Question
From:(redacted)
Sent:Thursday, March 15, 2007 2:05 PM
To:Walsh, Kathryn
Subject: Confirmation ofPNO informal guidance regarding exemption from
HSR filing under 16 CFR 802.40
Greetings, Kate-
I would like to obtainwritten confirmation of the informal guidance you gave in our phoneconversation on March 1, 2007 and again on March 2, 2007to the effect that no HSR filing is necessary for the transaction described inmy email of March 1, 2007. Below is a description of the transaction Ipreviously described but with some additional facts to ensure that you have allof the information necessary to confirm your guidance that no filing isnecessary because the particular transaction is exempt under 16 C.F.R. 802.40.
In ourtransaction, two nonprofit 501(c)(3) hospital systems (System A and System B)have agreed to affiliate through the creation of a new nonprofit system parent,pursuant to an executed integration agreement (We represent System/Hospital A).The new nonprofit system parent, Newco, will be a self-perpetuating nonprofit, nonstockcorporation under state law. The parties intend Newco to qualify under, and beoperated as a Section 501(c)(3) organization.
Simultaneously withthe execution of the integration agreement, Systems A and B have also enteredinto a Sponsorship Agreement with a third party, Entity C, a nonprofit hospitalplan corporation that offers fully insured products and administersemployer-funded health care plans to residents in the geographic area in whichSystem A and System B operate. Under the terms of the Sponsorship Agreement,Entity C will contribute certain funding at the closing of the integration agreement to assist in effectuatingthe integration for the benefit of the community. The integration funding willbe used by Newco to repay certain debt obligations of System B and theremaining amount will be used by Newco for integration costs, recruitment andservice reconfiguration.
Each of System A, System Band Entity C will identify 5 individuals to serve on the initial board ofNewco. The initial directors shall serveone-,two- or three-year terms. After expiration of the initial terms, Entity Cshall appoint directors to replace orreappoint the initial Entity C directors and the non-Entity C Directors shallappoint all other Newco directors to serve three-year terms. However,Entity C's ability to appoint or reappoint directors to the Newco Board islimited to a period of 10 years from theclosing date of the integration agreement. The terms of any Entity C directorsstill serving at that expiration of that time shall terminate and anyvacancies shall be filled by the Newco directors.
Newcowill be the sole member of each of the System A and B affiliates, includingHospital A and Hospital B. The existingparent entities of Hospitals A & B will merge into their respectivehospitals and, by operation of law, will cease to have corporate existence atthe closing of the integration agreement. Newco will govern the operation ofthe new health system, consisting ofHospitals A and B and their affiliates, and will retain certain reserved powersover management and operation of thehealth system. However, there will be no acquisition of assets, there are novoting securities involved, and there is no purchase price.
Please confirm your guidancethat neither Newco, nor System A nor System B is required to file a HSRPremerger Notification (Form C4) withrespect to the formation of Newco or the integration of System A and System Bunder Newco by virtue of the exemption under 16 CFR 802.40.
Thankyou for your assistance in this matter. Please contact me or (redacted) if youhave questions or need to furtherdiscuss.