Company determines, in good faith, to be confidential shall
not be disclosed by such persons unless (x) the disclosure of
such information is necessary to avoid or correct a
misstatement or omission in such registration statement, or
(y) the release of such information is ordered pursuant to a
subpoena or other order from a court of competent
jurisdiction. Each seller of
26
<PAGE> 27
Registrable Securities agrees, on its own behalf and on behalf
of all its underwriters, accountants, attorneys and agents,
that the information obtained by it as a result of such
inspections and which the Company determines, in good faith,
to be confidential, shall not be used by it as the basis for
any market transactions in the securities of the Company
unless and until such is made generally available to the
public. Each seller of Registrable Securities further agrees,
on its own behalf and on behalf of all its underwriters,
accountants, attorneys and agents, that it will, upon learning
that disclosure of such information is sought in a court of
competent jurisdiction, give notice to the Company and allow
the Company, at its expense, to undertake appropriate action
to prevent disclosure of the information deemed confidential;
(xi) use its best efforts to comply with all
applicable laws related to such registration statement and
offering and sale of securities and all applicable rules and
regulations of governmental authorities in connection
therewith (including, without limitation, the Securities Act
and the Exchange Act) and make generally available to its
security holders as soon as practicable (but in any event not
later than fifteen (15) months after the effectiveness of such
registration statement) an earnings statement of the Company
and its subsidiaries complying with Section 11(a) of the
Securities Act;
(xii) permit any Stockholder, which Stockholder, in
its sole and exclusive judgment, might be deemed to be an
underwriter or controlling person of the Company, to
participate in the preparation of such registration statement
and to require the insertion therein of material, furnished to
the Company in writing, which in the reasonable judgment of
such holder and such holder's counsel should be included;
(xiii) use reasonable best efforts to furnish to each
seller of Registrable Securities a signed counterpart of (x)
an opinion of counsel for the Company and (y) a comfort letter
signed by the independent public accountants who have
certified the Company's financial statements included or
incorporated by reference in such registration statement,
covering such matters with respect to such registration
statement and, in the case of the accountants' comfort letter,
with respect to events subsequent to the date of such
financial
27
<PAGE> 28
statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the
underwriters in underwritten Public Offerings of securities
for the account of, or on behalf of, an issuer of common
stock, such opinion and comfort letters to be dated the date
such opinions and comfort letters are customarily dated in
such transactions, and covering in the case of such legal
opinion, such other legal matters and, in the case of such
comfort letter, such other financial matters, as the holders
of a majority of the Registrable Securities being sold may
reasonably request; and
(xiv) take all such other actions as the holders of a
majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities.
(b) Underwriting. Without limiting any of the foregoing, in the event
that any offering of Registrable Securities is to be made by or through an
underwriter, the Company shall enter into an underwriting agreement with a
managing underwriter or underwriters containing representations, warranties,
indemnities and agreements customarily included (but not inconsistent with the
agreements contained herein) by an issuer of common stock in underwriting
agreements with respect to offerings of common stock for the account of, or on
behalf of, such issuers. In connection with the sale of Registrable Securities
hereunder, any seller of such Registrable Securities may, at its option, require
that any and all representations and warranties by, and indemnities and
agreements of, the Company to or for the benefit of such underwriter or
underwriters (or which would be made to or for the benefit of such an
underwriter or underwriter if such sale of Registrable Securities were pursuant
to a customary underwritten offering) be made to and for the benefit of such
seller and that any or all of the conditions precedent to the obligations of
such underwriter or underwriters (or which would be so for the benefit of such
underwriter or underwriters under a customary underwriting agreement) be
conditions precedent to the obligations of such seller in connection with the
disposition of its securities pursuant to the terms hereof (it being agreed that
in connection with any Demand Registration, without limiting any rights or
remedies of the Stockholders, in the event any such condition precedent shall
not be satisfied and, if not so satisfied, shall not be waived by the holders of
a majority of the Registrable Securities to be included in such Demand
Registration, such Demand Registration shall not be counted as a permitted
Demand hereunder). In connection with any offering of Registrable Securities
registered pursuant to this Agreement, the
28
<PAGE> 29
Company shall (x) furnish to the underwriter, if any (or, if no underwriter, the
sellers of such Registrable Securities), unlegended certificates representing
ownership of the Registrable Securities being sold, in such denominations as
requested and (y) instruct any transfer agent and registrar of the Registrable
Securities to release any stop transfer order with respect thereto.
(c) Return of Prospectuses. Each seller of Registrable
Securities hereunder agrees that upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5.05(a)(viii), such
seller shall forthwith discontinue such seller's disposition of Registrable
Securities pursuant to the applicable registration statement and prospectus
relating thereto until such seller's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 5.05(a)(viii) and, if so directed
by the Company, deliver to the Company all copies, other than permanent file
copies, then in such seller's possession of the prospectus current at the time
of receipt of such notice relating to such Registrable Securities. In the event
the Company shall give such notice, the ninety (90)-day period during which such
registration statement must remain effective pursuant to this Agreement shall be
extended by the number of days during the period from the date of giving of a
notice regarding the happening of an event of the kind described in Section
5.05(a)(viii) to the date when all such sellers shall receive such a
supplemented or amended prospectus and such prospectus shall have been filed
with the Commission.
Section 5.06 Registration Expenses. Except as otherwise provided in
this Section 5.06, all expenses incident to the Company's performance of, or
compliance with, its obligations under Article V of this Agreement, including,
without limitation, all registration and filing fees, all fees and expenses of
compliance with securities and "blue sky" laws (including, without limitation,
the fees and expenses of counsel for underwriters or placement or sales agents,
if any, in connection therewith), all printing and copying expenses, all
messenger and delivery expenses, all fees and expenses of underwriters and sales
and placement agents, if any, in connection therewith (excluding discounts and
commissions and the fees and expenses of counsel for such underwriters or
placement or sales agents), all fees and expenses of the Company's independent
certified public accountants and counsel (including, without limitation, with
respect to "comfort" letters and opinions) (collectively, the "Registration
Expenses") shall be borne by the Company; provided, however, that all
underwriting discounts and commissions allocable to each Stockholder selling
Registrable Securities shall be borne by such Stockholder. The Company shall be
responsible for the fees and expenses of one (1) legal counsel retained by all
of the Stockholders in the aggregate in connection with the sale of
29
<PAGE> 30
Registrable Securities. Notwithstanding the foregoing, the Company shall not be
responsible for the fees and expenses of any additional counsel, or any of the
accountants, agents or experts retained by the Stockholders in connection with
the sale of Registrable Securities. The Company will pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties, the expense of any annual audit
and the expense of any liability insurance) (collectively, "Internal Expenses")
and the expenses and fees for listing the securities to be registered on each
securities exchange and included in each established over-the-counter market on
which similar securities issued by the Company are then listed or traded or for
listing on Nasdaq.
Section 5.07 Indemnification.
(a) By the Company. The Company agrees to indemnify, to the
fullest extent permitted by law, each holder of Registrable Securities being
sold, its officers, directors, members, employees and agents and each Person who
controls (within the meaning of the Securities Act) such holder or such an other
indemnified Person against all losses, claims, damages, liabilities and expenses
(collectively, the "Losses") caused by, resulting from or relating to any untrue
or alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or a fact necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished to the Company in writing by or on behalf of such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering and without limiting
any of the Company's other obligations under this Agreement, the Company shall
indemnify such underwriters, their officers, directors, employees and agents and
each Person who controls (within the meaning of the Securities Act) such
underwriters or such an other indemnified Person to the same extent as provided
above with respect to the indemnification of the holders of Registrable
Securities being sold.
(b) By Stockholders. In connection with any registration
statement in which a holder of Registrable Securities is participating, each
such holder will furnish, or cause to be furnished, to the Company in writing
information regarding such holder's ownership of Registrable Securities and its
intended method of distribution thereof and, to the extent permitted by law,
shall indemnify the
30
<PAGE> 31
Company, its directors, officers, employees and agents and each Person who
controls (within the meaning of the Securities Act) the Company or such an other
indemnified Person against all Losses caused by, resulting from or relating to
any untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
caused by and contained in such information so furnished in writing by or on
behalf of such holder; provided, however, that each holder's obligation to
indemnify the Company hereunder (other than with respect to information provided
by a Stockholder) shall be apportioned between each holder based upon the net
amount received by each holder from the sale of Registrable Securities, as
compared to the total net amount received by all of the holders of Registrable
Securities sold pursuant to such registration statement, no such holder being
liable to the Company in excess of the net amount received by such holder from
the sale of Registrable Securities.
(c) Notice. Any Person entitled to indemnification hereunder shall give
prompt written notice to the indemnifying party of any claim with respect to
which its seeks indemnification; provided, however, the failure to give such
notice shall not release the indemnifying party from its obligation, except to
the extent that the indemnifying party has been materially prejudiced by such
failure to provide such notice.
(d) Defense of Actions. In any case in which any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof the indemnifying party will not (so long as it shall
continue to have the right to defend, contest, litigate and settle the matter in
question in accordance with this paragraph) be liable to such indemnified party
hereunder for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, supervision and monitoring (unless such indemnified
party reasonably objects to such assumption on the grounds that there may be
defenses available to it which are different from or in addition to the defenses
available to such indemnifying party, in which event the indemnified party shall
be reimbursed by the indemnifying party for the expenses incurred in
31
<PAGE> 32
connection with retaining separate legal counsel). An indemnifying party shall
not be liable for any settlement of an action or claim effected without its
consent. The indemnifying party shall lose its right to defend, contest,
litigate and settle a matter if it shall fail diligently to contest such matter
(except to the extent settled in accordance with the next following sentence).
No matter shall be settled by an indemnifying party without the consent of the
indemnified party (which consent shall not be unreasonably withheld).
(e) Survival. The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified Person and will survive the transfer of
the Registrable Securities and the termination of this Agreement.
(f) Contribution. If recovery is not available under the
foregoing indemnification provisions for any reason or reasons other than as
specified therein, any Person who would otherwise be entitled to indemnification
by the terms thereof shall nevertheless be entitled to contribution with respect
to any Losses with respect to which such Person would be entitled to such
indemnification but for such reason or reasons. In determining the amount of
contribution to which the respective Persons are entitled, there shall be
considered the Persons' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and other equitable
considerations appropriate under the circumstances. It is hereby agreed that it
would not necessarily be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not found guilty of
such fraudulent misrepresentation. Notwithstanding the foregoing, no Stockholder
shall be required to make a contribution in excess of the net amount received by
such holder from the sale of Registrable Securities.
ARTICLE VI
Co-Investment Rights
Section 6.01 Preemptive Rights. If, prior to the Initial Public
Offering, the Company proposes to issue and sell any shares of capital stock of
the Company (or other securities convertible into or exchangeable for shares of
such capital stock) to any Person, including to any Stockholder (whether for
cash, securities or other property), each Stockholder shall have the right to
purchase from
32
<PAGE> 33
the Company a number of shares of such class or series of capital stock of the
Company (or other securities convertible into or exchangeable for shares of such
capital stock) proposed to be sold to such Person such that, following such
transaction, such Stockholder shall maintain the same proportionate interest in
the issued shares of capital stock of the Company proposed to be issued as held
by such Stockholder immediately prior to such transaction. Such purchase by each
Stockholder shall be on the same terms and conditions as such purchase by such
Person, except that, in lieu of delivering securities or property as
consideration for shares of capital stock, such Stockholder shall be entitled to
purchase such shares for cash in an amount equal to the fair market value per
share of the securities or property being delivered by such Person, as
determined by the Board in good faith. Each such issuance and sale to any Person
shall be subject to the rights set forth in this Article VI.
Section 6.02 Purchase Rights. Subject to Section 6.01, each Stockholder
hereby agrees that, prior to the consummation of the Initial Public Offering,
the Company may undertake one or more issuances and sales of shares of Common
Stock to any Person at the price of $100 per share and one or more issuances and
sales of shares of Preferred Stock to any Person at the price of $1,000 per
share. Each Stockholder further hereby acknowledges and agrees that, subject to
Section 7.13 hereof, and, unless otherwise determined by the Board, in its
reasonable discretion, the payment of $100 per share of Common Stock or $1,000
per share of Preferred Stock by such Person, which payment shall be made in
cash, securities or such other property as determined by the Board, shall be
conclusive and binding as evidence of the Fair Market Value at such time of the
shares of Common Stock or Preferred Stock, as the case may be. Moreover, each
Stockholder hereby acknowledges and agrees that the Fair Market Value of the
Preferred Stock is and shall continue to be $1,000 per share, unless otherwise
determined by the Board, in its reasonable discretion.
Section 6.03 Notice. If, prior to the Initial Public Offering, the
Company proposes to issue shares of capital stock (or other securities
convertible into or exchangeable for shares of capital stock) to any Person,
including any other Stockholder, it shall give each Stockholder written notice
of such issuance, describing the price and terms upon which the Company intends
to issue the same, and the number of shares of capital stock (or other
securities convertible into or exchangeable for shares of capital stock)
eligible to be purchased by each such Stockholder pursuant to Section 6.01
above. Any revision of any material term of such intended issuance shall require
re-notification to each Stockholder and a restarting of the fifteen (15)
Business Day period provided in Section 6.04 below.
33
<PAGE> 34
Section 6.04 Exercise. Upon receipt by any Stockholder of the written
notice of the Company pursuant to Section 6.03 above, such Stockholder shall
have fifteen (15) Business Days during which to exercise the right pursuant to
Section 6.01 above to purchase its proportionate share of Company capital stock
for the price and upon the terms specified in such notice. If any Stockholder
fails to notify the Company of its exercise of such rights within such fifteen
(15) Business Day period, such Stockholder shall have no further rights with
regard to such purchase by such Person at the price and upon the terms specified
in the notice to the Stockholder, subject to Section 6.05 below.
Section 6.05 Limitations. If the Company has not sold the shares of
capital stock (or other securities convertible into or exchangeable for shares
of capital stock) to such Person within sixty (60) days following the expiration
of the fifteen (15) Business Day period referred to above, the Company shall not
thereafter issue or sell any such shares to such Person without also offering
the same to each Stockholder in the manner provided above.
Section 6.06 Scope. Each Share issued and sold to any Stockholder
pursuant to the rights set forth in this Article VI shall be subject to this
Agreement; and each certificate representing such Shares shall bear
substantially the legend set forth in Section 7.01 hereof.
Section 6.07 Exclusion. Notwithstanding the foregoing, each Stockholder
acknowledges and agrees that (i) the capital structure of the Company following
consummation of the Transactions and the financing thereof is set forth on Annex
II hereto and no Stockholder shall have preemptive rights pursuant to this
Article VI with respect to the issuance or sale of any such securities
contemplated in connection therewith and (ii) such Stockholder shall not have
any preemptive right pursuant to this Article VI with respect to the issuance of
any equity security (A) to employees of the Company under any equity
compensation plan approved by the Board or (B) to the selling parties as
consideration with respect to any acquisition or business combination.
Section 6.08 Calculation of Percentages. Solely for purposes of
Articles IV, V and VI, in determining each Stockholder's proportionate interest
of the Company's issued and outstanding capital stock and calculating the number
of shares of capital stock which Stockholders are entitled to purchase pursuant
to Section 6.01 hereof, the Company shall be deemed to have one class of capital
stock outstanding,
34
<PAGE> 35
and each outstanding share of Preferred Stock shall be deemed to be the
equivalent of ten shares of Common Stock.
ARTICLE VII
Miscellaneous
Section 7.01 Expenses. The Company hereby agrees that it shall
reimburse each of the Stockholders for their fees and expenses in connection
with the acquisition of Shares on the date hereof and the negotiation and
execution of this Agreement, including, without limitation, fees and expenses of
one outside counsel for each of (i) JLL Healthcare, (ii) Triumph, (iii) GECC,
(iv) the IHC Investors, (v) the Management Investors, (vi) CIBC WMC, Inc. and
(vii) J.P. Morgan Capital Corporation. The Company further agrees that it will
reimburse JLL Healthcare for its administrative fees and expenses incurred
during the Term of this Agreement.
Section 7.02 Specific Performance. Each of the Stockholders
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party or parties would be irreparably harmed and could not be made
whole solely by monetary damages. The Stockholders hereby agree that in addition
to any other remedy to which any party may be entitled at law or in equity, they
shall be entitled to compel specific performance of this Agreement in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction for such action.
Section 7.03 Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
Section 7.04 Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein, and there are no restrictions, promises,
representations, warranties, covenants, conditions or undertakings with respect
to the subject matter hereof, other than those expressly set forth or referred
to herein. This Agreement supersedes all prior agreements and understandings
between the parties hereto with respect to the subject matter hereof.
Section 7.05 Notices. All notices and other communications
required or permitted to be given hereunder shall be in writing and shall be (i)
delivered by hand, (ii) delivered by a nationally recognized commercial
overnight
35
<PAGE> 36
delivery service, (iii) mailed postage prepaid by first class mail or (iv)
transmitted by facsimile transmitted, if, (a) to the Company, JLL Healthcare or
PHC to the address below or (b) to any other Stockholder (and any other Person
designated by such Stockholder) at the address or telecopier number set forth in
Annex I hereto. Such notices shall be effective: (i) in the case of hand
deliveries when received; (ii) in the case of an overnight delivery service, on
the next business day after being placed in the possession of such delivery
service, with delivery charges prepaid; (iii) in the case of mail, seven (7)
Business Days after deposit in the postal system, first class mail, postage
prepaid; and (iv) in the case of facsimile notices, when electronic confirmation
of receipt is received by the sender. Any party may change its address and
telecopy number by written notice to the others given in accordance with this
Section 7.05.
If to the Company, to:
IASIS Healthcare Corporation
104 Woodmont Blvd., Suite 101
Nashville, TN 37205
Attention: General Counsel
Fax: (615) 846-3006
with copies to:
JLL Healthcare, LLC
c/o Joseph Littlejohn & Levy Fund III, LP
450 Lexington Avenue, Suite 3350
New York, NY 10017
Facsimile: (212) 286-8626
Attention: Mr. Jeffrey C. Lightcap
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, DE 19801
Attention: Robert B. Pincus, Esq.
Fax: (302) 651-3001
36
<PAGE> 37
If to JLL Healthcare, to:
JLL Healthcare, LLC
c/o Joseph Littlejohn & Levy Fund III, LP
450 Lexington Avenue, Suite 3350
New York, NY 10017
Facsimile: (212) 286-8626
Attention: Mr. Jeffrey C. Lightcap
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, DE 19801
Attention: Robert B. Pincus, Esq.
Fax: (302) 651-3001
If to Paracelsus Healthcare Corporation, to:
Paracelsus Healthcare Corporation
515 W. Greens Road
Suite 500
Houston, TX 77067
Attention: President
Fax: (281) 774-5200
with a copy to:
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, TX 77002-2778
Attention: Diana M. Hudson, Esq.
Fax: (713) 225-7047
37
<PAGE> 38
If to the Outside Investors, to:
General Electric Capital Corporation
3379 Peachtree Road
Suite 600
Atlanta, GA 30326
Attention:
Fax:
Triumph Partners III, L.P.
and
Triumph III Investors, L.P.
c/o Triumph Capital Group, Inc.
28 State Street
37th Floor
Boston, MA 02109
Attention:
Fax:
If to the IHC Investors, to:
104 Woodmont Blvd., Suite 101
Nashville, TN 37205
Attention: General Counsel
Fax: (615) 846-3006
Section 7.06 Applicable Law. The substantive laws of the State
of Delaware shall govern the interpretation, validity and performance of the
terms of this Agreement, regardless of the law that might be applied under
applicable principles of conflicts of laws. THE PARTIES HERETO WAIVE THEIR RIGHT
TO A JURY TRIAL WITH RESPECT TO DISPUTES HEREUNDER; ALL SUCH DISPUTES SHALL BE
SETTLED BY BINDING ARBITRATION PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION
ASSOCIATION IN NEW YORK, NEW YORK AND THE ORDER OF SUCH ARBITRATORS SHALL BE
FINAL AND BINDING ON ALL PARTIES HERETO AND MAY BE ENTERED AS A JUDGMENT IN A
COURT HAVING JURISDICTION OVER THE PARTIES.
38
<PAGE> 39
Section 7.07 Severability. The invalidity, illegality or
unenforceability of one or more of the provisions of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including, without limitation, any such
provision, in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
Section 7.08 Successors; Assigns; Third-Party Beneficiaries.
The provisions of this Agreement shall be binding upon the parties hereto and
their respective heirs, successors and permitted assigns. Neither this Agreement
nor the rights or obligations of any Stockholder hereunder, including, without
limitation, any rights pursuant to Article VI hereof, may be assigned, except in
connection with the transfer by a Stockholder of Shares to a Permitted
Transferee. Any such attempted assignment in contravention of this Agreement
shall be void and of no effect. Except for Sections 5.07 and 7.09 hereof, this
Agreement is for the sole benefit of the parties hereto and their respective
heirs, successors and permitted assigns and no provision hereof, whether express
or implied, is intended, or shall be construed, to give any other Person any
other rights or remedies, whether legal or equitable, hereunder.
Section 7.09 Amendments. This Agreement may not be amended,
modified or supplemented unless such modification is in writing and signed by
the Company and Stockholders owning at least a majority (50.1%) of the
outstanding shares of Common Stock as of the date hereof; provided, however,
that no such amendment or modification that materially and adversely affects any
Stockholder or any member of JLL Healthcare shall be effective against such
Stockholder or in respect of such member without such Stockholder's or member's
express written consent.
Section 7.10 Additional Parties. Any Person who is a Permitted
Transferee or who is approved by the Board and who executes a Stockholders
Agreement shall be deemed to be a Stockholder and shall be bound by all
obligations and, except to the extent limited in the Stockholders Agreement,
entitled to all rights and privileges of a Stockholder as if he, she or it had
been an original signatory to this Agreement.
Section 7.11 Waiver. Any provision of this Agreement may be
waived if, but only if, such waiver is in writing and is signed by the Company
and each Stockholder whose rights or duties are affected by such waiver. Any
waiver
39
<PAGE> 40
(express or implied) of any default or breach of this Agreement shall not
constitute a waiver of any other or subsequent default or breach.
Section 7.12 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same Agreement.
Section 7.13 Recapitalization. In the event that any capital
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any Shares by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the Shares or any other change in the Company's
capital structure, appropriate adjustments shall be made to the terms hereof if
necessary to fairly and equitably preserve the original rights and obligations
of the parties hereto under this Agreement.
Section 7.14 Term. Unless terminated earlier by the Company
and Stockholders owning the percentage of shares set forth in Section 7.10
hereof, the term of this Agreement shall begin as of the date first written
above and terminate on the earlier of (i) the tenth anniversary of such date and
(ii) a Change in Control of the Company; provided, however, that the provisions
of Article V shall survive any termination of this Agreement pursuant to clause
(i) above so long as there are any Registrable Securities.
[SIGNATURE PAGES FOLLOW]
40
<PAGE> 41
IN WITNESS WHEREOF, the undersigned hereby agree to be bound
by the terms and provisions of this Stockholders Agreement as of the date first
above written.
IASIS HEALTHCARE CORPORATION
By: /s/ Frank Coyle
------------------------------------
Name: Frank Coyle
Title: Secretary and General Counsel
JLL HEALTHCARE, LLC
By: /s/ J. C. Lightcap
------------------------------------
Name: J. C. Lightcap
Title: Authorized Person
PARACELSUS HEALTHCARE CORPORATION
By: /s/ James G. VanDevender
------------------------------------
Name: James G. VanDevender
Title: Chief Executive Officer
<PAGE> 42
OUTSIDE INVESTORS:
TRIUMPH PARTNERS III, L.P.
By: Triumph III Advisors, L.P.
its general partner
By: Triumph III Advisors, Inc.
its general partner
By: /s/ Frederick S. Moseley IV
-----------------------------
Name: Frederick S. Moseley IV
Title: President
TRIUMPH III INVESTORS, L.P.
By: Triumph III Investors, Inc.,
its general partner
By: /s/ Frederick S. Moseley IV
-----------------------------
Name: Frederick S. Moseley IV
Title: President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Elaine L. Moore
---------------------------
Name: Elaine L. Moore
---------------------------
Title: SVP as Duly
Authorized Signatory
---------------------------
<PAGE> 43
ANNEX I
STOCKHOLDERS FOLLOWING THE
RECAPITALIZATION TRANSACTION
<TABLE>
<CAPTION>
Number of Shares of
Name Common Stock
- ---- ------------
<S> <C>
JLL Healthcare 1,162,281
Paracelsus 80,000
Triumph Partners 65,000
Triumph Investors 789
GECC 21,930
</TABLE>
I-1
<PAGE> 44
ANNEX II
STOCKHOLDERS FOLLOWING THE
TRANSACTIONS
<TABLE>
<CAPTION>
Number of Shares Number of Shares of Preferred Stock
Name of Common Stock Series A Series B
- ---- --------------- -------- --------
<S> <C> <C> <C>
JLL Healthcare 1,162,281 148,772 --
Paracelsus 80,000 -- --
Triumph Partners 65,000 8,320 --
Triumph Investors 789 101.1 --
GECC 21,930 2,807 --
IHC Investors 41,490 -- 5,311
</TABLE>
II-1
<PAGE> 1
EXHIBIT 10.2
================================================================================
CREDIT AGREEMENT
AMONG
IASIS HEALTHCARE CORPORATION,
VARIOUS LENDERS,
J.P. MORGAN SECURITIES INC.
AND
THE BANK OF NOVA SCOTIA,
AS CO-LEAD ARRANGERS AND CO-BOOK RUNNERS,
PARIBAS,
AS DOCUMENTATION AGENT,
THE BANK OF NOVA SCOTIA,
AS SYNDICATION AGENT
AND
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS ADMINISTRATIVE AGENT
----------------------------------
DATED AS OF OCTOBER 15, 1999
----------------------------------
$455,000,000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1. Amount and Terms of Credit.................................... 1
1.01 The Commitments................................................ 1
1.02 Minimum Amount of Each Borrowing; Limitation on Number
of Borrowings................................................ 4
1.03 Notice of Borrowing............................................ 4
1.04 Disbursement of Funds.......................................... 5
1.05 Notes.......................................................... 6
1.06 Conversions.................................................... 8
1.07 Pro Rata Borrowings............................................ 8
1.08 Interest....................................................... 8
1.09 Interest Periods............................................... 9
1.10 Increased Costs, Illegality, etc. ............................. 10
1.11 Compensation................................................... 13
1.12 Change of Lending Office....................................... 13
1.13 Replacement of Lenders......................................... 13
SECTION 2. Letters of Credit............................................. 15
2.01 Letters of Credit.............................................. 15
2.02 Letter of Credit Requests, etc. ............................... 17
2.03 Letter of Credit Participations................................ 17
2.04 Agreement to Repay Letter of Credit Drawings................... 19
2.05 Increased Costs................................................ 20
SECTION 3. Commitment Commission; Fees; Reductions of Commitment......... 21
3.01 Fees........................................................... 21
3.02 Voluntary Termination or Reduction of Unutilized Revolving
Loan Commitments............................................. 22
3.03 Mandatory Reduction of Commitments............................. 22
SECTION 4. Prepayments; Payments; Taxes.................................. 23
4.01 Voluntary Prepayments.......................................... 23
4.02 Mandatory Repayments and Commitment Reductions................. 25
4.03 Method and Place of Payment.................................... 31
4.04 Net Payments; Taxes............................................ 31
SECTION 5. Conditions Precedent to Loans................................. 33
5.01 Execution of Agreement; Notes.................................. 33
5.02 Fees, etc. .................................................... 33
5.03 Opinions of Counsel............................................ 33
5.04 Corporate Documents; Proceedings; etc. ........................ 34
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
5.05 Employee Benefit Plans; Shareholders' Agreements;
Management Agreements; Debt Agreements; Tax Sharing
Agreements; Employment Agreements; Collective Bargaining
Agreements and Material Contracts............................. 34
5.06 Consummation of the Transaction............................... 36
5.07 Refinancing; Existing Indebtedness............................ 36
5.08 Guaranties.................................................... 37
5.09 Pledge Agreement; Hypothecation Agreement..................... 37
5.10 Security Agreement............................................ 38
5.11 Mortgages; Title Insurance; Surveys; etc. .................... 38
5.12 Material Adverse Change, etc. ................................ 39
5.13 Litigation.................................................... 40
5.14 Solvency Certificate; Insurance............................... 40
5.15 Pro Forma Balance Sheet; Financial Statements; Projections.... 40
SECTION 6. Conditions Precedent to All Credit Events.................... 40
6.01 No Default; Representations and Warranties.................... 40
6.02 Notice of Borrowing; Letter of Credit Request................. 41
SECTION 7. Representations, Warranties and Agreements................... 41
7.01 Corporate Status.............................................. 41
7.02 Corporate Power and Authority................................. 41
7.03 No Violation.................................................. 42
7.04 Governmental Approvals........................................ 42
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. ............................... 42
7.06 Litigation.................................................... 44
7.07 True and Complete Disclosure.................................. 44
7.08 Use of Proceeds; Margin Regulations........................... 44
7.09 Tax Returns and Payments...................................... 45
7.10 Compliance with ERISA......................................... 45
7.11 The Security Documents........................................ 46
7.12 Representations and Warranties in Other Documents............. 47
7.13 Properties.................................................... 47
7.14 Capitalization................................................ 48
7.15 Subsidiaries.................................................. 48
7.16 Compliance with Statutes, etc. ............................... 48
7.17 Investment Company Act........................................ 49
7.18 Public Utility Holding Company Act............................ 49
7.19 Environmental Matters......................................... 49
7.20 Labor Relations............................................... 49
7.21 Patents, Licenses, Franchises and Formulas.................... 50
7.22 Indebtedness.................................................. 50
7.23 Transaction................................................... 50
7.24 Year 2000 Compliance.......................................... 50
7.25 Subordination................................................. 51
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 8. Affirmative Covenants............................................ 51
8.01 Information Covenants........................................... 51
8.02 Books, Records and Inspections.................................. 54
8.03 Maintenance of Property; Insurance.............................. 54
8.04 Corporate Franchises............................................ 55
8.05 Compliance with Statutes, etc. ................................. 55
8.06 Compliance with Environmental Laws.............................. 55
8.07 ERISA........................................................... 56
8.08 End of Fiscal Years; Fiscal Quarters............................ 57
8.09 Payment of Taxes................................................ 57
8.10 Ownership of Subsidiaries....................................... 57
8.11 Additional Security; Further Assurances; Surveys................ 58
8.12 Permitted Acquisitions.......................................... 60
8.13 Foreign Subsidiaries Security................................... 61
8.14 Year 2000 Compliance............................................ 62
8.15 Pioneer Valley.................................................. 62
SECTION 9. Negative Covenants............................................... 63
9.01 Liens........................................................... 63
9.02 Consolidation, Merger, Acquisitions or Sale of Assets, etc. .... 66
9.03 Dividends....................................................... 68
9.04 Indebtedness.................................................... 69
9.05 Advances, Investments and Loans................................. 71
9.06 Transactions with Affiliates.................................... 73
9.07 Capital Expenditures............................................ 74
9.08 Consolidated Interest Coverage Ratio............................ 75
9.09 Maximum Leverage Ratio.......................................... 76
9.10 Fixed Charge Coverage Ratio..................................... 77
9.11 Limitation on Modifications of Indebtedness; Modifications of
Certificate of Incorporation, By-Laws and Certain
Other Agreements; etc. ...................................... 78
9.12 Limitation on Certain Restrictions on Subsidiaries.............. 79
9.13 Limitation on Issuance of Capital Stock......................... 79
9.14 Limitation on Creation of Subsidiaries and Joint Ventures....... 80
9.15 Business........................................................ 80
9.16 Designated Senior Debt.......................................... 80
9.17 St. Luke's Lease................................................ 80
SECTION 10. Events of Default............................................... 80
10.01 Payments........................................................ 81
10.02 Representations, etc. .......................................... 81
10.03 Covenants....................................................... 81
10.04 Default Under Other Agreements.................................. 81
10.05 Bankruptcy, etc. ............................................... 81
10.06 ERISA........................................................... 82
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.07 Security Documents......................................... 82
10.08 Guaranties................................................. 83
10.09 Judgments.................................................. 83
10.10 Change of Control.......................................... 83
10.11 St. Luke's Lease........................................... 83
SECTION 11. Definitions and Accounting Terms.......................... 84
11.01 Defined Terms.............................................. 84
SECTION 12. Administrative Agent...................................... 119
12.01 Appointment................................................ 119
12.02 Nature of Duties........................................... 119
12.03 Lack of Reliance on the Administrative Agent............... 120
12.04 Certain Rights of the Administrative Agent................. 120
12.05 Reliance................................................... 121
12.06 Indemnification............................................ 121
12.07 Administrative Agent in Its Individual Capacity............ 121
12.08 Holders.................................................... 121
12.09 Resignation by the Administrative Agent.................... 122
12.10 Delegation of Duties....................................... 122
12.11 Exculpatory Provisions..................................... 122
12.12 Notice of Default.......................................... 123
12.13 Special Provisions Regarding the Co-Lead Arrangers......... 123
SECTION 13. Miscellaneous............................................. 123
13.01 Payment of Expenses, etc. ................................. 123
13.02 Right of Setoff............................................ 124
13.03 Notices.................................................... 125
13.04 Benefit of Agreement....................................... 125
13.05 No Waiver; Remedies Cumulative............................. 127
13.06 Payments Pro Rata.......................................... 127
13.07 Calculations; Computations................................. 128
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL.................................... 129
13.09 Counterparts............................................... 130
13.10 Effectiveness.............................................. 130
13.11 Headings Descriptive....................................... 130
13.12 Amendment or Waiver; etc. ................................. 130
13.13 Survival................................................... 132
13.14 Domicile of Loans.......................................... 132
13.15 Confidentiality............................................ 132
13.16 Register................................................... 133
</TABLE>
(iv)
<PAGE> 6
SCHEDULES
SCHEDULE I - COMMITMENTS
SCHEDULE II - LENDER ADDRESSES
SCHEDULE III - REAL PROPERTY
SCHEDULE IV - EXISTING LIENS
SCHEDULE V.A - EXISTING INDEBTEDNESS
SCHEDULE V.B - INDEBTEDNESS TO BE REFINANCED
SCHEDULE VI - SUBSIDIARIES
SCHEDULE VII - PROJECTIONS
SCHEDULE VIII - POST-CLOSING DELIVERIES
SCHEDULE IX - EXISTING LETTERS OF CREDIT
SCHEDULE X - EXISTING INVESTMENTS
SCHEDULE XI - DIRECT INVESTORS
SCHEDULE XII - JLL HEALTH CARE INVESTORS
SCHEDULE XIII - AFFILIATE TRANSACTIONS
EXHIBITS
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B-1 Form of Tranche A Term Note
EXHIBIT B-2 Form of Tranche B Term Note
EXHIBIT B-3 Form of Revolving Note
EXHIBIT B-4 Form of Swingline Note
EXHIBIT C Form of Letter of Credit Request
EXHIBIT D Form of Section 4.04(b)(ii) Certificate
EXHIBIT E Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
EXHIBIT F Form of Officer's Certificate
EXHIBIT G Form of Subsidiaries Guaranty
EXHIBIT H Form of Pledge Agreement
EXHIBIT I Form of Hypothecation Agreement
EXHIBIT J Form of Security Agreement
EXHIBIT K Form of Solvency Certificate
EXHIBIT L Form of Assignment and Assumption Agreement
EXHIBIT M Form of Subordination Provisions
<PAGE> 7
CREDIT AGREEMENT, dated as of October 15, 1999, among IASIS
HEALTHCARE CORPORATION, a Delaware corporation (the "Borrower"), the Lenders
party hereto from time to time, J.P. MORGAN SECURITIES INC. and THE BANK OF NOVA
SCOTIA, as Co-Lead Arrangers (in such capacity, each a "Co-Lead Arranger" and,
collectively, the "Co-Lead Arrangers") and Co-Book Runners, PARIBAS, as
Documentation Agent (in such capacity, the "Documentation Agent"), THE BANK OF
NOVA SCOTIA, as Syndication Agent (in such capacity, the "Syndication Agent")
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (in such
capacity, the "Administrative Agent") (all capitalized terms used herein and
defined in Section 11 are used herein as therein defined).
W I T N E S S E T H :
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. (a) Subject to and upon the terms and
conditions set forth herein, each Lender with a Tranche A Term Loan Commitment
severally agrees to make, on the Initial Borrowing Date, a term loan (each, a
"Tranche A Term Loan" and, collectively, the "Tranche A Term Loans") to the
Borrower, which Tranche A Term Loans (i) except as hereafter provided, shall be
made and initially maintained as a single Borrowing of Base Rate Loans and after
the fifth Business Day following the Initial Borrowing Date, shall, at the
option of the Borrower, be maintained as, and/or converted into, Base Rate Loans
or Eurodollar Loans, provided, that (x) except as otherwise specifically
provided in Section 1.10(b), all Tranche A Term Loans made as part of the same
Borrowing shall at all times consist of Tranche A Term Loans of the same Type
and (y) unless the Syndication Date has occurred (at which time this clause (y)
shall no longer be applicable), no more than three Borrowings of Tranche A Term
Loans to be maintained as Eurodollar Loans may be incurred prior to the 90th day
after the Initial Borrowing Date (or, if later, the last day of the Interest
Period applicable to the third Borrowing of Eurodollar Loans referred to below),
each of which Borrowings of Eurodollar Loans may only have an Interest Period of
one month, and the first of which Borrowings may only be made on or after the
fifth Business Day after the Initial Borrowing Date and on or prior to the
seventh Business Day after the Initial Borrowing Date, the second of which
Borrowings may only be made on the last day of the Interest Period of the first
such Borrowing and the third of which Borrowings may only be made on the last
day of the Interest Period of the second such Borrowing and (ii) shall be made
by each Lender in that initial aggregate principal amount as is equal to the
Tranche A Term Loan Commitment of such Lender on such date (before giving effect
to any reductions thereto on such date pursuant to Section 3.03(b)(i) but after
giving effect to any reductions thereto on or prior to such date pursuant to
Section 3.03(b)(ii)). Once repaid, Tranche A Term Loans incurred hereunder may
not be reborrowed.
(b) Subject to and upon the terms and conditions set forth
herein, each Lender with a Tranche B Term Loan Commitment severally agrees to
make, on the Initial Borrowing Date, a term loan (each, a "Tranche B Term Loan"
and, collectively, the "Tranche B Term
<PAGE> 8
Loans") to the Borrower, which Tranche B Term Loans (i) except as hereafter
provided, shall be made and initially maintained as a single Borrowing of Base
Rate Loans and after the fifth Business Day following the Initial Borrowing
Date, shall, at the option of the Borrower, be maintained as, and/or converted
into, Base Rate Loans or Eurodollar Loans, provided, that (x) except as
otherwise specifically provided in Section 1.10(b), all Tranche B Term Loans
made as part of the same Borrowing shall at all times consist of Tranche B Term
Loans of the same Type and (y) unless the Syndication Date has occurred (at
which time this clause (y) shall no longer be applicable), no more than three
Borrowings of Tranche B Term Loans to be maintained as Eurodollar Loans may be
incurred prior to the 90th day after the Initial Borrowing Date (or, if later,
the last day of the Interest Period applicable to the third Borrowing of
Eurodollar Loans referred to below), each of which Borrowings of Eurodollar
Loans may only have an Interest Period of one month, and the first of which
Borrowings may only be made on the same date as the initial Borrowing of Tranche
A Term Loans that are maintained as Eurodollar Loans, the second of which
Borrowings may only be made on the last day of the Interest Period of the first
such Borrowing and the third of which Borrowings may only be made on the last
day of the Interest Period of the second such Borrowing and (ii) shall be made
by each Lender in that initial aggregate principal amount as is equal to the
Tranche B Term Loan Commitment of such Lender on such date (before giving effect
to any reductions thereto on such date pursuant to Section 3.03(c)(i) but after
giving effect to any reductions thereto on or prior to such date pursuant to
Section 3.03(c)(ii)). Once repaid, Tranche B Term Loans incurred hereunder may
not be reborrowed.
(c) Subject to and upon the terms and conditions set forth
herein, each Lender with a Revolving Loan Commitment severally agrees, at any
time and from time to time on and after the Initial Borrowing Date and prior to
the Revolving Loan Maturity Date, to make a revolving loan or revolving loans
(each, a "Revolving Loan" and, collectively, the "Revolving Loans") to the
Borrower, which Revolving Loans (i) except as hereafter provided, shall, at the
option of the Borrower, be incurred and maintained as, and/or converted into,
Base Rate Loans or Eurodollar Loans, provided, that (x) except as otherwise
specifically provided in Section 1.10(b), all Revolving Loans made as part of
the same Borrowing shall at all times consist of Revolving Loans of the same
Type and (y) unless the Syndication Date has occurred (at which time this clause
(y) shall no longer be applicable), no more than three Borrowings of Revolving
Loans to be maintained as Eurodollar Loans may be incurred prior to the 90th day
after the Initial Borrowing Date (or, if later, the last day of the Interest
Period applicable to the third Borrowing of Eurodollar Loans referred to below),
each of which Borrowings of Eurodollar Loans may only have an Interest Period of
one month, and the first of which Borrowings may only be made on the same date
as the initial Borrowing of Tranche A Term Loans that are maintained as
Eurodollar Loans, the second of which Borrowings may only be made on the last
day of the Interest Period of the first such Borrowing and the third of which
Borrowings may only be made on the last day of the Interest Period of the second
such Borrowing, (ii) may be repaid and reborrowed in accordance with the
provisions hereof, (iii) shall not exceed for any Lender at any time outstanding
that aggregate principal amount which, when added to the product of (x) such
Lender's Adjusted Percentage and (y) the sum of (I) the aggregate amount of all
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time and
-2-
<PAGE> 9
(II) the aggregate principal amount of all Swingline Loans (exclusive of
Swingline Loans which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) then
outstanding, equals the Revolving Loan Commitment of such Lender at such time
and (iv) shall not exceed for all Lenders at any time outstanding that aggregate
principal amount which, when added to (x) the amount of all Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, and (y) the aggregate principal amount of all
Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) then outstanding, equals the Total Revolving Loan Commitment at
such time.
(d) Subject to and upon the terms and conditions herein set
forth, the Swingline Lender in its individual capacity agrees to make at any
time and from time to time on and after the Initial Borrowing Date and prior to
the Swingline Expiry Date, a revolving loan or revolving loans (each, a
"Swingline Loan" and, collectively, the "Swingline Loans") to the Borrower,
which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii)
may be repaid and reborrowed in accordance with the provisions hereof, (iii)
shall not exceed in aggregate principal amount at any time outstanding, when
added to (x) the aggregate principal amount of all Revolving Loans made by
Non-Defaulting Lenders then outstanding and (y) the Letter of Credit
Outstandings at such time, an amount equal to the Adjusted Total Revolving Loan
Commitment at such time (after giving effect to any reductions to the Adjusted
Total Revolving Loan Commitment on such date), (iv) shall not exceed at any time
outstanding the Maximum Swingline Amount and (v) shall not be extended if the
Swingline Lender receives a written notice from the Administrative Agent or the
Required Lenders that has not been rescinded that there is a Default or an Event
of Default in existence hereunder.
(e) On any Business Day, the Swingline Lender may, in its sole
discretion, give notice to the other Lenders that its outstanding Swingline
Loans shall be funded with a Borrowing of Revolving Loans (provided that such
notice shall be deemed to have been automatically given upon the occurrence of a
Default or an Event of Default under Section 10.05 or upon the exercise of any
of the remedies provided in the last paragraph of Section 10), in which case a
Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing,
a "Mandatory Borrowing") shall be made on the immediately succeeding Business
Day by all Lenders with a Revolving Loan Commitment (without giving effect to
any termination thereof pursuant to the last paragraph of Section 10) pro rata
based on each Lender's Adjusted Percentage (determined before giving effect to
any termination of the Revolving Loan Commitments pursuant to the last paragraph
of Section 10) and the proceeds thereof shall be paid directly to the Swingline
Lender to repay the Swingline Lender for such outstanding Swingline Loans. Each
such Lender hereby irrevocably agrees to make Revolving Loans upon one Business
Day's notice pursuant to each Mandatory Borrowing in the amount and in the
manner specified in the preceding sentence and on the date specified in writing
by the Swingline Lender notwithstanding (i) that the amount of the Mandatory
Borrowing may not comply with the minimum amount for Borrowings otherwise
required hereunder, (ii) whether any conditions specified in Section 6 are then
satisfied, (iii) whether a Default or an Event of Default then exists, (iv) the
date of such Mandatory Borrowing and (v) the amount of the Total Revolving Loan
-3-
<PAGE> 10
Commitment or the Adjusted Total Revolving Loan Commitment at such time. In the
event that any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code with respect to the
Borrower), then each such Lender hereby agrees that it shall forthwith purchase
(as of the date the Mandatory Borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after such date and
prior to such purchase) from the Swingline Lender such participations in the
outstanding Swingline Loans as shall be necessary to cause such Lenders to share
in such Swingline Loans ratably based upon their respective Adjusted Percentages
(determined before giving effect to any termination of the Revolving Loan
Commitments pursuant to the last paragraph of Section 10), provided that (x) all
interest payable on the Swingline Loans shall be for the account of the
Swingline Lender until the date as of which the respective participation is
required to be purchased and, to the extent attributable to the purchased
participation, shall be payable to the participant from and after such date and
(y) at the time any purchase of participations pursuant to this sentence is
actually made, the purchasing Lender shall be required to pay the Swingline
Lender interest on the principal amount of participation purchased for each day
from and including the day upon which the Mandatory Borrowing would otherwise
have occurred to but excluding the date of payment for such participation, at
the overnight Federal Funds Rate for the first three days and at the rate
otherwise applicable to Revolving Loans maintained as Base Rate Loans hereunder
for each day thereafter.
1.02 Minimum Amount of Each Borrowing; Limitation on Number of
Borrowings. The aggregate principal amount of each Borrowing of Loans shall not
be less than the Minimum Borrowing Amount applicable thereto; provided that
Mandatory Borrowings shall be made in the amounts required by Section 1.01(e).
More than one Borrowing may be incurred on the same date, but at no time shall
there be outstanding more than 10 Borrowings of Eurodollar Loans in the
aggregate under all Tranches.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to
make a Borrowing hereunder (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Administrative Agent at its Notice
Office at least one Business Day's prior written notice (or telephonic notice
promptly confirmed in writing) of each Base Rate Loan and at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each Eurodollar Loan to be made hereunder, provided that any such
notice shall be deemed to have been given on a certain day only if given before
12:00 Noon (New York time). Each such written notice or written confirmation of
telephonic notice (each, a "Notice of Borrowing"), except as otherwise expressly
provided in Section 1.10, shall be irrevocable and shall be given by the
Borrower in the form of Exhibit A, appropriately completed to specify: (i) the
aggregate principal amount of the Loans to be made pursuant to such Borrowing,
(ii) the date of such Borrowing (which shall be a Business Day), (iii) whether
the Loans being made pursuant to such Borrowing shall constitute Tranche A Term
Loans, Tranche B Term Loans or Revolving Loans and (iv) whether the Loans being
made pursuant to such Borrowing are to be initially maintained as Base Rate
Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period
to be applicable thereto. The Administrative Agent shall promptly give each
Lender which is required to make Loans of the Tranche specified in the
respective Notice of Borrowing, notice of such
-4-
<PAGE> 11
proposed Borrowing, of such Lender's proportionate share thereof and of the
other matters required by the immediately preceding sentence to be specified in
the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give the Swingline Lender not later than
12:00 Noon (New York time) on the date that a Swingline Loan is to be made,
written notice (or telephonic notice promptly confirmed in writing) of each
Swingline Loan to be made hereunder. Each such notice shall be irrevocable and
specify in each case (A) the date of Borrowing (which shall be a Business Day)
and (B) the aggregate principal amount of the Swingline Loans to be made
pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified
in Section 1.01(e), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of the Mandatory Borrowings as set forth in
Section 1.01(e).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice of any Borrowing of Loans, the
Administrative Agent or the Swingline Lender, as the case may be, may act
without liability upon the basis of telephonic notice of such Borrowing,
believed by the Administrative Agent or the Swingline Lender, as the case may
be, in good faith to be from an Authorized Officer of the Borrower prior to
receipt of written confirmation. In each such case, the Borrower hereby waives
the right to dispute the Administrative Agent's and the Swingline Lender's
record of the terms of such telephonic notice of such Borrowing of Loans, absent
manifest error.
1.04 Disbursement of Funds. Except as otherwise specifically
provided in the immediately succeeding sentence, no later than 1:00 P.M. (New
York time) on the date specified in each Notice of Borrowing (or (x) in the case
of Swingline Loans, not later than 1:00 P.M. (New York time) on the date
specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory
Borrowings, not later than 1:00 P.M. (New York time) on the date specified in
Section 1.01(e)), each Lender with a Commitment of the respective Tranche will
make available its pro rata portion of each such Borrowing requested to be made
on such date (or in the case of Swingline Loans, the Swingline Lender shall make
available the full amount thereof). All such amounts shall be made available in
Dollars and in immediately available funds at the Payment Office of the
Administrative Agent, and, except in the case of Mandatory Borrowings, the
Administrative Agent will make available to the Borrower at the Payment Office
the aggregate of the amounts so made available by the Lenders (for Loans other
than Swingline Loans, prior to 3:00 P.M. (New York time) on such day, to the
extent of funds actually received by the Administrative Agent prior to 1:00 P.M.
(New York time) on such day). Unless the Administrative Agent shall have been
notified by any Lender prior to the date of Borrowing that such Lender does not
intend to make available to the Administrative Agent such Lender's portion of
any Borrowing to be made on such date, the Administrative Agent may assume that
such Lender has made such amount available to the Administrative Agent on such
date of Borrowing and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Agent
by such Lender, the Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender. If such Lender does not pay
such
-5-
<PAGE> 12
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover on demand from such
Lender or the Borrower, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount was made
available by the Administrative Agent to the Borrower until the date such
corresponding amount is recovered by the Administrative Agent, at a rate per
annum equal to (i) if recovered from such Lender, at the overnight Federal Funds
Rate and (ii) if recovered from the Borrower, the rate of interest applicable to
the respective Borrowing, as determined pursuant to Section 1.08. Nothing in
this Section 1.04 shall be deemed to relieve any Lender from its obligation to
make Loans hereunder or to prejudice any rights which the Borrower may have
against any Lender as a result of any failure by such Lender to make Loans
hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal
of, and interest on, the Loans made by each Lender shall, if requested by such
Lender, be evidenced (i) if Tranche A Term Loans, by a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B-1
with blanks appropriately completed in conformity herewith (each, a "Tranche A
Term Note" and, collectively, the "Tranche A Term Notes"), (ii) if Tranche B
Term Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit B-2, with blanks appropriately completed in
conformity herewith (each, a "Tranche B Term Note" and, collectively, the
"Tranche B Term Notes"), (iii) if Revolving Loans, by a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B-3,
with blanks appropriately completed in conformity herewith (each, a "Revolving
Note" and, collectively, the "Revolving Notes") and (iv) if Swingline Loans, by
a promissory note duly executed and delivered by the Borrower substantially in
the form of Exhibit B-4, with blanks appropriately completed in conformity
herewith (the "Swingline Note").
(b) The Tranche A Term Note issued to each Lender with a Tranche
A Term Loan Commitment or outstanding Tranche A Term Loans shall (i) be executed
by the Borrower, (ii) be payable to the order of such Lender and be dated the
Initial Borrowing Date (or, in the case of Tranche A Term Notes issued after the
Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in
a stated principal amount equal to the Tranche A Term Loan made by such Lender
on the Initial Borrowing Date (or, in the case of any Tranche A Term Note issued
after the Initial Borrowing Date, be in a stated principal amount equal to the
outstanding principal amount of the Tranche A Term Loan of such Lender on the
date of the issuance thereof) and be payable in the principal amount of Tranche
A Term Loans evidenced thereby, (iv) mature on the Tranche A Term Loan Maturity
Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to voluntary prepayment and mandatory
repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(c) The Tranche B Term Note issued to each Lender with a Tranche
B Term Loan Commitment or outstanding Tranche B Term Loans shall (i) be executed
by the Borrower, (ii) be payable to the order of such Lender and be dated the
Initial Borrowing Date (or, in the case
-6-
<PAGE> 13
of Tranche B Term Notes issued after the Initial Borrowing Date, be dated the
date of the issuance thereof), (iii) be in a stated principal amount equal to
the Tranche B Term Loan made by such Lender on the Initial Borrowing Date (or,
in the case of any Tranche B Term Note issued after the Initial Borrowing Date,
be in a stated principal amount equal to the outstanding principal amount of the
Tranche B Term Loan of such Lender on the date of the issuance thereof) and be
payable in the principal amount of Tranche B Term Loans evidenced thereby, (iv)
mature on the Tranche B Term Loan Maturity Date, (v) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment and mandatory repayment as provided in Sections 4.01 and
4.02 and (vii) be entitled to the benefits of this Agreement and the other
Credit Documents.
(d) The Revolving Note issued to each Lender with a Revolving
Loan Commitment shall (i) be executed by the Borrower, (ii) be payable to the
order of such Lender and be dated the Initial Borrowing Date (or, in the case of
Revolving Notes issued after the Initial Borrowing Date, be dated the date of
the issuance thereof), (iii) be in a stated principal amount equal to the
Revolving Loan Commitment of such Lender and be payable in the principal amount
of the Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment and mandatory
repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(e) The Swingline Note shall (i) be executed by the Borrower,
(ii) be payable to the order of the Swingline Lender and be dated the Initial
Borrowing Date (or, in the case of any Swingline Note issued after the Initial
Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated
principal amount equal to the Maximum Swingline Amount and be payable in the
principal amount of the outstanding Swingline Loans evidenced thereby, (iv)
mature on the Swingline Expiry Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans evidenced
thereby, (vi) be subject to voluntary prepayment and mandatory repayment as
provided in Sections 4.01 and 4.02 and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
(f) Each Lender will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in any such notation or endorsement shall not affect the Borrower's
obligations in respect of such Loans.
(g) Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement, Tranche A Term Notes, Tranche B Term Notes,
Revolving Notes and the Swingline Note shall only be delivered to Lenders which
at any time specifically request the delivery of such Notes. No failure of any
Lender to request or obtain a Note evidencing its Loans to the Borrower shall
affect or in any manner impair the obligations of the Borrower to pay the Loans
(and all related Obligations) which would otherwise be evidenced thereby in
accordance with the requirements of this Agreement, and shall not in any way
affect the security or
-7-
<PAGE> 14
guaranties therefor provided pursuant to the various Credit Documents. Any
Lender which does not have a Note evidencing its outstanding Loans shall in no
event be required to make the notations otherwise described in preceding clause
(f). At any time when any Lender requests the delivery of a Note to evidence any
of its Loans, the Borrower shall promptly execute and deliver to the respective
Lender the requested Note or Notes in the appropriate amount or amounts to
evidence such Loans.
1.06 Conversions. The Borrower shall have the option to convert,
on any Business Day occurring on or after the fifth Business Day following the
Initial Borrowing Date, all or a portion of the outstanding principal amount of
Loans made pursuant to one or more Borrowings (so long as of the same Tranche)
of one or more Types of Loans into a Borrowing (of the same Tranche) of another
Type of Loan, provided that (i) except as provided in Section 1.10(b) or unless
the Borrower pays all breakage costs and other amounts owing to each Lender
pursuant to Section 1.11 concurrently with any such conversion, Eurodollar Loans
may be converted into Base Rate Loans only on the last day of an Interest Period
applicable to the Loans being converted, (ii) no partial conversion of a
Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of
the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum
Borrowing Amount applicable thereto, (iii) unless the Required Lenders otherwise
agree in writing, Base Rate Loans may only be converted into Eurodollar Loans if
no Default or Event of Default is in existence on the date of the conversion,
(iv) no conversion pursuant to this Section 1.06 shall result in a greater
number of Borrowings of Eurodollar Loans than is permitted under Section 1.02,
(v) unless the Syndication Date has occurred (at which time this clause (v)
shall no longer be applicable), prior to the 90th day after the Initial
Borrowing Date, conversions of Base Rate Loans into Eurodollar Loans may only be
made if any such conversion is effective on the first day of the first, second
or third Interest Period referred to in clause (y) of each of Sections
1.01(a)(i), 1.01(b)(i) and 1.01(c)(i) and so long as such conversion does not
result in a greater number of Borrowings of Eurodollar Loans prior to the 90th
day after the Initial Borrowing Date as are permitted under Sections 1.01(a)(i),
1.01(b)(i), and 1.01(c)(i) and (vi) Swingline Loans may not be converted
pursuant to this Section 1.06. Each such conversion shall be effected by the
Borrower by giving the Administrative Agent at its Notice Office prior to 12:00
Noon (New York time) at least three Business Days' prior written notice (each, a
"Notice of Conversion"), specifying the Loans to be so converted, the
Borrowing(s) pursuant to which such Loans were made and, if to be converted into
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall give each Lender prompt notice of any such proposed
conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Borrowings of Tranche A Term Loans,
Tranche B Term Loans and Revolving Loans under this Agreement shall be incurred
from the Lenders pro rata on the basis of their Tranche A Term Loan Commitments,
Tranche B Term Loan Commitments or Revolving Loan Commitments, as the case may
be, provided that all Borrowings of Revolving Loans made pursuant to a Mandatory
Borrowing shall be incurred from the Lenders pro rata on the basis of their
Adjusted Percentages. It is understood that no Lender shall be responsible for
any default by any other Lender of its obligation to make Loans hereunder and
that each Lender shall be obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Lender to make its Loans
hereunder.
-8-
<PAGE> 15
1.08 Interest. (a) The Borrower shall pay interest in respect of
the unpaid principal amount of each Base Rate Loan from the date the proceeds
thereof are made available to the Borrower until the earlier of (i) the maturity
(whether by acceleration or otherwise) of such Base Rate Loan and (ii) the
conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06,
at a rate per annum which shall be equal to the sum of the relevant Applicable
Margin plus the Base Rate, each as in effect from time to time.
(b) The Borrower shall pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof are
made available to the Borrower until the earlier of (i) the maturity (whether by
acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion of
such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or
1.10(b), as applicable, at a rate per annum which shall, during each Interest
Period applicable thereto, be equal to the sum of the relevant Applicable Margin
plus the Eurodollar Rate for such Interest Period, each as in effect from time
to time.
(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall, in each case, bear interest at a rate per annum equal to the
greater of (x) 2% per annum in excess of the rate otherwise applicable to Base
Rate Loans of the respective Tranche of Loans from time to time (or, if such
overdue amount is not interest or principal in respect of a Loan, 2% per annum
in excess of the rate otherwise applicable to Base Rate Loans maintained as
Revolving Loans from time to time) and (y) the rate which is 2% in excess of the
rate then borne by such Loans, in each case with such interest to be payable on
demand.
(d) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date of any
conversion into a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as
applicable (on the amount converted) and (y) the last day of each Interest
Period applicable thereto and, in the case of an Interest Period in excess of
three months, on each date occurring at three month intervals after the first
day of such Interest Period and (iii) in respect of each Loan, on any repayment
or prepayment on the amount repaid or prepaid, at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Administrative
Agent shall determine the Eurodollar Rate for each Interest Period applicable to
Eurodollar Loans and shall promptly notify the Borrower and the Lenders thereof.
Each such determination shall, absent manifest error, be final and conclusive
and binding on all parties hereto.
(f) All computations of interest hereunder shall be made in
accordance with Section 13.07(b).
1.09 Interest Periods. At the time it gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or on the third Business Day prior to the expiration
of an Interest Period applicable to such Borrowing of Eurodollar Loans (in the
case of any subsequent Interest Period), the Borrower shall have the right to
elect, by giving the
-9-
<PAGE> 16
Administrative Agent written notice thereof, the interest period (each, an
"Interest Period") applicable to such Eurodollar Loans, which Interest Period
shall, at the option of the Borrower be a one, two, three or six month period,
provided that:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date
of any conversion thereto from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Borrowing shall
commence on the day on which the next preceding Interest Period
applicable thereto expires;
(iii) if any Interest Period relating to a Borrowing of Eurodollar
Loans begins on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period, such
Interest Period shall end on the last Business Day of such calendar
month;
(iv) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided, that if any Interest Period for a
Borrowing of Eurodollar Loans would otherwise expire on a day which is
not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on
the next preceding Business Day;
(v) unless the Required Lenders otherwise agree in writing, no
Interest Period may be selected at any time when a Default or Event of
Default is then in existence;
(vi) no Interest Period in respect of any Borrowing of any Tranche
of Loans shall be selected which extends beyond the respective Maturity
Date for such Tranche of Loans; and
(vii) no Interest Period in respect of any Borrowing of Tranche A
Term Loans or Tranche B Term Loans, as the case may be, shall be
selected which extends beyond any date upon which a mandatory repayment
of such Tranche of Term Loans will be required to be made under Section
4.02(b) or (c), as the case may be, if, after giving effect to the
election of such Interest Period, the aggregate principal amount of
Tranche A Term Loans or Tranche B Term Loans, as the case may be, which
have Interest Periods which will expire after such date will be in
excess of the aggregate principal amount of Tranche A Term Loans or
Tranche B Term Loans, as the case may be, then outstanding less the
aggregate amount of such required prepayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
-10-
<PAGE> 17
1.10 Increased Costs, Illegality, etc. (a) In the event that any
Lender shall have determined (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties hereto but, with respect to
clause (i) below, may be made only by the Administrative Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition
of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect
to any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, order, guideline or
request, such as, for example, but not limited to: (A) a change in the
basis of taxation of payment to any Lender of the principal of or
interest on such Eurodollar Loan or any other amounts payable hereunder
(except for changes in the rate of tax on, or determined by reference
to, the net income or profits of such Lender, or any franchise tax based
on the net income or profits of such Lender, in either case pursuant to
the laws of the United States of America, the jurisdiction in which it
is organized or in which its principal office or applicable lending
office is located or any subdivision thereof or therein), but without
duplication of any amounts payable in respect of Taxes pursuant to
Section 4.04(a), or (B) a change in official reserve requirements but,
in all events, excluding reserves required under Regulation D to the
extent included in the computation of the Eurodollar Rate and/or (y)
other circumstances since the date of this Agreement affecting such
Lender or the New York interbank Eurodollar market or the position of
such Lender in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, and/or (y) impossible by compliance by any Lender
in good faith with any governmental request (whether or not having force
of law) or (z) impracticable as a result of a contingency occurring
after the date of this Agreement which materially and adversely affects
the interbank Eurodollar market;
then, and in any such event, such Lender (or the Administrative Agent, in the
case of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the Borrower and, except in the case of clause (i) above, to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Administrative Agent notifies the Borrower and the
Lenders that the circumstances giving rise to such notice by the Administrative
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
by the Borrower with respect to Eurodollar Loans which have not yet been
incurred (including by way of conversion) shall be deemed instead to have
contained a request for Base Rate Loans, (y) in the case of clause (ii) above,
the Borrower shall, pay to such Lender, upon
-11-
<PAGE> 18
written demand therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender in its sole discretion shall determine) as shall be required to
compensate such Lender for such increased costs or reductions in amounts
received or receivable hereunder (a written notice as to the additional amounts
owed to such Lender, showing in reasonable detail the basis for and the
calculation thereof, submitted to the Borrower by such Lender in good faith
shall, absent manifest error, be final and conclusive and binding on all the
parties hereto, although the failure to give any such notice shall not release
or diminish any of the Borrower's obligations to pay additional amounts pursuant
to this Section 1.10(a) upon the subsequent receipt of such notice) and (z) in
the case of clause (iii) above, the Borrower shall take one of the actions
specified in Section 1.10(b) as promptly as possible and, in any event, within
the time period required by law. Each of the Administrative Agent and each
Lender agrees that if it gives notice to the Borrower of any of the events
described in clause (i) or (iii) above, it shall promptly notify the Borrower
and, in the case of any such Lender, the Administrative Agent, if such event
ceases to exist. If any such event described in clause (iii) above ceases to
exist as to a Lender, the obligations of such Lender to make Eurodollar Loans
and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions
contained herein shall be reinstated.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and,
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii), shall) either (x) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, cancel the respective
Borrowing by giving the Administrative Agent telephonic notice (confirmed in
writing) on the same date that the Borrower was notified by the affected Lender
or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if
the affected Eurodollar Loan is then outstanding, upon at least three Business
Days' written notice to the Administrative Agent, require the affected Lender to
convert such Eurodollar Loan into a Base Rate Loan on the earlier of the date
required by law or the last day of the Interest Period applicable to such
Eurodollar Loans, provided that, if more than one Lender is affected at any
time, then all affected Lenders must be treated the same pursuant to this
Section 1.10(b).
(c) If at any time after the date of this Agreement any Lender
determines that the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, in each case introduced or changed after the date
hereof, will have the effect of increasing the amount of capital required or
requested to be maintained by such Lender or any corporation controlling such
Lender based on the existence of such Lender's Commitments hereunder or its
obligations hereunder, then the Borrower shall, pay to such Lender, upon its
written demand therefor, such additional amounts as shall be required to
compensate such Lender or such other corporation for the increased cost to such
Lender or such other corporation or the reduction in the rate of return to such
Lender or such other corporation as a result of such increase of capital. In
determining such additional amounts, each Lender will act reasonably and in good
faith and will use averaging and attribution methods which are reasonable,
provided that such Lender's determination of compensation owing under this
Section 1.10(c) shall, absent manifest error, be final and conclusive and
binding on all the parties hereto.
-12-
<PAGE> 19
Each Lender, upon determining that any additional amounts will be payable
pursuant to this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall show in reasonable detail the basis for and
calculation of such additional amounts, although the failure to give any such
notice shall not release or diminish the Borrower's obligation to pay additional
amounts pursuant to this Section 1.10(c) upon the subsequent receipt of such
notice.
1.11 Compensation. The Borrower shall compensate each Lender,
upon its written request (which request shall set forth in reasonable detail the
basis for requesting and the calculation of such compensation), for all losses,
expenses and liabilities (including, without limitation, any loss, expense or
liability incurred by reason of the liquidation or reemployment of deposits or
other funds required by such Lender to fund its Eurodollar Loans but excluding
any loss of anticipated profit) which such Lender may sustain: (i) if for any
reason (other than a default by such Lender or the Administrative Agent) a
Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a
date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn pursuant to
Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant
to Section 4.02 or as a result of an acceleration of the Loans pursuant to
Section 10) or conversion of any of its Eurodollar Loans occurs on a date which
is not the last day of an Interest Period with respect thereto; (iii) if any
prepayment of any of its Eurodollar Loans is not made on any date specified in a
notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any
other default by the Borrower to repay its Eurodollar Loans when required by the
terms of this Agreement or any Note held by such Lender or (y) any election made
pursuant to Section 1.10(b). Each Lender's calculation of the amount of
compensation owing pursuant to this Section 1.11 shall be made in good faith. A
Lender's basis for requesting compensation pursuant to this Section 1.11 and a
Lender's calculation of the amount thereof, shall, absent manifest error, be
final and conclusive and binding on all parties hereto.
1.12 Change of Lending Office. Each Lender agrees that on the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to such
Lender, it will, if requested by the Borrower, use reasonable efforts (subject
to overall policy considerations of such Lender) to designate another lending
office for any Loans or Letters of Credit affected by such event, provided that
such designation is made on such terms that, in the sole judgment of such
Lender, such Lender and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section. Nothing in this Section
1.12 shall affect or postpone any of the obligations of the Borrower or the
right of any Lender provided in Sections 1.10, 2.05 and 4.04.
1.13 Replacement of Lenders. (x) If any Lender becomes a
Defaulting Lender or otherwise defaults in its obligations to make Loans or fund
Unpaid Drawings, (y) upon the occurrence of any event giving rise to the
operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or
Section 4.04 with respect to any Lender which results in such Lender charging to
the Borrower increased costs materially in excess of those being generally
charged by the other Lenders, or (z) in the case of certain refusals by a Lender
to consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Lenders as
provided in Section 13.12(b), the Borrower shall have the right, if no
-13-
<PAGE> 20
Default or Event of Default then exists or would exist immediately after giving
effect to the respective replacement, to either replace such Lender (the
"Replaced Lender") with one or more other Eligible Transferee or Transferees,
none of whom shall constitute a Defaulting Lender at the time of such
replacement (collectively, the "Replacement Lender") and each of whom shall be
reasonably acceptable to the Administrative Agent or, at the option of the
Borrower, to replace only (a) the Revolving Loan Commitment (and outstandings
pursuant thereto) of the Replaced Lender with an identical Revolving Loan
Commitment provided by the Replacement Lender or (b) in the case of a
replacement as provided in Section 13.12(b) where the consent of the respective
Lender is required with respect to less than all Tranches of its Loans or
Commitments, the Commitments and/or outstanding Term Loans of such Lender in
respect of each Tranche where the consent of such Lender would otherwise be
individually required, with identical Commitments and/or Loans of the respective
Tranche provided by the Replacement Lender, provided that:
(i) at the time of any replacement pursuant to this Section 1.13,
the Replacement Lender shall enter into one or more Assignment and
Assumption Agreements pursuant to Section 13.04(b) (and with all fees
payable pursuant to said Section 13.04(b) to be paid by the Replacement
Lender) pursuant to which the Replacement Lender shall acquire all of
the Commitments and outstanding Loans (or, in the case of the
replacement of only (a) the Revolving Loan Commitment, the Revolving
Loan Commitment and outstanding Revolving Loans or (b) the outstanding
Term Loans of one or more Tranches, the outstanding Term Loans of the
respective Tranche or Tranches) of, and in each case (except for the
replacement of only the outstanding Term Loans of one or more Tranches
of the respective Lender) participations in Letters of Credit by, the
Replaced Lender and, in connection therewith, shall pay to (x) the
Replaced Lender in respect thereof an amount equal to the sum (without
duplication) of (A) an amount equal to the principal of, and all accrued
interest on, all outstanding Loans (or, in the case of the replacement
of only (I) the Revolving Loan Commitment, the outstanding Revolving
Loans or (II) the Term Loans of one or more Tranches, the outstanding
Term Loans of such Tranche or Tranches) of the Replaced Lender, (B)
except in the case of the replacement of only the outstanding Term Loans
of one or more Tranches of a Replaced Lender, an amount equal to all
Unpaid Drawings that have been funded by (and not reimbursed to) such
Replaced Lender, together with all then unpaid interest with respect
thereto at such time and (C) an amount equal to all accrued, but
theretofore unpaid, Fees owing to the Replaced Lender (but only with
respect to the relevant Tranche, in the case of the replacement of less
than all Tranches of Loans then held by the respective Replaced Lender)
pursuant to Section 3.01, (y) except in the case of the replacement of
only the outstanding Term Loans of one or more Tranches of a Replaced
Lender, the respective Issuing Bank an amount equal to such Replaced
Lender's Adjusted Percentage (for this purpose, determined as if the
adjustment described in clause (y) of the immediately succeeding
sentence had been made with respect to such Replaced Lender) of any
Unpaid Drawing (which at such time remains an Unpaid Drawing) to the
extent such amount was not theretofore funded by such Replaced Lender
and (z) in the case of any replacement of Revolving Loan Commitments,
the Swingline Lender an amount equal to such Replaced
-14-
<PAGE> 21
Lender's Adjusted Percentage of any Mandatory Borrowing to the extent
such amount was not theretofore funded by such Replaced Lender; and
(ii) all obligations of the Borrower owing to the Replaced Lender
(other than those (a) specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is
concurrently being, paid or (b) relating to any Tranche of Loans and/or
Commitments of the respective Replaced Lender which will remain
outstanding after giving effect to the respective replacement) shall be
paid in full to such Replaced Lender concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above, the recordation of
the assignment on the Register by the Administrative Agent pursuant to Section
13.16 and, if so requested by the Replacement Lender, delivery to the
Replacement Lender of the appropriate Note or Notes executed by the Borrower,
(x) the Replacement Lender shall become a Lender hereunder and, unless the
respective Replaced Lender continues to have outstanding Term Loans and/or a
Revolving Loan Commitment hereunder, the Replaced Lender shall cease to
constitute a Lender hereunder, except with respect to indemnification provisions
under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05,
4.04, 13.01 and 13.06), which shall survive as to such Replaced Lender and (y)
in the case of a replacement of a Defaulting Lender with a Non-Defaulting
Lender, the Adjusted Percentages of the Lenders shall be automatically adjusted
at such time to give effect to such replacement (and to give effect to the
replacement of a Defaulting Lender with one or more Non-Defaulting Lenders).
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that any Issuing Bank
issue, at any time and from time to time after the Initial Borrowing Date and
prior to the date which is 30 days prior to the Revolving Loan Maturity Date,
(x) for the account of the Borrower and for the benefit of any holder (or any
trustee, agent or other similar representative for any such holders) of L/C
Supportable Indebtedness of the Borrower or any of its Subsidiaries, an
irrevocable sight standby letter of credit, in a form customarily used by such
Issuing Bank or in such other form as has been approved by such Issuing Bank
(each such standby letter of credit, a "Standby Letter of Credit") in support of
such L/C Supportable Indebtedness and (y) for the account of the Borrower and
for the benefit of sellers of goods or materials to the Borrower or any of its
Subsidiaries, an irrevocable sight commercial letter of credit in a form
customarily used by such Issuing Bank or in such other form as has been approved
by such Issuing Bank (each such commercial letter of credit, a "Trade Letter of
Credit", and each such Trade Letter of Credit and each Standby Letter of Credit,
a "Letter of Credit") in support of trade obligations of the Borrower and its
Subsidiaries that arise in the ordinary course of business.
(b) Subject to the terms and conditions contained herein, each
Issuing Bank hereby agrees that it will, at any time and from time to time on or
after the Initial Borrowing Date and prior to the date which is 30 days prior to
the Revolving Loan Maturity Date, following its receipt of the respective Letter
of Credit Request, issue for the account of the Borrower one or
-15-
<PAGE> 22
more Letters of Credit (x) in the case of Standby Letters of Credit, in support
of such L/C Supportable Indebtedness of the Borrower or any of its Subsidiaries
as is permitted to remain outstanding without giving rise to a Default or Event
of Default hereunder and (y) in the case of Trade Letters of Credit, in support
of sellers of goods or materials as referenced in Section 2.01(a), provided that
the respective Issuing Bank shall be under no obligation to issue any Letter of
Credit of the types described above if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing
Bank from issuing such Letter of Credit or any requirement of law
applicable to such Issuing Bank or any request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over such Issuing Bank shall prohibit, or request that such
Issuing Bank refrain from, the issuance of letters of credit generally
or such Letter of Credit in particular or shall impose upon such Issuing
Bank with respect to such Letter of Credit any restriction or reserve or
capital requirement (for which such Issuing Bank is not otherwise
compensated) not in effect on the date hereof, or any unreimbursed loss,
cost or expense which was not applicable, in effect or known to such
Issuing Bank as of the date hereof and which such Issuing Bank in good
faith deems material to it; or
(ii) such Issuing Bank shall have received notice from any Lender
prior to the issuance of such Letter of Credit of the type described in
the second sentence of Section 2.02(b).
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time would
exceed either (x) $75,000,000 or (y) when added to (I) the aggregate principal
amount of all Revolving Loans made by Non-Defaulting Lenders and then
outstanding and (II) the principal amount of all Swingline Loans then
outstanding, an amount equal to the Adjusted Total Revolving Loan Commitment at
such time, (ii) each Letter of Credit shall be denominated in Dollars, (iii)
each Letter of Credit shall by its terms terminate (x) in the case of Standby
Letters of Credit, on or before the earlier of (A) the date which occurs 12
months after the date of the issuance thereof (although any such Standby Letter
of Credit may be automatically extendible for successive periods of up to 12
months, but not beyond the fifth Business Day prior to the Revolving Loan
Maturity Date, on terms acceptable to the Issuing Bank thereof) and (B) the
fifth Business Day prior to the Revolving Loan Maturity Date, and (y) in the
case of Trade Letters of Credit, on or before the earlier of (A) the date which
occurs 180 days after the date of issuance thereof and (B) the date which is 10
days prior to the Revolving Loan Maturity Date and (iv) the Stated Amount of
each Letter of Credit upon issuance shall be not less than $50,000 or such
lesser amount as is acceptable to the respective Issuing Bank.
(d) Notwithstanding the foregoing, in the event a Lender Default
exists, no Issuing Bank shall be required to issue any Letter of Credit unless
the respective Issuing Bank has entered into arrangements satisfactory to it and
the Borrower to eliminate such Issuing Bank's risk with respect to the
participation in Letters of Credit of the Defaulting Lender or
-16-
<PAGE> 23
Lenders, including by cash collateralizing such Defaulting Lender or Lenders'
Adjusted Percentage of the Letter of Credit Outstandings, as the case may be.
(e) Schedule IX hereto contains a description of all letters of
credit issued by The Bank of Nova Scotia for the account of the Borrower and
outstanding on the Initial Borrowing Date. Each such letter of credit, as
amended on the Initial Borrowing Date to change the account party thereon to
"IASIS Healthcare Corporation", including any extension or renewal thereof
(each, as amended from time to time in accordance with the terms hereof and
thereof, an "Existing Letter of Credit") shall constitute a "Letter of Credit"
for all purposes of this Agreement, issued, for purposes of Section 2.03(a), on
the Initial Borrowing Date. The Bank of Nova Scotia shall constitute the
"Issuing Bank" with respect to each such Letter of Credit for all purposes of
this Agreement.
2.02 Letter of Credit Requests, etc. (a) Whenever the Borrower
desires that a Letter of Credit be issued for its account, the Borrower shall
give the Administrative Agent and the respective Issuing Bank written notice
thereof prior to 12:00 Noon (New York time) at least three Business Days' (or
such shorter period as is acceptable to the respective Issuing Bank) prior to
the proposed date of issuance (which shall be a Business Day). Each notice shall
be in the form of Exhibit C (each, a "Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed
to be a representation and warranty by the Borrower that such Letter of Credit
may be issued in accordance with, and will not violate the requirements of,
Section 2.01(c). Unless the respective Issuing Bank has received notice from any
Lender before it issues a Letter of Credit that one or more of the conditions
specified in Section 5 or Section 6, as applicable, are not then satisfied, or
that the issuance of such Letter of Credit would violate Section 2.01(c), then
such Issuing Bank shall issue the requested Letter of Credit for the account of
the Borrower in accordance with such Issuing Bank's usual and customary
practices.
(c) Each Issuing Bank shall, promptly after each issuance of, or
amendment or modification to, a Standby Letter of Credit issued by it, give the
Administrative Agent (and the Administrative Agent shall in turn promptly
forward same to each Participant and the Borrower) written notice of the
issuance of, or amendment or modification to, such Standby Letter of Credit,
which notice shall be accompanied by a copy of the Standby Letter of Credit or
Standby Letters of Credit issued by it and each such amendment or modification
thereto.
(d) Each Issuing Bank shall deliver to the Administrative Agent,
promptly on the first Business Day of each week, by facsimile transmission, the
aggregate daily Stated Amount available to be drawn under the outstanding Trade
Letters of Credit issued by such Issuing Bank for the previous week. The
Administrative Agent shall, within 10 days after the last Business Day of each
calendar month, deliver to each Participant a report setting forth for such
preceding calendar month the aggregate daily Stated Amount available to be drawn
under all outstanding Trade Letters of Credit during such calendar month.
2.03 Letter of Credit Participations. (a) Immediately upon the
issuance by any Issuing Bank of any Letter of Credit, such Issuing Bank shall be
deemed to have sold and trans-
-17-
<PAGE> 24
ferred to each Lender with a Revolving Loan Commitment, other than such Issuing
Bank (each such Lender, in its capacity under this Section 2.03, a
"Participant"), and each such Participant shall be deemed irrevocably and
unconditionally to have purchased and received from such Issuing Bank, without
recourse or warranty, an undivided interest and participation, to the extent of
such Participant's Adjusted Percentage, in such Letter of Credit, each drawing
made thereunder and the obligations of the Borrower under this Agreement with
respect thereto (although Letter of Credit Fees shall be payable directly to the
Administrative Agent for the account of the Participants as provided in Section
3.01(b) and the Participants shall have no right to receive any portion of any
Facing Fees with respect to such Letters of Credit), and any security therefor
or guaranty pertaining thereto. Upon any change in the Revolving Loan
Commitments or Adjusted Percentages of the Lenders pursuant to Section 1.13 or
13.04 or as a result of a Lender Default, it is hereby agreed that, with respect
to all outstanding Letters of Credit and Unpaid Drawings, there shall be an
automatic adjustment to the participations pursuant to this Section 2.03 to
reflect the new Adjusted Percentages of the assignor and assignee Lender or of
all Lenders with Revolving Loan Commitments, as the case may be.
(b) In determining whether to pay under any Letter of Credit, no
Issuing Bank shall have any obligation relative to the other Lenders other than
to confirm that any documents required to be delivered under such Letter of
Credit appear to have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Subject to
the provisions of the immediately preceding sentence, any action taken or
omitted to be taken by any Issuing Bank under or in connection with any Letter
of Credit if taken or omitted in the absence of gross negligence or willful
misconduct, as determined by a court of competent jurisdiction, shall not create
for such Issuing Bank any resulting liability to any Credit Party or any Lender.
(c) In the event that any Issuing Bank makes any payment under
any Letter of Credit and the Borrower shall not have reimbursed such amount in
full to such Issuing Bank pursuant to Section 2.04(a), such Issuing Bank shall
promptly notify the Administrative Agent, which shall promptly notify each
Participant, of such failure, and each Participant shall promptly and
unconditionally pay to such Issuing Bank the amount of such Participant's
Adjusted Percentage of such unreimbursed payment in Dollars and in same day
funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York
time) on any Business Day, any Participant required to fund a payment under a
Letter of Credit, such Participant shall make available to such Issuing Bank in
Dollars such Participant's Adjusted Percentage of the amount of such payment on
such Business Day in same day funds. If and to the extent such Participant shall
not have so made its Adjusted Percentage of the amount of such payment available
to such Issuing Bank, such Participant agrees to pay to such Issuing Bank,
forthwith on demand such amount, together with interest thereon, for each day
from such date until the date such amount is paid to such Issuing Bank at the
overnight Federal Funds Rate. The failure of any Participant to make available
to such Issuing Bank its Adjusted Percentage of any payment under any Letter of
Credit shall not relieve any other Participant of its obligation hereunder to
make available to such Issuing Bank its Adjusted Percentage of any Letter of
Credit on the date required, as specified above, but no Participant shall be
responsible for the failure of any other Participant to make available to such
Issuing Bank such other Participant's Adjusted Percentage of any such payment.
-18-
<PAGE> 25
(d) Whenever any Issuing Bank receives a payment of a
reimbursement obligation as to which it has received any payments from the
Participants pursuant to clause (c) above, such Issuing Bank shall forward such
payment to the Administrative Agent, which in turn shall distribute to each
Participant which has paid its Adjusted Percentage thereof, in Dollars and in
same day funds, an amount equal to such Participant's share (based upon the
proportionate aggregate amount originally funded by such Participant to the
aggregate amount funded by all Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of the
respective participations.
(e) Upon the request of any Participant, each Issuing Bank shall
furnish to such Participant copies of any Letter of Credit issued by it and such
other documentation as may reasonably be requested by such Participant.
(f) The obligations of the Participants to make payments to each
Issuing Bank with respect to Letters of Credit issued by it shall be irrevocable
and not subject to any qualification or exception whatsoever and shall be made
in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower or any of its Subsidiaries may have at any time
against a beneficiary named in a Letter of Credit, any transferee of any
Letter of Credit (or any Person for whom any such transferee may be
acting), the Administrative Agent, any Issuing Bank, any Participant, or
any other Person, whether in connection with this Agreement, any Letter
of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the Borrower
or any of its Subsidiaries and the beneficiary named in any such Letter
of Credit);
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.04 Agreement to Repay Letter of Credit Drawings. (a) The
Borrower hereby agrees to reimburse the respective Issuing Bank, by making
payment to the Administrative Agent in immediately available funds at the
Payment Office, for any payment or disbursement made by such Issuing Bank under
any Letter of Credit (each such amount, so paid until reimbursed, an "Unpaid
Drawing"), by 1.00 P.M. (New York time) on the Business Day immediately
succeeding the date of such payment or disbursement, with interest on the amount
so paid or disbursed by
-19-
<PAGE> 26
such Issuing Bank, to the extent not reimbursed prior to 12:00 Noon (New York
time) on the date of such payment or disbursement, from and including the date
paid or disbursed to but excluding the date such Issuing Bank was reimbursed by
the Borrower therefor at a rate per annum which shall be the Base Rate in effect
from time to time plus the Applicable Margin for Revolving Loans maintained as
Base Rate Loans as in effect from time to time, such interest to be payable on
demand; provided, however, to the extent such amounts are not reimbursed prior
to 12:00 Noon (New York time) on the third Business Day following receipt of
notice of such payment or disbursement, interest shall thereafter accrue on the
amounts so paid or disbursed by such Issuing Bank (and until reimbursed by the
Borrower) at a rate per annum which shall be the Base Rate in effect from time
to time plus the Applicable Margin for Revolving Loans maintained as Base Rate
Loans as in effect from time to time plus 2%, in each such case, with interest
to be payable on demand. The respective Issuing Bank shall give the Borrower
prompt notice of each Drawing under any Letter of Credit issued by it, provided
that the failure of, or delay in, giving any such notice shall in no way affect,
impair or diminish the Borrower's obligations hereunder.
(b) The obligations of the Borrower under this Section 2.04 to
reimburse the respective Issuing Bank with respect to drawings on Letters of
Credit (each, a "Drawing") (including, in each case, interest thereon) shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Borrower or any of its
Subsidiaries may have or have had against any Lender (including in its capacity
as issuer of the Letter of Credit or as Participant), or any nonapplication or
misapplication by the beneficiary of the proceeds of such Drawing, the
respective Issuing Bank's only obligation to the Borrower being to confirm that
any documents required to be delivered under such Letter of Credit appear to
have been delivered and that they appear to substantially comply on their face
with the requirements of such Letter of Credit. Subject to the provisions of the
immediately preceding sentence, any action taken or omitted to be taken by any
Issuing Bank under or in connection with any Letter of Credit if taken or
omitted in the absence of gross negligence or willful misconduct as determined
by a court of competent jurisdiction, shall not create for such Issuing Bank any
resulting liability to the Borrower or any other Credit Party.
2.05 Increased Costs. If at any time after the date of this
Agreement, the introduction of or any change in any applicable law, rule,
regulation, order, guideline or request or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Issuing Bank or
any Participant with any request or directive by any such authority (whether or
not having the force of law), shall either (i) impose, modify or make applicable
any reserve, deposit, capital adequacy or similar requirement against letters of
credit issued by any Issuing Bank or participated in by any Participant, or (ii)
impose on any Issuing Bank or any Participant any other conditions relating,
directly or indirectly, to this Agreement, any Letter of Credit or such
Participant's participation therein; and the result of any of the foregoing is
to increase the cost to any Issuing Bank or any Participant of issuing,
maintaining or participating in any Letter of Credit, or reduce the amount of
any sum received or receivable by any Issuing Bank or any Participant hereunder
or reduce the rate of return on its capital with respect to Letters of Credit
(except for changes in the rate of tax on, or determined by reference to, the
net income or profits of such Issuing Bank or such Participant, or any franchise
tax based on the net income or profits of such Issuing Bank or Participant, in
either case pursuant to the laws of the United States of America, the
jurisdiction in
-20-
<PAGE> 27
which it is organized or in which its principal office or applicable lending
office is located or any subdivision thereof or therein), but without
duplication of any amounts payable in respect of Taxes pursuant to Section
4.04(a), then, upon demand to the Borrower by such Issuing Bank or any
Participant (a copy of which demand shall be sent by such Issuing Bank or such
Participant to the Administrative Agent) and subject to the provisions of
Section 13.15 (to the extent applicable), the Borrower shall pay to such Issuing
Bank or such Participant such additional amount or amounts as will compensate
such Issuing Bank or such Participant for such increased cost or reduction in
the amount receivable or reduction on the rate of return on its capital. Any
Issuing Bank or any Participant, upon determining that any additional amounts
will be payable pursuant to this Section 2.05, will give prompt written notice
thereof to the Borrower, which notice shall include a certificate submitted to
the Borrower by such Issuing Bank or such Participant (a copy of which
certificate shall be sent by such Issuing Bank or such Participant to the
Administrative Agent), setting forth in reasonable detail the basis for and the
calculation of such additional amount or amounts necessary to compensate such
Issuing Bank or such Participant. The certificate required to be delivered
pursuant to this Section 2.05 shall, if delivered in good faith and absent
manifest error, be final and conclusive and binding on the Borrower, although
the failure to deliver any such certificate shall not release or diminish the
Borrower's obligations to pay additional amounts pursuant to this Section 2.05
upon subsequent receipt of such certificate.
SECTION 3. Commitment Commission; Fees; Reductions of Commitment.
3.01 Fees. (a) The Borrower shall pay the Administrative Agent
for distribution to each Non-Defaulting Lender with a Revolving Loan Commitment
a commitment commission (the "Commitment Commission") for the period from the
Effective Date to and including the Revolving Loan Maturity Date (or such
earlier date as the Total Revolving Loan Commitment shall have been terminated),
computed at a rate for each day equal to the relevant Applicable Margin then in
effect on the daily average Unutilized Revolving Loan Commitment of such
Non-Defaulting Lender. Accrued Commitment Commission shall be due and payable
quarterly in arrears on each Quarterly Payment Date and on the Revolving Loan
Maturity Date (or such earlier date upon which the Total Revolving Loan
Commitment is terminated).
(b) The Borrower shall pay to the Administrative Agent for pro
rata distribution to each Non-Defaulting Lender with a Revolving Loan Commitment
(based on their respective Adjusted Percentages), a fee in respect of each
Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the period
from and including the date of issuance of such Letter of Credit to and
including the termination of such Letter of Credit, computed at a rate per annum
equal to the Applicable Margin then in effect for Revolving Loans maintained as
Eurodollar Loans on the daily average Stated Amount of such Letter of Credit.
Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on
each Quarterly Payment Date and upon the first day on or after the termination
of the Total Revolving Loan Commitment upon which no Letters of Credit remain
outstanding.
(c) The Borrower shall pay to each Issuing Bank, for its own
account, a facing fee in respect of each Letter of Credit issued by such Issuing
Bank hereunder (the "Facing Fee"), for the period from and including the date of
issuance of such Letter of Credit to and including
-21-
<PAGE> 28
the termination of such Letter of Credit, computed at a rate equal to 1/4 of 1%
per annum of the daily average Stated Amount of such Letter of Credit (or such
lesser percentage as shall be agreed by the respective Issuing Bank). Facing
Fees shall be due and payable quarterly in arrears on each Quarterly Payment
Date and on the date upon which the Total Revolving Loan Commitment has been
terminated and such Letter of Credit has been terminated in accordance with its
terms.
(d) The Borrower shall pay to each Issuing Bank, upon each
payment under, issuance of, or amendment to, any Letter of Credit issued by such
Issuing Bank, such amount as shall at the time of such event be the
administrative charge which such Issuing Bank is generally imposing in
connection with such occurrence with respect to letters of credit issued by it.
(e) The Borrower agrees to pay to the Administrative Agent, for
its own account, such other fees as have been agreed to in writing by the
Borrower and the Administrative Agent.
3.02 Voluntary Termination or Reduction of Unutilized Revolving
Loan Commitments. (a) Upon at least three Business Days' prior notice to the
Administrative Agent at its Notice Office (which notice the Administrative Agent
shall promptly transmit to each of the Lenders), the Borrower shall have the
right, at any time or from time to time, without premium or penalty, to
terminate the Total Unutilized Revolving Loan Commitment, in whole or in part,
in integral multiples of $1,000,000 in the case of partial reductions to the
Total Unutilized Revolving Loan Commitment, provided that (i) each such
reduction shall apply proportionately to permanently reduce the Revolving Loan
Commitment of each Lender with such a Commitment and (ii) no reduction to the
Total Unutilized Revolving Loan Commitment shall be in an amount which would
cause the Revolving Loan Commitment of any Lender to be reduced (as required by
preceding clause (i)) by an amount which exceeds the remainder of (x) the
Unutilized Revolving Loan Commitment of such Lender as in effect immediately
before giving effect to such reduction minus (y) such Lender's Adjusted
Percentage of the aggregate principal amount of Swingline Loans then
outstanding.
(b) In the event of certain refusals by a Lender to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Lenders as provided in
Section 13.12(b), the Borrower may, subject to the requirements of said Section
13.12(b), upon five Business Days' prior written notice to the Administrative
Agent at its Notice Office (which notice the Administrative Agent shall promptly
transmit to each of the Lenders), terminate all of the Revolving Loan Commitment
of such Lender so long as all Loans, together with accrued and unpaid interest,
fees and all other amounts, owing to such Lender (including all amounts, if any,
owing pursuant to Section 1.11 but excluding amounts owing in respect of any
Tranche of Term Loans maintained by such Lender, if such Term Loans are not
being repaid pursuant to Section 13.12(b)) are repaid concurrently with the
effectiveness of such termination (at which time Schedule I shall be deemed
modified to reflect such changed amounts), and at such time, unless the
respective Lender continues to have outstanding Term Loans hereunder, such
Lender shall no longer constitute a "Lender" for purposes of this Agreement,
except with respect to indemnification provisions
-22-
<PAGE> 29
under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05,
4.04, 13.01 and 13.06), which shall survive as to such repaid Lender.
3.03 Mandatory Reduction of Commitments. (a) The Total
Commitments (and the Tranche A Term Loan Commitment, the Tranche B Term Loan
Commitment and the Revolving Loan Commitment of each Lender) shall terminate in
their entirety on November 30, 1999 unless the Initial Borrowing Date shall have
occurred on or prior to such date.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Tranche A Term Loan Commitment (and the
Tranche A Term Loan Commitment of each Lender with such a Commitment) shall (i)
terminate in its entirety on the Initial Borrowing Date (after giving effect to
the making of the Tranche A Term Loans on such date) and (ii) prior to the
termination of the Total Tranche A Term Loan Commitment as provided in clause
(i) above, be reduced from time to time to the extent required by Section 4.02.
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Tranche B Term Loan Commitment (and the
Tranche B Term Loan Commitment of each Lender with such a Commitment) shall (i)
terminate in its entirety on the Initial Borrowing Date (after giving effect to
the making of the Tranche B Term Loans on such date) and (ii) prior to the
termination of the Total Tranche B Term Loan Commitment as provided in clause
(i) above, be reduced from time to time to the extent required by Section 4.02.
(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Lender with such a Commitment) shall terminate
in its entirety on the Revolving Loan Maturity Date.
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date after the Initial Borrowing Date
upon which a mandatory repayment of Term Loans pursuant to any of Sections
4.02(d) through (g), inclusive, is required (and exceeds in amount the aggregate
principal amount of Term Loans then outstanding) or would be required if Term
Loans were then outstanding, the Total Revolving Loan Commitment shall be
permanently reduced by the amount, if any, by which the amount required to be
applied pursuant to said Sections (determined as if an unlimited amount of Term
Loans were actually outstanding) exceeds the aggregate principal amount of Term
Loans then outstanding.
(f) Each reduction to the Total Tranche A Term Loan Commitment,
the Total Tranche B Term Loan Commitment, and the Total Revolving Loan
Commitment pursuant to this Section 3.03 shall be applied proportionately to
reduce the Tranche A Term Loan Commitment, the Tranche B Term Loan Commitment,
or the Revolving Loan Commitment, as the case may be, of each Lender with such a
Commitment.
SECTION 4. Prepayments; Payments; Taxes.
4.01 Voluntary Prepayments. (a) The Borrower shall have the right
to prepay the Loans, without premium or penalty except as provided in Section
4.01(b), in whole or in part, at
-23-
<PAGE> 30
any time and from time to time on the following terms and conditions: (i) the
Borrower shall give the Administrative Agent prior to 12:00 Noon (New York time)
at its Notice Office (x) at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay Term
Loans or Revolving Loans maintained as Base Rate Loans, (y) same day prior
written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay Swingline Loans and (z) at least three Business Days' (or in
the case of a prepayment of Eurodollar Loans at the end of the Interest Period
therefor, one Business Day's) prior written notice (or telephonic notice
promptly confirmed in writing) of its intent to prepay Eurodollar Loans, whether
Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or Swingline Loans
shall be prepaid, the amount of such prepayment, the Types of Loans to be
prepaid and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings pursuant to which made, which notice the Administrative Agent shall
(except in the case of Swingline Loans) promptly transmit to each of the
Lenders; (ii) each prepayment shall be in an aggregate principal amount of at
least $5,000,000, in the case of Term Loans, $1,000,000, in the case of
Revolving Loans, $100,000 in the case of Swingline Loans and, in each case, if
greater, in integral multiples of $500,000, in the case of Term Loans and
$100,000, in the case of Revolving Loans and Swingline Loans (or, in each case,
such lesser amount of a Borrowing which is outstanding), provided that if any
partial prepayment of Eurodollar Loans made pursuant to any Borrowing shall
reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount applicable thereto, then such
Borrowing may not be continued as a Borrowing of Eurodollar Loans and any
election of an Interest Period with respect thereto given by the Borrower shall
have no force or effect; (iii) at the time of any prepayment of Eurodollar Loans
pursuant to this Section 4.01 on any date other than the last day of the
Interest Period applicable thereto, the Borrower shall pay the amounts required
pursuant to Section 1.11; (iv) in the event of certain refusals by a Lender as
provided in Section 13.12(b) to consent to certain proposed changes, waivers,
discharges or terminations with respect to this Agreement which have been
approved by the Required Lenders, the Borrower may, upon five Business Days'
prior written notice to the Administrative Agent at its Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Lenders)
repay all Loans, together with accrued and unpaid interest, Fees, and other
amounts owing to such Lender (or owing to such Lender with respect to each
Tranche which gave rise to the need to obtain such Lender's individual consent)
in accordance with said Section 13.12(b) so long as (A) in the case of the
repayment of Revolving Loans of any Lender pursuant to this clause (iv), the
Revolving Loan Commitment of such Lender is terminated concurrently with such
repayment (at which time Schedule I shall be deemed modified to reflect the
changed Revolving Loan Commitments) and (B) the consents required by Section
13.12(b) in connection with the repayment pursuant to this clause (iv) have been
obtained; (v) except as expressly provided in the preceding clause (iv), each
voluntary prepayment of Term Loans pursuant to this Section 4.01 shall be
applied, subject to modification of such application as set forth in Section
4.02(k), to the Tranche A Term Loans and Tranche B Term Loans on a pro rata
basis (based upon the then outstanding principal amount of Tranche A Term Loans
and Tranche B Term Loans); (vi) except as expressly provided in the preceding
clause (iv), each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among the Loans comprising such Borrowing;
provided that at the Borrower's election in connection with any prepayment of
Revolving Loans pursuant to this Section 4.01, such prepayment shall not be
applied to any Revolving Loan of a Defaulting
-24-
<PAGE> 31
Lender; and (vii) any such prepayment of the respective Tranche of Term Loans
shall first be applied in direct order of maturity to those Scheduled Repayments
of the respective Tranche which are due within 12 months after the date of such
prepayment (based upon the then remaining principal amounts of such Scheduled
Repayments after giving effect to all prior reductions thereto), with any excess
amount of such prepayment to be applied to the then remaining Scheduled
Repayments of the respective Tranche of Term Loans on a pro rata basis as
otherwise provided below in this clause (vii) unless the Borrower notifies the
Administrative Agent that it does not desire such application in which event
such payment shall be applied to the then remaining Scheduled Repayments of the
respective Tranche of Term Loans on a pro rata basis based upon the then
remaining principal amounts of the Scheduled Repayments of the respective
Tranche after giving effect to all prior reductions thereto.
(b) All voluntary prepayments of the Tranche B Term Loans shall
be accompanied by a prepayment premium of (x) 2% of the principal amount
prepaid, if such repayment occurs on or prior to the first anniversary of the
Initial Borrowing Date and (y) 1% of the principal amount prepaid, if such
repayment occurs after the first anniversary of the Initial Borrowing Date and
on or prior to the second anniversary of the Initial Borrowing Date.
4.02 Mandatory Repayments and Commitment Reductions. (a)(i) On
any date on which the sum of the aggregate outstanding principal amount of the
Revolving Loans made by Non-Defaulting Lenders, the outstanding principal amount
of the Swingline Loans and the Letter of Credit Outstandings on such date
exceeds the Adjusted Total Revolving Loan Commitment as then in effect, the
Borrower shall prepay on such date the principal of Swingline Loans and, after
the Swingline Loans have been repaid in full, Revolving Loans of Non-Defaulting
Lenders in an amount equal to such excess. If, after giving effect to the
prepayment of all outstanding Swingline Loans and all outstanding Revolving
Loans of Non-Defaulting Lenders, the aggregate amount of the Letter of Credit
Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then in
effect, the Borrower shall pay to the Administrative Agent at the Payment Office
on such date an amount in cash and/or Cash Equivalents equal to the amount of
such excess (up to a maximum amount equal to the Letter of Credit Outstandings
at such time), such cash and/or Cash Equivalents to be held as security for all
obligations of the Borrower to Non-Defaulting Lenders hereunder in a cash
collateral account to be established by the Administrative Agent pursuant to a
cash collateral agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent.
(ii) On any date on which the aggregate outstanding principal
amount of the Revolving Loans made by any Defaulting Lender exceeds the
Revolving Loan Commitment of such Defaulting Lender, the Borrower shall prepay
on such date principal of Revolving Loans of such Defaulting Lender in an amount
equal to such excess.
(b) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Tranche A Term
Loans, to the extent then outstanding, as is set forth opposite such date (each
such repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(h), a "Tranche A Scheduled Repayment," and each such date, a "Tranche A
Scheduled Repayment Date"):
-25-
<PAGE> 32
<TABLE>
<CAPTION>
Tranche A
Scheduled Repayment Date Amount
- ------------------------ ------
<S> <C>
March 31, 2000 $833,000
June 30, 2000 $833,000
September 30, 2000 $834,000
December 31, 2000 $1,250,000
March 31, 2001 $1,250,000
June 30, 2001 $1,250,000
September 30, 2001 $1,250,000
December 31, 2001 $3,750,000
March 31, 2002 $3,750,000
June 30, 2002 $3,750,000
September 30, 2002 $3,750,000
December 31, 2002 $5,625,000
March 31, 2003 $5,625,000
June 30, 2003 $5,625,000
September 30, 2003 $5,625,000
December 31, 2003 $8,750,000
March 31, 2004 $8,750,000
June 30, 2004 $8,750,000
Tranche A Term Loan Maturity Date $8,750,000
</TABLE>
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Tranche B Term
Loans, to the extent then outstanding, as is set forth opposite such date (each
such repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(h), a "Tranche B Scheduled Repayment," and each such date, a "Tranche B
Scheduled Repayment Date"):
<TABLE>
<CAPTION>
Tranche B
Scheduled Repayment Date Amount
- ------------------------ ------
<S> <C>
March 31, 2000 $833,000
June 30, 2000 $833,000
September 30, 2000 $834,000
December 31, 2000 $625,000
March 31, 2001 $625,000
June 30, 2001 $625,000
</TABLE>
-26-
<PAGE> 33
<TABLE>
<CAPTION>
Tranche B
Scheduled Repayment Date Amount
- ------------------------ ------
<S> <C>
September 30, 2001 $625,000
December 31, 2001 $625,000
March 31, 2002 $625,000
June 30, 2002 $625,000
September 30, 2002 $625,000
December 31, 2002 $625,000
March 31, 2003 $625,000
June 30, 2003 $625,000
September 30, 2003 $625,000
December 31, 2003 $625,000
February 29, 2004 $625,000
June 30, 2004 $625,000
September 30, 2004 $625,000
December 31, 2004 $625,000
March 31, 2005 $625,000
June 30, 2005 $625,000
September 30, 2005 $178,125,000
December 31, 2005 $143,750
March 31, 2006 $143,750
June 30, 2006 $143,750
Tranche B Term Loan Maturity Date $57,068,750
</TABLE>
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which the Borrower or any of its Subsidiaries receives any proceeds from
any incurrence by the Borrower or any of its Subsidiaries of Indebtedness (other
than Indebtedness permitted to be incurred pursuant to Section 9.04), an amount
equal to the cash proceeds (net of underwriting discounts and commissions and
other fees, expenses and costs associated therewith including, without
limitation, legal fees and expenses) of the respective incurrence of
Indebtedness shall be applied as a mandatory repayment of principal of
outstanding Term Loans (or, if the Initial Borrowing Date has not yet occurred,
such amounts shall be applied as a mandatory reduction to the Total Term Loan
Commitment) in accordance with the requirements of Sections 4.02(h) and (i).
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within five Business Days after each
date after the Effective Date upon which the Borrower or any of its Subsidiaries
receives any Net Asset Sale Proceeds, an amount equal to 100% of such Net Asset
Sale Proceeds shall be applied as a mandatory repayment of principal of
outstanding Term Loans in accordance with the requirements of Sections 4.02(h)
and
-27-
<PAGE> 34
(i); provided that the Net Asset Sale Proceeds received by the Borrower or any
of its Subsidiaries in connection with any Asset Sale (including the proceeds of
a Permitted Sale-Leaseback Transaction) shall not give rise to a mandatory
repayment within five Business Days after the date of the receipt of such Net
Asset Sale Proceeds so long as (i) no Default or Event of Default shall have
occurred and be continuing on the date of receipt of such Net Asset Sale
Proceeds, (ii) the aggregate amount of Net Asset Sale Proceeds not applied in
any fiscal year of the Borrower pursuant to this proviso do not exceed
$15,000,000 and (iii) the Borrower delivers an officer's certificate to the
Administrative Agent within five Business Days after the date of receipt of such
Net Asset Sale Proceeds stating that the conditions set forth in clauses (i) and
(ii) are satisfied and that an amount equal to such Net Asset Sale Proceeds
shall be used to purchase equipment or other assets useful in a Permitted
Business (including capital stock of a Person engaged in such business) of the
Borrower and its Subsidiaries (such assets being "Eligible Assets") within 365
days following the date of receipt of such Net Asset Sale Proceeds (which
certificate shall set forth (or if not set forth in such certificate, in an
additional certificate to be delivered within thirty days after the date of
receipt of such Net Asset Sale Proceeds) the estimates of the proceeds to be so
expended and such other information with respect to such reinvestment as the
Administrative Agent may reasonably request); and provided further, that if all
or any portion of such Net Asset Sale Proceeds referred to in preceding proviso
are not so used within the 365 days period following the date of the respective
receipt of such Net Asset Sale Proceeds, such remaining portion not so used
shall be applied on such 365th day (or, if such date shall not be a Business
Day, the immediately preceding Business Day) as a mandatory repayment of
principal of outstanding Term Loans in accordance with the requirements of
Sections 4.02(h) and (i); provided that so long as no Material Default or Event
of Default shall have occurred and be continuing, no mandatory repayment shall
be required hereunder until the aggregate amount of Net Asset Sale Proceeds
which have not previously been applied as a mandatory repayment equals at least
$1,000,000. If the Borrower is required to apply any portion of asset sale
proceeds to prepay or offer to prepay Indebtedness evidenced by the Senior
Subordinated Notes or Permitted Subordinated Refinancing Indebtedness (under the
terms of the Senior Subordinated Notes Indenture or the documentation relating
thereto, as the case may be), then notwithstanding anything contained in this
Agreement to the contrary the Borrower shall apply such asset sale proceeds as a
mandatory prepayment of the principal of outstanding Term Loans in accordance
with requirements of Sections 4.02(h) and (i).
(f) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 10 Business Days (or such
greater time, not to exceed 60 days, as is acceptable to the Administrative
Agent) following each date after the Effective Date on which the Borrower or any
of its Subsidiaries receives any Net Insurance/Condemnation Proceeds, an amount
equal to 100% of such Net Insurance/Condemnation Proceeds shall be applied as a
mandatory repayment of principal of outstanding Term Loans in accordance with
the requirements of Sections 4.02(h) and (i); provided that Net
Insurance/Condemnation Proceeds received by the Borrower or any of its
Subsidiaries shall not give rise to a mandatory repayment within such 10
Business Day period (or such greater time, not to exceed 60 days, as is
acceptable to the Administrative Agent) so long as (i) no Material Default or
Event of Default shall have occurred and be continuing and (ii) to the extent
that the Borrower delivers an officer's certificate to the Administrative Agent
within such 10 Business Day period (or such greater time, not to
-28-
<PAGE> 35
exceed 60 days, as is acceptable to the Administrative Agent) stating that such
Net Insurance/Condemnation Proceeds have been or are intended to be used within
365 days of such date of receipt of such Net Insurance/Condemnation Proceeds to
replace, repair or restore any properties or assets in respect of which such Net
Insurance/Condemnation Proceeds were paid or to purchase Eligible Assets;
provided that the Borrower shall have 730 days following the date of receipt of
such Net Insurance/Condemnation Proceeds to complete such replacement, repair or
restoration if (w) the intended replacement, repair or restoration cannot be
completed within such 365 day period, (x) the Borrower, during such 365 day
period, has entered into binding commitments with third parties to complete such
replacement, repair or restoration, (y) the Borrower diligently pursues the
completion of such replacement, repair or restoration and (z) the Borrower,
during such 365 day period delivers an officer's certificate to the
Administrative Agent certifying as to clause (w) through (y) of this proviso. If
all or any portion of such Net Insurance/Condemnation Proceeds not required to
be applied as a mandatory repayment pursuant to the preceding proviso are not so
used within 365 days or 730 days, as the case may be, after the date of the
receipt of such Net Insurance/Condemnation Proceeds, then such remaining portion
not so used shall be applied on the last day of such 365 day or 730 day, as the
case may be, period (or, if such day shall not be a Business Day, the
immediately preceding Business Day), to prepay Term Loans in accordance with the
requirements of Sections 4.02(h) and (i); provided that so long as no Material
Default or Event of Default shall have occurred and be continuing, no mandatory
prepayment shall be required hereunder until the aggregate amount of Net
Insurance/Condemnation Proceeds which have not been previously applied as a
mandatory repayment equals at least $1,000,000.
(g) In addition to any other mandatory repayments pursuant to
this Section 4.02, on each Excess Cash Payment Date, an amount equal to the
Applicable Excess Cash Flow Percentage of the Excess Cash Flow for the relevant
Excess Cash Payment Period shall be applied as a mandatory repayment of
principal of outstanding Term Loans in accordance with the requirements of
Sections 4.02(h) and (i).
(h) Each amount required to be applied to Term Loans (or to the
Total Term Loan Commitment) pursuant to Sections 4.02(d), (e), (f) and (g) shall
be applied, subject to modification of such application as set forth in Section
4.02(k), pro rata to each Tranche of Term Loans based upon the then remaining
principal amounts of the respective Tranches (with each Tranche of Term Loans to
be allocated that percentage of the amount to be applied as is equal to a
fraction (expressed as a percentage) the numerator of which is the then
outstanding principal amount of such Tranche of Term Loans (or, if the Initial
Borrowing Date has not yet occurred, the aggregate Term Loan Commitments of the
Lenders with respect to such Tranche) and the denominator of which is equal to
the then outstanding principal amount of all Term Loans (or, if the Initial
Borrowing Date has not yet occurred, the then Total Term Loan Commitment)). Any
amount required to be applied to any Tranche of Term Loans pursuant to Sections
4.02(d), (e), (f) and (g) shall be applied to repay the outstanding principal
amount of Term Loans of the respective Tranche then outstanding (or, if the
Initial Borrowing Date has not yet occurred, to reduce the Total Tranche A Term
Loan Commitment or the Total Tranche B Term Loan Commitment, as the case may
be). Any such repayment (or reduction) shall first be applied in direct order of
maturity to reduce the then remaining Scheduled Repayments of the respective
Tranche of Term Loans which are due within 12 months after the date of such
repayment (or reduction), with any excess amount of such repayment (or
-29-
<PAGE> 36
reduction) to be applied to the then remaining Scheduled Repayments on a pro
rata basis as otherwise provided below in this Section 4.02(h) unless the
Borrower notifies the Administrative Agent that it does not desire such
application in which event such repayment shall be applied to the then remaining
Scheduled Repayments of the respective Tranche of Term Loans on a pro rata basis
based upon the then remaining principal amounts of the Scheduled Repayments of
the respective Tranche after giving effect to all prior reductions thereto.
(i) With respect to each repayment of Loans required by this
Section 4.02, the Borrower may designate the Types of Loans of the respective
Tranche which are to be repaid and, in the case of Eurodollar Loans, the
specific Borrowing or Borrowings of the respective Tranche pursuant to which
made, provided that: (i) repayments of Eurodollar Loans pursuant to this Section
4.02 may only be made on the last day of an Interest Period applicable thereto
unless all Eurodollar Loans of the respective Tranche with Interest Periods
ending on such date of required repayment and all Base Rate Loans of the
respective Tranche have been paid in full; (ii) if any repayment of Eurodollar
Loans made pursuant to a single Borrowing shall reduce the outstanding
Eurodollar Loans made pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount with respect thereto, such Borrowing shall be converted
at the end of the then current Interest Period into a Borrowing of Base Rate
Loans; and (iii) each repayment of any Loans made pursuant to a Borrowing shall
be applied pro rata among such Loans. In the absence of a designation by the
Borrower as described in the preceding sentence, the Administrative Agent shall,
subject to the above, make such designation in its sole discretion.
(j) Notwithstanding anything to the contrary contained elsewhere
in this Agreement, (i) all then outstanding Swingline Loans shall be repaid in
full on the Swingline Expiry Date and (ii) all other then outstanding Loans
shall be repaid in full on the respective Maturity Date for such Loans.
(k) Notwithstanding anything to the contrary contained in this
Section 4.02 or elsewhere in this Agreement, (x) the Lenders with outstanding
Tranche B Term Loans (the "Tranche B Term Lenders") shall have the option,
without the consent of the Borrower, to waive a voluntary prepayment of such
Loans pursuant to Section 4.01 (a "Waivable Voluntary Repayment") and (y) the
Tranche B Term Lenders shall have the option, without the consent of the
Borrower, to waive a mandatory repayment of such Loans pursuant to Section
4.02(d), (e), (f) and (g) (each such repayment, a "Waivable Mandatory
Repayment") upon the terms and provisions set forth in this Section 4.02(k). The
Borrower shall give the Administrative Agent written notice at least five
Business Days prior to the date of each Waivable Voluntary Repayment or Waivable
Mandatory Repayment, as the case may be, which notice the Administrative Agent
shall promptly forward to all Tranche B Term Lenders (indicating in such notice
the amount of such repayment to be applied to each such Lender's outstanding
Term Loans under such Tranche). In the event any Tranche B Term Lender desires
to waive such Lender's right to receive any such Waivable Voluntary Repayment or
Waivable Mandatory Repayment, as the case may be, in whole or in part, such
Lender shall so advise the Administrative Agent no later than the close of
business two Business Days after the date of such notice from the Administrative
Agent, which notice shall also include the amount such Lender desires to receive
in respect of such repayment. If any Lender does not reply to the
-30-
<PAGE> 37
Administrative Agent within such two Business Day period, it will be deemed not
to have waived any part of such repayment. If any Lender does not specify an
amount it wishes to receive, it will be deemed to have accepted 100% of the
total payment. In the event that any such Lender waives all or part of such
right to receive any such Waivable Voluntary Repayment or Waivable Mandatory
Repayment, as the case may be, the Administrative Agent shall apply 100% of the
amount so waived by such Lender to the Tranche A Term Loans in accordance with
Section 4.01 or Section 4.02(h), as the case may be. Notwithstanding the
foregoing, in no event shall the amount of a Waivable Repayment exceed the
aggregate principal amount of Tranche A Term Loans that will be outstanding
after Lenders with outstanding Tranche A Term Loans receive their respective
shares of voluntary prepayments or mandatory repayments, as the case may be,
pursuant to Section 4.01 or 4.02(h), as the case may be (i.e., before giving
effect to any application of such Waivable Repayment to Tranche A Loans pursuant
to this Section 4.02(k)).
4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made to the Administrative Agent for the account of the Lender or
Lenders entitled thereto not later than 12:00 Noon (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Payment Office. Any payments under this Agreement or under any Note which are
made later than 12:00 Noon (New York time) shall be deemed to have been made on
the next succeeding Business Day. Whenever any payment to be made hereunder or
under any Note shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest shall be payable at the
applicable rate during such extension.
4.04 Net Payments; Taxes. (a) All payments made by any Credit
Party hereunder or under any Note will be made without setoff, counterclaim or
other defense. Except as provided in Section 4.04(b), all such payments will be
made free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of a Lender pursuant to
the laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office or applicable lending office of such Lender is
located or any subdivision thereof or therein) and all interest, penalties or
similar liabilities with respect to such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges (all such non-excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement or
under any Note, after withholding or deduction for or on account of any Taxes,
will not be less than the amount provided for herein or in such Note. If any
amounts are payable in respect of Taxes pursuant to the preceding sentence, the
Borrower agrees to reimburse each Lender, upon the written request of such
Lender, for taxes imposed on or measured by the net income or net profits of
such Lender pursuant to the laws of the jurisdiction in which such Lender is
organized or in which the principal office or applicable lending office of such
Lender is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which such Lender is organized or in which
the principal
-31-
<PAGE> 38
office or applicable lending office of such Lender is located and for any
withholding of taxes as such Lender shall determine are payable by, or withheld
from, such Lender, in respect of such amounts so paid to or on behalf of such
Lender pursuant to the preceding sentence and in respect of any amounts paid to
or on behalf of such Lender pursuant to this sentence. The Borrower will furnish
to the Administrative Agent within 45 days after the date the payment of any
Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower. The Borrower agrees to indemnify and
hold harmless each Lender, and reimburse such Lender upon its written request,
for the amount of any Taxes so levied or imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for U.S. federal income tax
purposes agrees to deliver to the Borrower and the Administrative Agent on or
prior to the Effective Date, or in the case of a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to Section 1.13 or 13.04
(unless the respective Lender was already a Lender hereunder immediately prior
to such assignment or transfer), on the date of such assignment or transfer to
such Lender, (i) two accurate and complete original signed copies of Internal
Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption
under an income tax treaty) (or successor forms) certifying to such Lender's
entitlement as of such date to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Lender is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under
an income tax treaty) pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit D (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio
interest exemption) (or successor form) certifying to such Lender's entitlement
to a complete exemption from United States withholding tax with respect to
payments of interest to be made under this Agreement and under any Note. In
addition, each Lender agrees that from time to time after the Effective Date,
when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, it will deliver to
the Borrower and the Administrative Agent two new accurate and complete original
signed copies of Internal Revenue Service Form W-8ECI or Form W-8BEN (with
respect to the benefits of an income tax treaty), or Form W-8BEN (with respect
to the portfolio interest exemption) and a Section 4.04(b)(ii) Certificate, as
the case may be, and such other forms as may be required in order to confirm or
establish the entitlement as of such date of such Lender to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement and any Note, or it shall immediately notify the
Borrower and the Administrative Agent of its inability to deliver any such Form
or Certificate, in which case such Lender shall not be required to deliver any
such Form or Certificate pursuant to this Section 4.04(b). Notwithstanding
anything to the contrary contained in Section 4.04(a), but subject to Section
13.04(b) and the immediately succeeding sentence, (x) the Borrower shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
Taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, Fees or other amounts payable
hereunder for the account of any Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal
-32-
<PAGE> 39
income tax purposes to the extent that such Lender has not provided to the
Borrower U.S. Internal Revenue Service Forms that establish a complete exemption
from such deduction or withholding and (y) the Borrower shall not be obligated
pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Lender
in respect of Taxes imposed by the United States if (I) such Lender has not
provided to the Borrower the Internal Revenue Service Forms required to be
provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of
a payment, other than interest, to a Lender described in clause (ii) above, to
the extent that such Forms do not establish a complete exemption from
withholding of such taxes. Notwithstanding anything to the contrary contained in
the preceding sentence or elsewhere in this Section 4.04 and except as set forth
in Section 13.04(b), the Borrower agrees to pay any additional amounts and to
indemnify each Lender in the manner set forth in Section 4.04(a) (without regard
to the identity of the jurisdiction requiring the deduction or withholding) in
respect of any Taxes deducted or withheld by it as described in the immediately
preceding sentence as a result of any changes that are effective after the
Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of such Taxes.
SECTION 5. Conditions Precedent to Loans. The obligation of each
Lender to make Loans, and the obligation of each Issuing Bank to issue Letters
of Credit, in each case on the Initial Borrowing Date, is subject at the time of
the making of such Loans or the issuance of such Letters of Credit to the
satisfaction of the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each Lender
which has requested the same, the appropriate Tranche A Term Note, Tranche B
Term Note and/or Revolving Note and to the Swingline Lender if so requested, the
Swingline Note, in each case executed by the Borrower and in the amount,
maturity and as otherwise provided herein.
5.02 Fees, etc. On the Initial Borrowing Date, all costs, fees
and expenses and all other compensation (including, without limitation, legal
fees and expenses, title insurance premiums, survey charges and recording taxes
and fees) payable to the Administrative Agent, the Co-Lead Arrangers and the
Lenders shall have been paid to the extent then due and to the extent that a
statement or statements for such amounts shall have been provided to the
Borrower by no later than the Business Day immediately preceding the Initial
Borrowing Date.
5.03 Opinions of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received from (i) Skadden, Arps, Slate, Meagher
& Flom LLP, special counsel to the Borrower and its Subsidiaries, an opinion
addressed to the Administrative Agent, the Collateral Agent and each of the
Lenders and dated the Initial Borrowing Date covering the matters set forth in
Exhibit E and such other matters incident to the transactions contemplated
herein as the Administrative Agent and the Required Lenders may reasonably
request and in form and substance reasonably satisfactory to the Administrative
Agent and the Required Lenders, (ii) counsel rendering such opinions, reliance
letters addressed to the Administrative Agent and each of the Lenders and dated
the Initial Borrowing Date, with respect to certain other legal opinions
delivered in connection with the Transaction and (iii) local counsel
satisfactory to the Administrative Agent, opinions each of which (x) shall be
addressed to Administrative Agent,
-33-
<PAGE> 40
the Collateral Agent and each of the Lenders and be dated the Initial Borrowing
Date, (y) shall be in form and substance reasonably satisfactory to the
Administrative Agent and the Required Lenders and (z) shall cover the perfection
of security interests granted pursuant to the Security Agreement and the
Mortgages and such other matters incident to the transactions contemplated
herein as the Administrative Agent may reasonably request.
5.04 Corporate Documents; Proceedings; etc. (a) On the Initial
Borrowing Date, the Administrative Agent shall have received a certificate,
dated the Initial Borrowing Date, signed by an Authorized Officer of each Credit
Party, and attested to by the Secretary or any Assistant Secretary of such
Credit Party, as the case may be, in the form of Exhibit F with appropriate
insertions, together with copies of the Certificate of Incorporation and By-Laws
(or equivalent organizational documents) of such Credit Party and the
resolutions of such Credit Party referred to in such certificate, and the
foregoing shall be reasonably satisfactory to the Administrative Agent.
(b) All corporate and legal proceedings and all material
instruments and agreements in connection with the transactions contemplated by
this Agreement and the other Documents shall be reasonably satisfactory in form
and substance to the Administrative Agent and the Required Lenders, and the
Administrative Agent shall have received all information and copies of all
documents and papers, including records of corporate proceedings, governmental
approvals, good standing certificates and bring-down telegrams or facsimiles, if
any, which any Agent reasonably may have requested in connection therewith, such
documents and papers where appropriate to be certified by proper corporate or
governmental authorities.
(c) On the Initial Borrowing Date and after giving effect to the
Transaction, the ownership and capital structure (including, without limitation,
the terms of any capital stock, options, warrants or other securities issued by
the Borrower or any of its Subsidiaries), and management of the Borrower and its
Subsidiaries shall be in form and substance reasonably satisfactory to the
Administrative Agent and the Required Lenders.
5.05 Employee Benefit Plans; Shareholders' Agreements; Management
Agreements; Debt Agreements; Tax Sharing Agreements; Employment Agreements;
Collective Bargaining Agreements and Material Contracts. (a) On the Initial
Borrowing Date, there shall have been made available or delivered to the
Administrative Agent true and correct copies, certified as true and complete by
an appropriate officer of the Borrower, of the following documents, in each case
as the same will be in effect on the Initial Borrowing Date after the
consummation of the Transaction:
(i) all Plans (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500-series, a copy of
the most recent such report (including, to the extent required, the
related financial and actuarial statements and opinions and other
supporting statements, certifications, schedules and information), and
for each Plan that is a "single-employer plan," as defined in Section
4001(a)(15) of ERISA, the most recently prepared actuarial valuation
therefor) and any other "employee benefit plans," as defined in Section
3(3) of ERISA, and any other material agreements, plans or arrangements,
with or for the benefit of current or former employees of the Borrower
or any of its
-34-
<PAGE> 41
Subsidiaries or any ERISA Affiliate (provided that the foregoing shall
apply in the case of any Multiemployer Plan, only to the extent that
any document described therein is in the possession of the Borrower or
any of its Subsidiaries or any ERISA Affiliate or reasonably available
thereto from the sponsor or trustee of any such plan) (collectively,
the "Employee Benefit Plans").
(b) On the Initial Borrowing Date, there shall have been
delivered to the Administrative Agent, to the extent requested by the
Administrative Agent, true and correct copies, certified as true and complete by
an officer of the Borrower, of the following documents, in each case as the same
will be in effect on the Initial Borrowing Date after the consummation of the
Transaction:
(i) all agreements entered into by the Borrower or any of its
Subsidiaries governing the terms and relative rights of its capital
stock and any agreements entered into by shareholders relating to any
such entity with respect to its capital stock (collectively, as amended,
modified, supplemented or replaced to the extent permitted by the terms
hereof, the "Shareholders' Agreements");
(ii) all agreements with members of, or with respect to, the
management of the Borrower or any of its Subsidiaries after giving
effect to the Transaction (collectively, as amended, modified,
supplemented or replaced to the extent permitted by the terms hereof,
the "Management Agreements");
(iii) all agreements evidencing or relating to Indebtedness of the
Borrower or any of its Subsidiaries which is to remain outstanding
immediately after giving effect to the Transaction (collectively, the
"Debt Agreements");
(iv) all tax sharing, tax allocation and other similar agreements
entered into by the Borrower or any of its Subsidiaries (collectively,
as amended, modified, supplemented or replaced to the extent permitted
by the terms hereof, the "Tax Sharing Agreements");
(v) any material employment agreements to which the Borrower or
any of its Subsidiaries is a party after giving effect to the
Transaction (collectively, the "Employment Agreements");
(vi) all collective bargaining agreements applying or relating to
any employee of the Borrower or any of its Subsidiaries after giving
effect to the Transaction (collectively, the "Collective Bargaining
Agreements"); and
(vii) all other material contracts and licenses of the Borrower and
any of its Subsidiaries after giving effect to the Transaction
(collectively, the "Material Contracts");
all of which Employee Benefit Plans, Shareholders' Agreements, Management
Agreements, Debt Agreements, Tax Sharing Agreements, Employment Agreements,
Collective Bargaining Agreements and Material Contracts shall be in form and
substance reasonably satisfactory to the Administrative Agent and shall be in
full force and effect on the Initial Borrowing Date.
-35-
<PAGE> 42
5.06 Consummation of the Transaction. (a) On or prior to the
Initial Borrowing Date, (i) each of the Tenet Acquisition and the
Recapitalization shall have been consummated in accordance with all applicable
law and the respective Transaction Documents, (ii) the Borrower shall have
received gross cash proceeds from the issuance of the Senior Subordinated Notes
in an aggregate principal amount of at least $230,000,000 and the proceeds
thereof shall have been utilized to make payments owing in connection with the
Tenet Acquisition and the Refinancing prior to or concurrently with any use of
the proceeds of Loans, (iii) the Borrower shall have received gross cash
proceeds of approximately $160,000,000 from the issuance of Borrower Preferred
Stock (the "Preferred Equity Issuance") to the Direct Investors and the proceeds
thereof shall have been utilized to make payments owing in connection with the
Tenet Acquisition and the Refinancing prior to or concurrently with any proceeds
of Loans and (iv) the cash proceeds received from the Preferred Equity Issuance
and the issuance of the Senior Subordinated Notes, when added to the aggregate
principal amount of Term Loans incurred on the Initial Borrowing Date, shall be
sufficient to effect the Tenet Acquisition and the Refinancing and to pay fees
and expenses in connection therewith.
(b) On the Initial Borrowing Date, the Administrative Agent shall
have received true and correct copies of all Transaction Documents, Borrower
Preferred Stock Documents and Senior Subordinated Notes Documents, all of which
shall be in full force and effect, and all terms and conditions of the foregoing
Documents (including, without limitation, in the case of the Senior Subordinated
Notes Documents, amortization, maturities, interest rates, covenants, defaults,
remedies, sinking fund provisions and subordination provisions and, in the case
of Borrower Preferred Stock, maturity, limitation on cash dividends payable,
dividend rate, conversion features, covenants and redemption provisions) shall
be in form and substance reasonably satisfactory to the Administrative Agent and
Required Lenders.
(c) On the Initial Borrowing Date, all conditions precedent to
the consummation of the Tenet Acquisition, and the Preferred Equity Issuance and
the Senior Subordinated Notes as set forth in the Tenet Acquisition Documents,
Borrower Preferred Stock Documents and the Senior Subordinated Note Documents,
as the case may be, shall have been satisfied in all material respects, and not
waived unless consented to by the Administrative Agent and the Required Lenders,
to the satisfaction of the Administrative Agent and the Required Lenders.
(d) On the Initial Borrowing Date, each of the Preferred Equity
Issuance and the issuance of the Senior Subordinated Notes shall have been
consummated in accordance with the terms and conditions of the applicable
Documents and all applicable law.
5.07 Refinancing; Existing Indebtedness. (a) On the Initial
Borrowing Date, all Indebtedness to be Refinanced (including the Existing Credit
Facilities) shall have been repaid in full by the Borrower, all commitments in
respect thereof shall have been terminated, all letters of credit (including the
Existing Letters of Credit) issued pursuant to the documents evidencing the
Indebtedness to be Refinanced shall have been terminated, incorporated hereunder
as Letters of Credit as contemplated by Section 2.01(e) or supported by a
back-stop Letter of Credit issued hereunder and all Liens and guaranties in
connection therewith shall have been terminated (and all appropriate releases,
termination statements or other instruments of assignment with respect
-36-
<PAGE> 43
thereto or arrangements therefor shall have been obtained) to the reasonable
satisfaction of the Administrative Agent. Without limiting the foregoing, there
shall have been delivered to the Administrative Agent (x) proper termination
statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC
of each jurisdiction where a financing statement (Form UCC-1 or the appropriate
equivalent) was filed with respect to the Borrower or any of its Subsidiaries in
connection with the security interest created with respect to the Indebtedness
to be Refinanced and the documentation related thereto and (y) terminations (or
arrangements therefor) of all mortgages, leasehold mortgages and deeds of trust
created with respect to property of the Borrower or any of its Subsidiaries, in
each case, to secure the obligations under the Indebtedness to be Refinanced,
all of which shall be in form and substance satisfactory to the Administrative
Agent.
(b) On the Initial Borrowing Date and after giving effect to the
Transaction, the Borrower and its Subsidiaries shall have no Indebtedness or
preferred stock outstanding other than (i) the Loans, (ii) the Senior
Subordinated Notes, (iii) the Borrower Preferred Stock and (iv) certain other
indebtedness existing on the Initial Borrowing Date acceptable to the
Administrative Agent and the Required Lenders as listed on Schedule V.A hereto
in an aggregate outstanding principal amount not to exceed $5,000,000 (with the
Indebtedness described in this sub-clause (iv) being herein called the "Existing
Indebtedness"). On and as of the Initial Borrowing Date, all of the Existing
Indebtedness shall remain outstanding after giving effect to the Transaction and
the other transactions contemplated hereby without any default or event of
default existing thereunder or arising as a result of the Transaction and the
other transactions contemplated hereby (except to the extent amended or waived
by the parties thereto on terms and conditions reasonably satisfactory to the
Administrative Agent and the Required Lenders).
(c) On the Initial Borrowing Date, the Administrative Agent shall
have received evidence in form and substance reasonably satisfactory to the
Administrative Agent that the matters set forth in this Section 5.07 have been
satisfied.
5.08 Guaranties. On the Initial Borrowing Date, each Subsidiary
Guarantor shall have duly authorized, executed and delivered a Subsidiaries
Guaranty in the form of Exhibit G (as modified, supplemented or amended from
time to time, the "Subsidiaries Guaranty") and the Subsidiaries Guaranty shall
be in full force and effect.
5.09 Pledge Agreement; Hypothecation Agreement. (a) On the
Initial Borrowing Date, the Borrower and each Subsidiary Guarantor shall have
duly authorized, executed and delivered a Pledge Agreement in the form of
Exhibit H (as modified, supplemented or amended from time to time, the "Pledge
Agreement"), and each such Credit Party shall have delivered to the Collateral
Agent, as pledgee thereunder, all of the certificates representing the Pledged
Securities referred to therein and owned by such Credit Party on the Initial
Borrowing Date, endorsed in blank (in the case of promissory notes) or
accompanied by executed and undated stock powers (in the case of capital stock),
and the Pledge Agreement shall be in full force and effect.
(b) On the Initial Borrowing Date, each Direct Investor shall
have duly authorized, executed and delivered a Hypothecation Agreement in the
form of Exhibit I (as
-37-
<PAGE> 44
modified, supplemented or amended from time to time, the "Hypothecation
Agreement"), and each such Direct Investor shall have delivered to the
Collateral Agent, as pledgee thereunder, all of the certificates representing
the Pledged Securities referred to therein and owned by such Direct Investor on
the Initial Borrowing Date accompanied by executed and undated stock powers, and
the Hypothecation Agreement shall be in full force and effect.
5.10 Security Agreement. On the Initial Borrowing Date, the
Borrower and each Subsidiary Guarantor shall have duly authorized, executed and
delivered a Security Agreement in the form of Exhibit J (as modified,
supplemented or amended from time to time, the "Security Agreement") covering
all of the Security Agreement Collateral, in each case together with:
(i) proper Financing Statements (Form UCC-1) fully executed for
filing under the UCC or other appropriate filing offices of each
jurisdiction as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests purported
to be created by the Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of a recent date listing all
effective financing statements that name any Credit Party as debtor and
that are filed in the jurisdictions referred to in clause (a) above,
together with copies of such other financing statements (none of which
shall cover the Collateral except to the extent evidencing Permitted
Liens or in respect of which the Collateral Agent shall have received
termination statements (Form UCC-3) or such other termination statements
as shall be required by local law) fully executed for filing;
(iii) evidence of execution for post-closing filing and
recordation of all other recordings and filings of, or with respect to,
the Security Agreement as may be necessary or, in the reasonable opinion
of the Collateral Agent, desirable to perfect the security interests
intended to be created by such Security Agreement; and
(iv) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and
protect the security interests purported to be created by the Security
Agreement have been taken;
and the Security Agreement shall be in full force and effect.
5.11 Mortgages; Title Insurance; Surveys; etc. On the Initial
Borrowing Date, the Collateral Agent shall have received:
(a) fully executed counterparts of mortgages, deeds of trust or
deeds to secure debt, in each case in form and substance reasonably
satisfactory to the Collateral Agent (as amended, modified or
supplemented from time to time, each, a "Mortgage" and, collectively,
the "Mortgages"), which Mortgages shall cover such of the Real Property
owned or leased by the Borrower or any Subsidiary Guarantor (after
giving effect to the Transaction) as shall be designated as "Mortgaged
Properties" on Schedule III (each, a "Mortgaged Property" and,
collectively, the "Mortgaged Properties"), together with
-38-
<PAGE> 45
evidence that counterparts of the Mortgages have been delivered to the
title insurance company insuring the Lien of the Mortgages for
recording in all places to the extent necessary or, in the reasonable
opinion of the Collateral Agent, desirable to effectively create a
valid and enforceable first priority mortgage lien, subject only to
Permitted Encumbrances, on each Mortgaged Property in favor of the
Collateral Agent (or such other trustee as may be required or desired
under local law) for the benefit of the Secured Creditors;
(b) mortgagee title insurance policies (the "Mortgage Policies")
in connection with the Mortgaged Properties issued by Chicago Title
Insurance Company in amounts satisfactory to the Collateral Agent and
the Required Lenders and assuring the Collateral Agent that the
respective Mortgages on such mortgaged properties are valid and
enforceable first priority mortgage liens on the respective Mortgaged
Properties, free and clear of all defects and encumbrances except
Permitted Encumbrances, and such Mortgage Policies shall otherwise be in
form and substance reasonably satisfactory to the Collateral Agent and
(i) include the following endorsements (if available); comprehensive,
survey, contiguity, usury, creditor's rights, subsequent advance, tax,
doing-business, street, variable rate, zoning, environmental protection,
subdivision, tax deed, first loss, last dollar and tie-in, (ii) shall
not include an exception for mechanics' liens (unless such exception has
been insured over by the title company), and (iii) shall provide for
affirmative insurance and such reinsurance as the Collateral Agent in
its discretion may reasonably request;
(c) surveys in form and substance reasonably satisfactory to the
Collateral Agent of each Mortgaged Property, dated a recent date
reasonably acceptable to the Collateral Agent and certified in a manner
reasonably satisfactory to the Collateral Agent by a licensed
professional surveyor satisfactory to the Collateral Agent; and
(d) duly authorized, fully executed, acknowledged and delivered
landlord-lender agreements or owner-lender agreements and landlord
consents and waivers and such other documents relating to the Leaseholds
which are material to the conduct of the Borrower's business or are
subject to a mortgage and all the foregoing shall be in form and
substance reasonably satisfactory to the Collateral Agent.
5.12 Material Adverse Change, etc. (a) Since June 30, 1999, in
the case of the Paracelsus Business and May 31, 1999, in the case of the Tenet
Business, nothing shall have occurred which has had, or would reasonably be
expected to have a Material Adverse Effect or a material adverse change in the
consolidated business, assets, or financial condition or operations of either
Acquired Business.
(b) On or prior to the Initial Borrowing Date, all necessary
governmental (domestic and foreign), regulatory and third party approvals and/or
consents (including any necessary anti-trust approvals or consents) in
connection with the Transaction, the transactions contemplated by the Documents
and otherwise referred to herein or therein shall have been obtained and remain
in full force and effect, and all applicable waiting periods shall have expired
without any action being taken by any competent authority which restrains,
prevents or imposes
-39-
<PAGE> 46
materially adverse conditions upon the consummation of the Transaction, the
making of Loans or the transactions contemplated by the Documents. Additionally,
there shall not exist any judgment, order, injunction or other restraint or a
hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon, or materially
delaying, or making economically unfeasible, the Transaction or the transactions
contemplated by the Documents.
5.13 Litigation. On the Initial Borrowing Date, no actions,
suits, proceedings or investigations by any entity (private or governmental)
shall be pending or, to the knowledge of the Borrower, threatened (a) with
respect to this Agreement or any other Document or the Transaction or (b) which
would reasonably be expected to have a Material Adverse Effect.
5.14 Solvency Certificate; Insurance. On or before the Initial
Borrowing Date, the Borrower shall cause to be delivered to the Administrative
Agent (i) a solvency certificate from the chief financial officer of the
Borrower in the form of Exhibit K hereto, which shall be addressed to the
Administrative Agent and each of the Lenders and be dated the Initial Borrowing
Date, setting forth the conclusion that, after giving effect to the Transaction
and the incurrence of all the financings contemplated herein, each of the
Borrower (on a stand-alone basis), and the Borrower and its Subsidiaries (on a
consolidated basis), in each case, are not insolvent and will not be rendered
insolvent by the indebtedness incurred in connection therewith, and will not be
left with unreasonably small capital with which to engage in its or their
businesses and will not have incurred debts beyond its or their ability to pay
debts as they mature and become due and (ii) certificates of insurance complying
with the requirements of Section 8.03 for the business and properties of the
Borrower and its Subsidiaries, in scope, form and substance reasonably
satisfactory to the Administrative Agent and naming the Collateral Agent as an
additional insured, mortgagee and/or loss payee, and stating that such insurance
shall not be canceled or revised without 30 days' prior written notice by the
insurer to the Collateral Agent.
5.15 Pro Forma Balance Sheet; Financial Statements; Projections.
On or prior to the Initial Borrowing Date, the Administrative Agent and the
Lenders shall have received true and correct copies of the financial statements
(including the pro forma financial statements) and Projections referred to in
Sections 7.05(a), (b) and (e), as applicable, and all of the foregoing shall be
in form and substance reasonably satisfactory to the Agents and the Required
Lenders.
SECTION 6. Conditions Precedent to All Credit Events. The
obligation of each Lender to make Loans (including Loans made on the Initial
Borrowing Date but excluding Mandatory Borrowings made thereafter, which shall
be made as provided in Section 1.01(e)), and the obligation of an Issuing Bank
to issue any Letter of Credit, is subject, at the time of each such Credit Event
(except as hereinafter indicated), to the satisfaction of the following
conditions:
6.01 No Default; Representations and Warranties. At the time of
each such Credit Event and also after giving effect thereto (i) there shall
exist no Default or Event of Default and (ii) all representations and warranties
contained herein or in any other Credit Document shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of such Credit Event (it being understood
and agreed that any representation or warranty which by its terms is made as of
a
-40-
<PAGE> 47
specified date shall be required to be true and correct in all material respects
only as of such specified date).
6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to
the making of each Loan (excluding Swingline Loans and Mandatory Borrowings),
the Administrative Agent shall have received the notice required by Section
1.03(a). Prior to the making of any Swingline Loan, the Swingline Lender shall
have received the notice required by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Issuing Bank shall have received a
Letter of Credit Request meeting the requirements of Section 2.02(a).
The occurrence of the Initial Borrowing Date and the acceptance of the proceeds
of each Credit Event shall constitute a representation and warranty by the
Borrower to the Administrative Agent and each of the Lenders that all the
conditions specified in Section 5 and in this Section 6 and applicable to such
Credit Event have been satisfied as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Administrative Agent at the Notice Office or as otherwise directed by the
Administrative Agent for the account of each of the Lenders and, except for the
Notes, in sufficient counterparts for each of the Lenders and shall be in form
and substance reasonably satisfactory to the Administrative Agent.
SECTION 7. Representations, Warranties and Agreements. In order
to induce the Lenders to enter into this Agreement and to make the Loans, and
issue (or participate in) the Letters of Credit as provided herein, the Borrower
hereby makes the following representations, warranties and agreements, after
giving effect to the Transaction, all of which shall survive the execution and
delivery of this Agreement and the Notes and the making of the Loans and
issuance of the Letters of Credit, with the occurrence of the Initial Borrowing
Date and each Credit Event on or after the Initial Borrowing Date being deemed
to constitute a representation and warranty that the matters specified in this
Section 7 are true and correct in all material respects on and as of the Initial
Borrowing Date, and on the date of each such Credit Event (it being understood
and agreed that any representation or warranty which by its terms is made as of
a specified date shall be required to be true and correct in all material
respects only as of such specified date):
7.01 Corporate Status. Each of the Borrower and its Subsidiaries
(i) is a duly organized and validly existing corporation, limited partnership or
limited liability company, as the case may be, in good standing under the laws
of the jurisdiction of its incorporation, (ii) has the corporate or other
applicable power and authority to own its property and assets and to transact
the business in which it is engaged and presently proposes to engage and (iii)
is duly qualified and is authorized to do business and is in good standing in
each jurisdiction where the conduct of its business requires such qualifications
except for failures to be so qualified which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
-41-
<PAGE> 48
7.02 Corporate Power and Authority. Each Credit Party has the
corporate or other applicable power and authority to execute, deliver and
perform the terms and provisions of each of the Documents to which it is party
and has taken all necessary corporate or other applicable action to authorize
the execution, delivery and performance by it of each of such Documents. Each
Credit Party has duly executed and delivered each of the Documents to which it
is party, and each of such Documents constitutes the legal, valid and binding
obligation of such Credit Party enforceable in accordance with its terms, except
to the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law) and
principles of good faith and fair dealing.
7.03 No Violation. Neither the execution, delivery or performance
by any Credit Party of the Documents to which it is a party, nor compliance by
it with the terms and provisions thereof nor the consummation of the
Transaction, (i) will contravene any provision of any applicable law, statute,
rule or regulation or any applicable order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except pursuant to the Security
Documents) upon any of the properties or assets of any Credit Party or any of
its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, credit agreement or loan agreement, or any other material agreement,
contract or instrument, to which any Credit Party or any of its Subsidiaries is
a party or by which it or any of its property or assets is bound or to which it
may be subject (including, without limitation, the Senior Subordinated Notes
Indenture), (iii) will violate any provision of the Certificate of Incorporation
or By-Laws (or equivalent organizational documents) of any Credit Party or any
of its Subsidiaries or (iv) will, with respect to all leased Real Property,
constitute a default under any lease or will result in an occurrence which, with
the giving of notice or the lapse of time, or both, would constitute an event of
default pursuant to any such lease, except in the case of clauses (i), (ii) and
(iv), in the case of the Documents other than the Credit Documents, to the
extent that such contravention, conflict, breach, default, Lien or event of
default would not reasonably be expected to have a Material Adverse Effect. In
addition, no landlord under any such lease will have the right to terminate or
cancel any such lease or recapture the demised premises due to the execution and
delivery of this Agreement or consummation of the Transaction.
7.04 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made on or prior to the Initial Borrowing
Date (and which remain in full force and effect on the Initial Borrowing Date)
or, in the case of any filings or recordings in respect of the Security
Documents executed on the Initial Borrowing Date, will be made within 10 days
thereof except to the extent otherwise provided in the Security Documents), or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize, or is required in
connection with, (i) the execution, delivery and performance of any Document or
(ii) the legality, validity, binding effect or enforceability of any Document.
-42-
<PAGE> 49
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. (a) The consolidated balance sheets of IHC and
each of the Acquired Businesses for the fiscal period ended on June 30, 1999, in
the case of IHC, December 31, 1997, December 31, 1998 and the six month period
ending June 30, 1999, in the case of Paracelsus, and May 31, 1998 and May 31,
1999, in the case of Tenet, respectively, and the related consolidated
statements of income, cash flows and interdivision account of IHC and each of
the Acquired Businesses for the fiscal periods ended on such dates, copies of
which have been furnished to the Lenders prior to the Effective Date, present
fairly in all material respects the financial position of IHC and each of the
Acquired Businesses, as the case be, at the dates of such balance sheets and the
results of the operations of the each of the Acquired Businesses for the periods
covered thereby. All of the foregoing historical financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied.
(b) The unaudited pro forma consolidated balance sheet and
related statement of income of the Borrower and its Subsidiaries as of June 30,
1999 and for the fiscal year ended on such date, after giving effect to the
Transaction, copies of which have been furnished to the Lenders prior to the
Effective Date, present fairly in all material respects the pro forma
consolidated financial position of the Borrower and its Subsidiaries as at June
30, 1999, and the pro forma consolidated results of operations of the Borrower
and its Subsidiaries for the period covered thereby.
(c) On and as of the Initial Borrowing Date, on a pro forma basis
after giving effect to the Transaction and all other transactions contemplated
by the Documents and to all Indebtedness (including the Loans and the Senior
Subordinated Notes) being incurred or assumed, and Liens created by each Credit
Party in connection therewith, with respect to each of the Borrower,
individually, and the Borrower and its Subsidiaries taken as a whole, (x) the
sum of the assets, at a fair valuation, of the Borrower, individually, and the
Borrower and its Subsidiaries taken as a whole, will exceed its (or their)
debts; (y) it has (or they have) not incurred and does (or do) not intend to
incur, nor believes (or believe) that it (or they) will incur debts beyond its
(or their) ability to pay such debts as such debts mature; and (z) it (or they)
will have sufficient capital with which to conduct its (or their) business. For
purposes of this Section 7.05(c), "debt" means any liability on a claim and
"claim" means (i) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured or (ii) right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(d) Except as fully disclosed in the financial statements
(including the pro forma financial statements) delivered pursuant to Section
7.05(a) and 7.05(b), or as disclosed in the Transaction Documents and the
schedules thereto, there were as of the Initial Borrowing Date no liabilities or
obligations with respect to the Borrower or any of its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in the aggregate, would be
adversely material to the Borrower or any of its Subsidiaries. As of the Initial
Borrowing Date, none of the Borrower or its Subsidiaries knows of any basis for
the assertion against it of any liability or obligation of any nature that is
not fully
-43-
<PAGE> 50
disclosed in the financial statements delivered pursuant to Section 7.05(a) and
7.05(b) which, either individually or in the aggregate, have or would reasonably
be likely to have a Material Adverse Effect.
(e) On and as of the Initial Borrowing Date, the Projections
which have been delivered to the Administrative Agent and the Lenders on or
prior to the Effective Date are based on good faith estimates and assumptions
believed by management of the Borrower to be reasonable as of the date of such
Projections. On the Initial Borrowing Date, the Borrower believes that the
Projections are reasonable and attainable (it being understood that nothing
contained in this Section 7.05(e) shall constitute a representation that the
results forecasted in such Projections will in fact be achieved). There is no
fact known to the Borrower or any of its Subsidiaries which would have a
Material Adverse Effect which has not been disclosed herein or in such
documents, certificates and statements furnished to the Lenders for use in
connection with the transactions contemplated hereby.
(f) Since June 30, 1999 (but after giving effect to the
Transaction as if the same had occurred prior thereto), nothing has occurred
that has had or would reasonably be expected to have a Material Adverse Effect.
(g) The assets and liabilities, and the business, of the Tenet
Business acquired by the Borrower pursuant to the Tenet Acquisition Documents
comprise all of the assets which are necessary to conduct the business of the
Tenet Business as conducted during the period covered by the financial
statements referred to in Section 7.05(a).
(h) The assets and liabilities, and the business, of Paracelsus
acquired by the Borrower pursuant to the Paracelsus Recapitalization Documents
comprise all of the assets which are necessary to conduct the business of the
Paracelsus Business as conducted during the period covered by the financial
statements referred to in Section 7.05(a).
7.06 Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of the Borrower, threatened (i) on
the Initial Borrowing Date with respect to any Document or the Transaction or
(ii) with respect to any Credit Party or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
7.07 True and Complete Disclosure. All information (taken as a
whole) prepared by or on behalf of the Borrower or any of its Subsidiaries and
furnished in writing to the Administrative Agent or any Lender (including,
without limitation, all information contained in the Documents) for purposes of
or in connection with this Agreement, the other Credit Documents or any
transaction contemplated herein or therein is, and all other such information
(taken as a whole) hereafter prepared by or on behalf of any such Person and
furnished in writing to the Administrative Agent or any Lender will be true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any material fact
necessary to make such information (taken as a whole) not materially misleading
at such time in light of the circumstances under which such information was
provided.
-44-
<PAGE> 51
7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of all
Revolving Loans and all Swingline Loans shall be used for the Borrower's and its
Subsidiaries' general corporate and working capital purposes (including, without
limitation, to make Capital Expenditures and finance Permitted Acquisitions) and
shall not be used to finance the Transaction (other than working capital
adjustments required in connection with the Tenet Acquisition and the Paracelsus
Acquisition pursuant to the Transaction Documents).
(b) The proceeds of the Term Loans incurred on the Initial
Borrowing Date shall be used to finance, in part, the consummation of the Tenet
Acquisition and the Refinancing and to pay fees and expenses owing in connection
therewith.
(c) No part of the proceeds of any Loan will be used to purchase
or carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock. Neither the making of any Loan nor the use of the
proceeds thereof nor the occurrence of any other Credit Event will violate or be
inconsistent with the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
7.09 Tax Returns and Payments. The Borrower and each of its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and adequately disclosed and fully provided for on
the financial statements of the Borrower and its Subsidiaries in accordance with
generally accepted accounting principles. The Borrower and each of its
Subsidiaries have at all times paid, or have provided adequate reserves (in the
good faith judgment of the management of the Borrower) for the payment of, all
federal, state and foreign taxes applicable for all prior fiscal years and for
the current fiscal year to date. There is no action, suit, proceeding,
investigation, audit, or claim now pending or, to the knowledge of the Borrower
or any of its Subsidiaries, threatened by any authority regarding any taxes
relating to the Borrower or any of its Subsidiaries. Neither the Borrower nor
any of its Subsidiaries has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Borrower or
any of its Subsidiaries, or is aware of any circumstances that would cause the
taxable years or other taxable periods of the Borrower or any of its
Subsidiaries not to be subject to the normally applicable statute of
limitations.
7.10 Compliance with ERISA. Except to the extent that any of the
following, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect, each Plan (and each related trust, insurance
contract or fund) is in substantial compliance with its terms and with all
applicable laws, including without limitation, ERISA and the Code; each Plan
(and each related trust, if any) which is intended to be qualified under Section
401(a) of the Code has received a determination letter from the Internal Revenue
Service to the effect that it meets the requirements of Sections 401(a) and
501(a) of the Code; no Reportable Event has occurred; no Plan which is a
Multiemployer Plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or
in reorganization; no Plan has an Unfunded Current Liability; no Plan which is
subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency, within the meaning of such sections of the Code or ERISA, or
has applied for
-45-
<PAGE> 52
or received a waiver of an accumulated funding deficiency or an extension of any
amortization period, within the meaning of Section 412 of the Code or Section
303 or 304 of ERISA; all contributions required to be made with respect to a
Plan and each Multiemployer Plan have been timely made; neither the Borrower nor
any of its Subsidiaries nor any ERISA Affiliate has incurred any liability
(including any indirect, contingent or secondary liability) to or on account of
a Plan or a Multiemployer Plan pursuant to Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971
or 4975 of the Code or expects to incur any such liability under any of the
foregoing sections with respect to any Plan or Multiemployer Plan; no condition
exists which presents a material risk to the Borrower or any of its Subsidiaries
or any ERISA Affiliate of incurring a liability to or on account of a Plan or a
Multiemployer Plan pursuant to the foregoing provisions of ERISA and the Code;
no proceedings have been instituted to terminate or appoint a trustee to
administer any Plan which is subject to Title IV of ERISA; no action, suit,
proceeding, hearing, audit or investigation with respect to the administration,
operation or the investment of assets of any Plan (other than routine claims for
benefits) is pending, expected or threatened; using actuarial assumptions and
computation methods consistent with Part 1 of subtitle E of Title IV of ERISA,
the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA
Affiliates to all Plans which are Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Plan ended prior to the date of the most recent Credit Event, would not
exceed $1,000,000; each group health plan (as defined in Section 607(1) of ERISA
or Section 4980B(g)(2) of the Code) which covers or has covered employees or
former employees of the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate has at all times been operated in compliance with the provisions of
Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien
imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary
of the Borrower or any ERISA Affiliate exists or is likely to arise on account
of any Plan or Multiemployer Plan; and the Borrower and its Subsidiaries may
cease contributions to or terminate any employee benefit plan maintained by any
of them without incurring any liability.
7.11 The Security Documents. (a) On and after the Initial
Borrowing Date, (i) the provisions of the Security Agreement are effective to
create in favor of the Collateral Agent for the benefit of the Secured Creditors
a legal, valid and enforceable security interest in all right, title and
interest of the Credit Parties in the Security Agreement Collateral described
therein and (ii) the Security Agreement, upon the filing of Form UCC-1 financing
statements or the appropriate equivalent (which filings, if this representation
is being made more than 10 days after the Initial Borrowing Date, have been
made), creates a fully perfected first lien on, and security interest in, all
right, title and interest in all of the Security Agreement Collateral described
therein, subject to no other Liens other than Permitted Liens, to the extent a
security interest in such collateral can be perfected by the filing of a
financing statement. The recordation of the Grant of Security Interest in U.S.
Patents and Trademarks in the form attached to the Security Agreement in the
United States Patent and Trademark Office, together with filings on Form UCC-1
made pursuant to the Security Agreement will be effective when recorded or filed
(which recordings or filings, if this representation is being made more than 10
days after the Initial Borrowing Date, have been made), under applicable law, to
perfect the security interest granted to the Collateral Agent in the trademarks
and patents covered by the Security Agreement
-46-
<PAGE> 53
and identified in such Grant of Security Interest and the recordation of the
Grant of Security Interest in U.S. Copyrights in the form attached to the
Security Agreement with the United States Copyright Office, together with
filings on Form UCC-1 made pursuant to the Security Agreement, will be effective
when recorded or filed (which recordings or filings, if this representation is
being made more than 10 days after the Initial Borrowing Date, have been made)
under federal law to perfect the security interest granted to the Collateral
Agent in the copyrights covered by the Security Agreement and identified in such
Grant of Security Interest.
(b) On and after the Initial Borrowing Date, assuming the
Collateral Agent continues to retain possession of the applicable Pledged
Securities, the security interests created in favor of the Collateral Agent, as
pledgee, for the benefit of the Secured Creditors under the Pledge Agreement
constitute first priority perfected security interests in the Pledged Securities
described in the Pledge Agreement, in the case of pledges by the Borrower and
the Subsidiary Guarantors, subject to no security interests of any other Person.
Assuming the Collateral Agent continues to retain possession of the applicable
Pledged Securities, no filings or recordings are required in order to perfect
(or maintain the perfection or priority of) the security interests created in
the Pledged Securities and the proceeds thereof under the Pledge Agreement.
(c) On and after the Initial Borrowing Date, assuming the
Collateral Agent continues to retain possession of the applicable pledged
securities (as defined in the Hypothecation Agreement), the security interests
created in favor of the Collateral Agent, as pledgee, for the benefit of the
Secured Creditors under the Hypothecation Agreement constitute first priority
perfected security interests in the pledged securities described in the
Hypothecation Agreement. Assuming the Collateral Agent continues to retain
possession of the applicable pledged securities, no filings or recordings are
required in order to perfect (or maintain the perfection or priority of) the
security interests created in the pledged securities and the proceeds thereof
under the Hypothecation Agreement.
(d) On and after the Initial Borrowing Date, the Mortgages
create, as security for the obligations purported to be secured thereby, a valid
and enforceable perfected security interest in and mortgage lien on all of the
Mortgaged Properties in favor of the Collateral Agent (or such other trustee as
may be required or desired under local law) for the benefit of the Secured
Creditors, superior to and prior to the rights of all third persons (except that
the security interest and mortgage lien created in the Mortgaged Properties may
be subject to the Permitted Encumbrances related thereto) and subject to no
other Liens (other than Permitted Liens). On and after the Effective Date, the
Borrower and each of its Subsidiaries have good and indefeasible title to all
fee-owned Mortgaged Properties and valid leasehold title to all Leaseholds
(except to the extent that the failure to have such title to any such Leasehold
would not reasonably be expected to have a Material Adverse Effect), in each
case free and clear of all Liens and title exceptions except those described in
the first sentence of this subsection (d).
7.12 Representations and Warranties in Other Documents. All
representations and warranties of the Borrower and its Subsidiaries set forth in
the other Documents were true and correct in all material respects at the time
as of which such representations and warranties were made (or deemed made) and
shall be true and correct in all material respects as of the Initial Borrowing
Date as if such representations or warranties were made on and as of such date,
unless
-47-
<PAGE> 54
stated to relate to a specific earlier date, in which case such representations
or warranties shall be true and correct in all material respects as of such
earlier date.
7.13 Properties. The Borrower and each of its Subsidiaries have
good and valid title to all material properties owned by them, including, after
the Initial Borrowing Date, all material property reflected in the most recent
balance sheets referred to in Section 7.05(a) and in the pro forma balance sheet
referred to in Section 7.05(b) (except as sold or otherwise disposed of since
the Initial Borrowing Date in accordance with the terms of this Agreement), free
and clear of all Liens and title exceptions, other than Permitted Liens
permitted by Section 9.01. On the Initial Borrowing Date, Schedule III sets
forth a true and complete description of all Real Property owned or leased by
the Borrower and/or its Subsidiaries and sets forth the direct owner or lessee
thereof.
7.14 Capitalization. On the Initial Borrowing Date and after
giving effect to the Transaction and the IHC Merger (but without giving effect
to any Equity Plan), the authorized capital stock of the Borrower shall consist
of (i) 5,000,000 shares of common stock, $.01 par value per share (such
authorized shares of common stock, together with any subsequently authorized
shares of common stock of the Borrower, the "Borrower Common Stock"), of which
1,250,000 shares shall be issued and outstanding and owned beneficially and of
record by the Direct Investors and (ii) 550,000 shares of Borrower Preferred
Stock, of which 160,000.10 shares shall be issued and outstanding and owned
beneficially and of record by the Direct Investors. All such outstanding shares
have been duly and validly issued, are fully paid and non-assessable and have
been issued in compliance with any existing preemptive rights. On the Initial
Borrowing Date, neither the Borrower nor its Subsidiaries has any outstanding
securities convertible into or exchangeable for its membership interest or
capital stock, as the case may be, or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreement providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its membership interests or capital stock, as the
case may be, other than in the case of the Borrower's stock, pursuant to any
Equity Plan.
7.15 Subsidiaries. After giving effect to the Transaction, the
Borrower will have no Subsidiaries other than (i) those Subsidiaries listed on
Schedule VI and (ii) new Subsidiaries created in compliance with Section 9.14.
Schedule VI correctly sets forth, as of the Initial Borrowing Date and after
giving effect to the Transaction, the percentage ownership (direct and indirect)
of the Borrower in each class of capital stock or other equity interest of each
of its Subsidiaries and also identifies the direct owner thereof. On and after
the Effective Date, all outstanding shares of capital stock of each Subsidiary
of the Borrower have been duly and validly issued, are fully paid and
non-assessable and have been issued free of preemptive rights. No Subsidiary of
the Borrower has any outstanding securities convertible into or exchangeable for
its capital stock or outstanding any right to subscribe for or to purchase, or
any options or warrants for the purchase of, or any agreement providing for the
issuance (contingent or otherwise) of or any calls, commitments or claims of any
character relating to, its capital stock or any stock appreciation or similar
rights except in connection with the Hospital Investment Program.
7.16 Compliance with Statutes, etc. Each of the Borrower and its
Subsidiaries, is in compliance with all applicable statutes, regulations and
orders of, and all applicable
-48-
<PAGE> 55
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property, as
applicable (excluding applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls, which are governed by Section
7.19), except such noncompliances as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.17 Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
7.18 Public Utility Holding Company Act. Neither the Borrower nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
7.19 Environmental Matters. (a) Except to the extent that any of
the following, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, (i) the Borrower and each of its
Subsidiaries has complied with, and on the date of each Credit Event will be in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws, (ii) there are no past, pending
or, to the best knowledge of the Borrower after due inquiry, past or threatened
Environmental Claims against the Borrower or any of its Subsidiaries or any Real
Property owned, operated or occupied by the Borrower or any of its Subsidiaries
and (iii) there are no facts, circumstances, conditions or occurrences with
respect to the business or operation of the Borrower or any of its Subsidiaries,
or any Real Property owned, operated or occupied by the Borrower or any of its
Subsidiaries that would reasonably be expected (i) to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries or any such
Real Property, as the case may be, or (ii) to cause any such Real Property to be
subject to any restrictions on the ownership, occupancy, use or transferability
of such Real Property, by the Borrower or any of its Subsidiaries under any
applicable Environmental Law.
(b) Except to the extent that any of the following, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect, (i) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from any Real Property owned,
operated or occupied by the Borrower or any of its Subsidiaries, where such
generation, use, treatment or storage has violated or would reasonably be
expected to violate any Environmental Law or give rise to liability under any
Environmental Law and (ii) Hazardous Materials have not been Released on or from
any Real Property owned, operated or occupied by the Borrower or any of its
Subsidiaries, where such Release has violated or would reasonably be expected to
violate any applicable Environmental Law or give rise to liability under any
Environmental Law.
7.20 Labor Relations. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice that would reasonably be
expected to have a Material Adverse Effect; and there is (i) no unfair labor
practice complaint pending against the Borrower or any of its Subsidiaries or,
to the best knowledge of the Borrower, threatened against any of
-49-
<PAGE> 56
them, before the National Labor Relations Board, and no material grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Borrower or any of its Subsidiaries or, to
the best knowledge of the Borrower, threatened against any of them, (ii) no
strike, labor dispute, slowdown or stoppage pending against the Borrower or any
of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against the Borrower or any of its Subsidiaries, as the case may be, and (iii)
to the best knowledge of the Borrower, no union representation proceeding is
pending with respect to the employees of the Borrower or any of its
Subsidiaries, except (with respect to any matter specified in clause (i), (ii)
or (iii) above, either individually or in the aggregate) such as would not
reasonably be expected to have a Material Adverse Effect.
7.21 Patents, Licenses, Franchises and Formulas. Each of the
Borrower and its Subsidiaries owns or has a valid license to use all material
patents, trademarks, permits, service marks, trade names, copyrights, licenses,
franchises and formulas, or rights with respect to the foregoing, and has
obtained assignments of all leases and other rights of whatever nature,
necessary for the present conduct of its business, without any known conflict
with the rights of others, except to the extent that the failure to so own or
have a license or right, obtain or be without conflict would not reasonably be
expected to have a Material Adverse Effect.
7.22 Indebtedness. (a) Schedule V.A sets forth a true and
complete list of all Existing Indebtedness of the Borrower and its Subsidiaries
as of the Initial Borrowing Date and which is to remain outstanding after giving
effect to the Transaction, in each case showing the aggregate principal amount
thereof and the name of the respective borrower and any other entity which
directly or indirectly guaranteed such debt.
(b) Schedule V.B sets forth a true and complete list of all
Indebtedness of the Borrower and its Subsidiaries to be Refinanced (the
"Indebtedness to be Refinanced"), in each case showing the aggregate principal
amount thereof, the name of the respective borrower and any other entity which
directly or indirectly guaranteed such Indebtedness.
7.23 Transaction. At the time of consummation thereof, each
element of the Transaction shall have been consummated in all material respects
in accordance with the terms of the respective Documents and all applicable
laws. At the time of consummation of each element of the Transaction, all
material consents and approvals of, and filings and registrations with (or, in
the case of any filing in respect of the Security Documents executed on the
Initial Borrowing Date, will be made within 10 days thereof), and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required in order to make or consummate the Transaction will
have been obtained, given, filed or taken and are or will be in full force and
effect (or effective judicial relief with respect thereto has been obtained).
All applicable waiting periods with respect thereto have or, prior to the time
when required, will have, expired without, in all such cases, any action being
taken by any competent authority which restrains, prevents, or imposes material
adverse conditions upon the Transaction. Additionally, there does not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon any element of the Transaction, or the occurrence of any Credit
Event or the performance by any Credit Party of its obligations under the
respective Credit Documents. All actions taken by each
-50-
<PAGE> 57
Credit Party pursuant to or in furtherance of the Transaction have been taken in
all material respects in compliance with the respective Documents and all
applicable laws.
7.24 Year 2000 Compliance. The Borrower has reviewed its
operations and those of its Subsidiaries with a view to assessing whether its
businesses, or the businesses of any of its Subsidiaries, will be vulnerable to
a Y2K Problem or will be vulnerable in any material respect to the effects of a
Y2K Problem suffered by any of the Borrower or any of its Subsidiaries' major
customers and suppliers. The Borrower represents and warrants that it has a
reasonable basis to believe, and that it does believe, that no Y2K Problem will
cause a Material Adverse Effect.
7.25 Subordination. The subordination provisions contained in the
Senior Subordinated Notes Documents are enforceable against the Borrower, the
Subsidiary Guarantors and the holders of the Senior Subordinated Notes, and all
Obligations hereunder and under the other Credit Documents (including, without
limitation, pursuant to the Subsidiaries Guaranty) are within the definitions of
"Senior Debt" and "Designated Senior Debt" included in such subordination
provisions. There exists no Designated Senior Debt for purposes of, and as
defined in, the Senior Subordinated Notes Indenture (other than the
Obligations).
7.26 Actions Prior to the Initial Borrowing Date. During the
period commencing on the date of the consummation of the Recapitalization and
ending on the Initial Borrowing Date, the Borrower has not paid any Dividend,
sold or transferred any asset (other than sales of inventory in the ordinary
course of business and transfers among the Borrower and its Subsidiaries), made
any Acquisition (other than pursuant to the Transactions), or entered into any
transaction which would constitute a violation of Section 9.06 had such section
been effective during such period.
SECTION 8. Affirmative Covenants. The Borrower hereby covenants
and agrees that in the case of the covenants described below on and after the
Effective Date and until the Total Commitments and all Letters of Credit have
terminated and the Loans, Notes and Unpaid Drawings, together with interest,
Fees and all other obligations incurred hereunder and thereunder are paid in
full (other than any indemnity, not then due and payable, which by its terms
shall survive such termination and payment):
8.01 Information Covenants. The Borrower will furnish to each
Lender:
(a) Quarterly Financial Statements. Within 45 days after the
close of the first three quarterly accounting periods in each fiscal
year of the Borrower, the consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as at the end of such quarterly accounting
period and the related consolidated statements of income and cash flows,
in each case, for such quarterly accounting period and for the elapsed
portion of the fiscal year ended with the last day of such quarterly
accounting period and, in each case, setting forth comparative figures
(if available) for the related periods in the prior fiscal year and the
budgeted figures for such quarterly periods as set forth in the
respective budget delivered pursuant to Section 8.01(d), all of which
shall be certified by an Authorized Officer of the Borrower, subject to
normal year-end audit adjustments.
-51-
<PAGE> 58
(b) Annual Financial Statements. Within 90 days after the close
of each fiscal year of the Borrower, (i) the consolidated balance sheets
of the Borrower and its Consolidated Subsidiaries as at the end of such
fiscal year and the related consolidated statements of income and
retained earnings and of cash flows for such fiscal year setting forth
comparative figures for the preceding fiscal year and financial
statements certified by Ernst & Young LLP, or such other independent
certified public accountants of recognized national standing reasonably
acceptable to the Administrative Agent, together with a report of such
accounting firm stating that in the course of its regular audit of the
financial statements of the Borrower and its Subsidiaries, which audit
was conducted in accordance with generally accepted auditing standards,
such accounting firm obtained no knowledge of any Default or Event of
Default relating to financial matters which has occurred and is
continuing or, if in the opinion of such accounting firm such a Default
or Event of Default has occurred and is continuing, a statement as to
the nature thereof, and (ii) management's discussion and analysis of the
important operational and financial developments during such fiscal
year.
(c) Management Letters. Promptly after the receipt thereof by the
Borrower or any of its Subsidiaries, a copy of any "management letter"
received by any such Person from its certified public accountants and
the management's responses thereto.
(d) Budgets. No later than 60 days following the commencement of
the first day of each fiscal year of the Borrower, a budget of Borrower
and its Subsidiaries prepared by the Borrower for each fiscal quarter of
such fiscal year prepared in detail, accompanied by the statement of the
an Authorized Officer of the Borrower to the effect that, to the best of
the knowledge of such officer, the budget is a reasonable estimate for
the period covered thereby.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 8.01(a) and (b), a
certificate of an Authorized Officer of the Borrower to the effect that,
to the best of such officer's knowledge, no Default or Event of Default
has occurred and is continuing or, if any Default or Event of Default
has occurred and is continuing, specifying the nature and extent
thereof, which certificate shall, (x) set forth the calculations
required to establish whether the Borrower was in compliance with the
provisions of Sections 4.02(d), (e), (f) and (g) (but with respect to
Section 4.02(g) only to the extent delivered with the financial
statements required by Sections 8.01(b)), and 9.02 through 9.10,
inclusive, at the end of such fiscal quarter or year, as the case may
be, (y) set forth the calculation of the Available J.V. Basket Amount
and the Permitted Expenditure Amount at the end of the period covered by
such financial statements and all sources and uses of proceeds relating
to the calculation thereof and (z) if delivered with the financial
statements required by Section 8.01(b), set forth (in reasonable detail)
the amount of, and the calculations required to establish the amount of,
Excess Cash Flow for the respective Excess Cash Payment Period.
(f) Notice of Default or Litigation. Promptly, and in any event
within three Business Days after an officer of the Borrower or any of
its Subsidiaries obtains knowledge thereof, notice of (i) the occurrence
of any event which constitutes a Default
-52-
<PAGE> 59
or Event of Default and (ii) any litigation or governmental
investigation or proceeding pending or threatened (x) against the
Borrower or any of its Subsidiaries which would reasonably be expected
to have a Material Adverse Effect, (y) with respect to any Material
Indebtedness of the Borrower or any of its Subsidiaries or (z) with
respect to any Document.
(g) Other Reports and Filings. Promptly, copies of all financial
information, proxy materials and other information and reports, if any,
which the Borrower or any of its Subsidiaries shall file with the
Securities and Exchange Commission or any successor thereto (the "SEC")
or deliver to holders of its Material Indebtedness pursuant to the terms
of the documentation governing such Indebtedness (or any trustee, agent
or other representative therefor).
(h) Environmental Matters. Promptly upon, and in any event within
thirty days after, an officer of the Borrower or any of its Subsidiaries
obtains knowledge thereof, notice of one or more of the following
environmental matters which occurs after the Initial Borrowing Date
unless such environmental matters could not, individually or when
aggregated with all other such environmental matters, be reasonably
expected to have a Material Adverse Effect:
(i) any Environmental Claim pending or threatened in
writing against the Borrower or any of its Subsidiaries or any
Real Property owned, operated or occupied by the Borrower or any
of its Subsidiaries;
(ii) any condition or occurrence on or arising from any Real
Property owned, operated or occupied by the Borrower or any of
its Subsidiaries that (a) results in noncompliance by the
Borrower or any of its Subsidiaries with any applicable
Environmental Law or (b) would reasonably be expected to form the
basis of an Environmental Claim against the Borrower or any of
its Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property owned,
operated or occupied by the Borrower or any of its Subsidiaries
that would reasonably be expected to cause such Real Property to
be subject to any restrictions on the ownership, occupancy, use
or transferability by the Borrower or any of its Subsidiaries of
such Real Property under any Environmental Law; and
(iv) the taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous
Material on any Real Property owned, operated or occupied by the
Borrower or any of its Subsidiaries as required by any
Environmental Law or any governmental or other administrative
agency; provided that in any event the Borrower shall deliver to
the Administrative Agent all material notices received by it or
any of its Subsidiaries from any government or governmental
agency under, or pursuant to, CERCLA.
-53-
<PAGE> 60
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial
action and the Borrower's or such Subsidiary's response thereto. In
addition, the Borrower will provide the Lenders with copies of all
material communications with any government or governmental agency and
all material communications with any Person relating to any
Environmental Claim of which notice is required to be given pursuant to
this Section 8.01(h), and such detailed reports of any such
Environmental Claim as to which notice is required, as may reasonably be
requested by the Administrative Agent or the Lenders.
(i) Notice of Commitment Reductions and Mandatory Repayments. On
or prior to the date of any reduction to the Total Commitment or any
mandatory repayment of outstanding Term Loans pursuant to any of
Sections 4.02(e) through (g), inclusive, the Borrower shall provide
written notice of the amount of the respective reduction or repayment,
as the case may be, to the Total Revolving Loan Commitment or the
outstanding Term Loans, as applicable, the calculation thereof (in
reasonable detail) and the event to which the respective reduction or
repayment relates.
(j) Other Information. From time to time, such other information
or documents (financial or otherwise) with respect to the Borrower or
its Subsidiaries as the Administrative Agent or any Lender may
reasonably request in writing.
8.02 Books, Records and Inspections. The Borrower will, and will
cause each of its Subsidiaries to, keep in all material respects proper books of
record and account in which are made full, true and correct entries in
conformity with generally accepted accounting principles and all requirements of
law. The Borrower will, and will cause each of its Subsidiaries to, permit
officers and designated representatives of the Administrative Agent or any
Lender to visit and inspect, during regular business hours and under guidance of
officers of the Borrower, any of the properties of the Borrower or such
Subsidiary in whomsoever's possession, and to examine the books of account of
the Borrower or such Subsidiary and discuss the affairs, finances and accounts
of the Borrower or such Subsidiary with, and be advised as to the same by, its
and their officers and independent accountants, all upon reasonable advance
notice and at such reasonable times and intervals and to such reasonable extent
as the Administrative Agent or such Lender may request.
8.03 Maintenance of Property; Insurance. (a) The Borrower will,
and will cause each of its Subsidiaries to, (i) keep all material properties and
equipment used in its business in good working order and condition (ordinary
wear and tear and loss or damage by casualty or condemnation excepted), (ii)
maintain in full force and effect insurance with reputable and solvent insurance
carriers on all its property in at least such amounts, against at least such
risks and with such deductibles or self-insured retentions as is consistent and
in accordance with industry practice and (iii) furnish to each Lender, upon
written request, full information as to the insurance carried.
(b) The Borrower will, and will cause its Subsidiaries to, at all
times keep their respective property insured in favor of the Collateral Agent,
and all policies (including the Mortgage Policies) or certificates (or certified
copies thereof) with respect to such insurance (and
-54-
<PAGE> 61
any other insurance maintained by the Borrower or any of its Subsidiaries) (i)
shall be endorsed to the Collateral Agent's satisfaction for the benefit of the
Collateral Agent (as certificate holder, mortgagee and loss payee with respect
to Real Property, certificate holder and loss payee with respect to personal
property and additional insured with respect to general liability and umbrella
liability coverage), and (ii) shall state that such insurance policies shall not
be canceled or materially revised without 30 days' prior written notice thereof
by the respective insurer to the Collateral Agent.
(c) If the Borrower or any of its Subsidiaries shall fail to
maintain all insurance in accordance with this Section 8.03, or if the Borrower
or any of its Subsidiaries shall fail to so endorse all policies or certificates
with respect thereto, the Administrative Agent and/or the Collateral Agent shall
have the right (but shall be under no obligation) to procure such insurance and
the Borrower agrees to reimburse the Administrative Agent or the Collateral
Agent as the case may be, for all costs and expenses of procuring such
insurance.
8.04 Corporate Franchises. The Borrower will, and will cause each
of its Subsidiaries, to do or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and, except to the extent that
the failure to do so could not reasonably be expected to have a Material Adverse
Effect, its rights, franchises, licenses and patents used in its business;
provided, however, that any transaction permitted by Section 9.02 will not
constitute a breach of this Section 8.04.
8.05 Compliance with Statutes, etc. The Borrower will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except such noncompliances as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
8.06 Compliance with Environmental Laws. (a) Except to the extent
that the failure to do so could not reasonably be expected to have a Material
Adverse Effect, (i) the Borrower will comply, and will cause each of its
Subsidiaries to comply, in all material respects with all Environmental Laws
applicable to the operation of its business or to the ownership or use of Real
Property now or hereafter owned, operated or occupied by the Borrower or any of
its Subsidiaries, will within a reasonable time period pay or cause to be paid
all costs and expenses incurred in connection with such compliance (except to
the extent being contested in good faith), and will undertake all reasonable
efforts to keep or cause to be kept all such Real Property free and clear of any
Liens imposed pursuant to such Environmental Laws and (ii) neither the Borrower
nor any of its Subsidiaries will generate, use, treat, store, Release or dispose
of, or permit the generation, use, treatment, storage, Release or disposal of
Hazardous Materials on any Real Property now or hereafter owned, operated or
occupied by the Borrower or any of its Subsidiaries, or transport or permit the
transportation of Hazardous Materials to or from any such Real Property except
in compliance with all applicable Environmental Laws and reasonably required in
connection with the operation, use and maintenance of any such Real Property or
otherwise in connection with their businesses.
-55-
<PAGE> 62
(b) At the written request of the Administrative Agent or the
Required Lenders upon a reasonable belief by the Administrative Agent or the
Required Lenders that the Borrower or any of its Subsidiaries has breached any
representation or covenant contained herein relating to environmental matters,
which request shall specify in reasonable detail the basis therefor, the
Borrower will provide, at the Borrower's sole cost and expense, an environmental
site assessment report, reasonable in scope, concerning the subject matter of
such representation or covenant and any Real Property now or hereafter owned,
operated or occupied by the Borrower or any of its Subsidiaries, prepared by an
environmental consulting firm reasonably acceptable to the Administrative Agent,
indicating (if relevant to such breach) the presence or absence of Hazardous
Materials and the potential cost of any removal or remedial action in connection
with any Hazardous Materials on such Real Property; provided, that such request
may be made only if (i) there has occurred and is continuing an Event of
Default, (ii) the Administrative Agent or the Required Lenders reasonably
believe that the Borrower or any such Real Property is not in compliance with
Environmental Law and such circumstances could reasonably be expected to have a
Material Adverse Effect, or (iii) circumstances exist that reasonably could be
expected to form the basis of a material Environmental Claim against the
Borrower or any of its Subsidiaries or any such Real Property. If the Borrower
fails to provide the same within a reasonable period, not to exceed 90 days
after such request was made, the Administrative Agent may order the same, and
the Borrower shall grant and hereby grant to the Administrative Agent and the
Lenders and their respective agents access to such Real Property and
specifically grants the Administrative Agent and the Lenders an irrevocable
non-exclusive license, subject to the rights of tenants, to undertake such an
assessment, all at the Borrower's expense.
8.07 ERISA. As soon as possible and, in any event, within 10 days
after the Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following, the Borrower will
deliver to the Administrative Agent a certificate of the chief financial officer
of the Borrower setting forth the full details as to such occurrence and the
action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed by such Borrower, such Subsidiary, the Plan administrator
or such ERISA Affiliate to or with the PBGC or any other government agency, or a
Plan or Multiemployer Plan participant and any notices received by such
Borrower, such Subsidiary or ERISA Affiliate from the PBGC or any other
government agency, or a Plan or Multiemployer Plan participant with respect
thereto: that a Reportable Event has occurred (except to the extent that the
Borrower has previously delivered to the Lenders a certificate and notices (if
any) concerning such event pursuant to the next clause hereof); that a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA is subject to the advance reporting requirement of
PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof),
and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC
Regulation Section 4043 is reasonably expected to occur with respect to such
Plan within the following 30 days; that an accumulated funding deficiency,
within the meaning of Section 412 of the Code or Section 302 of ERISA, has been
incurred or an application may be or has been made for a waiver or modification
of the minimum funding standard (including any required installment payments) or
an extension of any amortization period under Section 412 of the Code or Section
303 or 304 of ERISA with respect to a Plan or Multiemployer Plan; that any
contribution required to be made
-56-
<PAGE> 63
with respect to a Plan or Multiemployer Plan has not been timely made; that a
Plan or Multiemployer Plan has been or may be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Plan has an
Unfunded Current Liability; that proceedings may be or have been instituted to
terminate or appoint a trustee to administer a Plan which is subject to Title IV
of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA
to collect a delinquent contribution to a Multiemployer Plan; that the Borrower,
any of its Subsidiaries or any ERISA Affiliate will or may incur any liability
(including any indirect, contingent, or secondary liability) to or on account of
the termination of or withdrawal from a Plan or Multiemployer under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan
under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or
502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B
of the Code; or that the Borrower, or any of its Subsidiaries may incur any
material liability pursuant to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any Plan.
The Borrower will deliver to the Administrative Agent copies of any records,
documents or other information that must be furnished to the PBGC with respect
to any Plan pursuant to Section 4010 of ERISA. The Borrower will also deliver to
the Administrative Agent a complete copy of the annual report (on Internal
Revenue Service Form 5500-series) of each Plan, other than a Multiemployer Plan
(including, to the extent required, the related financial and actuarial
statements and opinions and other supporting statements, certifications,
schedules and information) required to be filed with the Internal Revenue
Service. In addition to any certificates or notices delivered to the
Administrative Agent pursuant to the third sentence hereof, copies of annual
reports and any records, documents or other information required to be furnished
to the PBGC or any other government agency, and any material notices received by
the Borrower, any of its Subsidiaries or any ERISA Affiliate with respect to any
Plan or received from any government agency or plan administrator or sponsor or
trustee with respect to any Multiemployer Plan, shall be delivered to the
Administrative Agent no later than ten (10) days after the date such annual
report has been filed with the Internal Revenue Service or such records,
documents and/or information has been furnished to the PBGC or any other
government agency or such notice has been received by the Borrower, the
Subsidiary or the ERISA Affiliate, as applicable.
8.08 End of Fiscal Years; Fiscal Quarters. The Borrower shall
cause (i) its, and each of its Subsidiaries', fiscal years to end on September
30 and (ii) its, and each of its Subsidiaries', fiscal quarters to end on March
31, June 30, September 30, and December 31.
8.09 Payment of Taxes. The Borrower will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims for sums that have become
due and payable which, if unpaid, might become a Lien not otherwise permitted
under Section 9.01(i), provided, that neither the Borrower nor any of its
Subsidiaries shall be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by proper proceedings if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
-57-
<PAGE> 64
8.10 Ownership of Subsidiaries. Except to the extent expressly
permitted herein or as otherwise expressly consented in writing by the Required
Lenders, the Borrower shall directly or indirectly own 100% of the capital stock
or other equity interests of each of its Subsidiaries.
8.11 Additional Security; Further Assurances; Surveys. (a) The
Borrower will, and will cause each of its Domestic Subsidiaries to, grant to the
Collateral Agent security interests and mortgages (an "Additional Mortgage") in
such Real Property (excluding Real Property where the fair market value thereof
is less than $500,000) of the Borrower or any of its Domestic Subsidiaries as
are not covered by the original Mortgages, to the extent acquired after the
Initial Borrowing Date, and as may be requested from time to time by the
Administrative Agent or the Required Lenders (each such Real Property, an
"Additional Mortgaged Property"). All such Additional Mortgages shall be granted
pursuant to documentation substantially in the form of the Mortgages or in such
other form as is reasonably satisfactory to the Administrative Agent and shall
constitute valid and enforceable perfected Liens superior to and prior to the
rights of all third Persons and subject to no other Liens except as are
permitted by Section 9.01 at the time of perfection thereof. The Additional
Mortgages or instruments related thereto shall be duly recorded or filed in such
manner and in such places as are required by law to establish, perfect, preserve
and protect the Liens in favor of the Collateral Agent required to be granted
pursuant to the Additional Mortgages and all taxes, fees and other charges
payable in connection therewith shall be paid in full.
(b) The Borrower will, and will cause each of its Domestic
Subsidiaries to, at the expense of the Borrower, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, reports and other assurances or instruments and take such
further steps relating to the Collateral covered by any of the Security
Documents as the Collateral Agent may reasonably require pursuant to this
Section 8.11. Additionally, upon the request of the Collateral Agent or the
Required Lenders, the Borrower shall take, or cause to be taken such action as
may be requested in order to perfect (or maintain the perfection of) the
security interests (or take any analogous actions under the applicable
provisions of local law in order to protect such security interests) in any
Collateral located outside the U.S. owned by the Borrower or a Domestic
Subsidiary, in each case to the extent such actions are permitted to be taken
under the laws of the applicable jurisdictions. Furthermore, the Borrower shall
cause to be delivered to the Collateral Agent such opinions of counsel, title
insurance and other related documents as may be reasonably requested by the
Collateral Agent to assure itself that this Section 8.11 has been complied with.
(c) The Borrower agrees to cause each Domestic Subsidiary
established or created in accordance with Section 9.14 to execute and deliver a
guaranty of all Guaranteed Obligations in substantially the form of the
Subsidiaries Guaranty.
(d) The Borrower agrees to pledge and deliver, or cause to be
pledged and delivered, all of the capital stock or other equity interests of
each new Subsidiary (excluding that portion of the voting stock of any Foreign
Subsidiary which would be in excess of 65% of the
-58-
<PAGE> 65
total outstanding voting stock of such Foreign Subsidiary) established, created
or acquired after the Initial Borrowing Date, to the extent owned by the
Borrower or any Domestic Subsidiary, to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Pledge Agreement.
(e) The Borrower will cause each Domestic Subsidiary
established or created in accordance with Section 9.14 or acquired pursuant to
Section 8.12 to grant to the Collateral Agent a first priority (subject to
Permitted Liens) Lien on property (tangible and intangible) of such Subsidiary
upon terms and with exceptions similar to those set forth in the Security
Documents as appropriate, and satisfactory in form and substance to the
Borrower, the Administrative Agent and Required Lenders. The Borrower shall
cause each such Domestic Subsidiary, at its own expense, to execute, acknowledge
and deliver, or cause the execution, acknowledgment and delivery of, and
thereafter register, file or record in any appropriate governmental office, any
document or instrument reasonably deemed by the Collateral Agent to be necessary
or desirable for the creation and perfection of the foregoing Liens. The
Borrower will cause each of such Domestic Subsidiaries to take all actions
reasonably requested by the Administrative Agent (including, without limitation,
the filing of UCC-1's) in connection with the granting of such security
interests.
(f) The security interests required to be granted pursuant to
this Section 8.11 shall be granted pursuant to security documentation (which
shall be substantially similar to the Security Documents already executed and
delivered by the Borrower or its Subsidiaries, as applicable) or otherwise
satisfactory in form and substance to the Administrative Agent and the Borrower
and shall constitute valid and enforceable perfected security interests prior to
the rights of all third Persons and subject to no other Liens except such Liens
as are permitted by Section 9.01. The Additional Security Documents and other
instruments related thereto shall be duly recorded or filed in such manner and
in such places and at such times as are required by law to establish, perfect,
preserve and protect the Liens, in favor of the Collateral Agent for the benefit
of the respective Secured Creditors, required to be granted pursuant to the
Additional Security Documents and all taxes, fees and other charges payable in
connection therewith shall be paid in full by the Borrower. At the time of the
execution and delivery of the Additional Security Documents, the Borrower shall
cause to be delivered to the Collateral Agent such opinions of counsel, Mortgage
Policies, title surveys, real estate appraisals and other related documents as
may be reasonably requested by the Administrative Agent or the Required Lenders
to assure themselves that this Section 8.11 has been complied with.
(g) In the event that the Administrative Agent or the Required
Lenders at any time after the Effective Date determines in its or their
reasonable discretion (whether as a result of a position taken by an applicable
bank regulatory agency or official, or otherwise) that real estate appraisals
satisfying the requirements set forth in 12 C.F.R., Part 34-Subpart C, or any
successor or similar statute, rule, regulation, guideline or order (any such
appraisal, a "Required Appraisal") are or were required to be obtained, or
should be obtained, in connection with any Mortgaged Property then, within 90
days after receiving written notice thereof from the Administrative Agent or the
Required Lenders, as the case may be, the Borrower shall cause such Required
Appraisal to be delivered, at the expense of the Borrower, to the Administrative
Agent, which Required Appraisal, and the respective appraiser, shall be
reasonably satisfactory to the Administrative Agent.
-59-
<PAGE> 66
(h) The Borrower agrees that each action required above by
Section 8.11(a) or (b) shall be completed as soon as possible, but in no event
later than 60 days after such action is requested to be taken by the
Administrative Agent, the Collateral Agent or the Required Lenders. The Borrower
further agrees that each action required by Section 8.11(c), (d), (e) and (f)
with respect to the creation or acquisition of a new Subsidiary shall be
completed contemporaneously with (or, in the case of any documents or
instruments to be registered, filed or recorded, within 10 days of) the creation
of such new Subsidiary.
8.12 Permitted Acquisitions. (a) Subject to the provisions of
this Section 8.12 and the requirements contained in the definition of Permitted
Acquisition, the Borrower and any of its Domestic Subsidiaries may from time to
time effect Permitted Acquisitions, so long as (in each case except to the
extent the Required Lenders otherwise specifically agree in writing in the case
of a specific Permitted Acquisition):
(i) no Default or Event of Default shall be in existence at
the time of the consummation of the proposed Permitted Acquisition or
immediately after giving effect thereto;
(ii) the Borrower shall have given the Administrative Agent
and the Lenders at least ten Business Days' prior written notice of
such Permitted Acquisition;
(iii) calculations are made by the Borrower of compliance with
the covenants contained in Sections 9.08, 9.09 and 9.10 for the
Calculation Period most recently ended prior to the date of such
Permitted Acquisition, on a Pro Forma Basis as if the respective
Permitted Acquisition (as well as all other Permitted Acquisitions
theretofore consummated after the first day of such Calculation Period)
had occurred on the first day of such Calculation Period, and such
calculations shall show that such financial covenants would have been
complied with if the Permitted Acquisition had occurred on the first
day of such Calculation Period;
(iv) the Maximum Permitted Consideration payable in connection
with the proposed Permitted Acquisition, when combined with the
aggregate Maximum Permitted Consideration paid in connection with all
other Permitted Acquisitions consummated after the Effective Date and
on or prior to the date of the consummation of the proposed Permitted
Acquisition below does not exceed (x) $50,000,000 plus (y) the
Permitted Expenditure Amount determined on the date of the consummation
of the proposed Permitted Acquisition;
(v) all representations and warranties contained herein and in
the other Credit Documents shall be true and correct in all material
respects with the same effect as though such representations and
warranties had been made on and as of the date of such Permitted
Acquisition (both before and after giving effect thereto), unless
stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date;
-60-
<PAGE> 67
(vi) the Borrower provides to the Administrative Agent as soon
as available but not later than five Business Days after the execution
thereof, a copy of any executed purchase agreement or similar agreement
with respect to such Permitted Acquisition;
(vii) the Borrower shall believe in good faith that the
proposed Permitted Acquisition could not result in a material increase
in tax, ERISA, environmental or other contingent liabilities with
respect to the Borrower or any of its Subsidiaries which would
reasonably be expected to have a Material Adverse Effect; and
(viii) the Borrower shall have delivered to the Administrative
Agent an officer's certificate executed by an Authorized Officer of the
Borrower, certifying to the best of the knowledge of such Authorized
Officer, compliance with the requirements of preceding clauses (i)
through (vii), inclusive, containing the calculations required by the
preceding clauses (iii) and (iv).
(b) At the time of each Permitted Acquisition involving the
creation or acquisition of a Subsidiary, or the acquisition of capital stock or
other equity interest of any Person, the capital stock or other equity interests
thereof created or acquired in connection with such Permitted Acquisition shall
be pledged for the benefit of the Secured Creditors pursuant to the Pledge
Agreement in accordance with the requirements of Sections 8.11 and 9.14.
(c) The Borrower shall cause each Subsidiary which is formed
to effect, or is acquired pursuant to, a Permitted Acquisition to comply with,
and to execute and deliver, all of the documentation required by, Sections 8.11
and 9.14, to the satisfaction of the Administrative Agent.
(d) The consummation of each Permitted Acquisition shall be
deemed to be a representation and warranty by the Borrower that the
certifications by the Borrower (or by one or more of its Authorized Officers)
pursuant to Section 8.12(a) are true and correct and that all conditions thereto
have been satisfied and that same is permitted in accordance with the terms of
this Agreement, which representation and warranty shall be deemed to be a
representation and warranty for all purposes hereunder, including, without
limitation, Sections 6 and 10.
8.13 Foreign Subsidiaries Security. If following a change in
the relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower acceptable to the Administrative Agent and the Required Lenders does
not within 30 days after a request from the Administrative Agent or the Required
Lenders deliver to the Administrative Agent evidence, in form and substance
reasonably satisfactory to the Administrative Agent and the Required Lenders,
with respect to any Foreign Wholly-Owned Subsidiary which has not already had
all of its stock pledged pursuant to the Pledge Agreement that (i) a pledge of
65% or more of the total combined voting power of all classes of capital stock
of such Foreign Subsidiary entitled to vote or, in the case of a Foreign
Subsidiary whose capital stock is held by another Foreign Subsidiary, a pledge
of any of the capital stock of such Foreign Subsidiary, (ii) the entering into
by such Foreign Subsidiary of a security agreement in substantially the form of
the Security Agreement, (iii) the entering into by such Foreign Subsidiary of a
pledge agreement in substantially the form of the Pledge Agreement
-61-
<PAGE> 68
and (iv) the entering into by such Foreign Subsidiary of a guaranty in
substantially the form of the Subsidiaries Guaranty, in any such case would
cause (I) the undistributed earnings of such Foreign Subsidiary (or such Foreign
Subsidiary's parent or indirect parent to the extent that such parent is also a
foreign subsidiary) as determined for Federal income tax purposes to be treated
as a deemed dividend to such Foreign Subsidiary's United States parent for
Federal income tax purposes or (II) other material adverse Federal income tax
consequences to the Credit Parties, then in the case of a failure to deliver the
evidence described in clause (i) above, that portion of such Foreign
Subsidiary's outstanding capital stock not theretofore pledged pursuant to the
Pledge Agreement shall be pledged to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement
in substantially similar form, if needed), and in the case of a failure to
deliver the evidence described in clause (ii) or (iii) above, such Foreign
Subsidiary shall execute and deliver the Security Agreement (or another security
agreement in substantially similar form, if needed) or the Pledge Agreement (or
another pledge agreement in substantially similar form, if needed), as the case
may be, granting to the Collateral Agent for the benefit of the Secured
Creditors a security interest in all of such Foreign Subsidiary's assets or the
capital stock and promissory notes owned by such Foreign Subsidiary, as the case
may be, and securing the Obligations of the Borrower under the Credit Documents
and under any Interest Rate Protection Agreement or Other Hedging Agreement and,
in the event the Subsidiaries Guaranty shall have been executed by such Foreign
Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the
case of a failure to deliver the evidence described in clause (iv) above, such
Foreign Subsidiary shall execute and deliver the Subsidiaries Guaranty (or
another guaranty in substantially similar form, if needed), guaranteeing the
Obligations of the Borrower under the Credit Documents and under any Interest
Rate Protection Agreement or Other Hedging Agreement, in each case to the extent
that the entering into of such Security Agreement, Pledge Agreement or
Subsidiaries Guaranty (or substantially similar document) is permitted by the
laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 8.13 to be in form and substance reasonably
satisfactory to the Administrative Agent and the Required Lenders.
8.14 Year 2000 Compliance. The Borrower shall take all actions
necessary and commit adequate resources to assure that its computer-based and
other systems (and those of all Subsidiaries) are able to effectively process
dates, including dates before, on and after January 1, 2000, without
experiencing any Y2K Problem that could reasonably be expected cause a Material
Adverse Effect. At the request of the Administrative Agent and to the extent the
Borrower is able to do so after using its commercially reasonable efforts, the
Borrower will provide the Administrative Agent with assurances and
substantiations (including, but not limited to, the results of internal or
external audit reports prepared in the ordinary course of business) reasonably
acceptable to the Administrative Agent as to the capability of the Borrower and
its Subsidiaries to conduct its and their businesses and operations before, on
and after January 1, 2000 without experiencing a Y2K Problem causing a Material
Adverse Effect.
8.15 Pioneer Valley. The Borrower shall use its commercially
reasonable efforts to cause AHP of Utah, Inc. ("AHP") to consent to (i) the
granting of a first priority Lien on the accounts receivable of Pioneer Valley
included in the AHP Collateral and a second priority Lien on the other assets of
Pioneer Valley included in the AHP Collateral, in each case to the Collateral
Agent for the benefit of the Secured Creditors and (ii) the granting of a
Mortgage on
-62-
<PAGE> 69
the AHP Lease to the Collateral Agent for the benefit of the Secured Creditors,
in each case, with a target date of 90 days after the Initial Borrowing Date.
Upon the receipt of such consent, the Borrower shall cause Pioneer Valley to (i)
execute and deliver an amendment to the Security Agreement satisfactory in form
and substance to the Administrative Agent deleting the exclusion of such
collateral from the collateral under the Security Agreement and (ii) execute and
deliver a Mortgage and all documentation required by Section 8.11 granting a
Lien on the AHP Lease to secure the Guaranteed Obligations.
SECTION 9. Negative Covenants. The Borrower hereby covenants
and agrees that on and after the Effective Date and until the Total Commitments
and all Letters of Credit have terminated and the Loans, Notes and Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder and thereunder, are paid in full (other than any indemnity, not then
due and payable, which by its terms shall survive such termination and payment):
9.01 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets (real or personal, tangible or
intangible) of the Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable with recourse to the Borrower
or any of its Subsidiaries), or assign any right to receive income or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien under any similar recording or notice statute; provided that the provisions
of this Section 9.01 shall not prevent the creation, incurrence, assumption or
existence of the following (Liens described below are herein referred to as
"Permitted Liens"):
(i) Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting principles
in the United States;
(ii) Liens in respect of property or assets of the Borrower or
any of its Subsidiaries imposed by law, which arise or were incurred in
the ordinary course of business and do not secure Indebtedness for
borrowed money, such as carriers', workmen's, repairmen's,
warehousemen's, materialmen's and mechanics' liens, collecting bank's
liens, charge back rights of depository banks for uncollected items and
other similar Liens arising or incurred in the ordinary course of
business, and (x) which do not in the aggregate materially detract from
the value of the property or assets of the Borrower or such Subsidiary
and do not materially impair the use thereof in the operation of the
business of the Borrower or such Subsidiary or (y) which are being
contested in good faith by appropriate proceedings, which proceedings
(or orders entered in connection with such proceedings) have the effect
of preventing the forfeiture or sale of the property or assets subject
to any such Lien;
(iii) Liens in existence on the Effective Date which are listed,
and the property subject thereto described, in Schedule IV, but only to
the respective date, if any, set forth
-63-
<PAGE> 70
in such Schedule IV for the removal and termination of any such Liens,
plus renewals and extensions of such Liens to the extent set forth on
Schedule IV, provided that (x) the aggregate principal amount of the
Indebtedness, if any, secured by such Liens does not increase from that
amount outstanding at the time of any such renewal or extension and (y)
any such renewal or extension does not encumber any additional assets
or properties of the Borrower or any of its Subsidiaries;
(iv) Permitted Encumbrances;
(v) Liens created pursuant to this Agreement and the Security
Documents;
(vi) licenses, sublicenses, leases or subleases granted to other
Persons in the ordinary course of business not materially interfering
with the conduct of the business of the Borrower and its Subsidiaries
taken as a whole;
(vii) Liens placed upon assets used in the ordinary course of
business of the Borrower or any of its Subsidiaries at the time of
acquisition thereof by the Borrower or any such Subsidiary or within 90
days thereafter to secure Indebtedness incurred to pay all or a portion
of the purchase price thereof, provided that (i) any such Liens attach
only to the equipment so purchased and upgrades thereon, (ii) the
Indebtedness secured by any such Lien does not exceed the purchase
price of the equipment being purchased at the time of the incurrence of
such Indebtedness and (iii) the Indebtedness secured thereby is
permitted to be incurred pursuant to Section 9.04(vi);
(viii) easements, rights-of-way, restrictions (including zoning
restrictions), covenants, encroachments, protrusions permits,
servitudes, reservations and other similar charges or encumbrances, and
minor title deficiencies, in each case whether now or hereafter in
existence, not securing Indebtedness and not materially interfering
with the conduct of the business of the Borrower and its Subsidiaries
taken as a whole;
(ix) Liens arising from precautionary UCC financing statement
filings regarding operating leases entered into by the Borrower or any
of its Subsidiaries in the ordinary course of business;
(x) Liens arising out of judgments or awards in circumstances
not constituting an Event of Default under Section 10.09 either which
are in existence for less than 30 days or in respect of which the
Borrower or any of its Subsidiaries shall in good faith be prosecuting
an appeal or proceedings for review in respect of which there shall
have been secured a subsisting stay of execution pending such appeal or
proceedings, provided that the aggregate amount of all such judgments
or awards does not exceed $10,000,000 at any time outstanding;
(xi) statutory, contractual and common law landlords' liens
under leases or subleases permitted by this Agreement;
(xii) Liens (other than any Lien imposed by ERISA) (x) incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment
-64-
<PAGE> 71
insurance and other types of social security, (y) to secure the
performance of tenders, statutory obligations (other than excise
taxes), surety, stay, customs and appeal bonds, statutory bonds, bids,
leases, government contracts, trade contracts, performance and return
of money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money) or (z) arising by virtue of deposits
made in the ordinary course of business to secure liability for
premiums to insurance carriers;
(xiii) any interest or title of a lessor, sublessor, licensee or
licensor under any lease or license agreement permitted by this
Agreement;
(xiv) Liens created pursuant to Capital Leases permitted pursuant
to Section 9.04(vi), provided that (x) such Liens only serve to secure
the payment of Indebtedness arising under such Capitalized Lease
Obligation and (y) the Lien encumbering the asset giving rise to such
Capitalized Lease Obligation does not encumber any other asset of the
Borrower or any of its Subsidiaries;
(xv) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into
by the Borrower or any of its Subsidiaries in the ordinary course of
business (excluding any general inventory financing);
(xvi) Liens on property or assets acquired pursuant to a
Permitted Acquisition, or on property or assets of a Subsidiary of the
Borrower in existence at the time such Subsidiary is acquired pursuant
to a Permitted Acquisition, provided that (x) any Indebtedness that is
secured by such Liens is permitted to exist under Section 9.04(xii) and
(y) such Liens are not incurred in connection with, or in contemplation
or anticipation of, such Permitted Acquisition and do not attach to any
other asset of the Borrower or any of its Subsidiaries;
(xvii) Liens arising pursuant to Permitted Sale-Leaseback
Transactions to the extent permitted by Section 9.02(ix), so long as
such Liens do not attach to any assets of the Borrower or any of its
Subsidiaries other than those which are the subject of such
Permitted-Sale Leaseback Transaction;
(xviii) Liens in the nature of trustees' Liens granted pursuant to
any indenture governing any Indebtedness permitted by Section 9.04(ii)
in favor of the trustee under such indenture and securing only
obligations to pay compensation to such trustee, to reimburse its
expenses and to indemnify it under the terms thereof;
(xix) Liens to secure the performance by the Borrower and its
Subsidiaries of leases, subleases, licenses and sublicenses, to the
extent incurred or made in the ordinary course of business and not
interfering in any material respect with the business of the Borrower
and its Subsidiaries, provided that the aggregate amount of the fair
value of property subject to Liens at any time pursuant to this clause
(xix) does not exceed $5,000,000 at any time outstanding;
(xx) Liens encumbering the equity interests owned by the
Borrower or any of its Subsidiaries in respect of any Joint Venture
which are either (A) in support of obligations
-65-
<PAGE> 72
which are otherwise non-recourse to the Borrower and its Subsidiaries,
or (B) granted in favor of any non-Affiliate partners, members or joint
venturers in any Joint Venture that is not wholly-owned by the Borrower
or any Subsidiary securing its obligations under the relevant charter
or constitutional documents of such Joint Venture which do not
constitute Indebtedness or the obligations to make Investments in such
Joint Venture; and
(xxi) additional Liens incurred by the Borrower and its
Subsidiaries so long as the value of the property subject to such
Liens, and the Indebtedness and other obligations secured thereby, do
not exceed $500,000.
In connection with the granting of Liens of the type described in clauses (vi),
(vii), (xiv), (xvi), (xvii and (xxi) of this Section 9.01 by the Borrower of any
of its Subsidiaries, each of the Administrative Agent and the Collateral Agent
shall be authorized to take, and shall take, any actions reasonably requested by
the Borrower and deemed appropriate by it in connection therewith (including,
without limitation, by executing appropriate lien releases or lien subordination
agreements in favor of the holder or holders of such Liens, in either case
solely with respect to the item or items of equipment or other assets (including
Real Property) subject to such Liens).
9.02 Consolidation, Merger, Acquisitions or Sale of Assets,
etc. The Borrower will not, and will not permit any of its Subsidiaries to, wind
up, liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets, or enter into any sale-leaseback transactions, or make any Acquisition
(or agree to do any of the foregoing at any future time), except that:
(i) the Borrower and its Subsidiaries may in the ordinary
course of business, sell, lease or otherwise dispose of any assets
which, in the reasonable judgment of such Person, are obsolete, worn
out or otherwise no longer economic or useful in the conduct of such
Person's business;
(ii) Investments may be made to the extent permitted by Section
9.05 and Cash Equivalents may be disposed of or liquidated in the
ordinary course of business;
(iii) the Borrower and its Subsidiaries may make sales or
transfers of inventory in the ordinary course of business;
(iv) the Borrower and its Subsidiaries may sell or discount, in
each case without recourse and in the ordinary course of business,
overdue accounts receivable arising in the ordinary course of business,
but only in connection with the compromise or collection thereof
consistent with customary industry practice (and not as part of any
bulk sale);
(v) the Borrower and its Subsidiaries may license or sublicense
software, trademarks and other intellectual property in the ordinary
course of business which do not materially interfere with the business
of the Borrower and its Subsidiaries taken as a whole or the Borrower,
so long as each such license is permitted to be assigned pursuant to
the Security Agreement (to the extent that a security interest in such
intellectual
-66-
<PAGE> 73
property is granted thereunder) and does not otherwise prohibit the
granting of a Lien by the Borrower or any of its Subsidiaries pursuant
to the Security Agreement in the intellectual property covered by such
license or such sublicense;
(vi) the Borrower or any Domestic Subsidiary of the Borrower may
transfer assets (including capital stock and other equity interests) or
lease to or acquire or lease assets from the Borrower or any other
Domestic Subsidiary and any Domestic Subsidiary other than, except as
provided in Schedule VI, an Excluded Subsidiary may be merged into the
Borrower or any other Domestic Subsidiary other than, except as
provided in Schedule VI, an Excluded Subsidiary of the Borrower (so
long as, in the case of any merger involving the Borrower, the Borrower
is the surviving corporation thereof);
(vii) the Borrower and its Subsidiaries may sell or otherwise
dispose of additional assets (other than any Asset Sale pursuant to a
sale-leaseback transaction), provided that (v) each such sale or
disposition shall be for an amount at least equal to the fair market
value thereof (as determined in good faith by the senior management of
the Borrower), (w) except in the case of a Permitted Exchange, each
such sale results in consideration at least 75% of which shall be in
the form of cash (for such purpose, taking into account the amount of
cash, the principal amount of any promissory notes and the fair market
value, as determined in good faith by the senior management of the
Borrower, of any other consideration), (x) the Net Sale Proceeds
therefrom are either applied to repay Term Loans as provided in Section
4.02(e) or reinvested in Eligible Assets to the extent permitted by
Section 4.02(e), and (y) the aggregate Net Sale Proceeds of all assets
subject to sale or other disposition pursuant to this clause (vii)
shall not exceed the sum of (A) $50,000,000 and (B) the Permitted
Expenditure Amount, in the aggregate during the period commencing on
the Effective Date;
(viii) the Borrower and its Wholly-Owned Domestic Subsidiaries may
make Permitted Acquisitions, so long as such Permitted Acquisitions are
effected in accordance with the requirements of Section 8.12;
(ix) the Borrower or any of its Subsidiaries may effect
Permitted Sale-Leaseback Transactions in accordance with the definition
thereof, provided that (x) the aggregate amount of all proceeds
received by the Borrower and its Subsidiaries from all Permitted
Sale-Leaseback Transactions consummated on and after the Effective Date
shall not exceed $20,000,000, (y) the Net Sale Proceeds therefrom are
applied to repay Term Loans as provided in Section 4.02(e) or
reinvested in Eligible Assets to the extent permitted by Section
4.02(e) and (z) the Borrower establishes compliance with Sections 9.08,
9.09 and 9.10 after giving effect, on a Pro Forma Basis, to such
Permitted Sale-Leaseback Transaction;
(x) any Subsidiary of the Borrower may (A) liquidate or
dissolve voluntarily into, and may merge with and into, the Borrower
(so long as the Borrower is the surviving corporation of such
combination or merger) or any other Wholly-Owned Domestic Subsidiary,
and the assets or stock of any Subsidiary may be purchased or otherwise
acquired by the Borrower or any other Wholly-Owned Domestic Subsidiary,
(B) wind up
-67-
<PAGE> 74
its affairs so long as, immediately prior thereto, it shall have
transferred all of its assets to the Borrower or any Wholly-Owned
Domestic Subsidiary, and (C) be converted into, or reorganized or
reconstituted as, a limited partnership or limited liability company,
provided that at the time of such conversion, reorganization or
reconstitution, all actions required to maintain the perfection and
priority of the Lien of the Pledge Agreement shall have been taken to
the satisfaction of the Collateral Agent;
(xi) the Borrower and its Subsidiaries may sell (including by
the issuance of capital stock by the affected Subsidiary) equity
interests in any of the Subsidiaries of the Borrower to Hospital
Investment Program Participants in connection with the Hospital
Investment Program so long as such sale or issuance is effected in
accordance with the definition of Hospital Investment Program; and
(xii) the Borrower and its Subsidiaries may effect sale leaseback
transactions described in clause (x)(6) of the proviso to the
definition of Asset Sale.
To the extent the Required Lenders waive the provisions of this Section 9.02
with respect to the sale of any Collateral, or any Collateral is sold or
otherwise transferred as permitted by this Section 9.02, such Collateral (unless
sold to the Borrower or a Subsidiary of the Borrower) shall be sold free and
clear of the Liens created by the Security Documents, and the Administrative
Agent and Collateral Agent shall be authorized to take any actions reasonably
requested by the Borrower and deemed appropriate by the Administrative Agent and
the Collateral Agent in order to effect the foregoing.
9.03 Dividends. The Borrower shall not, and shall not permit
any of its Subsidiaries to, authorize, declare or pay any Dividends with respect
to the Borrower or any of its Subsidiaries, except that:
(i) any Subsidiary of the Borrower may pay cash Dividends to
the Borrower or any Wholly-Owned Subsidiary of the Borrower or,
provided that no Material Default or Event of Default shall have
occurred and be continuing, to any other equity holders of such
Subsidiary on a pro rata basis with any such Dividends to be paid to
the Borrower and any other Subsidiaries of the Borrower having equity
interests in such Dividend paying Subsidiary;
(ii) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof), the
Borrower may repurchase or redeem outstanding shares of its common
stock or other equity interests (or options to purchase such common
stock or other equity interests) owned by employees, officers or
directors of the Borrower or any Subsidiary pursuant to any management
equity subscription agreement or stock option agreement as in effect on
the Initial Borrowing Date, provided that the aggregate amount of all
Dividends paid pursuant to this clause (ii) in any fiscal year shall
not exceed $2,000,000;
-68-
<PAGE> 75
(iii) the Borrower may pay regularly accruing Dividends with
respect to the Borrower Preferred Stock through the issuance of
additional shares of Borrower Preferred Stock (but not in cash or other
property) in accordance with the terms thereof;
(iv) the Borrower may cancel all or a portion of the principal
amount of notes delivered to the Borrower by employees, officers or
directors in connection with the vesting of interests or repurchase of
interests pursuant to any Equity Plan;
(v) the Borrower and its Subsidiaries may repurchase or redeem
equity interests of Subsidiaries sold or issued in connection with the
Hospital Investment Program, provided, that no Material Default or
Event of Default shall have occurred and be continuing at the time of
such repurchase or redemption; and
(vi) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof), the
Borrower may pay Dividends in an amount not to exceed the Permitted
Expenditure Amount determined on the date of the payment thereof.
9.04 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(i) Indebtedness incurred or existing pursuant to this
Agreement and the other Credit Documents;
(ii) unsecured Indebtedness of the Borrower and the Subsidiary
Guarantors under the Senior Subordinated Notes and the other Senior
Subordinated Notes Documents in an aggregate principal amount for all
Indebtedness at any time outstanding pursuant to this clause (ii) not
to exceed $230,000,000;
(iii) Existing Indebtedness to the extent actually outstanding on
the Initial Borrowing Date and as the same is listed on Schedule V.A,
but no refinancings or renewals thereof other than as permitted by
clause (xvi) below;
(iv) Indebtedness under Interest Rate Protection Agreements
which may be entered into from time to time by the Borrower and which
the Borrower in good faith believes will provide protection against
fluctuations in interest rates with respect to outstanding floating
rate Indebtedness then outstanding, and permitted to be outstanding,
pursuant to the other provisions of this Section 9.04;
(v) Indebtedness under Other Hedging Agreements entered into in
the ordinary course of business and so long as any such Other Hedging
Agreement is not speculative in nature and is (x) related to income
derived from foreign operations of the Borrower or any Subsidiary or
otherwise related to purchases permitted hereunder from foreign
suppliers or (y) entered into to protect the Borrower and its
Subsidiaries against fluctuation in the price of raw materials used in
the business;
-69-
<PAGE> 76
(vi) Capitalized Lease Obligations (including Capitalized Lease
Obligations arising from Permitted Sale-Leaseback Transactions) and
Indebtedness of the Borrower and its Subsidiaries representing purchase
money Indebtedness secured by Liens permitted pursuant to Section
9.01(vii), provided that the sum of (without duplication) (w) the
aggregate amount of Capitalized Lease Obligations (including
Capitalized Lease Obligations arising from Permitted Sale Leaseback
Transactions) incurred on and after the Initial Borrowing Date and
outstanding at any time plus (x) the aggregate principal amount of
Permitted Refinancing Indebtedness incurred in respect of Indebtedness
incurred pursuant to this clause (vi) or Section 9.04(xii) and
outstanding at any time plus (y) the aggregate principal amount of all
such purchase money Indebtedness incurred on and after the Initial
Borrowing Date and outstanding at any time plus (z) Permitted Acquired
Debt assumed on and after the Initial Borrowing Date and outstanding at
any time, shall not exceed the sum of (A) $35,000,000 plus (B) the
Permitted Expenditure Amount;
(vii) intercompany Indebtedness of the Borrower and its
Subsidiaries outstanding to the extent permitted by Section 9.05(v);
(viii) Indebtedness under performance bonds, letter of credit
obligations to provide security for worker's compensation claims and
bank overdrafts, in each case incurred in the ordinary course of
business, provided that any obligations arising in connection with such
bank overdraft Indebtedness is extinguished within five Business Days;
(ix) Indebtedness of the Borrower and its Subsidiaries which may
be deemed to exist pursuant to their respective obligations to pay
Dividends permitted by Section 9.03 after same have been declared;
(x) Indebtedness consisting of loans by third Persons to
officers and employees of the Borrower and its Subsidiaries guaranteed
by the Borrower in an aggregate principal amount not to exceed $500,000
outstanding at any time;
(xi) Indebtedness of the Borrower or any of its Subsidiaries
which may be deemed to exist in connection with agreements providing
for indemnification, purchase price adjustments and similar obligations
in connection with acquisitions or sales of assets including equity
interests and/or businesses effected in accordance with the
requirements of this Agreement (so long as any such obligations are
those of the Person making the respective acquisition or sale, and are
not guaranteed by any other Person other than the Borrower);
(xii) Indebtedness of a Subsidiary acquired pursuant to a
Permitted Acquisition (or Indebtedness assumed by the Borrower or any
Domestic Subsidiary pursuant to a Permitted Acquisition as a result of
a merger or consolidation or the acquisition of an asset securing such
Indebtedness) (the "Permitted Acquired Debt"), so long as (w) such
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition, (x) such Indebtedness
does not constitute debt for borrowed money, it being understood and
agreed that Capitalized Lease Obligations and purchase
-70-
<PAGE> 77
money Indebtedness shall not constitute debt for borrowed money for
purposes of this clause (xii) and (y) the sum of (1) the aggregate
amount of all Capitalized Lease Obligations and purchase money
Indebtedness incurred on and after the Initial Borrowing Date pursuant
to Section 9.04(vi) and outstanding at any time, (2) the aggregate
amount of all Permitted Refinancing Indebtedness incurred in respect of
Indebtedness incurred pursuant to this clause (xii) or Section 9.04(vi)
and outstanding at any time and (3) the aggregate amount of all
Permitted Acquired Debt assumed on and after the Initial Borrowing Date
and outstanding at any time, shall not exceed (A) $35,000,000 plus (B)
the Permitted Expenditure Amount;
(xiii) guarantees by the Borrower of Indebtedness of Domestic
Subsidiaries so long as such Indebtedness is otherwise permitted
hereunder;
(xiv) Indebtedness with respect to completion guarantees,
performance bonds, surety bonds or customs bonds required in the
ordinary course of business in an aggregate principal amount not to
exceed $5,000,000 at any time outstanding;
(xv) Permitted Subordinated Refinancing Indebtedness, so long as
no Default or Event of Default is in existence at the time of any
incurrence thereof and immediately after giving effect thereto;
(xvi) Permitted Refinancing Indebtedness, so long as no Default
or Event of Default is in existence at the time of the incurrence of
such Permitted Refinancing Indebtedness and immediately after giving
effect thereto; and
(xvii) additional unsecured Indebtedness of the Borrower and its
Subsidiaries not otherwise permitted pursuant to this Section 9.04, so
long as the aggregate principal amount of all Indebtedness incurred
pursuant to this clause (xvii) does not exceed at any time outstanding
the sum of (x) $500,000 plus (y) the Permitted Expenditure Amount.
9.05 Advances, Investments and Loans. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or indirectly, lend
money or credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to, any other Person or hold any cash or Cash Equivalents,
(each of the foregoing an "Investment" and, collectively, "Investments") except
that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold
accounts receivables and other customary trade credit owing to any of
them if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms of
the Borrower or such Subsidiary;
(ii) the Borrower and its Subsidiaries may acquire and hold
cash and Cash Equivalents;
(iii) the Borrower and its Subsidiaries may make loans and
advances in the ordinary course of business to their respective
employees so long as the aggregate
-71-
<PAGE> 78
principal amount thereof at any time outstanding (determined without
regard to any write-downs or write-offs of such loans and advances)
shall not exceed $1,000,000;
(iv) the Borrower may enter into Interest Rate Protection
Agreements and other Hedging Agreements to the extent permitted in
Section 9.04(iv) and Section 9.04(v) respectively;
(v) any Subsidiary may make intercompany loans to the Borrower
or any Subsidiary (other than an Excluded Subsidiary) and the Borrower
may make intercompany loans and advances to any Subsidiary (other than
an Excluded Subsidiary), provided that (x) any promissory notes
evidencing such intercompany loans made by the Borrower or any Domestic
Subsidiary shall be pledged (and delivered) by the Borrower or the
respective Domestic Subsidiary that is the lender of such intercompany
loan as Collateral pursuant to the Pledge Agreement, (y) neither the
Borrower nor any Domestic Subsidiaries of the Borrower may make loans
to any Foreign Subsidiaries of the Borrower pursuant to this clause (v)
and (z) any loans made by any Foreign Subsidiaries to the Borrower or
any of its Domestic Subsidiaries pursuant to this clause (v) shall be
subordinated to the Obligations pursuant to subordination provisions in
substantially the form of Exhibit M hereto;
(vi) the Borrower and it Subsidiaries may sell or transfer
assets to the extent permitted by Section 9.02;
(vii) the Borrower may establish Subsidiaries to the extent
permitted by Section 9.14;
(viii) the Borrower and its Subsidiaries may acquire and own
Investments (including debt obligations and equity securities) received
in connection with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the ordinary course
of business;
(ix) the Borrower and any of its Domestic Subsidiaries may make
Permitted Acquisitions in accordance with the relevant requirements of
Section 8.12 and the component definitions as used therein;
(x) the Borrower may make Investments in any of its Domestic
Subsidiaries (other than an Excluded Subsidiary), or any Subsidiary of
the Borrower may make Investments in the Borrower or any of its
Domestic Subsidiaries (other than an Excluded Subsidiary);
(xi) Investments as listed on Schedule X existing on the
Effective Date shall be permitted to the extent actually outstanding on
the Initial Borrowing Date (including any such Investments transferred
to the Borrower after the Initial Borrowing Date pursuant to the
Transaction Documents);
-72-
<PAGE> 79
(xii) Investments made by the Borrower or any of its Subsidiaries
consisting of Investments received in connection with any disposition
permitted by Section 9.02;
a
(xiii) Investments in the nature of pledges or deposits with
respect to leases or utilities provided to third parties in the
ordinary course of business;
(xiv) Investments in Indebtedness issued by management of the
Borrower to purchase Borrower Common Stock pursuant to the Borrower's
restricted stock plan so long as the full amount of the proceeds of
such Indebtedness is contemporaneously paid to the Borrower as
consideration for such Borrower Common Stock; and
(xv) so long as no Default or Event of Default exists or would
exist immediately after giving effect to the respective Investment, the
Borrower and its Domestic Subsidiaries shall be permitted to make
Investments in any Joint Venture (including Unrestricted Subsidiaries)
on any date in an amount not to exceed the Available J.V. Basket Amount
on such date (after giving effect to all prior and contemporaneous
adjustments thereto, except as a result of such Investment), it being
understood and agreed that to the extent the Borrower or one or more
other Credit Parties (after the respective Investment has been made)
receives a cash return from the respective Joint Venture of amounts
previously invested pursuant to this clause (xv) (which cash return may
be made by way of repayment of principal in the case of loans and cash
equity returns (whether as a distribution, dividend or redemption) in
the case of equity investments) or a return in the form of an asset
distribution from the respective Joint Venture of any asset previously
contributed pursuant to this clause (xv), then the amount of such cash
return of investment or the fair market value of such distributed asset
(as determined in good faith by senior management of the Borrower), as
the case may be, shall, upon the Administrative Agent's receipt of a
certification of the amount of the return of investment from an
Authorized Officer, apply to increase the Available J.V. Basket Amount,
provided that the aggregate amount of increases to the Available J.V.
Basket Amount described above in respect of any Joint Venture shall not
exceed the amount previously invested pursuant to this clause (xv) in
such Joint Venture.
9.06 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any transaction or series
of related transactions, whether or not in the ordinary course of business, with
any Affiliate of the Borrower or any of its Subsidiaries, other than in the
ordinary course of business and on terms and conditions substantially as
favorable to the Borrower or such Subsidiary as would reasonably be obtained by
the Borrower or such Subsidiary at that time in a comparable arm's-length
transaction with a Person other than an Affiliate, except that:
(i) Dividends may be paid to the extent provided in Section
9.03;
(ii) loans may be made and other transactions may be entered
into between the Borrower and its Subsidiaries to the extent permitted
by Sections 9.02, 9.04 and 9.05;
-73-
<PAGE> 80
(iii) so long as no Default or Event of Default is then in
existence or would result therefrom, the payment, on a quarterly basis,
of management fees to JLL or an Affiliate of JLL in an aggregate amount
not to exceed $1,000,000 in any fiscal year of the Borrower, provided
that if during any fiscal quarter of the Borrower, a Default or Event
of Default is in existence and such management fees cannot be paid as
provided above, such fees shall continue to accrue and may be paid at
such time as all Defaults and Events of Default have been cured or
waived and so long as no Default or Event of Default will exist
immediately after giving effect to the payment thereof;
(iv) customary fees to non-officer directors of the Borrower and
its Subsidiaries;
(v) the Borrower may pay directly, or reimburse JLL, JLL
Hospital, JLL Healthcare and the other Investors for, reasonable
out-of-pocket expenses incurred for business purposes of the Borrower
and its Subsidiaries, including, without limitation, the payment of up
to $3,000,000 as reimbursement for administrative and out-of-pocket
expenses incurred by JLL, JLL Hospital or JLL Healthcare and the other
Investors on or prior to the Initial Borrowing Date in connection with
the Transactions;
(vi) the Borrower and its Subsidiaries may make payments under
the Tax Sharing Agreement;
(vii) the Borrower or any Subsidiary may enter into employment
agreements in the ordinary course of business in good faith;
(viii) the Borrower may enter into Equity Plans and transactions
contemplated thereby; and
(ix) the Borrower or any Subsidiary may enter into transactions
listed on Schedule XIII hereto.
9.07 Capital Expenditures. (a) The Borrower will not, and will
not permit any of its Subsidiaries to, make any Capital Expenditures, except
that during any fiscal year set forth below, the Borrower and its Subsidiaries
may make Capital Expenditures, so long as the aggregate amount of such Capital
Expenditures does not exceed in any fiscal year set forth below the amount set
forth opposite such fiscal year below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
September 30, 2000 $60,000,000
September 30, 2001 $60,000,000
September 30, 2002 $45,000,000
September 30, 2003 $40,000,000
September 30, 2004 $40,000,000
September 30, 2005 $40,000,000
</TABLE>
-74-
<PAGE> 81
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
September 30, 2006 $40,000,000
</TABLE>
(b) Notwithstanding the foregoing, in the event that the
amount of Capital Expenditures permitted to be made by the Borrower and its
Subsidiaries pursuant to clause (a) above in any fiscal year (before giving
effect to any increase in such permitted expenditure amount pursuant to this
clause (b)) is greater than the amount of such Capital Expenditures made by the
Borrower and its Subsidiaries during such fiscal year, such excess (the
"Rollover Amount") may be carried forward and utilized to make Capital
Expenditures in the succeeding fiscal year of the Borrower.
(c) Notwithstanding the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures (which Capital Expenditures will not
be included in any determination under the foregoing clause (a)) with Net Asset
Sale Proceeds (including proceeds from the Hospital Investment Program) to the
extent such Net Asset Sale Proceeds are not required to be applied to repay Term
Loans pursuant to Section 4.02(e) and such proceeds are reinvested as required
by said Section.
(d) Notwithstanding the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures (which Capital Expenditures will not
be included in any determination under the foregoing clause (a)) consisting of
the reinvestment of Net Insurance/Condemnation Proceeds not required to be
applied to prepay Term Loans pursuant to Section 4.02(f).
(e) Notwithstanding the foregoing, the Borrower and its
Domestic Subsidiaries may make Capital Expenditures (which Capital Expenditures
will not be included in any determination under the foregoing clause (a))
constituting Permitted Acquisitions effected in accordance with the requirements
of Section 8.12 and the component definitions as used therein.
(f) Notwithstanding the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures (which Capital Expenditures will not
be included in any determination under the foregoing clause (a)) from the
Permitted Expenditure Amount.
9.08 Consolidated Interest Coverage Ratio. The Borrower will
not permit the Consolidated Interest Coverage Ratio for any Test Period ended on
the last day of a fiscal quarter set forth below to be less than the ratio set
forth opposite such fiscal quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 2000 1.5:1.0
June 30, 2000 1.5:1.0
September 30, 2000 1.5:1.0
December 31, 2000 1.5:1.0
March 31, 2001 1.5:1.0
June 31, 2001 1.5:1.0
</TABLE>
-75-
<PAGE> 82
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
September 30, 2001 1.65:1.0
December 31, 2001 1.65:1.0
March 31, 2002 1.65:1.0
June 30, 2002 1.65:1.0
September 30, 2002 1.85:1.0
December 31, 2002 1.85:1.0
March 31, 2003 1.85:1.0
June 30, 2003 1.85:1.0
September 30, 2003 2.15:1.0
December 31, 2003 2.15:1.0
March 31, 2004 2.15:1.0
June 30, 2004 2.15:1.0
September 30, 2004 2.50:1.0
December 31, 2004 2.50:1.0
March 31, 2005 2.50:1.0
June 30, 2005 2.50:1.0
September 30, 2005 3.25:1.0
December 31, 2005 3.25:1.0
March 31, 2006 3.25:1.0
June 30, 2006 3.25:1.0
September 30, 2006 3.50:1.0
</TABLE>
9.09 Maximum Leverage Ratio. The Borrower will not permit the
Leverage Ratio at any time during a fiscal quarter set forth below to be greater
than the ratio set forth opposite such fiscal quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 2000 5.75:1.0
June 30, 2000 5.75:1.0
September 30, 2000 5.50:1.0
December 31, 2000 5.50:1.0
March 31, 2001 5.50:1.0
June 30, 2001 5.50:1.0
September 30, 2001 5.00:1.0
</TABLE>
-76-
<PAGE> 83
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
December 31, 2001 5.00:1.0
March 31, 2002 5.00:1.0
June 30, 2002 5.00:1.0
September 30, 2002 4.25:1.0
December 31, 2002 4.25:1.0
March 31, 2003 4.25:1.0
June 30, 2003 4.25:1.0
September 30, 2003 3.50:1.0
December 31, 2003 3.50:1.0
March 31, 2004 3.50:1.0
June 30, 2004 3.50:1.0
September 30, 2004 and each 3.00:1.0
Fiscal Quarter thereafter
</TABLE>
Notwithstanding anything to the contrary contained in this
Agreement, all calculations of compliance with this Section 9.09 shall be made
on a Pro Forma Basis.
9.10 Fixed Charge Coverage Ratio. The Borrower will not permit
the Fixed Charge Coverage Ratio for any Test Period ended on the last day of a
fiscal quarter set forth below to be less than the ratio set forth opposite such
fiscal quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 2000 1.00:1.0
June 30, 2000 1.00:1.0
September 30, 2000 1.00:1.0
December 31, 2000 1.00:1.0
March 31, 2001 1.00:1.0
June 30, 2001 1.00:1.0
September 30, 2001 1.00:1.0
December 31, 2001 1.00:1.0
March 31, 2002 1.00:1.0
June 30, 2002 1.00:1.0
September 30, 2002 1.05:1.0
December 31, 2002 1.05:1.0
March 31, 2003 1.05:1.0
June 30, 2003 1.05:1.0
</TABLE>
-77-
<PAGE> 84
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
September 30, 2003 1.15:1.0
December 31, 2003 1.15:1.0
March 31, 2004 1.15:1.0
June 30, 2004 1.15:1.0
September 30, 2004 1.30:1.0
December 31, 2004 1.30:1.0
March 31, 2005 1.30:1.0
June 30, 2005 1.30:1.0
September 30, 2005 and each 1.40:1.0
Fiscal Quarter thereafter
</TABLE>
9.11 Limitation on Modifications of Indebtedness;
Modifications of Certificate of Incorporation, By-Laws and Certain Other
Agreements; etc. The Borrower will not, and will not permit any of its
Subsidiaries to, (i) amend or modify, or permit the amendment or modification
of, any provision of any Borrower Preferred Stock Document or of any agreement
(including, without limitation, any purchase agreement, indenture, loan
agreement or security agreement) relating thereto, (ii) amend or modify, or
permit the amendment or modification of, any provision of any Senior
Subordinated Note, Permitted Subordinated Refinancing Indebtedness or of any
agreement (including, without limitation, any purchase agreement, indenture,
loan agreement or security agreement) relating thereto or make any payment
consistent with an amendment thereof or change thereto, if the effect of such
amendment or change is to increase the interest rate on the Senior Subordinated
Notes or the Permitted Subordinated Refinancing Indebtedness, change (to earlier
dates) any dates upon which payments of principal or interest are due thereon,
change any event of default or condition to an event of default with respect
thereto (other than to eliminate any such event of default or increase any grace
period related thereto), change the redemption, prepayment or defeasance
provisions thereof, change the subordination provisions of such Senior
Subordinated Notes or Permitted Subordinated Refinancing Indebtedness, as the
case may be (or of any guaranty thereof), or change any collateral therefor
(other than to release such collateral), or if the effect of such amendment or
change, together with all other amendments or changes made, is to increase
materially the obligations of the obligor thereunder or to confer any additional
rights on the holders of such Senior Subordinated Notes or Permitted
Subordinated Refinancing Indebtedness, as the case may be (or a trustee or other
representative on their behalf), which would reasonably be expected to be
materially adverse to any Credit Party or Lenders, (iii) make (or give any
notice in respect thereof) any voluntary or optional payment or prepayment on or
redemption or acquisition for value (including, without limitation, by way of
depositing with the trustee with respect thereto monies or securities before due
for the purpose of paying when due) or exchange of, or any prepayment or
redemption as a result of any asset sale, change of control or similar event of
any Senior Subordinated Note, Permitted Subordinated
-78-
<PAGE> 85
Refinancing Indebtedness or Borrower Preferred Stock; provided that (x) the
Borrower may exchange the Senior Subordinated Notes for Exchange Senior
Subordinated Notes issued as contemplated in the definition of Senior
Subordinated Notes and consistent with the requirements of the definition of
Exchange Senior Subordinated Notes and (y) provided that no Default or Event of
Default has occurred and is continuing, any Senior Subordinated Notes or
Permitted Subordinated Refinancing Indebtedness may be refinanced with Permitted
Subordinated Refinancing Indebtedness; (iv) amend or modify, or permit the
amendment or modification of any Transaction Document, any Management Agreement,
the St. Luke's Lease or the Tax Sharing Agreement, except for amendments or
modifications which are not in any way materially adverse to the interests of
the Lenders and do not involve the payment by the Borrower or any of its
Subsidiaries of any amounts which could give rise to a violation of this
Agreement or result in the Borrower or any of its Subsidiaries incurring any
material additional liability or monetary obligations not permitted under this
Agreement, or (v) amend, modify or change its Certificate of Incorporation
(including, without limitation, by the filing or modification of any certificate
of designation) or By-Laws (or equivalent organizational documents) or any
agreement entered into by it, with respect to its capital stock (or equivalent
interests) (including any Shareholders' Agreement), or enter into any new
agreement with respect to its capital stock, other than any amendments,
modifications or changes pursuant to this clause (v) or any such new agreements
pursuant to this clause (v) which do not in any way materially adversely affect
the interests of the Lenders or which may be required to issue new capital stock
permitted to be issued pursuant to Section 9.13
9.12 Limitation on Certain Restrictions on Subsidiaries. The
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (b) make loans or advances to the Borrower or any of the
Borrower's Subsidiaries or (c) transfer any of its properties or assets to the
Borrower or any of the Borrower's Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law (including
regulatory requirements), (ii) this Agreement and the other Credit Documents,
(iii) customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Borrower or a Subsidiary of the Borrower,
(iv) customary provisions restricting assignment of any licensing agreement
entered into by the Borrower or a Subsidiary of the Borrower in the ordinary
course of business, (v) the Senior Subordinated Notes Documents and the
documentation for Permitted Subordinated Refinancing Indebtedness and (vi)
customary provisions restricting the transfer of assets subject to Liens
permitted under Section 9.01 (iii), (vii), (xiv), (xvi) and (xvii), and any
agreement or instrument governing Permitted Acquired Debt, which encumbrance or
restriction is not applicable to any Person or the properties or assets of any
Person, other than the Person or the properties or assets of the Person acquired
pursuant to the respective Permitted Acquisition and so long as the respective
encumbrances or restrictions were not created (or made more restrictive) in
connection with or in anticipation of the respective Permitted Acquisition.
9.13 Limitation on Issuance of Capital Stock. (a) The Borrower
will not, and will not permit any of its Subsidiaries to issue any Disqualified
Stock (other than (i) Borrower
-79-
<PAGE> 86
Preferred Stock issued in accordance with the requirements of Section 5.06 and
the issuance of shares of Borrower Preferred Stock in payment of regularly
accruing dividends on theretofore outstanding shares of Borrower Preferred Stock
and (ii) the issuance of preferred stock by a Subsidiary of the Borrower to the
Borrower or a Wholly-Owned Subsidiary).
(b) The Borrower will not issue any capital stock unless such
capital stock (other than capital stock issued to the public in a registered
public offering) is delivered to the Collateral Agent for pledge pursuant to the
Hypothecation Agreement and the relevant shareholder executes and delivers a
counterpart of the Hypothecation Agreement.
(c) The Borrower will not sell any capital stock of a
Subsidiary or permit any of its Subsidiaries to issue any capital stock
(including by way of sales of treasury stock) or any options or warrants to
purchase, or securities convertible into, capital stock, except (i) for
transfers and replacements of then outstanding shares of capital stock, (ii) for
stock splits, stock dividends and additional issuances which do not decrease the
percentage ownership of the Borrower or any of its Subsidiaries in any class of
the capital stock of such Subsidiary, (iii) in the case of Foreign Subsidiaries
of the Borrower, to qualify directors to the extent required by applicable law,
(iv) Subsidiaries of the Borrower formed after the Effective Date pursuant to
Section 9.14 may issue capital stock to the Borrower or the respective
Subsidiary of the Borrower which is to own such stock in accordance with the
requirements of Section 8.11 and, (v) the Borrower may permit its Subsidiaries
to issue capital stock, and may sell capital stock of subsidiaries in accordance
with the Hospital Investment Program so long as the requirements of the
definition thereof are satisfied and (vi) the Borrower may sell 100% of its
interests in the capital stock of a Subsidiary pursuant to the provisions of
Section 9.02(vii). All capital stock issued in accordance with this Section
9.13(c) shall, to the extent required by the Pledge Agreement or the definition
of Hospital Investment Program, as the case may be, be delivered to the
Collateral Agent for pledge pursuant to the Pledge Agreement or a hypothecation
agreement reasonably satisfactory in form and substance to the Administrative
Agent.
9.14 Limitation on Creation of Subsidiaries and Joint
Ventures. (a) The Borrower shall not establish, create or acquire any additional
Subsidiaries without the prior written consent of the Required Lenders; provided
that the Borrower may establish or create one or more Wholly-Owned Subsidiaries
of the Borrower without such consent so long as (i) 100% of the capital stock of
any new Domestic Subsidiary (or all capital stock of any new Foreign Subsidiary
which is owned by any Credit Party, except that, subject to the provisions of
Section 8.12, not more than 65% of the voting stock of any such Foreign
Subsidiary shall be required to be so pledged) is upon the creation,
establishment or acquisition of any such new Subsidiary pledged and delivered to
the Collateral Agent for the benefit of the Secured Creditors under the Pledge
Agreement and (ii) upon the creation or establishment of any such new Domestic
Subsidiary, such Domestic Subsidiary executes the Additional Security Documents
and guaranty required to be executed by it in accordance with Section 8.11.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any Joint Venture except to the extent permitted by
Section 9.05(xv) or Section 9.05(x).
-80-
<PAGE> 87
9.15 Business. The Borrower will not, and will not permit any
of its Subsidiaries to, engage directly or indirectly in any lines of business
other than a Permitted Business.
9.16 Designated Senior Debt. The Borrower will not, and will
not permit any of its Subsidiaries to (i) designate any Indebtedness (other than
the Obligations) as "Designated Senior Debt" for purposes of, and as defined in,
the Senior Subordinated Notes Indenture or (ii) designate any documents with
respect to any Indebtedness (other than this Agreement) as the "Credit
Agreement" as defined in the Senior Subordinated Notes Indenture for purposes of
the receipt of notices by the Administrative Agent, and delivery of blockage
notices pursuant to the subordination provisions of the Senior Subordinated
Notes Documents.
9.17 St. Luke's Sub. Notwithstanding anything to the contrary
set forth in this Agreement, the Borrower will not permit St. Luke's Sub to (i)
acquire any assets (other than (x) inventory or (y) pursuant to an operating
lease) the fair market value of which (as determined in good faith by the
Borrower) exceeds $1,000,000 other than pursuant to leases from the Borrower or
a Domestic Subsidiary or (ii) merge or consolidate with or into the Borrower or
any Subsidiary of the Borrower.
SECTION 10. Events of Default. Upon the occurrence of any of
the following specified events (each, an "Event of Default"):
10.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of any Loan or any Note or (ii) default, and such
default shall continue unremedied for three or more Business Days, in the
payment when due of any Unpaid Drawings or interest on any Loan or Note, or any
Fees or any other amounts owing hereunder or under any other Credit Document; or
10.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any statement or certificate delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
10.03 Covenants. Any Credit Party shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(f)(i), 8.11 (within the time periods specified in Section 8.11(h))
or Section 9 or (ii) default in the due performance or observance by it of any
other term, covenant or agreement contained in this Agreement and such default
shall continue unremedied for a period of 30 days after written notice to the
Borrower by the Administrative Agent or any of the Lenders; or
10.04 Default Under Other Agreements. (a) The Borrower or any
of its Subsidiaries shall (i) default in any payment of any Indebtedness (other
than the Obligations) beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating
to any Indebtedness (other than the Obligations) or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or
-81-
<PAGE> 88
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause (determined without regard to whether any notice is required),
any such Indebtedness to become due prior to its stated maturity or (b) any
Indebtedness (other than the Obligations) of the Borrower or any of its
Subsidiaries shall be declared to be due and payable, or required to be prepaid
other than by a regularly scheduled required prepayment, prior to the stated
maturity thereof, provided that it shall not be a Default or Event of Default
under this Section 10.04 unless the aggregate principal amount of all
Indebtedness as described in preceding clauses (a) and (b) is at least
$1,000,000; or
10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Borrower or any of its respective Subsidiaries and the petition is
not controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower or any of its Subsidiaries or the Borrower or any of its
Subsidiaries commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Borrower or any of its Subsidiaries or there is commenced
against the Borrower or any of its Subsidiaries any such proceeding which
remains undismissed for a period of 60 days, or the Borrower or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or the Borrower or
any of its Subsidiaries suffers any appointment of any custodian or the like for
it or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or the Borrower or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by the Borrower or any of its Subsidiaries for the purpose of effecting
any of the foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such standard or extension of
any amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
with respect to such Plan within the following 30 days, any Plan which is
subject to Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan or Multiemployer Plan which is
subject to Title IV of ERISA is, shall have been or is likely to be terminated
or to be the subject of termination proceedings under ERISA, any Plan shall have
an Unfunded Current Liability, a contribution required to be made with respect
to a Plan or Multiemployer Plan has not been timely made, the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate has incurred or is likely to
incur any liability to or on account of a Plan or Multiemployer Plan under
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group
health plan (as defined in Section 607(1) of ERISA or Section
-82-
<PAGE> 89
4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower, or
any of its Subsidiaries has incurred or is likely to incur liabilities pursuant
to one or more employee welfare benefit plans (as defined in Section 3(1) of
ERISA) that provide benefits to retired employees or other former employees
(other than as required by Section 601 of ERISA) or Plans or Multiemployer
Plans, a "default," within the meaning of Section 4219(c)(5) of ERISA, shall
occur with respect to any Multiemployer Plan, any applicable law, rule or
regulation is adopted, changed or interpreted, or the interpretation or
administration thereof is changed, in each case after the date hereof, by any
governmental authority or agency or by any court (a "Change in Law"), or, as a
result of a Change in Law, an event occurs following a Change in Law, with
respect to or otherwise affecting any Plan or Multiemployer Plan; (b) there
shall result from any such event or events the imposition of a lien, the
granting of a security interest, or a liability or a material risk of incurring
a liability; and (c) such lien, security interest or liability, individually,
and/or in the aggregate, in the opinion of the Required Lenders, has had, or
would reasonably be expected to have, a Material Adverse Effect; or
10.07 Security Documents. At any time after the execution and
delivery thereof any of the Security Documents shall cease to be in full force
and effect, or shall cease to give the Collateral Agent for the benefit of the
Secured Creditors the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a perfected security interest
in, and Lien on, all of the Collateral), in favor of the Collateral Agent
(unless caused by the action or inaction of the Collateral Agent, superior to
and prior to the rights of all third Persons (except as permitted by Section
9.01), and subject to no other Liens (except as permitted by Section 9.01), or
any Credit Party shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to any of
the Security Documents and such default shall continue beyond any grace period
(if any) specifically applicable thereto pursuant to the terms of such Security
Document; or
10.08 Guaranties. Any Guaranty or any provision thereof shall
cease to be in full force or effect as to the relevant Guarantor (except in the
case such Guarantor is no longer a Subsidiary by virtue of a liquidation, sale,
merger or consolidation permitted by Section 9.02), or any Guarantor or Person
acting by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor's obligations under the relevant Guaranty, or any Guarantor shall
default in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to the relevant Guaranty; or
10.09 Judgments. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving in the
aggregate for the Borrower and its Subsidiaries a liability (not paid or fully
covered by a reputable and solvent insurance company) and such judgments and
decrees shall not be vacated, discharged or stayed or bonded pending appeal for
any period of 60 consecutive days, and the aggregate amount of all such
judgments, to the extent not covered by insurance or indemnity arrangements
provided by a reputable and creditworthy insurance company or other Person,
exceeds $1,000,000; or
10.10 Change of Control. A Change of Control Event shall
occur; or
-83-
<PAGE> 90
10.11 St. Luke's Lease. The Borrower or any of its
Subsidiaries shall default in the observance or performance of any agreement or
condition relating to the St. Luke's Lease, or any other event shall occur or
condition exist, the effect of which default or other condition is to cause, or
permit the lessor thereunder to cause (determined without regard to whether any
notice is required) such lease to be terminated prior to its scheduled
termination date;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent, upon the written request of
the Required Lenders, shall by written notice to the Borrower, take any or all
of the following actions, without prejudice to the rights of the Administrative
Agent, any Lender or the holder of any Note to enforce its claims against any
Credit Party (provided that, if an Event of Default specified in Section 10.05
shall occur with respect to the Borrower, the result which would occur upon the
giving of written notice by the Administrative Agent to the Borrower as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Total Commitments terminated,
whereupon all Commitments of each Lender shall forthwith terminate immediately
and any Commitment Commission shall forthwith become due and payable without any
other notice of any kind; (ii) declare the principal of and any accrued interest
in respect of all Loans and the Notes and all Obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Credit Party; (iii) terminate any Letter of Credit
that may be terminated in accordance with its terms; (iv) direct the Borrower
(and the Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default specified in Section 10.05 with respect to the
Borrower, it will pay) to the Collateral Agent at the Payment Office such
additional amount of cash, to be held as security by the Collateral Agent, as is
equal to the aggregate Stated Amount of all Letters of Credit issued for the
account of the Borrower and then outstanding; and (v) enforce, as Collateral
Agent, all of the Liens and security interests created pursuant to the Security
Documents.
SECTION 11. Definitions and Accounting Terms.
11.01 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Acquired Businesses" shall mean the Paracelsus Business and
the Tenet Business.
"Acquisition" shall mean the purchase or other acquisition by
the Borrower of any Subsidiary of assets constituting a business, division or
product line of any Person or of the capital stock or other equity interests of
any Person.
"Additional Collateral" shall mean all property (whether real
or personal) in which security interests are granted (or have been purported to
be granted) (and continue to be in effect at the time of determination) pursuant
to Section 8.11.
"Additional Mortgage" shall have the meaning provided in
Section 8.11(a).
-84-
<PAGE> 91
"Additional Mortgaged Property" shall have the meaning
provided in Section 8.11(a).
"Additional Security Documents" shall mean all mortgages,
pledge agreements, security agreements and other security documents entered into
pursuant to Section 8.11 with respect to Additional Collateral.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period and without giving effect to any
extraordinary gains or losses from sales of assets plus, without duplication,
(i) the sum of the amount of all non-cash charges (including, without
limitation, depreciation, amortization, depletion, deferred tax expense and
non-cash interest expense) and non-cash losses which were included in arriving
at Consolidated Net Income for such period less (ii) all non-cash gains included
in arriving at Consolidated Net Income for such period.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities.
"Adjusted Percentage" shall mean (x) at a time when no Lender
Default exists, for each Lender, such Lender's Percentage and (y) at a time when
a Lender Default exists (i) for each Lender that is a Defaulting Lender, zero
and (ii) for each Lender that is a Non-Defaulting Lender, the percentage
determined by dividing such Lender's Revolving Loan Commitment at such time by
the Adjusted Total Revolving Loan Commitment at such time, it being understood
that all references herein to Revolving Loan Commitments and the Adjusted Total
Revolving Loan Commitment at a time when the Total Revolving Loan Commitment or
Adjusted Total Revolving Loan Commitment, as the case may be, has been
terminated shall be references to the Revolving Loan Commitments or Adjusted
Total Revolving Loan Commitment, as the case may be, in effect immediately prior
to such termination, provided that (A) no Lender's Adjusted Percentage shall
change upon the occurrence of a Lender Default from that in effect immediately
prior to such Lender Default if after giving effect to such Lender Default, and
any repayment of Revolving Loans and Swingline Loans at such time pursuant to
Section 4.02(a) or otherwise, the sum of (i) the aggregate outstanding principal
amount of Revolving Loans of all Non-Defaulting Lenders plus (ii) the aggregate
outstanding principal amount of Swingline Loans plus (iii) the Letter of Credit
Outstandings, exceed the Adjusted Total Revolving Loan Commitment; (B) the
changes to the Adjusted Percentage that would have become effective upon the
occurrence of a Lender Default but that did not become effective as a result of
the preceding clause (A) shall become effective on the first date after the
occurrence of the relevant Lender Default on which the sum of (i) the aggregate
outstanding principal amount of the Revolving Loans of all Non-Defaulting
Lenders plus (ii) the aggregate outstanding principal amount of Swingline Loans
plus (iii) the Letter of Credit Outstandings is equal to or less than the
Adjusted Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting
Lender's Adjusted Percentage is changed pursuant to the preceding clause (B) and
(ii) any repayment of such Lender's Revolving Loans, or of Unpaid Drawings with
respect to Letters of Credit or of Swingline Loans, that were made during the
period commencing after the date of the relevant Lender Default and ending on
the date of such change to its Adjusted Percentage must be returned to the
Borrower as a preferential or
-85-
<PAGE> 92
similar payment in any bankruptcy or similar proceeding of the Borrower, then
the change to such Non-Defaulting Lender's Adjusted Percentage effected pursuant
to said clause (B) shall be reduced to that positive change, if any, as would
have been made to its Adjusted Percentage if (x) such repayments had not been
made and (y) the maximum change to its Adjusted Percentage would have resulted
in the sum of the outstanding principal of Revolving Loans made by such Lender
plus such Lender's new Adjusted Percentage of the outstanding principal amount
of Swingline Loans and of Letter of Credit Outstandings equaling such Lender's
Revolving Loan Commitment at such time.
"Adjusted Total Revolving Loan Commitment" shall mean at any
time the Total Revolving Loan Commitment less the aggregate Revolving Loan
Commitments of all Defaulting Lenders.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement, and shall include any successor thereto.
"Affiliate" shall mean, with respect to any Person, any other
Person (including, for purposes of Section 9.06 only, all directors, officers
and partners of such Person) directly or indirectly controlling, controlled by,
or under direct or indirect common control with, such Person; provided, however,
that for purposes of Section 9.06, an Affiliate of the Borrower shall include
any Person that directly or indirectly owns more than 10% of any class of the
capital stock of the Borrower and any officer or director of the Borrower or any
of its Subsidiaries. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agents" shall mean the Documentation Agent, the Syndication
Agent and the Administrative Agent.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented, amended, restated, extended, renewed or replaced from time to
time.
"AHP" shall have the meaning provided in Section 8.15.
"AHP Collateral" shall mean the "collateral" covered by the
AHP Security Agreement as in effect on the Initial Borrowing Date.
"AHP Lease" shall mean Lease dated October 8, 1999 between
Pioneer Valley and AHP as in effect on the Initial Borrowing Date.
"AHP Security Agreement" shall mean the Security Agreement,
dated as of May 15, 1996, by and between Pioneer Valley and AHP.
"Applicable Excess Cash Flow Percentage" shall mean, with
respect to any Excess Cash Payment Date, 75%; provided that so long as no
Default or Event of Default is then in existence, if on the last day of the
relevant Excess Cash Payment Period, the Leverage Ratio
-86-
<PAGE> 93
for (and as calculated on the last day of ) the Test Period then ended is less
than 3.5:1.0, then the Applicable Excess Cash Flow Percentage shall instead be
50%.
"Applicable Margin" shall mean a percentage per annum equal to
(i) in the case of Tranche A Term Loans and Revolving Loans maintained as (x)
Base Rate Loans, 2.50% and (y) Eurodollar Loans, 3.50%, (ii) in the case of
Tranche B Term Loans maintained as (x) Base Rate Loans, 3.25% and (y) Eurodollar
Loans, 4.25% and (iii) in the case of the Commitment Commission, 0.50%. In the
case of the Applicable Margins for Tranche A Term Loans, Revolving Loans and the
Commitment Commission (the "Adjustable Applicable Margins"), from and after each
day of delivery of any certificate delivered in accordance with the first
sentence of the following paragraph indicating an entitlement to a different
margin than that described in the immediately preceding sentence (each, a "Start
Date") to and including the applicable End Date described below, the Adjustable
Applicable Margins shall be that set forth below opposite the Leverage Ratio
indicated to have been achieved in any certificate delivered in accordance with
the following sentence:
<TABLE>
<CAPTION>
APPLICABLE MARGIN FOR APPLICABLE MARGIN FOR BASE
EURODOLLAR TRANCHE A TERM RATE TRANCHE A TERM LOANS AND APPLICABLE MARGIN FOR
LEVERAGE RATIO LOANS AND REVOLVING LOANS REVOLVING LOANS COMMITMENT COMMISSION
<S> <C> <C> <C>
greater than or equal to
4.25:1.00 3.50% 2.50% 0.50%
less than 4.25:1.00 but
greater than or equal to
3.75:1.00 3.25% 2.25% 0.50%
less than 3.75:1.00 but
greater than or equal to
3.25:1.00 3.00% 2.00% 0.425%
less than 3.25:1.00 but
greater than or equal to
2.75:1.00 2.50% 1.50% 0.425%
less than 2.75:1.00 but
greater than or equal to
2.50:1.00 2.25% 1.25% 0.375%
less than 2.50:1.00 2.00% 1.00% 0.375%
</TABLE>
-87-
<PAGE> 94
The Leverage Ratio shall be determined based on the delivery of a certificate of
the Borrower by an Authorized Officer of the Borrower to the Administrative
Agent (with a copy to be sent by the Administrative Agent to each Lender),
within 45 days (or, in the case of the last quarter of any fiscal year, 90 days)
days of the last day of any fiscal quarter of Borrower, which certificate shall
set forth the calculation of the Leverage Ratio as at the last day of the Test
Period ended immediately prior to the relevant Start Date and the Adjustable
Applicable Margins which shall be thereafter applicable (until same are changed
or cease to apply in accordance with the following sentences); provided that at
the time of the consummation of any Permitted Acquisition, an Authorized Officer
of the Borrower shall deliver to the Administrative Agent a certificate setting
forth the calculation of the Leverage Ratio on a Pro Forma Basis as of the last
day of the last Calculation Period ended prior to the date on which such
Permitted Acquisition is consummated for which financial statements have been
made available (or were required to be made available) pursuant to Section
8.01(a) or (b), as the case may be, and the date of such consummation shall be
deemed to be a Start Date and the Adjustable Applicable Margins which shall be
thereafter applicable (until same are changed or cease to apply in accordance
with the following sentence) shall be based upon the Leverage Ratio as so
calculated. The Adjustable Applicable Margins so determined shall apply, except
as set forth in the succeeding sentence, from the Start Date to the earliest of
(x) the date on which the next certificate is delivered to the Administrative
Agent, (y) the date on which the next Permitted Acquisition is consummated or
(z) the date which is 45 days (or, in the case of the last quarter of any fiscal
year, 90 days) days following the last day of the Test Period in which the
previous Start Date occurred (such earliest date, the "End Date"), at which
time, if no certificate has been delivered to the Administrative Agent
indicating an entitlement to new Adjustable Applicable Margins (and thus
commencing a new Start Date), the Adjustable Applicable Margins shall be those
described in the first sentence of this definition above until such certificate
shall have been delivered. Notwithstanding anything to the contrary contained
above in this definition, (x) the Applicable Margins shall be those described in
the first sentence of this definition above at all times during which there
shall exist any Default or Event of Default and (y) prior to the first Start
Date to occur after March 31, 2000, the Applicable Margins shall be those
described in the first sentence of this definition.
"Asset Sale" shall mean the sale by the Borrower or any of its
Subsidiaries to any Person other than the Borrower or any of its Subsidiaries of
(i) any of the stock of any of the Borrower's Subsidiaries, (ii) substantially
all of the assets of any division or line of business of the Borrower or any of
its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of
the Borrower or any of its Subsidiaries (other than any such other assets to the
extent that the aggregate fair market value of such assets (at the time of sale
thereof) sold in any single transaction or related series of transactions is
equal to $1,000,000 or less); provided, however, that (x) Asset Sales shall not
include (1) any sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in connection
with the compromise or collection thereof, (2) the leasing (pursuant to
operating leases in the ordinary course of business) or licensing of real or
personal property, including intellectual property, (3) disposals of obsolete,
uneconomical, negligible, worn out or surplus property in the ordinary course of
business, (4) the sale or other disposition of inventory or other assets in the
ordinary course of business, (5) the sale or other disposition of Cash
Equivalents, and (6) the sale and leaseback of an asset within 180 days after
the acquisition of such asset by the Borrower or any
-88-
<PAGE> 95
of its Subsidiaries and (y) Asset Sales shall in any event include sales of
assets pursuant to a Permitted Sale-Leaseback Transaction and sales and
issuances of Subsidiary stock (other than to the Borrower or a Subsidiary)
including, without limitation, sales and issuances in connection with the
Hospital Investment Program.
"Assignment and Assumption Agreement" shall mean the
Assignment and Assumption Agreement substantially in the form of Exhibit L
(appropriately completed).
"Authorized Officer" shall mean, with respect to (i)
delivering Notices of Borrowing, Notices of Conversion, Letter of Credit
Requests and similar notices, and delivering financial information and officer's
certificates pursuant to this Agreement, the chief operating officer, any
treasurer or other financial officer of the Borrower and (ii) any other matter
in connection with this Agreement or any other Credit Document, any Chief
Executive Officer, Chief Financial Officer, President, Vice President,
Treasurer, General Partner or Manager of a Credit Party in each case to the
extent reasonably acceptable to the Administrative Agent.
"Available J.V. Basket Amount" shall mean, on any date of
determination, an amount equal to the sum (without duplication) of (i)
$20,000,000 minus (ii) the aggregate amount of Investments made (including for
such purpose the fair market value of any assets contributed to any Joint
Venture (as determined in good faith by senior management of the Borrower), net
of Indebtedness assigned to, and assumed by, the respective Joint Venture in
connection therewith) pursuant to Section 9.05(xv) after the Effective Date,
minus (iii) the aggregate amount of Indebtedness or other obligations (whether
absolute, accrued, contingent or otherwise and whether or not due) of any Joint
Venture for which the Borrower or any of its Subsidiaries (other than the
respective Joint Venture) is liable on such date of determination, minus (iv)
all payments made by the Borrower or any of its Subsidiaries (other than the
respective Joint Venture) in respect of Indebtedness or other obligations of the
respective Joint Venture (including, without limitation, payments in respect of
obligations described in preceding clause (iii) after the Effective Date minus
(v) that portion of the Maximum Permitted Consideration in respect of any
Permitted Acquisition that is attributable to the acquisition of a Joint Venture
pursuant to such Permitted Acquisition, plus (vi) the amount of any increase to
the Available J.V. Basket Amount made after the Effective Date in accordance
with the provisions of Section 9.05(xv).
"Bankruptcy Code" shall have the meaning provided in Section
10.05.
"Base Rate" shall mean for any day, a rate of interest per
annum equal to the higher of (i) the Prime Lending Rate for such day and (ii)
the sum of the Federal Funds Rate for such day plus 1/2 of 1% per annum.
"Base Rate Loan" shall mean (i) each Swingline Loan and (ii)
each Loan designated or deemed designated as such by the Borrower at the time of
the incurrence thereof or conversion thereto.
"Beneficial Owner" shall have the meaning provided in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular
-89-
<PAGE> 96
"person" (as that term is used in Section 13(d)(3) of the Exchange Act), such
"person" shall be deemed to have beneficial ownership of all securities that
such "person" has the right to acquire by conversion or exercise of other
securities, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and
"Beneficially Owned" shall have a corresponding meaning.
"Borrower" shall mean IASIS Healthcare Corporation, and shall
include any successor thereto.
"Borrower Common Stock" shall have the meaning provided in
Section 7.14.
"Borrower Preferred Stock" shall mean the pay-in-kind
Preferred Stock of the Borrower, $.01 par value per share, issued by the
Borrower pursuant to the Borrower Preferred Stock Documents as contemplated by
Section 5.06.
"Borrower Preferred Stock Documents" shall mean the documents
executed and delivered with respect to the Borrower Preferred Stock.
"Borrowing" shall mean the borrowing of one Type of Loan of a
single Tranche from all the Lenders (other than any Lender which has not funded
its share of a Borrowing in accordance with this Agreement) having Commitments
of the respective Tranche (or from the Swingline Lender in the case of Swingline
Loans) on a given date (or resulting from a conversion or conversions on such
date) having in the case of Eurodollar Loans the same Interest Period, provided
that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered
part of the related Borrowing of Eurodollar Loans. It is understood that there
may be more than one Borrowing outstanding pursuant to a given Tranche.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day which
shall be in New York, New York a legal or a day on which banking institutions
are authorized or required by law or other government action to close and (ii)
with respect to all notices and determinations in connection with, and payments
of principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in the New York interbank Eurodollar market.
"Calculation Date" shall mean the date of the respective
Permitted Acquisition, Permitted Sale-Leaseback Transaction, or other event, as
the case may be, which gives rise to the requirement to calculate compliance
with the financial covenants under this Agreement on a Pro Forma Basis.
"Calculation Period" shall mean the Test Period (taken as one
accounting period) most recently ended prior to a given Calculation Date.
"Capital Expenditures" shall mean, with respect to any Person,
all expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in
-90-
<PAGE> 97
accordance with generally accepted accounting principles) and the amount of
Capitalized Lease Obligations incurred by such Person.
"Capitalized Lease Obligations" of any Person shall mean all
rental obligations which, under generally accepted accounting principles, are or
will be required to be capitalized on the books of such Person, in each case
taken at the amount thereof accounted for as indebtedness in accordance with
such principles.
"Cash Equivalents" shall mean, as to any Person, (i)
securities issued or directly and fully guaranteed or insured by the United
States or any agency or instrumentality thereof (provided that the full faith
and credit of the United States is pledged in support thereof) having maturities
of not more than one year from the date of acquisition, (ii) time deposits and
certificates of deposit of any commercial bank having, or which is the principal
banking subsidiary of a bank holding company organized under the laws of the
United States, any State thereof or the District of Columbia having capital,
surplus and undivided profits aggregating in excess of $200,000,000, with
maturities of not more than one year from the date of acquisition by such
Person, (iii) repurchase obligations with a term of not more than 90 days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (ii) above, (iv)
commercial paper issued by any Person incorporated in the United States rated at
least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least
P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in each
case maturing not more than one year after the date of acquisition by such
Person, and (v) investments in money market funds substantially all of whose
assets are comprised of securities of the types described in clauses (i) through
(iv) above.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. Section 9601 et seq.
"Change of Control Event" shall mean, the occurrence of any of
the following (i) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets
of the Borrower or its Subsidiaries taken as a whole to any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act) other than to a Principal
or a Related Party; (ii) the adoption of a plan relating to the liquidation or
dissolution of the Borrower; (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the Beneficial Owner, directly or indirectly, of more
than 50% of the Voting Stock of the Borrower, measured by voting power rather
than by number of shares; (iv) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Borrower (together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders of
the Borrower has been approved by the Principals or a majority of the directors
then still in office who either were directors at the beginning of such period
or whose election or recommendation for election was previously so approved)
cease to constitute a majority of the Board of Directors
-91-
<PAGE> 98
of the Borrower and (v) a "change of control" or similar event shall occur as
provided in any Senior Subordinated Note Document or in any other Material
Indebtedness.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Co-Lead Arranger" shall have the meaning provided in the
first paragraph of this Agreement, and shall include any successor thereto.
"Collateral" shall mean all property (whether real or
personal) with respect to which any security interests have been granted (or
purported to be granted) pursuant to any Security Document, including, without
limitation, all Pledge Agreement Collateral, all Security Agreement Collateral,
all Mortgaged Properties, all cash and Cash Equivalents delivered as collateral
pursuant to Section 4.02 or 10 hereof and all Additional Collateral, if any.
"Collateral Agent" shall mean the Administrative Agent acting
as collateral agent for the Secured Creditors pursuant to the Security
Documents.
"Collective Bargaining Agreements" shall have the meaning
provided in Section 5.05.
"Commitment" shall mean any of the commitments of any Lender,
i.e., whether the Tranche A Term Loan Commitment, Tranche B Term Loan Commitment
or Revolving Loan Commitment.
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"Consolidated Capital Expenditures" shall mean, for any
period, the aggregate amount of Capital Expenditures made by the Borrower and
its Subsidiaries during such period.
"Consolidated Cash Interest Expense" shall mean, for any
period, the total consolidated cash interest expense (net of interest income) of
the Borrower and its Consolidated Subsidiaries for such period determined in
accordance with GAAP, including that portion of Capitalized Lease Obligations of
the Borrower and its Consolidated Subsidiaries representing the interest factor
for such period, and plus or minus, without duplication, amounts paid or
received under Interest Rate Protection Agreements (with amounts paid under any
interest rate cap being amortized over the life of such cap for purposes of this
definition). Notwithstanding anything to the contrary contained above, to the
extent Consolidated Cash Interest Expense is to be determined for any Test
Period which ends prior to the first anniversary of the Initial Borrowing Date,
Consolidated Cash Interest Expense for all portions of such period occurring
prior to the Initial Borrowing Date shall be calculated in accordance with the
definition of Test Period contained herein.
"Consolidated Current Assets" shall mean, at any time, the
consolidated current assets of the Borrower and its Consolidated Subsidiaries.
-92-
<PAGE> 99
"Consolidated Current Liabilities" shall mean, at any time,
the consolidated current liabilities of the Borrower and its Consolidated
Subsidiaries at such time, but excluding (i) the current portion of any
Indebtedness under this Agreement and of any other long-term Indebtedness which
would otherwise be included therein, (ii) accrued but unpaid interest with
respect to the Indebtedness and (iii) the current portion of Indebtedness
constituting Capitalized Lease Obligations.
"Consolidated EBIT" shall mean, for any period, the
Consolidated Net Income for such period, before Consolidated Cash Interest
Expense, non-cash interest expense and provision for taxes based on income (in
each case to the extent deducted in determining Consolidated Net Income) and
without giving effect to any extraordinary gains or losses or gains or losses
from sales of assets other than inventory sold in the ordinary course of
business.
"Consolidated EBITDA" shall mean, for any period, Consolidated
EBIT, adjusted by (a) adding thereto the amount of all (i) amortization, (ii)
depletion and depreciation, (ii) non-cash expenses and charges, (iv) charges,
fees, costs and expenses incurred in connection with the closing of the
Transaction, (v) losses associated with the sale or write-down of assets not in
the ordinary course of business, (vi) cash restructuring charges and costs,
(vii) non-recurring charges and costs, and (viii) Consolidated EBIT attributable
to minority interests of a Subsidiary that is not a Wholly-Owned Subsidiary, in
each case that were deducted in arriving at Consolidated EBIT for such period,
and (b) deducting therefrom the amount of all non-cash credits that were added
in arriving at Consolidated EBIT for such period. Notwithstanding anything to
the contrary contained above, to the extent Consolidated EBITDA is to be
determined for any Test Period which ends prior to the first anniversary of the
Initial Borrowing Date, Consolidated EBITDA for all portions of such period
occurring prior to the Initial Borrowing Date shall be calculated in accordance
with the definition of Test Period contained herein.
"Consolidated Fixed Charges" shall mean, for any period, the
sum of, without duplication, (i) Consolidated Cash Interest Expense for such
period, (ii) the amount of all cash Consolidated Capital Expenditures for such
period (other than (x) Consolidated Capital Expenditures constituting
Capitalized Lease Obligations or financed by purchase money Indebtedness and (y)
Excluded Capital Expenditures) and (iii) the scheduled principal amount of all
amortization payments (as such amounts may be reduced from time to time in
accordance with the applicable agreements other than by reason of voluntary
prepayments made on or after the first day of the respective period), on all
Indebtedness (excluding payments pursuant to a revolving credit facility or an
over-draft facility as a result of the occurrence of the scheduled termination
date thereunder) of the Borrower and its Subsidiaries for such period.
Notwithstanding anything to the contrary contained above, (x) to the extent
Consolidated Fixed Charges is to be determined for any Test Period which ends
prior to the first anniversary of the Initial Borrowing Date, Consolidated Fixed
Charges for all portions of such period occurring prior to the Initial Borrowing
Date shall be calculated in accordance with the definition of Test Period
contained herein and (y) in the case of any Test Period which ends on or prior
to June 30, 2002, Consolidated Fixed Charges shall not include any Capital
Expenditures made during such period up to (but not in excess of) $20,000,000
which the Borrower in good faith determines to be non-recurring.
-93-
<PAGE> 100
"Consolidated Indebtedness" shall mean, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness
(but including in any event the then outstanding principal amount of all Loans
and all Capitalized Lease Obligations but not including Letter of Credit
Outstandings) of the Borrower and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP.
"Consolidated Interest Coverage Ratio" shall mean, for any
period, the ratio of (i) Consolidated EBITDA for such period to (ii)
Consolidated Cash Interest Expense for such period.
"Consolidated Net Income" shall mean, for any period, the
consolidated net after tax income of the Borrower and its Consolidated
Subsidiaries determined in accordance with GAAP; provided that the following
items shall be excluded in computing Consolidated Net Income (without
duplication): (i) the net income of any Person which is not a Subsidiary of the
Borrower, except to the extent of the amount of any dividends or other
distributions actually paid to the Borrower or any of its Wholly-Owned
Subsidiaries during such period, (ii) except for determinations expressly
required to be made on a Pro Forma Basis, the net income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary or all or substantially all of
the property or assets of such Person are acquired by a Subsidiary and (iii) the
net income of any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary of such net income is not
at the time permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary.
"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with GAAP.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business and any products warranties extended in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made (or, if the less, the
maximum amount of such primary obligation for which such Person may be liable
pursuant to the terms of the instrument evidencing such Contingent Obligation)
or, if not stated
-94-
<PAGE> 101
or determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof pursuant to the terms of this Agreement, each
Note, each Security Document and each Guaranty and, after the execution and
delivery thereof, each additional guaranty or security document executed
pursuant to Section 8.11.
"Credit Event" shall mean the making of any Loan or the
issuance of any Letter of Credit.
"Credit Party" shall mean the Borrower, each Subsidiary
Guarantor and any other Subsidiary of the Borrower which at any time executes
and delivers any Credit Document as required by this Agreement.
"Debt Agreements" shall have the meaning provided in Section
5.05(b)(iii).
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to
which a Lender Default is in effect.
"Direct Investors' shall mean JLL Healthcare and the other
Persons described on Schedule XI attached hereto.
"Disqualified Stock" shall mean any capital stock which, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event (including a
change of control event unless any rights of the holder in respect thereof are
made subject to any applicable restrictions in the Borrower's debt documents),
(i) matures (excluding any maturity as the result of an optional redemption by
the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the first anniversary of the Tranche B Term
Loan Maturity Date, or (ii) is convertible into or exchangeable (unless at the
sole option of the issuer thereof) for (a) debt securities or (b) any capital
stock referred to in (i) above, in each case at any time prior to the first
anniversary of the Tranche B Term Loan Maturity Date.
"Dividend" with respect to any Person shall mean that such
Person has declared or paid a dividend or returned any equity capital to its
stockholders, partners or members or authorized or made any other distribution,
payment or delivery of property (other than common stock of such Person) or cash
to its stockholders, partners or members as such, or redeemed, retired,
purchased or otherwise acquired, directly or indirectly, for a consideration any
shares of any class of its capital stock or membership interests outstanding on
or after the Effective Date (or any options or warrants issued by such Person
with respect to its capital stock, partnership interests or membership
interests), or set aside any funds for any of the foregoing purposes, or shall
have permitted any of its Subsidiaries to purchase or otherwise acquire for a
consideration
-95-
<PAGE> 102
any shares of any class of the capital stock, partnership interests or
membership interests of such Person outstanding on or after the Effective Date
(or any options or warrants or stock appreciation rights issued by such Person
with respect to its capital stock, partnership interests, or membership
interests). Without limiting the foregoing, "Dividends" with respect to any
Person shall also include all payments made or required to be made by such
Person with respect to any stock appreciation rights, plans, equity incentive or
achievement plans or any similar plans or setting aside of any funds for the
foregoing purposes.
"Documentation Agent" shall have the meaning provided in the
first paragraph of this Agreement, and shall include any successor thereto.
"Documents" shall mean the Credit Documents, the Senior
Subordinated Notes Documents, the Transaction Documents, the Borrower Preferred
Stock Documents and the Refinancing Documents.
"Dollars" and the sign "$" shall each mean lawful money of the
United States.
"Domestic Subsidiary" shall mean each Subsidiary of the
Borrower that is incorporated or organized in the United States of America, any
State thereof, the United States Virgin Islands or Puerto Rico.
"Drawing" shall have the meaning provided in Section 2.04(b).
"Effective Date" shall have the meaning provided in Section
13.10.
"Eligible Assets" shall have the meaning provided in Section
4.02(e).
"Eligible Transferee" shall mean and include a commercial
bank, insurance company, financial institution, fund or other Person which
regularly purchases interests in loans or extensions of credit of the types made
pursuant to this Agreement, any other Person which would constitute a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act as
in effect on the Effective Date or other "accredited investor" (as defined in
Regulation D of the Securities Act).
"Employee Benefit Plans" shall have the meaning provided in
Section 5.05.
"Employment Agreement" shall have the meaning provided in
Section 5.05.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued or
any approval given under any such Environmental Law (hereafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief in connection
with
-96-
<PAGE> 103
alleged injury or threat of injury to health, safety or the environment on
account of Hazardous Materials.
"Environmental Law" shall mean any applicable Federal, state,
foreign or local statute, law, rule, regulation, ordinance, code, legally
binding and enforceable guideline, legally binding and enforceable written
policy and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof, including
any legally binding and enforceable judicial or administrative order, consent
decree or judgment, to the extent binding on the Borrower or any of its
Subsidiaries, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the
Emergency Planning and the Community Right-To-Know Act of 1986, 42 U.S.C.
Section 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C.
Section 5101 et seq.; and the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq.; and any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"Equity Plan" shall mean any employment incentive plans,
restricted stock plans, employee stock plans, employee stock option plans and
similar plans and arrangements either (i) existing on the Initial Borrowing Date
(the "Existing Plans"), (ii) on terms not materially more adverse to the
interests of the Lenders than the Existing Plans or (iii) on terms reasonably
satisfactory to the Administrative Agent.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the
Borrower would be deemed to be a "single employer" (i) within the meaning of
Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Borrower
or a Subsidiary of the Borrower being or having been a general partner of such
person.
"Eurodollar Loan" shall mean each Loan (excluding Swingline
Loans) designated as such by the Borrower at the time of the incurrence thereof
or conversion thereto.
"Eurodollar Rate" shall mean (a) the arithmetic average
(rounded upward to the nearest 1/100th of 1%) of the offered quotation to
first-class banks in the New York interbank Eurodollar market determined by each
Reference Lender for Dollar deposits of amounts in immediately available funds
comparable to the outstanding principal amount of the Eurodollar Loan of such
Reference Lender with maturities comparable to the Interest Period applicable to
such Eurodollar Loan commencing two Business Days thereafter as of 11:00 A.M.
(New York time) on the date which is two Business Days prior to the commencement
of such Interest Period, divided (and rounded upward to the nearest 1/16 of 1%)
by (b) a percentage equal to 100% minus
-97-
<PAGE> 104
the then stated maximum rate of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or other reserves
required by applicable law) applicable to any member bank of the Federal Reserve
System in respect of Eurocurrency funding or liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D);
provided that if one or more of the Reference Lenders fail to provide the
Administrative Agent with its aforesaid rate, then the Eurodollar Rate shall be
determined based on the rate or rates provided to the Administrative Agent by
the other Reference Lender or Reference Lenders.
"Event of Default" shall have the meaning provided in Section
10.
"Excess Cash Flow" shall mean, for any period, the remainder
of (a) the sum of (i) Adjusted Consolidated Net Income for such period, and (ii)
the decrease, if any, in Adjusted Consolidated Working Capital from the first
day to the last day of such period, minus (b) the sum of (i) the amount of
Capital Expenditures made by the Borrower and its Subsidiaries on a consolidated
basis during such period pursuant to and in accordance with Section 9.07 (but
without giving effect to Capital Expenditures made pursuant to Section 9.07(c),
(d), (e) and (f)), except for each such Capital Expenditure to the extent
financed with the proceeds of Indebtedness or pursuant to Capitalized Lease
Obligations, (ii) the aggregate amount of permanent principal payments of
Indebtedness for borrowed money of the Borrower and its Subsidiaries and the
permanent repayment of the principal component of Capitalized Lease Obligations
of the Borrower and its Subsidiaries (excluding (1) payments with proceeds of
asset sales and Net Insurance/Condemnation Proceeds and (2) payments with the
proceeds of other Indebtedness or equity or equity contributions) (but in the
case of a voluntary prepayment of Revolving Loans or Swingline Loans, only to
the extent accompanied by a voluntary reduction to the Total Revolving Loan
Commitment) during such period, (iii) the increase, if any, in Adjusted
Consolidated Working Capital from the first day to the last day of such period.
"Excess Cash Payment Date" shall mean the date occurring 90
days after the last day of each fiscal year of the Borrower (beginning with its
fiscal year ending on September 30, 2000).
"Excess Cash Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the Borrower (or, in the case of the first Excess Cash Payment
Date, the period beginning on and including the Initial Borrowing Date and to
and including September 30, 2000).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Senior Subordinated Notes" shall mean Senior
Subordinated Notes which are substantially identical securities to the Senior
Subordinated Notes issued on or prior to the Initial Borrowing Date, which
Exchange Senior Subordinated Notes shall be issued pursuant to a registered
exchange offer or private exchange offer for the Senior Subordinated Notes and
pursuant to the Senior Subordinated Notes Indenture. In no event will the
issuance of any Exchange Senior Subordinated Notes increase the aggregate
principal amount of Senior
-98-
<PAGE> 105
Subordinated Notes then outstanding or otherwise result in an increase in an
interest rate applicable to the Senior Subordinated Notes.
"Excluded Capital Expenditures" shall mean Capital
Expenditures made under Section 9.07(c), (d), (e) and (f).
"Excluded Subsidiary" shall mean a Domestic Subsidiary which
is not a Subsidiary Guarantor.
"Existing Credit Documents" shall mean the Credit Agreement
dated as of October 7, 1999, among the Borrower, the various financial
institutions party thereto, The Bank of Nova Scotia, as lead arranger and
administrative agent, together with the other documents and instruments in
connection therewith.
"Existing Credit Facilities" shall mean the senior secured
credit facilities provided under the Existing Credit Documents.
"Existing Indebtedness" shall have the meaning provided in
Section 5.07(b).
"Existing Letters of Credit" shall have the meaning provided
in Section 2.01(e).
"Expenditure Use Amounts" shall mean, as of any date of
determination, the amount equal to the sum of (a) the principal amount of
Indebtedness incurred by the Borrower and its Subsidiaries pursuant to Section
9.04(vi)(z)(B), (xii)(3)(B) and (xvii)(y), (b) the amount of all Dividends paid
by the Borrower and its Subsidiaries pursuant to Section 9.03(vi), (c) all
amounts utilized by the Borrower or any of its Subsidiaries to finance Capital
Expenditures pursuant to Section 9.07(f), (d) all amounts utilized by the
Borrower and its Subsidiaries to finance Permitted Acquisitions pursuant to
Section 8.12(a)(iv)(y) and (e) the Net Sale Proceeds of all Asset Sales made
pursuant to Section 9.02(vii)(y)(B).
"Facing Fee" shall have the meaning provided in Section
3.01(c).
"Federal Funds Rate" shall mean, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11:00 A.M. (New
York time) on such day on such transactions received by the Administrative Agent
from three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Fees" shall mean all amounts payable pursuant to or referred
to in Section 3.01.
"Fixed Charge Coverage Ratio" shall mean, for any Test Period,
the ratio of Consolidated EBITDA to Consolidated Fixed Charges for such Test
Period.
-99-
<PAGE> 106
"Foreign Subsidiary" shall mean each Subsidiary of the
Borrower that is incorporated or organized under the laws of any jurisdiction
other than the United States of America, any State thereof, the United States
Virgin Islands or Puerto Rico.
"Foreign Wholly-Owned Subsidiary" as to any Person, shall mean
each Wholly-Owned Subsidiary of such Person which is not a Domestic Subsidiary.
"GAAP" shall have the meaning provided in Section 13.07(a).
"Guaranteed Obligations" shall have the meaning provided in
the Subsidiaries Guaranty.
"Guaranty" shall mean and include the Subsidiaries Guaranty
and any other guaranty delivered pursuant to Section 8.11 or 8.13.
"Hazardous Materials" shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, ureaformaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous substances," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants,"
or words of similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority under Environmental Laws.
"Hospital" shall mean a hospital, outpatient clinic, long-term
care facility, medical office building or other facility, business or asset that
is used or useful in or related to the provision of healthcare services.
"Hospital Investment Program" shall mean, with respect to any
Subsidiary of the Borrower substantially all of the assets of which consist of
one or more Hospitals, an offering by such Subsidiary for the sale or issuance
of equity interests in such Subsidiary to any Hospital Investment Program
Participants, provided that (i) after giving effect to such sale or issuance
with respect to any Subsidiary, the Borrower controls such Subsidiary and owns
at least 65% of the economic interests of such Subsidiary, (ii) each such sale
or issuance shall be for an amount at least equal to the fair market value
thereof (as determined in good faith by the senior management of the Borrower),
(iii) each such sale results in consideration at least 75% of which shall be in
the form of cash (for such purpose, taking into account the amount of cash, the
principal amount of any promissory notes and the fair market value, as
determined in good faith by the senior management of the Borrower, of any other
consideration), (iv) the Net Sale Proceeds therefrom are either applied to repay
Term Loans as provided in Section 4.02(e) or reinvested in Eligible Assets to
the extent permitted by Section 4.02(e), (v) each Hospital Investment Program
Participant (A) acknowledges in writing in a manner reasonably satisfactory to
the Administrative Agent that (x) the relevant Subsidiary has guaranteed the
Guaranteed
-100-
<PAGE> 107
Obligations and the obligations of the Borrower under the Senior Subordinated
Notes and have granted a security interest in its assets to secure such guaranty
of the Guaranteed Obligations and (y) the documentation governing such the
Guaranteed Obligations restricts the ability of such Subsidiary to make
distributions to such Hospital Investment Program Participant and (B) pledges
all such equity interests acquired by such Hospital Program Participant to the
Collateral Agent for the benefit of the Secured Creditors as security for the
Guaranteed Obligations in accordance with the requirements of Section 9.13.
"Hospital Investment Program Participants" shall mean with
respect to any Hospital, Persons interested in such Hospital including
physicians, administrators and other Persons in the community in which such
Hospital is located
"Hypothecation Agreement" shall have the meaning provided in
Section 5.09(b).
"IHC" shall mean IASIS Healthcare Corp., a Tennessee
corporation.
"IHC Merger" shall mean the merger of IHC with and into the
IHC Merger Subsidiary, with the IHC Merger Subsidiary as the survivor, on or
prior to the Initial Borrowing Date.
"IHC Merger Subsidiary" shall mean a wholly-owned Subsidiary
of the Borrower created for the purpose of effecting the IHC Merger.
"IHC Stockholders" shall mean, immediately prior to giving
effect to the IHC Merger, collectively, the holders of any equity interests in
IHC, including, without limitation, common equity, preferred equity, options,
restricted equity, warrants and rights to acquire equity interests.
"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money or for the deferred purchase price of
property or services, (ii) the maximum amount available to be drawn under all
letters of credit issued for the account of such Person and all unpaid drawings
in respect of such letters of credit, (iii) all Indebtedness of the types
described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition
secured by any Lien on any property owned by such Person, whether or not such
Indebtedness has been assumed by such Person (to the extent of the value of the
respective property), (iv) the aggregate amount required to be capitalized under
leases in accordance with GAAP under which such Person is the lessee, (v) all
obligations of such person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vi) all Contingent Obligations of such Person in respect of the
types of Indebtedness described in clauses (i), (ii), (iii), (iv), (v) and (vii)
of this definition and (vii) the net obligations under any Interest Rate
Protection Agreement or Other Hedging Agreement or under any similar type of
agreement. Notwithstanding the foregoing, Indebtedness shall not include
obligations under trade payables, accrued expenses and other current liabilities
other than in respect of borrowed money incurred by any person in accordance
with its customary practices and in the ordinary course of business of such
Person or obligations under operating leases.
-101-
<PAGE> 108
"Indebtedness to be Refinanced" shall have the meaning
provided in Section 7.22(b).
"Initial Borrowing Date" shall mean the date occurring on or
after the Effective Date on which the initial Borrowing of Term Loans hereunder
occurs.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section
1.09.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, interest collar agreement,
interest rate hedging agreement, interest rate floor agreement or other similar
agreement or arrangement.
"Investments" shall have the meaning provided in Section 9.05.
"Investors" shall mean the JLL Healthcare Investors and Direct
Investors.
"Issuing Bank" shall mean The Bank of Nova Scotia and any
Lender which at the request of the Borrower and with the consent of the
Administrative Agent (which shall not be unreasonably withheld) agrees, in such
Lender's sole discretion, to become an Issuing Bank for the purpose of issuing
Letters of Credit pursuant to Section 2.
"JLL" shall mean Joseph Littlejohn and Levy Fund III L.P., a
Delaware limited partnership and its successors.
"JLL Healthcare" shall mean JLL Healthcare LLC, a Delaware
limited liability company and its successors.
"JLL Healthcare Investors" shall mean JLL and the other
Persons described on Schedule XII attached hereto.
"JLL Hospital" shall mean JLL Hospital LLC, a Delaware limited
liability company and its successors.
"JLL Hospital Merger" shall mean the merger of JLL Hospital
with and into the Borrower, with the Borrower as the survivor, on or prior to
the Initial Borrowing Date.
"Joint Venture" shall mean any Person, other than an
individual or a Subsidiary of the Borrower, (i) in which the Borrower or a
Subsidiary of the Borrower holds or acquires an ownership interest (whether by
way of capital stock, partnership or limited liability company interest, or
other evidence of ownership) and (ii) which is engaged in a Permitted Business.
"L/C Supportable Indebtedness" shall mean obligations of the
Borrower or its Subsidiaries incurred in the ordinary course of business and
such other obligations of the
-102-
<PAGE> 109
Borrower or any of its Subsidiaries otherwise permitted to exist pursuant to the
terms of this Agreement.
"Leaseholds" of any Person shall mean all the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Lender" shall mean each financial institution listed on
Schedule I, as well as any Person which becomes a "Lender" hereunder pursuant to
13.04(b).
"Lender Default" shall mean (i) the refusal (which has not
been retracted) of a Lender to make available its portion of any Borrowing
(including any Mandatory Borrowing) or to fund its portion of any unreimbursed
payment under Section 2.03(c) or (ii) a Lender having notified in writing the
Borrower and/or the Administrative Agent that it does not intend to comply with
its obligations under Section 1.01(c), 1.01(e) or Section 2, in the case of
either clause (i) or (ii) above as a result of the appointment of a receiver or
conservator with respect to such Lender at the direction or request of any
regulatory agency or authority.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the
sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and
(ii) the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Leverage Ratio" shall mean, at any date of determination, the
ratio of Consolidated Indebtedness on such date to Consolidated EBITDA for the
Test Period then last ended.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
the UCC or any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Tranche A Term Loan, each Tranche B
Term Loan, each Revolving Loan and each Swingline Loan.
"Majority Lenders" of any Tranche shall mean those
Non-Defaulting Lenders which would constitute the Required Lenders under, and as
defined in, this Agreement if all outstanding Obligations of the other Tranches
under this Agreement were repaid in full and all Commitments with respect
thereto were terminated.
-103-
<PAGE> 110
"Management Agreements" shall have the meaning provided in
Section 5.05.
"Mandatory Borrowing" shall have the meaning provided in
Section 1.01(e).
"Margin Stock" shall have the meaning provided in Regulation
U.
"Material Adverse Effect" shall mean (i) a material adverse
effect on the rights or remedies of the Lenders or the Administrative Agent
hereunder or under any other Credit Document or on the ability of any Credit
Party to perform its obligation to them hereunder or under any other Credit
Document, or (ii) a material adverse effect on the consolidated business, assets
or financial condition of the Borrower and its Subsidiaries taken as a whole.
"Material Contracts" shall have the meaning provided in
Section 5.05(b)(vii).
"Material Default" shall mean a Default under Section 10.01 or
Section 10.05.
"Material Indebtedness" shall mean (i) the Senior Subordinated
Notes, (ii) Permitted Subordinated Refinancing Indebtedness and (iii) any other
Indebtedness of the Borrower or any Subsidiary the aggregate principal amount of
which exceeds 1,000,000.
"Maturity Date" shall mean, with respect to any Tranche of
Loans, the Tranche A Term Loan Maturity Date, the Tranche B Term Loan Maturity
Date, the Revolving Loan Maturity Date or the Swingline Expiry Date, as the case
may be.
"Maximum Permitted Consideration" shall mean, with respect to
any Permitted Acquisition, the sum (without duplication) of (i) the aggregate
principal amount of Permitted Acquired Debt acquired or assumed by the Borrower
or any of its Subsidiaries in connection with such Permitted Acquisition, (ii)
the aggregate principal amount of all cash paid by the Borrower or any of its
Subsidiaries in connection with such Permitted Acquisition (including payments
of fees and costs and expenses in connection therewith), (iii) the aggregate
principal amount of all other Indebtedness assumed, incurred and/or issued in
connection with such Permitted Acquisition to the extent permitted by Section
9.04 and (iv) the fair market value (determined in good faith by senior
management of the Borrower) of all other consideration payable in connection
with such Permitted Acquisition.
"Maximum Swingline Amount" shall mean $5,000,000.
"Minimum Borrowing Amount" shall mean (i) for Term Loans of
any Tranche, $5,000,000 (and, if greater, in an integral multiple of $500,000)
(ii) for Revolving Loans, $1,000,000 (and, if greater, in an integral multiple
of $100,000) and (iii) for Swingline Loans, $100,000 (and if greater, in an
integral multiple of $100,000).
"Morgan Guaranty" shall mean Morgan Guaranty Trust Company of
New York, in its individual capacity, and any successor thereto.
"Mortgage" shall have the meaning provided in Section 5.11(a)
and, after the execution and delivery thereof, shall include each Additional
Mortgage.
-104-
<PAGE> 111
"Mortgage Policies" shall have the meaning provided in Section
5.11(b).
"Mortgaged Property" shall have the meaning provided in
Section 5.11(a) and, after the execution and delivery of any Additional
Mortgage, shall include the respective Additional Mortgaged Property.
"Multiemployer Plan" shall mean any multiemployer plan as
defined in Section 4001(a)(3) of ERISA, which is maintained or contributed to by
(or to which there is an obligation to contribute of) the Borrower or a
Subsidiary of the Borrower or an ERISA Affiliate, and each such plan for the
five year period immediately following the latest date on which the Borrower, or
a Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or
had an obligation to contribute to such plan.
"Net Asset Sale Proceeds" shall mean the Net Sale Proceeds
resulting from any Asset Sale.
"Net Insurance/Condemnation Proceeds" shall mean any cash
payments or proceeds received by the Borrower or any of its Subsidiaries (i)
under any casualty insurance policy in respect of a covered loss thereunder or
(ii) as a result of the taking of any assets of the Borrower or any of its
Subsidiaries by any Person pursuant to the power of eminent domain, condemnation
or otherwise, or pursuant to a sale of any such assets to a purchaser with such
power under threat of such a taking, in each case net of any actual and
documented fees, expenses and costs incurred by the Borrower or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
the Borrower or such Subsidiary in respect thereof, including (i) income taxes
reasonably estimated to be actually payable within two years of the date of
receipt of such payments or proceeds as a result of any gain recognized in
connection with the receipt of such payment or proceeds and (ii) payment of the
outstanding amount of premium or penalty, if any, and interest of any
Indebtedness (other than the Loans) that is secured by a Lien on the stock or
assets in question and that is repaid as a result of receipt of such payments or
proceeds.
"Net Sale Proceeds" shall mean for any sale of assets, the
gross cash proceeds (including any cash received by way of deferred payment
pursuant to a promissory note, receivable or otherwise, but only as and when
received) received from any sale of assets, net of (i) reasonable transaction
costs (including, without limitation, any underwriting, brokerage or other
customary selling commissions and reasonable legal, advisory and other fees and
expenses, including title and recording expenses, associated therewith) and
payments of unassumed liabilities relating to the assets sold at the time of, or
within 30 days after, the date of such sale, (ii) the amount of such gross cash
proceeds required to be used to repay any Indebtedness (other than Indebtedness
of the Lenders pursuant to this Agreement) which is secured by the respective
assets which were sold, and (iii) the estimated marginal increase in income
taxes which will be payable by the Borrower's consolidated group with respect to
the fiscal year in which the sale occurs as a result of such sale; provided,
however, that such gross proceeds shall not include any portion of such gross
cash proceeds which the Borrower determines in good faith should be reserved for
post-closing adjustments (including indemnification payments) (to the extent the
Borrower delivers to the Lenders a certificate signed by its chief financial
officer or treasurer,
-105-
<PAGE> 112
controller or chief accounting officer as to such determination), it being
understood and agreed that on the day that all such post-closing adjustments
have been determined, the amount (if any) by which the reserved amount in
respect of such sale or disposition exceeds the actual post-closing adjustments
payable by the Borrower or any of its Subsidiaries shall constitute Net Sale
Proceeds on such date received by the Borrower and/or any of its Subsidiaries
from such sale, lease, transfer or other disposition. The parties hereto
acknowledge and agree that Net Sale Proceeds shall not include any
trade-in-credits or purchase price reductions received by the Borrower or any of
its Subsidiaries in connection with an exchange of assets for other assets.
"Non-Defaulting Lender" shall mean and include each Lender
other than a Defaulting Lender.
"Note" shall mean each Tranche A Term Note, each Tranche B
Term Note, each Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03(a).
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Administrative
Agent located at 60 Wall Street, New York, New York 10260 or such other office
as the Administrative Agent may hereafter designate in writing as such to the
other parties hereto.
"Obligations" shall mean all amounts owing to the
Administrative Agent, the Collateral Agent or any Lender pursuant to the terms
of this Agreement or any other Credit Document.
"Other Hedging Agreement" shall mean any foreign exchange
contracts, currency swap agreements, commodity agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency or commodity values.
"Paracelsus" shall mean Paracelsus Healthcare Corporation, a
California corporation.
"Paracelsus Acquisition" shall mean, in connection with the
Recapitalization, the acquisition by the Direct Investors of approximately 94%
(as determined at the time of the Recapitalization of the common stock of the
Borrower pursuant to the Paracelsus Recapitalization Documents.
"Paracelsus Business" shall mean certain of the assets of
Paracelsus which are located in the Salt Lake City, Utah area.
"Paracelsus Recapitalization Documents" shall mean (i) the
Recapitalization Agreement dated as of August 16, 1999, among Paracelsus
Healthcare Corporation and PHC/CHC Holdings, Inc., as parents, each of
PHC/Psychiatric Healthcare Corporation, PHC-Salt Lake City, Inc., Paracelsus
Pioneer Valley Hospital, Inc., Pioneer Valley Health Plan, Inc., PHC-Jordan
Valley, Inc., Paracelsus PHC Regional Medical Center, Inc., Paracelsus Davis
Hospital,
-106-
<PAGE> 113
Inc., PHC Utah, Inc. and Clinicare of Utah, Inc., as sellers, and the Direct
Investors (as assignees of JLL Hospital), as buyers, and (ii) all other material
documentation related to the Paracelsus Acquisition.
"Participant" shall have the meaning provided in Section
2.03(a).
"Payment Office" shall mean the office of the Administrative
Agent located at 500 Station Christiana Road, Newark, DEL or such other office
as the Administrative Agent may hereafter designate in writing as such to the
other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Lender at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Lender at such time and the denominator of which is the Total
Revolving Loan Commitment at such time, provided that if the Percentage of any
Lender is to be determined after the Total Revolving Loan Commitment has been
terminated, then the Percentages of the Lenders shall be determined immediately
prior (and without giving effect) to such termination.
"Permitted Acquired Debt" shall have the meaning provided in
Section 9.04(xii).
"Permitted Acquisition" shall mean an Acquisition by the
Borrower or any of its Domestic Subsidiaries, provided that (A) the
consideration paid by the Borrower or such Subsidiary consists solely of cash
(including proceeds of Revolving Loans), the issuance of the Borrower capital
stock other than Disqualified Stock, the issuance of Indebtedness otherwise
permitted in Section 9.04 and the assumption/acquisition of any Permitted
Acquired Debt (calculated in accordance with GAAP) relating to the business,
division, product line or Person the subject of such Acquisition which is
permitted to remain outstanding in accordance with the requirements of Section
9.04, (B) those acquisitions that are structured as stock acquisitions shall be
effected through a purchase of the Specified Percentage of the capital stock or
other equity interests of such Person by the Borrower or such Domestic
Subsidiary or through a merger between such Person and a Domestic Subsidiary of
the Borrower, so that after giving effect to such merger, the Specified
Percentage of the capital stock or other equity interests of the surviving
corporation of such merger is owned by the Borrower or a Domestic Subsidiary,
(C) in the case of the acquisition of the capital stock or other equity
interests of any Person, (the "Acquired Person") if the Acquired Person owns
capital stock or equity interests in any other Person which is not a
Wholly-Owned Subsidiary of the Acquired Person (a "Non-Wholly Owned Entity"),
(1) the Acquired Person shall not have been created or established in
contemplation of, or for purposes of, the respective Permitted Acquisition, and
(2) any Non-Wholly Owned Entity of the Acquired Person shall have been
non-wholly-owned prior to the date of the respective Permitted Acquisition and
not created or established in contemplation thereof, (D) substantially all of
the business, division or product line acquired pursuant to the respective
Permitted Acquisition, or the business of the Acquired Person and its
Subsidiaries taken as a whole, is in the United States, (E) the assets acquired,
or the business of the Acquired Person and its Subsidiaries, shall be in a
business permitted to be conducted pursuant to Section 9.15 and (F) all
-107-
<PAGE> 114
applicable requirements of Sections 8.12 and 9.02 applicable to Permitted
Acquisitions are satisfied. Notwithstanding anything to the contrary contained
in the immediately preceding sentence, an acquisition which does not otherwise
meet the requirements set forth above in the definition of "Permitted
Acquisition" shall constitute a Permitted Acquisition if, and to the extent, the
Required Lenders agree in writing that such acquisition shall constitute a
Permitted Acquisition for purposes of this Agreement.
"Permitted Business" shall mean any business in which the
Borrower and its Subsidiaries are engaged on the Initial Borrowing Date or any
business reasonably related, incidental or ancillary thereto.
"Permitted Encumbrance" shall mean, with respect to any
Mortgaged Property, such exceptions to title as are set forth in the title
insurance policy or title commitment delivered with respect thereto, provided
that all such exceptions shall also be acceptable to the Administrative Agent in
its reasonable discretion.
"Permitted Exchange" shall mean an exchange of assets (other
than hospitals and equity interests) which qualifies as a like-kind exchange
pursuant to and in compliance with Section 1031 of the Code or any other
substantially concurrent exchange of assets (other than hospitals and equity
interests) of the Borrower or any of its Subsidiaries for assets (other than
hospitals and equity interests) of another Person which are useful to the
business of the Borrower or any of its Subsidiaries (with any Net Asset Sale
Proceeds received in connection therewith being subject to Section 4.02(e)).
"Permitted Expenditure Amount" shall mean, as of any date of
determination, the amount equal to (a) Qualified Equity Proceeds actually
received by the Borrower after the Initial Borrowing Date minus (b) the
aggregate amount of Expenditure Use Amounts as of such date.
"Permitted Liens" shall have the meaning provided in Section
9.01.
"Permitted Refinancing Indebtedness" shall mean any
Indebtedness of the Borrower and its Subsidiaries issued or given in exchange
for, or the proceeds of which are used to, extend, refinance, renew, replace,
substitute or refund Existing Indebtedness, Indebtedness incurred pursuant to
Section 9.04(vi) or 9.04(xii) or any Indebtedness issued to so extend,
refinance, renew, replace, substitute or refund any such Indebtedness, so long
as (a) such Indebtedness has a weighted average life to maturity greater than or
equal to the weighted average life to maturity of the Indebtedness being
refinanced, (b) such refinancing or renewal does not add guarantors, obligors or
security from that which applied to such Indebtedness being refinanced or
renewed, (c) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, substituted or refunded (plus all accrued interest thereon
and the amount of all fees, commissions, discounts, costs, expenses and premiums
incurred in connection therewith), and (d) such refinancing or renewal
Indebtedness has substantially the same (or, from the perspective of the
Lenders, more favorable) subordination provisions, if any, as applied to the
Indebtedness being renewed or refinanced.
-108-
<PAGE> 115
"Permitted Sale-Leaseback Transaction" shall mean any sale by
the Borrower or any of its Subsidiaries of any asset first acquired by the
Borrower or such Subsidiary which asset is then leased back to the Borrower or
such Subsidiary, provided that (i) the proceeds of the respective sale shall be
entirely cash and in an amount at least equal to the fair market value of such
asset (as determined in good faith by senior management of the Borrower) and
(ii) the respective transaction is otherwise effected in accordance with the
applicable requirements of Section 9.02(ix).
"Permitted Subordinated Refinancing Indebtedness" shall mean
Indebtedness of the Borrower issued or given in exchange for, or all the
proceeds of which are used to refinance, all of the outstanding Senior
Subordinated Notes, so long as (a) such Indebtedness has a weighted average life
to maturity greater than or equal to the weighted average life to maturity of
the Senior Subordinated Notes, (b) such refinancing does not (i) add guarantors,
obligors or security from that which applied to the Senior Subordinated Notes or
(ii) provide for the payment of interest at a rate greater than the rate
applicable to the Senior Subordinated Notes, (c) the principal amount (or
accreted value, if applicable) of such Permitted Subordinated Refinancing
Indebtedness does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness so extended, refinanced, renewed, replaced,
substituted or refunded (plus all accrued interest thereon and the amount of all
fees, commissions, discounts, costs, expenses and premiums incurred in
connection therewith), (d) such Indebtedness has substantially the same (or,
from the perspective of the Lenders, more favorable) subordination provisions,
if any, as applied to the Senior Subordinated Notes, and (e) all other terms of
such refinancing (including, without limitation, with respect to the
amortization schedules, redemption provisions, maturities, covenants, defaults
and remedies), are not, taken as a whole, materially less favorable to the
Borrower than those previously existing with respect to the Senior Subordinated
Notes.
"Person" shall mean any individual, partnership, limited
liability company, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"Pioneer Valley" shall mean Pioneer Valley Hospital, Inc., a
Utah corporation.
"Plan" shall mean any pension plan as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an
ERISA Affiliate, and each such plan for the five-year period immediately
following the latest date on which the Borrower, or a Subsidiary of the Borrower
or an ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section
5.09(a).
"Pledge Agreement Collateral" shall mean all "Collateral" as
defined in the Pledge Agreement.
"Pledged Securities" shall mean "Pledged Securities" as
defined in the Pledge Agreement.
-109-
<PAGE> 116
"Preferred Equity Issuance" shall have the meaning provided in
Section 5.06(a).
"Prime Lending Rate" shall mean the rate which the
Administrative Agent announces from time to time as its prime lending rate, the
Prime Lending Rate to change when and as such prime lending rate changes. The
Prime Lending Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Administrative Agent
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate.
"Principal" shall mean JLL, investment funds managed by JLL,
partners of JLL, an entity controlled by any of the foregoing and/or by a trust
of the type described hereafter, and/or a trust for the benefit of any of the
foregoing.
"Pro Forma Basis" shall mean, in connection with any
calculation of compliance with any financial covenant or financial term, the
calculation thereof after giving effect on a pro forma basis to (i) if the
relevant period to be tested includes any period prior to the Initial Borrowing
Date, the consummation of the Transaction as if the same had occurred on the
first day of such period, (ii) the assumption, incurrence or issuance of any
Indebtedness (other than revolving Indebtedness, except to the extent same is
incurred to finance the Transaction, to refinance other outstanding Indebtedness
or to finance Permitted Acquisitions) after the first day of the relevant
Calculation Period as if such Indebtedness had been assumed, incurred or issued
(and the proceeds thereof applied) on the first day of the relevant Calculation
Period, (ii) the permanent repayment of any Indebtedness (other than the
revolving Indebtedness) after the first day of the relevant Calculation Period
as if such Indebtedness had been retired or repaid on the first day of the
relevant Calculation Period, (iii) the Permitted Acquisition, if any, then being
consummated as if such Permitted Acquisition (and all other Permitted
Acquisitions consummated after the first day of the relevant Calculation Period
and on or prior to the Calculation Date) had been effected on the first day of
the respective Calculation Period and (iv) the Permitted Sale-Leaseback
Transaction, if any, then being consummated as if such Permitted Sale-Leaseback
Transaction (and all other Permitted Sale-Leaseback Transactions consummated
after the first day of the relevant Calculation Period and on or prior to the
Calculation Date) had been effected on the first day of the respective
Calculation Period, with the following rules to apply in connection therewith:
(a) all Indebtedness (x) (other than revolving Indebtedness,
except to the extent same is incurred to finance the Transaction, to
refinance other outstanding Indebtedness or to finance Permitted
Acquisitions) assumed, incurred or issued after the first day of the
relevant Calculation Period and on or prior to the Calculation Date
(whether incurred to finance Permitted Acquisitions, to refinance
Indebtedness or otherwise) shall be deemed to have been assumed,
incurred or issued (and the proceeds thereof applied) on the first day
of the respective Calculation Period and remain outstanding through the
Calculation Date and (y) (other than revolving Indebtedness)
permanently retired or redeemed after the first day of the relevant
Calculation Period shall be deemed to have been retired or redeemed on
the first day of the respective Calculation Period and remain retired
through the Calculation Date;
-110-
<PAGE> 117
(b) all Indebtedness assumed to be outstanding pursuant to
preceding clause (i) shall be deemed to have borne interest (x) at the
rate applicable thereto, in the case of fixed rate Indebtedness or (y)
at the rates which would have been applicable thereto during the
respective period when same was deemed outstanding, in the case of
floating rate Indebtedness (although interest expense with respect to
any Indebtedness for periods while same was actually outstanding during
the respective period shall be calculated using the actual rates
applicable thereto while same was actually outstanding);
(c) in making any determination of Consolidated EBITDA, pro
forma effect shall be given to any Permitted Acquisition for the
respective period being tested, taking into account, cost savings and
expenses which would otherwise be accounted for as an adjustment
pursuant to Article 11 of Regulation S-X under the Securities Act, as
if such cost-savings or expenses were realized on the first day of the
respective period; and
(d) the amount of revolving Indebtedness shall be determined
by using the average daily amount of revolving Indebtedness for the
four fiscal quarters (or portion thereof) ended on the last day of such
Calculation Period.
Notwithstanding anything to the contrary contained above, (x)
for the purposes of Sections 9.09 and for purposes of all determinations of the
Applicable Margins, pro forma effect (as otherwise provided above) shall only be
given for events or occurrences which occurred during the respective Test Period
but not thereafter and for purposes of Sections 8.12 and 9.02(ix), pro forma
effect (as otherwise provided above) shall be given for events or occurrences
which occurred during the respective Calculation Period and thereafter but on or
prior to the respective date of determination.
"Projections" shall mean the financial projections set forth
on Schedule VII hereto.
"Qualified Equity Proceeds" shall mean the net cash proceeds
actually received by the Borrower after the Initial Borrowing Date from any sale
or offering of, or capital contribution in respect of the capital stock of the
Borrower other than Disqualified Stock.
"Quarterly Payment Date" shall mean the last Business Day of
March, June, September and December occurring after the Initial Borrowing Date.
"RCRA" shall mean the Resource Conservation and Recovery Act,
as the same may be amended from time to time, 42 U.S.C. Section 6901 et seq.
"Real Property" of any Person shall mean all the right, title
and interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recapitalization" shall mean the recapitalization of the
Borrower as follows: (i) the recapitalization of the common stock of the
Borrower (then known as PHC/Psychiatric Healthcare Corporation) so that
approximately 2,880,250 shares of common stock of the Borrower are outstanding
and held by Paracelsus; (ii) the repurchase by the Borrower of approximately
1,550,250 shares of its common stock for a promissory note in the principal
-111-
<PAGE> 118
amount of $155,025,000, which promissory note was paid in full with a portion of
the proceeds from the Existing Credit Facilities; (iii) the purchase by the
Direct Investors of approximately 1,250,000 shares of common stock of the
Borrower for aggregate cash consideration of approximately $125,000,000; and
(iv) the retention by Paracelsus of approximately 80,000,000 shares of common
stock of the Borrower.
"Reference Lender" shall mean Morgan Guaranty, The Bank of
Nova Scotia and Paribas.
"Refinancing" shall mean the consummation of the refinancing
transactions pursuant to, and in accordance with the requirements of, Section
5.07.
"Refinancing Documents" shall mean the certificates,
agreements and other documents entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 13.16.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Related Party" shall mean (i) any controlling stockholder,
80% (or more) owned Subsidiary, or immediate family member (in the case of an
individual) of any Principal; or (ii) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of any
one or more Principals and/or such other Persons referred to in the immediately
preceding clause (i).
"Release" shall mean the active or passive disposing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, leaking, dumping, migrating, placing and the like into or
upon any land, water or air or otherwise into the environment.
"Replaced Lender" shall have the meaning provided in Section
1.13.
"Replacement Lender" shall have the meaning provided in
Section 1.13.
-112-
<PAGE> 119
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the 30-day notice period is waived under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Appraisal" shall have the meaning provided in
Section 8.11(g).
"Required Lenders" shall mean Non-Defaulting Lenders, the sum
of whose outstanding Term Loans (or, if prior to the Initial Borrowing Date,
Term Loan Commitments) and Revolving Loan Commitments (or after the termination
thereof, outstanding Revolving Loans and Adjusted Percentage of Swingline Loans
and Letter of Credit Outstandings) represent an amount greater than 50% of the
sum of all outstanding Term Loans (or, if prior to the Initial Borrowing Date,
Term Loan Commitments) of Non-Defaulting Lenders and the Adjusted Total
Revolving Loan Commitment (or after the termination thereof, the sum of the then
total outstanding Revolving Loans of Non-Defaulting Lenders and the aggregate
Adjusted Percentages of all Non-Defaulting Lenders of the total outstanding
Swingline Loans and Letter of Credit Outstandings at such time).
"Revolving Loan" shall have the meaning provided in Section
1.01(c).
"Revolving Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule I hereto directly below
the column entitled "Revolving Loan Commitment," as same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted
from time to time as a result of assignments to or from such Lender pursuant to
Section 1.13 or 13.04(b).
"Revolving Loan Maturity Date" shall mean September 30, 2004.
"Revolving Note" shall have the meaning provided in Section
1.05(a).
"Rollover Amount" shall have the meaning provided in Section
9.07(b).
"Scheduled Repayments" shall mean Tranche A Scheduled
Repayments and Tranche B Scheduled Repayments.
"SEC" shall have the meaning provided in Section 8.01(g).
"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b).
"Secured Creditors" shall have the meaning provided in the
Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Agreement" shall have the meaning provided in
Section 5.10.
-113-
<PAGE> 120
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Document" shall mean the Pledge Agreement, the
Hypothecation Agreement, the Security Agreement, each Mortgage and, after the
execution and delivery thereof, each Additional Mortgage and each Additional
Security Document.
"Senior Subordinated Notes" shall mean the Borrower's 13%
Senior Subordinated Notes due 2009 issued pursuant to the Senior Subordinated
Notes Indenture, as in effect on the Effective Date and as the same may be
amended, modified or supplemented from time to time in accordance with the terms
hereof and thereof. As used herein, the term "Senior Subordinated Notes" shall
include any Exchange Senior Subordinated Notes issued pursuant to the Senior
Subordinated Notes Indenture in exchange for theretofore outstanding Senior
Subordinated Notes, as contemplated by the Offering Memorandum, dated as of
October 13, 1999, and the definition of Exchange Senior Subordinated Notes.
"Senior Subordinated Notes Documents" shall mean the Senior
Subordinated Notes, the Senior Subordinated Notes Indenture and all other
documents executed and delivered in respect of the Senior Subordinated Notes and
the Senior Subordinated Notes Indenture, in each case as in effect on the
Effective Date and as the same may be amended, modified or supplemented from
time to time in accordance with the terms hereof and thereof.
"Senior Subordinated Notes Indenture" shall mean the
Indenture, dated as of October 15, 1999, among the Borrower, the Subsidiary
Guarantors and The Bank of New York, as trustee thereunder, as in effect on the
Effective Date and as the same may be amended, modified or supplemented from
time to time in accordance with the terms hereof and thereof.
"Shareholders' Agreements" shall have the meaning provided in
Section 5.05.
"Specified Percentage" shall mean 51% unless the relevant
Permitted Acquisition is being made utilizing the Permitted Expenditure Amount
pursuant to Section 8.12(a)(iv)(y), in which case the Specified Percentage shall
mean 100%.
"St. Luke's Lease" shall mean Facility Lease dated as of
February 1, 1995 between Medi Trust of Arizona, Inc. and St. Luke's Sub (as
successor to Oranda Healthcorp of Phoenix, Inc.), as amended by the Agreement
Regarding Consent to Lease Assignments, Leasehold Mortgages and Other Matters,
dated as of October 15, 1999, as the same may be amended or modified from time
to time in accordance with the terms hereof and thereof.
"St. Luke's Sub" shall mean St. Luke's Medical Center, L.P.
"Standby Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Stated Amount" of each Letter of Credit shall, at any time,
mean the maximum amount available to be drawn thereunder (in each case
determined without regard to whether any conditions to drawing could then be
met).
-114-
<PAGE> 121
"Stockholders' Agreement" shall mean the Stockholders
Agreement, dated as of October 8, 1999 as in effect on the Initial Borrowing
Date.
"Subsidiaries Guaranty" shall have the meaning provided in
Section 5.08.
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, limited
liability company, joint venture or other entity in which such Person and/or one
or more Subsidiaries of such Person has more than a 50% equity interest at the
time. Notwithstanding the foregoing (and except for the purposes of the
definition of Unrestricted Subsidiary contained herein) an Unrestricted
Subsidiary shall be deemed not to be a Subsidiary of the Borrower or any of its
other Subsidiaries for the purposes of this Agreement.
"Subsidiary Guarantor" shall mean each Subsidiary of the
Borrower designated as a "Subsidiary Guarantor" on Schedule VII hereto or which
executes a guaranty after the Initial Borrowing Date pursuant to Section 8.11.
"Swingline Expiry Date" shall mean the date which is two
Business Days prior to the Revolving Loan Maturity Date.
"Swingline Lender" shall mean Morgan Guaranty.
"Swingline Loan" shall have the meaning provided in Section
1.01(d).
"Swingline Note" shall have the meaning provided in Section
1.05(a).
"Syndication Agent" shall have the meaning provided in the
first paragraph of this Agreement, and shall include any successor thereto.
"Syndication Date" shall mean the earlier of (x) the 90th day
after the Initial Borrowing Date and (y) that date upon which the Co-Lead
Arrangers determine in their sole discretion acting in good faith (and notify
the Borrower) that the primary syndication (and resultant addition of
institutions as Lenders pursuant to Section 13.04) has been completed.
"Tax Benefit" shall have the meaning provided in Section
4.04(c).
"Tax Sharing Agreement" shall have the meaning provided in
Section 5.05(b)(iv).
"Taxes" shall have the meaning provided in Section 4.04(a).
"Tenet Acquisition" shall mean the acquisition by the Borrower
of all or substantially all of the assets comprising the Tenet Business pursuant
to the Tenet Acquisition Documents.
-115-
<PAGE> 122
Tenet Acquisition Documents" shall mean the Asset Sale
Agreement dated August 15, 1999 between Tenet Healthcare Corporation and
Holdings and all other material documentation related to the Tenet Acquisition
as in effect on the Initial Borrowing Date.
"Tenet Business" shall mean certain of the assets of Tenet
Healthcare Corporation which are located in Arizona, Florida and Texas.
"Term Loan" shall mean each Tranche A Term Loan and each
Tranche B Term Loan.
"Term Loan Commitment" shall mean each Tranche A Term Loan
Commitment and each Tranche B Term Loan Commitment, with the Term Loan
Commitment of any Lender at any time to equal the sum of its Tranche A Term Loan
Commitment and Tranche B Term Loan Commitment as then in effect.
"Test Period" shall mean shall mean the period of four
consecutive fiscal quarters then last ended or then ending in each case taken as
one accounting period. Notwithstanding anything to the contrary contained above
or in Section 13.07 or otherwise required by GAAP, in the case of any Test
Period ending prior to the first anniversary of the Initial Borrowing Date, such
period shall be a one-year period ending on the last day of the fiscal quarter
last ended, with any calculations of Consolidated Cash Interest Expense,
Consolidated EBITDA and Consolidated Fixed Charges for (x) the fiscal quarters
ended on each of March 31, 1999, June 30, 1999 and September 30, 1999, to be
determined as set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Consolidated Cash Consolidated Consolidated Fixed
Ended Interest Expense EBITDA Charges
- ----- ---------------- ------ -------
<S> <C> <C> <C>
March 31, 1999 $16,500,000 $30,300,000 $24,000,000
June 30, 1999 $16,500,000 $30,300,000 $24,000,000
September 30, 1999 $16,500,000 $30,300,000 $24,000,000
</TABLE>
and (y) the fiscal quarter ended on December 31, 1999 to be determined by (i)
taking the actual Consolidated Cash Interest Expense determined in accordance
with the definition thereof, for any period beginning on, and ending after, the
Initial Borrowing Date, (ii) for each day of such fiscal quarter occurring prior
to the Initial Borrowing Date, using a per-day amount of $181,000, for
Consolidated Cash Interest Expense and (iii) taking the actual Consolidated
EBITDA and Consolidated Fixed Charges for the period commencing October 1, 1999,
including, for the period prior to the Initial Borrowing Date, the Consolidated
EBITDA and Consolidated Fixed Charges for the Paracelsus Business and the Tenet
Business and including in Consolidated Fixed Charges for the period prior to the
Initial Borrowing Date, Consolidated Interest Expense determined in accordance
with clause (ii) above.
-116-
<PAGE> 123
"Total Commitments" shall mean, at any time, the sum of the
Commitments of each of the Lenders.
"Total Revolving Loan Commitment" shall mean, at any time, the
sum of the Revolving Loan Commitments of each of the Lenders.
"Total Term Loan Commitment" shall mean, at any time, the sum
of the Total Tranche A Term Loan Commitment and the Total Tranche B Term Loan
Commitment.
"Total Tranche A Term Loan Commitment" shall mean, at any
time, the sum of the Tranche A Term Loan Commitments of each of the Lenders.
"Total Tranche B Term Loan Commitment" shall mean, at any
time, the sum of the Tranche B Term Loan Commitments of each of the Lenders.
"Total Unutilized Revolving Loan Commitment" shall mean, at
any time, an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment, less (y) the sum of the aggregate principal amount of Revolving
Loans and Swingline Loans then outstanding plus the then aggregate amount of
Letter of Credit Outstandings.
"Trade Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being four separate Tranches,
i.e., Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and Swingline
Loans.
"Tranche A Scheduled Repayment" shall have the meaning
provided in Section 4.02(b).
"Tranche A Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(b).
"Tranche A Term Loan" shall have the meaning provided in
Section 1.01(a).
"Tranche A Term Loan Commitment" shall mean, for each Lender,
the amount set forth opposite such Lender's name in Schedule I hereto directly
below the column entitled "Tranche A Term Loan Commitment", as same may be (x)
reduced from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y)
adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 1.13 or 13.04.
"Tranche A Term Loan Maturity Date" shall mean September 30,
2004.
"Tranche A Term Note" shall have the meaning provided in
Section 1.05(a).
"Tranche B Scheduled Repayment" shall have the meaning
provided in Section 4.02(c).
-117-
<PAGE> 124
"Tranche B Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(c).
"Tranche B Term Lender" shall have the meaning provided in
Section 4.02(k).
"Tranche B Term Loan" shall have the meaning provided in
Section 1.01(b).
"Tranche B Term Loan Commitment" shall mean, for each Lender,
the amount set forth opposite such Lender's name in Schedule I hereto directly
below the column entitled "Tranche B Term Loan Commitment", as same may be (x)
reduced from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y)
adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 1.13 or 13.04(b).
"Tranche B Term Loan Maturity Date" shall mean September 30,
2006.
"Tranche B Term Note" shall have the meaning provided in
Section 1.05(a).
"Transaction" shall mean, collectively, (i) the Preferred
Equity Issuance, (ii) the consummation of the Refinancing (including, without
limitation, with respect to the Existing Credit Facilities), (iii) the issuance
by the Borrower of the Senior Subordinated Notes on the Initial Borrowing Date
in an aggregate principal amount of $230,000,000, (iv) the consummation of the
Tenet Acquisition, (v) the consummation of the Recapitalization, (vi) the IHC
Merger and JLL Hospital Merger, and (vii) the payment of fees and expenses owing
in connection with the foregoing.
"Transaction Documents" shall mean the Paracelsus
Recapitalization Documents and the Tenet Acquisition Documents.
"Type" shall mean the type of Loan determined with regard to
the interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the value of the accumulated plan benefits under the
Plan determined on a plan termination basis in accordance with actuarial
assumptions at such time consistent with those prescribed by the PBGC for
purposes of Section 4044 of ERISA, exceeds the market value of all plan assets
allocable to such liabilities under Title IV of ERISA (excluding any accrued but
unpaid contributions).
"United States" and "U.S." shall each mean the United States
of America.
"Unpaid Drawing" shall have the meaning provided for in
Section 2.04(a).
"Unrestricted Subsidiary" shall mean any Subsidiary of the
Borrower that is acquired or created after the Initial Borrowing Date pursuant
to Section 9.05(xv) and is
-118-
<PAGE> 125
designated by the Borrower at the time of the acquisition or creation thereof as
an Unrestricted Subsidiary hereunder by written notice to the Administrative
Agent and shall include any Subsidiary of such Unrestricted Subsidiary;
provided, that the Borrower shall only be permitted to designate a Subsidiary as
an Unrestricted Subsidiary so long as (i) no Default or Event of Default then
exists or would result therefrom, (ii) such Unrestricted Subsidiary does not own
any capital stock of, or other equity interests in, or have any Lien on any
property of the Borrower or any Subsidiary of the Borrower other than a
Subsidiary of the Unrestricted Subsidiary, (iii) any Indebtedness and other
obligations of such Unrestricted Subsidiary are non-recourse to the Borrower or
any of its other Subsidiaries, and (iv) the Borrower's and its other
Subsidiaries' aggregate Investments in all Unrestricted Subsidiaries and Joint
Ventures made after the Effective Date does not exceed that amount permitted by
Sections 9.05(xv). Unrestricted Subsidiaries shall be treated as Joint Ventures
for all purposes of this Agreement.
"Unutilized Revolving Loan Commitment" with respect to any
Lender, at any time, shall mean such Lender's Revolving Loan Commitment at such
time less the sum of (i) the aggregate outstanding principal amount of Revolving
Loans made by such Lender and (ii) such Lender's Adjusted Percentage of the
Letter of Credit Outstandings in respect of Letters of Credit issued under this
Agreement.
"Voting Stock" shall mean, as to any Person, any class or
classes of capital stock of such Person pursuant to which the holders thereof
are entitled to vote in the election of the Board of Directors of such Person.
"Waivable Mandatory Repayment" shall have the meaning provided
in Section 4.02(k).
"Waivable Repayment" shall mean a Waivable Mandatory Repayment
and a Waivable Voluntary Repayment.
"Waivable Voluntary Repayment" shall have the meaning provided
in Section 4.02(k).
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i)
any corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.
"Y2K Problem" shall mean any significant risk that computer
hardware, software or equipment containing embedded microchips essential to the
business or operations of the Borrower or any of its Subsidiaries will not, in
the case of dates or time periods occurring after December 31, 1999, function at
least as efficiently and reliably in all material respects as in the case of
times or time periods occurring before January 1, 2000.
-119-
<PAGE> 126
SECTION 12. Administrative Agent.
12.01 Appointment. Each Lender hereby irrevocably designates
and appoints Morgan Guaranty as Administrative Agent (for purposes of this
Section 12, the term "Administrative Agent" shall mean and include Morgan
Guaranty (and/or any of its affiliates) in its capacity as Administrative Agent
hereunder and Collateral Agent pursuant to the Security Documents). Each Lender
hereby irrevocably authorizes, and each holder of any Note by the acceptance of
such Note shall be deemed irrevocably to authorize, the Administrative Agent to
take such action on its behalf under the provisions of this Agreement, the other
Credit Documents and any other instruments and agreements referred to herein or
therein and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Administrative
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Administrative Agent may perform any of its duties
hereunder by or through its respective officers, directors, agents, employees or
affiliates.
12.02 Nature of Duties. The Administrative Agent agrees to act
in its capacity as such upon the express conditions contained in this Section
12. Notwithstanding any provision to the contrary elsewhere in this Agreement or
in any other Credit Document, the Administrative Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or
otherwise exist against the Administrative Agent. The duties of the
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Lender or the holder
of any Note; and nothing in this Agreement or any other Credit Document, express
or implied, is intended to or shall be so construed as to impose upon the
Administrative Agent any obligations in respect of this Agreement or any other
Credit Document except as expressly set forth herein or therein. The provisions
of this Section 12 are solely for the benefit of the Administrative Agent, the
Co-Lead Arrangers and the Lenders, and neither the Borrower nor any of its
Subsidiaries shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
the Administrative Agent shall act solely as agent of the Lenders and does not
assume and shall not be deemed to have assumed any obligation or relationship of
agency or trust with or for the Borrower or any of its Subsidiaries.
12.03 Lack of Reliance on the Administrative Agent. Each
Lender expressly acknowledges that none of the Administrative Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender.
Independently and without reliance upon the Administrative Agent or any other
Lender, each Lender and the holder of each Note, to the extent it deems
appropriate and based on such documents and information as it deems appropriate,
has made and shall continue to make (i) its own independent investigation of the
business, assets, operations, property, prospects, financial and other
conditions and affairs of the Borrower and its Subsidiaries in connection with
the making and the continuance of the Loans and the taking or
-120-
<PAGE> 127
not taking of any action in connection herewith and (ii) its own credit analysis
and appraisal of the creditworthiness of the Borrower and its Subsidiaries and,
except as expressly provided in this Agreement, the Administrative Agent shall
not have any duty or responsibility, either initially or on a continuing basis,
to provide any Lender or the holder of any Note with any credit or other
information with respect thereto, whether coming into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates before the making of the Loans or at any time or
times thereafter. The Administrative Agent shall not be responsible to any
Lender or the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectability, priority or
sufficiency of this Agreement or any other Credit Document or the financial
condition of the Borrower and its Subsidiaries or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document, or the
financial condition of the Borrower and its Subsidiaries or the existence or
possible existence of any Default or Event of Default.
12.04 Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from the Required Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Credit Document, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the
Administrative Agent shall have received instructions from the Required Lenders
as it deems appropriate or it shall have been indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action; and the
Administrative Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Lender or the holder of any Note
shall have any right of action whatsoever against the Administrative Agent as a
result of the Administrative Agent acting or refraining from acting hereunder or
under any other Credit Document in accordance with the instructions of the
Required Lenders and such instructions or any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.
12.05 Reliance. The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, order or other document, conversation or telephone message
signed, sent or made by any Person that the Administrative Agent believed to be
the proper Person or persons, and upon advice or statement of legal counsel
(including, without limitations counsel to the Borrower or any of its
Subsidiaries), independent accountants and other experts selected by the
Administrative Agent.
12.06 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such ratably according to its
"percentage" as used in determining the Required Lenders at such time or, if the
Commitments have terminated and all Loans have been repaid in full, as
determined immediately prior to such termination and repayment (with such
"percentage" to be determined as if there are no Defaulting Lenders), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at
-121-
<PAGE> 128
any time following the payment of the Obligations) be imposed on, incurred by or
asserted against the Administrative Agent in its capacity as such in any way
relating to or arising out of this Agreement or any other Credit Document, or
any documents contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted to be taken by the
Administrative Agent under or in connection with any of the foregoing, but only
to the extent that any of the foregoing is not paid by the Borrower or any of
its Subsidiaries; provided, that no Lender shall be liable to the Administrative
Agent for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting primarily from the gross negligence or willful misconduct of the
Administrative Agent. If any indemnity furnished to the Administrative Agent for
any purpose shall, in the opinion of the Administrative Agent be insufficient or
become impaired, the Administrative Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this Section 12.06 shall survive the
payment of all Obligations.
12.07 Administrative Agent in Its Individual Capacity. With
respect to its obligation to make Loans, the Loans made by it and all
Obligations owed to it under this Agreement, the Administrative Agent shall have
the rights and powers specified herein for a "Lender" and may exercise the same
rights and powers as though it were not performing the duties specified herein;
and the term "Lenders," "Required Lenders," "Majority Lenders," "holders of
Notes" or any similar terms shall, unless the context clearly otherwise
indicates, include the Administrative Agent in its individual capacity. The
Administrative Agent may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with any Credit Party or
any Affiliate of any Credit Party as if it were not performing the duties
specified herein, and may accept fees and other consideration from the Borrower
or any other Credit Party for services in connection with this Agreement and
otherwise without having to account for the same to the Lenders.
12.08 Holders. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or endorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
12.09 Resignation by the Administrative Agent. (a) The
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Credit Documents at any time by giving
15 Business Days' prior written notice to the Borrower and the Lenders. Such
resignation shall take effect upon the appointment of a successor Administrative
Agent pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation by the Administrative
Agent, the Lenders shall appoint a successor Administrative Agent hereunder or
thereunder who shall be a commercial bank or trust company reasonably acceptable
to the Borrower.
-122-
<PAGE> 129
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Borrower (which shall not be unreasonably withheld or delayed),
shall then appoint a commercial bank or trust company with capital and surplus
of not less than $500,000,000 as successor Administrative Agent who shall serve
as Administrative Agent hereunder or thereunder until such time, if any, as the
Lenders appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 25th Business Day after the date such
notice of resignation was given by the Administrative Agent, the Administrative
Agent's resignation shall become effective and the Required Lenders shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under any other Credit Document until such time, if any, as the Required Lenders
appoint a successor Administrative Agent as provided above.
12.10 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement or any other Credit Document by
or through Administrative Agent or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any Administrative Agent or attorneys-in-fact selected by it with reasonable
care.
12.11 Exculpatory Provisions. None of the Administrative Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action taken or omitted to be taken by it
or such Person in its capacity as Administrative Agent under or in connection
with this Agreement or the other Credit Documents (except for its or such
Person's own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by the Borrower, any of its Subsidiaries or any of its officers
contained in this Agreement or the other Credit Documents, any other Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or any other Document or for any failure of the Borrower or any
of its Subsidiaries or any of their respective officers to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or the other Documents, or to inspect the properties, books or records
of the Borrower or any of its Subsidiaries. The Administrative Agent shall not
be responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or any other
Document or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
in connection herewith or therewith furnished or made by the Administrative
Agent to the Lenders or by or on behalf of the Borrower or any of its
Subsidiaries to the Administrative Agent or any Lender or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default.
-123-
<PAGE> 130
12.12 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless the Administrative Agent has actually received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give prompt notice thereof to the Lenders. The Administrative Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders; provided, that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
12.13 Special Provisions Regarding the Co-Lead Arrangers. No
Co-Lead Arranger, Documentation Agent or Syndication Agent shall have any
obligations, responsibilities or duties under this Agreement or any other Credit
Document in its capacity as such.
SECTION 13. Miscellaneous.
13.01 Payment of Expenses, etc. The Borrower shall: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent and the
Co-Lead Arrangers (including, without limitation, the reasonable fees and
disbursements of White & Case LLP and local counsel) in connection with the
preparation, execution and delivery of this Agreement and the other Credit
Documents and the documents and instruments referred to herein and therein and
any amendment, waiver or consent relating hereto or thereto, of each Co-Lead
Arranger in connection with its syndication efforts with respect to this
Agreement and of the Administrative Agent, each Issuing Bank and each of the
Lenders in connection with the enforcement of this Agreement and the other
Credit Documents and the documents and instruments referred to herein and
therein (including, without limitation, the reasonable fees and disbursements of
counsel (including in-house counsel) for the Administrative Agent and for each
of the Lenders and the fees payable to the lessor upon the foreclosure under the
St. Luke's Lease); (ii) pay and hold each of the Lenders harmless from and
against any and all present and future stamp, excise and other similar taxes
with respect to the foregoing matters and save each of the Lenders harmless from
and against any and all liabilities with respect to or resulting from any delay
or omission (other than to the extent attributable to such Lender) to pay such
taxes; and (iii) indemnify the Administrative Agent, each Co-Lead Arranger, the
Collateral Agent, each Issuing Bank and each Lender, and each of their
respective officers, directors, trustees, employees, representatives and
Administrative Agent from and hold each of them harmless against any and all
liabilities, obligations (including removal or remedial actions), losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses and
disbursements (including reasonable attorneys' and consultants' fees and
disbursements) incurred by, imposed on or assessed against any of them as a
result of, or arising out of, or in any way related to, or by reason of, (a) any
investigation, litigation or other proceeding (whether or not the Administrative
Agent, any Co-Lead Arranger, any Issuing Bank, the Collateral Agent or any
Lender is a party thereto and whether or not any such investigation, litigation
or other proceeding is between or among the Administrative Agent, any Co-Lead
Arranger, the Collateral Agent, any Issuing Bank, any Lender, any Credit Party
or any third Person or otherwise) related to the
-124-
<PAGE> 131
entering into and/or performance of this Agreement or any other Credit Document
or the use of any Letter of Credit or the proceeds of any Loans hereunder or the
consummation of any transactions contemplated herein (including, without
limitation, the Transaction), or in any other Credit Document or the exercise of
any of their rights or remedies provided herein or in the other Credit
Documents, or (b) the actual or alleged presence of Hazardous Materials in the
air, surface water or groundwater or on the surface or subsurface of any Real
Property at any time owned, operated or occupied by the Borrower or any of its
Subsidiaries, the generation, storage, transportation, handling or disposal of
Hazardous Materials at any location, whether or not owned, operated or occupied
by the Borrower or any of its Subsidiaries, the non-compliance of any Real
Property at any time owned, operated or occupied by the Borrower or any of its
Subsidiaries with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any such Real
Property, or any Environmental Claim asserted against the Borrower, any of its
Subsidiaries or such Real Property, including, in each case, without limitation,
the reasonable fees and disbursements of counsel and other consultants incurred
in connection with any such investigation, litigation or other proceeding (but
excluding any losses, liabilities, penalties, claims, damages, costs,
disbursements or expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified). To the extent
that the undertaking to indemnify, pay or hold harmless the Administrative Agent
or any Lender set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrower shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
13.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
an Event of Default, the Administrative Agent, each Issuing Bank and each Lender
is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by the Administrative Agent, such Issuing
Bank or such Lender (including, without limitation, by branches and agencies of
such Lender wherever located) to or for the credit or the account of any Credit
Party but in any event excluding assets held in trust for any such Person
against and on account of the Obligations and liabilities of such Credit Party
to the Administrative Agent, such Issuing Bank or such Lender under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Lender pursuant to
Section 13.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit Document, irrespective
of whether or not the Administrative Agent, such Issuing Bank or such Lender
shall have made any demand hereunder and although said Obligations, liabilities
or claims, or any of them, shall be contingent or unmatured.
13.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telexed, telegraphic, telex, telecopier or cable communication) and
mailed, telexed, telecopied, cabled or delivered: if to the Borrower, at the
address specified opposite its signature below; if to any Lender, at its address
specified opposite its name on Schedule II below or in the applicable Assignment
and
-125-
<PAGE> 132
Assumption Agreement; if to the Administrative Agent, at its Notice Office; and
if to any Co-Lead Arranger, at the address specified opposite its signature
below; or, as to the Borrower, at such other address as shall be designated by
the Borrower in a written notice to the other parties hereto and, as to each
Lender, at such other address as shall be designated by such Lender in a written
notice to the Borrower and the Administrative Agent. All such notices and
communications shall, when mailed, telexed, telecopied or sent by overnight
courier, be effective when deposited in the mails or delivered to the overnight
courier, prepaid and properly addressed for delivery on such or the next
Business Day, or sent by telex or telecopier, except that notices and
communications to the Administrative Agent shall not be effective until received
by the Administrative Agent.
13.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, that (i) no
Credit Party may assign or transfer any of its rights, obligations or interest
hereunder or under any other Credit Document without the prior written consent
of the Lenders, (ii) although any Lender may transfer, assign or grant
participations in its rights hereunder in accordance with this Section 13.04,
such Lender shall remain a "Lender" for all purposes hereunder (and may not
transfer or assign all or any portion of its Commitments hereunder except as
provided in Section 13.04(b)) and the transferee, assignee or participant, as
the case may be, shall not constitute a "Lender" hereunder and (iii) no Lender
shall transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (x) extend
the final scheduled maturity of any Loan, Note or Letter of Credit (unless such
Letter of Credit is not extended beyond the Revolving Loan Maturity Date) in
which such participant is participating, or reduce the rate or extend the time
of payment of interest or Fees thereon (except (I) in connection with a waiver
of applicability of any post-default increase in interest rates and (II) that
any amendment or modification to the financial definitions in this Agreement
shall not constitute a reduction in the rate of interest for purposes of this
clause (x)) or reduce the principal amount thereof, or increase the amount of
the participant's participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitments shall not constitute a change in the terms of
such participation, and that an increase in any Commitment or Loan shall be
permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (y) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (z) release all or substantially all of the Collateral
under all of the Security Documents (except as expressly provided in the Credit
Documents) securing the Loans hereunder in which such participant is
participating. In the case of any such participation, the participant shall not
have any rights under this Agreement or any of the other Credit Documents (the
participant's rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Lender had not sold such participation.
(b) Notwithstanding the foregoing, any Lender (or any Lender
together with one or more other Lenders) may (x) assign all or a portion of its
Revolving Loan Commitment (and related outstanding Obligations hereunder) and/or
its outstanding Term Loans (or, if prior to
-126-
<PAGE> 133
the Initial Borrowing Date, Term Loan Commitment) to its (i) parent company
and/or any affiliate of such Lender (which, if a fund and such assignment
relates to Revolving Loans or Revolving Loan Commitments, such fund shall
represent that it has the financial resources to fulfill its commitments
hereunder) which is at least 50% owned by such Lender or its parent company or
(ii) in the case of any Lender of Term Loans that is a fund that invests in bank
loans, any other fund that invests in bank loans and is managed or advised by
the same investment advisor of such Lender or by an Affiliate of such investment
advisor or (iii) to one or more Lenders (which, if a fund and such assignment
relates to Revolving Loans or Revolving Loan Commitments, such fund shall
represent that it has the financial resources to fulfill its commitments
hereunder) or (y) assign all, or if less than all, a portion equal to at least
$2,500,000 in the aggregate for the assigning Lender or assigning Lenders, of
such Revolving Loan Commitments and outstanding principal amount of Term Loans
(or, if prior to the Initial Borrowing Date, Term Loan Commitment) hereunder to
one or more Eligible Transferees (with respect to Term Loans, treating any fund
that invests in bank loans and any other fund that invests in bank loans and is
managed or advised by the same investment advisor of such fund or by an
Affiliate of such investment advisor as a single Eligible Transferee), each of
which assignees shall become a party to this Agreement as a Lender by execution
of an Assignment and Assumption Agreement, provided that, (i) at such time
Schedule I shall be deemed modified to reflect the Commitments (and/or
outstanding Term Loans, as the case may be) of such new Lender and of the
existing Lenders, (ii) new Notes will be issued, at the Borrower's expense, to
such new Lender and to the assigning Lender upon the request of such new Lender
or assigning Lender, such new Notes to be in conformity with the requirements of
Section 1.05 (with appropriate modifications) to the extent needed to reflect
the revised Commitments (and/or outstanding Term Loans, as the case may be),
(iii) the consent of the Administrative Agent and each Issuing Bank shall be
required in connection with any assignment of all or any portion of Revolving
Loan Commitments (which consents shall not be unreasonably withheld or delayed),
(iv) in the case of assignments pursuant to clause (y) above, the consent of the
Administrative Agent and, unless any Material Default or Event of Default is
then in existence, the consent of the Borrower shall be required (which consents
shall not be unreasonably withheld or delayed) and (v) the Administrative Agent
shall receive at the time of each such assignment, from the assigning or
assignee Lender, the payment of a non-refundable assignment fee of $3,500. To
the extent of any assignment pursuant to this Section 13.04(b), the assigning
Lender shall be relieved of its obligations hereunder with respect to its
assigned Commitments (it being understood that the indemnification provisions
under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05,
4.04, 13.01 and 13.06) shall survive as to such assigning Lender). At the time
of each assignment pursuant to this Section 13.04(b) to a Person which is not
already a Lender hereunder and which is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes,
the respective assignee Lender, as a condition to its becoming a Lender
hereunder, shall provide to the Borrower and the Administrative Agent the
appropriate Internal Revenue Service Forms (and, if applicable, a Section
4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an
assignment of all or any portion of a Lender's Commitments and related
outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would,
at the time of such assignment, result in increased costs under Section 1.10,
1.11, 2.05 or 4.04 from those being charged by the respective assigning Lender
prior to such assignment, then the Borrower shall not be obligated to pay such
increased
-127-
<PAGE> 134
costs (although the Borrower shall be obligated to pay any other increased costs
of the type described above resulting from changes after the date of the
respective assignment, subject to Section 4.04(b)).
(c) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank and,
with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld or delayed), any Lender which is a fund may pledge all or
any portion of its Notes or Loans to any trustee, other representative of
holders of notes issued by such fund, or holder of obligations owed by such
fund, in support of its obligation to such trustee, representative or holder. No
pledge pursuant to this clause (c) shall release the transferor Lender from any
of its obligations hereunder.
13.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Administrative Agent or any Lender or any holder of any Note in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between any other Credit Party and the
Administrative Agent or any Lender or the holder of any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which the Administrative Agent or any Lender or the
holder of any Note would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the Administrative Agent or any Lender or the holder of any Note to any other
or further action in any circumstances without notice or demand.
13.06 Payments Pro Rata. (a) Except as otherwise provided in
this Agreement, the Administrative Agent agrees that promptly after its receipt
of each payment from or on behalf of the Borrower in respect of any Obligations
hereunder, it shall distribute such payment to the Lenders (other than any
Lender that has consented in writing to waive its pro rata share of any such
payment) pro rata based upon their respective shares, if any, of the Obligations
with respect to which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees,
of a sum which with respect to the related sum or sums received by other Lenders
is in a greater proportion than the total of such Obligation then owed and due
to such Lender bears to the total of such Obligation then owed and due to all of
the Lenders immediately prior to such receipt, then such Lender receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Lenders an interest in the Obligations of the respective Credit Party to
such Lenders in such amount as shall result in a proportional participation by
all the Lenders in
-128-
<PAGE> 135
such amount; provided that if all or any portion of such excess amount is
thereafter recovered from such Lender, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 13.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.
13.07 Calculations; Computations. (a) The financial statements
to be furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the Borrower to the
Lenders) (with the foregoing generally accepted accounting principles herein
called "GAAP"); provided that, (i) except as otherwise specifically provided
herein, all computations of Excess Cash Flow and all computations determining
compliance with Sections 9.08 through 9.10, inclusive, and the determination of
Applicable Margin and Applicable Commitment Commission Percentage shall utilize
accounting principles and policies in conformity with those used to prepare the
annual financial statements first delivered to the Lenders pursuant to Section
7.05(a), (ii) for purposes of calculating financial terms, all covenants and
related definitions, all such calculations based on the operations of the
Borrower and its Subsidiaries on a consolidated basis shall be made without
giving effect to the operations of any Unrestricted Subsidiaries and (iii) to
the extent expressly required pursuant to the provisions of this Agreement,
certain calculations shall be made on a Pro Forma Basis.
(b) All computations of interest on Eurodollar Loans,
Commitment Commission and Fees hereunder shall be made on the basis of a year of
360 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, Commitment
Commission or Fees are payable. All computations of interest on Base Rate Loans
shall be made on the basis of a year of 365 or 366 days, as the case may be, for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
-129-
<PAGE> 136
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS
OTHERWISE PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO
BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE BORROWER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES
AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER
OR ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR
INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT
UNDER THIS AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE
AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
130-
<PAGE> 137
13.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
13.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower and each of the Lenders
who are initially parties hereto shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered the same to the
Administrative Agent or, in the case of the Lenders, shall have given to the
Administrative Agent telephonic (confirmed in writing), written or telex notice
(actually received) at such office that the same has been signed and mailed to
it. The Administrative Agent will give the Borrower and each Lender prompt
written notice of the occurrence of the Effective Date.
13.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor
any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties party thereto
and the Required Lenders, provided that no such change, waiver, discharge or
termination shall, without the consent of each Lender (other than a Defaulting
Lender) (with Obligations being directly affected in the case of following
clause (i)), (i) extend the final scheduled maturity of any Loan or Note or
extend the stated maturity of any Letter of Credit beyond the Revolving Loan
Maturity Date, or reduce the rate or extend the time of payment of interest or
Fees thereon (except (x) in connection with the waiver of applicability of any
post-default increase in interest rates and (y) that any amendment or
modification to the financial definitions in this Agreement shall not constitute
a reduction in the rate of interest for purposes of this clause (i)), or reduce
the principal amount thereof (except to the extent repaid in cash), (ii) release
all or substantially all of the Collateral (except as expressly provided in the
Credit Documents) under all the Security Documents, (iii) amend, modify or waive
any provision of this Section 13.12, (iv) reduce the percentage specified in the
definition of Required Lenders (it being understood that, with the consent of
the Required Lenders, additional extensions of credit pursuant to this Agreement
may be included in the determination of the Required Lenders on substantially
the same basis as the extensions of Term Loans and Revolving Loan Commitments
are included on the Effective Date) or (v) consent to the assignment or transfer
by the Borrower of any of its rights and obligations under this Agreement or any
other Credit Document; provided further, that no such change, waiver, discharge
or termination shall (t) increase the Commitments of any Lender over the amount
thereof then in effect without the consent of such Lender (it being understood
that waivers or modifications of conditions precedent, covenants, Defaults or
Events of Default or of a mandatory reduction in the Total Commitments shall not
constitute an increase of the Commitment of any Lender, and that an increase in
the available portion of any Commitment of any Lender shall not constitute an
increase in the Commitment of such Lender), (u) without the consent of the
Swingline Lender,
-131-
<PAGE> 138
alter its rights or obligations with respect to Swingline Loans, (v) without the
consent of the respective Issuing Bank, amend, modify or waive any provision of
Section 2 or alter its rights or obligations with respect to Letters of Credit,
(w) without the consent of the Administrative Agent, amend, modify or waive any
provision of Section 12 as same applies to the Administrative Agent or any other
provision as same relates to the rights or obligations of the Administrative
Agent, (x) without the consent of the Collateral Agent, amend, modify or waive
any provision relating to the rights or obligations of the Collateral Agent, (y)
without the consent of the Majority Lenders of each Tranche which is being
allocated a lesser prepayment, repayment or commitment reduction as a result of
the actions described below (or without the consent of the Majority Lenders of
each Tranche in the case of an amendment to the definition of Majority Lenders),
amend the definition of Majority Lenders (it being understood that, with the
consent of the Required Lenders, additional extensions of credit pursuant to
this Agreement may be included in the determination of the Majority Lenders on
substantially the same basis as the extensions of Term Loans and Revolving Loan
Commitments are included on the Effective Date) or alter the required
application of any prepayments or repayments (or commitment reductions), as
between the various Tranches, pursuant to Section 4.01 or 4.02 (excluding
Sections 4.02(b) and (c)) (although (x) the Required Lenders may waive, in whole
or in part, any such prepayment, repayment or commitment reduction, so long as
the application, as amongst the various Tranches, of any such prepayment,
repayment or commitment reduction which is still required to be made is not
altered and (y) if additional Tranches of Term Loans are extended after the
Initial Borrowing Date with the consent of the Required Lenders as required
above, such Tranches may be included on a pro rata basis (as is originally done
with the Tranche A Term Loans and Tranche B Term Loans) in the various
prepayments or repayments required pursuant to Sections 4.01 and 4.02 (excluding
Sections 4.02(b) and (c) and any section providing Scheduled Repayments for any
new Tranche of Term Loans) or (z) without the consent of the Majority Lenders of
the respective Tranche, reduce the amount of, or extend the date of, any
Scheduled Repayment applicable to such Tranche or, without the consent of the
Majority Lenders of each Tranche, amend the definition of Majority Lenders (it
being understood that, with the consent of the Required Lenders, additional
extensions of credit pursuant to this Agreement may be included in the
determination of the Majority Lenders on substantially the same basis as the
extensions of Term Loans and Revolving Loan Commitments are included on the
Effective Date).
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clauses (i) through (v), inclusive, of the first proviso to
Section 13.12(a), the consent of the Required Lenders is obtained but the
consent of one or more of such other Lenders whose consent is required is not
obtained, then the Borrower shall have the right, so long as all non-consenting
Lenders whose individual consent is required are treated as described in either
clauses (A) or (B) below, to either (A) replace each such non-consenting Lender
or Lenders (or, at the option of the Borrower if the respective Lender's consent
is required with respect to less than all Tranches of Loans (or related
Commitments), to replace only the respective Tranche or Tranches of Commitments
and/or Loans of the respective non-consenting Lender which gave rise to the need
to obtain such Lender's individual consent) with one or more Replacement Lenders
pursuant to Section 1.13 so long as at the time of such replacement, each such
Replacement Lender consents to the proposed
-132-
<PAGE> 139
change, waiver, discharge or termination or (B) terminate such non-consenting
Lender's Revolving Loan Commitment (if such Lender's consent is required as a
result of its Revolving Loan Commitment) and/or repay each Tranche of
outstanding Term Loans of such Lender which gave rise to the need to obtain such
Lender's consent, in accordance with Sections 3.02(b) and/or 4.01(iv), provided
that, unless the Commitments terminated and Loans repaid pursuant to preceding
clause (B) are immediately replaced in full at such time through the addition of
new Lenders or the increase of the Commitments and/or outstanding Loans of
existing Lenders (who in each case must specifically consent thereto), then in
the case of any action pursuant to preceding clause (B) the Required Lenders
(determined both before and after giving effect to the proposed action) shall
specifically consent thereto, provided further, that in any event the Borrower
shall not have the right to replace a Lender, terminate its Revolving Loan
Commitment or repay its Loans solely as a result of the exercise of such
Lender's rights (and the withholding of any required consent by such Lender)
pursuant to the second proviso to Section 13.12(a).
13.13 Survival. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 2.05, 4.04, 12.06, 13.01 and 13.06
shall, subject to Section 13.15 (to the extent applicable), survive the
execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Loans.
13.14 Domicile of Loans. Each Lender may transfer and carry
its Loans at, to or for the account of any office, Subsidiary or Affiliate of
such Lender. Notwithstanding anything to the contrary contained herein, to the
extent that a transfer of Loans pursuant to this Section 13.14 would, at the
time of such transfer, result in increased costs under Section 1.10, 1.11, 2.05
or 4.04 from those being charged by the respective Lender prior to such
transfer, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective
transfer).
13.15 Confidentiality. (a) Subject to the provisions of clause
(b) of this Section 13.15, each Lender agrees that it will use its best efforts
not to disclose without the prior consent of the Borrower (other than to its
employees, auditors, advisors or counsel or to another Lender if the Lender or
such Lender's holding or parent company or board of trustees in its sole
discretion determines that any such party should have access to such
information), any information with respect to the Borrower or any of its
Subsidiaries which is now or in the future furnished pursuant to this Agreement
or any other Credit Document, provided that any Lender may disclose any such
information (a) as has become generally available to the public other than by
virtue of a breach of this Section 13.15(a) by the respective Lender, (b) as may
be required or appropriate (x) in any report, statement or testimony submitted
to any municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Lender or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or similar organizations (whether in the United
States or elsewhere) or their successors or (y) in connection with any request
or requirement of any such regulatory body (including any securities exchange or
self-regulatory body), (c) as may be required or appropriate in respect to any
summons or subpoena or in connection with any litigation, (d) in order to comply
with any law, order, regulation or ruling applicable to such Lender, (e) to the
Administrative Agent or the Collateral Agent, (f) to any prospective or actual
transferee or participant in connection with any contemplated transfer or
participation of any of
-133-
<PAGE> 140
the Notes or Commitments or any interest therein by such Lender, provided that
such prospective transferee agrees to be bound by the confidentiality provisions
contained in this Section 13.15 and (g) to any Person (or such Person's
investment advisor) with whom such Lender has entered into or proposes to enter
into (in each case either directly or indirectly) any credit swap agreement with
respect to such Lender's Loans and/or Commitments, provided such Person (and
such investment advisor, if any) agrees to be bound by the confidentiality
provisions contained in this Section 13.15.
(b) The Borrower hereby acknowledges and agrees that each
Lender may share with any of their affiliates or investment advisors any
information related to the Borrower or any of its Subsidiaries (including,
without limitation, any nonpublic customer information regarding the
creditworthiness of the Borrower or its Subsidiaries, provided such Persons
shall be subject to the provisions of this Section 13.15 to the same extent as
such Lender).
13.16 Register. The Borrower hereby designates the
Administrative Agent to serve as its agent, solely for purposes of this Section
13.16, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Lenders, the Loans made by each of
the Lenders and each repayment in respect of the principal amount of the Loans
of each Lender. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Lender, the transfer of any Commitment of such Lender
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitment shall not be effective until such transfer is recorded on the
Register maintained by the Administrative Agent with respect to ownership of
such Commitment and Loans and prior to such recordation all amounts owing to the
transferor with respect to such Commitment and Loans shall remain owing to the
transferor. The registration of assignment or transfer of all or part of any
Commitment and Loans shall be recorded by the Administrative Agent on the
Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
13.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Administrative Agent for acceptance and registration of
assignment or transfer of all or part of a Commitment and/or Loan, or as soon
thereafter as practicable, the assigning or transferor Lender shall surrender
the Note evidencing such Commitment and/or Loan, if any, and thereupon one or
more new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Lender and/or the new Lender, if requested by such
assigning or transferor Lender and/or such new Lender. The Borrower shall
indemnify the Administrative Agent from and against any and all losses, claims,
damages and liabilities of whatsoever nature which may be imposed on, asserted
against or incurred by the Administrative Agent in performing its duties under
this Section 13.16.
13.17 Post-Closing Actions. Notwithstanding anything to the
contrary contained in this Agreement or the other Credit Documents, the parties
hereto acknowledge and agree that the matters set forth on Schedule VIII have
not been completed on or before the Initial Borrowing Date.
All provisions of this Credit Agreement and the other Credit
Documents (including, without limitation, all conditions precedent,
representations, warranties, covenants,
-134-
<PAGE> 141
events of default and other agreements herein and therein) shall be deemed
modified to the extent necessary to effect the foregoing (and to permit the
taking of the actions and the satisfaction of the conditions described above and
on Schedule VIII within the time periods required hereby and thereby (and,
rather than as otherwise provided in the Credit Documents)); provided, that (x)
to the extent any representation and warranty would not be true because the
foregoing actions were not taken, or conditions were not satisfied, on the
Initial Borrowing Date, the respective representation and warranty shall be
required to be true and correct in all material respects at the time the
respective action is taken or condition is satisfied (or was required to be
taken or satisfied) in accordance with the foregoing provisions of this Section
13.17 and (y) all representations and warranties relating to the Collateral
Documents shall be required to be true immediately after the actions required to
be taken, or the conditions required to be satisfied, by this Section 13.17 have
been taken or satisfied (or were required to be taken or satisfied), it being
understood that any condition set forth in items 4 and 5 on Schedule VIII not
satisfied within the time period specified therefor on said Schedule shall
nevertheless be deemed to have been satisfied within such time period to the
extent "best efforts" or "commercially reasonable efforts" (as may be specified
on Schedule VIII for such item) were used by the Borrower or its relevant
Subsidiary to satisfy such condition. The acceptance of the benefits of the
Loans shall constitute a representation, warranty and covenant by the Borrower
to each of the Lenders that the actions and conditions required pursuant to this
Section 13.17 will be, or have been, taken or satisfied within the relevant time
periods referred to in this Section 13.17 and Schedule VIII and that, at such
time, all representations and warranties contained in this Credit Agreement and
the other Credit Documents shall then be true and correct without any
modification pursuant to this Section 13.17. The parties hereto acknowledge and
agree that the failure to take any of the actions or satisfy any of the
conditions required above or on Schedule VIII within the relevant time periods
required above or by said Schedule VIII shall give rise to an immediate Event of
Default pursuant to this Agreement.
[Remainder of page intentionally left blank]
-135-
<PAGE> 142
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address: IASIS HEALTHCARE CORPORATION
IASIS Healthcare Corporation
104 Woodmont Boulevard
Nashville, TN 37205
By: /s/ Wayne B. Gower
--------------------------------
Attention: Frank Aaron Coyle Name: Wayne B. Gower
Telephone: 615-844-2747 Title: President & Chief
Facsimile: 615-846-3006 Executive Officer
Address: MORGAN GUARANTY TRUST COMPANY OF NEW
c/o J.P. Morgan Services, Inc. YORK, Individually and as
500 Stanton Christiana Road Administrative Agent
Newark, DE 19713
Attention: Renee Richmond By: /s/ Colleen B. Galle
Telephone: (302) 634-3316 --------------------------------
Facsimile: (302) 634-4300 Name: Colleen B. Galle
Title: Vice President
JP MORGAN SECURITIES, INC., as Co-Lead
Arranger
By: /s/ Steven Tulip
--------------------------------
Name: Steven Tulip
Title: Vice President
THE BANK OF NOVA SCOTIA, Individually,
as Syndication Agent and as Co-Lead
Arranger
By: /s/ Robert Gaviglio
--------------------------------
Name: Robert Gaviglio
Title: Senior Relationship Manager
<PAGE> 143
PARIBAS, Individually and as
Documentation Agent
By: /s/ Glenn E. Mealey
----------------------------------
Name: Glenn E. Mealey
Title: Managing Director
By: /s/ Rosine K. Matthews
----------------------------------
Name: Rosine K. Matthews
Title: Vice President
<PAGE> 144
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Henry J. Reukauf
------------------------------
Name: Henry J. Reukauf
Title: Vice President
<PAGE> 145
FRANKLIN FLOATING RATE TRUST
By: /s/ Chauncey Lufkin
-----------------------------
Name: Chauncey Lufkin
Title: Vice President
<PAGE> 146
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ John P. Crosby, Jr.
------------------------------
Name: John P. Crosby, Jr.
Title: Vice President
<PAGE> 1
EXHIBIT 10.3
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of November 16,
1999, among IASIS HEALTHCARE CORPORATION, a Delaware corporation (the
"Borrower"), the lending institutions party to the Credit Agreement referred to
below from time to time (each a "Lender" and , collectively, the "Lenders"),
J.P. MORGAN SECURITIES INC. and THE BANK OF NOVA SCOTIA, as Co-Lead Arrangers
(in such capacity, each a "Co-Lead Arranger" and, collectively, the "Co-Lead
Arrangers") and Co-Book Runners, PARIBAS, as Documentation Agent (in such
capacity, the "Documentation Agent"), THE BANK OF NOVA SCOTIA, as Syndication
Agent (in such capacity, the "Syndication Agent") and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Administrative Agent (in such capacity, the
"Administrative Agent"). All capitalized terms used herein and not otherwise
defined herein shall have the respective meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Co-Lead Arrangers, the
Documentation Agent, the Syndication Agent and the Administrative Agent are
party to a Credit Agreement, dated as of October 15, 1999 (the "Credit
Agreement"); and
WHEREAS, the Borrower and the Lenders wish to provide the
amendment provided for herein;
NOW, THEREFORE, it is agreed:
1. The following new definition of "Supermajority Lenders" is
hereby inserted into Section 11 of the Credit Agreement in its appropriate
alphabetical position:
"Supermajority Lenders" of any Tranche of Term Loans
shall mean Non-Defaulting Lenders, the sum of whose outstanding Term
Loans under such Tranche represent an amount equal to or greater than
66-2/3% of the sum of all outstanding Term Loans of Non-Defaulting
Lenders under such Tranche.
2. Section 13.12(a) of the Credit Agreement is hereby amended
by (x) deleting the parenthetical set forth in clause (i) thereof and inserting
in lieu thereof:
"(except that any amendment or modification that is
not agreed to by each Lender directly affected thereby to the financial
definitions in this Agreement or to Section 13.07(a) shall not
constitute a reduction in the rate of interest or fees for purposes of
this clause (i), notwithstanding the fact that such amendment or
modification would otherwise actually result in such a reduction, so
long as the primary purpose (as determined in good faith by the
Borrower and the Administrative Agent) of the respective amendment or
modification was not to decrease the pricing pursuant to this
Agreement)"
1
<PAGE> 2
and (y) deleting the reference to "Majority Lenders" in each
place such reference appears in clause (z) thereof and inserting a reference to
"Supermajority Lenders" in lieu thereof.
3. The Borrower hereby represents and warrants that (i) no
Default or Event of Default exists as of the Amendment Effective Date (as
defined below) after giving effect to this Amendment and (ii) on the Amendment
Effective Date, both before and after giving effect to this Amendment, all
representations and warranties (other than those representations made as of a
specified date) contained in the Credit Agreement and in the other Credit
Documents are true and correct in all material respects.
4. This Amendment shall become effective on the date (the
"Amendment Effective Date") when each Lender and the Borrower shall have signed
a counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the
Administrative Agent at its Notice Office;
5. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
6. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Administrative Agent.
7. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
* * *
2
<PAGE> 3
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
hereof.
IASIS HEALTHCARE CORPORATION
By: /s/ Frank Coyle
------------------------------------
Name: Frank Coyle
Title: Secretary
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, Individually
and as Administrative Agent
By: /s/ Colleen B. Galle
------------------------------------
Name: Colleen B. Galle
Title: Vice President
THE BANK OF NOVA SCOTIA, Individually, as
Syndication Agent and as Co-Lead
Arranger
By: /s/ W. E. Garrett
------------------------------------
Name: William E. Garrett
Title: Senior Relationship Manager
PARIBAS, Individually and as
Documentation Agent
By: /s/ Glenn E. Mealey
------------------------------------
Name: Glenn E. Mealey
Title: Managing Director
By: /s/ Larry Robinson
------------------------------------
Name: Larry Robinson
Title: Vice President
3
<PAGE> 4
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Henry J. Reukauf
------------------------------------
Name: Henry J. Reukauf
Title: Vice President
FIRST DOMINION FUNDING I
By: /s/ Andrew H. Marshak
------------------------------------
Name: Andrew H. Marshak
Title: Authorized Signatory
FIRST DOMINION FUNDING II
By: /s/ Andrew H. Marshak
------------------------------------
Name: Andrew H. Marshak
Title: Authorized Signatory
FRANKLIN FLOATING RATE TRUST
By: /s/ Chauncey Lufkin
------------------------------------
Name: Chauncey Lufkin
Title: Vice President
4
<PAGE> 5
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ John P. Crosby
------------------------------------
Name: John P. Crosby
Title: Duly Authorized Signatory
MAGNETITE ASSET INVESTORS, LLC
By: /s/ M. J. Williams
------------------------------------
Name: M. J. Williams
Title: Director
5
<PAGE> 1
EXHIBIT 10.4
===============================================================================
SECURITY AGREEMENT
among
IASIS HEALTHCARE CORPORATION,
VARIOUS SUBSIDIARIES OF
IASIS HEALTHCARE CORPORATION
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Collateral Agent
Dated as of October 15, 1999
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I SECURITY INTERESTS............................................. 2
1.1. Grant of Security Interests.................................... 2
1.2. Power of Attorney.............................................. 4
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS............. 4
2.1. Necessary Filings.............................................. 4
2.2. No Liens....................................................... 5
2.3. Other Financing Statements..................................... 5
2.4. Chief Executive Office; Records................................ 5
2.5. Location of Inventory and Equipment............................ 6
2.6. Recourse....................................................... 6
2.7. Trade Names; Change of Name.................................... 6
ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT
RIGHTS; INSTRUMENTS............................................ 7
3.1. Additional Representations and Warranties...................... 7
3.2. Maintenance of Records......................................... 7
3.3. Direction to Account Debtors; Contracting Parties; etc. ....... 8
3.4. Modification of Terms; etc. ................................... 8
3.5. Collection..................................................... 8
3.6. Instruments.................................................... 9
3.7. Further Actions................................................ 9
ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS...................... 9
4.1. Additional Representations and Warranties...................... 9
4.2. Licenses and Assignments....................................... 10
4.3. Infringements.................................................. 10
4.4. Preservation of Marks.......................................... 10
4.5. Maintenance of Registration.................................... 10
4.6. Future Registered Marks........................................ 11
4.7. Remedies....................................................... 11
ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND
TRADE SECRETS.................................................. 11
5.1. Additional Representations and Warranties...................... 11
5.2. Licenses and Assignments....................................... 12
5.3. Infringements.................................................. 12
5.4. Maintenance of Patents and Copyrights.......................... 13
</TABLE>
(i)
<PAGE> 3
Page
----
5.5. Prosecution of Patent or Copyright Applications............... 13
5.6. Other Patents and Copyrights.................................. 13
5.7. Remedies...................................................... 13
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL........................... 14
6.1. Protection of Collateral Agent's Security..................... 14
6.2. Warehouse Receipts Non-Negotiable............................. 14
6.3. Further Actions............................................... 14
6.4. Financing Statements.......................................... 14
ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT.................. 15
7.1. Remedies; Obtaining the Collateral Upon Default............... 15
7.2. Remedies; Disposition of the Collateral....................... 16
7.3. Waiver of Claims.............................................. 17
7.4. Application of Proceeds....................................... 17
7.5. Remedies Cumulative........................................... 19
7.6. Discontinuance of Proceedings................................. 20
ARTICLE VIII INDEMNITY.................................................... 20
8.1. Indemnity..................................................... 20
8.2. Indemnity Obligations Secured by Collateral; Survival......... 21
ARTICLE IX DEFINITIONS.................................................... 22
ARTICLE X MISCELLANEOUS................................................... 28
10.1. Notices....................................................... 28
10.2. Waiver; Amendment............................................. 28
10.3. Obligations Absolute.......................................... 29
10.4. Successors and Assigns........................................ 29
10.5. Headings Descriptive.......................................... 30
10.6. Governing Law................................................. 30
10.7. Assignors' Duties............................................. 30
10.8. Termination; Release.......................................... 30
10.9. Counterparts.................................................. 31
10.10. The Collateral Agent.......................................... 31
10.11. Severability.................................................. 31
10.12. Limited Obligations........................................... 31
10.13. Additional Assignors.......................................... 31
10.14. Effectiveness................................................. 32
(ii)
<PAGE> 4
ANNEX A Schedule of Chief Executive Offices/Record Locations
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Schedule of Trade and Fictitious Names
ANNEX D Schedule of Marks and Applications
ANNEX E Schedule of Patents and Applications
ANNEX F Schedule of Copyrights and Applications
ANNEX G Form of Grant of Security Interest in Certain Patents
and Trademarks
ANNEX H Form of Grant of Security Interest in Certain Copyrights
(iii)
<PAGE> 5
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 15, 1999 (as amended,
restated, modified and/or supplemented from time to time in accordance with the
terms hereof, this "Agreement"), among each of the undersigned (each, an
"Assignor" and, together with each other entity which becomes a party hereto
pursuant to Section 10.13, collectively, the "Assignors") and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Collateral Agent (the "Collateral Agent"), for the
benefit of the Secured Creditors (as defined below). Except as otherwise defined
in Article IX hereof, terms used herein and defined in the Credit Agreement (as
defined below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, IASIS Healthcare Corporation, a Delaware corporation
(the "Borrower"), various financial institutions from time to time party thereto
(the "Lenders"), J.P. Morgan Securities Inc. and The Bank of Nova Scotia, as
Co-Lead Arrangers (in such capacity, each a "Co-Lead Arranger" and collectively,
the "Co-Lead Arrangers") and Co-Book Runners, Paribas, as Documentation Agent
(in such capacity, the "Documentation Agent"), The Bank of Nova Scotia, as
Syndication Agent (in such capacity, the "Syndication Agent"), and Morgan
Guaranty Trust Company of New York, as Administrative Agent (in such capacity,
the "Administrative Agent", and together with the Lenders, the Co-Lead
Arrangers, the Syndication Agents, each Issuing Bank, the Pledgee and the
Collateral Agent, the "Lender Creditors") have entered into the Credit
Agreement, providing for the extension of credit to the Borrower as contemplated
therein;
WHEREAS, the Borrower may from time to time enter into one or
more (i) interest rate protection agreements (including, without limitation,
interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign
exchange contracts, currency swap agreements, commodity agreements or other
similar agreements or arrangements designed to protect against the fluctuations
in currency or commodity values and/or (iii) other types of hedging agreements
from time to time (each such agreement or arrangement with an Other Creditor (as
hereinafter defined), an "Interest Rate Protection Agreement or Other Hedging
Agreement"), with Morgan Guaranty Trust Company of New York in its individual
capacity ("Morgan Guaranty"), any Lender or a syndicate of financial
institutions organized by Morgan Guaranty or any such Lender, or an affiliate of
Morgan Guaranty or any such Lender (Morgan Guaranty, any such Lender or Lenders
or affiliate or affiliates of Morgan Guaranty or such Lender or Lenders (even if
Morgan Guaranty or any such Lender ceases to be a Lender under the Credit
Agreement for any reason) and any such institution that participates in such
Interest Rate Protection Agreements or Other Hedging Agreements, and in each
case their subsequent successors and assigns, collectively, the "Other
Creditors", and together with the Lender Creditors, the "Secured Creditors");
<PAGE> 6
WHEREAS, pursuant to a Subsidiaries Guaranty, dated as of
October 15, 1999 (as amended, restated, modified and/or supplemented from time
to time, the "Subsidiaries Guaranty"), each Assignor (other than the Borrower)
has, jointly and severally guaranteed to the Secured Creditors the payment when
due of all obligations and liabilities of the Borrower under or with respect to
the Credit Documents and each Interest Rate Protection Agreement and Other
Hedging Agreement;
WHEREAS, it is a condition precedent to the making of Loans to
the Borrower and the issuance of, and participation in, Letters of Credit for
the account of the Borrower under the Credit Agreement and to the Other
Creditors entering into Interest Rate Protection Agreements and Other Hedging
Agreements that each Assignor shall have executed and delivered to the
Collateral Agent this Agreement; and
WHEREAS, each Assignor will obtain benefits from the
incurrence and/or assumption of Loans by the Borrower and the issuance of
Letters of Credit for the account of the Borrower under the Credit Agreement and
the Borrower's entering into Interest Rate Protection Agreements or Other
Hedging Agreements and, accordingly, desires to execute this Agreement in order
to satisfy the conditions precedent described in the preceding paragraph and to
induce the Lenders to make Loans to the Borrower and to issue, and participate
in, Letters of Credit for the account of the Borrower, and to induce the Other
Creditors to enter into Interest Rate Protection Agreements and Other Hedging
Agreements with the Borrower;
NOW, THEREFORE, in consideration of the benefits accruing to
each Assignor, the receipt and sufficiency of which are hereby acknowledged,
each Assignor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the
prompt and complete payment and performance when due of all of its Obligations,
each Assignor does hereby assign and transfer unto the Collateral Agent, and
does hereby pledge and grant to the Collateral Agent for the benefit of the
Secured Creditors, a continuing security interest in, all of the right, title
and interest of such Assignor in, to and under all of the following, whether now
existing or hereafter from time to time acquired:
(i) each and every Receivable;
(ii) all Contracts, together with all Contract Rights arising
thereunder;
(iii) all Inventory;
(iv) the Cash Collateral Account and any other cash collateral
account established for such Assignor for the benefit of the Secured
Creditors and all moneys,
<PAGE> 7
securities and instruments deposited or required to be deposited in
such Cash Collateral Account;
(v) all Equipment;
(vi) all Marks, together with the registrations and right to
all renewals thereof, and the goodwill of the business of such Assignor
symbolized by the Marks;
(vii) all Patents and Copyrights and all reissues, renewals
and extensions thereof;
(viii) all computer programs of such Assignor and all
intellectual property rights therein and all other proprietary
information of such Assignor, including, but not limited to, Trade
Secrets and Trade Secret Rights;
(ix) all insurance policies;
(x) all other Goods, General Intangibles, Chattel Paper,
Documents and Instruments of such Assignor (other than the Pledged
Securities);
(xi) all Permits; and
(xii) all Proceeds and products of any and all of the
foregoing (all of the above, collectively, the "Collateral").
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
(c) Notwithstanding anything to the contrary contained in
clauses (a) and (b) above, the security interest created by this Agreement shall
not extend to, and the term "Collateral" shall not include any Equipment subject
to a purchase money Lien permitted under Section 9.01(iii) or (vii) of the
Credit Agreement or a Lien securing Capital Lease Obligations permitted under
Section 9.01(xiv) of the Credit Agreement, in each case to the extent, and only
to the extent, that the instrument evidencing the purchase money Indebtedness or
Capitalized Lease Obligations, as the case may be, secured by such Lien
expressly prohibits any other Lien on such Equipment and only for so long as
such purchase money Indebtedness or Capitalized Lease Obligations, as the case
may be, remains or remain outstanding and upon the earlier of the termination of
such prohibition or the satisfaction of such Indebtedness, such Equipment shall
be included in the term "Collateral" without any further action on the part of
any Assignor, the Collateral Agent or any other Secured Creditor.
(d) Notwithstanding anything to the contrary contained in
clauses (a) and (b) above, the security interest created by this Agreement shall
not extend to, and the term "Collateral" shall not include (i) any permit, lease
or license held by any Assignor that is subject to any agreement which validly
prohibits the creation by such Assignor of a security interest in such permit,
lease or license, and (ii) any permit, lease or license to the extent that any
valid
<PAGE> 8
enforceable law or regulation applicable to such permit, lease or license
prohibits the creation of a security interest therein; provided, however, that
(A) to the extent permitted under applicable law, the right to receive payments
of money under such permits, leases or licenses described in the preceding
clauses (i) and (ii) above shall not be excluded from the security interest
created hereunder and (B) such rights and property described in the preceding
clauses (i) and (ii) above shall be excluded from the Collateral only to the
extent and for so long as such agreement (in the case of clause (i)) or such law
(in the case of clause (ii)) continues validly to prohibit the creation of such
security interest, and upon the expiration of such prohibition, the permits,
leases and licenses as to which such prohibition previously applied shall
automatically be included in the Collateral, without further action on the part
of each Assignor.
(e) Notwithstanding anything to the contrary contained in
clauses (a) and (b) above, it is acknowledged and agreed that the security
interest created hereby shall not extend to (i) the AHP Collateral, to the
extent, and only to the extent, that the AHP Security Agreement validly
prohibits the grant of such security interest and only for the period that the
AHP Security Agreement is in full force and effect and (ii) any Marks, Patents
or Copyrights owned by a third Person in which any Assignor has rights of usage
thereof to the extent (and only to the extent) the granting of a security
interest therein is expressly prohibited by an agreement relating thereto to
which such Assignor is a party provided, however, that such Marks, Patents or
Copyrights, as the case may be, shall be excluded from the Collateral only to
the extent and only for so long as the relevant agreement continues validly to
prohibit the creation of such security interest, and upon the expiration of such
prohibition, all Marks, Patents or Copyrights, as the case may be, as to which
such prohibition previously applied shall automatically be included in the
Collateral, without any further action on the part of any Assignor, the
Collateral Agent, or any other Secured Creditor.
1.2. Power of Attorney. Each Assignor hereby appoints the
Collateral Agent its true and lawful attorney, irrevocably, with full power
after the occurrence of and during the continuance of an Event of Default (in
the name of such Assignor or otherwise) to act, require, demand, receive,
compound and give acquittance for any and all monies and claims for monies due
or to become due to such Assignor under or arising out of the Collateral, to
endorse any checks or other instruments or orders in connection therewith and to
file any claims or take any action or institute any proceedings which the
Collateral Agent may deem to be necessary or advisable to accomplish the
purposes of this Agreement, which appointment as attorney is coupled with an
interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. (i) All filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect the
security interest granted by such Assignor to the Collateral Agent hereby in
respect of the Collateral have been accomplished (or, in the
<PAGE> 9
case of Collateral for which it is necessary to file a UCC-1 financing statement
or the filing of the Grants of Security Interests set forth in Annexes G and H
in order to perfect a security interest in such Collateral, such filings will be
accomplished within 10 days following the Initial Borrowing Date (or to the
extent such Collateral is acquired after the Initial Borrowing Date, within 10
days following the date of the acquisition of such Collateral)), and (ii) the
security interest granted to the Collateral Agent pursuant to this Agreement in
and to the Collateral constitutes (or, in the case of Collateral referred to in
the parenthetical in clause (i) above, upon compliance with the requirements of
such parenthetical, will constitute) a perfected security interest therein prior
to the rights of all other Persons therein and subject to no other Liens (other
than Permitted Liens) and is entitled to all the rights, priorities and benefits
afforded by the Uniform Commercial Code or other relevant law as enacted in any
relevant jurisdiction to perfected security interests.
2.2. No Liens. Such Assignor is, and as to Collateral acquired
by it from time to time after the date hereof such Assignor will be, the owner
of, or has rights in, all Collateral free from any Lien, security interest,
encumbrance or other right, title or interest of any Person (other than
Permitted Liens and Liens created under this Agreement), and such Assignor shall
defend the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Collateral Agent.
2.3. Other Financing Statements. There is no financing
statement evidencing a valid security interest against the Borrower or any of
its Subsidiaries (or similar statement or instrument of registration under the
law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than (x) as may be filed in connection with Liens
permitted pursuant to Section 9.01 of the Credit Agreement and (y) those with
respect to which appropriate termination statements executed by the secured
lender thereunder have been delivered to the Administrative Agent pursuant to
the terms of the Credit Agreement), and so long as the Total Commitments have
not been terminated or any Note or Letter of Credit remains outstanding or any
of the Obligations (other than arising from indemnities for which no request has
been made) remain unpaid or any Interest Rate Protection Agreement or Other
Hedging Agreement remains in effect or any Obligations are owed with respect
thereto, such Assignor will not execute or authorize to be filed in any public
office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by such Assignor or as permitted
by the Credit Agreement.
2.4. Chief Executive Office; Records. The chief executive
office of such Assignor is located at the address or addresses indicated on
Annex A hereto. Such Assignor will not move its chief executive office except to
such new location as such Assignor may establish in accordance with the last
sentence of this Section 2.4. The originals of all documents evidencing all
Receivables, Contract Rights and Trade Secret Rights of such Assignor and the
only original books of account and records of such Assignor relating thereto
are, and will continue to be, kept at such chief executive office or at such new
locations as such Assignor may establish in accordance with the last sentence of
this Section 2.4. All Receivables, Contract Rights and Trade Secret Rights of
such Assignor are, and will continue to be, maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from,
the office locations described above or such new location established in
accordance with the last sentence
<PAGE> 10
of this Section 2.4. Such Assignor shall not establish new locations for such
offices until (i) it shall have given to the Collateral Agent not less than 30
days' (or such shorter period of time agreed to by the Collateral Agent) prior
written notice of its intention to do so, clearly describing such new location
and providing such other information in connection therewith as the Collateral
Agent may reasonably request, (ii) with respect to such new location, it shall
have taken all action, satisfactory to the Collateral Agent, to maintain the
security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect, (iii)
at the reasonable request of the Collateral Agent, it shall have furnished an
opinion of counsel reasonably acceptable to the Collateral Agent to the effect
that all financing or continuation statements and amendments or supplements
thereto have been filed in the appropriate filing office or offices, and (iv)
the Collateral Agent shall have received reasonable evidence that all other
actions (including, without limitation, the payment of all filing fees and
taxes, if any, payable in connection with such filings) have been taken, in
order to perfect (and maintain the perfection and priority of) the security
interest granted hereby.
2.5. Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by such Assignor is located at one of the
locations shown on Annex B hereto. Such Assignor agrees that all Inventory and
Equipment now held or subsequently acquired by it shall be kept at (or shall be
in transport to) any one of the locations shown on Annex B hereto, or such new
location as such Assignor may establish in accordance with the last sentence of
this Section 2.5. Such Assignor may establish a new location for Inventory and
Equipment only if (i) it shall have given to the Collateral Agent not less than
30 days' (or such shorter period of time agreed to by the Collateral Agent)
prior written notice of its intention to do so, clearly describing such new
location and providing such other information in connection therewith as the
Collateral Agent may reasonably request, (ii) with respect to such new location,
it shall take all action as the Collateral Agent may reasonably request to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect, (iii) at the reasonable request of the Collateral Agent, it shall have
furnished an opinion of counsel reasonably acceptable to the Collateral Agent to
the effect that all financing or continuation statements and amendments or
supplements thereto have been filed in the appropriate filing office or offices,
and (iv) the Collateral Agent shall have received reasonable evidence that all
other actions (including, without limitation, the payment of all filing fees and
taxes, if any, payable in connection with such filings) have been taken, in
order to perfect (and maintain the perfection and priority of) the security
interest granted hereby.
2.6. Recourse. This Agreement is made with full recourse to
such Assignor and pursuant to and upon all the warranties, representations,
covenants and agreements on the part of such Assignor contained herein, in the
other Credit Documents, in the Interest Rate Protection Agreements or Other
Hedging Agreements and otherwise in writing in connection herewith or therewith.
2.7. Trade Names; Change of Name. Such Assignor does not have
or operate in any jurisdiction under, or within the five year period preceding
the date of this Agreement previously has not had or has not operated in any
jurisdiction under, any trade names, fictitious names or other names (including
any names of divisions or operations) except its legal name and such other trade
or fictitious names as are listed on Annex C hereto. Such Assignor shall not
<PAGE> 11
change its legal name or assume or operate in any jurisdiction under any trade,
fictitious or other name except those names listed on Annex C hereto in the
jurisdictions listed with respect to such names and new names (including,
without limitation, any names of divisions or operations) and/or jurisdictions
established in accordance with the last sentence of this Section 2.7. Such
Assignor shall not assume or operate in any jurisdiction under any new trade,
fictitious or other name or operate under any existing name in any additional
jurisdiction until (i) it shall have given to the Collateral Agent not less than
30 days' (or such shorter period of time agreed to by the Collateral Agent)
prior written notice of its intention so to do, clearly describing such new name
and/or jurisdiction and, in the case of a new name, the jurisdictions in which
such new name shall be used and providing such other information in connection
therewith as the Collateral Agent may reasonably request, (ii) with respect to
such new name and/or jurisdiction, it shall have taken all action to maintain
the security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect, (iii)
at the reasonable request of the Collateral Agent, it shall have furnished an
opinion of counsel reasonably acceptable to the Collateral Agent to the effect
that all financing or continuation statements and amendments or supplements
thereto have been filed in the appropriate filing office or offices, and (iv)
the Collateral Agent shall have received reasonable evidence that all other
actions (including, without limitation, the payment of all filing fees and
taxes, if any, payable in connection with such filings) have been taken, in
order to perfect (and maintain the perfection and priority of) the security
interest granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are genuine and in all material respects
what they purport to be, and that all papers and documents (if any) relating
thereto (i) will be the only original writings evidencing and embodying such
obligation of the account debtor named therein (other than copies created for
general accounting purposes) and (ii) will be in compliance and will in all
material respects conform with all applicable federal, state and local laws and
applicable laws of any relevant foreign jurisdiction.
3.2. Maintenance of Records. Each Assignor will keep and
maintain at its own cost and expense satisfactory and complete records of its
Receivables and Contracts, including, but not limited to, originals of all
documentation (including each Contract) with respect thereto, records of all
payments received, all credits granted thereon, all merchandise returned and all
other dealings therewith, and such Assignor will make the same available on such
Assignor's premises to the Collateral Agent for inspection, at such Assignor's
own cost and expense, at any and all reasonable times and intervals as the
Collateral Agent may request. Upon the occurrence and during the continuance of
an Event of Default and at the request of the Collateral Agent, such Assignor
shall, at its own cost and expense, deliver all tangible evidence of its
Receivables and Contract Rights (including, without limitation, all documents
evidencing the Receivables and
<PAGE> 12
all Contracts) and such books and records to the Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by such Assignor). If the Collateral Agent so directs, such Assignor shall
legend, in form and manner reasonably satisfactory to the Collateral Agent, the
Receivables and the Contracts, as well as books, records and documents of such
Assignor evidencing or pertaining to such Receivables and Contracts with an
appropriate reference to the fact that such Receivables and Contracts have been
assigned to the Collateral Agent and that the Collateral Agent has a security
interest therein.
3.3. Direction to Account Debtors; Contracting Parties; etc.
Upon the occurrence and during the continuance of an Event of Default, and if
the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause
all payments on account of the Receivables and Contracts to be made directly to
the Cash Collateral Account, (y) that the Collateral Agent may, at its option
and in accordance with applicable law, directly notify the obligors with respect
to any Receivables and/or under any Contracts to make payments with respect
thereto as provided in preceding clause (x), and (z) that the Collateral Agent
may, in accordance with applicable law, enforce collection of any such
Receivables or Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent as such Assignor,
provided that this sentence shall not apply to Receivables owed to St. Luke's
Sub to the extent (and only to the extent) that such action is prohibited by the
St. Luke's Lease. Upon the occurrence and during the continuance of an Event of
Default, without notice to or assent by any Assignor, the Collateral Agent may
apply, in accordance with applicable law, any or all amounts then in, or
thereafter deposited in, the Cash Collateral Account in the manner provided in
Section 7.4 of this Agreement. The costs and expenses (including attorneys'
fees) of collection, whether incurred by any Assignor or the Collateral Agent,
shall be borne by such Assignor.
3.4. Modification of Terms; etc. At any time when a Noticed
Event of Default shall have occurred and be continuing, no Assignor shall
rescind or cancel any indebtedness evidenced by any Receivable, or modify any
term thereof or make any adjustment with respect thereto, or extend or renew the
same, or compromise or settle any material dispute, claim, suit or legal
proceeding relating thereto, or sell any Receivable, or interest therein,
without the prior written consent of the Collateral Agent, except as permitted
by Section 3.5. No Assignor shall rescind or cancel any indebtedness evidenced
by any Contract, or modify any term thereof or make any adjustment with respect
thereto, or extend or renew the same, or compromise or settle any material
dispute, claim, suit or legal proceeding relating thereto, or sell any Contract,
or interest therein, without the prior written consent of the Collateral Agent,
except (i) as permitted by Section 3.5 and (ii) so long as no Default or Event
of Default is then in existence, to the extent that the aggregate cost to such
Assignor resulting from any such recission, cancellation, modification,
adjustment, extension, compromise, settlement or sale is not material to such
Assignor. Each Assignor will duly fulfill all material obligations on its part
to be fulfilled under or in connection with the Receivables and Contracts and
will do nothing to impair the rights of the Collateral Agent in the Receivables
or the Contracts, except as permitted by this Section 3.4 and Section 3.5.
3.5. Collection. At any time when a Noticed Event of Default
shall have occurred and be continuing, each Assignor shall use reasonable
efforts to endeavor to cause to be collected from the account debtor named in
each of its Receivables or obligor under any
<PAGE> 13
Contract, as and when due (including, without limitation, amounts, services or
products which are delinquent, such amounts, services or products to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts, services or products owing under or on account of such
Receivable or Contract, and apply forthwith upon receipt thereof all such
amounts, services or products as are so collected to the outstanding balance of
such Receivable or under such Contract, except that, prior to the occurrence of
an Event of Default, any Assignor may allow in the ordinary course of business
as adjustments to amounts, services or products owing under its Receivables and
Contracts (i) an extension or renewal of the time or times of payment or
exchange, or settlement for less than the total unpaid balance, which such
Assignor finds appropriate in accordance with reasonable business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise or
improperly performed services. The costs and expenses (including, without
limitation, attorneys' fees) of collection, whether incurred by an Assignor or
the Collateral Agent, shall be borne by the relevant Assignor.
3.6. Instruments. If any Assignor owns or acquires any
Instrument constituting Collateral, such Assignor will within 10 days notify the
Collateral Agent thereof and, upon request by the Collateral Agent, promptly
deliver such Instrument to the Collateral Agent appropriately endorsed to the
order of the Collateral Agent as further security hereunder.
3.7. Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably request to preserve and protect its security interest in the
Collateral.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true, lawful, sole and exclusive owner of
or otherwise has the right to use the Marks listed in Annex D hereto and that
said listed Marks constitute all the Marks that such Assignor presently owns or
uses in connection with its business (other than immaterial unregistered Marks)
and include all Marks registered in the United States Patent and Trademark
Office or the equivalent thereof in any foreign country and all unregistered
Marks (other than immaterial unregistered Marks) that such Assignor now owns,
licenses or uses for products developed by such Assignor in connection with its
business. Each Assignor further warrants that it has no knowledge of any
material third party claim that any aspect of such Assignor's present or
contemplated business operations infringes or will infringe any rights in any
trademark, service mark or trade name. Each Assignor represents and warrants
that it is the beneficial and record owner of all trademark registrations and
applications listed in Annex D hereto and designated as "owned" thereon and that
said registrations are valid, subsisting and have not been canceled and that
such Assignor is not aware of any material third-party claim that any of said
registrations is invalid or unenforceable, or that there is any reason that any
of said applications
<PAGE> 14
will not pass to registration. Each Assignor represents and warrants that upon
the recordation of a Grant of Security Interest in United States Trademarks and
Patents in the form of Annex G hereto in the United States Patent and Trademark
Office, together with filings on Form UCC-1 pursuant to this Agreement, all
filings, registrations and recordings necessary or appropriate to perfect the
security interest granted to the Collateral Agent in the registered United
States Marks covered by this Agreement under federal law will have been
accomplished. Each Assignor agrees to execute such a Grant of Security Interest
in United States Trademark and Patents covering all right, title and interest in
each registered United States Mark, and the associated goodwill, of such
Assignor, and to record the same. Each Assignor hereby grants to the Collateral
Agent an absolute power of attorney to sign, upon the occurrence and during the
continuance of an Event of Default, any document which may be required by the
United States Patent and Trademark Office or secretary of state or equivalent
governmental agency of any State of the United States or any foreign
jurisdiction in order to effect an absolute assignment of all right, title and
interest in each Mark, and record the same.
4.2. Licenses and Assignments. Each Assignor hereby agrees not
to divest itself of any right under any Mark that is material to the business of
such Assignor absent prior written approval of the Collateral Agent, except as
otherwise permitted by this Agreement or the Credit Agreement.
4.3. Infringements. Each Assignor agrees, promptly upon
learning thereof, to notify the Collateral Agent in writing of the name and
address of, and to furnish such pertinent information that may be available with
respect to, (i) any party who such Assignor believes is infringing or diluting
or otherwise violating in any material respect any of such Assignor's rights in
and to any material Mark, or (ii) with respect to any party claiming that such
Assignor's use of any material Mark violates in any material respect any
property right of that party. Each Assignor further agrees, unless otherwise
agreed by the Collateral Agent, to prosecute, in accordance with reasonable
business practices, any Person infringing any material Mark owned by such
Assignor.
4.4. Preservation of Marks. Each Assignor agrees to use its
Marks in interstate or foreign commerce, as the case may be, during the time in
which this Agreement is in effect, sufficiently to preserve such Marks as valid
and subsisting trademarks or service marks under the laws of the United States
or the relevant foreign jurisdiction; provided that no Assignor shall be
obligated to preserve any Mark to the extent the Assignor determines, in its
reasonable business judgment, that the preservation of such Mark is no longer
desirable in the conduct of its business.
4.5. Maintenance of Registration. Each Assignor shall, at its
own expense and in accordance with reasonable business practices, process all
documents required by the Trademark Act of 1946, as amended, 15 U. S. C.
SectionSection 1051 et seq. and any foreign equivalent thereof to maintain
trademark registrations, including but not limited to affidavits of continued
use and applications for renewals of registration in the United States Patent
and Trademark Office or equivalent governmental agency in any foreign
jurisdiction for all of its registered Marks pursuant to 15 U. S. C.
SectionSection 1058(a), 1059 and 1065 or any foreign equivalent thereof, as
applicable, and shall pay all fees and disbursements in connection therewith and
shall not abandon any such filing of affidavit of use or any such application of
renewal prior to the
<PAGE> 15
exhaustion of all administrative and judicial remedies without prior written
consent of the Collateral Agent; provided that no Assignor shall be obligated to
maintain any Mark to the extent such Assignor determines, in its reasonable
business judgment, that the maintenance of such Mark is no longer necessary or
desirable in the conduct of its business.
4.6. Future Registered Marks. Within 30 days following the end
of each fiscal quarter of the Borrower, the Assignors shall deliver to the
Collateral Agent, an updated Annex D listing (as of the end of such fiscal
quarter) any and all newly issued Marks (other than immaterial unregistered
Marks) not previously listed on such Annex D or any such update. Upon the
Collateral Agent's request, the relevant Assignor shall, at such Assignor's
expense, deliver to the Collateral Agent an assignment for security in any such
newly issued Mark, the form of such assignment for security to be substantially
the same as the form hereof or in such other form as may be reasonably
satisfactory to the Collateral Agent.
4.7. Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent may, by written notice to the relevant
Assignor, take any or all of the following actions: (i) declare the entire
right, title and interest of such Assignor in and to each of the Marks, together
with all trademark rights and rights of protection to the same and the goodwill
of such Assignor's business symbolized by said Marks and the right to recover
for past infringements thereof, vested in the Collateral Agent for the benefit
of the Secured Creditors, in which event such rights, title and interest shall
immediately vest, in the Collateral Agent for the benefit of the Secured
Creditors, and the Collateral Agent shall be entitled to exercise the power of
attorney referred to in Section 4.1 to execute, cause to be acknowledged and
notarized and to record an absolute assignment with the applicable agency; (ii)
take and use or sell the Marks and the goodwill of such Assignor's business
symbolized by the Marks and the right to carry on the business and use the
assets of such Assignor in connection with which the Marks have been used; and
(iii) direct such Assignor to refrain, in which event such Assignor shall
refrain, from using the Marks in any manner whatsoever, directly or indirectly,
and, if requested by the Collateral Agent, change such Assignor's corporate name
to eliminate therefrom any use of any Mark and execute such other and further
documents that the Collateral Agent may request to further confirm this and to
transfer ownership of the Marks and registrations and any pending trademark
applications therefor in the United States Patent and Trademark Office or any
equivalent government agency or office in any foreign jurisdiction to the
Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful exclusive owner of or
otherwise has the right to use all (i) Trade Secret Rights of such Assignor,
(ii) rights in the Patents of such Assignor listed in Annex E hereto and that
said Patents constitute all the patents and applications for patents that such
Assignor now owns or that are otherwise used, pursuant to a license or
sublicense, in the conduct of the business of such Assignor and (iii) rights in
the Copyrights of such Assignor listed in Annex F hereto, and that such
Copyrights constitute all registrations of copyrights and
<PAGE> 16
applications for copyright registrations that the Assignor now owns or that are
otherwise used, pursuant to a license or sublicense, in the conduct of the
business of such Assignor. Each Assignor further represents and warrants that it
has the exclusive right (or, in the case of any Patents or Copyrights subject to
an agreement which provides such right is non-exclusive, non-exclusive rights),
in all material respects, to use and practice under all material Patents and
Copyrights that it owns, uses, pursuant to a license or sublicense, or under
which it practices and has the exclusive right (or, in the case of Patent
subject to an agreement which provides such right is non-exclusive,
non-exclusive right), in all material respects, to exclude others from using or
practicing under any Patents it owns, uses, pursuant to a license or sublicense,
or under which it practices. Each Assignor further warrants that it has no
knowledge of any material third party claim that any aspect of such Assignor's
present or contemplated business operations infringes or will infringe any
rights in any Patent or Copyright or that such Assignor has misappropriated any
Trade Secrets, Trade Secret Rights or other proprietary information. Each
Assignor represents and warrants that upon the recordation of a Grant of
Security Interest in United States Trademarks and Patents in the form of Annex G
hereto in the United States Patent and Trademark Office and the recordation of a
Grant of Security Interest in United States Copyrights in the form of Annex H
hereto in the United States Copyright Office, together with filings on Form
UCC-1 pursuant to this Agreement, all filings, registrations and recordings
necessary or appropriate to perfect the security interest granted to the
Collateral Agent in the registered United States Patents and registered United
States Copyrights covered by this Agreement under federal law will have been
accomplished. Each Assignor agrees to execute a Grant of Security Interest in
registered United States Trademarks and Patents covering all right, title and
interest in each registered United States Patent of such Assignor and to record
the same, and to execute such a Grant of Security Interest in registered United
States Copyrights covering all right, title and interest in each registered
United States Copyright of such Assignor and to record the same. Each Assignor
hereby grants to the Collateral Agent an absolute power of attorney to sign,
upon the occurrence and during the continuance of any Event of Default, any
document which may be required by the United States Patent and Trademark Office
or equivalent governmental agency in any foreign jurisdiction or the United
States Copyright Office or equivalent governmental agency in any foreign
jurisdiction in order to effect an absolute assignment of all right, title and
interest in each registered Patent and registered Copyright of such Assignor, as
the case may be, and to record the same.
5.2. Licenses and Assignments. Each Assignor hereby agrees not
to divest itself of any right under any Patent or Copyright that is material to
the business of such Assignor absent prior written approval of the Collateral
Agent, except as otherwise permitted by this Agreement or the Credit Agreement.
5.3. Infringements. Each Assignor agrees, promptly upon
learning thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement,
contributing infringement or active inducement to infringe any of such
Assignor's rights in any material Patent or material Copyright or to any claim
that the practice of any material Patent or the use of any material Copyright of
such Assignor violates any property right of a third party, or with respect to
any misappropriation of any material Trade Secret Right of such Assignor or any
claim that practice of any material Trade Secret Right of such Assignor violates
any property right of a third party. Each Assignor further agrees, absent
<PAGE> 17
direction of the Collateral Agent to the contrary, diligently to prosecute, in
accordance with reasonable business practices, any Person infringing any
material Patent or material Copyright of such Assignor or any Person
misappropriating any material Trade Secret Right of such Assignor.
5.4. Maintenance of Patents and Copyrights. At its own
expense, each Assignor shall make timely payment of all post-issuance fees
required pursuant to 35 U. S. C. Section 41 and any foreign equivalent thereof
to maintain in force rights under each of its Patents, and to apply as permitted
pursuant to applicable law for any renewal of each of its Copyrights, in any
case absent prior written consent of the Collateral Agent; provided, that, no
Assignor shall be obligated to pay any such fees or apply for any such renewal
to the extent that such Assignor determines, in its reasonable business
judgment, that the maintenance of such Patent or Copyright is no longer
necessary or desirable in the conduct of its business.
5.5. Prosecution of Patent or Copyright Applications. At its
own expense, each Assignor shall diligently prosecute, in accordance with
reasonable business practices, all of its applications for Patents listed in
Annex E hereto and for Copyrights listed in Annex F hereto and shall not abandon
any such application prior to exhaustion of all administrative and judicial
remedies, absent written consent of the Collateral Agent, provided that no
Assignor shall be obligated to prosecute such application for any such Patent or
Copyright to the extent that such Assignor determines, in its reasonable
business judgment, that the prosecution of such application for any such Patent
or Copyright is no longer necessary or desirable in the conduct of its business.
5.6. Other Patents and Copyrights. Within 30 days following
the end of each fiscal quarter of the Borrower, Assignors shall deliver to the
Collateral Agent updated Annexes E and F listing, as of the end of such fiscal
quarter, any and all newly issued or acquired United States Patent or Copyright
registrations and any and all newly filed applications for United States Patent
or Copyright registrations. Upon the Collateral Agent's reasonable request, the
relevant Assignor shall, at such Assignor's expense, deliver to the Collateral
Agent an assignment for security as to any such newly issued or acquired Patent
or Copyright (or newly filed application therefor), the form of such assignment
for security to be substantially the same as the form hereof or in such other
form as may be reasonably satisfactory to the Collateral Agent.
5.7. Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent may by written notice to the relevant Assignor,
take any or all of the following actions: (i) declare the entire right, title,
and interest of such Assignor in each of the Patents and Copyrights vested in
the Collateral Agent for the benefit of the Secured Creditors, in which event
such right, title, and interest shall immediately vest in the Collateral Agent
for the benefit of the Secured Creditors, and the Collateral Agent shall be
entitled to exercise the power of attorney referred to in Section 5.1 to
execute, cause to be acknowledged and notarized and to record an absolute
assignment with the applicable agency; (ii) take and use, practice or sell the
Patents, Copyrights and Trade Secret Rights; and (iii) direct such Assignor to
refrain, in which event such Assignor shall refrain, from practicing the Patents
and using the Copyrights and/or Trade Secret Rights directly or indirectly, and
such Assignor shall execute such other and further documents as the Collateral
Agent may request further to confirm this and to transfer ownership of the
<PAGE> 18
Patents, Copyrights and Trade Secret Rights to the Collateral Agent for the
benefit of the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. Each Assignor
will do nothing to impair the rights of the Collateral Agent in the Collateral.
Each Assignor will at all times keep its Inventory and Equipment insured, at
such Assignor's own expense to the extent and in the manner provided in the
Credit Agreement and the other Credit Documents. Except as otherwise permitted
to be retained or expended by the relevant Assignor pursuant to the Credit
Agreement, the Collateral Agent shall, at the time such proceeds of such
insurance are distributed to the Secured Creditors, apply such proceeds in
accordance with the Credit Agreement, or after the Obligations have been
accelerated or otherwise become due and payable, in accordance with Section 7.4.
Each Assignor assumes all liability and responsibility in connection with the
Collateral acquired by it and the liability of such Assignor to pay the
Obligations shall in no way be affected or diminished by reason of the fact that
such Collateral may be lost, destroyed, stolen, damaged or for any reason
whatsoever unavailable to such Assignor.
6.2. Warehouse Receipts Non-Negotiable. Each Assignor agrees
that if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued with respect to any of its Inventory, such warehouse receipt or receipt
in the nature thereof shall not be "negotiable" (as such term is used in Section
7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under other relevant law).
6.3. Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.4. Financing Statements. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form acceptable to
the Collateral Agent, as the Collateral Agent may from time to time reasonably
request or as are reasonably necessary or desirable in the opinion of the
Collateral Agent to establish and maintain a valid, enforceable, first priority
(subject to Permitted Liens) perfected security interest in the Collateral as
provided herein and the other rights and security contemplated hereby all in
accordance with the Uniform Commercial Code as enacted in any and all relevant
jurisdictions or any other relevant law. Each Assignor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Assignor hereby authorizes the Collateral Agent to file any such financing
statements without the signature of such Assignor where permitted by law.
<PAGE> 19
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. Each
Assignor agrees that, if any Event of Default shall have occurred and be
continuing, then and in every such case, the Collateral Agent, in addition to
any rights now or hereafter existing under applicable law, shall have all rights
as a secured creditor under the Uniform Commercial Code in all relevant
jurisdictions and may also, in each case subject to and in accordance with all
applicable laws:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon
such Assignor's premises where any of the Collateral is located and
remove the same and use in connection with such removal any and all
services, supplies and other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the
Receivables and the Contracts) constituting the Collateral to make any
payment required by the terms of such agreement, instrument or other
obligation directly to the Collateral Agent;
(iii) withdraw all monies, securities and instruments in the
Cash Collateral Account for application to the Obligations in
accordance with Section 7.4;
(iv) sell, assign or otherwise liquidate, or direct such
Assignor to sell, assign or otherwise liquidate, any or all of the
Collateral or any part thereof in accordance with Section 7.2, or
direct the relevant Assignor to sell, assign or otherwise liquidate any
or all of the Collateral or any part thereof, and, in each case, take
possession of the proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places designated by the Collateral
Agent, in which event such Assignor shall at its own expense:
(x) forthwith cause the same to be moved to the place
or places so reasonably designated by the Collateral Agent and
there delivered to the Collateral Agent;
(y) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further
action by the Collateral Agent as provided in Section 7.2; and
(z) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain
them in good condition; and
<PAGE> 20
(vi) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the
Collateral for such term and on such conditions and in such manner as
the Collateral Agent shall in its sole judgment determine;
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Administrative Agent or the Collateral Agent, in each case acting upon
the instructions of the Required Secured Creditors and that no other Secured
Creditor shall have any right individually to seek to enforce or to enforce this
Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the
Administrative Agent or the Collateral Agent or the holders of at least a
majority of the outstanding Other Obligations, as the case may be, for the
benefit of the Secured Creditors upon the terms of this Agreement.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 and any
other Collateral whether or not so repossessed by the Collateral Agent, may be
sold, assigned, leased or otherwise disposed of under one or more contracts or
as an entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times, at
such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the relevant Assignor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the 10 days after the giving of such notice,
to the right of the relevant Assignor or any nominee of such Assignor to acquire
the Collateral involved at a price or for such other consideration at least
equal to the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the relevant Assignor
specifying the time and place of such sale and, in the absence of applicable
requirements of law, shall be by public auction (which may, at the Collateral
Agent's option, be subject to reserve), after publication of notice of such
auction not less than 10 days prior thereto in two newspapers in general
circulation to be selected by the Collateral Agent. To the extent permitted by
any such requirement of law, the Collateral Agent on behalf of the Secured
Creditors (or certain of them) may bid for and become the purchaser of the
Collateral or any item thereof, offered for sale in accordance with this Section
without accountability to the relevant Assignor. If, under mandatory
<PAGE> 21
requirements of applicable law, the Collateral Agent shall be required to make a
disposition of the Collateral within a period of time which does not permit the
giving of notice to the relevant Assignor as hereinabove specified, the
Collateral Agent need give such Assignor only such notice of disposition as
shall be reasonably practicable in view of such mandatory requirements of
applicable law. Each Assignor agrees to do or cause to be done all such other
acts and things as may be reasonably necessary to make such sale or sales of all
or any portion of the Collateral of such Assignor valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrations or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at such Assignor's expense.
7.3. Waiver of Claims. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and such Assignor hereby further waives, to the extent
permitted by law:
(i) all damages occasioned by such taking of possession except
any damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(ii) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Collateral Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any portion thereof, and each
Assignor, for itself and all who may claim under it, insofar as it or
they now or hereafter lawfully may, hereby waives the benefit of all
such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall, to the fullest extent permitted under applicable law,
operate to divest all right, title, interest, claim and demand, either at law or
in equity, of the relevant Assignor therein and thereto and shall be a perpetual
bar both at law and in equity against such Assignor and against any and all
Persons claiming or attempting to claim the Collateral so sold, optioned or
realized upon, or any part thereof, from, through and under such Assignor.
7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent upon any sale or other disposition of the Collateral (or, to
the extent the Pledge Agreement, any Mortgage or any other Security Document
requires proceeds of collateral thereunder to be applied in accordance with the
provisions of this Agreement, the Pledgee under the Pledge Agreement, the
mortgagee under such Mortgage or the collateral agent under such other Security
Document), together with all other moneys received by the Collateral Agent
hereunder, shall be applied as follows:
<PAGE> 22
(i) first, to the payment of all Obligations owing to the
Pledgee or the Collateral Agent of the type described in clauses (iii)
and (iv) of the definition of "Obligations";
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations shall be paid to the Secured
Creditors as provided in Section 7.4(e), with each Secured Creditor
receiving an amount equal to its outstanding Primary Obligations or, if
the proceeds are insufficient to pay in full all such Primary
Obligations, its Pro Rata Share of the amount remaining to be
distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount
equal to the outstanding Secondary Obligations shall be paid to the
Secured Creditors as provided in Section 7.4(e), with each Secured
Creditor receiving an amount equal to its outstanding Secondary
Obligations or, if the proceeds are insufficient to pay in full all
such Secondary Obligations, its Pro Rata Share of the amount remaining
to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant to
Section 10.8(a) hereof, to the relevant Assignor or to whomever may be
lawfully entitled to receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount of such Secured Creditor's Primary
Obligations or Secondary Obligations, as the case may be, and the denominator of
which is the then outstanding amount of all Primary Obligations or Secondary
Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the
case of the Credit Document Obligations, all principal of, and interest on, all
Loans under the Credit Agreement, all Unpaid Drawings theretofore made (together
with all interest accrued thereon), the aggregate Stated Amounts of all Letters
of Credit issued (or deemed issued) under the Credit Agreement, and all Fees and
(ii) in the case of the Other Obligations, all amounts due under the Interest
Rate Protection Agreements or Other Hedging Agreements (other than indemnities,
fees (including, without limitation, attorneys' fees) and similar obligations
and liabilities) and (z) "Secondary Obligations" shall mean all Obligations
other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to
their Secondary Obligations. If any payment to any Secured Creditor of its Pro
Rata Share of any distribution would result in overpayment to such Secured
Creditor, such excess amount shall instead be distributed in respect of the
unpaid Primary Obligations or Secondary Obligations, as the case may be, of the
other Secured Creditors, with each Secured Creditor whose Primary Obligations or
Secondary Obligations, as the case may be, have not been paid in full to receive
an amount equal to such excess amount multiplied by a
<PAGE> 23
fraction the numerator of which is the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of such Secured Creditor and the denominator of
which is the unpaid Primary Obligations or Secondary Obligations, as the case
may be, of all Secured Creditors entitled to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that
if the Lender Creditors are to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued (or deemed issued) under the
Credit Agreement (which shall only occur after all outstanding Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Administrative Agent under the Credit Agreement and
held by it, for the equal and ratable benefit of the Lender Creditors, as cash
security for the repayment of Obligations owing to the Lender Creditors as such.
If any amounts are held as cash security pursuant to the immediately preceding
sentence, then upon the termination of all outstanding Letters of Credit, and
after the application of all such cash security to the repayment of all
Obligations owing to the Lender Creditors after giving effect to the termination
of all such Letters of Credit, if there remains any excess cash, such excess
cash shall be returned by the Agent to the Collateral Agent for distribution in
accordance with Section 7.4(a) hereof.
(e) Except as set forth in Section 7.4(d), all payments
required to be made hereunder shall be made (x) if to the Lender Creditors, to
the Administrative Agent under the Credit Agreement for the account of the
Lender Creditors, and (y) if to the Other Creditors, to the trustee, paying
agent or other similar representative (each, a "Representative") for the Other
Creditors or, in the absence of such a Representative, directly to the Other
Creditors.
(f) For purposes of applying payments received in accordance
with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i)
the Administrative Agent under the Credit Agreement and (ii) the Representative
for the Other Creditors or, in the absence of such a Representative, upon the
Other Creditors for a determination (which the Administrative Agent, each
Representative for any Secured Creditors and the Secured Creditors agree (or
shall agree) to provide upon request of the Collateral Agent) of the outstanding
Primary Obligations and Secondary Obligations owed to the Lender Creditors or
the Other Creditors, as the case may be. Unless it has actual knowledge
(including by way of written notice from a Lender Creditor or an Other Creditor)
to the contrary, the Administrative Agent and each Representative, in furnishing
information pursuant to the preceding sentence, and the Collateral Agent, in
acting hereunder, shall be entitled to assume that no Secondary Obligations are
outstanding. Unless it has actual knowledge (including by way of written notice
from an Other Creditor) to the contrary, the Collateral Agent, in acting
hereunder, shall be entitled to assume that no Interest Rate Protection
Agreements or Other Hedging Agreements are in existence.
(g) It is understood and agreed that each Assignor shall
remain liable to the extent of any deficiency between the amount of the proceeds
of the Collateral in which it has granted a security interest hereunder and the
aggregate amount of its Obligations.
7.5. Remedies Cumulative. Each and every right, power and
remedy hereby specifically given to the Collateral Agent shall be in addition to
every other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or
<PAGE> 24
Other Hedging Agreements or the other Credit Documents or now or hereafter
existing at law, in equity or by statute and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time or simultaneously and as often and in such order as may be
deemed expedient by the Collateral Agent. All such rights, powers and remedies
shall be cumulative and the exercise or the beginning of the exercise of one
shall not be deemed a waiver of the right to exercise any other or others. No
delay or omission of the Collateral Agent in the exercise of any such right,
power or remedy and no renewal or extension of any of the Obligations shall
impair any such right, power or remedy or shall be construed to be a waiver of
any Default or Event of Default or an acquiescence therein. No notice to or
demand on any Assignor in any case shall entitle it to any other or further
notice or demand in similar or other circumstances or constitute a waiver of any
of the rights of the Collateral Agent to any other or further action in any
circumstances without notice or demand. In the event that the Collateral Agent
shall bring any suit to enforce any of its rights hereunder and shall be
entitled to judgment, then in such suit the Collateral Agent may recover
expenses, including reasonable attorneys' fees, and the amounts thereof shall be
included in such judgment.
7.6. Discontinuance of Proceedings. In case the Collateral
Agent shall have instituted any proceeding to enforce any right, power or remedy
under this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Collateral Agent, then and in every such
case the relevant Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor jointly and severally agrees
to indemnify, reimburse and hold the Collateral Agent, each other Secured
Creditor and their respective successors, assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as an
"Indemnitee," and, collectively, as "Indemnitees") harmless from any and all
liabilities, obligations, losses, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements
(including attorneys' fees and expenses) (for the purposes of this Section 8.1,
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, any Interest Rate Protection
Agreement or Other Hedging Agreement, any other Credit Document or any other
document executed in connection herewith or therewith or in any other way
connected with the administration of the transactions contemplated hereby or
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent or
other defects, whether or not discoverable), the violation
<PAGE> 25
of the laws of any country, state or other governmental body or unit, any tort
(including, without limitation, claims arising or imposed under the doctrine of
strict liability, or for or on account of injury to or the death of any Person
(including any Indemnitee), or property damage), or contract claim; provided
that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for
losses, damages or liabilities to the extent caused by the gross negligence or
willful misconduct of such Indemnitee. Each Assignor agrees that upon written
notice by any Indemnitee of the assertion of such a liability, obligation, loss,
damage, injury, penalty, claim, demand, action, suit or judgment, the relevant
Assignor shall assume full responsibility for the defense thereof. Each
Indemnitee agrees to use its best efforts to promptly notify the relevant
Assignor of any such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a), each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all fees, costs and expenses of whatever kind or nature
incurred in connection with the creation, preservation or protection of the
Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b),
each Assignor agrees, jointly and severally, to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses which
such Indemnitee may suffer, expend or incur in consequence of or growing out of
any misrepresentation by any Assignor in this Agreement, any Interest Rate
Protection Agreement or Other Hedging Agreement, any other Credit Document or in
any writing contemplated by or made or delivered pursuant to or in connection
with this Agreement, any Interest Rate Protection Agreement or Other Hedging
Agreement or any other Credit Document.
(d) If and to the extent that the obligations of any Assignor
under this Section 8.1 are unenforceable for any reason, such Assignor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral; Survival.
Any amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Interest Rate
Protection Agreements or Other Hedging Agreements and Letters of Credit, and the
payment of all other Obligations and notwithstanding the discharge thereof.
<PAGE> 26
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified.
Such definitions shall be equally applicable to the singular and plural forms of
the terms defined.
"Administrative Agent" shall have the meaning provided in the recitals
hereto.
"Agreement" shall have the meaning provided in the preamble to this
Agreement.
"Assignor" shall have the meaning provided in the preamble to this
Agreement.
"Borrower" shall mean IASIS Healthcare Corporation, a Delaware
corporation.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Collateral Agent for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
"Co-Book Runner" shall have the meaning set forth in the recitals
hereto.
"Co-Lead Arrangers" shall have the meaning provided in the recitals
hereto.
"Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.
"Collateral Agent" shall have the meaning provided in the preamble to
this Agreement.
"Contract Rights" shall mean (i) all rights of an Assignor (including,
without limitation, all rights to payment) under each Contract and (ii) any
Receivable or any money(ies) due or to become due under any Excluded Contract.
"Contracts" shall mean all contracts between any Assignor and
one or more additional parties (including, without limitation, any Interest Rate
Protection Agreement or Other Hedging Agreement) to the extent the grant by an
Assignor of a security interest pursuant to this Agreement in its right, title
and interest in any such contract is not prohibited by such contract (or, if
prohibited, the consent of each other party to such grant of a security interest
is obtained) and would not give any other party to such contract the right to
terminate, or automatically result in the termination of, such other party's
obligations thereunder or the Assignor's rights thereunder (those contracts
where such grant is so prohibited (and consent not obtained) or resulting in
such a right of, or automatic, termination are referred to herein as "Excluded
Contracts").
<PAGE> 27
"Copyrights" shall mean any United States or foreign copyright owned by
any Assignor, including any registrations of any Copyright in the United States
Copyright Office or the equivalent thereof in any foreign country, other than
any country outside the United States where the grant of a security interest
would violate such Copyrights, as well as any application for a United States or
foreign copyright registration now or hereafter made with the United States
Copyright Office or the equivalent thereof in any foreign jurisdiction by any
Assignor.
"Credit Agreement" shall mean the Credit Agreement, dated as of October
15, 1999, among the Borrower, the Lenders, the Co-Lead Arrangers, the
Syndication Agent and the Administrative Agent, providing for the making of
Loans to the Borrower and the issuance of, and participation in, Letters of
Credit for the account of the Borrower as contemplated therein, as the same may
be amended, restated, modified, extended, renewed, replaced, supplemented,
restructured and/or refinanced from time to time, and including any agreement
extending the maturity of, refinancing or restructuring (including, but not
limited to, the inclusion of additional borrowers thereunder that are
Subsidiaries of the Borrower and whose obligations are guaranteed by the
Borrower and/or the Subsidiary Guarantors thereunder or any increase in the
amount borrowed) all, or any portion of, the Indebtedness under such agreement
or any successor agreements; provided, that with respect to any agreement
providing for the refinancing of Indebtedness under the Credit Agreement, such
agreement shall only be treated as, or as part of, the Credit Agreement
hereunder if (i) either (A) all obligations under the Credit Agreement being
refinanced shall be paid in full at the time of such refinancing, and all
commitments under the refinanced Credit Agreement shall have terminated in
accordance with their terms or (B) the Required Lenders shall have consented in
writing to the refinancing Indebtedness being treated, along with their
Indebtedness, as Indebtedness pursuant to the Credit Agreement, (ii) the
refinancing Indebtedness shall be permitted to be incurred under the Credit
Agreement being refinanced (if such Credit Agreement is to remain outstanding)
and (iii) a notice to the effect that the refinancing Indebtedness shall be
treated as issued under the Credit Agreement shall be delivered by the Borrower
to the Collateral Agent).
"Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Documentation Agent" shall have the meaning set forth in the recitals
hereto
"Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by any Assignor and any and
all additions, substitutions and replacements of any of the foregoing,
<PAGE> 28
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Credit Document Obligations after the
expiration of any applicable grace period.
"Excluded Contracts" shall have the meaning provided in the definition
of Contracts.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York, but
excluding those General Intangibles constituting or arising under Excluded
Contracts (other than any Receivable or any money(ies) due or to become due
under any such Excluded Contract).
"Goods" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Interest Rate Protection Agreement or Other Hedging Agreement" shall
have the meaning provided in the recitals to this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through
work-in-process to finished goods -- and all products and proceeds of whatever
sort and wherever located and any portion thereof which may be returned,
rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's
customers, and shall specifically include all "inventory" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, now or hereafter owned by any Assignor.
"Lender Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Lenders" shall have the meaning provided in the recitals to this
Agreement.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Marks" shall mean all right, title and interest in and to any United
States or foreign trademarks, service marks and trade names now held or
hereafter acquired by any
<PAGE> 29
Assignor, including any registration or application for registration of any
trademarks and service marks in the United States Patent and Trademark Office,
or the equivalent thereof in any State of the United States or in any foreign
country, other than any country outside the United States where the grant of a
security interest would violate such Marks and any trade dress including logos,
designs, trade names, company names, business names, fictitious business names
and other business identifiers used by any Assignor in the United States or any
foreign country.
"Noticed Event of Default" shall mean (i) an Event of Default with
respect to the Borrower under Section 10.05 of the Credit Agreement and (ii) any
other Event of Default in respect of which the Pledgee has given the Borrower
notice that such Event of Default constitutes a "Noticed Event of Default".
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities
(including, without limitation, indemnities, fees and interest thereon) of each
Assignor owing to the Lender Creditors, now existing or hereafter incurred
under, arising out of or in connection with any Credit Document to which such
Assignor is a party (including all such obligations and indebtedness under any
Subsidiaries Guaranty to which such Assignor is a party) and the due performance
and compliance by each Assignor with the terms, conditions and agreements of
each such Credit Document (all such obligations and liabilities under this
clause (i), except to the extent consisting of obligations or indebtedness with
respect to Interest Rate Protection Agreements or Other Hedging Agreements,
being herein collectively called the "Credit Document Obligations"); (ii) the
full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise) of all obligations (including obligations which, but
for the automatic stay under Section 362(a) of the Bankruptcy Code, would become
due) and liabilities (including, without limitation, indemnities, fees and
interest thereon) of each Assignor owing to the Other Creditors, now existing or
hereafter incurred under, arising out of or in connection with any Interest Rate
Protection Agreement or Other Hedging Agreement, whether such Interest Rate
Protection Agreement or Other Hedging Agreement is now in existence or hereafter
arising, including, in the case of each Subsidiary Guarantor, all obligations
under the Subsidiaries Guaranty in respect of Interest Rate Protection
Agreements or Other Hedging Agreements, and the due performance and compliance
by each Assignor with all of the terms, conditions and agreements contained in
any such Interest Rate Protection Agreement or Other Hedging Agreement (all such
obligations and indebtedness under this clause (ii) being herein collectively
called the "Other Obligations"); (iii) any and all sums advanced by the
Collateral Agent or the Pledgee in order to preserve the Collateral or preserve
its security interest in the Collateral; (iv) in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or liabilities
of each Assignor referred to in clauses (i), (ii) and (iii) after an Event of
Default shall have occurred and be continuing, the reasonable expenses of
re-taking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent or
the Pledgee of its rights hereunder, together with reasonable attorneys' fees
and court costs; and (v) all amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement under Section 8.1 of this Agreement.
It is acknowledged and agreed that the "Obligations" shall include extensions of
<PAGE> 30
credit of the types described above, whether outstanding on the date of this
Agreement or extended from time to time after the date of this Agreement.
"Other Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX.
"Patents" shall mean any United States or foreign patent to which any
Assignor now or hereafter has title and any divisions or continuations thereof,
as well as any application for a United States or foreign patent now or
hereafter made by any Assignor, except as to patents or patent applications in
any country where the granting of a security interest therein is not permissible
under the laws of such country.
"Permits" shall mean, to the extent permitted to be assigned by the
terms thereof or by applicable law, all licenses, permits, rights, orders,
variances, franchises or authorizations (including certificates of need) of or
from any governmental authority or agency.
"Pledge Agreement" shall have the meaning provided in the Credit
Agreement.
"Pledged Securities" shall mean all Securities under, and as defined
in, the Pledge Agreement, which have been pledged by the Assignors pursuant
thereto.
"Pledgee" shall have the meaning provided in the Pledge Agreement.
"Primary Obligations" shall have the meaning provided in Section 7.4(b)
of this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b) of
this Agreement.
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for, or
exchange of, goods sold or leased or services performed or product exchanged by
such Assignor, whether now in existence or arising from time to time
<PAGE> 31
hereafter, including, without limitation, rights evidenced by an account, note,
contract, barter arrangement, security agreement, chattel paper, or other
evidence of indebtedness or security, together with (a) all security pledged,
assigned, hypothecated or granted to or held by such Assignor to secure the
foregoing, (b) all of any Assignor's right, title and interest in and to any
goods or services, the sale or exchange of which gave rise thereto, (c) all
guarantees, endorsements and indemnifications on, or of, any of the foregoing,
(d) all powers of attorney for the execution of any evidence of indebtedness or
security or other writing in connection therewith, (e) all books, records,
ledger cards, and invoices relating thereto, (f) all evidences of the filing of
financing statements and other statements and the registration of other
instruments in connection therewith and amendments thereto, notices to other
creditors or secured parties, and certificates from filing or other registration
officers, (g) all credit information, reports and memoranda relating thereto and
(h) all other writings related in any way to the foregoing.
"Representative" shall have the meaning provided in Section 7.4(e) of
this Agreement.
"Required Secured Creditors" shall mean the Required Lenders (or, after
the date on which all Credit Document Obligations have been paid in full, the
holders of at least the majority of the outstanding Other Obligations).
"Requisite Creditors" shall have the meaning provided in Section 10.2
of this Agreement.
"Secondary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Subsidiaries Guaranty" shall have the meaning provided in the recitals
to this Agreement.
"Syndication Agent" shall have the meaning provided in the recitals to
this Agreement.
"Termination Date" shall have the meaning provided in Section 10.8 of
this Agreement.
"Trade Secret Rights" shall mean the rights of an Assignor in any Trade
Secrets it holds or owns.
"Trade Secrets" means any secretly held engineering and other data,
information, production procedures and other know-how relating to the design,
manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of an Assignor worldwide, whether written
or not written.
<PAGE> 32
ARTICLE X
MISCELLANEOUS
10.1. Notices. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made when delivered to
the party to which such notice, request, demand or other communication is
required or permitted to be given or made under this Agreement, addressed:
(a) if to any Assignor, at:
c/o IASIS Healthcare Corporation
Suite 101
104 Woodmont Boulevard
Nashville, TN 37205
Attention: President or General Counsel
Tel: (615) 844-2747
Fax: (615) 846-3006
(b) if to the Collateral Agent:
Morgan Guaranty Trust Company of New York
c/o J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Renee Richmond
Telephone No.: (302) 634-3316
Facsimile No.: (302) 634-4300
(c) if to any Lender Creditor (other than the Collateral
Agent), at such address as such Lender Creditor shall have specified in
the Credit Agreement; and
(d) if to any Other Creditor, at such address as such Other
Creditor shall have specified in writing to each Assignor and the
Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2. Waiver; Amendment. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by each Assignor directly and adversely
affected thereby and the Collateral Agent (with the consent of (x) the Required
Lenders (or all the Lenders if required by Section 13.12 of the Credit
Agreement) at all times prior to the time at which all Credit Document
Obligations (other than those arising from indemnities for which no request has
been made) have been paid in full and all Commitments and Letters of Credit
under the Credit Agreement have been terminated or (y) the holders of at least a
majority of the outstanding Other Obligations at all times after the
<PAGE> 33
time on which all Credit Document Obligations have been paid in full and all
Commitments and Letters of Credit under the Credit Agreement have been
terminated); provided, however, that no such change, waiver, modification or
variance shall be made to Section 8 hereof or this Section 10.2 without the
consent of each Secured Creditor adversely affected thereby, provided further,
that any change, waiver, modification or variance affecting the rights and
benefits of a single Class (as defined below) of Secured Creditors (and not all
Secured Creditors in a like or similar manner) shall require the written consent
of the Requisite Creditors (as defined below) of such Class of Secured
Creditors. For the purpose of this Agreement, the term "Class" shall mean each
class of Secured Creditors, i.e., whether (x) the Lender Creditors as holders of
the Credit Document Obligations or (y) the Other Creditors as the holders of the
Other Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to the Credit
Document Obligations, the Required Lenders and (y) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Interest Rate Protection Agreements and Other
Hedging Agreements.
10.3. Obligations Absolute. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement or Other Hedging Agreement; (c) any
renewal, extension, amendment or modification of or addition or supplement to or
deletion from any Credit Document or any Interest Rate Protection Agreement or
Other Hedging Agreement or any security for any of the Obligations; (d) any
waiver, consent, extension, indulgence or other action or inaction under or in
respect of any such agreement or instrument including, without limitation, this
Agreement; (e) any furnishing of any additional security to the Collateral Agent
or its assignee or any acceptance thereof or any release of any security by the
Collateral Agent or its assignee; or (f) any limitation on any party's liability
or obligations under any such instrument or agreement or any invalidity or
unenforceability, in whole or in part, of any such instrument or agreement or
any term thereof; whether or not any Assignor shall have notice or knowledge of
any of the foregoing. The rights and remedies of the Collateral Agent herein
provided are cumulative and not exclusive of any rights or remedies which the
Collateral Agent would otherwise have.
10.4. Successors and Assigns. This Agreement shall be binding
upon each Assignor and its successors and assigns and shall inure to the benefit
of the Collateral Agent and its successors and assigns; provided, that no
Assignor may transfer or assign any or all of its rights or obligations
hereunder without the prior written consent of the Collateral Agent. All
agreements, statements, representations and warranties made by each Assignor
herein or in any certificate or other instrument delivered by such Assignor or
on its behalf under this Agreement shall be considered to have been relied upon
by the Secured Creditors and shall survive the execution and delivery of this
Agreement, the other Credit Documents and the Interest Rate Protection
Agreements or Other Hedging Agreements regardless of any investigation made by
the Secured Creditors or on their behalf.
<PAGE> 34
10.5. Headings Descriptive. The headings of the several
sections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
10.7. Assignors' Duties. It is expressly agreed, anything
herein contained to the contrary notwithstanding, that each Assignor shall
remain liable to perform all of the obligations, if any, assumed by it with
respect to the Collateral and the Collateral Agent shall not have any
obligations or liabilities with respect to any Collateral by reason of or
arising out of this Agreement, nor shall the Collateral Agent be required or
obligated in any manner to perform or fulfill any of the obligations of any
Assignor under or with respect to any Collateral.
10.8. Termination; Release. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 8.1 hereof shall
survive such termination) and the Collateral Agent, at the request and expense
of the relevant Assignor, will execute and deliver to such Assignor a proper
instrument or instruments (including, without limitation, Uniform Commercial
Code termination statements on form UCC-3) acknowledging the satisfaction and
termination of this Agreement, and will duly assign, transfer and deliver to
such Assignor (without recourse and without any representation or warranty) such
of the Collateral as may be in the possession of the Collateral Agent and as has
not theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Total Commitments and all Interest Rate Protection Agreements or
Other Hedging Agreements have been terminated, no Note is outstanding (and all
Loans have been paid in full), all Letters of Credit have been terminated and
all other Obligations (other than those arising from indemnities for which no
request has been made) then owing have been paid in full.
(b) In the event that any part of the Collateral is sold or
otherwise disposed of (to a Person other than the Borrower or a Subsidiary
thereof) (x) at any time prior to the time at which all Credit Document
Obligations have been paid in full and all Commitments under the Credit
Agreement have been terminated, in connection with a sale or other disposition
(including the sale of the capital stock or other equity interests of an
Assignor) permitted by Section 9.02 of the Credit Agreement or is otherwise
released at the direction of the Required Lenders (or all the Lenders if
required by Section 13.12 of the Credit Agreement) or (y) at any time
thereafter, in accordance with the terms of the Interest Rate Protection
Agreements or Other Hedging Agreements, and the proceeds of any such sale or
disposition are applied in accordance with the terms of the Credit Agreement or
such Interest Rate Protection Agreements or Other Hedging Agreements, as the
case may be, to the extent required to be so applied, the Collateral Agent, at
the request and expense of such Assignor, will (i) duly assign, transfer and
deliver to such Assignor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold,
disposed of or released and as may be in the possession of the Collateral Agent
and has not theretofore been released pursuant to this Agreement and/or (ii)
<PAGE> 35
execute such releases and discharges in respect of such Collateral as is then
being (or has been) so sold, disposed of or released as such Assignor may
reasonably request.
(c) At any time that the respective Assignor desires that
Collateral be released as provided in the foregoing Section 10.8(a) or (b), it
shall deliver to the Collateral Agent a certificate signed by an Authorized
Officer stating that the release of the respective Collateral is permitted
pursuant to Section 10.8(a) or (b). If requested by the Collateral Agent
(although the Collateral Agent shall have no obligation to make any such
request), the relevant Assignor shall furnish appropriate legal opinions (from
counsel, which may be in-house counsel, reasonably acceptable to the Collateral
Agent) to the effect set forth in the immediately preceding sentence. The
Collateral Agent shall have no liability whatsoever to any Secured Creditor as
the result of any release of Collateral by it as permitted (or which the
Collateral Agent in the absence of gross negligence or willful misconduct
believes to be permitted) by this Section 10.8.
10.9. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Collateral Agent.
10.10. The Collateral Agent. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Collateral Agent as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement. The Collateral Agent shall act
hereunder on the terms and conditions set forth in Section 12 of the Credit
Agreement.
10.11. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.12. Limited Obligations. It is the desire and intent of
each Assignor and the Secured Creditors that this Agreement shall be enforced
against each Assignor to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Notwithstanding anything to the contrary contained herein, in furtherance of the
foregoing, it is noted that, on and after the execution and delivery of the
Subsidiaries Guaranty, the obligations of each Subsidiary Guarantor constituting
an Assignor have been limited as provided in the Subsidiaries Guaranty.
10.13. Additional Assignors. It is understood and agreed that
any Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to Section 8.11, 8.13 or 9.14 of the
Credit Agreement shall automatically become an Assignor hereunder by executing a
counterpart hereof and delivering the same to the Collateral Agent.
<PAGE> 36
10.14. Effectiveness. This Agreement shall become effective
when the Collateral Agent, the Borrower and each Subsidiary of the Borrower
whose name appears on the signature pages hereto shall have signed a counterpart
hereof (whether the same or different counterparts) and shall have delivered
(including by way of facsimile transmission) the same to the Administrative
Agent.
* * *
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
IASIS HEALTHCARE CORPORATION,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SALT LAKE REGIONAL MEDICAL CENTER, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
JORDAN VALLEY HOSPITAL, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
DAVIS HOSPITAL & MEDICAL CENTER, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ROCKY MOUNTAIN MEDICAL CENTER, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 38
PIONEER VALLEY HOSPITAL, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
PIONEER VALLEY HEALTH PLAN, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
CLINICARE OF UTAH, INC., as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SOUTHRIDGE PLAZA HOLDINGS, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SANDY CITY HOLDINGS, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
DAVIS SURGICAL CENTER HOLDINGS, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 39
MESA GENERAL HOSPITAL, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ST. LUKE'S MEDICAL CENTER, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ST. LUKE'S BEHAVIORAL HOSPITAL, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
HEALTH CHOICE ARIZONA, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
METRO AMBULATORY SURGERY CENTER, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 40
BILTMORE SURGERY CENTER, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
PALMS OF PASADENA HOSPITAL, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ODESSA REGIONAL HOSPITAL, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
TEMPE ST. LUKE'S HOSPITAL, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
MEMORIAL HOSPITAL OF TAMPA, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 41
TOWN & COUNTRY HOSPITAL, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SOUTHWEST GENERAL HOSPITAL, LP,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SSJ ST. PETERSBURG HOLDINGS, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
FIRST CHOICE PHYSICIANS NETWORK
HOLDINGS, INC., as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
BAPTIST JOINT VENTURE HOLDINGS, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 42
BEAUMONT HOSPITAL HOLDINGS, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
IASIS HEALTHCARE HOLDINGS, INC.,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
IASIS MANAGEMENT COMPANY,
as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
Accepted and Agreed to:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Collateral Agent, as Assignee
By: /s/ Colleen Galle
----------------------------------
Name: Colleen Galle
Title: Vice President
<PAGE> 43
BILTMORE SURGERY CENTER, INC.
(ARIZONA CORPORATION), as an Assignor
By: /s/ Wayne Gower
---------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 44
IASIS HEALTHCARE MSO SUB OF SALT
LAKE CITY, LLC, as an Assignor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.5
PLEDGE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. SECURITY FOR OBLIGATIONS................................... 2
2. DEFINITIONS; ANNEXES....................................... 3
3. PLEDGE OF SECURITY INTEREST, ETC. ......................... 7
3.1 Pledge................................................ 7
3.2 Procedures............................................ 10
3.3 Subsequently Acquired Collateral...................... 12
3.4 Transfer Taxes........................................ 12
3.5 Definition of Pledged Notes........................... 12
3.6 Certain Representations and Warranties Regarding
the Collateral...................................... 12
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS; ETC. ............. 13
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT.................... 13
6. DIVIDENDS AND OTHER DISTRIBUTIONS.......................... 13
7. REMEDIES IN CASE OF AN EVENT OF DEFAULT.................... 14
8. REMEDIES, ETC., CUMULATIVE................................. 15
9. APPLICATION OF PROCEEDS.................................... 16
10. PURCHASERS OF COLLATERAL................................... 16
11. INDEMNITY.................................................. 16
12. FURTHER ASSURANCES; POWER OF ATTORNEY...................... 17
13. THE PLEDGEE AS COLLATERAL AGENT............................ 17
14. TRANSFER BY THE PLEDGORS................................... 17
15. REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE PLEDGORS............................................ 17
16. CHIEF EXECUTIVE OFFICE; RECORDS............................ 19
17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. ...................... 20
18. SALE OF COLLATERAL WITHOUT REGISTRATION.................... 21
19. TERMINATION; RELEASE....................................... 21
20. NOTICES, ETC. ............................................. 22
21. THE PLEDGEE................................................ 23
22. WAIVER; AMENDMENT.......................................... 23
23. MISCELLANEOUS.............................................. 24
24. WAIVER OF JURY TRIAL....................................... 24
25. ADDITIONAL PLEDGORS........................................ 24
26. RECOURSE................................................... 24
27. LIMITED OBLIGATIONS........................................ 24
28. PLEDGEE NOT A PARTNER OR LIMITED LIABILITY
COMPANY MEMBER............................................. 25
29. EFFECTIVENESS.............................................. 25
</TABLE>
<PAGE> 2
PLEDGE AGREEMENT, dated as of October 15, 1999 (as amended,
restated, modified and/or supplemented from time to time, this "Agreement"),
among each of the undersigned (each, a "Pledgor" and, together with each other
entity which becomes a party hereto pursuant to Section 25, collectively, the
"Pledgors") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, not in its individual
capacity but solely as Collateral Agent (the "Pledgee"), for the benefit of the
Secured Creditors (as defined below). Except as otherwise defined herein, terms
used herein and defined in the Credit Agreement (as defined below) shall be used
herein as therein defined.
W I T N E S S E T H :
WHEREAS, IASIS Healthcare Corporation, a Delaware corporation
(the "Borrower"), various financial institutions from time to time party thereto
(the "Lenders"), J.P. Morgan Securities Inc. and The Bank of Nova Scotia, as
Co-Lead Arrangers (in such capacity, each a "Co-Lead Arranger" and collectively,
the "Co-Lead Arrangers") and Co-Book Runners (in such capacity, each a "Co-Book
Runner" and collectively, the "Co-Book Runners"), Paribas, as Documentation
Agent (in such capacity, the "Documentation Agent"), The Bank of Nova Scotia, as
Syndication Agent (in such capacity, the "Syndication Agent"), and Morgan
Guaranty Trust Company of New York, as Administrative Agent (in such capacity,
the "Administrative Agent", and together with the Lenders, the Co-Lead
Arrangers, the Syndication Agent, each Issuing Bank, the Pledgee and the
Collateral Agent, the "Lender Creditors") have entered into the Credit
Agreement, providing for the extension of credit to the Borrower as contemplated
therein;
WHEREAS, the Borrower may from time to time enter into one or
more (i) interest rate protection agreements (including, without limitation,
interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign
exchange contracts, currency swap agreements, commodity agreements or other
similar agreements or arrangements designed to protect against the fluctuations
in currency values and/or (iii) other types of hedging agreements from time to
time (each such agreement or arrangement with an Other Creditor (as hereinafter
defined), an "Interest Rate Protection Agreement or Other Hedging Agreement"),
with Morgan Guaranty Trust Company of New York in its individual capacity
("Morgan Guaranty"), any Lender or a syndicate of financial institutions
organized by Morgan Guaranty or any such Lender, or an affiliate of Morgan
Guaranty or any such Lender (Morgan Guaranty, any such Lender or Lenders or
affiliate or affiliates of Morgan Guaranty or such Lender or Lenders (even if
Morgan Guaranty or any such Lender ceases to be a Lender under the Credit
Agreement for any reason) and any such institution that participates in such
Interest Rate Protection Agreements or Other Hedging Agreements, and in each
case their subsequent successors and assigns, collectively, the "Other
Creditors", and together with the Lender Creditors, the "Secured Creditors");
WHEREAS, pursuant to a Subsidiaries Guaranty, dated as of
October 15, 1999 (as amended, restated, modified and/or supplemented from time
to time, the "Subsidiaries Guaranty"), each Pledgor (other than the Borrower)
has jointly and severally guaranteed to the Secured Creditors the payment when
due of all obligations and liabilities of the Borrower under or with respect to
the Credit Documents and each Interest Rate Protection Agreement and Other
Hedging Agreement;
WHEREAS, it is a condition precedent to the making of Loans to
the Borrower and the issuance of, and participation in, Letters of Credit for
the account of the Borrower under the Credit Agreement and to the Other
Creditors entering into Interest Rate Protection Agreements and Other Hedging
Agreements that each Pledgor shall have executed and delivered to the Pledgee
this Agreement; and
WHEREAS, each Pledgor will obtain benefits from the incurrence
of Loans by the Borrower and the issuance of Letters of Credit for the account
of the Borrower under the Credit Agreement and the Borrower's entering into
Interest Rate Protection Agreements or Other Hedging Agreements and,
accordingly, desires to execute this Agreement in order to satisfy the
conditions precedent described in the preceding paragraph and to induce the
Lenders to make Loans to the Borrower and to issue, and participate in, Letters
of Credit for the account of the Borrower, and to induce the Other Creditors to
enter into Interest Rate Protection Agreements and Other Hedging Agreements with
the Borrower;
NOW, THEREFORE, in consideration of the benefits accruing to
each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each
Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations,
liabilities and indebtedness (including, without limitation,
indemnities, Fees and interest thereon) of such Pledgor owing to the
Lender Creditors, whether now existing or hereafter incurred under,
arising out of, or in connection with the Credit Agreement and the
other Credit Documents to which such Pledgor is a party (including, in
the case of a Pledgor other than the Borrower, all such obligations,
liabilities and indebtedness under the Subsidiaries Guaranty) and the
due performance and compliance by such Pledgor with all of the terms,
conditions and agreements contained in the Credit Agreement and such
other Credit Documents (all such obligations, liabilities and
indebtedness under this clause (i), except to the extent guaranteeing
obligations of the Borrower under Interest Rate Protection Agreements
or
<PAGE> 3
Other Hedging Agreements, being herein collectively called the "Credit
Document Obligations");
(ii) the full and prompt payment when due (whether at stated
maturity, by acceleration or otherwise) of all obligations, liabilities
and indebtedness (including, without limitation, indemnities, fees and
interest thereon) of such Pledgor owing to the Other Creditors, now
existing or hereafter incurred under, arising out of or in connection
with any Interest Rate Protection Agreement or Other Hedging Agreement,
whether such Interest Rate Protection Agreement or Other Hedging
Agreement is now in existence or hereinafter arising, and the due
performance and compliance with the terms, conditions and agreements of
each such Interest Rate Protection Agreement and Other Hedging
Agreement by such Pledgor, including, in the case of Pledgors other
than the Borrower, all obligations, liabilities and indebtedness under
the Subsidiaries Guaranty, in each case, in respect of the Interest
Rate Protection Agreements and Other Hedging Agreements, and the due
performance and compliance by such Pledgor with all of the terms,
conditions and agreements contained in each such Interest Rate
Protection Agreement and Other Hedging Agreement (all such obligations,
liabilities and indebtedness under this clause (ii) being herein
collectively called the "Other Obligations");
(iii) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) and/or preserve its
security interest therein;
(iv) in the event of any proceeding for the collection of the
Obligations (as defined below) or the enforcement of this Agreement,
after an Event of Default (such term, as used in this Agreement, shall
mean and include any Event of Default under, and as defined in, the
Credit Agreement and any payment default under any Interest Rate
Protection Agreement or Other Hedging Agreement and shall in any event
include, without limitation, any payment default (after the expiration
of any applicable grace period) on any of the Obligations (as defined
below)) shall have occurred and be continuing, the reasonable expenses
of retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Pledgee of its rights hereunder, together with reasonable attorneys'
fees and court costs; and
(v) all amounts paid by any Indemnitee to which such
Indemnitee has the right to reimbursement under Section 11 of this
Agreement.
all such obligations, liabilities, indebtedness, sums and expenses set forth in
clauses (i) through (v) of this Section 1 being collectively called the
"Obligations", it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
<PAGE> 4
2. DEFINITIONS; ANNEXES. (a) Unless otherwise defined herein,
all capitalized terms used herein and defined in the Credit Agreement shall be
used herein as therein defined. Reference to singular terms shall include the
plural and vice versa.
(b) The following capitalized terms used herein shall have the
definitions specified below:
"Administrative Agent" shall have the meaning given such term
in the recitals hereto.
"Adverse Claim" shall have the meaning given such term in
Section 8-102(a)(1) of the UCC.
"Agreement" shall have the meaning set forth in the first
paragraph hereof.
"Borrower" shall mean IASIS Healthcare Corporation, a Delaware
corporation.
"Certificated Security" shall have the meaning given such term
in Section 8-102(a)(4) of the UCC.
"Clearing Corporation" shall have the meaning given such term
in Section 8-102(a)(5) of the UCC.
"Co-Book Runner" shall have the meaning set forth in the
recitals hereto.
"Co-Lead Arranger" shall have the meaning set forth in the
recitals hereto.
"Collateral" shall have the meaning set forth in Section 3.1
hereof.
"Collateral Accounts" shall mean any and all accounts
established and maintained by the Pledgee in the name of any Pledgor to which
Collateral may be credited.
"Credit Agreement" shall mean the Credit Agreement, dated as
of October 15, 1999, among the Borrower, the Lenders, the Co-Lead Arrangers, the
Documentation Agent, the Syndication Agent and the Administrative Agent,
providing for the making of Loans to the Borrower and the issuance of, and
participation in, Letters of Credit for the account of the Borrower as
contemplated therein, as the same may be amended, restated, modified, extended,
renewed, replaced, supplemented, restructured and/or refinanced from time to
time, and including any agreement extending the maturity of, refinancing or
restructuring (including, but not limited to, the inclusion of additional
borrowers thereunder that are Subsidiaries of the Borrower and whose obligations
are guaranteed by the Borrower and/or the Subsidiary Guarantors thereunder or
any increase in the amount borrowed) all, or any portion of, the Indebtedness
under such agreement or any successor agreements; provided that, with respect to
any agreement providing for the refinancing of Indebtedness under the Credit
Agreement, such agreement shall only be treated as, or as part of, the Credit
Agreement hereunder if (i) either (A) all obligations under the Credit Agreement
being refinanced shall be paid in full at the time of
<PAGE> 5
such refinancing, and all commitments under the refinanced Credit Agreement
shall have terminated in accordance with their terms or (B) the Required Lenders
shall have consented in writing to the refinancing Indebtedness being treated,
along with their Indebtedness, as Indebtedness pursuant to the Credit Agreement,
(ii) the refinancing Indebtedness shall be permitted to be incurred under the
Credit Agreement being refinanced (if such Credit Agreement is to remain
outstanding) and (iii) a notice to the effect that the refinancing Indebtedness
shall be treated as issued under the Credit Agreement shall be delivered by the
Borrower to the Pledgee).
"Credit Document Obligations" shall have the meaning set forth
in Section 1 hereof.
"Documentation Agent" shall have the meaning set forth in the
recitals hereto.
"Domestic Corporation" shall have the meaning set forth in the
definition of "Stock."
"Event of Default" shall have the meaning set forth in Section
1 hereof.
"Financial Asset" shall have the meaning given such term in
Section 8-102(a)(9) of the UCC.
"Foreign Corporation" shall have the meaning set forth in the
definition of "Stock."
"Indemnitees" shall have the meaning set forth in Section 11
hereof.
"Instrument" shall have the meaning given such term in Section
9-105(1)(i) of the UCC.
"Interest Rate Protection or Other Hedging Agreement" shall
have the meaning given such term in the recitals hereto.
"Investment Property" shall have the meaning given such term
in Section 9-115(f) of the UCC.
"Lender Creditors" shall have the meaning given such term in
the recitals hereto.
"Lenders" shall have the meaning given such term in the
recitals hereto.
"Limited Liability Company Assets" shall mean all assets,
whether tangible or intangible and whether real, personal or mixed (including,
without limitation, all limited liability company capital and interest in other
limited liability companies), at any time owned or represented by any Limited
Liability Company Interest.
<PAGE> 6
"Limited Liability Company Interests" shall mean the entire
limited liability company membership interest at any time owned by any Pledgor
in any limited liability company.
"Non-Voting Stock" shall mean all capital stock which is not
Voting Stock.
"Notes" shall mean (x) all intercompany notes at any time
issued to each Pledgor and (y) all other promissory notes from time to time
issued to, or held by, each Pledgor.
"Obligations" shall have the meaning set forth in Section 1
hereof.
"Other Creditors" shall have the meaning set forth in the
recitals hereto.
"Other Obligations" shall have the meaning set forth in
Section 1 hereof.
"Partnership Assets" shall mean all assets, whether tangible
or intangible and whether real, personal or mixed (including, without
limitation, all partnership capital and interest in other partnerships), at any
time owned or represented by any Partnership Interest.
"Partnership Interest" shall mean the entire general
partnership interest or limited partnership interest at any time owned by any
Pledgor in any general partnership or limited partnership.
"Pledged Notes" shall have the meaning set forth in Section
3.5 hereof.
"Pledgee" shall have the meaning set forth in the first
paragraph hereof.
"Pledgor" shall have the meaning set forth in the first
paragraph hereof.
"Proceeds" shall have the meaning given such term in Section
9-306(l) of the UCC.
"Required Lenders" shall have the meaning given such term in
the Credit Agreement.
"Secured Creditors" shall have the meaning set forth in the
recitals hereto.
"Secured Debt Agreements" shall have the meaning set forth in
Section 5 hereof.
"Securities Account" shall have the meaning given such term in
Section 8-501(a) of the UCC.
"Securities Act" shall mean the Securities Act of 1933, as
amended, as in effect from time to time.
<PAGE> 7
"Security" and "Securities" shall have the meaning given such
term in Section 8-102(a)(15) of the UCC and shall in any event include all Stock
and Notes (to the extent same constitute "Securities" under Section
8-102(a)(15)).
"Security Entitlement" shall have the meaning given such term
in Section 8-102(a)(17) of the UCC.
"Stock" shall mean (x) with respect to corporations
incorporated under the laws of the United States or any State or territory
thereof (each, a "Domestic Corporation"), all of the issued and outstanding
shares of capital stock of any corporation at any time owned by any Pledgor of
any Domestic Corporation and (y) with respect to corporations not Domestic
Corporations (each a "Foreign Corporation"), all of the issued and outstanding
shares of capital stock at any time owned by any Pledgor of any Foreign
Corporation.
"Syndication Agent" shall have the meaning given such term in
the recitals hereto.
"Termination Date" shall have the meaning set forth in Section
19 hereof.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York from time to time; provided that all references herein to
specific sections or subsections of the UCC are references to such sections or
subsections, as the case may be, of the Uniform Commercial Code as in effect in
the State of New York on the date hereof.
"Uncertificated Security" shall have the meaning given such
term in Section 8-102(a)(18) of the UCC.
"Voting Stock" shall mean all classes of capital stock of any
Foreign Corporation entitled to vote.
3. PLEDGE OF SECURITY INTEREST, ETC.
3.1 Pledge. To secure the Obligations now or hereafter owed or
to be performed by such Pledgor, each Pledgor does hereby grant, pledge and
assign to the Pledgee for the benefit of the Secured Creditors, and does hereby
create a continuing security interest (subject to those Liens permitted to exist
with respect to the Collateral pursuant to the terms of all Secured Debt
Agreements then in effect) in favor of the Pledgee for the benefit of the
Secured Creditors in, all of the right, title and interest in and to the
following, whether now existing or hereafter from time to time acquired
(collectively, the "Collateral"):
(a) each of the Collateral Accounts (to the extent a security
interest therein is not created pursuant to the Security Agreement),
including any and all assets of whatever type or kind deposited by such
Pledgor in such Collateral Account, whether now owned or hereafter
acquired, existing or arising, including, without limitation, all
Financial Assets, Investment Property, moneys, checks, drafts,
Instruments, Securities or interests
<PAGE> 8
therein of any type or nature deposited or required by the Credit
Agreement or any other Secured Debt Agreement to be deposited in such
Collateral Account, and all investments and all certificates and other
Instruments (including depository receipts, if any) from time to time
representing or evidencing the same, and all dividends, interest,
distributions, cash and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing;
(b) all Securities of such Pledgor from time to time;
(c) all Limited Liability Company Interests of such Pledgor
from time to time, excluding those in a limited liability company that
is not a Subsidiary of the Borrower to the extent (and only to the
extent) such Limited Liability Company Interests may not be pledged
hereunder without violating the terms of the operating agreement or
other organizational documents of such limited liability company, and
all of its right, title and interest in each limited liability company
to which each such interest relates, whether now existing or hereafter
acquired, including, without limitation:
(A) all its capital therein and its interest in all
profits, losses, Limited Liability Company Assets and other
distributions to which such Pledgor shall at any time be
entitled in respect of such Limited Liability Company
Interests;
(B) all other payments due or to become due to such
Pledgor in respect of Limited Liability Company Interests,
whether under any limited liability company agreement or
otherwise, whether as contractual obligations, damages,
insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges,
authority, options, security interests, liens and remedies, if
any, under any limited liability company agreement or
operating agreement, or at law or otherwise in respect of such
Limited Liability Company Interests;
(D) all present and future claims, if any, of such
Pledgor against any such limited liability company for moneys
loaned or advanced, for services rendered or otherwise;
(E) all of such Pledgor's rights under any limited
liability company agreement or operating agreement or at law
to exercise and enforce every right, power, remedy, authority,
option and privilege of such Pledgor relating to such Limited
Liability Company Interests, including any power to terminate,
cancel or modify any limited liability company agreement or
operating agreement, to execute any instruments and to take
any and all other action on behalf of and in the name of any
of such Pledgor in respect of such Limited Liability Company
Interests and any such limited liability company, to make
determinations, to exercise any election (including, but not
limited to, election of remedies) or option or to give or
receive any notice, consent, amendment, waiver or approval,
together
<PAGE> 9
with full power and authority to demand, receive, enforce,
collect or receipt for any of the foregoing or for any Limited
Liability Company Asset, to enforce or execute any checks, or
other instruments or orders, to file any claims and to take
any action in connection with any of the foregoing (with all
of the foregoing rights only to be exercisable upon the
occurrence and during the continuation of an Event of
Default); and
(F) all other property hereafter delivered in
substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such
other property and all cash, securities, interest, dividends,
rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or
in exchange for any or all thereof;
(d) all Partnership Interests of such Pledgor from time to
time, excluding those in a partnership that is not a Subsidiary of the
Borrower to the extent (and only to the extent) such Partnership
Interests (or any of the following items (A) through (F)) may not be
pledged hereunder without violating the terms of the partnership
agreement or other organizational documents of such partnership, and
all of its right, title and interest in each partnership to which each
such interest relates, whether now existing or hereafter acquired,
including, without limitation:
(A) all its capital therein and its interest in all
profits, losses, Partnership Assets and other distributions to
which such Pledgor shall at any time be entitled in respect of
such Partnership Interests;
(B) all other payments due or to become due to such
Pledgor in respect of Partnership Interests, whether under any
partnership agreement or otherwise, whether as contractual
obligations, damages, insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges,
authority, options, security interests, liens and remedies, if
any, under any partnership agreement or operating agreement,
or at law or otherwise in respect of such Partnership
Interests;
(D) all present and future claims, if any, of such
Pledgor against any such partnership for moneys loaned or
advanced, for services rendered or otherwise;
(E) all of such Pledgor's rights under any
partnership agreement or operating agreement or at law to
exercise and enforce every right, power, remedy, authority,
option and privilege of such Pledgor relating to such
Partnership Interests, including any power to terminate,
cancel or modify any partnership agreement or operating
agreement, to execute any instruments and to take any and all
other action on behalf of and in the name of any of such
Pledgor in respect of such Partnership Interests and any such
partnership, to make determinations, to
<PAGE> 10
exercise any election (including, but not limited to, election
of remedies) or option or to give or receive any notice,
consent, amendment, waiver or approval, together with full
power and authority to demand, receive, enforce, collect or
receipt for any of the foregoing or for any Partnership Asset,
to enforce or execute any checks, or other instruments or
orders, to file any claims and to take any action in
connection with any of the foregoing (with all of the
foregoing rights only to be exercisable upon the occurrence
and during the continuation of an Event of Default); and
(F) all other property hereafter delivered in
substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such
other property and all cash, securities, interest, dividends,
rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or
in exchange for any or all thereof;
(e) all Security Entitlements of such Pledgor from time to
time in any and all of the foregoing;
(f) all Financial Assets and Investment Property of such
Pledgor from time to time; and
(g) all Proceeds of any and all of the foregoing;
provided that (x) except to the extent provided by Section 8.13 of the Credit
Agreement, no Pledgor shall be required at any time to pledge hereunder more
than 65% of the Voting Stock of any Foreign Corporation and (y) each Pledgor
shall be required to pledge hereunder 100% of any Non-Voting Stock at any time
and from time to time acquired by such Pledgor of any Foreign Corporation.
3.2 Procedures. (a) To the extent that any Pledgor at any time
or from time to time owns, acquires or obtains any right, title or interest in
any Collateral, such Collateral shall automatically (and without the taking of
any action by the respective Pledgor) be pledged pursuant to Section 3.1 of this
Agreement and, in addition thereto, such Pledgor shall (to the extent provided
below) take the following actions as set forth below (as promptly as practicable
and, in any event, within 10 days after it obtains such Collateral) for the
benefit of the Pledgee and the Secured Creditors:
(i) with respect to a Certificated Security (other than a
Certificated Security credited on the books of a Clearing Corporation),
the respective Pledgor shall physically deliver such Certificated
Security to the Pledgee, endorsed to the Pledgee or endorsed in blank;
(ii) with respect to an Uncertificated Security (other than an
Uncertificated Security credited on the books of a Clearing
Corporation), the respective Pledgor shall cause the issuer of such
Uncertificated Security to duly authorize and execute, and deliver
<PAGE> 11
to the Pledgee, an agreement for the benefit of the Pledgee and the
other Secured Creditors substantially in the form of Annex G hereto
(appropriately completed to the satisfaction of the Pledgee and with
such modifications, if any, as shall be satisfactory to the Pledgee)
pursuant to which such issuer agrees to comply with any and all
instructions originated by the Pledgee without further consent by the
registered owner and not to comply with instructions regarding such
Uncertificated Security (and any Partnership Interests and Limited
Liability Company Interests issued by such issuer) originated by any
other Person other than a court of competent jurisdiction; it being
understood that the Pledgee will not so originate any instructions to
any such issuer unless an Event of Default has occurred and is
continuing;
(iii) with respect to a Certificated Security, Uncertificated
Security, Partnership Interest or Limited Liability Company Interest
credited on the books of a Clearing Corporation (including a Federal
Reserve Bank, Participants Trust Company or The Depository Trust
Company), the respective Pledgor shall promptly notify the Pledgee
thereof and shall promptly take all actions (x) required (i) to comply
with the applicable rules of such Clearing Corporation and (ii) to
perfect the security interest of the Pledgee under applicable law
(including, in any event, under Sections 9-115 (4)(a) and (b), 9-115
(1)(e) and 8-106(d) of the UCC) and (y) as the Pledgee deems necessary
or desirable to effect the foregoing;
(iv) with respect to a Partnership Interest or a Limited
Liability Company Interest (other than a Partnership Interest or
Limited Liability Interest credited on the books of a Clearing
Corporation), (1) if such Partnership Interest or Limited Liability
Company Interest is represented by a certificate, the procedure set
forth in Section 3.2(a)(i), and (2) if such Partnership Interest or
Limited Liability Company Interest is not represented by a certificate,
the procedure set forth in Section 3.2(a)(ii);
(v) with respect to any Note, physical delivery of such Note
to the Pledgee, endorsed to the Pledgee or endorsed in blank; and
(vi) after an Event of Default has occurred and is continuing,
with respect to cash, to the extent not otherwise provided in the
Security Agreement, at the request of the Collateral Agent, (i)
establishment by the Pledgee of a cash account in the name of such
Pledgor over which the Pledgee shall have exclusive and absolute
control and dominion (and no withdrawals or transfers may be made
therefrom by any Person except with the prior written consent of the
Pledgee) and (ii) deposit of such cash in such cash account.
(b) In addition to the actions required to be taken pursuant
to proceeding Section 3.2(a), each Pledgor shall take the following additional
actions with respect to the Securities and Collateral (as defined below):
(i) with respect to all Collateral of such Pledgor whereby or
with respect to which the Pledgee may obtain "control" thereof within
the meaning of Section 8-106 of the UCC (or under any provision of the
UCC as same may be amended or supplemented
<PAGE> 12
from time to time, or under the laws of any relevant State other than
the State of New York), the respective Pledgor shall take all actions
as may be requested from time to time by the Pledgee so that "control"
of such Collateral is obtained and at all times held by the Pledgee;
and
(ii) each Pledgor shall from time to time cause appropriate
financing statements (on Form UCC-1 or other appropriate form) under
the Uniform Commercial Code as in effect in the various relevant
States, on forms covering all Collateral hereunder (with the form of
such financing statements to be satisfactory to the Pledgee), to be
filed in the relevant filing offices so that at all times the Pledgee
has a security interest in all Investment Property and other Collateral
which is perfected by the filing of such financing statements (in each
case to the maximum extent perfection by filing may be obtained under
the laws of the relevant States, including, without limitation, Section
9-115(4)(b) of the UCC).
3.3 Subsequently Acquired Collateral. If any Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional Collateral at
any time or from time to time after the date hereof, such Collateral shall
automatically (and without any further action being required to be taken) be
subject to the pledge and security interests created pursuant to Section 3.1
and, furthermore, such Pledgor will within 10 days thereafter take (or cause to
be taken) all action with respect to such Collateral (except to the extent such
Collateral consists of Cash Equivalents) in accordance with the procedures set
forth in Section 3.2, and will promptly thereafter deliver to the Pledgee (i) a
certificate executed by an Authorized Officer of such Pledgor describing such
Collateral and certifying that the same has been duly pledged in favor of the
Pledgee (for the benefit of the Secured Creditors) hereunder and (ii)
supplements to Annexes A through F hereto as are necessary to cause such annexes
to be complete and accurate at such time. Without limiting the foregoing, each
Pledgor shall be required to pledge hereunder any shares of stock at any time
and from time to time after the date hereof acquired by such Pledgor of any
Foreign Corporation, provided that (x) except to the extent provided by Section
8.13 of the Credit Agreement, no Pledgor shall be required at any time to pledge
hereunder more than 65% of the Voting Stock of any Foreign Corporation and (y)
each Pledgor shall be required to pledge hereunder 100% of any Non-Voting Stock
at any time and from time to time acquired by such Pledgor of any Foreign
Corporation.
3.4 Transfer Taxes. Each pledge of Collateral under Section
3.1 or Section 3.3 shall be accompanied by any transfer tax stamps required in
connection with the pledge of such Collateral.
3.5 Definition of Pledged Notes. All Notes at any time pledged
or required to be pledged hereunder are hereinafter called the "Pledged Notes".
3.6 Certain Representations and Warranties Regarding the
Collateral. Each Pledgor represents and warrants that on the date hereof (i)
each Subsidiary of such Pledgor, and the direct ownership thereof, is listed in
Annex A hereto; (ii) the Stock held by such Pledgor
<PAGE> 13
consists of the number and type of shares of the stock of the corporations as
described in Annex B hereto; (iii) such Stock constitutes that percentage of the
issued and outstanding capital stock of the issuing corporation as is set forth
in Annex B hereto; (iv) the Notes held by such Pledgor consist of the promissory
notes described in Annex C hereto where such Pledgor is listed as the lender;
(v) the Limited Liability Company Interests held by such Pledgor consist of the
number and type of interests of the Persons described in Annex D hereto; (vi)
each such Limited Liability Company Interest constitutes that percentage of the
issued and outstanding equity interest of the issuing Person as set forth in
Annex D hereto; (vii) the Partnership Interests held by such Pledgor consist of
the number and type of interests of the Persons described in Annex E hereto;
(viii) each such Partnership Interest constitutes that percentage or portion of
the entire partnership interest of the Partnership as set forth in Annex E
hereto; (ix) the Pledgor has complied with the respective procedure set forth in
Section 3.2(a) with respect to each item of Collateral described in Annexes A
through E hereto; and (x) such Pledgor owns no other Securities, Limited
Liability Company Interests or Partnership Interests.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Collateral, which may be held (in the
discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or
assigned in blank or in favor of the Pledgee or any nominee or nominees of the
Pledgee or a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until
there shall have occurred and be continuing an Event of Default, each Pledgor
shall be entitled to exercise all voting rights attaching to any and all
Collateral owned by it, and to give consents, waivers or ratifications and take
all other actions in respect thereof, provided that no vote shall be cast or any
consent, waiver or ratification given or any action taken which would violate,
result in breach of any covenant contained in, or be inconsistent with, any of
the terms of this Agreement, the Credit Agreement, any other Credit Document or
any Interest Rate Protection Agreement or Other Hedging Agreement (collectively,
the "Secured Debt Agreements"), or which would have the effect of materially
impairing the value of the Collateral or any material part thereof or the
position or interests of the Pledgee or any other Secured Creditor therein. All
such rights of a Pledgor to vote and to give consents, waivers and ratifications
shall cease if and for so long as an Event of Default shall occur and be
continuing and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until an
Event of Default shall have occurred and be continuing, all cash dividends, cash
distributions, cash Proceeds and other cash amounts payable in respect of the
Collateral shall be paid to (and may be retained by) the respective Pledgor.
Subject to Section 3.2 hereof, the Pledgee shall be entitled to receive
directly, and to retain as part of the Collateral:
(i) all other or additional stock, notes, limited liability
company interests, partnership interests, instruments or other
securities or property (including, but not
<PAGE> 14
limited to, cash dividends other than as set forth above) paid or
distributed by way of dividend or otherwise in respect of the
Collateral;
(ii) all other or additional stock, notes, limited liability
company interests, partnership interests, instruments or other
securities or property (including, but not limited to, cash) paid or
distributed in respect of the Collateral by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(iii) all other or additional stock, notes, limited liability
company interests, partnership interests, instruments or other
securities or property (including, but not limited to, cash) which may
be paid in respect of the Collateral by reason of any consolidation,
merger, exchange of stock, conveyance of assets, liquidation or similar
corporate reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive the proceeds of the Collateral in any form in
accordance with Section 3 of this Agreement. All dividends, distributions or
other payments which are received by the respective Pledgor contrary to the
provisions of this Section 6 or Section 7 shall be received in trust for the
benefit of the Pledgee, shall be segregated from other property or funds of such
Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the
same form as so received (with any necessary endorsement).
7. REMEDIES IN CASE OF AN EVENT OF DEFAULT. In the event an
Event of Default shall have occurred and be continuing, the Pledgee shall be
entitled to exercise all of the rights, powers and remedies (whether vested in
it by this Agreement or by any other Secured Debt Agreement or by law) for the
protection and enforcement of its rights in respect of the Collateral,
including, without limitation, all the rights and remedies of a secured party
upon default under the Uniform Commercial Code of the State of New York, and the
Pledgee shall be entitled, without limitation, to exercise any or all of the
following rights, which each Pledgor hereby agrees to be commercially
reasonable:
(i) to receive all amounts payable in respect of the
Collateral otherwise payable under Section 6 to such Pledgor;
(ii) to transfer all or any part of the Collateral into the
Pledgee's name or the name of its nominee or nominees;
(iii) to accelerate any Pledged Note which may be accelerated
in accordance with its terms, and take any other lawful action to
collect upon any Pledged Note (including, without limitation, to make
any demand for payment thereon);
(iv) to vote all or any part of the Collateral (whether or not
transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise
act with respect thereto as though it were the outright owner thereof
(subject to any applicable operating agreement, partnership agreement
or other
<PAGE> 15
organizational document in the case of any Collateral constituting a
Partnership Interest or a Limited Liability Company Interest) (each
Pledgor hereby irrevocably constituting and appointing the Pledgee the
proxy and attorney-in-fact of such Pledgor, with full power of
substitution to do so during the continuation of an Event of Default);
(v) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell or of the time or place of sale or adjournment thereof or to
redeem or otherwise, except to the extent required by applicable law
(all of which are hereby waived by each Pledgor), for cash, on credit
or for other property, for immediate or future delivery without any
assumption of credit risk, and for such price or prices and on such
terms as the Pledgee in its absolute discretion may determine; provided
that at least 10 days' notice of the time and place of any such sale
shall be given to such Pledgor. The Pledgee shall not be obligated to
make such sale of Collateral regardless of whether any such notice of
sale has theretofore been given. Each purchaser at any such sale shall
hold the property so sold absolutely free from any claim or right on
the part of each Pledgor, and each Pledgor hereby waives and releases
to the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after sale
hereunder, all rights, if any, of marshalling the Collateral and any
other security for the Obligations or otherwise, and all rights, if
any, of stay and/or appraisal which it now has or may at any time in
the future have under rule of law or statute now existing or hereafter
enacted. At any such sale, unless prohibited by applicable law, the
Pledgee on behalf of all Secured Creditors (or certain of them) may bid
for and purchase (by bidding in Obligations or otherwise) all or any
part of the Collateral so sold free from any such right or equity of
redemption. Neither the Pledgee nor any other Secured Creditor shall be
liable for failure to collect or realize upon any or all of the
Collateral or for any delay in so doing nor shall any of them be under
any obligation to take any action whatsoever with regard thereto; and
(vi) to set-off any and all Collateral against any and all
Obligations, and to withdraw any and all cash or other Collateral from
any and all Collateral Accounts and to apply such cash and other
Collateral to the payment of any and all Obligations.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee provided for in this Agreement or any other Secured Debt Agreement,
or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or any other Secured Debt Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any other Secured Creditor to exercise any such
right, power or remedy shall operate as a waiver thereof.
<PAGE> 16
Unless otherwise required by the Credit Documents, no notice to or demand on any
Pledgor in any case shall entitle such Pledgor to any other or further notice or
demand in similar other circumstances or constitute a waiver of any of the
rights of the Pledgee or any other Secured Creditor to any other or further
action in any circumstances without demand or notice. The Secured Creditors
agree that this Agreement may be enforced only by the action of the Pledgee,
acting upon the instructions of the Required Lenders (or, after the date on
which all Credit Document Obligations have been paid in full, the holders of at
least a majority of the outstanding Other Obligations) and that no other Secured
Creditor shall have any right individually to seek to enforce or to enforce this
Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the
Pledgee or the holders of at least a majority of the outstanding Other
Obligations, as the case may be, for the benefit of the Secured Creditors upon
the terms of this Agreement and the other Credit Documents.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral pursuant to the
terms of this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied to the payment of the Obligations in the manner
provided in Section 7.4 of the Security Agreement.
(b) It is understood and agreed that each Pledgor shall remain
liable to the extent of any deficiency between the amount of proceeds of the
Collateral pledged by it hereunder and the aggregate amount of its Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), to the extent permitted by law, the
receipt of the Pledgee or the officer making such sale of the purchase money
paid as consideration pursuant to such sale shall be a sufficient discharge to
the purchaser or purchasers of the Collateral so sold, and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Pledgee or such officer or be answerable in any
way for the misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i)
to indemnify and hold harmless the Pledgee, each other Secured Creditor and
their respective successors, assigns, employees, agents and servants
(individually an "Indemnitee", and collectively, the "Indemnitees") from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, and (ii) to
reimburse each Indemnitee for all reasonable costs and expenses, including
reasonable attorneys' fees, in each case arising out of or resulting from this
Agreement or the exercise by any Indemnitee of any right or remedy granted to it
hereunder or under any other Secured Debt Agreement (but excluding any claims,
demands, losses, judgments and liabilities (including liabilities for penalties)
or expenses of whatsoever kind or nature to the extent incurred or arising by
reason of gross negligence or willful misconduct of such Indemnitee). In no
event shall any Indemnitee hereunder be liable, in the absence of gross
negligence or willful misconduct on its part, for any
<PAGE> 17
matter or thing in connection with this Agreement other than to account for
monies or other property actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of any Pledgor under this
Section 11 are unenforceable for any reason, each Pledgor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law. The indemnity obligations of each
Pledgor contained in this Section 11 shall continue in full force and effect
notwithstanding the full payment of all the Notes issued under the Credit
Agreement, the termination of all Interest Rate Protection and Other Hedging
Agreements and Letters of Credit, and the payment of all other Obligations and
notwithstanding the discharge thereof.
12. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor
agrees that it will join with the Pledgee in executing and, at such Pledgor's
own expense, file and refile under the Uniform Commercial Code such financing
statements, continuation statements and other documents in such offices as the
Pledgee (acting on its own or on the instructions of the Required Lenders) may
reasonably deem necessary or appropriate and wherever required or permitted by
law in order to perfect and preserve the Pledgee's security interest in the
Collateral hereunder and hereby authorizes the Pledgee to file financing
statements and amendments thereto relative to all or any part of the Collateral
without the signature of such Pledgor where permitted by law, and agrees to do
such further acts and things and to execute and deliver to the Pledgee such
additional conveyances, assignments, agreements and instruments as the Pledgee
may reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto the Pledgee its rights,
powers and remedies hereunder or thereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default, in the Pledgee's discretion
to take any action and to execute any instrument which the Pledgee may deem
necessary or advisable to accomplish the purposes of this Agreement.
13. THE PLEDGEE AS COLLATERAL AGENT. The Pledgee will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Pledgee as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are only
those expressly set forth in this Agreement and pursuant to applicable laws. The
Pledgee shall act hereunder on the terms and conditions set forth herein and in
Section 12 of the Credit Agreement.
14. TRANSFER BY THE PLEDGORS. No Pledgor will sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein (except in
accordance with the terms of this Agreement and the other Secured Debt
Agreements).
<PAGE> 18
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS.
(a) Each Pledgor represents, warrants and covenants that:
(i) it is the legal, beneficial and record owner of, and has
good and marketable title to, all Collateral consisting of one or more
Securities and that it has sufficient interest in all Collateral in
which a security interest is purported to be created hereunder for such
security interest to attach (subject, in each case, to no pledge, lien,
mortgage, hypothecation, security interest, charge, option, Adverse
Claim or other encumbrance whatsoever, except the liens and security
interests created by this Agreement or permitted under the Credit
Agreement);
(ii) it has full power, authority and legal right to pledge
all the Collateral pledged by it pursuant to this Agreement;
(iii) this Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes a legal, valid and binding
obligation of such Pledgor enforceable against such Pledgor in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law) and principles of good faith
and fair dealing;
(iv) except to the extent already obtained or made, no consent
of any other party (including, without limitation, any stockholder,
member, partner or creditor of such Pledgor or any of its Subsidiaries)
and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required to be obtained
by such Pledgor in connection with (a) the execution, delivery or
performance of this Agreement, (b) the validity or enforceability of
this Agreement (except as set forth in clause (iii) above), (c) the
perfection or enforceability of the Pledgee's security interest in the
Collateral, (d) except for compliance with or as may be required by
applicable securities laws, the exercise by the Pledgee of any of its
rights or remedies provided herein or (e) except for compliance with or
as may required by any applicable partnership agreement, limited
liability company agreement or other organizational document relating
to any partnership or limited liability company that is not a
Wholly-Owned Subsidiary of the Borrower, the exercise by the Pledgee of
any of is rights or remedies provided herein with respect to the
Partnership Interest or Limited Liability Company Interest relating to
such partnership or limited liability company;
(v) the execution, delivery and performance of this Agreement
will not violate any provision of any applicable law or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator
or governmental authority, domestic or foreign, applicable to such
Pledgor, or of the certificate of incorporation, operating agreement,
limited liability company agreement or by-laws of such Pledgor or of
any securities
<PAGE> 19
issued by such Pledgor or any of its Subsidiaries, or of any mortgage,
deed of trust, indenture, lease, loan agreement, credit agreement or
other contract, agreement or instrument or undertaking to which such
Pledgor or any of its Subsidiaries is a party or which purports to be
binding upon such Pledgor or any of its Subsidiaries or upon any of
their respective assets and will not result in the creation or
imposition of (or the obligation to create or impose) any lien or
encumbrance on any of the assets of such Pledgor or any of its
Subsidiaries except as contemplated by this Agreement (other than the
Liens created by the Collateral Documents);
(vi) all of the Collateral (consisting of Securities, Limited
Liability Company Interests or Partnership Interests), has been duly
and validly issued, is fully paid and non-assessable (to the extent
applicable) and is subject to no options to purchase or similar rights,
provided that Collateral consisting of Limited Liability Company
Interests or Partnership Interests, may require further payments and/or
assessments in respect thereof in accordance with the partnership
agreements, limited liability company agreements or other
organizational documents relating thereto or applicable laws;
(vii) each of the Pledged Notes constitutes, or when executed
by the obligor thereof will constitute, the legal, valid and binding
obligation of such obligor, enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at
law) and principles of good faith and fair dealing;
(viii) the pledge, collateral assignment and delivery to the
Pledgee of the Collateral consisting of certificated securities
(together with instruments of transfer therefor), pursuant to this
Agreement creates a valid and perfected first priority security
interest in such Securities, and the proceeds thereof, subject to no
prior Lien or encumbrance or to any agreement purporting to grant to
any third party a Lien or encumbrance on the property or assets of such
Pledgor which would include the Securities (other than Permitted Liens)
and the Pledgee is entitled to all the rights, priorities and benefits
afforded by the UCC or other relevant law as enacted in any relevant
jurisdiction to perfect security interests in respect of such
Collateral; and
(ix) "control" (as defined in Section 8-106 of the UCC) has
been obtained by the Pledgee over all Collateral consisting of
Securities (including Notes which are Securities) with respect to which
such "control" may be obtained pursuant to Section 8-106 of the UCC,
provided that in the case of the Pledgee obtaining "control" over
Collateral consisting of a security entitlement, such Pledgor shall
have taken all steps in its control so that the Pledgee obtains
"control" over such security entitlement.
(b) Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and the
proceeds thereof against the claims and
<PAGE> 20
demands of all persons whomsoever; and each Pledgor covenants and agrees that it
will have like title to and right to pledge any other property at any time
hereafter pledged to the Pledgee as Collateral hereunder and will likewise
defend the right thereto and security interest therein of the Pledgee and the
other Secured Creditors.
(c) Each Pledgor covenants and agrees that it will take no
action which would violate any of the terms of any Secured Debt Agreement.
16. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive
office of each Pledgor is located at the address specified in Annex F hereto.
Each Pledgor will not move its chief executive office except to such new
location as such Pledgor may establish in accordance with the last sentence of
this Section 16. The originals of all documents in the possession of such
Pledgor evidencing all Collateral, including but not limited to all Limited
Liability Company Interests and Partnership Interests, and the only original
books of account and records of such Pledgor relating thereto are, and will
continue to be, kept at such chief executive office at the location specified in
Annex F hereto, or at such new locations as such Pledgor may establish in
accordance with the last sentence of this Section 16. All Limited Liability
Company Interests and Partnership Interests are, and will continue to be,
maintained at, and controlled and directed (including, without limitation, for
general accounting purposes) from, such chief executive office location
specified in Annex F hereto, or such new locations as the respective Pledgor may
establish in accordance with the last sentence of this Section 16. No Pledgor
shall establish a new location for such offices until (i) it shall have given to
the Collateral Agent not less than 30 days' (or such shorter time period as may
be agreed to by the Collateral Agent) prior written notice of its intention so
to do, clearly describing such new location and providing such other information
in connection therewith as the Collateral Agent may reasonably request and (ii)
with respect to such new location, it shall have taken all action, satisfactory
to the Collateral Agent, to maintain the security interest of the Collateral
Agent in the Collateral intended to be granted hereby at all times fully
perfected and in full force and effect. Promptly after establishing a new
location for such offices in accordance with the immediately preceding sentence,
the respective Pledgor shall deliver to the Pledgee a supplement to Annex F
hereto so as to cause such Annex F hereto to be complete and accurate.
17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of
each Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever (other than termination of this Agreement pursuant to
Section 19 hereof), including, without limitation:
(i) any renewal, extension, amendment or modification of, or
addition or supplement to or deletion from any Secured Debt Agreement
(other than this Agreement in accordance with its terms), or any other
instrument or agreement referred to therein, or any assignment or
transfer of any thereof;
<PAGE> 21
(ii) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such agreement or
instrument or this Agreement (other than a waiver, consent or extension
with respect to this Agreement in accordance with its terms);
(iii) any furnishing of any additional security to the Pledgee
or its assignee or any acceptance thereof or any release of any
security by the Pledgee or its assignee;
(iv) any limitation on any party's liability or obligations
under any such instrument or agreement or any invalidity or
unenforceability, in whole or in part, of any such instrument or
agreement or any term thereof; or
(v) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating
to any Pledgor or any Subsidiary of any Pledgor, or any action taken
with respect to this Agreement by any trustee or receiver, or by any
court, in any such proceeding, whether or not such Pledgor shall have
notice or knowledge of any of the foregoing.
18. SALE OF COLLATERAL WITHOUT REGISTRATION. If at any time
when the Pledgee shall determine to exercise its right to sell all or any part
of the Collateral consisting of Securities, Limited Liability Company Interests
or Partnership Interests pursuant to Section 7, and such Collateral or the part
thereof to be sold shall not, for any reason whatsoever, be effectively
registered under the Securities Act of 1933, as then in effect, the Pledgee may,
in its sole and absolute discretion, sell such Collateral or part thereof by
private sale in such manner and under such circumstances as the Pledgee may deem
necessary or advisable in order that such sale may legally be effected without
such registration. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion: (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Collateral or part thereof shall have been filed under such
Securities Act; (ii) may approach and negotiate with a single possible purchaser
to effect such sale; and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Collateral
or part thereof. In the event of any such sale, the Pledgee shall incur no
responsibility or liability for selling all or any part of the Collateral at a
price which the Pledgee, in its sole and absolute discretion, may in good faith
deem reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until the
registration as aforesaid.
19. TERMINATION; RELEASE. (a) On the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 11 hereof shall
survive any such termination) and the Pledgee, at the request and expense of the
respective Pledgor, will execute and deliver to such Pledgor a proper instrument
or instruments acknowledging or effecting the satisfaction and termination of
this Agreement (including, without limitation, UCC termination statements and
instruments of satisfaction, discharge and/or reconveyance), and will duly
assign, transfer and deliver to such
<PAGE> 22
Pledgor (without recourse and without any representation or warranty) such of
the Collateral as may be in the possession of the Pledgee and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Pledgee or any of
its sub-agents hereunder and, with respect to any Collateral consisting of an
Uncertificated Security (other than an Uncertificated Security credited on the
books of a Clearing Corporation), a Partnership Interest or a Limited Liability
Company Interest, a termination of the agreement relating thereto executed and
delivered by the issuer of such Uncertificated Security pursuant to Section
3.2(a)(ii) or by the respective partnership or limited liability company
pursuant to Section 3.2(a)(iv). As used in this Agreement, "Termination Date"
shall mean the date upon which the Total Commitments and all Interest Rate
Protection Agreements and Other Hedging Agreements have been terminated, no
Letter of Credit or Note is outstanding (and all Loans have been paid in full),
all Letters of Credit have been terminated, and all other Obligations then due
and payable have been paid in full (other than any indemnity, not then due and
payable, which by its terms shall survive such termination and payment).
(b) In the event that any part of the Collateral is sold or
otherwise disposed of (to a Person other than a Credit Party) (x) at any time
prior to the time at which all Credit Document Obligations have been paid in
full and all Commitments and Letters of Credit under the Credit Agreement have
been terminated, in connection with a sale or disposition permitted by Section
9.02 of the Credit Agreement or is otherwise released at the direction of the
Required Lenders (or all the Lenders if required by Section 13.12 of the Credit
Agreement) or (y) at any time thereafter, to the extent permitted by the other
Secured Debt Agreements, and in the case of clauses (x) and (y), the proceeds of
such sale or disposition (or from such release) are applied in accordance with
the terms of the Credit Agreement or such other Secured Debt Agreement, as the
case may be, to the extent required to be so applied, the Pledgee, at the
request and expense of such Pledgor, will duly assign, transfer and deliver to
such Pledgor (without recourse and without any representation or warranty) such
of the Collateral as is then being (or has been) so sold or released and as may
be in possession of the Pledgee and has not theretofore been released pursuant
to this Agreement.
(c) At any time that any Pledgor desires that Collateral be
released as provided in the foregoing Section 19(a) or (b), it shall deliver to
the Pledgee a certificate signed by an Authorized Officer of such Pledgor
stating that the release of the respective Collateral is permitted pursuant to
Section 19(a) or (b). If reasonably requested by the Pledgee (although the
Pledgee shall have no obligation to make any such request), the relevant Pledgor
shall furnish appropriate legal opinions (from counsel reasonably acceptable to
the Pledgee) to the effect set forth in the immediately preceding sentence. The
Pledgee shall have no liability whatsoever to any Secured Creditor as the result
of any release of Collateral by it as permitted by this Section 19.
<PAGE> 23
20. NOTICES, ETC. All notices and other communications
hereunder shall be in writing and shall be delivered or mailed by first class
mail, postage prepaid, addressed:
(i) if to any Pledgor, at:
IASIS Healthcare Corporation
Suite 101
104 Woodmont Boulevard
Nashville, TN 37205
Tel: (615) 844-2747
Fax: (615) 846-3006
(ii) if to the Pledgee, at:
Morgan Guaranty Trust Company of New York
c/o J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Renee Richmond
Tel: (302) 634-3316
Fax: (302) 634-4300
(iii) if to any Lender (other than the Pledgee), at such
address as such Lender shall have specified in the Credit Agreement;
(iv) if to any Other Creditor, at such address as such Other
Creditor shall have specified in writing to the Borrower and the
Pledgee;
or at such address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
21. THE PLEDGEE. The Pledgee will hold, directly or indirectly
in accordance with this Agreement, all items of the Collateral at any time
received by it under this Agreement. It is expressly understood and agreed that
the obligations of the Pledgee with respect to the Collateral, interests therein
and the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in the UCC and this Agreement.
22. WAIVER; AMENDMENT. Except as contemplated in Section 25
hereof, none of the terms and conditions of this Agreement may be changed,
waived, discharged or terminated in any manner whatsoever unless such change,
waiver, discharge or termination is in writing duly signed by each Pledgor
directly and adversely affected thereby and the Collateral Agent (with the
consent of (x) the Required Lenders (or, to the extent required by Section 13.12
of the Credit Agreement, all of the Lenders) at all time prior to the time in
which all Credit Document Obligations (other than those arising from indemnities
for which no request has been made) have been paid in full and all Commitments
and Letters of Credit under the Credit
<PAGE> 24
Agreement had been terminated or (y) the holders of at least a majority of the
outstanding Other Obligations at all times after the time on which all Credit
Document Obligations (other than those arising from indemnities for which no
request has been made)) have been paid in full and all Commitments and Letters
of Credit under the Credit Agreement had been terminated, provided, however,
that no such change, waiver, modification or variance shall be made to Section
11 hereof or this Section 22 without the consent of each Secured Creditor
adversely affected thereby, provided further, that any change, waiver,
modification or variance affecting the rights and benefits of a single Class (as
defined below) of Secured Creditors (and not all Secured Creditors in a like or
similar manner) shall require the written consent of the Requisite Creditors (as
defined below) of such Class of Secured Creditors. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Creditors, i.e.,
whether (x) the Lender Creditors as holders of the Credit Document Obligations
or (y) the Other Creditors as holders of the Other Obligations. For the purpose
of this Agreement, the term "Requisite Creditors" of any Class shall mean each
of (x) with respect to each of the Credit Document Obligations, the Required
Lenders and (y) with respect to the Other Obligations, the holders of more than
50% of all obligations outstanding from time to time under the Interest Rate
Protection Agreements and Other Hedging Agreements.
23. MISCELLANEOUS. This Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full force and
effect, subject to release and/or termination as set forth in Section 19, (ii)
be binding upon each Pledgor, its successors and assigns; provided, however,
that no Pledgor shall assign any of its rights or obligations hereunder without
the prior written consent of the Pledgee (with the prior written consent of the
Required Lenders or to the extent required by Section 13.12 of the Credit
Agreement, all of the Lenders), and (iii) inure, together with the rights and
remedies of the Pledgee hereunder, to the benefit of the Pledgee, the other
Secured Parties and their respective successors, transferees and assigns. THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK. The headings of the several sections and
subsections in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall
remain binding on all parties hereto.
24. WAIVER OF JURY TRIAL. Each Pledgor hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement or the transactions contemplated
hereby.
25. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become a Pledgor hereunder by executing a counterpart hereof and
delivering the same to the Pledgee.
<PAGE> 25
26. RECOURSE. This Agreement is made with full recourse to the
Pledgors and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Pledgors contained herein and in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
27. LIMITED OBLIGATIONS. It is the desire and intent of each
Pledgor and the Secured Parties that this Agreement shall be enforced against
each Pledgor to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Notwithstanding anything to the contrary contained herein, in furtherance of the
foregoing, it is noted that the obligations of each Pledgor constituting a
Subsidiary Guarantor have been limited as provided in the Subsidiaries Guaranty.
28. PLEDGEE NOT A PARTNER OR LIMITED LIABILITY COMPANY MEMBER.
(a) Nothing herein shall be construed to make the Pledgee or any other Secured
Creditor liable as a member of any limited liability company or partnership and
neither the Pledgee nor any other Secured Creditor by virtue of this Agreement
or otherwise (except as referred to in the following sentence) shall have any of
the duties, obligations or liabilities of a member of any limited liability
company or partnership. The parties hereto expressly agree that, unless the
Pledgee shall become the absolute owner of Collateral consisting of a Limited
Liability Company Interest or Partnership Interest pursuant hereto, this
Agreement shall not be construed as creating a partnership or joint venture
among the Pledgee, any other Secured Creditor and/or any Pledgor.
(b) Except as provided in the last sentence of paragraph (a)
of this Section 28, the Pledgee, by accepting this Agreement, did not intend to
become a member of any limited liability company or partnership or otherwise be
deemed to be a co-venturer with respect to any Pledgor or any limited liability
company or partnership either before or after an Event of Default shall have
occurred. The Pledgee shall have only those powers set forth herein and the
Secured Creditors shall assume none of the duties, obligations or liabilities of
a member of any limited liability company or partnership or any Pledgor except
as provided in the last sentence of paragraph (a) of this Section 28.
(c) The Pledgee and the other Secured Creditors shall not be
obligated to perform or discharge any obligation of any Pledgor as a result of
the pledge hereby effected.
(d) The acceptance by the Pledgee of this Agreement, with all
the rights, powers, privileges and authority so created, shall not at any time
or in any event obligate the Pledgee or any other Secured Creditor to appear in
or defend any action or proceeding relating to the Collateral to which it is not
a party, or to take any action hereunder or thereunder, or to expend any money
or incur any expenses or perform or discharge any obligation, duty or liability
under the Collateral.
29. EFFECTIVENESS. This Agreement shall become effective when
the Pledgee, and each Pledgor whose name appears on the signature pages hereto
shall have signed a
<PAGE> 26
counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the
Administrative Agent.
[Remainder of page intentionally left blank]
<PAGE> 27
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused
this Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.
IASIS HEALTHCARE CORPORATION
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SALT LAKE REGIONAL MEDICAL CENTER, INC.,
as a Pledgor
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
JORDAN VALLEY HOSPITAL, INC., as a
Pledgor
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
DAVIS HOSPITAL & MEDICAL CENTER, INC.,
as a Pledgor
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 28
ROCKY MOUNTAIN MEDICAL CENTER, INC., as
a Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
PIONEER VALLEY HOSPITAL, INC., as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
PIONEER VALLEY HEALTH PLAN, INC., as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
CLINICARE OF UTAH, INC., as a Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SOUTHRIDGE PLAZA HOLDINGS, INC., as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 29
SANDY CITY HOLDINGS, INC., as a Pledgor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
DAVIS SURGICAL CENTER HOLDINGS, INC., as
a Pledgor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
MESA GENERAL HOSPITAL, LP, as a Pledgor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ST. LUKE'S MEDICAL CENTER, LP, as a
Pledgor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ST. LUKE'S BEHAVIORAL HOSPITAL, LP, as a
Pledgor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 30
HEALTH CHOICE ARIZONA, INC., as a Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
METRO AMBULATORY SURGERY CENTER, INC.,
as a Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
BILTMORE SURGERY CENTER, INC., as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
PALMS OF PASADENA HOSPITAL, LP, as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ODESSA REGIONAL HOSPITAL, LP, as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 31
TEMPE ST. LUKE'S HOSPITAL, LP, as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
MEMORIAL HOSPITAL OF TAMPA, LP, as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
TOWN & COUNTRY HOSPITAL, LP, as a Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SOUTHWEST GENERAL HOSPITAL, LP, as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SSJ ST. PETERSBURG HOLDINGS, INC., as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 32
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS,
INC., as a Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
BAPTIST JOINT VENTURE HOLDINGS, INC., as
a Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
BEAUMONT HOSPITAL HOLDINGS, INC., as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
IASIS HEALTHCARE HOLDINGS, INC., as a
Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
IASIS MANAGEMENT COMPANY, as a Pledgor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 33
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Pledgee
By: /s/ Colleen Galle
--------------------------------
Name: Colleen Galle
Title: Vice President
<PAGE> 34
BILTMORE SURGERY CENTER, INC. (ARIZONA
CORPORATION), as Pledgee
By: /s/ Wayne Gower
---------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 35
IASIS HEALTHCARE MSO SUB OF SALT LAKE
CITY, LLC, as a Pledgor
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.6
SUBSIDIARIES GUARANTY
GUARANTY, dated as of October 15, 1999 (as amended, restated,
modified and/or supplemented from time to time, this "Guaranty"), made by each
of the undersigned (each, a "Guarantor" and, together with any other entity
which becomes a party hereto pursuant to Section 24, collectively, the
"Guarantors"). Except as otherwise defined herein, terms used herein and defined
in the Credit Agreement (as defined below) shall be used herein as therein
defined.
W I T N E S S E T H :
WHEREAS, IASIS Healthcare Corporation, a Delaware corporation
(the "Borrower"), various financial institutions from time to time party thereto
(the "Lenders"), J.P. Morgan Securities Inc. and The Bank of Nova Scotia, as
Co-Lead Arrangers and Co-Book Runners, Paribas, as Documentation Agent, The Bank
of Nova Scotia, as Syndication Agent, and Morgan Guaranty Trust Company of New
York, as Administrative Agent, have entered into a Credit Agreement, dated as of
October 15, 1999 (as amended, restated, modified and/or supplemented from time
to time, the "Credit Agreement"), providing for the making of Loans to the
Borrower, all as contemplated therein (with the Lenders, each Issuing Bank, the
Co-Arrangers, the Syndication Agent, the Administrative Agent and the Collateral
Agent being herein called the "Lender Creditors");
WHEREAS, the Borrower may from time to time enter into one or
more (i) interest rate protection agreements (including, without limitation,
interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign
exchange contracts, currency swap agreements, commodity agreements or other
similar agreements or arrangements designed to protect against the fluctuations
in currency values and/or (iii) other types of hedging agreements from time to
time (each such agreement or arrangement with an Other Creditor (as hereinafter
defined), an "Interest Rate Protection Agreement or Other Hedging Agreement"),
with Morgan Guaranty Trust Company of New York in its individual capacity
("Morgan Guaranty"), any Lender or a syndicate of financial institutions
organized by Morgan Guaranty or any such Lender, or an affiliate of Morgan
Guaranty or any such Lender (Morgan Guaranty, any such Lender or Lenders or
affiliate or affiliates of Morgan Guaranty or such Lender or Lenders (even if
Morgan Guaranty or any such Lender ceases to be a Lender under the Credit
Agreement for any reason) and any such institution that participates in such
Interest Rate Protection Agreements or Other Hedging Agreements and their
subsequent successors and assigns, collectively, the "Other Creditors", and
together with the Lender Creditors, the "Creditors");
WHEREAS, each Guarantor is a direct or indirect Subsidiary of
the Borrower;
<PAGE> 2
Page 2
WHEREAS, it is a condition to the making of Loans to the
Borrower and the issuance of, and participation in, Letters of Credit for the
account of the Borrower under the Credit Agreement and to the Other Creditors
entering into the Interest Rate Protection Agreements or Other Hedging
Agreements that each Guarantor shall have executed and delivered this Guaranty;
and
WHEREAS, each Guarantor will obtain benefits from the
assumption and/or incurrence of Loans by the Borrower and the issuance of, and
participation in, Letters of Credit for the account of the Borrower under the
Credit Agreement and the entering into of Interest Rate Protection Agreements or
Other Hedging Agreements and, accordingly, desires to execute this Guaranty in
order to satisfy the conditions described in the preceding paragraph and to
induce the Lenders to maintain and make Loans to the Borrower and issue Letters
of Credit for the account of the Borrower and the Other Creditors to maintain
and/or enter into Interest Rate Protection Agreements or Other Hedging
Agreements with the Borrower;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Guarantor, the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby makes the following representations
and warranties to the Creditors and hereby covenants and agrees with each
Creditor as follows:
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally guarantees: (i) to the Lender Creditors the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of (x) the principal of and interest on the Notes issued by, and the Loans made
to, the Borrower under the Credit Agreement and all reimbursement obligations
and Unpaid Drawings with respect to Letters of Credit and (y) all other
obligations (including obligations which, but for any automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Borrower to the Lender Creditors (including, without limitation,
indemnities, Fees and interest thereon) now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement or any other
Credit Document and the due performance and compliance with the terms,
conditions and agreements contained in the Credit Documents by the Borrower (all
such principal, interest, liabilities and obligations being herein collectively
called the "Credit Document Obligations"); and (ii) to each Other Creditor the
full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise) of all obligations (including obligations which, but
for any automatic stay under Section 362(a) of the Bankruptcy Code, would become
due) and liabilities owing by the Borrower to the Other Creditors (including,
without limitation, indemnities, fees and interest thereon) under any Interest
Rate Protection Agreements or Other Hedging Agreements, whether now in existence
or hereafter arising, and the due performance and compliance by the Borrower
with all terms, conditions and agreements contained therein (all such
obligations and liabilities under this clause (ii) being herein collectively
called the "Other Obligations", and together with the Credit Document
Obligations are herein collectively called the "Guaranteed Obligations"). Each
Guarantor understands, agrees and confirms that the Creditors may enforce this
Guaranty up to the full amount of the Guaranteed Obligations against
<PAGE> 3
Page 3
each Guarantor without proceeding against any other Guarantor, the Borrower,
against any security for the Guaranteed Obligations, or against any other
guarantor under any other guaranty covering all or a portion of the Guaranteed
Obligations. This Guaranty shall constitute a guaranty of payment and not of
collection. All payments by each Guarantor under this Guaranty shall be made on
the same basis as payments by the Borrower under Sections 4.03 and 4.04 of the
Credit Agreement.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations to the Creditors whether or not due or payable by the
Borrower upon the occurrence in respect of the Borrower of any of the events
specified in Section 10.05 of the Credit Agreement, and unconditionally and
irrevocably, jointly and severally, promises to pay such Guaranteed Obligations
to the Creditors, or order, on demand, in lawful money of the United States of
America.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the Guaranteed Obligations
whether executed by such Guarantor, any other Guarantor, any other guarantor or
by any other person, and the liability of each Guarantor hereunder shall not be
affected or impaired by (i) any direction as to application of payment by the
Borrower or by any other person, (ii) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other person as to the
Guaranteed Obligations, (iii) any payment on or in reduction of any such other
guaranty or undertaking, (iv) any dissolution, termination or increase, decrease
or change in personnel by the Borrower, (v) any payment made to any Creditor on
the Guaranteed Obligations which any Creditor repays the Borrower pursuant to
court order in any bankruptcy, reorganization, arrangement, moratorium or other
debtor relief proceeding, and each Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding, (vi)
any action or inaction by the Creditors as contemplated in Section 6 hereof or
(vii) any invalidity, irregularity or unenforceability of all or part of the
Guaranteed Obligations or of any security therefor.
4. The obligations of each Guarantor hereunder are independent
of the obligations of any other Guarantor, any other guarantor of the Borrower
or the Borrower, and a separate action or actions may be brought and prosecuted
against each Guarantor whether or not action is brought against any other
Guarantor, any other guarantor of the Borrower or the Borrower and whether or
not any other Guarantor, any other guarantor of the Borrower or the Borrower be
joined in any such action or actions. Each Guarantor waives, to the fullest
extent permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the Borrower or
other circumstance which operates to toll any statute of limitations as to the
Borrower shall operate to toll the statute of limitations as to each Guarantor.
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other
<PAGE> 4
Page 4
action by the Administrative Agent or any other Creditor against, and any other
notice to, any party liable thereon (including such Guarantor or any other
guarantor of the Borrower).
6. Any Creditor may at any time and from time to time without
the consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(i) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, (including any increase or decrease in the rate
of interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended,
renewed or altered;
(ii) take and hold security for the payment of the Guaranteed
Obligations and/or sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(iii) exercise or refrain from exercising any rights against the
Borrower, any Guarantor, any other guarantor of the Borrower or others
or otherwise act or refrain from acting;
(iv) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of
any liability (whether due or not) of the Borrower to creditors of the
Borrower;
(v) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Creditors
regardless of what liabilities of the Borrower remain unpaid;
(vi) release or substitute any one or more endorsers,
guarantors, Guarantors, the Borrower or other obligors;
(vii) consent to or waive any breach of, or any act, omission or
default under, the Interest Rate Protection Agreements or Other Hedging
Agreements, the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or
supplement any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of such other
instruments or agreements; and/or
<PAGE> 5
Page 5
(viii) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty.
7. No invalidity, irregularity or unenforceability of all or
any part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
discharge of a surety or guarantor except payment in full of the Guaranteed
Obligations.
8. This Guaranty is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of any Creditor in exercising any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly specified are cumulative and not exclusive of any
rights or remedies which any Creditor would otherwise have. No notice to or
demand on any Guarantor in any case shall entitle such Guarantor to any other
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Creditor to any other or further action in any
circumstances without notice or demand. It is not necessary for any Creditor to
inquire into the capacity or powers of the Borrower or any of its Subsidiaries
or the officers, directors, partners or agents acting or purporting to act on
its behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
9. Any indebtedness of the Borrower now or hereafter held by
any Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to any Guarantor, if the
Administrative Agent, after an Event of Default has occurred and is continuing,
so requests, shall be collected, enforced and received by such Guarantor as
trustee for the Creditors and be paid over to the Creditors on account of the
indebtedness of the Borrower to the Creditors, but without affecting or
impairing in any manner the liability of such Guarantor under the other
provisions of this Guaranty. Prior to the transfer by any Guarantor of any note
or negotiable instrument evidencing any indebtedness of the Borrower to such
Guarantor, such Guarantor shall mark such note or negotiable instrument with a
legend that the same is subject to this subordination. Without limiting the
generality of the foregoing, each Guarantor hereby agrees with the Creditors
that it will not exercise any right of subrogation which it may at any time
otherwise have as a result of this Guaranty (whether contractual, under Section
509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have
been irrevocably paid in full in cash.
10. (a) Each Guarantor waives any right (except as shall be
required by applicable statute and cannot be waived) to require the Creditors
to: (i) proceed against the Borrower, any other Guarantor, any other guarantor
of the Borrower or any other person; (ii)
<PAGE> 6
Page 6
proceed against or exhaust any security held from the Borrower, any other
Guarantor, any other guarantor of the Borrower or any other person; or (iii)
pursue any other remedy in the Creditors' power whatsoever. Each Guarantor
waives any defense based on or arising out of any defense of the Borrower, any
other Guarantor, any other guarantor of the Borrower or any other person other
than payment in full in cash of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of the
Borrower, any other Guarantor, any other guarantor of the Borrower or any other
person, or the unenforceability of the Guaranteed Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of the
Borrower other than payment in full of the Guaranteed Obligations in cash. The
Creditors may, at their election, foreclose on any security held by the
Administrative Agent, the Collateral Agent or the other Creditors by one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Creditors may have against the
Borrower or any other person, or any security, without affecting or impairing in
any way the liability of any Guarantor hereunder except to the extent the
Guaranteed Obligations have been paid in full in cash. Each Guarantor waives any
defense arising out of any such election by the Creditors, even though such
election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of such Guarantor against the Borrower or
any other person or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new or
additional indebtedness. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that the Creditors shall have no duty
to advise any Guarantor of information known to them regarding such
circumstances or risks.
(c) Until such time as the Guaranteed Obligations have been
paid in full in cash, each Guarantor hereby waives all contractual, statutory or
common law rights of reimbursement, contribution or indemnity from the Borrower
or any other Guarantor which it may at any time otherwise have as a result of
this Guaranty.
11. In order to induce the Lenders to make Loans and issue
Letters of Credit pursuant to the Credit Agreement, and in order to induce the
Other Creditors to execute, deliver and perform the Interest Rate Protection
Agreements or Other Hedging Agreements, each Guarantor represents, warrants and
covenants that:
(a) Such Guarantor (i) is a duly organized and validly
existing legal entity and is in good standing under the laws of the
jurisdiction of its organization, and has the requisite power and
authority to own its property and assets and to transact the business
in which it is engaged and presently proposes to engage and (ii) is
duly qualified and is
<PAGE> 7
Page 7
authorized to do business and is in good standing in all jurisdictions
where it is required to be so qualified except where the failure to be
so qualified would reasonably be expected not to have a Material
Adverse Effect.
(b) Such Guarantor has the requisite power and authority to
execute, deliver and carry out the terms and provisions of this
Guaranty and each other Document (for purposes of this Guaranty, such
term to mean and include each Document (as defined in the Credit
Agreement) and each Interest Rate Protection Agreement or Other Hedging
Agreement) to which it is a party and has taken all necessary corporate
action to authorize the execution, delivery and performance by it of
each such Document. Such Guarantor has duly executed and delivered this
Guaranty and each other Document to which it is a party, and each such
Document constitutes the legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or law) and
principles of good faith and fair dealing.
(c) Neither the execution, delivery or performance by such
Guarantor of this Guaranty or any other Document to which it is a
party, nor compliance by it with the terms and provisions hereof and
thereof: (i) will contravene any applicable material provision of any
law, statute, rule or regulation, or any order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will conflict
or be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under,
or (other than pursuant to the Security Documents) result in the
creation or imposition of (or the obligation to create or impose) any
Lien upon any of the property or assets of such Guarantor or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, credit agreement, loan agreement or any other agreement or other
instrument to which such Guarantor or any of its Subsidiaries is a
party or by which it or any of its property or assets is bound or to
which it may be subject or (iii) will violate any provision of the
certificate of incorporation or by-laws (or equivalent organizational
documents) of such Guarantor or any of its Subsidiaries.
(d) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption
by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize, or is required in
connection with, (i) the execution, delivery and performance of this
Guaranty or any other Document to which such Guarantor is a party, or
(ii) the legality, validity, binding effect or enforceability of this
Guaranty or any other Document to which such Guarantor is a party.
12. Each Guarantor covenants and agrees that on and after the
date hereof and until the termination of the Total Commitments and when no Note
or Letter of Credit remains outstanding and all other Guaranteed Obligations
have been paid in full (other than those arising
<PAGE> 8
Page 8
from indemnities for which no request has been made), such Guarantor shall take,
or will refrain from taking, as the case may be, all actions that are necessary
to be taken or not taken so that no violation of any provision, covenant or
agreement contained in Section 8 or 9 of the Credit Agreement, and so that no
Event of Default, is caused by the actions of such Guarantor or any of its
Subsidiaries.
13. The Guarantors hereby jointly and severally agree to pay
all out-of-pocket costs and expenses of each Creditor in connection with the
enforcement of this Guaranty and the protection of such Creditor's rights
hereunder, and in connection with any amendment, waiver or consent relating
hereto (including, without limitation, the fees and disbursements of counsel
employed by the Administrative Agent or any of the other Creditors).
14. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.
15. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated in any manner whatsoever unless in
writing duly signed by the Administrative Agent (with the consent of (x) the
Required Lenders or, to the extent required by Section 13.12 of the Credit
Agreement, all of the Lenders, at all times prior to the time at which all
Credit Document Obligations have been paid in full, or (y) the holders of at
least a majority of the outstanding Other Obligations at all times after the
time at which all Credit Document Obligations have been paid in full) and each
Guarantor directly affected thereby (it being understood that the addition or
release of any Guarantor hereunder shall not constitute a change, waiver,
discharge or termination affecting any Guarantor other than the Guarantor so
added or released); provided, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class (as defined below) of
Creditors (and not all Creditors in a like or similar manner) shall require the
written consent of the Requisite Creditors (as defined below) of such Class. For
the purpose of this Guaranty, the term "Class" shall mean each class of
Creditors, i.e., whether (i) the Lender Creditors as holders of the Credit
Document Obligations or (ii) the Other Creditors as holders of the Other
Obligations. For the purpose of this Guaranty, the term "Requisite Creditors" of
any Class shall mean each of (i) with respect to the Credit Document
Obligations, the Required Lenders and (ii) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Interest Rate Protection Agreements or Other Hedging
Agreements.
16. Each Guarantor acknowledges that an executed (or
conformed) copy of each of the Credit Documents and the Interest Rate Protection
Agreements or Other Hedging Agreements has been made available to its principal
executive officers and such officers are familiar with the contents thereof.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit
<PAGE> 9
Page 9
Agreement or any payment default under any Interest Rate Protection Agreement or
Other Hedging Agreement and shall in any event, include, without limitation, any
payment default on any of the Guaranteed Obligations continuing after any
applicable grace period), each Creditor is hereby authorized at any time or from
time to time, without notice to any Guarantor or to any other Person, any such
notice being expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other indebtedness at any time held or
owing by such Creditor to or for the credit or the account of such Guarantor,
against and on account of the obligations and liabilities of such Guarantor to
such Creditor under this Guaranty, irrespective of whether or not such Creditor
shall have made any demand hereunder and although said obligations, liabilities,
deposits or claims, or any of them, shall be contingent or unmatured. Each
Creditor acknowledges and agrees that the provisions of this Section 17 are
subject to the sharing provisions set forth in Section 13.06(b) of the Credit
Agreement.
18. All notices, requests, demands or other communications
pursuant hereto shall be deemed to have been duly given or made when delivered
to the Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to such
party at (i) in the case of any Lender Creditor, as provided in the Credit
Agreement, (ii) in the case of any Guarantor, at:
c/o IASIS Healthcare Corporation
Suite 101
104 Woodmont Boulevard
Nashville, TN 37205
Tel: [ ]
Fax: (615) 846-3006
and (iii) in the case of any Other Creditor, at such address as such Other
Creditor shall have specified in writing to the Guarantor; or in any case at
such other address as any of the foregoing Persons may hereafter notify the
others in writing.
19. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of said Creditors repays all or part of said
amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such Creditor or any of its
property or (ii) any settlement or compromise of any such claim effected by such
Creditor with any such claimant (including the Borrower), then and in such event
each Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon such Guarantor, notwithstanding any revocation
hereof or the cancellation of any Note or any Interest Rate Protection Agreement
or Other Hedging Agreement or other instrument evidencing any liability of the
Borrower, and such Guarantor shall be and remain liable to such Creditor
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by any such Creditor.
<PAGE> 10
Page 10
20. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY OR ANY OTHER CREDIT DOCUMENT TO WHICH ANY GUARANTOR IS A PARTY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS GUARANTY, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO EACH GUARANTOR AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE
BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR
PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT TO WHICH SUCH
GUARANTOR IS A PARTY THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR
INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY OF THE CREDITORS TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST EACH GUARANTOR IN ANY OTHER
JURISDICTION.
(C) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (B) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(D) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS GUARANTY, THE
<PAGE> 11
Page 11
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
21. In the event that all of the capital stock or other equity
interests of one or more Guarantors is sold or otherwise disposed of (to a
Person other than the Borrower or a Subsidiary thereof) or liquidated in
compliance with the requirements of Section 9.02 of the Credit Agreement (or
such sale, disposition or liquidation has been approved in writing by the
Required Lenders (or all Lenders if required by Section 13.12 of the Credit
Agreement)) and the proceeds of such sale, disposition or liquidation are
applied in accordance with the provisions of the Credit Agreement, to the extent
applicable, such Guarantor and each Guarantor which is a Subsidiary of such
Guarantor shall be released from this Guaranty and this Guaranty shall, as to
each such Guarantor or Guarantors, terminate, and have no further force or
effect (it being understood and agreed that the sale of one or more Persons that
own, directly or indirectly, all of the capital stock of any Guarantor shall be
deemed to be a sale of such Guarantor for the purposes of this Section 21).
22. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense.
23. This Guaranty may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
24. It is understood and agreed that any Subsidiary of the
Borrower that is required to execute a counterpart of this Guaranty pursuant to
the Credit Agreement shall automatically become a Guarantor hereunder by
executing a counterpart hereof and delivering the same to the Administrative
Agent.
25. Notwithstanding anything else to the contrary in this
Guaranty, the Creditors agree that this Guaranty may be enforced only by the
action of the Administrative Agent or the Collateral Agent, in each case acting
upon the instructions of the Required Lenders (or, after the date on which all
Credit Document Obligations have been paid in full, the holders of at least a
majority of the outstanding Other Obligations), and that no other Creditor shall
have any right individually to seek to enforce or to enforce this Guaranty or to
realize upon the security to be granted by the Security Documents, it being
understood and agreed that such rights and remedies may be exercised by the
Administrative Agent or the Collateral Agent or the holders of at least a
majority of the outstanding Other Obligations, as the case may be, for the
benefit of the Creditors upon the terms of this Guaranty and the Security
Documents. The Creditors further agree that this Guaranty may not be enforced
against any director, officer, employee, or stockholder of any Guarantor (except
to the extent such stockholder is also a Guarantor hereunder). It is understood
that the agreement in this Section 25 is among and solely for the benefit of the
Lenders and that if
<PAGE> 12
Page 12
the Required Lenders so agree (without requiring the consent of any Guarantor),
this Guaranty may be directly enforced by any Creditor.
26. At any time a payment in respect of the Guaranteed
Obligations is made under this Guaranty, the right of contribution of each
Guarantor hereunder against each other such Guarantor shall be determined as
provided in the immediately following sentence, with the right of contribution
of each Guarantor to be revised and restated as of each date on which a payment
(a "Relevant Payment") is made on the Guaranteed Obligations under this
Guaranty. At any time that a Relevant Payment is made by a Guarantor that
results in the aggregate payments made by such Guarantor hereunder in respect of
the Guaranteed Obligations to and including the date of the Relevant Payment
exceeding such Guarantor's Contribution Percentage (as defined below) of the
aggregate payments made by all Guarantors hereunder in respect of the Guaranteed
Obligations to and including the date of the Relevant Payment (such excess, the
"Aggregate Excess Amount"), each such Guarantor shall have a right of
contribution against each other Guarantor who has made payments hereunder in
respect of the Guaranteed Obligations to and including the date of the Relevant
Payment in an aggregate amount less than such other Guarantor's Contribution
Percentage of the aggregate payments made to and including the date of the
Relevant Payment by all Guarantors hereunder in respect of the Guaranteed
Obligations (the aggregate amount of such deficit, the "Aggregate Deficit
Amount") in an amount equal to (x) a fraction the numerator of which is the
Aggregate Excess Amount of such Guarantor and the denominator of which is the
Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate
Deficit Amount of such other Guarantor. A Guarantor's right of contribution
pursuant to the preceding sentences shall arise at the time of each computation,
subject to adjustment to the time of any subsequent computation; provided, that
no Guarantor may take any action to enforce such right until the Guaranteed
Obligations have been paid in full and the Total Commitments have been
terminated, it being expressly recognized and agreed by all parties hereto that
any Guarantor's right of contribution arising pursuant to this Guaranty against
any other Guarantor shall be expressly junior and subordinate to such other
Guarantor's obligations and liabilities in respect of the Guaranteed Obligations
and any other obligations owing under this Guaranty. As used in this Section 26:
(i) each Guarantor's "Contribution Percentage" shall mean the percentage
obtained by dividing (x) the Adjusted Net Worth (as defined below) of such
Guarantor by (y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the
"Adjusted Net Worth" of each Guarantor shall mean the greater of (x) the Net
Worth (as defined below) of such Guarantor and (y) zero; and (iii) the "Net
Worth" of each Guarantor shall mean the amount by which the fair salable value
of such Guarantor's assets on the date of any Relevant Payment exceeds its
existing debts and other liabilities (including contingent liabilities, but
without giving effect to any Guaranteed Obligations arising under this Guaranty)
on such date. All parties hereto recognize and agree that, except for any right
of contribution arising pursuant to this Section 26, each Guarantor who makes
any payment in respect of the Guaranteed Obligations shall have no right of
contribution or subrogation against any other Guarantor in respect of such
payment. Each of the Guarantors recognizes and acknowledges that the rights to
contribution arising hereunder shall constitute an asset in favor of the party
entitled to such contribution. In this connection, each Guarantor has the right
to waive its contribution right against any
<PAGE> 13
Page 13
Guarantor to the extent that after giving effect to such waiver such Guarantor
would remain solvent, in the determination of the Required Lenders.
27. Each Guarantor hereby confirms that it is its intention
that this Guaranty not constitute a fraudulent transfer or conveyance for
purposes of any bankruptcy, insolvency or similar law, the Uniform Fraudulent
Conveyance Act or any similar Federal, state of foreign law. To effectuate the
foregoing intention, each Guarantor hereby irrevocably agrees that the
Guaranteed Obligations shall be limited to the maximum amount as will, after
giving effect to such maximum amount and all other (contingent or otherwise)
liabilities of such Guarantor that are relevant under such laws, result in the
Guaranteed Obligations of such Guarantor in respect of such maximum amount not
constituting a fraudulent transfer or conveyance.
28. EACH GUARANTOR WARRANTS AND AGREES THAT EACH OF THE
WAIVERS SET FORTH ABOVE IS MADE WITH FULL KNOWLEDGE OF ITS SIGNIFICANCE AND
CONSEQUENCES AND THAT IF ANY OF SUCH WAIVERS ARE DETERMINED TO BE CONTRARY TO
ANY APPLICABLE LAW OR PUBLIC POLICY, SUCH WAIVERS SHALL BE EFFECTIVE ONLY TO THE
MAXIMUM EXTENT PERMITTED BY LAW.
29. This guaranty, including, without limitation, the
representations, warranties and covenants contained herein, shall become
effective when the Collateral Agent, the Borrower and each subsidiary of the
Borrower whose name appears on the signature pages hereto shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the
Administrative Agent at its notice office or the offices of its counsel.
<PAGE> 14
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be executed and delivered as of the date first above written.
IASIS HEALTHCARE CORPORATION
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SALT LAKE REGIONAL MEDICAL CENTER, INC.,
as a Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
JORDAN VALLEY HOSPITAL, INC., as a
Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
DAVIS HOSPITAL & MEDICAL CENTER, INC.,
as a Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ROCKY MOUNTAIN MEDICAL CENTER, INC., as
a Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 15
PIONEER VALLEY HOSPITAL, INC., as a
Guarantor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
PIONEER VALLEY HEALTH PLAN, INC., as
a Guarantor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
CLINICARE OF UTAH, INC., as a Guarantor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SOUTHRIDGE PLAZA HOLDINGS, INC., as
a Guarantor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SANDY CITY HOLDINGS, INC., as a Guarantor
By: /s/ Wayne Gower
----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
DAVIS SURGICAL CENTER HOLDINGS, INC., as
a Guarantor
<PAGE> 16
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
MESA GENERAL HOSPITAL, LP, as a Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ST. LUKE'S MEDICAL CENTER, LP, as a
Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ST. LUKE'S BEHAVIORAL HOSPITAL, LP, as a
Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
HEALTH CHOICE ARIZONA, INC., as a
Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
METRO AMBULATORY SURGERY CENTER, INC.,
as a Guarantor
<PAGE> 17
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
BILTMORE SURGERY CENTER, INC., as a
Guarantor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
PALMS OF PASADENA HOSPITAL, LP, as a
Guarantor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
ODESSA REGIONAL HOSPITAL, LP, as a
Guarantor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
TEMPE ST. LUKE'S HOSPITAL, LP, as a
Guarantor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 18
MEMORIAL HOSPITAL OF TAMPA, LP, as a
Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
TOWN & COUNTRY HOSPITAL, LP, as a
Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SOUTHWEST GENERAL HOSPITAL, LP, as a
Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
SSJ ST. PETERSBURG HOLDINGS, INC., as a
Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS,
INC., as a Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 19
BAPTIST JOINT VENTURE HOLDINGS, INC., as
a Guarantor
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
BEAUMONT HOSPITAL HOLDINGS, INC., as a
Guarantor
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
IASIS HEALTHCARE HOLDINGS, INC., as a
Guarantor
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
IASIS MANAGEMENT COMPANY, as a Guarantor
By: /s/ Wayne Gower
-----------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Administrative Agent for the Lenders
By: /s/ Colleen Galle
-------------------------------------
Name: Colleen Galle
Title: Vice President
<PAGE> 20
BILTMORE SURGERY CENTER, INC. (ARIZONA
CORPORATION), as a Guarantor
By: /s/ Wayne Gower
-------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 21
IASIS HEALTHCARE MSO SUB OF SALT LAKE
CITY, LLC, as a Guarantor
By: /s/ Wayne Gower
------------------------------------
Name: Wayne Gower
Title: President & Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.7
HYPOTHECATION AGREEMENT
HYPOTHECATION AGREEMENT, dated as of October 15, 1999 (as
amended, restated, modified and/or supplemented from time to time, this
"Agreement"), among each of the undersigned (each, a "Pledgor" and together with
any other entity which becomes a party hereto pursuant to Section 24 hereof,
collectively, the "Pledgors"), in favor of MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, not in its individual capacity, but solely as Collateral Agent (including
any successor collateral agent, the "Pledgee") for the benefit of the Secured
Creditors (as defined below). Except as otherwise defined herein, terms used
herein and defined in the Credit Agreement (as defined below) shall be used
herein as therein defined.
W I T N E S S E T H:
WHEREAS, IASIS Healthcare Corporation (the "Borrower"),
various financial institutions from time to time party thereto (the "Lenders"),
J.P. Morgan Securities Inc. and The Bank of Nova Scotia, as Co-Lead Arrangers
and Co-Book Runners, Paribas, as Documentation Agent, The Bank of Nova Scotia,
as Syndication Agent, and Morgan Guaranty Trust Company of New York, as
Administrative Agent (in such capacity, the "Administrative Agent", and together
with the Lenders, the Co-Lead Arrangers, the Syndication Agent, each Issuing
Bank, the Pledgee and the Collateral Agent, the "Lender Creditors") have entered
into the Credit Agreement, dated as of October 15, 1999 (as amended, modified or
supplemented from time to time, the "Credit Agreement") providing for the
extension of credit to the Borrower as contemplated therein;
WHEREAS, the Borrower may from time to time enter into one or
more (i) interest rate protection agreements (including, without limitation,
interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign
exchange contracts, currency swap agreements, commodity agreements or other
similar agreements or arrangements designed to protect against the fluctuations
in currency values and/or (iii) other types of hedging agreements from time to
time (each such agreement or arrangement with an Other Creditor (as hereinafter
defined), an "Interest Rate Protection Agreement or Other Hedging Agreement"),
with Morgan Guaranty Trust Company of New York in its individual capacity
("Morgan Guaranty"), any Lender or a syndicate of financial institutions
organized by Morgan Guaranty or any such Lender, or an affiliate of Morgan
Guaranty or any such Lender (Morgan Guaranty, any such Lender or Lenders or
affiliate or affiliates of Morgan Guaranty or such Lender or Lenders (even if
Morgan Guaranty or any such Lender thereafter ceases to be a Lender under the
Credit Agreement for any reason) and any such institution that participates in
such Interest Rate Protection Agreements or Other Hedging Agreements, and in
each case their subsequent successors and assigns, collectively, the "Other
Creditors", and together with the Lender Creditors, the "Secured Creditors");
WHEREAS, it is a condition precedent to the making of Loans to
the Borrower and the issuance of, and participation in, Letters of Credit for
the account of the Borrower under the Credit Agreement and to the Other
Creditors entering into Interest Rate Protection
<PAGE> 2
Agreements and Other Hedging Agreements that each Pledgor shall have executed
and delivered to the Pledgee this Agreement; and
WHEREAS, each Pledgor will obtain benefits from the incurrence
of Loans by the Borrower and the issuance of Letters of Credit for the account
of the Borrower under the Credit Agreement and the Borrower's entering into
Interest Rate Protection Agreements or Other Hedging Agreements and,
accordingly, desires to execute this Agreement in order to satisfy the
conditions precedent described in the preceding paragraph and to induce the
Lenders to make Loans to the Borrower and to issue, and participate in, Letters
of Credit for the account of the Borrower, and to induce the Other Creditors to
enter into Interest Rate Protection Agreements and Other Hedging Agreements with
the Borrower;
NOW, THEREFORE, in consideration of the benefits accruing to
each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each
Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due), liabilities and
indebtedness of the Borrower owing to the Lender Creditors, whether now
existing or hereafter incurred under, arising out of, or in connection
with the Credit Agreement and the other Credit Documents to which the
Borrower is a party and the due performance of and compliance by the
Borrower with all of the terms, conditions and agreements contained in
the Credit Agreement and in each such Credit Document (all such
obligations, liabilities and indebtedness under this clause (i), being
herein collectively called the "Credit Document Obligations");
(ii) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations,
liabilities and indebtedness (including obligations which, but for the
automatic stay under Section 362(a) of the Bankruptcy Code, would
become due) and liabilities of the Borrower, now existing or hereafter
incurred under, arising out of or in connection with any Interest Rate
Protection Agreement or Other Hedging Agreement, whether such Interest
Rate Protection Agreement or Other Hedging Agreement is now in
existence or hereinafter arising, and the due performance and
compliance with the terms, conditions and agreements of each such
Interest Rate Protection Agreement and Other Hedging Agreement by the
Borrower, and the due performance and compliance by the Borrower, with
all of the terms, conditions and agreements contained in each such
Interest Rate Protection Agreement and Other Hedging Agreement (all
such obligations, liabilities and indebtedness under this clause (ii)
being herein collectively called the "Other Obligations");
<PAGE> 3
(iii) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) and/or preserve its
security interest therein;
(iv) in the event of any proceeding for the collection of the
Obligations (as defined below) or the enforcement of this Agreement,
after an Event of Default (such term, as used in this Agreement, shall
mean any Event of Default under, and as defined in, the Credit
Agreement and any payment default under any Interest Rate Protection
Agreement or Other Hedging Agreement and shall in any event include,
without limitation, any payment default (after the expiration of any
applicable grace period) on any of the Obligations (as defined below))
shall have occurred and be continuing, the reasonable expenses of
retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Pledgee of its rights hereunder, together with reasonable attorneys'
fees and court costs; and
(v) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of
this Agreement;
all such obligations, liabilities, indebtedness, sums and expenses set forth in
clauses (i) through (v) of this Section 1 being herein collectively called the
"Obligations" it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
2. DEFINITION OF STOCK, ETC. (a) As used herein, the term
"Stock" shall mean all of the issued and outstanding shares of stock of the
Borrower at any time to the extent owned by a Pledgor. Each Pledgor represents
and warrants that on the date hereof: (a) the Stock held by such Pledgor
consists of the number and type of shares of the stock of the Borrower as
described in Annex A hereto; (b) such Stock constitutes that percentage of the
issued and outstanding capital stock of the Borrower as set forth in Annex A
hereto; and (c) each such Pledgor is the holder of record and sole beneficial
owner of the Stock so held by it and there exists no options or preemption
rights in respect of any of the Stock.
(b) All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock", which together with all
proceeds thereof, including any securities and moneys received and at the time
held by the Pledgee hereunder, are hereinafter called the "Collateral".
3. PLEDGE OF STOCK, ETC.
3.1 Pledge. To secure the Obligations now or hereafter owed or
to be performed by the Borrower, each Pledgor hereby: (i) grants to the Pledgee
a security interest in all of the Collateral owned by such Pledgor including all
Stock; (ii) pledges and deposits as security with the Pledgee the Stock owned by
such Pledgor on the date hereof, and delivers to the Pledgee certificates
therefor or instruments thereof, accompanied by undated stock powers duly
executed in blank by such Pledgor or such other instruments of transfer as are
reasonably acceptable to the Pledgee; and (iii) collaterally assigns, transfers,
hypothecates, mortgages, charges and sets over
<PAGE> 4
to the Pledgee all of such Pledgor's right, title and interest in and to such
Stock (and in and to the certificates or instruments evidencing such Stock) to
be held by the Pledgee, upon the terms and conditions set forth in this
Agreement.
3.2 Subsequently Acquired Stock. If any Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Stock at any time or
from time to time after the date hereof, such Pledgor will forthwith pledge and
deposit such Stock (or certificates or instruments representing such Stock) as
security with the Pledgee and deliver to the Pledgee certificates or instruments
thereof, accompanied by undated stock powers duly executed in blank by such
Pledgor, or such other instruments of transfer as are reasonably acceptable to
the Pledgee, and will promptly thereafter deliver to the Pledgee a certificate
executed by a principal executive officer of such Pledgor describing such Stock
and certifying that the same have been duly pledged with the Pledgee hereunder.
3.3 Uncertificated Securities. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2, if any Stock (whether now owned or
hereafter acquired) are uncertificated securities, the respective Pledgor shall
promptly notify the Pledgee thereof, and shall promptly take all actions
required to perfect the security interest of the Pledgee under applicable law
(including, in any event, under Sections 8-313 and 8-321 of the New York Uniform
Commercial Code if applicable). Each Pledgor further agrees to take such actions
as the Pledgee deems reasonably necessary or desirable to effect the foregoing
and to permit the Pledgee to exercise any of its rights and remedies hereunder.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Stock, which may be held (in the
discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or
assigned in blank or, following a Noticed Event of Default (as hereinafter
defined) which is continuing, in favor of the Pledgee or any nominee or nominees
of the Pledgee or a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO NOTICED EVENT OF DEFAULT. (i) Unless
and until a Noticed Event of Default (as defined below) shall have occurred and
be continuing, each Pledgor shall be entitled to exercise all voting rights
attaching to any and all Pledged Stock owned by it, and to give consents,
waivers or ratifications and other actions in respect thereof; provided that no
vote shall be cast or any consent, waiver or ratification given or any action
taken which would violate, result in a breach of any covenant contained in, or
be materially inconsistent with, any of the terms of this Agreement, the Credit
Agreement, any other Credit Document or any Interest Rate Protection Agreement
or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or
which would have the effect of materially impairing the position or interests of
the Pledgee or any other Secured Creditor therein. All such rights of a Pledgor
to vote and to give consents, waivers and ratifications shall cease if and so
long as a Noticed Event of Default shall have occurred and be continuing and
Section 7 hereof shall become applicable, provided that, unless otherwise
directed by the Required Lenders, the Pledgee shall have the right from time to
time following and during the continuance of a Noticed Event of Default to
permit the Pledgor to exercise such rights. As used herein, a "Noticed Event
<PAGE> 5
of Default" shall mean (i) an Event of Default with respect to the Borrower
under Section 10.05 of the Credit Agreement and (ii) any other Event of Default
in respect of which the Pledgee has given the Borrower notice that such Event of
Default constitutes a "Noticed Event of Default". After all Noticed Events of
Default have been cured or waived, the Pledgor will have the right to exercise
the voting and all other rights and powers that it would otherwise be entitled
to exercise pursuant to the terms of this Section 5.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until a
Noticed Event of Default shall have occurred and be continuing, all cash
dividends, interest and principal or other amounts payable in respect of the
Pledged Stock (collectively, the "Cash Dividends") shall be paid to the
respective Pledgor; provided that all dividends, interest and principal or other
amounts payable in respect of the Pledged Stock which are reasonably determined
by the Pledgee, to represent in whole or in part an extraordinary, liquidating
or other distribution in return of capital not permitted by the Credit Agreement
shall be paid, to the extent so determined to represent an extraordinary,
liquidating or other distribution in return of capital, to the Pledgee and
retained by it as part of the Collateral (unless such cash dividends are applied
to repay the Obligations pursuant to Section 9 of this Agreement). Upon the
occurrence and continuation of a Noticed Event of Default, the Pledgee shall
also be entitled to receive directly, and to retain as part of the Collateral:
(i) all other or additional stock, or other securities or
property (other than cash) paid or distributed by way of dividend or
otherwise in respect of the Pledged Stock;
(ii) all other or additional stock or other securities or
property (including, but not limited to, cash) paid or distributed in
respect of the Pledged Stock by way of stock-split, spin-off, split-up,
reclassification, combination of shares or similar rearrangement; and
(iii) all other or additional stock or other securities or
property (including, but not limited to, cash) which may be paid in
respect of the Collateral by reason of any consolidation, merger,
exchange of stock, conveyance of assets, liquidation or similar
corporate reorganization.
All dividends, distributions or other payments which are received by the
respective Pledgor contrary to the provisions of this Section 6 or Section 7
shall be received in trust for the benefit of the Pledgee, shall be segregated
from other property or funds of such Pledgor and shall be forthwith paid over to
the Pledgee as Collateral in the same form as so received (with any necessary
endorsement). After all Noticed Events of Default have been cured or waived, (i)
the Pledgee shall, within five Business Days after all such Noticed Events of
Default have been cured or waived, repay to each Pledgor all Cash Dividends that
such Pledgor would otherwise have been permitted to retain pursuant to the terms
of this Section 6 to the extent then held by the Pledgee and not distributed to
the Secured Creditors and (ii) all Cash Dividends shall be paid to, and retained
by, each respective Pledgor, subject to the first sentence of this Section 6.
7. REMEDIES IN CASE OF A NOTICED EVENT OF DEFAULT. In case a
Noticed Event of Default shall have occurred and be continuing, the Pledgee
shall be entitled to
<PAGE> 6
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or any other Secured Debt Agreement or by law) for the protection and
enforcement of its rights in respect of the Collateral, including, without
limitation, all the rights and remedies of a secured party upon default under
the Uniform Commercial Code of the State of New York, and the Pledgee shall be
entitled, without limitation, to exercise any or all of the following rights,
which each Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the
Collateral otherwise payable under Section 6 to such Pledgor;
(ii) to transfer all or any part of the Collateral into the
Pledgee's name or the name of its nominee or nominees;
(iii) to vote all or any part of the Pledged Stock (in each
case whether or not transferred into the name of the Pledgee) and give
all consents, waivers and ratifications in respect of the Collateral
and otherwise act with respect thereto as though it were the outright
owner thereof (each Pledgor hereby irrevocably constituting and
appointing the Pledgee the proxy and attorney-in-fact of such Pledgor,
with full power of substitution to do so during the continuation of a
Noticed Event of Default); and
(iv) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or to redeem or otherwise
(except to the extent required by applicable law, all of which are
hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the
Pledgee in its reasonable discretion may determine, provided that at
least 10 days' notice of the time and place of any such sale shall be
given to such Pledgor. The Pledgee shall not be obligated to make such
sale of Collateral regardless of whether any such notice of sale has
theretofore been given. Each purchaser at any such sale shall hold the
property so sold absolutely free from any claim or right on the part of
any Pledgor, and each Pledgor hereby waives and releases to the fullest
extent permitted by law any right or equity of redemption with respect
to the Collateral, whether before or after sale hereunder, and all
rights, if any, of marshalling the Collateral and any other security
for the Obligations or otherwise. At any such sale, unless prohibited
by applicable law, the Pledgee on behalf of all Secured Creditors (or
certain of them) may bid for and purchase all or any part of the
Collateral so sold free from any such right or equity of redemption.
Neither the Pledgee nor any Secured Creditor shall be liable for
failure to collect or realize upon any or all of the Collateral or for
any delay in so doing nor shall it be under any obligation to take any
action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee provided for in this Agreement or any other Secured Debt Agreement,
or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise
<PAGE> 7
by the Pledgee or any other Secured Creditor of any one or more of the rights,
powers or remedies provided for in this Agreement or any other Secured Debt
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by the Pledgee
or any other Secured Creditor of all such other rights, powers or remedies, and
no failure or delay on the part of the Pledgee or any other Secured Creditor to
exercise any such right, power or remedy shall operate as a waiver thereof.
Unless otherwise required by the Credit Documents, no notice to or demand on any
Pledgor in any case shall entitle it to any other or further notice or demand in
similar other circumstances or constitute a waiver of any of the rights of the
Pledgee or any other Secured Creditor to any other further action in any
circumstances without demand or notice. The Secured Creditors agree, by their
acceptance of the benefits of this Agreement, that this Agreement may be
enforced only by the action of the Pledgee acting upon the instructions of the
Required Secured Creditors (as defined in the Security Agreement) and that no
other Secured Creditor shall have any right individually to seek to enforce or
to enforce this Agreement or to realize upon the security to be granted hereby,
it being understood and agreed that such rights and remedies will be exercised
by the Pledgee for the benefit of the Secured Creditors upon the terms of this
Agreement.
9. APPLICATION OF PROCEEDS. All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral pursuant to the
terms of this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied to the payment of the Obligations in the manner
provided in Section 7.4 of the Security Agreement.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), to the extent permitted by
applicable law, the receipt of the Pledgee or the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold, and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Pledgee or such
officer or be answerable in any way for the misapplication or nonapplication
thereof.
11. INDEMNITY. Subject to Section 23, the Borrower agrees to
reimburse the Pledgee for all reasonable costs and expenses, including
reasonable attorneys' fees, in each case growing out of or resulting from the
exercise by the Pledgee against any Pledgor of any right or remedy granted to it
hereunder except to the extent arising from the Pledgee's gross negligence or
willful misconduct. In no event shall the Pledgee be liable, in the absence of
gross negligence or willful misconduct on its part, for any matter or thing in
connection with this Agreement other than to account for moneys or other
property actually received by it in accordance with the terms hereof.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor
agrees that it will join with the Pledgee in executing and, subject to Section
23, at the Borrower's own expense, file and refile under the Uniform Commercial
Code such financing statements, continuation statements and other documents in
such offices as the Pledgee (acting on its own or on the instructions of the
Required Lenders) may reasonably deem necessary or appropriate and wherever
required or permitted by law in order to perfect and preserve the Pledgee's
security
<PAGE> 8
interest in the Collateral hereunder and hereby authorizes the Pledgee to file
financing statements and amendments thereto relative to all or any part of the
Collateral without the signature of such Pledgor where permitted by law, and
agrees to do such further acts and things and to execute and deliver to the
Pledgee such additional conveyances, assignments, agreements and instruments as
the Pledgee may reasonably require or reasonably deem advisable to carry into
effect the purposes of this Agreement or to further assure and confirm unto the
Pledgee its rights, powers and remedies hereunder or thereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, to act from time to time after the
occurrence and during the continuance of a Noticed Event of Default in the
Pledgee's reasonable discretion to take any action and to execute any instrument
which the Pledgee may deem necessary or advisable to accomplish the purposes of
this Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement and pursuant to applicable laws. The
Pledgee shall act hereunder on the terms and conditions set forth herein and in
Section 12 of the Credit Agreement.
14. TRANSFER BY THE PLEDGORS. No Pledgor will sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein except in
accordance with the terms of this Agreement and the Credit Agreement provided,
that, without the written consent of the Pledgee, each Pledgor may sell,
transfer or assign any of the Collateral he, she or it owns to any Person who
agrees to be bound by the terms hereof.
15. REPRESENTATION AND WARRANTIES OF THE PLEDGORS. (a) Each
Pledgor represents, warrants and covenants that:
(i) it is, or at the time when pledged hereunder will be, the
legal, beneficial and record owner of, and has (or will have) good and
marketable title to, all Stock pledged by it hereunder, subject to no
pledge, lien, mortgage, hypothecation, security interest, charge,
option, adverse claim or other encumbrance whatsoever, except the liens
and security interests created by this Agreement;
(ii) it has full power, authority and legal right to pledge
all the Stock pledged by it pursuant to this Agreement;
(iii) this Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes a legal, valid and binding
obligation of such Pledgor enforceable against such Pledgor in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to or affecting
<PAGE> 9
creditors' rights generally and general equitable principles
(regardless of whether enforcement is sought in equity or at law);
(iv) except to the extent already obtained or made, no consent
of any other party (including, without limitation, any stockholder or
creditor of each Pledgor or any of their Subsidiaries) and no order,
consent, approval, license, permit, authorization, or validation of, or
filing or declaration with, recording or registration with, or
exemption by, or notice or report to, any foreign or domestic
governmental authority, or any subdivision thereof, is required to
authorize or is required in connection with (a) the execution, delivery
or performance of this Agreement, (b) the legality, validity, binding
effect or enforceability of this Agreement, (c) the perfection or
enforceability of the Pledgee's security interest in the Collateral or
(d) except for compliance with or as may be required by applicable
securities laws, the exercise by the Pledgee of any of its rights or
remedies provided herein;
(v) neither the execution, delivery and performance by any
Pledgor of this Agreement nor compliance with the terms and provisions
hereof (a) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any
court, arbitrator or governmental instrumentality, (b) will conflict or
be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under,
or (other than pursuant to this Agreement) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any
of the property or assets of any Pledgor or any Subsidiary of any
Pledgor pursuant to the terms of any indenture, mortgage, deed of
trust, agreement or other instrument to which any Pledgor is a party or
by which it or any of its property or assets are bound or to which it
may be subject or (iii) will violate any provision of the certificate
of incorporation or by-laws of any such Pledgor;
(vi) to the best of its knowledge, all the shares of the Stock
have been duly and validly issued, are fully paid and non-assessable
and are subject to no options to purchase or similar rights; and
(vii) the pledge, collateral assignment and delivery to the
Pledgee of the Stock pursuant to this Agreement creates a valid and
perfected first priority Lien in the Stock, and the proceeds thereof,
subject to no other Lien or to any agreement purporting to grant to any
third party a Lien on the property or assets of any Pledgor which would
include the Stock.
16. COVENANTS OF THE PLEDGORS. Each Pledgor covenants and
agrees that it will take no action which would have the effect of materially
impairing the position or interests of the Pledgee hereunder except as expressly
permitted by this Agreement.
17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of
each Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation:
<PAGE> 10
(i) any renewal, extension, amendment or modification of, or
addition or supplement to or deletion from any of the Secured Debt Agreements,
or any other instrument or agreement referred to therein, or any assignment or
transfer of any thereof;
(ii) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such agreement or instrument or
this Agreement;
(iii) any furnishing of any additional security to the Pledgee
or its assignee or any acceptance thereof or any release of any security by the
Pledgee or its assignee;
(iv) any limitation on any party's liability or obligations
under any such instrument or agreement or any invalidity or unenforceability, in
whole or in part, of any such instrument or agreement or any term thereof; or
(v) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to such
Pledgor or any Affiliate of such Pledgor, or any action taken with respect to
this Agreement by any trustee or receiver, or by any court, in any such
proceeding, whether or not such Pledgor shall have notice or knowledge of any of
the foregoing.
18. TERMINATION; RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate and the Pledgee, at the request
and expense of the respective Pledgor, will execute and deliver to such Pledgor
all instruments that such Pledgor shall reasonably request acknowledging the
satisfaction and termination of this Agreement as provided above, and will duly
assign, transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Stock owned by such Pledgor as may be in
the possession of the Pledgee and as has not theretofore been sold or otherwise
applied or released pursuant to this Agreement, together with its pro rata share
of any moneys at the time held by the Pledgee hereunder. As used in this
Agreement, "Termination Date" shall mean the date upon which the Total
Commitment and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note under the Credit Agreement is
outstanding and all other Obligations have been paid in full (other than arising
from indemnities described in Section 13.13 of the Credit Agreement and
analogous provisions in the Security Documents for which no request has been
made).
(b) In the event that any part of the Collateral is released
with the consent of the Required Secured Creditors (as defined in the Security
Agreement), the Pledgee, at the request and expense of the respective Pledgor
will release any of such Collateral owned by such Pledgor from this Agreement,
duly assign, transfer and deliver to such Pledgor (without recourse and without
any representation or warranty) such of the Collateral owned by such Pledgor as
is then being (or has been) so released and as may be in possession of the
Pledgee and has not theretofore been released pursuant to this Agreement.
(c) The Pledgee shall have no liability whatsoever to any
Secured Creditor as the result of any release of Collateral by it as permitted
by this Section 18.
<PAGE> 11
19. NOTICES, ETC. Except as otherwise expressly provided
herein, all notices and other communications hereunder shall be in writing
(including telegraphic, telex, telecopier, facsimile or cable communication) and
shall be mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered to
the parties hereto at the respective address set forth below and shall be
effective when received:
(i) if to any Pledgor, at its address set forth opposite
its signature below;
(ii) if to the Pledgee, at:
Morgan Guaranty Trust Company of New York
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Renee Richmond
Tel: (302) 634-3316
Fax: (302) 634-4300
(iii) if to any Lender (other than the Pledgee), at such
address as such Lender shall have specified in the Credit Agreement;
(iv) if to any Other Creditor, at such address as such Other
Creditor shall have specified in writing to the Pledgors and the
Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Pledgee (with the consent of the
Required Secured Creditors (as defined in the Security Agreement) to the extent
required by the Credit Agreement), and each Pledgor affected thereby (it being
understood that the addition or release of any Pledgor hereunder shall not
constitute a change, waiver, discharge or variance affecting any Pledgor other
than the Pledgor so added or released), provided that (i) no such change,
waiver, modification or variance shall be made to Section 9 hereof (directly or
indirectly by modifying Section 7.4 of the Security Agreement) or this Section
20 without the consent of each Secured Creditor adversely affected thereby and
(ii) that any change, waiver, modification or variance affecting the rights and
benefits of a single Class (as defined below) of Secured Creditors (and not all
Secured Creditors in a like or similar manner) shall require the written consent
of the Requisite Creditors of such Class (as defined below) of Secured
Creditors. For the purpose of this Agreement, the term "Class" shall mean each
class of Secured Creditors, i.e., whether (x) the Credit Agreement Creditors as
holders of the Credit Document Obligations or (y) the Other Creditors as holders
of the Other Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to each of the
Credit Document Obligations, the Required Lenders and (y) with respect to the
Other Obligations, the holders of at least a majority
<PAGE> 12
of all obligations outstanding at the time under the Interest Rate Protection
Agreements or Other Hedging Agreements.
21. MISCELLANEOUS. This Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full force and
effect, subject to release and/or termination as set forth in Section 18, (ii)
be binding upon each Pledgor, its successors and assigns, and (iii) inure,
together with the rights and remedies of the Pledgee hereunder, to the benefit
of the Pledgee, the Secured Creditors and their respective successors,
transferees and assigns. This Agreement shall be construed in accordance with
and governed by the law of the State of New York. The headings of the several
sections and subsections in this Agreement are for purposes of reference only
and shall not limit or define the meaning hereof. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument. In the event that any provision
of this Agreement shall prove to be invalid or unenforceable, such provision
shall be deemed to be severable from the other provisions of this Agreement
which shall remain binding on all parties hereto.
22. WAIVER OF JURY TRIAL. Each party hereto irrevocably waives
all right to a trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement or the transactions contemplated hereby.
23. RECOURSE. Notwithstanding anything to the contrary
contained herein, the Pledgee, on behalf of itself and each of the other Secured
Creditors, hereby acknowledges and agrees that this Agreement is made without
recourse to Pledgors and nothing in this Agreement shall be construed to create
any personal liability for the payment of money (including damages), except to
the extent that such liability is limited in recourse to the Collateral. No
Pledgor shall be obligated to incur any out of pocket expenses to comply with
this Agreement. No Pledgor shall be personally liable for the payment of any of
the Obligations. The Pledgee's and the other Secured Creditors' rights shall be
limited to the foreclosure of the Lien created hereby in the manner provided
herein and the Pledgee and the other Secured Creditors shall have no right to
proceed directly against any Pledgor for the satisfaction of any Obligation or
for any deficiency remaining from the foreclosure of the Lien created hereunder
or any portion thereof.
24. SEVERAL OBLIGATIONS. Notwithstanding anything to the
contrary set forth herein, the obligations of the Pledgors hereof shall be
several and not joint.
25. ADDITIONAL PLEDGORS. It is understood and agreed that no
Person not a Pledgor hereunder shall become the beneficial owner of any capital
stock of the Borrower without first executing as an additional Pledgor a
counterpart of, or assumption agreement with respect to, this Agreement and
delivering same, plus its stock of the Borrower in pledge hereunder, to the
Pledgee, and Annex A will be modified at such time in a manner reasonably
acceptable to the Pledgee to give effect to such additional Pledgors.
26. JLL HEALTHCARE RESOLUTIONS. JLL Healthcare LLC hereby
covenants and agrees that it will not engage in any business and have no assets
or liabilities other than owning stock of the Borrower and its rights and
obligations under the Documents to which it is a party. Notwithstanding the
foregoing, JLL Healthcare LLC may engage in activities
<PAGE> 13
incidental to (a) the maintenance of its corporate existence in compliance with
applicable law, and (b) legal, tax and accounting matters in connection with any
of the foregoing activities.
* * *
<PAGE> 14
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused
this Agreement to be executed and delivered by their duly authorized officers as
of the date first above written.
<TABLE>
<S> <C>
Address: JLL HEALTHCARE LLC
c/o Joseph Littlejohn & Levy Fund III, LP as Pledgor
450 Lexington Avenue, Suite 3350 By:/s/Jeffrey C. Lightcap
New York, NY 10017 -------------------------
Name: Jeffrey C. Lightcap
Title:Senior Managing Director
Attention: Mr. Jeffrey C. Lightcap
Telephone: (212) 210-9334
Facsimile: (212) 286-8626
Address: GENERAL ELECTRIC CAPITAL
3379 Peachtree Road CORPORATION as Pledgor
Suite 600 By: /s/ John P. Crosby
Atlanta, GA 30326 -------------------------
Name: John P. Crosby
Title: Duly Authorized Signatory
Attention: John P. Crosby
Telephone: (404) 814-2609
Facsimile: (404) 266-3538
Address: TRIUMPH PARTNERS III, L.P.
Triumph Capital Group, Inc. as Pledgor
28 State Street By: Triumph III Advisors, L.P., its general partner
37th floor By: Triumph III Advisors, Inc., its general partner
Boston, MA 02109
Attention: Charles Spadoni By:/s/ Frederick S. Moseley IV
Telephone: (617) 557-6049 ---------------------------
Facsimile: (617) 557-6022 Name: Frederick S. Moseley IV
Title: President
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
Address: TRIUMPH III, INVESTORS, L.P.
Triumph Capital Group, Inc. as Pledgor
28 State Street By: Triumph III Investors, Inc., its general partner
37th floor
Boston, MA 02109 By: /s/ Frederick S. Moseley IV
----------------------------------
Name: Frederick S. Moseley IV
Attention: Charles Spadoni Title: President
Telephone: (617) 557-6049
Facsimile: (617) 557-6022
Address: MORGAN GUARANTY TRUST COMPANY
c/o J.P. Morgan Services, Inc. OF NEW YORK
500 Stanton Christiana Road as Collateral Agent and
Newark, DE 19713 as Pledgee
Attention: Renee Richmond
Telephone: (302) 634-3316 By: /s/ Colleen Galle
Facsimile: (302) 634-4300 ------------------------------
Name: Colleen Galle
Title: Vice President
</TABLE>
<PAGE> 16
Annex A
LIST OF STOCK
<TABLE>
<CAPTION>
Name of
Issuing Type of Number of Certificate Percentage
Corporation Shares Shares No. Owned
----------- ------ ------ --- -----
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.8
EMPLOYEE LEASING AGREEMENT
THIS EMPLOYEE LEASING AGREEMENT (the "Agreement") is entered into
effective as of October 15, 1999, by and between Iasis Healthcare Corporation,
a Delaware corporation, as successor-in-interest to JLL Hospital, LLC, a
Delaware limited liability company (the "Lessee") and Tenet Healthcare
Corporation, a Nevada corporation (the "Lessor"); provided, however that OrNda
HealthCorp. of Phoenix, Inc., American Medical (Central), Inc. S.C. San
Antonio, Inc., Mesa General Hospital Medical Center, Inc., Tenet Texas
Employment, Inc., National Medical Services, Inc. and Tenet HealthSystem
Medical, Inc. shall each be a party to this Agreement and a Lessor to the
extent each employs individuals at any of the Facilities.
WHEREAS, the Lessor has agreed to sell to the Lessee, and the Lessee has
agreed to purchase from the Lessor, certain healthcare assets and businesses of
the Lessor and its affiliates (the "Facilities") upon the terms and conditions
set forth in the Asset Sale Agreement by and between Lessee and Lessor dated as
of August 15, 1999 and the Asset Sale Agreement between Odessa Hospital, Ltd.
and Lessee dated August 15, 1999 (collectively, "Asset Sale Agreements"); and
WHEREAS, the Lessee desires to retain, and the Lessor desires to provide,
the temporary services of the Lessor's work force at the Facilities (the
"Facility Employees") in order to continue without interruption the operation
of the transferred assets and business following sale of the same by the Lessor
to the Lessee, until such time as the Facility Employees shall become employed
by Lessee.
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants, agreements and undertakings hereinafter made, the
parties hereby agree as follows:
1. Term. The term of this Agreement shall be from the "Closing Date," as
such term is defined in the Asset Sale Agreements, through December 31, 1999.
2. Staffing. Lessor agrees to continue to employ the Facility Employees,
and to make the services of such employees available to Lessee, for the term of
this Agreement. Subject to Sections 3, 5 and 7 hereof, Lessor will continue to
be responsible for all wages, salaries and other compensation, employee
benefits, insurance, workers' compensation, employment taxes, withholding,
employee-related reporting, filing, and disclosure obligations, compliance with
all employment laws, and all other employment-related liabilities for the
Facility Employees which arise during the term of this Agreement.
3. Compensation. In exchange for Lessor's provision of staffing services,
Lessee shall pay as described below an amount equal to the out-of-pocket costs
or expenses (including but not limited to wages, salaries and other
compensation, employee benefits, insurance, workers' compensation, employment
taxes, withholding, administration, and insurance costs) incurred by Lessor in
connection with continued employment of its employees for the term of this
Agreement. Lessor shall provide the amount of such out-of -pocket costs or
expenses to Lessee by 5:00 p.m. Eastern Time on the Wednesday immediately
preceding the payday for the Facility Employees and Lessee shall wire said
amount on the following day, Thursday, so as to
<PAGE> 2
ensure that Lessor receives said amount no later than 5:00 p.m. Eastern Time
the following day, Thursday, in Lessor's account as designated by Lessor from
time to time.
4. Supervision. During the term of this Agreement, Lessor agrees that the
Facility Employees will perform such services as may be mutually agreed upon by
Lessor and Lessee. Lessee shall not act as an employer with respect to the
Facility Employees and shall have no responsibility, authority, or liability as
such. Lessor reserves the right and authority, in its capacity as employer, to
direct, supervise, and discipline (including hire, retain, and terminate) the
Facility Employees. However, Lessee shall be permitted to reasonably request
that Lessor release or replace any Facility Employee, which request shall be
promptly considered by Lessor. In particular, Lessee shall have the authority
to designate tasks to be performed, and shall have the authority to instruct
and oversee employees in the manner, means and method of accomplishing such
tasks.
5. Compliance. To the extent that Lessor is responsible for any legal
liability relating to or arising out of events, occurrences, conditions,
actions, or inactions with respect to the Facility Employees during the term of
this Agreement, including, without limitation, claims of, for, or relating to
employment discrimination, unfair labor practices, wage and hour violations,
health and safety violations, workers' compensation, employee benefits,
wrongful discharge, tort liability, breach of agreement, or any other violation
of sate or federal law or regulation, Lessee agrees to defend, indemnify, and
hold harmless Lessor from and against any and all such liabilities; provided,
however, that Lessee shall not be required to indemnify Lessor from any
liability resulting from Lessor's gross negligence or willful misconduct.
6. Wages and Salaries. Lessor shall pay the Facility Employees such wages,
salaries and bonuses, at such rate and at such times as it shall determine from
time to time for each Facility Employee, consistent with past employment
practices as of the effective date of this Agreement. Subject to Section 3
hereof, all withholding and payroll taxes due with respect to such payments, as
well as any other legally required contributions (such as in the nature of
social security payments) shall be the sole responsibility of Lessor. Lessee
shall not be obligated to pay any wage or salary to the Facility Employees
directly, nor shall it be responsible for any withholding taxes or
contributions due with respect to such payments.
7. Employee Benefits.
(a) During the term of this Agreement, Lessor shall continue to
maintain its employee benefit and fringe benefit plans, programs and
arrangements in effect at the execution of this Agreement and continue to
provide its employees with such employee benefits and fringe benefits as
authorized and provided pursuant to those plans, programs and arrangements
as of such date, or as thereafter amended, and Lessee shall fully
reimburse Lessor for all benefit costs, including without limitation claim
costs, premium costs and costs of administration paid by Lessor with
respect to all such benefits including, without limitation, the ongoing
costs associated with offering COBRA coverage to any Facility Employees
(or dependent thereof) who terminates employment with Lessor (or otherwise
incurs a qualified event) during the term of this Agreement (collectively,
the "Benefit Costs"). Lessor shall provide the amount of the Benefit Costs
to Lessee for a particular calendar month by 5:00 p.m. Eastern Time on the
day which is
<PAGE> 3
two (2) calendar days prior to the last calendar day of such month (the
"Submittal Date"), and Lessee shall wire said amount on the following
calendar day (the "Pay Date"), so as to ensure that Lessor receives said
amount no later than 5:00 p.m. Eastern Time on the Pay Date, in Lessor's
account as designated from time to time. Notwithstanding the foregoing, if
either the Submittal Date or the Pay Date falls on a day which is not a
business day, the Submittal Date and the Pay Date shall be accelerated in
such calendar month to the first date in such calendar month which would
enable both the Submittal Date and the Pay Date to fall on a business day.
Lessor shall give Lessee 30 days advance notice of any plan amendment that
would increase the employer costs thereunder.
(b) Lessor agrees to purchase and maintain from vendors recommended
and secured by Lessee, at Lessee's expense, such stop loss insurance as
may be requested and secured by Lessee with respect to the medical and
dental benefits provided to the Facility Employees.
8. Personnel Policies. Except as specified herein, all terms and
conditions of employment applicable to the Facility Employees shall be governed
by Lessor's personnel policies and practices in effect at the execution of this
Agreement, or as amended from time to time, and Lessee shall have no authority
to enforce, alter or interpret such policies and practices.
9. Workers' Compensation. Lessor shall provide workers' compensation
insurance for Lessor's employees during the term of the Agreement, provided,
however, that Lessee shall fully reimburse Lessor for any and all claims,
premiums and administrative costs associated with such coverage.
10. Transfer. Upon termination of this Agreement, Lessee shall
unconditionally make offers of employment to all Facility Employees who are
leased to Lessee under this Agreement at the expiration of the term hereof in
accordance with section 5.3 of the Asset Sale Agreements.
11. Third Party Beneficiaries. This Agreement and all conditions and
provisions hereof are for the sole and exclusive benefit of the parties hereto
and their respective successors and assigns and are not intended for the
benefit of any other person. In particular, nothing expressed by or mentioned
in this Agreement is intended or shall be construed to give any Facility
Employee or his or her respective heirs, assigns and beneficiaries, any legal
or equitable right, remedy or claim under or in respect to this Agreement or
any provision herein contained.
12. Notices. Any notice or other communication required or which may be
given hereunder shall be in writing and either be (i) delivered personally,
(ii) deposited in the United States mail, first class, certified, return
receipt requested, postage prepaid, or (iii) sent by electronic transmission,
receipt confirmed, and shall be deemed given when so delivered personally, or
if mailed, five business days after the date of such mailing, or upon receipt
of electronic transmission, and shall be addressed as follows:
<PAGE> 4
If to Lessor:
Tenet Healthcare Corporation
Paul Slavin
Tenet HealthSystem
Dallas Operations Center
14001 Dallas Parkway, Suite 200
Dallas, Texas 75240
with a copy to:
David I. Schiller, Esq.
Gibson, Dunn & Crutcher, L.L.P.
1717 Main Street, Suite 5400
Dallas, Texas 75201-7390
If to Lessee:
Frank A. Coyle
IASIS Healthcare Corporation
104 Woodmont, Suite 101
Nashville, Tennessee 37205
with a copy to:
Robert Pincus
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
Either party may change its address to which notices or other communications
are to be sent by giving written notice of such change in the manner provided
herein for giving notice.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
14. Headings. The headings contained in this Agreement are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
15. Severability. In the event any one or more of the provisions contained
in this Agreement or in any other instrument referred to herein shall, for any
reason, be determined to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
provision hereof. Lessor and Lessee shall endeavor in good faith
<PAGE> 5
negotiations to modify the invalid, illegal or unenforceable provision to the
extent necessary to make such provision, valid, legal and enforceable and to
cause this Agreement to operate in a fair and equitable manner between the
parties. Each of the parties hereto agrees that it shall not allege the
invalidity, illegality, or unenforceability of this Agreement, or any one or
more of the provisions contained herein.
16. Relationship of Parties. Nothing herein contained shall constitute
Lessor and Lessee as members of any partnership, joint venture, association,
syndicate, or other entity, or be deemed to confer on any of them any express,
implied, or apparent authority to incur any obligation or liability on behalf
of another party, except as otherwise expressly provided herein.
17. Assignment. This Agreement and the rights, benefits, obligations
and remedies hereunder or any interest therein shall not be assignable or
transferable by operation of law or otherwise by Lessor or Lessee without the
prior written consent of each of them. Any attempt so to assign or to delegate
any of the foregoing without such consent shall be void.
TENET HEALTHCARE CORPORATION IASIS HEALTHCARE CORPORATION
By: /s/ Paul O'Neill By: /s/ Frank Coyle
------------------------------- ---------------------------
Name: Paul O'Neill Name: Frank Coyle
Title: Vice President Title: Secretary
ORNDA HEALTHCORP. OF PHOENIX, INC.
By: /s/ Paul O'Neill
-------------------------------
Name: Paul O'Neill
Title: Vice President
AMERICAN MEDICAL(CENTRAL), INC.
By: /s/ Paul O'Neill
-------------------------------
Name: Paul O'Neill
Title: Vice President
<PAGE> 6
S.C. SAN ANTONIO, INC.
By: /s/ Paul O'Neill
-------------------------------
Name: Paul O'Neill
Title: Vice President
MESA GENERAL HOSPITAL MEDICAL
CENTER, INC.
By: /s/ Paul O'Neill
-------------------------------
Name: Paul O'Neill
Title: Vice President
TENET TEXAS EMPLOYMENT, INC.
By: /s/ Paul O'Neill
-------------------------------
Name: Paul O'Neill
Title: Vice President
NATIONAL MEDICAL SERVICES, INC.
By: /s/ Paul O'Neill
-------------------------------
Name: Paul O'Neill
Title: Vice President
TENET HEALTHSYSTEM MEDICAL, INC.
By: /s/ Paul O'Neill
-------------------------------
Name: Paul O'Neill
Title: Vice President
<PAGE> 1
EXHIBIT 10.9
TENET BUYPOWER
PURCHASING ASSISTANCE AGREEMENT
This Purchasing Assistance Agreement (this "Agreement") is entered into by and
between Iasis Healthcare Corporation, a Delaware corporation as successor in
interest to JLL Hospital, LLC, a Delaware limited liability company, for itself
and on behalf of its subsidiaries identified on Exhibit A, attached hereto and
incorporated herein by this reference (collectively hereinafter, "Purchaser"),
located at 104 Woodmont, Suite 101, Nashville, Tennessee 37205, and Tenet
HealthSystem Medical, Inc., on behalf of itself and its affiliates, a Delaware
Corporation ("Tenet"), located at 14001 Dallas Parkway, Dallas, Texas 75240.
WITNESSETH:
A. Purchaser (through its direct and indirect subsidiaries) owns and/or
operates those certain facilities listed on Exhibit B, attached hereto
and incorporated herein by this reference (hereinafter referred to as
"a facility" or collectively as "the facilities"), through which
Purchaser and its direct and indirect subsidiaries (collectively,
"Hospital") provides medical and hospital services.
B. Tenet maintains agreements for purchasing various goods, supplies,
materials, dietary products, pharmaceutical and equipment used by
hospitals on a national basis.
C. Hospital desires to purchase such goods, supplies, materials, dietary
products, pharmaceutical and equipment under said national supply and
purchase agreements to the extent permitted by such agreements, and to
the extent that the price for purchase hereunder would be based upon
meeting vendor terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth, it is agreed as follows:
1. PURPOSE:
Hospital hereby employs Tenet to assist Hospital in the purchasing of
various supplies, goods, materials, dietary products, pharmaceutical
and equipment used in the Hospital's normal and customary operations of
the facilities and Tenet agrees to assist Hospital in the purchasing of
such supplies, goods, materials, dietary products, pharmaceutical and
equipment for the facilities, all as is more fully set forth below.
2. TERM:
Subject to prior termination under Paragraph 6, below, the term of this
Agreement shall be for a period of one year commencing on October 5,
1999, and ending on October 16, 2000 (the "Initial Term"); provided,
however, that unless notice of termination is provided by Hospital at
least 30 days prior to the expiration of the Initial Term or any
renewal term, this agreement shall automatically be extended for
successive one year periods.
<PAGE> 2
3. TENET'S RESPONSIBILITIES:
a. Prior to the commencement date of this Agreement, Tenet has
delivered, or caused to be delivered, to Hospital a copy (or
brief summary hereof) of all national purchase and supply
agreements which Tenet has in effect at that time.
Additionally, Tenet will, during the term hereof, provide
Hospital with copies of any additional amendments, changes, or
terminations to such agreements on a timely basis so that
Hospital can be advised thereof.
b. Tenet will provide consultation with Hospital to effect a
smooth transition.
c. Tenet shall notify each of the contracting parties to such
national purchase and supply agreements that Hospital is
participating in such agreements to the extent permitted by
such agreements and accordingly is entitled to purchase of
such goods, supplies, materials, dietary products,
pharmaceutical and equipment and receive the same discounts
thereunder as Tenet.
d. Hospital acknowledges that Tenet has certain subsidiaries and
divisions in the health care field. Certain of these
subsidiaries or divisions may, from time to time, make
proposals to or do business with Hospital. Tenet shall in each
instance cause the disclosure of the related nature of such
enterprises, and Hospital shall in each such instance be free
to enter into or reject any such proposals or business dealing
solely on the respective merits.
4. REPRESENTATIONS AND COVENANTS OF HOSPITAL:
Hospital hereby represents to and covenants with Tenet as follows:
a. All purchasing by Hospital of goods, supplies, materials,
dietary products, pharmaceuticals and equipment under said
national purchasing and supply agreements shall be in the name
of Hospital or its controlled affiliates, and Hospital shall
be solely responsible for payment therefor.
b. Any purchase by Hospital under any such national purchase and
supply agreement will be between Hospital and the respective
contractor; Tenet does not make any warranty, express or
implied, as to such goods, supplies, materials, dietary
products, pharmaceuticals or equipment.
c. Hospital shall indemnify and hold Tenet harmless from any
liability brought against them or any of them as a result of
Hospital's action or inaction with respect to such national
purchase and supply agreements.
5. ADMINISTRATIVE FEES:
Tenet shall share back 50% of all administrative fees paid by suppliers
against the Hospital's purchases as identified in Paragraph 8 of this
Agreement.
6. TERMINATION:
a. During the term hereof, either party may terminate this
Agreement with or without
<PAGE> 3
cause at any time by giving written notice to the other, such
termination to be effective sixty (60) days after the date
such notice is given.
b. Upon termination of this Agreement, whether by expiration of
its term or otherwise, provided that Tenet is not performing
services on a month-to-month basis as provided in Paragraph 2
above, neither Hospital nor Tenet shall have any further
obligations hereunder, and particularly no obligation to
maintain, update, or advise concerning any system or procedure
provided hereunder.
7. SUCCESSORS AND ASSIGNS:
a. No party hereto may assign its interest in or delegate the
performance of its obligations under this Agreement to any
other person without obtaining the prior written consent of
the other party. Hospital may assign its interest to a duly
authorized successor in interest provided, however, that any
such transferee or assignee shall expressly assume in writing
the obligations of Hospital to Tenet as set forth herein.
b. The terms, provisions, covenants, obligations and conditions
of this Agreement shall be binding upon and shall inure to the
benefit of the successors in interest and the assigns of the
parties hereto, provided that no assignment, transfer, pledge
or mortgage by or through either party, as the case may be, in
violation of the provisions of this Agreement, shall vest any
rights in the assignee, transferee, pledgee or mortgagee.
8. FEE FOR PURCHASING ASSISTANCE AGREEMENT:
Hospital acknowledges that, as part of an agreement to furnish goods or
services to Hospital, Tenet may receive a group purchasing
administrative fee in connection with certain products that are
purchased, licensed or leased by Hospital. Such payment shall equal 3%
or less of the purchase price of the goods or services provided by the
participating vendor. Tenet shall disclose to Hospital in writing, on
an annual basis, and to the Secretary of Health and Human Services upon
his or her request, the amount received from each vendor with respect
to purchases made by or on behalf of Hospital. Within 90 days after the
end of each fiscal quarter of Tenet (FYE May 31) during the term of
this Agreement, Tenet shall provide Hospital with information from
venders regarding administrative fees with respect to purchases by
Hospital hereunder for such quarterly period.
9. NOTICES:
Any notice by any party to the other shall be in writing and shall be
deemed to have been given on the earlier of (a) the date on which it is
delivered personally or (b) four (4) days after it is deposited in the
U.S. mail, postage prepaid, certified with return receipt requested and
addressed to the party at its address as set forth on Page 1 of this
Agreement (or at such other address as may have been designated by the
party pursuant to this Paragraph 9).
<PAGE> 4
10. APPLICABLE LAW:
This Agreement is entered into in the State of New York and shall be
governed by the laws of the State of York and all actions concerning
this Agreement shall be brought in the courts of the State of New York.
11. ACCESS TO BOOKS AND RECORDS OF TENET BY SECRETARY OF HHS OR AUTHORIZED
REPRESENTATIVE:
Upon written request of the Secretary of Health and Human Services or
the Comptroller General or any of their duly authorized
representatives, Tenet or any other related organization providing
services with a value or cost of ten thousand dollars ($10,000.00) or
more, over a twelve (12) month period, shall make available to the
Secretary the contracts, books, documents and records that are
necessary to certify the nature and extent of the costs of providing
such services. Such inspection shall be available up to four (4) years
after the rendering of such services. This paragraph is not intended to
prohibit or impede any state audits pursuant to state law.
12. ENTIRE AGREEMENT:
This Agreement constitutes the sole and only Agreement of the parties
hereto with respect to purchasing assistance services to the facilities
and correctly sets forth the rights, duties, and obligations of each to
the other as of its date. Any and all prior agreements, promises,
proposals, negotiations or representations, whether written or oral
with respect to purchasing assistance services to the facilities, which
are not expressly set forth in this Agreement are hereby superseded and
are of no force or effect. This Agreement is considered confidential,
therefore, any specifics of this Agreement will not be discussed unless
mutual consent has been agreed upon by both parties.
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed
by their authorized representatives this 15th day of October, 1999.
TENET HEALTHSYSTEM MEDICAL, INC. IASIS HEALTHCARE CORPORATION
By: /s/ Paul O'Neill /s/ Frank Coyle
------------------------- ---------------------------
Name: Paul O'Neill Signature
Title: Vice President
Frank Coyle
---------------------------
Print Name
Secretary
---------------------------
Title
<PAGE> 6
EXHIBIT A
PURCHASER SUBSIDIARIES
St. Luke's Medical Center, LP
St. Luke's Behavioral Center, LP
Health Choice Arizona, Inc.
Metro Ambulatory Surgery Center, Inc.
Biltmore Surgery Center, Inc.
Palms of Pasadena, LP
Odessa Regional Hospital, LP
Tempe St. Luke's Hospital, LP
Memorial Hospital of Tampa, LP
Mesa General Hospital, LP
Town & Country Hospital, LP
Southwest General Hospital, LP
SSJ St. Petersburg Holdings, Inc.
First Choice Physicians Network Holdings, Inc.
Baptist Joint Venture Holdings, Inc.
Beaumont Hospital Holdings, Inc.
Iasis Healthcare Holdings, Inc.
<PAGE> 7
EXHIBIT B
FACILITIES
HealthChoice Arizona
Memorial Hospital of Tampa
Mesa General Hospital
Mid-Jefferson Hospital
Odessa Regional Hospital
Palms of Pasadena Hospital
Park Place Medical Center
St. Luke's Medical Center
St. Luke's Behavioral Health Center
Southwest General Hospital
Tempe St. Luke's Hospital
Town & Country Hospital
Davis Hospital and Medical Center
Jordan Valley Hospital
Pioneer Valley Hospital
State Street Hospital
Salt Lake Regional Medical Center
<PAGE> 1
EXHIBIT 10.10
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this "Agreement") is made
as of October 8, 1999, by and between PARACELSUS HEALTHCARE CORPORATION, a
California corporation ("PHC"), and PHC/PSYCHIATRIC HEALTHCARE CORPORATION, a
Delaware corporation ("HOLDCO").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Recapitalization Agreement,
dated as of August 13, 1999, by and among PHC, PHC/CHC HOLDINGS, INC., a
California corporation, HOLDCO, PHC-SALT LAKE CITY, INC., a Utah corporation,
PARACELSUS PIONEER VALLEY HOSPITAL, INC., a Utah corporation, PIONEER VALLEY
HEALTH PLAN, INC., a Utah corporation, PHC-JORDAN VALLEY, INC., a Utah
corporation, PARACELSUS PHC REGIONAL MEDICAL CENTER, INC., a Utah corporation,
PARACELSUS DAVIS HOSPITAL, INC., a Utah corporation, PHC UTAH, INC., a Delaware
corporation, CLINICARE OF UTAH INC., a Utah corporation, and JLL HOSPITAL LLC, a
Delaware limited liability company ("JLL") (the "Recapitalization Agreement"),
the parties agreed to recapitalize Holdco following the contribution of the
Assets to Holdco and the assumption of the Assumed Liabilities by Holdco; and
WHEREAS, capitalized terms used herein and not otherwise
defined herein have the meanings given to such terms in the Recapitalization
Agreement; and
WHEREAS, PHC utilizes certain licensed software and other
products and services pursuant to (i) an agreement with the Health Services
Division of Keane, Inc. dated April 13, 1998 as amended and supplemented (the
"Keane Agreement"), (ii) an agreement with CompuLab System Corporation dated
April 30, 1998 (the "CompuLab Agreement"), and (iii) an agreement with Lawson
Software dated May 30, 1997 (the "Lawson Agreement") (the Keane Agreement,
Lawson Agreement and CompuLab Agreement, as the same may be amended,
supplemented or replaced, are collectively referred to herein as the "Services
Agreements"); and
WHEREAS, prior to the consummation of the transactions
contemplated by the Recapitalization Agreement, PHC provided and made available
certain data processing services and systems to the Business pursuant to the
Service Agreements; and
WHEREAS, Holdco desires PHC to continue to provide such data
processing services and systems in support of the Business as provided herein
and PHC is willing to continue to provide the Services on the terms and
conditions set forth herein.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, PHC and Holdco agree as follows:
1. Transition Services. During the term of this Agreement as
set forth in Section 5 below (the "Transition Period"), PHC shall provide, or
cause its Affiliates to provide, to Holdco and its subsidiaries the services set
forth on such Annex A (the "Services"), in the manner, at the locations and at a
relative level of service consistent with that provided by PHC or its Affiliates
to or for the benefit of the Business immediately prior to the date hereof. The
Services shall be provided from PHC's data processing center (the "Data Center")
in Houston, Texas using PHC's computer processing equipment at such site, with
the exception of the CompuLab Clinical Lab System which is operated at the
Paracelsus Davis Hospital, Inc. facility. Holdco or its Subsidiaries operating
the Business shall be responsible for (i) coding and transmitting the data (the
"Facilities Data") to be processed hereunder to the Data Center, (ii)
supervising the conversion of the Facilities Data, including financial data,
into a form that can be processed by PHC, (iii) determining whether the
Facilities have complied with applicable accounting practices, (iv) determining
whether the Facilities have complied with applicable state and federal
regulations governing financial reporting obligations; (v) verifying the
accounting of data generated by the Facilities or by PHC from other data
generated by the Facilities; (vi) maintaining prudent internal controls of
reports and data generated by the Facilities and (vii) maintaining all equipment
and all communication lines at the Facilities to the extent reasonably necessary
in connection with providing the Services. The Services used by Holdco and its
subsidiaries shall be provided, and Holdco shall pay for such Services (i) an
amount equal to actual costs to PHC (including third-party out-of-pocket costs
and PHC's reasonable internal overhead and administrative costs) of providing
such Services plus two percent (2%) (the "Service Fee") and (ii) those charges
set forth in Annex B hereto (the "Charges").
PHC will provide to Holdco and its subsidiaries operating the
Business, for the term of this Agreement, and to the extent necessary to utilize
the Services, a non-transferable and non-exclusive right to use the computer
software systems (the "Software") set forth in Annex A to the extent permitted
by and in accordance with the terms and conditions of the applicable Service
Agreements.
Holdco and its subsidiaries operating the Business shall have
no rights in the Software not expressly granted hereby, including, but not
limited to any right to: alter the Software; create derivative works; distribute
or sublicense the Software to third parties; incorporate additional software
into the Software at the operating system level; incorporate the Software into
any publicly available database; reproduce the Software; or use the software for
any purpose other than as specified by this Agreement.
From time to time PHC may, but is not obligated to, update the
Software at no additional charge to Holdco. In such event, Holdco will
discontinue use of the
2
<PAGE> 3
then-current version of the Software within 60 days after its receipt of the
updated Software and substitute the updated version of such Software in
accordance with any installation guidelines provided by PHC.
2. Billing and Payment. At the end of each calendar month
during the Transition Period, PHC shall submit to Holdco a bill or invoice
setting forth the Service Fees and Charges for Services provided by PHC or its
Affiliates during the immediately preceding month. Holdco shall pay all bills
and invoices that it receives from PHC or its Affiliates for the Services
provided under or pursuant to this Agreement within thirty (30) calendar days of
receipt of such bill or invoice. All payments will be made by wire transfer or
by check in accordance with the instructions provided in writing by PHC.
3. General Intent. PHC shall use its reasonable best efforts
to provide the Services it is to provide that are set forth on Annex A attached
hereto and such other transition services and assistance as the parties may
otherwise agree (with respect to such additional services, at a cost and for
such period as is mutually agreed). Holdco agrees to use its reasonable best
efforts to end its need to use such assistance as soon as reasonably possible
and (unless the parties otherwise agree) in all events to end such need with
respect to each Service specified in Annex A attached hereto not later than the
first anniversary of the date hereof; provided, however, that if PHC is not
permitted, by the terms of its Agreements with third parties relating to the
Services, to provide any of the Services hereunder for the entire Term, then
such Service or Services shall only be provided by PHC to the extent, and for
the period of time permitted by, such Agreement.
4. Validity of Documents. The parties hereto shall be entitled
to rely upon the genuineness, validity or truthfulness of any document,
instrument or other writing presented in connection with this Agreement unless
such document, instrument or other writing appears on its face to be fraudulent,
false or forged.
5. Term of Agreement. The term of this Agreement (the "Term")
shall commence on the date hereof and shall continue (unless sooner terminated
pursuant to the terms of Section 6 hereof) for a period of one year or, with
respect to any of the Services, such shorter period as may be permitted under
the terms of third-party agreements relating to such Services. It is understood
that Services provided in accordance with the Keane Agreement may not exceed a
period of six months under the terms of the Keane Agreement unless otherwise
agreed upon by Keane.
6. Partial Termination. The provision of one or more of the
Services provided by PHC and/or its Affiliates hereunder may be terminated by
Holdco earlier than the first anniversary of the date hereof, on not less than
sixty (60) days' prior written notice to PHC. Such termination shall be final as
of such sixtieth day or other later date specified in the applicable notices
only with respect to the Service(s) so terminated and the remainder of the
Services shall continue to be provided in accordance
3
<PAGE> 4
with the terms of this Agreement, including Annex A hereto, for the remainder of
the Term.
7. Assignment. This Agreement shall not be assignable or
otherwise transferable by any party hereto, other than to its affiliates,
without the prior written consent of the other party hereto provided that Holdco
shall be permitted to assign its rights hereunder to the financing sources of
Holdco with respect to the financing of the transactions contemplated by the
Recapitalization Agreement and provided that PHC shall be permitted to assign
its rights and obligations hereunder to any person or entity that acquires
substantially all the business and assets of PHC, whether by merger,
consolidation, sale of stock or assets or otherwise.
8. Confidentiality. Each party shall, and shall cause each of
its Affiliates and each of their officers, directors and employees to, hold all
confidential or proprietary information relating to (i) the Services or (ii) the
business of the other party disclosed to it by reason of this Agreement
confidential and will not disclose any of such information to any party unless
legally compelled to disclose such information; provided, however, that to the
extent that any of them may become so legally compelled they may only disclose
such information if they shall first have used reasonable efforts, to have
afforded the other party the opportunity to obtain an appropriate protective
order or other satisfactory assurance of confidential treatment for the
information required to be so disclosed.
9. Limitation of Liability. PHC shall not be liable to Holdco
or any third party (including specifically affiliates or employees of Holdco)
and Holdco shall not be liable to PHC or any third party (including specifically
affiliates or employees of PHC) for any special, punitive, consequential,
incidental or exemplary damages (including lost or anticipated revenues or
profits relating to the same) arising from any claim relating to this Agreement
or any of the services provided hereunder, whether such claim is based on
warranty, contract, tort (including negligence or strict liability) or
otherwise, even if an authorized representative of PHC or Holdco, as applicable,
is advised of the possibility or likelihood of the same. In addition, PHC shall
not be liable to Holdco or any third party (including specifically employees of
Holdco) for any damages arising from any claim relating to this Agreement or any
of the Services provided hereunder or required to be provided hereunder, except
to the extent that such damages are caused by the willful misconduct or gross
negligence of PHC or its Affiliates, as applicable.
10. Indemnification.
(a) To the fullest extent permitted by law, from and
after the date hereof Holdco shall indemnify and hold PHC harmless, including
PHC's Affiliates, shareholders, directors, officers, employees, agents, and
other representatives (collectively, the "PHC Indemnitees"), from and against
any and all damages (including exemplary damages and penalties, losses,
deficiencies, costs, expenses, obligations,
4
<PAGE> 5
fines, expenditures, claims and liabilities, reasonable counsel fees and
reasonable expenses of investigation, defending and prosecuting litigation
(collectively, the "Damages") suffered by any PHC Indemnitee, arising out of,
resulting from, or related to this Agreement, the Services provided hereunder,
or its actions in relation thereto, including Damages alleged or caused to third
parties, unless such Damages are the result of PHC's gross negligence or willful
misconduct.
(b) To the fullest extent permitted by law, from and
after the date hereof PHC shall indemnify and hold Holdco harmless, including
Holdco's Affiliates, shareholders, directors, officers, employees, agents, and
other representatives (collectively, the "Holdco Indemnitees"), from and against
any and all Damages suffered by a Holdco Indemnitee arising out of, resulting
from, or related to this Agreement, the Services provided hereunder, or its
actions in relation thereto, including Damages alleged or caused to third
parties, but only to the extent such Damages are caused by PHC's gross
negligence or willful misconduct.
11. Notices. All notices, reports and receipts shall be in
writing and shall be deemed duly given on (i) the date of personal or courier
delivery; (ii) the date of transmission by telecopy or other electronic
transmission service, provided a confirmation copy is also sent no later than
the next business day by postage paid, return receipt requested first-class
mail; or (iii) three (3) business days after the date of deposit in the United
States mails, by postage paid, return receipt requested first-class mail,
addressed as follows:
if to Holdco, to:
c/o: Joseph, Littlejohn & Levy
450 Lexington Avenue
New York, NY 10017
Attention: Jeffrey Lightcap
Facsimile: (212) 286-8686
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Attention: Robert B. Pincus, Esq.
Facsimile: (302) 651-3001
5
<PAGE> 6
if to PHC, to:
Paracelsus Healthcare Corporation
515 W. Greens Road
Suite 800
Houston, TX 77067
Attention: James VanDevender
Facsimile: (281) 774-5200
with a copy to:
Mayor, Day, Caldwell, Keeton, LLP
700 Louisiana, Suite 1900
Houston, TX 77002-2778
Attention: Diana M. Hudson, Esq.
Facsimile: (713) 225-7047
Either party may change its address by written notice to the
other party in accordance with this Section 11.
12. Modification; Nonwaiver. No alleged waiver, modification
or amendment to this Agreement or to Annex A or Annex B attached hereto shall be
effective against either party hereto, unless in writing, signed by the party
against which such waiver, modification or amendment is asserted, and referring
specifically to the provision hereof alleged to be waived, modified or amended.
The failure or delay of either party to insist upon the other party's strict
performance of the provisions in this Agreement or to exercise in any respect
any right, power, privilege or remedy provided for under this Agreement shall
not operate as a waiver or relinquishment thereof, nor shall any single or
partial exercise of any right, power, privilege or remedy preclude other or
further exercise thereof, or the exercise of any other right, power, privilege
or remedy; provided, however, that the obligations and duties of either party
with respect to the performance of any term or condition in this Agreement shall
continue in full force and effect.
13. Relationship of Parties. Except as specifically provided
herein, none of the parties shall act or represent or hold itself out as having
authority to act as an agent or partner of the other parties, or in any way bind
or commit the other party to any obligations. Nothing contained in this
Agreement shall be construed as creating a partnership, joint venture, agency,
trust or other association of any kind, each party being individually
responsible only for its obligations as set forth in this Agreement.
14. Force Majeure. If PHC or Holdco is prevented from
complying, either totally or in part, with any of the terms or provisions of
this Agreement by reason of fire, flood, storm, strike, lockout or other labor
trouble, any law, order, proclamation,
6
<PAGE> 7
regulation, ordinance, demand or requirement of any governmental authority,
riot, war, rebellion or other causes beyond the reasonable control of PHC or
Holdco, or other acts of God, then upon written notice to PHC or Holdco, as
applicable, the affected provisions and/or other requirements of this Agreement
shall be suspended during the period of such disability and PHC shall have no
liability to Holdco and Holdco shall have no liability to PHC, as applicable, or
any other party in connection therewith. PHC or Holdco, as applicable, shall
make all commercially reasonable efforts to remove such disability within thirty
(30) days of giving notice of such disability.
15. Interpretation. The headings and captions contained in
this Agreement and in Annex A and Annex B attached hereto are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The use of the word "including" herein shall mean "including
without limitation."
16. Counterparts. This Agreement may be executed in one or
more counterparts (including by means of telecopied signature pages), all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to the other party.
17. Entire Agreement. This Agreement (including the Annex
attached hereto) and the Recapitalization Agreement and the Collateral
Agreements constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
18. Severability. If any provision of this Agreement,
including any phrase, sentence, clause, section or subsection is inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
19. Governing Law. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of Delaware, without regard to the conflicts of law principles
therein.
20. Annexes. Each of Annex A and Annex B attached hereto and
referred to herein is hereby incorporated in and made a part of this Agreement
as if set forth in full herein.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Transition
Services Agreement to be executed by their duly authorized representatives as of
the date and year first set forth above.
PARACELSUS HEALTHCARE CORPORATION
By: /s/ James G. VanDevender
---------------------------------
Name: James G. VanDevender
---------------------------------
Title: Chief Executive Officer
---------------------------------
PHC/PSYCHIATRIC HEALTHCARE CORPORATION
By: /s/ Frank Coyle
---------------------------------
Name: Frank Coyle
---------------------------------
Title: Secretary
---------------------------------
8
<PAGE> 9
Annex A
SERVICES
"Services" shall mean the computer and data processing
services provided to the Business by PHC immediately prior to the date hereof
pursuant to the following software products, systems and services, in accordance
with the applicable Service Agreements:
A. Computer Software Systems/Services
- PATCOM Plus Patient Accounting Systems
- Patient Accounting
- ADT / Census
- Master Patient Index
- Patient Billing
- All Payor Logs
- Accounts Receivable Management System
- Medibase
- MediData
- Interface between CompuLAB and 3M Encoding
System (PC)
- LAWSON Financial Management System
- Accounts Payable
- General Ledger
- Payroll
- Human Resources
- Benefits
- Materials Management
- CompuLAB Clinical Lab Systems (Davis only)
- Network
- Utilize existing MCI Worldcom Frame
Relay Network necessary to access
the PATCOM Plus and LAWSON Systems.
B. Holdco and its subsidiaries operating the Business
will be granted access to PHC's computer hardware at
the Data Center for the purposes of utilizing the
Services.
C. PHC shall also provide Back-up Tape and Media and
Off-Site Storage for the Facilities Data processed.
9
<PAGE> 10
Annex B
Summary of Charges
In addition to the Service Fee, the following charges shall
apply in connection with the Services.
1. SYSTEM INITIALIZATION FEE. Holdco shall pay a one time
initialization fee of $2,000 per Facility promptly upon invoice.
2. TRAINING, SUPPORT AND ADDITIONAL FEES.
<TABLE>
<CAPTION>
<S> <C>
a) Reruns: Dayend $1,000.00
Monthend 2,000.00
b) Special Reports - PATCOM Plus 500.00
- LAWSON 500.00
c) Deinstallation Fee (per site) 1,500.00
d) Hourly Rate. The agreed hourly rate is $95.00 per hour.
e) Training and Support. PHC will provide training and
onsite support as requested by Holdco, at the agreed
hourly rate plus expenses.
</TABLE>
3. ADDITIONAL USER DOCUMENTATION AND SUPPLIES. Additional user
documentation or supplies requested by Holdco will be provided at the current
cost to PHC to the extent such documentation or supplies are available.
10
<PAGE> 11
EXHIBIT 3.4
AMENDED AND RESTATED
BY-LAWS
OF
IASIS HEALTHCARE CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
Section 2. Annual Meetings. The Annual Meetings of
Stockholders for the election of directors shall be held on such date and at
such time as shall be
<PAGE> 1
EXHIBIT 10.11
TAX SHARING AGREEMENT
Tax Sharing Agreement (the "Agreement"), dated as of October 8th,
1999, by and among JLL Healthcare, LLC, a Delaware limited liability company
("Parent"), and the affiliates of JLL Healthcare, LLC listed on Schedule A
attached hereto, as amended from time to time (each a "Sub" and collectively
"the Subs").
WHEREAS, Parent and the corporations listed on Schedule A attached
hereto (collectively and including any other includible corporations, the
"Members") are includible corporations in an affiliated group of corporations of
which Parent is the common parent (the "Group"), all within the meaning of
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, Parent and the Subs wish to allocate and settle between
Parent and the Subs in an equitable manner the consolidated or combined U.S.
federal, foreign, state, and local income tax liabilities of the Group.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Parent and the Subs agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall be defined as follows:
(a) "Estimated Tax Payments" shall mean for a Taxable Period
(as defined in Section 1(d)) the aggregate payments for such Taxable Period
provided in Section 2 hereof.
(b) "Final Determination" shall mean a closing agreement with
the Internal Revenue Service (the "IRS"), a claim for refund that has been
allowed, a deficiency notice with respect to which the period for filing a
petition with the United States Tax Court has expired, or a decision of any
court of competent jurisdiction that is not subject to appeal or for which the
time for appeal has expired.
(c) "Separate Tax Liability" for a Taxable Period shall mean
the amount equal to the lesser of (but in no case less than zero) (A) the U.S.
federal income tax liability (including, without limitation, liability for any
penalty, fine, additions to tax, interest, minimum tax and other items of any
nature applicable to each Sub in connection with the determination of such Sub's
U.S. federal income tax liability) that each Sub and its subsidiaries would have
incurred if Sub had filed (i) a consolidated U.S. federal income tax return as
the common parent corporation together with its subsidiaries that would qualify
as includible corporations with the Sub under Section 1504 of the Code or (ii) a
separate U.S.
<PAGE> 2
federal income tax return in the event no such subsidiaries exist, as the case
may be, for the Taxable Period and all prior Taxable Periods, and computed the
applicable tax liability in a manner consistent with (i) general tax accounting
principles, (ii) the Code and the Treasury Regulations promulgated thereunder
(the "Treasury Regulations") and (iii) the Sub's and its subsidiaries', if any,
practice in computing U.S. federal income tax liability (the "Separate Federal
Income Tax Liability") or (B) the product of(i) the U.S. federal income tax
liability of the Group for such year and (ii) a fraction, (x) the numerator of
which is an amount equal to the Separate Federal Income Tax Liability of Sub for
such year and (y) the denominator of which is the aggregate total of the
Separate Federal Income Tax Liability of each member of the Group for such year.
(d) "Taxable Period" shall mean any taxable year or portion
thereof ending on or after the date hereof with respect to which a consolidated
U.S. federal income tax return including Sub is or is expected to be filed on
behalf of the Group.
2. Estimated Tax Payments.
(a) For each calendar quarter in the Taxable Period that
includes the date of this Agreement, Sub shall pay to Parent on behalf of Sub
and its subsidiaries an amount equal to the amount of any estimated Separate Tax
Liability that Sub would have been required to pay with respect to such quarter.
Such amount shall be payable by Sub to Parent at least five (5) days prior to
the date on which such estimated U.S. federal income tax payment would have been
due. Such hypothetical estimated U.S. federal income tax liability shall be
determined by Sub in a manner consistent with Section 1(c) hereof.
(b) Thirty days before the end of the fourth quarter of each
Taxable Period that ends after the date hereof, Sub shall provide Parent with an
estimate of the Separate Tax Liability for the following Taxable Period and the
amount of estimated U.S. federal income taxes that Sub would have been required
to pay with respect to each quarter in the following Taxable Period if Sub were
filing a consolidated U.S. federal income tax return with Sub as the parent or
separate U.S. federal income tax return, as the case may be, for such Taxable
Period, which estimates shall be prepared in a manner consistent with Section
1(c) hereof and shall be approved by Parent. Parent shall notify Sub of any
disagreement with such estimates within 15 days of Parent's receipt of such
estimates. Upon such notification, Parent and Sub will negotiate in good faith
to resolve the dispute, but if no agreement is reached, Sub's estimates shall be
final, provided that such estimates were prepared in a manner consistent with
Section 1(c) hereof. For each of the first three calendar quarters in every
Taxable Period that begins after the date hereof, Sub shall pay to Parent an
amount equal to the estimated Separate Tax Liability for the Taxable Period that
includes such quarter. Such amount shall be payable by Sub to Parent at least 5
days prior to the date on which such estimated U.S. federal income tax payment
would have been due. If, during
2
<PAGE> 3
the course of a Taxable Period, there is a material change in Sub's estimates of
the Separate Tax Liability of Sub for such Taxable Period and the estimated tax
payments resulting therefrom, Sub shall notify Parent of such changes, and the
provisions of this Section 2(b) shall apply as if such new estimates were
submitted to Parent during the fourth quarter of the prior Taxable Period,
except that Sub shall not be required to adjust any payments already made to
Parent with respect to such current Taxable Period to reflect such new
estimates. Notwithstanding anything contrary in this Section 2(b), the amount
that Sub and its subsidiaries shall pay to Parent each calendar quarter pursuant
to this Section 2(b) shall not exceed the amount of estimated U.S. federal
income taxes that Sub would have been obligated to pay to the IRS with respect
to such quarter if Sub were filing a consolidated U.S. federal income tax return
with Sub as the common parent corporation or separate U.S. federal income tax
return, as the case may be, for the Taxable Period that includes such quarter
and all prior Taxable Periods (and such hypothetical estimated U.S. federal
income tax liability shall be determined by Sub in a manner consistent with
Section 1(c) hereof).
3. Payments and Accruals.
(a) For every Taxable Period, (i) Sub shall pay to Parent an
amount equal to the excess, if any, of the actual Separate Tax Liability for
such Taxable Period over the Estimated Tax Payments that it has paid to Parent
for such Taxable Period or (ii) Parent shall accrue as a liability (or, to the
extent not already forwarded to the IRS, promptly pay) to Sub an amount equal to
the excess, if any, of Sub's Estimated Tax Payments that have been paid to
Parent for such Taxable Period over the actual Separate Tax Liability for such
Taxable Period.
(b) As soon as practicable following the close of Sub's
taxable year, Sub shall compute the actual Separate Tax Liability, which
computation shall be reviewed by a nationally recognized accounting firm
selected by Parent.
(c) If Parent receives from the IRS as a result of a Final
Determination a refund or credit directly attributable to a payment previously
made by Sub in respect of a Separate Tax Liability, then (i) in the case of a
credit, appropriate adjustments will be made to subsequent payments of Sub
required hereunder to Parent and (ii) in the case of a refund, Parent shall
promptly repay to Sub such refund.
4. Time and Manner of Payment and Accrual. Except as otherwise
provided in Section 3(c), payments and accruals pursuant to Section 3(a) hereof
shall be made no sooner than ten (10) days prior to and no later than five (5)
days prior to the due date of the Group's consolidated U.S. federal income tax
return for the Taxable Period in question, without giving effect to any
extensions. If the due date for such return is extended, such payments and
accruals shall be recalculated by Sub no sooner than ten (10) days prior to and
3
<PAGE> 4
no later than five (5) days prior to the filing date for such return, and any
difference between such recalculated payments and accruals and such payments and
accruals (prior to such recalculation) shall be paid to or accrued for the party
entitled thereto at the time of such recalculation.
All payments Sub is required to make hereunder shall be paid in
immediately available funds as instructed by Parent.
5. Adjustments.
(a) Adjustment of Tax Liability. In the event of any
redetermination of the consolidated U.S. federal income tax liability of the
Group for any Taxable Period as a result of audit by the IRS, amended return,
claim for refund or otherwise, the Separate Tax Liability shall be re-computed
by a nationally recognized accounting firm selected by Parent for such Taxable
Period to take into account such redetermination, and the payments and accruals
pursuant to Section 3 hereof shall be appropriately adjusted. Any reconciliation
between Parent and Sub required by such adjustment shall be paid by Sub, or
accrued as a liability of Parent (or paid by Parent to Sub in the case of a
refund from the IRS), as the case may be, no sooner than ten (10) days prior to
and no later than five (5) days following the earlier of (i) the date of a Final
Determination with respect to such redetermination or (ii) the earliest date
such adjustment can reasonably be calculated or, in the case of a refund from
the IRS, within five (5) days of the receipt of such refund.
(b) Deconsolidation.
(i) In the event that it is determined that Sub has ceased to be a
Member of the Group with respect to any Taxable Period, the amount of any
payments ("Deconsolidated Payments") made by Parent or Sub with respect to
such or subsequent Taxable Periods under Sections 2 and 3 hereof (taking
into account any adjustments pursuant to paragraph (a) of this Section 5)
shall be repaid by Sub, or accrued as a liability of Parent, as the case
may be, with interest at the rate determined under Section 6621(a)(2) of
the Code no sooner than ten (10) days prior to and no later than five (5)
days following the earlier of (i) the date of a Final Determination with
respect to such determination or (ii) the earliest date such adjustment
can reasonably be calculated. In the event Parent accrues a liability to
Sub under this Section 5(b)(i), Parent shall promptly (i) repay to Sub any
Deconsolidated Payments that Parent has not forwarded to the IRS; and
(ii)(a) file a request with the IRS for a refund of all Deconsolidated
Payments that Parent has forwarded to the IRS and pay to Sub all amounts
received from the IRS pursuant to such refund request or (b) apply for and
receive permission from the IRS to have all Deconsolidated Payments that
Parent has forwarded to the IRS credited as payments made by Sub to the
IRS
4
<PAGE> 5
(in accordance with Treasury Regulation Section 1.1502-75(f)(2)). For
purposes of this Section 5(b)(i), interest shall be computed in the same
manner as the IRS would have computed interest with respect to a
hypothetical overpayment equivalent to the amount to be repaid or accrued
from the date of such hypothetical overpayment until the date repaid or
accrued.
(ii) Notwithstanding anything in this Agreement to the contrary, the
provisions of the final sentence of Section 3(a) shall continue to apply
following Sub's ceasing to be a Member of the Group for any reason.
6. Parent as Agent; Filing of Returns; Payment of Taxes.
(a) For each Taxable Period of the Group, Parent shall file,
and cause all Members to join in the filing of, consolidated U.S. federal income
tax returns. Sub hereby consents to the filing of such returns, the making of
such elections and applications and the execution of any other documents as
Parent reasonably believes may be required or appropriate for the filing of such
returns.
(b) Sub hereby appoints Parent as its agent, as long as Sub is
a member of the Group, (i) for the purpose of filing all consolidated U.S.
federal income tax returns for the Group and making any election or application
or taking any action in connection therewith on behalf of Sub and (ii) in
connection with any audit, examination or other proceeding relating to any taxes
of the Group (a "Proceeding"), to take any action in respect of any Proceeding,
to control any Proceeding, and to initiate any claim for refund, file any
amended return or take any other action Parent deems appropriate. IASIS
Healthcare Corporation, at its own cost and expense, shall prepare all such tax
returns and conduct all Proceedings in each case subject to the control of
Parent.
(c) Parent shall make all required payments of the U.S.
federal consolidated tax liability (including estimated tax payments), if any,
of the Group to the IRS provided that the Subs shall have made all payments
required of it hereunder.
7. Cooperation. In the event that the preparation of U.S. federal
income tax returns, amended returns, claims for refund, an IRS examination or
litigation relating to the foregoing may require the use of records and
information that is within the exclusive possession and control of Parent or any
Member or former Member, Parent and each Member or former Member shall provide
such records, information and assistance (which may include making employees of
any of the foregoing entities available to provide additional information and
explanatory material thereunder) as are requested by Parent or Sub, as the case
may be, during regular business hours, in connection with any of the
developments described in the preceding sentence. The decision to settle any
issue with the taxing authority
5
<PAGE> 6
shall be Parent's decision but Parent shall in good faith take into account the
intent of this Agreement to treat Sub as it would have been treated on a
consolidated U.S. federal income tax return with Sub as the parent or separate
U.S. federal income return, as the case may be, and shall endeavor to make a
settlement that is consistent with that intent. Any of the information obtained
pursuant to this Section 7 or any provision hereof providing for the sharing of
information shall be kept confidential by the parties hereto.
8. State, Local and Foreign Taxes. In the event the Parent elects,
or is required to elect, to file combined, unitary or consolidated state, local
or foreign income tax returns with Sub or any of Sub's subsidiaries, the
principles of this Agreement shall be applicable in determining the amount and
time of payment by Sub to the Parent or the accrual of a liability by Parent to
Sub.
9. Operating Principles. Parent and Sub agree to (i) act, subject to
principles of sound tax planning, to minimize payments required hereunder, (ii)
utilize cash received from any tax authority in respect of prior payments
hereunder to satisfy any unpaid accruals hereunder and (iii) pay timely amounts
paid hereunder in respect of Separate Tax Liability (including for this purpose
the equivalent amounts corresponding to state, local or foreign taxes computed
in accordance with Section 8 hereof) to the appropriate taxing authority and
return to the payor the excess, if any, of (a) such amount over (b) the amount
actually paid in respect thereof to such taxing authority.
10. Binding Effect; Successors. This Agreement shall be binding upon
each Member of the Group, whether or not such Member was a Member upon the
execution of this Agreement. Parent shall cause each present Member of the Group
formally to assent to the terms hereof and shall cause each future Member of the
Group to so assent promptly after becoming a Member of the Group. This Agreement
shall inure to the benefit of and be binding upon any successors or assigns of
the parties hereto.
11. Governing Law. This Agreement shall be governed by the laws of
the State of New York without regard to principles of conflicts of law which
would apply a law of a jurisdiction other than the law of the State of New York
to this Agreement.
[Signature Page Follows]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective officers effective as of the date
first written above.
JLL HEALTHCARE, LLC
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Vice President & Assistant Secretary
IASIS HEALTHCARE CORPORATION
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: General Counsel and Secretary
SALT LAKE REGIONAL MEDICAL CENTER,
INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
JORDAN VALLEY HOSPITAL, NC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
S-1
<PAGE> 8
DAVIS HOSPITAL & MEDICAL CENTER, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
ROCKY MOUNTAIN MEDICAL CENTER, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
PIONEER VALLEY HOSPITAL, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
PIONEER VALLEY HEALTH PLAN, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
S-2
<PAGE> 9
CLINICARE OF UTAH,INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
SOUTHRIDGE PLAZA HOLDINGS, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
SANDY CITY HOLDINGS, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
DAVIS SURGICAL CENTER HOLDINGS, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
S-3
<PAGE> 10
IASIS MANAGEMENT COMPANY
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
IASIS HEALTHCARE HOLDINGS, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
HEALTH CHOICE ARIZONA, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
METRO AMBULATORY SURGERY CENTER, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
S-4
<PAGE> 11
BILTMORE SURGERY CENTER, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
BEAUMONT HOSPITAL HOLDINGS, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
SSJ ST. PETERSBURG HOLDINGS, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
FIRST CHOICE PHYSICIANS NETWORK
HOLDINGS, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
BAPTIST JOINT VENTURE HOLDINGS, INC.
By: /s/ Frank A. Coyle
-------------------------------------------
Name: Frank A. Coyle
Title: Secretary
S-5
<PAGE> 12
Schedule A
IASIS Healthcare Corporation
Salt Lake Regional Medical Center, Inc.
Jordan Valley Hospital, Inc.
Davis Hospital & Medical Center, Inc.
Rocky Mountain Medical Center, Inc.
Pioneer Valley Hospital, Inc.
Pioneer Valley Health Plan, Inc.
CliniCare of Utah, Inc.
Southridge Plaza Holdings, Inc.
Sandy City Holdings, Inc.
Davis Surgical Center Holdings, Inc.
IASIS Management Company
IASIS Healthcare Holdings, Inc.
Health Choice Arizona, Inc.
Metro Ambulatory Surgery Center, Inc.
Biltmore Surgery Center Holdings, Inc.
Biltmore Surgery Center, Inc.
Beaumont Hospital Holdings, Inc.
SSJ St. Petersburg Holdings, Inc.
First Choice Physicians Network Holdings, Inc.
Baptist Joint Venture Holdings, Inc.
<PAGE> 1
EXHIBIT 12.1
Paracelsus Utah Facilities
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Period from Date
of Acquisition Through Year Ended Year Ended Nine Months Ended
December 31, 1996 December 31, 1997 December 31, 1998 September 30, 1998
---------------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Earnings
Income (loss) from continuing
operations before minority
interests and income taxes (103,257) 3,750 3,548 3,600
Fixed charges 10,693 25,883 20,977 16,384
Less interest capitalized -- -- -- --
------- ------ ------ ------
(92,564) 29,633 24,525 19,984
Fixed charges
Interest charged to expense 8,465 22,097 17,088 13,426
Interest capitalized -- -- -- --
Interest portion of rental expense 2,228 3,786 3,889 2,958
------- ------ ------ ------
Fixed charges 10,693 25,883 20,977 16,384
------- ------ ------ ------
Ratio of earnings to fixed charges -- 1.1 1.2 1.2
======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999
------------------
<S> <C>
Earnings
Income (loss) from continuing
operations before minority
interests and income taxes 910
Fixed charges 10,340
Less interest capitalized 218
-------
11,468
Fixed charges
Interest charged to expense 7,304
Interest capitalized 218
Interest portion of rental expense 2,818
-------
Fixed charges 10,340
-------
Ratio of earnings to fixed charges 1.1
=======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF IASIS HEALTHCARE CORPORATION
<TABLE>
<CAPTION>
Name of Subsidiary
(As stated in its organizational document State or Other Jurisdiction
and under which it does business) of Incorporation or Organization
- --------------------------------- --------------------------------
<S> <C>
Baptist Joint Venture Holdings, Inc. Delaware
Beaumont Hospital Holdings, Inc. Delaware
Biltmore Surgery Center, Inc. Arizona
Biltmore Surgery Center Holdings, Inc. Delaware
CliniCare of Utah, Inc. Delaware
Davis Hospital & Medical Center, Inc. Delaware
Davis Surgical Center Holdings, Inc. Delaware
Health Choice Arizona, Inc. Delaware
IASIS Healthcare Holdings, Inc. Delaware
IASIS Healthcare MSO Sub of Salt Lake City, LLC Utah
IASIS Management Company Delaware
Jordan Valley Hospital, Inc. Delaware
Metro Ambulatory Surgery Center, Inc. Delaware
Pioneer Valley Health Plan, Inc. Delaware
Pioneer Valley Hospital, Inc. Delaware
Rocky Mountain Medical Center, Inc. Delaware
Salt Lake Regional Medical Center, Inc. Delaware
Sandy City Holdings, Inc. Delaware
Southridge Plaza Holdings, Inc. Delaware
First Choice Physicians Network Holdings, Inc. Delaware
SSJ St. Petersburg Holdings, Inc. Delaware
Memorial Hospital of Tampa, LP Delaware
Mesa General Hospital, LP Delaware
Odessa Regional Hospital, LP Delaware
Palms of Pasadena Hospital, LP Delaware
Southwest General Hospital, LP Delaware
St. Luke's Behavioral Hospital Center, LP Delaware
St. Luke's Medical Center, LP Delaware
Tempe St. Luke's Hospital, LP Delaware
Town & Country Hospital, LP Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Tenet Healthcare Corporation:
We consent to the inclusion of our report dated September 20, 1999, relating to
the combined balance sheets of St. Luke's Medical Center, St. Luke's Behavioral
Health Center, Mesa General Hospital Medical Center, Tempe St. Luke's Hospital,
Health Choice Arizona, Inc., Memorial Hospital of Tampa, Town & Country
Hospital, Palms of Pasadena Hospital, Odessa Regional Hospital, Southwest
General Hospital, Mid-Jefferson Hospital and Park Place Medical Center,
including certain medical office buildings and other healthcare businesses
related to the operations of these hospitals (collectively the "Tenet
Hospitals") as of May 31, 1999 and 1998, and the related combined statements of
income and changes in ownership equity and cash flows for each of the years in
the three-year period ended May 31, 1999, and to the reference to our firm under
the heading "Experts" in the registration statement on Form S-4 of IASIS
Healthcare Corporation dated January 12, 2000.
/s/ KPMG LLP
Dallas, Texas
January 7, 2000
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and the
caption "Selected Historical Financial Information-Paracelsus Hospitals" and to
the use of our reports dated November 12, 1999 and December 8, 1999 with respect
to Paracelsus Utah Facilities (Subsidiaries of Paracelsus Healthcare
Corporation) and IASIS Healthcare Corporation, respectively, in the Registration
Statement (Form S-4) and related Prospectus of IASIS Healthcare Corporation for
the registration of $230 million of 13% Senior Subordinated Notes.
/s/ Ernst & Young LLP
Nashville, Tennessee
January 12, 2000
<PAGE> 1
EXHIBIT 25.1
========================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
IASIS HEALTHCARE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 76-0450619
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
113 Seaboard Lane
Suite A-200
Franklin, Tennessee 37067
(Address of principal executive offices) (Zip code)
ADDITIONAL REGISTRANTS
MEMORIAL HOSPITAL OF TAMPA, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795584
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
MESA GENERAL HOSPITAL, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795590
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
ODESSA REGIONAL HOSPITAL, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795574
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
<PAGE> 2
PALMS OF PASADENA HOSPITAL, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795583
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
SOUTHWEST GENERAL HOSPITAL, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795572
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
ST. LUKE'S MEDICAL CENTER, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795587
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
ST. LUKE'S BEHAVIORAL HOSPITAL, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795588
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
TEMPE ST. LUKE'S HOSPITAL, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795586
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
TOWN & COUNTRY HOSPITAL, L.P.
(Exact name of obligor as specified in its charter)
Delaware 62-1795580
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
BAPTIST JOINT VENTURE HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796514
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
-2-
<PAGE> 3
BEAUMONT HOSPITAL HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796501
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
BILTMORE SURGERY CENTER HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796499
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
CLINICARE OF UTAH, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1795211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
DAVIS HOSPITAL & MEDICAL CENTER, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1795217
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
DAVIS SURGICAL CENTER HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796493
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
FIRST CHOICE PHYSICIANS NETWORK HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796513
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
HEALTH CHOICE ARIZONA, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796494
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
-3-
<PAGE> 4
IASIS HEALTHCARE HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1798194
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
IASIS MANAGEMENT COMPANY
(Exact name of obligor as specified in its charter)
Delaware 62-1797795
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
JORDAN VALLEY HOSPITAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1795215
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
METRO AMBULATORY SERVICE CENTER, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796497
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
PIONEER VALLEY HEALTH PLAN, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1795212
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
PIONEER VALLEY HOSPITAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1795216
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
ROCKY MOUNTAIN MEDICAL CENTER, INC.
(Exact name of obligor as specified in its charter)
-4-
<PAGE> 5
Delaware 62-1795213
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
SALT LAKE REGIONAL MEDICAL CENTER, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1795214
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
SANDY CITY HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796492
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
SOUTHRIDGE PLAZA HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796491
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
SSJ ST. PETERSBURG HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-1796504
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
IASIS HEALTHCARE MSO SUB OF SALT LAKE CITY, LLC
(Exact name of obligor as specified in its charter)
Utah 62-1756039
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
BILTMORE SURGERY CENTER, INC.
(Exact name of obligor as specified in its charter)
Arizona 86-0837176
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
- --------------------------------------------------------------------------------
13% Senior Subordinated Exchange Notes due 2009
(Title of the indenture securities)
========================================================================
-5-
<PAGE> 6
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-6-
<PAGE> 7
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 11th day of January, 2000.
THE BANK OF NEW YORK
By: /s/ Van K. Brown
---------------------
Name: Van K. Brown
Title: Assistant Vice President
<PAGE> 8
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 11th day of January, 2000.
THE BANK OF NEW YORK
By: /s/ Van K. Brown
---------------------
Name: Van K. Brown
Title: Assistant Vice President
<PAGE> 9
EXHIBIT 7 TO FORM T-1
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from
depository institutions:
Noninterest-bearing balances and
currency and coin.............. $6,394,412
Interest-bearing balances........ 3,966,749
Securities:
Held-to-maturity securities...... 805,227
Available-for-sale securities.... 4,152,260
Federal funds sold and Securities
purchased under agreements to
resell........................... 1,449,439
Loans and lease financing
receivables:
Loans and leases, net of
unearned income................. 37,900,739
LESS: Allowance for loan and
lease losses..................... 572,761
LESS: Allocated transfer risk
reserve.......................... 11,754
Loans and leases, net of
unearned income, allowance, and
reserve........................ 37,316,224
Trading Assets..................... 1,646,634
Premises and fixed assets
(including capitalized leases)... 678,439
</TABLE>
<PAGE> 10
<TABLE>
<S> <C>
Other real estate owned............ 11,571
Investments in unconsolidated
subsidiaries and associated
companies........................ 183,038
Customers' liability to this bank
on acceptances outstanding....... 349,282
Intangible assets.................. 790,558
Other assets....................... 2,498,658
----------------
Total assets....................... $60,242,491
================
LIABILITIES
Deposits:
In domestic office............... $26,030,231
Noninterest-bearing.............. 11,348,986
Interest-bearing................. 14,681,245
In foreign offices, Edge and
Agreement subsidiaries,
and IBFs....................... 18,530,950
Noninterest-bearing.............. 156,624
Interest-bearing................. 18,374,326
Federal funds purchased and
Securities sold under agreements
to repurchase.................... 2,094,678
Demand notes issued to the
U.S.Treasury..................... 232,459
Trading liabilities................ 2,081,462
Other borrowed money:
With remaining maturity of one
year or less................... 863,201
With remaining maturity of more
than one year through three
years ......................... 449
With remaining maturity of more
than three years............... 31,080
Bank's liability on acceptances
executed and outstanding......... 351,286
Subordinated notes and debentures.. 1,308,000
Other liabilities.................. 3,055,031
----------------
Total liabilities.................. 54,578,827
================
EQUITY CAPITAL
Common stock....................... 1,135,284
</TABLE>
2
<PAGE> 11
<TABLE>
<S> <C>
Surplus............................ 815,314
Undivided profits and capital
reserves......................... 3,759,164
Net unrealized holding gains
(losses) on available-for-sale
securities....................... (15,440)
Cumulative foreign currency
translation adjustment........... (30,658)
----------------
Total equity capital............... 5,663,664
----------------
Total liabilities and equity
capital............................ $60,242,491
================
</TABLE>
3
<PAGE> 12
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni ---
Gerald L. Hassell | Directors
Alan R. Griffith |
---
4
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
IASIS HEALTHCARE CORPORATION
OFFER TO EXCHANGE
13% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED [ ], 2000,
FOR ALL ISSUED AND OUTSTANDING
13% SENIOR SUBORDINATED NOTES DUE 2009
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ],
2000, UNLESS THE EXCHANGE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Regular or Certified Mail: By Facsimile: By Overnight Courier or Hand:
The Bank of New York (Eligible Guarantor The Bank of New York
101 Barclay Street, 7E Institutions Only) 101 Barclay Street
New York, NY 10286 Corporate Trust Services Window
Attention: Reorganization Section (212) 571-4699 Ground Level
New York, NY 10286
To Confirm by Telephone Attention: Reorganization Section
or for Information Call:
(212) 815-6333
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THOSE
LISTED ABOVE, OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF YOUR OLD NOTES.
By signing this Letter of Transmittal, you hereby acknowledge that you have
received and reviewed the Prospectus, dated [ ], 2000, of IASIS
Healthcare Corporation ("IASIS") and this Letter of Transmittal. The Prospectus,
together with this Letter of Transmittal, constitutes IASIS's offer to exchange
an aggregate principal amount of up to $230,000,000 of our 13% Senior
Subordinated Exchange Notes due 2009 (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of our issued and outstanding 13% Senior
Subordinated Notes due 2009 (the "Old Notes"). The Old Notes were issued in
offerings under Rule 144A and Regulation S of the Securities Act that were not
registered under the Securities Act. This Exchange Offer is being extended to
all holders of the Old Notes.
If you decide to tender your Old Notes, and we accept the Old Notes, this
will constitute a binding agreement between you and IASIS, subject to the terms
and conditions set forth in the Prospectus and this Letter of Transmittal.
Unless you comply with the procedures described in the Prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures," you must do one
of the following on or prior to the expiration of the Exchange Offer to
participate in the Exchange Offer:
- tender your Old Notes by sending the certificates for your Old Notes, in
proper form for transfer, a properly completed and duly executed Letter
of Transmittal, with any required signature guarantees, and all other
documents required by this Letter of Transmittal to the Exchange Agent at
one of the addresses listed above; or
<PAGE> 2
- tender your Old Notes by using the book-entry transfer procedures
described in the Prospectus under the caption "The Exchange
Offer -- Book-Entry Transfer," and transmitting this Letter of
Transmittal, with any required signature guarantees, or an Agent's
Message (as defined below) instead of this Letter of Transmittal to the
Exchange Agent.
In order for a book-entry transfer to constitute a valid tender of your Old
Notes in the Exchange Offer, the Exchange Agent must receive a confirmation of
book-entry transfer (a "Book-Entry Confirmation") of your Old Notes into the
Exchange Agent's account at The Depository Trust Company prior to the expiration
of the Exchange Offer. The term "Agent's Message" means a message, transmitted
by The Depository Trust Company and received by the Exchange Agent and forming a
part of the Book-Entry Confirmation, which states that The Depository Trust
Company has received an express acknowledgment from you that you have received
and have agreed to be bound by the terms of this Letter of Transmittal. If you
use this procedure, we may enforce the Letter of Transmittal against you.
DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY'S BOOK-ENTRY TRANSFER
FACILITY WILL NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If you are a holder of Old Notes and wish to tender your Old Notes in the
Exchange Offer, but (1) the Old Notes are not immediately available, (2) time
will not permit your Old Notes or other required documents to reach the Exchange
Agent before the expiration of the Exchange Offer, or (3) the procedure for
book-entry transfer cannot be completed prior to the expiration of the Exchange
Offer, you may tender Old Notes by following the procedures described in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
Only registered holders of Old Notes -- which term, for purposes of this
Letter of Transmittal, includes any participant in The Depository Trust
Company's system whose name appears on a security position listing as the owner
of the Old Notes -- are entitled to tender their Old Notes for exchange in the
Exchange Offer. If you are a beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and you wish to tender your Old Notes in the Exchange Offer, you should promptly
contact the person in whose name the Old Notes are registered and instruct that
person to tender on your behalf. If you wish to tender in the Exchange Offer on
your own behalf, prior to completing and executing this Letter of Transmittal
and delivering the certificates for your Old Notes, you must either make
appropriate arrangements to register ownership of the Old Notes in your name or
obtain a properly completed bond power from the person in whose name the Old
Notes are registered.
YOU MUST COMPLETE THIS LETTER OF TRANSMITTAL IF YOU ARE A REGISTERED HOLDER
OF OLD NOTES -- WHICH TERM, FOR PURPOSES OF THIS LETTER OF TRANSMITTAL, INCLUDES
ANY PARTICIPANT IN THE DEPOSITORY TRUST COMPANY'S SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE OWNER OF THE OLD NOTES -- AND EITHER (1) YOU
WISH TO TENDER THE CERTIFICATES REPRESENTING YOUR OLD NOTES TO THE EXCHANGE
AGENT TOGETHER WITH THIS LETTER OF TRANSMITTAL OR (2) YOU WISH TO TENDER YOUR
OLD NOTES BY BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT THE
DEPOSITORY TRUST COMPANY AND YOU ELECT TO SUBMIT THIS LETTER OF TRANSMITTAL TO
THE EXCHANGE AGENT INSTEAD OF AN AGENT'S MESSAGE.
In order to properly complete this Letter of Transmittal, you must: (1)
complete the box entitled "Description of Old Notes Tendered," (2) if
appropriate, check and complete the boxes relating to book-entry transfer and
guaranteed delivery and the boxes entitled "Special Issuance Instructions" and
"Special Delivery Instructions," (3) sign this Letter of Transmittal by
completing the box entitled "Sign Here" and (4) complete the box entitled
"Substitute Form W-9." By completing the box entitled "Description of Old Notes
Tendered" and signing below, you will have tendered your Old Notes for exchange
on the terms and conditions described in the Prospectus and this Letter of
Transmittal. You should read the detailed instructions below before completing
this Letter of Transmittal.
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX BELOW TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- ----------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS
OF REGISTERED HOLDER 1 2 3
- ----------------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL
CERTIFICATE AMOUNT OF AMOUNT
NUMBER(S)* OLD NOTE(S) TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL:
- ----------------------------------------------------------------------------------------------------------------------
* Need not be completed by holders who tender by book-entry transfer.
** Old Notes tendered by this Letter of Transmittal must be in denominations of $1,000 principal amount and any
integral multiple thereof. Unless otherwise indicated in column 3, a holder will be deemed to have tendered ALL of
the Old Notes represented by the certificate(s) listed in column 1. See Instruction 4.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
BOXES BELOW TO BE CHECKED AS APPLICABLE
[ ] CHECK HERE IF THE CERTIFICATE(S) REPRESENTING YOUR OLD NOTES IS BEING
TENDERED WITH THIS LETTER OF TRANSMITTAL.
[ ] CHECK HERE IF THE CERTIFICATE(S) REPRESENTING YOUR OLD NOTES HAS BEEN LOST,
DESTROYED OR STOLEN AND YOU REQUIRE ASSISTANCE IN OBTAINING A NEW
CERTIFICATE(S).
Certificate Number(s)
------------------------------------------------------
Principal Amount(s) Represented
--------------------------------------------
You must contact the Exchange Agent to obtain instructions for replacing
lost, destroyed or stolen certificate(s) representing Old Notes. (See
Instruction 12)
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
TO BE COMPLETED ONLY IF NEW NOTES OR OLD NOTES NOT TENDERED OR
EXCHANGED ARE TO BE ISSUED IN THE NAME OF SOMEONE OTHER THAN THE
REGISTERED HOLDER OF THE OLD NOTES WHOSE NAME(S) APPEAR BELOW.
[ ] Old Note(s) to:
[ ] New Note(s) to:
Name
--------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
--------------------------------------------------
(ZIP CODE)
Telephone Number ( ) -
---------------------------------
--------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE INSTRUCTION 9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
TO BE COMPLETED ONLY IF NEW NOTES OR OLD NOTES NOT TENDERED OR
EXCHANGED ARE TO BE DELIVERED TO SOMEONE OTHER THAN THE REGISTERED HOLDER
OF THE OLD NOTES WHOSE NAME(S) APPEAR(S) BELOW OR TO THE REGISTERED HOLDER
AT AN ADDRESS OTHER THAN THAT SHOWN BELOW.
[ ] Old Note(s) to:
[ ] New Note(s) to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
----------------------------------------------------
----------------------------------------------------
(ZIP CODE)
Telephone Number ( ) -
-----------------------------------
----------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE INSTRUCTION 9)
4
<PAGE> 5
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED UNDER A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
--------------------------------------------
Window Ticket Number (if any)
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------
Name of Institution Which Guaranteed Delivery
------------------------------
If delivered by Book-Entry Transfer, complete the following:
Name of Tendering Institution
---------------------------------------------
Account Number
-----------------------------------------------------------
Transaction Code Number
----------------------------------------------------
BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
----------------------------------------------
Account Number
-------------------------------------------------------------
Transaction Code Number
----------------------------------------------------
[ ] CHECK HERE IF OLD NOTES THAT ARE NOT TENDERED OR NOT EXCHANGED ARE TO BE
RETURNED BY CREDITING. THE DEPOSITORY TRUST COMPANY ACCOUNT NUMBER
INDICATED ABOVE.
5
<PAGE> 6
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, as
described in the Prospectus and this Letter of Transmittal, I hereby tender to
IASIS Healthcare Corporation ("IASIS") the aggregate principal amount of Old
Notes described above in the box entitled "Description of Old Notes Tendered" in
exchange for a like principal amount of New Notes which have been registered
under the Securities Act.
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered by this Letter of Transmittal in accordance
with the terms and conditions of the Exchange Offer -- including, if the
Exchange Offer is extended or amended, the terms and conditions of any extension
or amendment -- I hereby sell, assign and transfer to, or upon the order of,
IASIS all right, title and interest in and to the Old Notes tendered by this
Letter of Transmittal. I hereby irrevocably constitute and appoint the Exchange
Agent as my agent and attorney-in-fact -- with full knowledge that the Exchange
Agent is also acting as the agent of IASIS in connection with the Exchange
Offer -- with respect to the tendered Old Notes, with full power of
substitution, such power of attorney being deemed to be an irrevocable power
coupled with an interest, subject only to the right of withdrawal described in
the Prospectus, to (1) deliver certificates for the tendered Old Notes to IASIS
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, IASIS, upon receipt by the Exchange Agent, as my agent, of
the New Notes to be issued in exchange for the tendered Old Notes, (2) present
certificates for the tendered Old Notes for transfer, and to transfer the
tendered Old Notes on the books of IASIS, and (3) receive for the account of
IASIS all benefits and otherwise exercise all rights of ownership of the
tendered Old Notes, all in accordance with the terms and conditions of the
Exchange Offer.
I hereby represent and warrant that I have full power and authority to
tender, sell, assign and transfer the Old Notes tendered by this Letter of
Transmittal and that, when the tendered Old Notes are accepted for exchange,
IASIS will acquire good, marketable and unencumbered title to the tendered Old
Notes, free and clear of all liens, restrictions, charges and encumbrances, and
that the tendered Old Notes are not subject to any adverse claims or proxies. I
will, upon request, execute and deliver any additional documents deemed by IASIS
or the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment and transfer of the Old Notes tendered by this Letter of
Transmittal, and I will comply with my obligations under the Registration Rights
Agreement, dated as of October 15, 1999 (the "Registration Rights Agreement"),
among IASIS, IASIS's wholly owned subsidiaries acting as guarantors of the Old
Notes and the New Notes and J.P. Morgan Securities Inc. I have read and I agree
to all of the terms of the Exchange Offer.
The name(s) and address(es) of the registered holder(s) -- which term, for
purposes of this Letter of Transmittal, includes any participant in The
Depository Trust Company's system whose name appears on a security position
listing as the holder of the Old Notes -- of the Old Notes tendered by this
Letter of Transmittal are printed above as they appear on the certificate(s)
representing the Old Notes. The certificate number(s) and the Old Notes that I
wish to tender are indicated in the appropriate boxes above.
Unless I have otherwise indicated by completing the box entitled "Special
Issuance Instructions" above, I hereby direct that the New Notes be issued in
the name(s) of the undersigned or, in the case of a book-entry transfer of Old
Notes, that the New Notes be credited to the account indicated above maintained
with The Depository Trust Company. Similarly, unless I have otherwise indicated
by completing the box entitled "Special Delivery Instructions," I hereby direct
that the New Notes be delivered to the address shown below my signature.
If I have (1) tendered any Old Notes that are not exchanged in the Exchange
Offer for any reason or (2) submitted certificates for more Old Notes than I
wish to tender, unless I have otherwise indicated by completing the boxes
entitled "Special Issuance Instructions" or "Special Delivery Instructions," I
hereby direct that certificates for any Old Notes that are not tendered or not
exchanged should be issued in the name of the undersigned, if applicable, and
delivered to the address shown below my signature or, in the case of a
book-entry transfer of Old Notes, that Old Notes that are not tendered or not
exchanged be credited to the account
6
<PAGE> 7
indicated above maintained with The Depository Trust Company, in each case, at
IASIS's expense, promptly following the expiration or termination of the
Exchange Offer.
I understand that if I decide to tender Old Notes, and IASIS accepts the
Old Notes for exchange, this will constitute a binding agreement between me and
IASIS, subject to the terms and conditions set forth in the Prospectus and this
Letter of Transmittal.
I also recognize that, under certain circumstances described in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer," IASIS may not be required to accept for exchange any of the Old Notes
tendered by this Letter of Transmittal.
By tendering Old Notes and executing this Letter of Transmittal, or
delivering an Agent's Message instead of this Letter of Transmittal, I hereby
represent and agree that: (1) I am not an "affiliate" (as defined in Rule 144
under the Securities Act) of IASIS; (2) at the time of the commencement of the
Exchange Offer, neither I nor, to my knowledge, anyone receiving New Notes from
me, has any arrangement or understanding with any person to participate, nor do
I engage or intend to engage, in the distribution of the New Notes; and (3) any
New Notes I receive in the Exchange Offer are being acquired by me in the
ordinary course of my business.
I understand that this Exchange Offer is being made in reliance on
interpretations by the staff of the Securities and Exchange Commission (the
"SEC"), as set forth in no-action letters issued to third parties, that the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for resale, resold and otherwise transferred by a holder who is not an
affiliate of IASIS without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that (1) the New Notes are
acquired in the ordinary course of the holder's business and (2) the holder has
no arrangement or understanding with any person to participate in the
distribution of the New Notes. However, the SEC has not considered the Exchange
Offer in the context of a no-action letter and there can be no assurance that
the staff of the SEC would make a similar determination with respect to the
Exchange Offer as in other circumstances. I understand that if I am not a
broker-dealer, I represent that I am not engaged in, and do not intend to engage
in, a distribution of New Notes. If I am an affiliate of IASIS or I am engaged
in or intend to engage in or have any arrangement or understanding with respect
to the distribution of the New Notes to be acquired pursuant to the Exchange
Offer, I understand that I (1) could not rely on the applicable interpretations
of the staff of the SEC and (2) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale of the
New Notes . If I am a broker-dealer that will receive New Notes for my own
account in exchange for Old Notes, I understand that the Old Notes to be
exchanged for the New Notes were acquired by me as a result of market-making
activities or other trading activities and I acknowledge that I will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of the New Notes; however, by so acknowledging and by delivering a
prospectus meeting the requirements of the Securities Act, I will not be deemed
to have admitted that I am an "underwriter" within the meaning of the Securities
Act.
I understand and agree that by tendering Old Notes and executing this
Letter of Transmittal, or delivering an Agent's Message instead of this Letter
of Transmittal, I will suspend the sale of New Notes under the Prospectus upon
receipt of notice from IASIS of (1) the occurrence of any event or the discovery
of any fact which makes any statement contained or incorporated by reference in
the Registration Statement or Prospectus untrue in any material respect or which
causes the Registration Statement or Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
in the Registration Statement or Prospectus, in light of the circumstances under
which they were made, not misleading, (2) the occurrence of any event or the
discovery of any fact which makes the Registration Statement or Prospectus cease
to be effective and usable for resale of the New Notes, or (3) the issuance by
the SEC of any stop order suspending the effectiveness of the Registration
Statement or Prospectus or of the suspension by any state securities commission
of the qualification of the New Notes for offering or sale, or the initiation of
any of these proceedings. I further agree that, upon receipt of a notice from
IASIS as set forth
7
<PAGE> 8
above, I will suspend resales of the New Notes until (1) IASIS has amended or
supplemented the Prospectus to correct the misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to me or (2) IASIS
has given notice that the sale of the New Notes may be resumed, as the case may
be. If IASIS gives notice to suspend the sale of the New Notes as provided
above, it will extend the period referred to above during which holders of the
New Notes are entitled to use the Prospectus in connection with the resale of
New Notes by the number of days during the period from and including the date of
the giving of such notice to and including the date when holders of the New
Notes receive copies of the supplemented or amended Prospectus necessary to
permit resales of the New Notes or to and including the date on which IASIS has
given notice that the sale of New Notes may be resumed, as the case may be.
Interest on the New Notes will accrue (1) from the later of (a) the last
date to which interest was paid on the Old Notes surrendered in exchange for the
New Notes or (b) if the Old Notes are surrendered for exchange on a date in a
period which includes the record date for an interest payment date to occur on
or after the date of the exchange and as to which interest will be paid, the
date to which interest will be paid on such interest payment date or (2) if no
interest has been paid on the Old Notes, from October 15, 1999.
All authority conferred in or agreed to be conferred in this Letter of
Transmittal will survive my death or incapacity, and any obligation of mine
under this Letter of Transmittal will be binding upon my heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns. Except as stated in the Prospectus,
this tender is irrevocable.
8
<PAGE> 9
SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
This Letter of Transmittal must be signed by (1) the registered
Holder(s) -- which term, for purposes of this Letter of Transmittal, includes
any participant in The Depository Trust Company's system whose name appears on a
security position listing as the holder of the Old Notes -- exactly as the
name(s) of the registered holder(s) appear(s) on the certificate(s) for the Old
Notes tendered or on the register of holders maintained by IASIS, or (2) by any
person(s) authorized to become the registered holder(s) by endorsements and
documents transmitted with this Letter of Transmittal -- including any opinions
of counsel, certifications and other information as may be required by IASIS for
the Old Notes to comply with the restrictions on transfer applicable to the Old
Notes. If the signature below is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or another person acting in
a similar fiduciary or representative capacity, please set forth the signer's
full title. See Instruction 3 below.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
DATED:
------------------------------------, 1999
NAME(S)
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
CAPACITY
-----------------------------------------------------------------------
ADDRESS
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ZIP CODE)
TAX IDENTIFICATION OR
SOCIAL SECURITY NO.
------------------------------------------------------------
(SEE INSTRUCTION 9)
AREA CODE AND TELEPHONE NO.
-----------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED
(SEE INSTRUCTION 2, IF REQUIRED)
ELIGIBLE GUARANTOR INSTITUTION
-------------------------------------------------
OFFICIAL SIGNATURE
------------------------------------------------------------
DATED:
------------------------------------, 1999
PAYOR'S NAME: THE BANK OF NEW YORK
<TABLE>
<C> <S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TAXPAYER TIN ----------------------------------
SUBSTITUTE IDENTIFICATION NUMBER ("TIN") IN THE BOX AT (SOCIAL SECURITY NUMBER
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING OR EMPLOYER IDENTIFICATION NUMBER)
BELOW.
--------------------------------------------------------------------------------------
PART 2 -- CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING UNDER THE
PROVISIONS OF SECTION 3406(a)(1)(C) OF THE INTERNAL REVENUE CODE BECAUSE EITHER (1)
DEPARTMENT OF THE TREASURY YOU ARE EXEMPT FROM BACKUP WITHHOLDING, (2) YOU HAVE NOT BEEN NOTIFIED THAT YOU ARE
INTERNAL REVENUE SERVICE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS OR (3) THE INTERNAL REVENUE SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER
SUBJECT TO BACKUP WITHHOLDING. [ ]
--------------------------------------------------------------------------------------
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY. I CERTIFY PART 3
PAYER'S REQUEST FOR TAXPAYER THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT, AWAITING TIN [ ]
IDENTIFICATION NUMBER AND COMPLETE.
SIGNATURE ------------------------------------------------
DATE-------------------------------------------------, 2000
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
or (2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by
the time of the exchange, 31% of all reportable payments made to me
thereafter will be withheld until I provide a number.
<TABLE>
<S> <C>
------------------------------------------------------------ ---------------------------------------
SIGNATURE DATE
</TABLE>
CERTIFICATE INSTRUCTIONS: You must not check the box in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, then you may check the box in Part 2 above.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY CASH PAYMENTS.
THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING.
PLEASE REVIEW ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. You must complete this Letter of Transmittal if you are a
holder of Old Notes -- which term, for purposes of this Letter of Transmittal,
includes any participant in The Depository Trust Company's system whose name
appears on a security position listing as the holder of the Old Notes -- and
either (1) you wish to tender the certificates representing your Old Notes to
the Exchange Agent together with this Letter of Transmittal or (2) you wish to
tender your Old Notes by book-entry transfer to the Exchange Agent's account at
The Depository Trust Company and you elect to submit this Letter of Transmittal
to the Exchange Agent instead of an Agent's Message. In order to constitute a
valid tender of your Old Notes, unless you comply with the procedures for
Guaranteed Delivery described below, the Exchange Agent must receive the
following documents at one of the addresses listed above on or prior to the
expiration of the Exchange Offer: (1) certificates for the Old Notes, in proper
form for transfer, or Book-Entry Confirmation of transfer of the Old Notes into
the Exchange Agent's account at The Depository Trust Company, (2) a properly
completed and duly executed Letter of Transmittal, with any required signature
guarantees, or, in the case of a Book-Entry Confirmation, an Agent's Message
instead of this Letter of Transmittal, and (3) all other documents required by
this Letter of Transmittal. Old Notes tendered in the Exchange Offer must be in
denominations of $1,000 principal amount and any integral multiple thereof.
If you are a holder of the Old Notes and wish to tender your Old Notes, but
(1) the certificates for Old Notes are not immediately available, (2) time will
not permit your certificates for Old Notes or other required documents to reach
the Exchange Agent before the expiration of the Exchange Offer, or (3) the
procedure for book-entry transfer cannot be completed prior to the expiration of
the Exchange Offer, you may effect a tender if: (1) the tender is made through
an Eligible Guarantor Institution (as defined below); (2) prior to the
expiration of the Exchange Offer, the Exchange Agent receives from an Eligible
Guarantor Institution a
10
<PAGE> 11
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form we have provided, setting forth your name and address
and the amount of Old Notes you are tendering and stating that the tender is
being made by Notice of Guaranteed Delivery; and (3) the Exchange Agent receives
within three New York Stock Exchange, Inc. ("NYSE") trading days after the date
of execution of the Notice of Guaranteed Delivery: (a) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation of transfer of the Old Notes into the Exchange Agent's account at
The Depository Trust Company, as the case may be, (b) a properly completed and
duly executed Letter of Transmittal, with any required signature guarantees, or,
in the case of a Book-Entry Confirmation, an Agent's Message instead of the
Letter of Transmittal, and (c) all other documents required by the Letter of
Transmittal. The Notice of Guaranteed Delivery may be sent by overnight courier,
hand delivery, registered or certified mail or facsimile transmission and must
include a guarantee by an Eligible Guarantor Institution in the form set forth
in the Notice.
THE METHOD OF DELIVERY OF CERTIFICATES FOR OLD NOTES, LETTERS OF
TRANSMITTAL, AGENT'S MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR
ELECTION. IF YOU DELIVER YOUR OLD NOTES BY MAIL, WE RECOMMEND REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW
SUFFICIENT TIME TO ASSURE TIMELY DELIVERY. DO NOT SEND CERTIFICATES FOR OLD
NOTES, LETTERS OF TRANSMITTAL, AGENT'S MESSAGES OR OTHER REQUIRED DOCUMENTS TO
IASIS.
IASIS will not accept any alternative, conditional or contingent tenders.
Each tendering holder, by execution of this Letter of Transmittal or delivery of
an Agent's Message instead of the Letter of Transmittal, waives any right to
receive any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(a) this Letter of Transmittal is signed by the registered
holder -- which term, for purposes of this Letter of Transmittal, includes
any participant in The Depository Trust Company's system whose name appears
on a security position listing as the owner of the Old Notes -- of Old
Notes tendered with this Letter of Transmittal, unless such holder(s) has
completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" above, or
(b) the Old Notes are tendered for the account of a firm that is an
Eligible Guarantor Institution.
In all other cases, an Eligible Guarantor Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
An "Eligible Guarantor Institution" (as defined in Rule 17Ad-15 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
means:
- Banks (as defined in Section 3(a) of the Federal Deposit Insurance Act);
- Brokers, dealers, municipal securities dealers, municipal securities
brokers, government securities dealers and government securities brokers
(as defined in the Exchange Act);
- Credit unions (as defined in Section 19B(1)(A) of the Federal Reserve
Act);
- National securities exchanges, registered securities associations and
clearing agencies (as these terms are defined in the Exchange Act); and
- Savings associations (as defined in Section 3(b) of the Federal Deposit
Insurance Act).
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes Tendered" is inadequate, the certificate number(s)
and/or the principal amount of Old Notes and any other required information
should be listed on a separate signed schedule which is attached to this Letter
of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in denominations of $1,000 principal amount and integral multiples
thereof. If you are tendering less than
11
<PAGE> 12
all of the Old Notes evidenced by any certificate you are submitting, please
fill in the principal amount of Old Notes which are to be tendered in column 3
("Principal Amount of Old Notes Tendered") of the box entitled "Description of
Old Notes Tendered." In that case, unless you have otherwise indicated by
completing the boxes entitled "Special Issuance Instructions" or "Special
Delivery Instructions", new certificate(s) for the remainder of the Old Notes
that were evidenced by your old certificate(s) will be sent to the registered
holder of the Old Notes, promptly after the expiration of the Exchange Offer.
All Old Notes represented by certificates delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided in this Letter of Transmittal, tenders of Old
Notes may be withdrawn at any time on or prior to the expiration of the Exchange
Offer. For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to the expiration of the Exchange Offer at
one of the addresses listed above. Any notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, identify the Old
Notes to be withdrawn, including the principal amount of the Old Notes, and,
where certificates for Old Notes have been transmitted, specify the name in
which the Old Notes are registered, if different from that of the withdrawing
holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of the
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Guarantor Institution unless the holder is
an Eligible Guarantor Institution. If Old Notes have been tendered using the
procedure for book-entry transfer described in the Prospectus under the caption
"The Exchange Offer -- Book-Entry Transfer," any notice of withdrawal must
specify the name and number of the account at The Depository Trust Company to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of the book-entry transfer facility. All questions as to the validity, form and
eligibility -- including time of receipt -- of these notices will be determined
by IASIS. Any such determination will be final and binding. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
registered holder without cost to that holder as soon as practicable after
withdrawal, non-acceptance of tender or termination of the Exchange Offer. In
the case of Old Notes tendered using the procedure for book-entry transfer
described in the Prospectus under the caption "The Exchange Offer -- Book-Entry
Transfer," the Old Notes will be credited to the tendering holder's account with
The Depository Trust Company. Properly withdrawn Old Notes may be retendered at
any time on or prior to the expiration of the Exchange Offer by following one of
the procedures described in the Prospectus under the caption "The Exchange
Offer -- Procedures for Tendering Old Notes."
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are registered in the name of two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registered holders.
When this Letter of Transmittal is signed by the registered holder(s) of
the Old Notes listed and transmitted by this Letter of Transmittal, no
endorsement(s) of certificate(s) or separate bond power(s) are required unless
New Notes are to be issued in the name of a person other than the registered
holder(s). Signature(s) on the certificate(s) or bond power(s) must be
guaranteed by an Eligible Guarantor Institution.
If a person or persons other than the registered holder(s) of Old Notes
signs the Letter of Transmittal, certificates for the Old Notes must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered holder(s) that appears on the certificates for the Old Notes
and also must be accompanied by any opinions of counsel, certifications and
other information as IASIS may require in
12
<PAGE> 13
accordance with the restrictions on transfer applicable to the Old Notes.
Signatures on certificates or bond powers must be guaranteed by an Eligible
Guarantor Institution.
If you are a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or act in a similar fiduciary or representative
capacity, and wish to sign this Letter of Transmittal or any certificates for
Old Notes or bond powers, you must indicate your status when signing. If you are
acting in any of these capacities, you must submit proper evidence satisfactory
to us of your authority to so act unless we waive this requirement.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be delivered to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained with The Depository Trust Company. See Instruction 4.
7. IRREGULARITIES. All questions as to the validity, form,
eligibility -- including time of receipt -- and acceptance of Old Notes tendered
for exchange will be determined by IASIS in its sole discretion. Our
determination will be final and binding. We reserve the absolute right to reject
any and all tenders of Old Notes improperly tendered or to not accept any Old
Notes, the acceptance of which might be unlawful as determined by us or our
counsel. We also reserve the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any Old Notes either
before or after the expiration of the Exchange Offer -- including the right to
waive the ineligibility of any holder who seeks to tender Old Notes in the
Exchange Offer. Our interpretation of the terms and conditions of the Exchange
Offer as to any particular Old Notes either before or after the expiration of
the Exchange Offer -- including the terms and conditions of the Letter of
Transmittal and the accompanying instructions -- will be final and binding.
Unless waived, any defects or irregularities in connection with tenders of Old
Notes for exchange must be cured within a reasonable period of time, as
determined by us. Neither we, the Exchange Agent nor any other person has any
duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor will we have any liability for failure to
give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Exchange Agent at the
addresses and telephone number listed on the front of this Letter of
Transmittal. Additional copies of the Prospectus, this Letter of Transmittal or
the Notice of Guaranteed Delivery may be obtained from the Exchange Agent or
from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is required
to provide the Exchange Agent with the holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 above. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service may subject the
holder or other payee to a $50 penalty. In addition, cash payments to such
holders or other payees with respect to Old Notes exchanged in the Exchange
Offer may be subject to 31% backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number above in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain all amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60-day period
will be remitted to the holder and no further amounts will be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has
13
<PAGE> 14
not provided the Exchange Agent with its TIN within the 60-day period, amounts
withheld will be remitted to the IRS as backup withholding. In addition, 31% of
all payments made thereafter will be withheld and remitted to the IRS until a
correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual holder, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders -- including, among others, corporations, financial
institutions and certain foreign persons -- may not be subject to these backup
withholding and reporting requirements. These holders should nevertheless
complete the Substitute Form W-9 above, and check the box in Part 2 of the
Substitute Form W-9, to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed IRS
Form W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. IASIS's obligation to complete the Exchange
Offer is subject to the conditions described in the Prospectus under the caption
"The Exchange Offer -- Conditions to the Exchange Offer." These conditions are
for our benefit only and we may assert them regardless of the circumstances
giving rise to any condition. We may also waive any condition in whole or in
part at any time in our sole discretion. Our failure at any time to exercise any
of the foregoing rights will not constitute a waiver of that right and each
right is an ongoing right that we may assert at any time.
11. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering holders of Old Notes, by execution of
this Letter of Transmittal, waive any right to receive notice of the acceptance
of Old Notes for exchange.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
check the box above regarding lost, destroyed or stolen certificates and
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen certificate(s) have been followed.
13. TRANSFER TAXES. You will not be obligated to pay any transfer taxes in
connection with the tender of Old Notes in the Exchange Offer unless you
instruct us to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder. In those cases, you will be responsible
for the payment of any applicable transfer tax. If satisfactory evidence of
payment of these taxes or an exemption from payment is not submitted with this
Letter of Transmittal, no certificates for New Notes will be issued until such
evidence is received by the Exchange Agent.
IMPORTANT: UNLESS YOU COMPLY WITH THE GUARANTEED DELIVERY PROCEDURES
DESCRIBED ABOVE, THIS LETTER OF TRANSMITTAL (OR A FACSIMILE OF THIS LETTER OF
TRANSMITTAL), OR, IN THE CASE OF OLD NOTES TENDERED BY BOOK-ENTRY TRANSFER TO
THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY, AN AGENT'S MESSAGE
INSTEAD OF THIS LETTER OF TRANSMITTAL, AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION OF THE EXCHANGE
OFFER.
14
<PAGE> 1
EXHIBIT 99.2
IASIS HEALTHCARE CORPORATION
NOTICE OF GUARANTEED DELIVERY
This form or one substantially equivalent to this form must be used to
accept the offer (the "Exchange Offer") of IASIS Healthcare Corporation
("IASIS") to exchange an aggregate principal amount of up to $230,000,000 of our
13% Senior Subordinated Exchange Notes due 2009 (the "New Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for a like principal amount of our issued and outstanding 13% Senior
Subordinated Notes due 2009 (the "Old Notes"), which were issued in offerings
under Rule 144A and Regulation S of the Securities Act that were not registered
under the Securities Act. The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 2000, unless extended (as it may be extended, the
"Expiration Date"). As described in the enclosed Prospectus, dated
[ ], 2000 (the "Prospectus"), if you are a registered holder of Old
Notes and wish to tender your Old Notes, but (1) the certificates for Old Notes
are not immediately available, (2) time will not permit your certificates for
Old Notes or other required documents to reach The Bank of New York, as exchange
agent (the "Exchange Agent"), before the Expiration Date or (3) the procedure
for book-entry transfer cannot be completed before the Expiration Date, you may
effect a tender of your Old Notes if (1) the tender is made through an Eligible
Guarantor Institution (as defined in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering Old Notes"); (2) prior to the
Expiration Date, the Exchange Agent receives from an Eligible Guarantor
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in this form, setting forth your name and address, and
the amount of Old Notes you are tendering and stating that the tender is being
made by Notice of Guaranteed Delivery. These documents may be sent by overnight
courier, registered or certified mail or facsimile transmission. If you elect to
use this procedure, you must also guarantee that within three New York Stock
Exchange, Inc. ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Notes,
in proper form for transfer, or a Book-Entry Confirmation (as defined in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering Old
Notes") of transfer of the Old Notes into the Exchange Agent's account at The
Depository Trust Company (including the Agent's Message (as defined in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering Old
Notes") that forms a part of the Book-Entry Confirmation), as the case may be, a
properly completed and duly executed Letter of Transmittal, with any required
signature guarantees, and all other documents required by the Letter of
Transmittal, will be deposited by the Eligible Guarantor Institution with the
Exchange Agent; and (3) the Exchange Agent receives the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation of transfer of the Old Notes into the Exchange Agent's account at
The Depository Trust Company, as the case may be, a properly completed and duly
executed Letter of Transmittal, with any required signature guarantees, and all
other required documents or, in the case of a Book-Entry Confirmation, a
properly completed and duly executed Letter of Transmittal, with any required
signature guarantees, or an Agent's Message instead of the Letter of
Transmittal, in each case, within three NYSE trading days after the date of
execution of this Notice of Guaranteed Delivery.
DELIVERY TO: THE BANK OF NEW YORK, EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Regular or Certified Mail: By Facsimile: By Overnight Courier or Hand:
The Bank of New York (Eligible Guarantor Institutions The Bank of New York
101 Barclay Street, 7E Only) 101 Barclay Street
New York, NY 10286 Corporate Trust Services Window
Attention: Reorganization Section (212) 571-4699 Ground Level
New York, NY 10286
To Confirm by Telephone Attention: Reorganization Section
or for Information Call:
(212) 815-6333
</TABLE>
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS OTHER
THAN THE ADDRESS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER
THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER OF TRANSMITTAL OR
AGENT'S MESSAGE.
<PAGE> 2
Ladies and Gentlemen:
Subject to the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to IASIS the
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedure described in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures."
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Principal Amount of Old Notes Tendered:* If Old Notes will be delivered by book-entry
$ transfer to The Depository Trust Company, provide
- ----------------------------------------------------------- account number.
Certificate Nos. (if available): Account Number
- ----------------------------------------------------------- ----------------------------------------
Total Principal Amount Represented by
Old Notes Certificate(s):
$
- -----------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
<TABLE>
<S> <C>
PLEASE SIGN HERE
X
- -------------------------------------------------------- --------------------------------------------------------
X
- -------------------------------------------------------- --------------------------------------------------------
Signature(s) of Owner(s) or Authorized Signatory Date
</TABLE>
Area Code and Telephone Number: ( )
-----------------------------------
Must be signed by the holder(s) of Old Notes as their name(s) appear(s)
on certificates for Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature
is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer or other person acting in a fiduciary or representative capacity,
such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
<TABLE>
<S> <C>
Name(s): -----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
Capacity: -----------------------------------------------------------------------------------------------------
Address(es): -----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Guarantor Institution, hereby guarantees
that the certificates representing the principal amount of Old Notes
tendered hereby in proper form for transfer, or timely confirmation of the
book-entry transfer of such Old Notes into the Exchange Agent's account at
The Depository Trust Company pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures," together with any required signature guarantee and any other
documents required by the Letter of Transmittal, will be received by the
Exchange Agent at the address set forth above, no later than three NYSE
trading days after the Expiration Date.
<TABLE>
<S> <C>
- -------------------------------------------------------- --------------------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------------------- --------------------------------------------------------
Address Title
- -------------------------------------------------------- Name: --------------------------------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. Date:
---------------------------------- --------------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
3
<PAGE> 1
EXHIBIT 99.3
IASIS HEALTHCARE CORPORATION
OFFER TO EXCHANGE
13% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ALL ISSUED AND OUTSTANDING
13% SENIOR SUBORDINATED NOTES DUE 2009
To:BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
IASIS Healthcare Corporation ("IASIS") is offering, subject to the terms
and conditions set forth in the Prospectus, dated [ ], 2000 (the
"Prospectus"), and the enclosed Letter of Transmittal, relating to the offer
(the "Exchange Offer") of IASIS to exchange an aggregate principal amount of up
to $230,000,000 of our 13% Senior Subordinated Exchange Notes due 2009 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of our issued and
outstanding 13% Senior Subordinated Notes due 2009 (the "Old Notes"). The Old
Notes were issued on October 15, 1999 in offerings under Rule 144A and
Regulation S of the Securities Act that were not registered under the Securities
Act. The Exchange Offer is being extended to all holders of the Old Notes in
order to satisfy certain obligations of IASIS contained in the Registration
Rights Agreement, dated as of October 15, 1999, among IASIS, parties thereto and
J.P. Morgan Securities Inc. The New Notes are substantially identical to the Old
Notes, except that the transfer restrictions and registration rights applicable
to the Old Notes do not apply to the New Notes.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated [ ], 2000;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if (a) certificates for the Old Notes are not immediately available,
(b) time will not permit the certificates for the Old Notes or other
required documents to reach the Exchange Agent before the expiration of the
Exchange Offer or (c) the procedure for book-entry transfer cannot be
completed prior to the expiration of the Exchange Offer;
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining the clients' instructions with
respect to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Bank of New York, the Exchange
Agent for the Exchange Offer.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON [ ], 2000, UNLESS THE EXCHANGE OFFER IS
EXTENDED (AS IT MAY BE EXTENDED, THE "EXPIRATION DATE"). OLD NOTES TENDERED
PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE
EXPIRATION DATE.
<PAGE> 2
Unless a holder of Old Notes complies with the procedures described in the
Prospectus under the caption "-- Guaranteed Delivery Procedures," the holder
must do one of the following on or prior to the Expiration Date to participate
in the Exchange Offer:
- tender the Old Notes by sending the certificates for the Old Notes, in
proper form for transfer, a properly completed and duly executed Letter
of Transmittal, with any required signature guarantees, and all other
documents required by the Letter of Transmittal, to The Bank of New York,
as Exchange Agent, at one of the addresses listed in the Prospectus under
the caption "The Exchange Offer -- Exchange Agent"; or
- tender the Old Notes by using the book-entry procedures described in the
Prospectus under the caption "The Exchange Offer -- Book Entry Transfer"
and transmitting a properly completed and duly executed Letter of
Transmittal, with any required signature guarantees, or an Agent's
Message instead of the Letter of Transmittal, to the Exchange Agent.
In order for a book-entry transfer to constitute a valid tender of Old Notes in
the Exchange Offer, the Exchange Agent must receive a confirmation of book-entry
transfer (a "Book-Entry Confirmation") of the Old Notes into the Exchange
Agent's account at The Depository Trust Company prior to the Expiration date.
The term "Agent's Message" means a message, transmitted by the Depository Trust
Company and received by the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that The Depository Trust Company has received an
express acknowledgment from the tendering holder of Old Notes that the holder
has received and has agreed to be bound by the Letter of Transmittal.
If a registered holder of Old Notes wishes to tender the Old Notes in the
Exchange Offer, but (a) the certificates for the Old Notes are not immediately
available, (b) time will not permit the certificates for the Old Notes or other
required documents to reach the Exchange Agent before the Expiration Date, or
(c) the procedure for book-entry transfer cannot be completed before the
Expiration Date, a tender of Old Notes may be effected by following the
Guaranteed Delivery Procedures described in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures."
IASIS will, upon request, reimburse brokers, dealers, commercial banks,
trust companies and other nominees for reasonable and necessary costs and
expenses incurred by them in forwarding the Prospectus and the related documents
to the beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. IASIS will pay or cause to be paid all stock transfer taxes applicable
to the exchange of Old Notes in the Exchange Offer, except as set forth in
Instruction 13 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to the Bank
of New York, the Exchange Agent for the Exchange Offer, at its address and
telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
IASIS HEALTHCARE CORPORATION
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF IASIS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM
WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
<PAGE> 1
EXHIBIT 99.4
IASIS HEALTHCARE CORPORATION
OFFER TO EXCHANGE
13% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ALL ISSUED AND OUTSTANDING
13% SENIOR SUBORDINATED NOTES DUE 2009
To Our Clients:
Enclosed for your consideration is a Prospectus, dated [ ],
2000 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of IASIS Healthcare
Corporation ("IASIS") to exchange an aggregate principal amount of up to
$230,000,000 of our 13% Senior Subordinated Exchange Notes due 2009 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of our issued and
outstanding 13% Senior Subordinated Notes due 2009 (the "Old Notes"), which were
issued in offerings under Rule 144A and Regulation S of the Securities Act that
were not registered under the Securities Act. The Exchange Offer is being
extended to all holders of the Old Notes in order to satisfy certain obligations
of IASIS contained in the Registration Rights Agreement, dated as of October 15,
1999, among IASIS, parties thereto and J.P. Morgan Securities Inc. The New Notes
are substantially identical to the Old Notes, except that the transfer
restrictions and registration rights relating to the Old Notes do not apply to
the New Notes.
These materials are being forwarded to you as the beneficial owner of the
Old Notes held by us for your account but not registered in your name. A TENDER
OF SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M.,
New York City time, on [ ], 2000, unless the Exchange Offer is
extended. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time before the expiration of the Exchange Offer.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus under the caption "The Exchange Offer -- Conditions to the
Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to IASIS will be paid by IASIS, except as otherwise provided in
Instruction 13 of the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 P.M., New York City time, on
[ ], 2000, unless the Exchange Offer is extended.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
materials referred to therein relating to the Exchange Offer made by IASIS
Healthcare Corporation with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, subject to the terms and conditions set forth in the
Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
13% Senior Subordinated Notes due 2009 $
-----------------------------------
(Aggregate Principal Amount of Old Notes)
[ ] Please do not tender any Old Notes held by you for my account.
Dated:
----------------------------- , 2000
Signature(s):
-------------------------------------------------------------------
Print Name(s) here:
-----------------------------------------------------------
(Print Address(es)):
-----------------------------------------------------------
(Area Code and Telephone Number(s)):
--------------------------------------------
(Tax Identification or Social Security Number(s)):
-----------------------------
NONE OF THE OLD NOTES HELD BY US FOR YOUR ACCOUNT WILL BE TENDERED UNLESS
WE RECEIVE WRITTEN INSTRUCTIONS FROM YOU TO DO SO. UNLESS A SPECIFIC CONTRARY
INSTRUCTION IS GIVEN IN THE SPACE PROVIDED, YOUR SIGNATURE(S) HEREON SHALL
CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL THE OLD NOTES HELD BY US FOR YOUR
ACCOUNT.
