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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File No. 000-18799
HEALTH MANAGEMENT ASSOCIATES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 61-0963645
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5811 Pelican Bay Boulevard
Suite 500
Naples, Florida 34108-2710
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(941) 598-3131
Securities registered pursuant to Section 12(b) of the Act:
================================================================================
Title of Each Class Name of Each Exchange
on Which Registered
================================================================================
Class A Common Stock, $.01 par value New York Stock Exchange
================================================================================
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
As of December 15, 1999 there were 240,858,205 shares of Common Stock, par
value $.01 per share outstanding. The aggregate market value of the voting
stock held by non-affiliates of the Registrant is $2,515,881,260. Market value
is determined by reference to the listed price of the Registrant's Class A
Common Stock as of the close of business on December 15, 1999.
Portions of the Registrant's definitive Proxy Statement to be issued in
connection with the Annual Meeting of Stockholders of the Registrant to be held
on February 15, 2000 have been incorporated by reference into Part III, Items
10, 11, 12 and 13 of this Report.
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TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
HEALTH MANAGEMENT ASSOCIATES, INC.
Fiscal year ended September 30, 1999
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Page
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PART I
Item 1. Business...................................................... 1
Item 2. Properties.................................................... 13
Item 3. Legal Proceedings............................................. 17
Item 4. Submission of Matters to a Vote of Security Holders........... 17
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................... 18
Item 6. Selected Financial Data....................................... 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 19
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.... 27
Item 8. Financial Statements and Supplementary Data................... 27
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 47
PART III
Item 10. Directors and Executive Officers of the Registrant............ 47
Item 11. Executive Compensation........................................ 47
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 47
Item 13. Certain Relationships and Related Transactions................ 47
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K................................................... 47
</TABLE>
_________________________
Note: Portions of the Registrant's definitive Proxy Statement to be issued in
connection with the Annual Meeting of Stockholders of the Registrant to
be held on February 15, 2000 have been incorporated by reference into
Part III, Items 10, 11, 12, and 13 of this Report.
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PART I
Item 1. Business
General
Health Management Associates, Inc. (the "Company" or the "Registrant") was
incorporated in Delaware in 1979 and succeeded to the operations of its
subsidiary, Hospital Management Associates, Inc., which was formed in 1977. The
Company provides a broad range of general acute care health services in non-
urban communities. As of September 30, 1999, the Company operated 32 general
acute care hospitals with a total of 4,379 licensed beds and four psychiatric
hospitals with a total of 286 licensed beds. For the year ended September 30,
1999 ("Fiscal 1999"), the acute care hospital operations accounted for
approximately 95% of the Company's net patient service revenue and the
psychiatric hospital operations accounted for approximately 2%. See Item 2
"Properties".
Business Strategy
The Company pursues a business strategy of efficiently and profitably
operating its existing base of facilities and selectively acquiring additional
100 to 300 bed acute care hospitals located in non-urban communities in market
areas of 40,000 to 300,000 people in the southeastern and southwestern United
States. The Company seeks to acquire at reasonable prices acute care hospitals
which are the sole or predominant health care providers in their market service
areas. In evaluating potential acquisitions, the Company requires a hospital's
market service area to exhibit a demographic need for the facility and to have
an established physician base which can be augmented by the Company's ability to
attract additional physicians to the community. Many of the hospitals the
Company has acquired were unprofitable at the time of acquisition. Upon
acquiring a facility, the Company employs a well-qualified executive director
and controller, implements its proprietary management information system,
recruits physicians, introduces strict cost control measures with respect to
hospital staffing and volume purchasing under Company-wide agreements, and
spends the necessary capital to renovate the facility and upgrade equipment.
The Company strives to provide at least 90% of the acute care needs of each
community its hospitals serve, thereby reducing the out-migration of potential
patients to hospitals in larger urban areas.
The Company manages each acquired hospital to maximize operating margins
and return on capital within the first 24 to 36 months of operations, a time
period which the Company believes is sufficient to fully implement the plan of
improvement. Generally, the Company has been successful in achieving a
significant improvement in the operating performance of its facilities within
this time period. Once a facility has matured, the Company generally achieves
additional growth through favorable demographic trends, the continued growth of
physicians' practices in the community, expansion of health care services
offered and selective rate increases.
The Company also selectively reviews potential acquisitions of psychiatric
hospitals on an opportunistic basis. The demographic criteria for a psychiatric
hospital is a minimum service area of about 250,000 people. The psychiatric
hospital business is characterized by substantial competition within a market
area.
See Item 2 "Properties" for a description of the Company's current
facilities.
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Operations and Marketing
Upon acquisition of a hospital, the Company immediately implements its
policies to achieve its financial and operating goals. The Company (i)
appraises current management personnel and makes necessary changes, (ii) seeks
to reduce expenses by managing staffing more effectively and purchasing supplies
through volume agreements, (iii) improves billings and collections and (iv)
installs its proprietary management information system. The Company's flexible
staffing program allows the Company to manage its labor costs effectively by
properly staffing a hospital based on current occupancy, utilizing a combination
of full-time and part-time employees. The Company's management information
system provides the executive director and the controller with the necessary
financial and operational information to operate the hospital effectively and to
implement the Company's flexible staffing program. Based on the information
gathered, the Company can also assist physicians in appropriate case management.
The Company also attempts to increase admissions and outpatient business
through marketing programs. The marketing programs of each of the Company's
hospitals are directed by the hospital's executive director to best suit the
particular geographic, demographic and economic characteristics of the
hospital's market area. A key element of the Company's marketing strategy is to
establish and maintain a cooperative relationship with its physicians. The
Company pursues an active physician recruitment program to attract and retain
qualified specialists and other physicians to broaden the services available.
The Company's hospitals often provide newly recruited physicians with various
services to assist them in opening and commencing the operation of their
practices, including staffing assistance, financial support, equipment and
office rental. Such costs are generally expensed as incurred. The Company's
hospitals also pursue various strategies aimed at increasing utilization of
their services, particularly emergency and outpatient services. For example,
hospitals offer an emergency service program called "Nurse First," which quickly
assigns a registered nurse specially trained for emergency room duties to assess
the condition of each patient upon arrival. Other programs include "Pro Med,"
an emergency room computer-based diagnostic aid that helps physicians assess a
patient's medical condition quickly and formulate a diagnosis and course of
treatment, "Med Key," a plastic identification card that contains a variety of
patient information imbedded on a magnetic strip which streamlines the
registration process, and "One Call Scheduling," a dedicated phone system which
physicians and their staff can utilize to schedule various diagnostic tests and
other services easily at one time.
The operations of the Company's psychiatric hospitals focus mainly on
child/adolescent residential treatment programs. This has been in response to a
movement in recent years by third party payors to severly limit payments for
traditional inpatient treatment programs. Since the Company's psychiatric
hospitals receive most of their admissions for the child/adolescent programs
from state and locally-sponsored child and adolescent care agencies and the
court system, the majority of the hospitals' marketing efforts are devoted to
these areas. There is little direct marketing to the public. See "Competition-
- -Psychiatric Hospitals" in this Item 1.
The Company considers its management structure to be decentralized. Its
hospitals are run by experienced executive directors and controllers having both
authority and responsibility for day-to-day operations. Incentive compensation
programs have been implemented to reward such managers for accomplishing
established goals. The Company employs a relatively small corporate staff to
provide services such as systems design and development, marketing assistance,
training, human resource management, reimbursement, technical accounting
support, purchasing and construction management. Financial control is
maintained through
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fiscal and accounting policies which are established at the corporate level for
use at the hospitals. Financial information is centralized at the corporate
level through the Company's proprietary management information system.
Selected Operating Statistics
The following table sets forth selected operating statistics for the
Company's hospitals for the periods and dates indicated.
<TABLE>
<CAPTION>
Year ended September 30,
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1999 1998 1997
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<S> <C> <C> <C>
Total hospitals owned or leased
(as of the end of period)................................. 36 32 26
Licensed beds (as of end of period)......................... 4,665 3,821 3,108
Admissions.................................................. 144,172 123,713 100,677
Patient days................................................ 718,035 615,248 494,977
Acute care average length of stay (days).................... 4.5 4.6 4.6
Psychiatric average length of stay (days)................... 47.5 21.9 14.9
Occupancy rate (1).......................................... 47% 47% 45%
Outpatient utilization (2).................................. 36% 35% 35%
Earnings before depreciation, interest
and income taxes margin................................... 23% 25% 24%
</TABLE>
______________________________
(1) Hospital occupancy rates are affected by many factors, including the
population size and general economic conditions within the service area,
the degree of variation in medical and surgical products, outpatient use of
hospital services, quality and treatment availability at competing
hospitals, and seasonality. Generally, the Company's hospitals experience
a seasonal decline in occupancy in the first and fourth fiscal quarters.
(2) Outpatient revenue as a percent of Total Patient Service Revenue (as
defined in "Sources of Revenue" in this Item 1).
Competition
Acute Care Hospitals. The healthcare industry is highly competitive and in
recent years has been characterized by increased competition for patients and
staff physicians, a shift from inpatient to outpatient settings and increased
consolidation. The principal factors contributing to these trends are advances
in medical technology, cost-containment efforts by managed care payors,
employers and traditional health insurers, changes in regulations and
reimbursement policies, increases in the number and type of competing health
care providers and changes in physician practice patterns. A hospital will
compete within the geographic area in which it operates by distinguishing itself
based on the quality and scope of medical services provided. With respect to
the delivery of general acute care services, most of the Company's hospitals
face less competition in their immediate patient service areas than would be
expected in larger communities. While the Company's hospitals are generally the
predominant provider in their respective communities, most of its hospitals face
competition; however, that competition is generally limited to a single
competitor in each respective market. The Company seeks to provide at least 90%
of the health care needs in each community its hospital serves. For the
specialized treatment of diseases, such as neurological and major
cardiopulmonary disorders and health problems of relatively low incidence in the
population served, requiring specialized technology, residents in the Company's
service areas will generally be referred for treatment at major medical centers.
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The competitive position of a hospital is increasingly affected by its
ability to negotiate service contracts with purchasers of group health care
services. Such purchasers include employers, preferred provider organizations
("PPOs") and health maintenance organizations ("HMOs"). PPOs and HMOs attempt to
direct and control the use of hospital services through management of care and
either (i) receive discounts from a hospital's established charges or (ii) pay
based on a fixed per diem or on a capitated basis, where hospitals receive fixed
periodic payments based on the number of members of the organization regardless
of the actual services provided. To date, HMOs have not been a competitive
factor in the Company's nonurban hospitals. In addition, employers and
traditional health insurers are increasingly interested in containing costs
through negotiations with hospitals for managed care programs and discounts from
established charges. In return, hospitals secure commitments for a larger number
of potential patients. Accordingly, the Company has been proactive in
establishing or joining such programs to maintain, and even increase, hospital
services. Management believes the Company is able to compete effectively in its
markets, and does not believe such programs will have a significant adverse
impact on the Company's net revenue. See "Operations and Marketing" in this Item
1.
Psychiatric Hospitals. In recent years third party payors have severly
limited payments for traditional inpatient programs, which has negatively
affected the Company's volume of business and its revenue per admission. In
response to these changes, most of the Company's psychiatric hospitals have
moved to residential treatment programs for the youth services market, which
includes a variety of services for the troubled child and adolescent groups.
These changes have served to reverse the negative trends in recent years. The
Company's psychiatric hospitals face substantial competition in their market
areas because the Company's psychiatric hospitals compete in larger urban areas
than do its acute care hospitals and these hospitals draw patients from a
limited number of sources. The Company's psychiatric hospitals realize over 90%
of their admissions through a) networking with various state and local-sponsored
child and adolescent programs and b) the Department of Juvenile Justice via
court system commitments. However, as noted earlier in this Item 1.,
psychiatric operations only account for 2% of the Company's net revenue.
Acquisitions. The Company faces competition for the acquisition of non-
urban community acute care hospitals from proprietary and not-for-profit multi-
hospital groups. Some of these competitors may have greater financial and other
resources than the Company. Historically, the Company has been able to acquire
hospitals at reasonable prices. However, increased competition for the
acquisition of nonurban community acute care hospitals could have an adverse
impact on the Company's ability to acquire such hospitals on favorable terms.
Consolidation. There has been significant consolidation in the hospital
industry over the past decade due, in large part, to continuing pressures on
payments from government and private payors and increasing shifts away from the
provision of traditional in-patient services. Those economic trends have caused
many hospitals to close and many to consolidate either through acquisitions or
affiliations. The Company believes that these cost containment pressures will
continue and will lead to further consolidation in the hospital industry.
Sources of Revenue
The Company receives payment for services rendered to patients from (i) the
federal government under the Medicare program, (ii) each of the states in which
its hospitals are located under the Medicaid program, and (iii) private insurers
and patients. The following table sets forth the approximate percentage of
Total
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Patient Service Revenue (defined as revenue from all sources before deducting
contractual allowances and discounts from established billing rates) derived
from the various sources of payment for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
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1999 1998 1997
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<S> <C> <C> <C>
Medicare........................................ 47% 47% 53%
Medicaid........................................ 12 12 13
Private and other sources....................... 41 38 34
---- ---- ----
Total...................................... 100% 100% 100%
==== ==== ====
</TABLE>
Hospital revenues depend upon inpatient occupancy levels, the extent to
which ancillary services and therapy programs are ordered by physicians and
provided to patients, and the volume of outpatient procedures. Reimbursement
rates for inpatient routine services vary significantly depending on the type of
service (e.g., acute care, intensive care or psychiatric) and the geographic
location of the hospital. The Company has experienced an increase in the
percentage of patient revenues attributable to outpatient services in recent
years. This increase is primarily the result of advances in medical technology
(which allow more services to be provided on an outpatient basis) and increased
pressures from Medicare, Medicaid and insurers to reduce hospital stays and
provide services, where possible, on a less expensive outpatient basis. The
Company's experience with respect to increased outpatient volume mirrors the
trend in the hospital industry.
Medicare. Most hospitals (including all of the Company's hospitals) derive
a substantial portion of their revenue from the Medicare program, which is a
federal government program designed to reimburse participating health care
providers for covered services rendered and items furnished to qualified
beneficiaries. The Medicare program is heavily regulated and subject to
frequent changes which in recent years have reduced, and in future years are
expected to restrict increases in, Medicare payments to hospitals. In light of
its hospitals' high percentage of Medicare patients, the Company's ability in
the future to operate its business successfully will depend in large measure on
its ability to adapt to changes in the Medicare program.
The Medicare program is designed primarily to provide health care services
to persons aged 65 and over and those who are chronically disabled or who have
End Stage Renal Disease ("ESRD"). The Medicare program is governed by the
Social Security Act of 1965 and is administered by the federal government,
primarily the Department of Health and Human Services ("DHHS") and the Health
Care Financing Administration ("HCFA").
Legislative action and federal regulatory changes over the years have
resulted in significant changes in the Medicare program. Formerly, Medicare
provided reimbursement for the reasonable direct and indirect costs of hospital
services furnished to beneficiaries, plus an allowed return on equity for
proprietary hospitals. Pursuant to the Social Security Amendments of 1983 ("the
Amendments") and subsequent budget reconciliation act modifications, Congress
adopted a prospective payment system ("PPS") to reimburse the routine and
ancillary operating costs of most Medicare inpatient hospital services.
Psychiatric, long-term care, rehabilitation and pediatric hospitals, as well as
psychiatric or rehabilitation units that are distinct parts of a hospital,
currently are exempt from PPS and continue to be reimbursed on a reasonable cost
basis. In addition, many outpatient services continue to be reimbursed, subject
to certain regulatory limitations, on a reasonable cost basis. The Company's
four psychiatric hospitals, which are currently exempt from PPS reimbursement,
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are subject to an operating cost per discharge limitation for Medicare
reimbursement purposes.
Under PPS, the Secretary of DHHS has established fixed payment amounts per
discharge for categories of hospital treatment, commonly known as diagnosis-
related groups ("DRGs"). DRG rates have been established for each individual
hospital participating in the Medicare program, in part based upon the
facility's geographic location. As a general rule under PPS, if a facility's
costs of providing care for the beneficiary are less than the predetermined DRG
rate, the facility retains the difference. Conversely, if the facility's costs
of providing the necessary service are more than the predetermined rate, the
facility must absorb the loss. Because DRG rates are based upon a statistically
normal distribution of severity, patients falling outside the normal
distribution are afforded additional payments and defined as "outliers." In
certain instances, additional payments may be received for outliers.
The DRG rates are updated annually to account for projected inflation. For
several years the annual updates or percentage increases to the DRG rates have
been lower than the actual inflation in the cost of goods and services purchased
by general hospitals. The inflation index used by HCFA to adjust the DRG rates
gives consideration to the cost of goods and services purchased by hospitals as
well as non-hospitals (the "market basket"). The increase in the market basket
for the year beginning on October 1, 1999 is 1.1%. Pursuant to the Balanced
Budget Act of 1997, the net annual updates have been set as follows: federal
fiscal year ("FY") 2000, market basket minus 1.8%; FY 2001 and FY 2002, market
basket minus 1.1%; and, for FY 2003 and each subsequent FY, the market basket
percentage increase. The Company cannot predict how future adjustments by
Congress and the HCFA will affect the profitability of its health care
facilities.
Hospitals currently excluded from the PPS, such as psychiatric and
rehabilitation hospitals, receive reimbursement based on their reasonable costs,
with limits placed upon the annual rate of increase in operating costs per
discharge. Pursuant to the Balanced Budget Act of 1997, the annual update for
FY 1998 was set at 0%. For FY 1999 through FY 2002, the annual update factor is
dependent upon where the hospital's costs fall in relation to the limits set by
the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"). The annual
update factor will range from 0% to the market basket percentage increase,
depending upon whether the hospital's costs are at, below or above the TEFRA
target limits. The Company currently has four hospitals that are exempt from
the PPS.
Prior to October 1, 1990, Medicare payments for outpatient hospital-based
services were generally the lower of hospital costs or customary charges. Due
to federal budget restraints, the Omnibus Budget Reconciliation Act of 1993
("OBRA-1993") reduced Medicare payments for the majority of outpatient services
to the lower of 94.2% of hospital costs, customary charges or a blend of 94.2%
of hospital costs and a fee schedule (such fee schedule generally being lower
than hospital costs) through FY 1998. The Balanced Budget Act of 1997 extends
this reduction up to January 1, 2000. The Balanced Budget Act of 1997 also
requires the development of a prospective payment system for outpatient
services, certain Part B services furnished to hospital inpatients who have no
Part A coverage, and partial hospitalization services furnished for community
health centers. The new system was to go into effect on January 1, 1999.
However, because of work involved in order to ensure Medicare's Year 2000
compliance, implementation of the system has been delayed until after January 1,
2000. Although it is anticipated that the system will be proposed and
implemented shortly after January 1, 2000, no final regulations have been
published as of this date. Accordingly, the Company cannot accurately assess the
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impact of the new system at this time. Outpatient laboratory services are paid
based on a fee schedule which is substantially lower than customary charges.
Certain ambulatory surgery procedures are paid for at a rate based on a blend of
hospital costs and the rate paid by Medicare for similar procedures performed in
free-standing ambulatory surgery centers. Certain radiology and other diagnostic
services are paid on a blend of actual cost and prevailing area charge.
Payments under the Medicare program for capital related costs, for cost
reporting periods prior to October 1, 1991, were made on a reasonable cost
basis. Reasonable capital costs generally include depreciation, rent and lease
expense, capital interest, property taxes, insurance related to the physical
plant, fixed equipment and movable equipment. As a result of changes made to
the Social Security Act by the Omnibus Reconciliation Act of 1987 ("OBRA-1987")
hospitals paid under PPS for operating costs must be reimbursed for capital
costs on a prospective basis, effective with the cost reporting period beginning
October 1, 1991 (i.e., FY 1992). HCFA implemented the PPS for capital costs for
FY 1992 based upon FY 1989 Medicare inpatient capital costs per discharge
updated to FY 1992 by the estimated increase in Medicare capital costs per
discharge. A ten year transition period, beginning with FY 1992, was
established for the phasing-in of the capital PPS. Under the transition period
rules, hospitals with a hospital-specific capital rate below the standard
Federal rate are paid on a fully prospective methodology. Hospitals with a
hospital-specific rate above the standard Federal rate are paid based on a hold-
harmless method or 100% of the standard Federal rate, whichever results in the
higher payment. Beginning with cost reporting periods on or after October 1,
2001, at the end of the transition period, all hospitals are to be paid at the
standard Federal rate. Pursuant to the Balanced Budget Act of 1997, capital
payment rates were rebased in FY 1998 using the actual rates in effect in FY
1995 and the budget neutrality adjustment factor used to determine the federal
capital payment rate on September 30, 1995. In addition, capital rates are
reduced by an additional 2.1% by the Balanced Budget Act of 1997. For FY 2000,
HCFA announced a 0.28% decrease to the Federal rate. The Company anticipates
further adjustments in the future but is unable to predict the amount or impact
of future adjustments.
The Medicare program reimburses each hospital on a reasonable cost basis
for the Medicare program's pro rata share of the hospital's allowable capital
costs related to outpatient services. Outpatient capital reimbursement was
reduced by 15% (i.e., 85% of outpatient capital costs) during FY 1990 and
OBRA1990 extended the 15% reduction through FY 1991. OBRA-1990 and OBRA-1993
further directed that outpatient capital reimbursement be reduced by only 10%
beginning FY 1992 through FY 1998. The Balanced Budget Act of 1997 continues
the 10% reduction during FY 2000 up to January 1, 2000. The Company anticipates
that payments to hospitals will be reduced as a result of future legislation but
is unable to predict what the amount of the final reduction will be.
The Balanced Budget Act of 1997 mandates that home health care
reimbursement must transition to a prospective payment system on October 1,
1999, as well as a 15% reduction in the cost limits and per beneficiary limits
effective September 30, 1999. During a transition period of not longer than 4
years, home health care reimbursement rates will be a blend of agency-specific
costs and the regional-specific costs, until a fully prospective payment rate is
achieved. Implementation of the home health prospective payment system has
been delayed until October 1, 2000 and the 15% reduction in the limits has been
delayed until 12 months after the implementation of the new home health
prospective payment system. The Company currently has 12 hospitals that provide
home health care services. The impact of the transition to PPS for home health
care services cannot be assessed at this time. The Company anticipates that
payments for home health services may be limited or reduced as a result of this
legislation.
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The Balanced Budget Act of 1997 mandated numerous other adjustments and
reductions to the Medicare system that collectively may impact the Company's
operations. With respect to the valuation of capital assets as a result of a
change in hospital ownership, the Balanced Budget Act of 1997 eliminates the
allowance for return on equity capital, and bases reimbursement on the book
value of the assets, recognizing no gain, loss or recapture of depreciation. In
addition, the Balanced Budget Act of 1997 mandated the following changes: a)
reimbursement for Medicare enrollee deductible and coinsurance bad debts is
reduced 40% for FY 1999 and 45% for FY 2000 and each subsequent year; b) the
bonus payments made to hospitals whose costs are below the target amounts is
reduced to 2% of the target amount; and, c) skilled nursing home reimbursement
must transition to a prospective payment system, based upon 1995 allowable
costs, with a three year transition period beginning on or after July 1, 1998.
Due to concern over Medicare's ability to address Year 2000 issues, many
implementation dates have been indefinitely postponed. For example, outpatient
PPS rules have been proposed, but an actual start date has yet to be announced.
In addition, portions of the skilled nursing home PPS program and consolidated
billing have been postponed until July 1, 2000 or later.
Medicaid. The Medicaid program, created by the Social Security Act of
1965, is designed to provide medical assistance to individuals unable to afford
care. Medicaid is a joint federal and state program in which states voluntarily
participate. Payment rates and services covered under the Medicaid program are
set by each participating state. As a result, Medicaid payment rates and
covered services may vary from state to state. Approximately 50% of Medicaid
funding comes from the federal government, with the balance shared by the state
and local governments. The Medicaid program is administered by individual state
governments, subject to compliance with broadly defined federal requirements.
The Balanced Budget Act of 1997 repealed the Boren Amendment to the
Medicaid Act which had been interpreted by the Courts as establishing a federal
minimum standard for Medicaid rates payable to hospitals and nursing homes.
Congress repealed the Boren Amendment in order to give states greater
flexibility in establishing Medicaid payment methods and rates. The Boren
Amendment required states to undertake a finding analysis and then to assure the
federal government that their Medicaid rates were reasonable and adequate to
meet the costs that must be incurred by economically and efficiently operated
hospitals in providing care to Medicaid recipients. In place of this minimum
standard, Congress has mandated that states employ a rate setting process that
requires prior publication and an opportunity for provider comment on the rates.
This replacement requirement became effective for rates of payment on and after
January 1, 1998.
State Medicaid payment methodologies vary from state to state. The most
common methodologies are state Medicaid prospective payment systems or state
programs that negotiate payment rates with individual hospitals. Generally,
Medicaid payments are less than Medicare payments and are substantially less
than a hospital's cost of services. In 1991 Congress passed legislation
limiting the states' use of provider-specific taxes and donated funds to bolster
the state's share and obtain increased federal Medicaid matching funds. Certain
states in which the Company operates have adopted broad-based provider taxes to
fund their Medicaid programs in response to the 1991 legislation. Congress has
also established a national limit on disproportionate share hospital adjustments
(which are additional amounts required to be paid to hospitals defined as
providing a disproportionate amount of Medicaid and low-income inpatient
services). This legislation and the resulting state broad-based provider taxes
have adversely affected the Company's net Medicaid payments, but to date the net
impact has not been materially adverse.
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The federal government and many states are currently considering additional
ways to limit the increase in the level of Medicaid funding, which also could
adversely affect future levels of Medicaid payments received by the Company's
hospitals. Because the Company cannot predict precisely what action the federal
government or the states will take as a result of existing and future
legislation, the Company is unable to assess the effect of such legislation on
its business. Like Medicare funding, Medicaid funding may also be affected by
health care reform legislation, and it is impossible to predict the effect such
legislation might have on the Company.
CHAMPUS. Some of the Company's hospitals provide services to retired and
certain other military personnel and their families pursuant to the Civilian
Health and Medical Program of Uniformed Services ("CHAMPUS") program. CHAMPUS
pays for inpatient acute hospital care on the basis of a prospectively
determined rate applied on a per discharge basis using DRGs similar to the
Medicare system. At this time, inpatient psychiatric hospital services are
reimbursed on an individual hospital per diem rate calculated based upon the
average charges for these services by all psychiatric hospitals. The Company
can make no assurance that the CHAMPUS program will continue per diem
reimbursement for psychiatric hospital services in the future.
The Medicare, Medicaid and CHAMPUS programs are subject to statutory and
regulatory changes, administrative rulings, interpretations and determinations,
requirements for utilization review and new governmental funding restrictions,
all of which may materially increase or decrease program payments as well as
affect the cost of providing services and the timing of payments to facilities.
The final determination of amounts earned under the programs often requires many
years, because of audits by the program representatives, providers' rights of
appeal and the application of numerous technical reimbursement provisions.
Management believes that adequate provision has been made for such adjustments.
Until final adjustment, however, significant issues remain unresolved and
previously determined allowances could become either inadequate or more than
ultimately required.
Commercial Insurance. The Company's hospitals provide services to
individuals covered by private health care insurance. Private insurance
carriers either reimburse their policy holders or make direct payments to the
Company's hospital based upon the particular hospital's established charges and
the particular coverage program that provides its subscribers with hospital
benefits through independent organizations that vary from state to state. The
Company's hospitals are paid directly by local Blue Cross organizations on the
basis agreed to by each hospital and Blue Cross by a written contract.
Recently, several commercial insurers have undertaken efforts to limit the
costs of hospital services by adopting prospective payment or DRG-based systems.
To the extent such efforts are successful, and to the extent that the insurers'
systems fail to reimburse hospitals for the costs of providing services to their
beneficiaries, such efforts may have a negative impact on the results of
operations of the Company's hospitals.
Healthcare Reform, Regulation and Other Factors
General. Healthcare, as one of the largest industries in the United
States, continues to attract much legislative interest and public attention.
Medicare, Medicaid, mandatory and other public and private hospital cost-
containment programs, proposals to limit healthcare spending, proposals to limit
prices and industry 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
9
<PAGE>
which the industry has the benefit of little or no regulatory or judicial
interpretation. Although the Company believes it is in compliance in all
material respects with such laws, rules and regulations, if a determination is
made that the Company was in material violation of such laws, rules or
regulations, its operations and financial results could be materially adversely
affected.
Licensure, Certification and Accreditation. Health care facility
construction and operation is subject to federal, state and local regulation
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. Facilities are subject to
periodic inspection by governmental and other authorities to assure continued
compliance with the various standards necessary for licensing and accreditation.
All of the Company's health care facilities are properly licensed under
appropriate state laws and are certified under the Medicare program or are
accredited by the Joint Commission on Accreditation of Health Care Organizations
("Joint Commission"), the effect of which is to permit the facilities to
participate in the Medicare/Medicaid programs. Should any Joint Commission
facility lose its accreditation, and then not become certified under the
Medicare program, the facility would be unable to receive reimbursement from the
Medicare/Medicaid programs. Management believes that the Company's facilities
are in substantial 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 the Company to effect changes in
its facilities, equipment, personnel and services. Although the Company intends
to continue its qualification, there can be no assurance that its hospitals will
be able to comply in the future.
Utilization Review. In order to ensure efficient utilization of facilities
and services, federal regulations require that admissions to and the utilization
of facilities by Medicare and Medicaid patients be reviewed by a federally
funded Peer Review Organization ("PRO"). Pursuant to Federal law, the PRO must
review the need for hospitalization and the utilization of services, denying
admission of a patient or denying payment for services provided, where
appropriate. Each of the Company's facilities has contracted with a PRO and has
had in effect a quality assurance program that provides for retrospective
patient care evaluation and utilization review.
Certificates of Need. The construction of new facilities, the acquisition
of existing facilities, and the addition of new beds or services may be
reviewable by state regulatory agencies under a program frequently referred to
as certificate of need. Except for Arkansas, all the states in which the
Company's health care facilities are located have certificate of need or
equivalent laws which generally require appropriate state agency determination
of public need and approval prior to beds or services being added, or a related
capital amount being spent. Failure to obtain necessary state approval can
result in the inability to complete the acquisition, the imposition of civil or,
in some cases, criminal sanctions, the inability to receive Medicare or Medicaid
reimbursement and/or the revocation of the facility's license.
State Hospital Rate-Setting Activity. The Company currently operates one
facility in a state that has some form of mandated hospital rate-setting. The
West Virginia Health Care Rate Authority ("HCRA") establishes a maximum approved
charge for each hospital service. Hospitals are limited to this maximum charge
for each service until HCRA approves an increase. Rate increases are reviewed,
approved and implemented on an annual basis. As a result, in West Virginia, the
Company's ability to increase its rates to compensate for increased costs per
10
<PAGE>
admission is limited and the Company's operating margin on its West Virginia
facility may be adversely affected. There can be no assurance that other states
in which the Company operates hospitals will not enact rate-setting provisions
as well.
Antikickback and Self-Referral Regulations. During 1998, the federal
government announced that reducing healthcare fraud was its second priority
(behind reducing crime in America). As a result, the healthcare industry is
being subjected to unprecedented scrutiny and a panoply of statutes, regulations
and government initiatives intended to prevent those practices deemed
fraudulent or abusive by the government. The healthcare industry is subject to
extensive Federal, state and local regulation relating to licensure, conduct of
operations, ownership of facilities, addition of facilities and services and
prices for services. In particular, Medicare and Medicaid antikickback,
antifraud and abuse amendments codified under Section 1128B(b) of the Social
Security Act (the "Antikickback Amendments") prohibit certain business practices
and relationships that might affect the provision and cost of healthcare
services reimbursable under Medicare and Medicaid, including the payment or
receipt of remuneration for the referral of patients whose care will be paid for
by Medicare or other government programs. Sanctions for violating the
Antikickback Amendments include criminal penalties and civil sanctions,
including fines and possible exclusion from the Medicare and Medicaid programs.
Pursuant to the Medicare and Medicaid Patient and Program Protection Act of
1987, DHHS has issued regulations that describe some of the conduct and business
relationships permissible under the Antikickback Amendments ("Safe Harbors").
The fact that a given business arrangement does not fall within a Safe Harbor
does not render the arrangement per se illegal. Business arrangements of
healthcare service providers that fail to clearly satisfy the applicable Safe
Harbor criteria, however, risk increased scrutiny by enforcement authorities.
Because the Company may be less willing than some of its competitors to enter
into business arrangements that do not clearly satisfy the Safe Harbors, it
could be at a competitive disadvantage in entering into certain transactions and
arrangements with physicians and other healthcare providers.
In addition, Section 1877 of the Social Security Act, which restricts
referrals by physicians of Medicare and other government-program patients to
providers of a broad range of designated health services with which they have
ownership or certain other financial arrangements, was amended effective January
1, 1995, to significantly broaden the scope of prohibited physician referrals
under the Medicare and Medicaid programs to providers with which they have
ownership or certain other financial arrangements (the "Self-Referral
Prohibitions"). Many states have adopted or are considering similar legislative
proposals, some of which extend beyond the Medicaid program to prohibit the
payment or receipt of renumeration for the referral of patients and physician
self-referrals regardless of the source of the payment for the care. The
Company's participation in and development of joint ventures and other financial
relationships with physicians could be adversely affected by these amendments
and similar state enactments. The Company systematically reviews all of its
operations to ensure that it complies with the Social Security Act and similar
state statutes. In addition, the Company has in operation a Corporate
compliance program at all of the Company's hospitals, and that is an ongoing,
working program to monitor and insure continuing compliance with these statutory
prohibitions and requirements.
Both Federal and state government agencies have announced heightened and
coordinated civil and criminal enforcement efforts in accordance with the
requirements of recent federal statutory enactments including the Health
Insurance Portability Act of 1996. The Company is unable to predict the future
course of Federal, state and local regulation or legislation, including Medicare
11
<PAGE>
and Medicaid statutes and regulations. Further changes in the regulatory
framework could have a material adverse effect on the Company's financial
condition.
Conversion Legislation. Many states have enacted or are considering
enacting laws affecting the conversion or sale of not-for-profit hospitals.
These laws generally require prior approval from state attorney generals,
advance notification and community involvement. In addition, state attorney
generals in states without specific conversion legislation may exercise
authority over these transactions based upon existing law. States are showing
an increased interest in overseeing the sales or conversions of not-for-profit
hospitals. The adoption of conversion legislation and the increased review of
not-for-profit hospital conversions may make it more difficult for the Company
to acquire not-for-profit hospitals, or could increase our acquisition costs in
the future. See "Business Strategy" in this Item 1.
Environmental Regulations. The Company's healthcare operations generate
medical waste that must be disposed of in compliance with Federal, state and
local environmental laws, rules and regulations. The Company's operations, as
well as the Company's purchases and sales of facilities, are also subject to
compliance with various other environmental laws, rules and regulations. Such
compliance does not, and the Company anticipates that such compliance will not,
materially affect the Company's capital expenditures, financial position or
results of operations.
Compliance Program. During 1996 the Company began developing, and in 1997
formally implemented, a Corporate compliance program to supplement and enhance
our existing ethics program. The Company believes its compliance and ethics
program meets or exceeds all applicable federal guidelines and industry
standards. The program is designed to raise awareness of various regulatory
issues among employees and to stress the importance of complying with all
governmental laws and regulations. As part of the program, the Company provides
ethics and compliance training to every employee. Management encourages all of
our employees to report, without fear of retaliation, any suspected legal or
ethical violation to their supervisors, the compliance officer on staff at the
hospital or our Corporate compliance officer. In addition, the Company
maintains a 24-hour toll-free telephone hotline, which is manned by an
independent company, so that employees can report suspected violations
anonymously.
Employees and Medical Staff
As of September 30, 1999, the Company had approximately 16,000 full-time
and part-time employees, approximately 300 of whom were covered by two
collective bargaining agreements. The Company's corporate office staff
consisted of approximately 65 people at that date. The Company believes that
its relations with employees are satisfactory. In general, the staff physicians
at the Company's acute care and psychiatric hospitals are not employees of the
Company. The physicians may also be staff members of other hospitals. The
Company provides physicians with certain services and assistance. The Company
does employ approximately 115 physicians, most of whom are primary care
physicians located at clinics the Company owns and operates. In addition, the
Company's hospitals provide emergency room coverage, radiology, pathology and
anesthesiology services by entering into service contracts with physician groups
which are generally cancelable on 90 days notice.
12
<PAGE>
Liability Insurance
The Company maintains at each hospital it operates professional liability
insurance and general liability insurance in amounts of $1 million per claim and
$4,500,000 per aggregation of claims, of which the Company retains the first
$100,000 of each professional liability claim and up to $4.5 million (as of
October 1, 1999) in the aggregate for all such claims each year. The Company
maintains a $1 million layer of self-insured retention of professional liability
for all hospitals above the first level of coverage and then purchases $35
million umbrella coverage for all hospitals. The Company also maintains other
typical insurance coverage. The Company maintains an unfunded reserve for its
self-insured risks described above based upon actuarially determined estimates.
Actual hospital professional liability costs for a particular period are not
known for several years after the period has expired. The delay in determining
the actual cost associated with a particular period is a result of the time
between the occurrence of an incident and when it is reported as well as the
time involved and costs incurred in resolution of such claims. The Company
believes that its insurance is adequate in amount and coverage. There can be no
assurance that in the future such insurance will be available at a reasonable
price or that the Company will not have to increase its levels of self-
insurance.
Item 2. Properties
The Company's acute care hospitals offer a broad range of medical and
surgical services, including inpatient care, intensive and cardiac care,
diagnostic services and emergency services that are physician-staffed 24 hours a
day, seven days a week. The Company also provides outpatient services such as
one-day surgery, laboratory, x-ray, respiratory therapy, cardiology and physical
therapy. At certain of the Company's hospitals specialty services such as
oncology, radiation therapy, CT scanning, MRI imaging, lithotripsy and full-
service obstetrics are provided.
The Company's psychiatric care operations consist of four psychiatric
hospitals: one 66-bed hospital with 32 psychiatric adult beds, 16 psychiatric
child/adolescent beds, and 18 adult substance abuse beds, one 72-bed
child/adolescent secure residential treatment facility, one 88-bed hospital with
28 psychiatric adult beds and 60 intensive residential treatment beds, and one
60-bed intensive residential treatment hospital.
The following table presents certain information with respect to the
Company's facilities as of September 30, 1999. For more information regarding
the utilization of the Company's facilities, see "Item 1. Business -- Selected
Operating Statistics".
13
<PAGE>
<TABLE>
<CAPTION>
Owned Acquisition or
Licensed Leased or Commencement
Hospital Location Type Beds Managed Date
- ----------------------------------------- ------------ ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Paul B. Hall Regional Medical Center Paintsville, Acute Care 72 Owned January 1979
Kentucky (replaced
September 1983)
Williamson Memorial Hospital Williamson, Acute Care 76 Owned June 1979
West Virginia (replaced June
1987)
Highlands Regional Medical Center Sebring, Acute Care 126 Leased August 1985
Florida
Lake Norman Regional Medical Center(1) Mooresville, Acute Care 105 Owned January 1986
North Carolina
Palmview Hospital Lakeland, Psychiatric 66 Owned March 1986
Florida
Fishermen's Hospital Marathon, Acute Care 58 Leased August 1986
Florida
Franklin Regional Medical Center Louisburg, Acute Care 70 Owned August 1986
North Carolina Psychiatric 15
Biloxi Regional Medical Center Biloxi, Acute Care 153 Leased September 1986
Mississippi
Medical Center of Southeastern Oklahoma Durant, Acute Care 103 Owned May 1987
Oklahoma
Crawford Memorial Hospital Van Buren, Acute Care 103 Leased May 1987
Arkansas
Hamlet Hospital Hamlet, Acute Care 54 Owned August 1987
North Carolina Psychiatric 10
Upstate Carolina Regional Medical Center Gaffney, Acute Care 125 Owned March 1988
South Carolina
University Behavioral Center Orlando, Psychiatric 88 Owned January 1989
Florida
SandyPines Tequesta, Psychiatric 60 Owned January 1990
Florida
Riverview Regional Medical Center Gadsden, Acute Care 281 Owned July 1991
Alabama
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Owned Acquisition or
Licensed Leased or Commencement
Hospital Location Type Beds Managed Date
- ---------------------------------------- --------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Parkview Hospital of Topeka Topeka, Psychiatric 72 Owned July 1993
Kansas
Heart of Florida Hospital Haines City, Acute Care 75 Owned August 1993
Florida
Natchez Community Hospital Natchez, Acute Care 101 Owned September 1993
Mississippi
Sebastian Hospital Sebastian, Acute Care 133 Owned September 1993
Florida
Medical Center Hospital Punta Gorda, Acute Care 156 Owned December 1994
Florida Psychiatric 52
Byerly Hospital (2) Hartsville, Acute Care 116 Leased September 1995
South Carolina
Bulloch Memorial Hospital (3) Statesboro, Acute Care 158 Leased October 1995
Georgia
Northwest Mississippi Regional Clarksdale, Acute Care 175 Leased January 1996
Medical Center Mississippi Skilled Nursing 20
Midwest City Regional Hospital Midwest City, Acute Care 197 Leased June 1996
Oklahoma Psychiatric 30
Skilled Nursing 20
Stringfellow Memorial Hospital Anniston, Acute Care 125 Managed January 1997
Alabama
Rankin Medical Center Brandon, Acute Care 120 Leased January 1997
Mississippi 14
Southwest Regional Medical Center (4) Little Rock, Acute Care 108 Owned November 1997
Arkansas Gero-Psych 17
Riley Memorial Hospital (5) Meridian, Acute Care 168 Owned January 1998
Mississippi Skilled Nursing 12
River Oaks Hospital (6) Jackson, Acute Care 110 Owned January 1998
Mississippi
River Oaks East (6) Jackson, Acute Care 94 Owned January 1998
Mississippi Skilled Nursing 17
Brooksville Regional Hospital (7) Brooksville, Acute Care 91 Leased June 1998
Florida
Springhill Regional Hospital (7) Spring Hill, Acute Care 75 Leased June 1998
Florida
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Owned Acquisition or
Licensed Leased or Commencement
Hospital Location Type Beds Managed Date
- ---------------------------------------- --------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Central Mississippi Medical Center (8) Jackson, Acute Care 444 Leased April 1999
Mississippi Psychiatric 29
Lower Keys Medical Center (9) Key West, Acute Care 112 Leased May 1999
Florida Skilled Nursing 15
Psychiatric 40
Community Hospital of Lancaster (10) Lancaster, Acute Care 204 Owned July 1999
Pennsylvania
-----
TOTAL LICENSED BEDS OWNED, LEASED OR MANAGED 4,665
=====
</TABLE>
(1) The Company opened a replacement hospital for the Lake Norman
Regional Medical Center in June 1999. The total cost of the project
was approximately $49 million, including equipment and a new medical
office building.
(2) The Company opened a replacement facility for Byerly Hospital,
the new Carolina Pines Regional Medical Center, in May 1999. Whereas
the previous facility was operated by the Company under a lease
agreement, the Company now owns the new replacement hospital. The
total cost of the project was approximately $45 million, including
equipment and a new medical office building.
(3) The Company is currently operating Bulloch Memorial Hospital
under a short-term lease agreement while building a new replacement
hospital. The total cost of the new hospital is approximately $45
million. The Company will own the replacement hospital.
(4) Effective November 1, 1997 the Company acquired Southwest
Hospital from Safecare Company, Inc. pursuant to an Asset Purchase
Agreement. The Agreement included the purchase of substantially all
property, plant and equipment of the hospital, and working capital.
The total consideration approximated $21.4 million, including $20.7
million in cash and the assumption of $.7 million in debt.
(5) In January 1998 the Company acquired Riley Memorial Hospital from
Riley Development Systems, Inc., pursuant to an Asset Purchase
Agreement. The Agreement included the purchase of substantially all
property, plant and equipment of the hospital, and working capital.
The total consideration approximated $75.7 million in cash.
(6) In January 1998 the Company acquired a two-hospital system from
River Oaks Hospital, Inc., via an Agreement of Merger and tax-free
stock exchange transaction. The transaction included the purchase of
substantially all property, plant and equipment of the system, and
working capital. The total consideration involved approximated $114.9
million, including $80.0 million in Company stock and the assumption
of $34.9 million in debt.
(7) Effective June 1998 the Company acquired a two-hospital system
from Regional Healthcare, Inc. pursuant to a Definitive Agreement and
Lease Agreement. The transaction included a lease of the real property
and the purchase of substantially all equipment and the working
capital of the
16
<PAGE>
hospitals. The total consideration approximated $76.0 million,
including $72.0 million in cash, and the assumption of $4.0 million in
debt.
(8) Effective April 1, 1999 the Company acquired a two-hospital
system from Methodist Healthcare pursuant to an Asset Purchase and
Lease Agreement. The transaction included the lease of certain real
property and the purchase of substantially all equipment and working
capital of the hospitals. The total consideration approximated $134
million in cash.
(9) Effective April 1, 1999 the Company acquired the Lower Florida
Keys Health System pursuant to asset purchase and lease agreements.
The consideration totaled approximately $49.9 million, which included
$27 million in cash paid at closing, $18.6 recorded as the net present
value of lease payments required over the 30 year term of the lease,
and the assumption of $4.3 million in debt. The agreements included
the assumption of working capital balances at closing, and also
entitle the Company to receive $1.5 million per year in cash from the
seller for the first ten years of the lease to support indigent care
programs.
(10) Effective July 1, 1999 the Company acquired Community Hospital of
Lancaster from Community of Lancaster Hospital Foundation pursuant to
a Definitive Agreement. The Agreement included the purchase of
substantially all property, plant and equipment and working capital of
the hospital. The total consideration involved approximately $15
million in cash. The Company is committed to the construction of a
replacement hospital, subject to obtaining all required governmental
and regulatory approvals.
The Company currently leases the facilities of Highlands Regional
Medical Center, Fishermen's Hospital, Biloxi Regional Medical Center, Crawford
Memorial Hospital, Northwest Mississippi Regional Medical Center, Midwest City
Regional Hospital, Rankin Medical Center, Brooksville Regional Hospital, Spring
Hill Regional Hospital, Central Mississippi Medical Center and Lower Keys
Medical Center pursuant to long-term leases expiring in 2025, 2011, 2024, 2027,
2025, 2026, 2026, 2028, 2028, 2040 and 2029, respectively, which provide the
Company with the exclusive right to use and control the hospital operations.
The Company's corporate headquarters are located in an office building
in Naples, Florida, in which space is leased. The Company believes that all of
its facilities are suitable and adequate for its needs. Certain of the Company's
hospitals are subject to mortgages securing various borrowings. See Note 3 of
the Notes to the Consolidated Financial Statements (Item 8. hereof).
Item 3. Legal Proceedings
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 are unlikely,
individually or in the aggregate, to have a material adverse effect on the
Company's financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended September 30, 1999.
17
<PAGE>
Executive Officers of the Registrant
The following is certain information regarding the executive officers of
the Company.
William J. Schoen, age 64, has served as Chairman of the Board, and Chief
Executive Officer of the Company since April 1986. He joined the Company's
Board of Directors in February 1983, in December 1983 became its President and
Chief Operating Officer, and Co-Chief Executive Officer in December 1985. He
relinquished the position of President in April 1997. From 1982 to 1987 Mr.
Schoen was Chairman of Commerce National Bank, Naples, Florida, and from 1973 to
1981 he was President, Chief Operating Officer and Chief Executive Officer of
The F&M Schaefer Corporation, a consumer products company. From 1971 to 1973,
Mr. Schoen was President of the Pierce Glass subsidiary of Indian Head, Inc., a
diversified company. Mr. Schoen also serves on the Board of Directors of Horace
Mann Insurance Companies.
Earl P. Holland, age 54, is Vice Chairman and Chief Operations Officer.
He joined the Company in 1981 as Senior Vice President - Operations. He became
Senior Vice President - Marketing and Development in 1984, Executive Vice
President - Operations and Development in 1989, and Vice Chairman in 1997. For
more than five years prior to 1981, he was employed by Humana, Inc., where he
served as Assistant Regional Vice President and as the Executive Director of two
hospitals.
Joseph V. Vumbacco, age 54, is President and Chief Administrative Officer.
He joined the Company as an Executive Vice President in January 1996 after 14
years with Turner Construction Company, most recently as an Executive Vice
President. He was promoted to President in 1997 and then became Chief
Administrative Officer in 1998. Prior to joining Turner, he served as the Senior
Vice President and General Counsel for The F&M Schaefer Corporation.
Stephen M. Ray, age 51, is Executive Vice President - Finance of the
Company. A certified public accountant, he joined the Company in 1981 as
Controller, became a Vice President in 1983, and a Senior Vice President in
1991. He also served as Treasurer from 1987 to 1988 and most recently Senior
Vice President - Administrative Services until his appointment to Senior Vice
President - Finance in September 1994 and Executive Vice President in January
1999. From 1979 until 1981, Mr. Ray was employed by Hospital Affiliates
International, Inc., a hospital management company, where he was responsible for
reporting compliance and corporate technical accounting.
Timothy R. Parry, age 44, is Vice President and General Counsel of the
Company. He joined the Company in February 1996 as a Divisional Vice-President
and Assistant General Counsel after 12 years in the law firm of Harter, Secrest
& Emery, the last seven years as partner. Prior to joining Harter, Secrest &
Emery he was an Assistant Ohio Attorney General for two years and before that a
law clerk for the United States District Court for the Southern District of
Ohio.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company completed an initial public offering of its Class A Common
Stock on February 5, 1991. The Company's Class A Common Stock is listed on the
New York Stock Exchange under the Symbol HMA. At December 15, 1999 there were
18
<PAGE>
approximately 1,724 record holders of the Company's Class A Common Stock. The
following table sets forth, for the periods indicated, the high and low sale
prices per share of the Company's Class A Common Stock as listed on the New York
Stock Exchange. All prices below reflect the effect of a 3-for-2 stock split in
the form of stock dividends effective in June 1998.
High Low
-------- ---------
Fiscal Year Ended September 30, 1998
First Quarter....................... $ 17 5/8 $ 14 1/8
Second Quarter...................... 19 3/4 14 15/16
Third Quarter....................... 23 3/16 17 5/8
Fourth Quarter...................... 24 9/16 17 1/2
Fiscal Year Ended September 30, 1999
First Quarter....................... 23 1/2 16
Second Quarter...................... 21 5/8 10 3/16
Third Quarter....................... 17 5/16 10 7/16
Fourth Quarter...................... 12 1/4 7 1/4
The Company has not paid any cash dividends since its inception, and does
not anticipate the payment of cash dividends in the foreseeable future.
In connection with a stock repurchase program approved by the Board of
Directors in February 1998 the Company sold, pursuant to Section 4(2) of the
Securities Act of 1933, 2,459,000 put options to an independent third party for
proceeds totaling $2,090,000. Each put option entitled the holder to sell one
share of the Company's common stock to the Company at a price of $17.50 per
share, exercisable only at maturity and expiring at various dates from November
1998 to December 1998. The put options expired without being exercised.
During Fiscal 1999 the Company repurchased 7.5 million shares of its stock,
which completed the February 1998 stock repurchase plan referred to above. In
September 1999 the Board of Directors approved a stock repurchase program of up
to 25 million shares of common stock. On October 14, 1999 the Company executed
a share repurchase agreement with an independent third party, whereby the third
party agreed to "sell short" 5 million shares of the Company's common stock to
the Company. As of October 19, 1999 the 5 million shares were delivered to the
Company and became treasury stock. From October 15, 1999 to December 15, 1999,
a period of 60 days, the third party covered the "short sale" by buying shares
on the open market. On December 15, 1999 the Company reimbursed the third party
the cost of the common stock purchased plus a commission plus interest (at
LIBOR) on the outstanding balance of funds used to purchase the common stock.
The total cost for the purchase of the 5 million shares of treasury stock was
approximately $40 million.
Item 6. Selected Financial Data
The following table summarizes certain selected financial data of the
Registrant and should be read in conjunction with the related Consolidated
Financial Statements and accompanying Notes to Consolidated Financial Statements
(Item 8. hereof).
19
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net patient service revenue $1,355,707 $1,138,802 $895,482 $714,317 $531,094
Costs and expenses 1,109,054 913,523 717,173 575,906 426,845
Income from operations 246,653 225,279 178,309 138,411 104,249
Net income 149,845 136,844 108,322 84,086 63,331
Net income per share-diluted $ .59 $ .54 $ .43 $ .34 $ .26
Weighted average number of
shares outstanding-diluted 255,067 255,575 249,130 244,045 239,487
At Year End
- -----------
Working capital $ 250,251 $ 196,578 $153,250 $106,907 $122,747
Total assets 1,517,300 1,106,022 734,041 591,707 466,998
Short-term debt 9,351 8,544 8,263 8,438 6,571
Long-term debt 401,522 134,217 49,650 68,702 67,721
Stockholders' equity 890,523 756,825 560,220 417,739 317,950
Book value per common share $ 3.51 $ 3.01 $ 2.30 $ 1.76 $ 1.36
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Fiscal Year Ended September 30, 1999 Compared to Fiscal Year Ended
September 30, 1998
Net patient service revenue for Fiscal 1999 was $1,355.7 million, as
compared to $1,138.8 million for the fiscal year ended September 30, 1998
("Fiscal 1998"). This represented an increase in net patient service revenue of
$216.9 million, or 19.0%. Hospitals in operation for the entire period of
Fiscal 1999 and Fiscal 1998 ("same hospitals") provided $48.0 million of the
increase in net patient service revenue. The remaining increase of $168.9
million included $169.3 million of net patient service revenue from the April
1999 acquisition of a 473-bed hospital system, the May 1999 acquisition of a
167-bed hospital system and the July 1999 acquisition of a 204-bed hospital,
offset by a decrease of $.4 million in Corporate and miscellaneous revenue.
As noted above, same hospital net operating revenue increased $48.0
million, or a 4.9% increase over Fiscal 1998. The increase in net operating
revenue of same hospitals was primarily attributable to inpatient and outpatient
volume increases, partially offset by a decrease in reimbursement. The Company
has experienced lower payments from a number of payors, resulting primarily from
a) reductions mandated by the Balanced Budget Act of 1997, particularly in the
areas of home health and Medicare bad debts, b) reduced Medicare outlier
payments caused by an increase in the cost outlier threshold, c) reductions in
various states' Medicaid programs, d) an increase in managed care discounts,
and e) a reduction in the Medicare case-mix index.
The Company's hospitals generated 718,035 patient days of service in Fiscal
1999, which produced an overall occupancy rate of 47.1%. During Fiscal 1998 the
20
<PAGE>
Company's hospitals generated 615,248 patient days of service for an overall
occupancy rate of 47.1%. Admissions in same hospitals for Fiscal 1999 increased
3.3%, from 105,235 to 108,673.
The Company's salaries and benefits, supplies and other expenses and
provision for doubtful accounts for Fiscal 1999 were $1,006.2 million, or 74.2%
of net patient service revenue, as compared to $831.4 million, or 73.0% of net
patient service revenue for Fiscal 1998. Of the total $174.8 million increase,
approximately $47.5 million related to same hospitals, which was largely
attributable to increased inpatient and outpatient volumes. Another $128.2
million of increased operating expenses related to the acquisitions mentioned
previously. The remaining decrease of $.9 million represented a decrease in
Corporate and miscellaneous other operating expenses. The Company's Fiscal 1999
rent expense increased by $6.2 million, which resulted both from acquisitions
and the expansion of hospital services.
The Company's depreciation and amortization costs increased by $10.8
million. Approximately $8.5 million of the increase resulted from the
acquisitions mentioned above with the remaining increase attributable to ongoing
building improvements and equipment purchases. Interest expense increased $3.6
million, which was due largely to acquisition related debt and lower investment
income in Fiscal 1999 (which is settled against interest expense), partially
offset by higher capitalized interest costs during Fiscal 1999.
The Company's income before income taxes was $246.7 million for Fiscal
1999 as compared to $225.3 million for Fiscal 1998, an increase of $21.4 million
or 9.5%. As noted above, the increased profitability resulted from an increase
in inpatient and outpatient business and from the acquisitions previously
mentioned. The Company's provision for income taxes was $96.8 million for
Fiscal 1999, as compared to $88.4 million for Fiscal 1998. These provisions
reflect an effective income tax rate of 39.25% for Fiscal 1999 and Fiscal 1998.
As a result of the foregoing, the Company's net income was $149.8 million for
Fiscal 1999 as compared to $136.8 million for Fiscal 1998.
Fiscal Year Ended September 30, 1998 Compared to Fiscal Year Ended
September 30, 1997
Net patient service revenue for Fiscal 1998 was $1,138.8 million, as
compared to $895.5 million for the fiscal year ended September 30, 1997 ("Fiscal
1997"). This represented an increase in net patient service revenue of $243.3
million, or 27.2%. Hospitals in operation for the entire period of Fiscal 1998
and Fiscal 1997 ("same hospitals") provided $80.0 million of the increase in net
patient service revenue, which resulted primarily from inpatient and outpatient
volume increases. The remaining increase of $163.3 million included $164.0
million of net patient service revenue from the November 1997 acquisition of a
125-bed hospital, the January 1998 acquisitions of a 180-bed hospital and a 221-
bed two-hospital system, and the June 1998 acquisition of a 166-bed two-hospital
system, offset by a decrease of $.7 million in Corporate and miscellaneous
revenue.
The Company's hospitals generated 615,248 patient days of service in Fiscal
1998, which produced an overall occupancy rate of 47.1%. During Fiscal 1997 the
Company's hospitals generated 494,977 patient days of service for an overall
occupancy rate of 44.8%. Admissions in same hospitals for Fiscal 1998 increased
5.5%, from 95,787 to 101,025.
21
<PAGE>
The Company's salaries and benefits, supplies and other expenses and
provision for doubtful accounts for Fiscal 1998 were $831.4 million, or 73.0% of
net patient service revenue, as compared to $657.5 million, or 73.4% of net
patient service revenue for Fiscal 1997. Of the total $173.9 million increase,
approximately $51.4 million related to same hospitals, which was largely
attributable to increased inpatient and outpatient volumes. Another $120.7
million of increased operating expenses related to the acquisitions mentioned
previously. The remaining increase of $1.8 million represented an increase in
Corporate and miscellaneous other operating expenses. The Company's Fiscal 1998
rent expense increased by $7.5 million, which resulted both from acquisitions
and the expansion of hospital services.
The Company's depreciation and amortization costs increased by $13.9
million. Approximately $10.5 million of the increase resulted from the
acquisitions mentioned above with the remaining increase attributable to ongoing
building improvements and equipment purchases. Interest expense increased $1.0
million in Fiscal 1999, which was due largely to acquisition related debt,
partially offset by higher capitalized interest costs during Fiscal 1999.
The Company's income before income taxes was $225.3 for Fiscal 1998 as
compared to $178.3 million for Fiscal 1997, an increase of $47.0 million or
26.3%. As noted above, the increased profitability resulted from an increase in
inpatient and outpatient business, improved operating performance of same
hospitals and the contribution from the acquisitions previously mentioned. The
Company's provision for income taxes was $88.4 million for Fiscal 1998, as
compared to $70.0 million for Fiscal 1997. These provisions reflect an
effective income tax rate of 39.25% for Fiscal 1998 and Fiscal 1997. As a
result of the foregoing, the Company's net income was $136.8 million for Fiscal
1998 as compared to $108.3 million for Fiscal 1997.
Liquidity and Capital Resources
Fiscal 1999 Cash Flows Compared to Fiscal 1998 Cash Flows
Working capital increased to $250.3 million at September 30, 1999 from
$196.6 million at September 30, 1998, resulting primarily from increased
business volumes and good management of the Company's working capital. The
Company's cash flows from operating activities increased by $50.3 million from
$118.0 million in Fiscal 1998 to $168.3 million in Fiscal 1999. Offsetting the
Company's improved profitability was a large increase in accounts receivable,
both at same hospitals and newly-acquired hospitals. This increase was due to
higher volumes at same hospitals and acquisition hospitals, as well as temporary
delays in billing of Medicare and Medicaid accounts receivable while waiting for
assignment of applicable third-party provider numbers at those newly-acquired
hospitals. The use of the Company's cash in investing activities increased from
$233.4 million in Fiscal 1998 to $412.3 million in Fiscal 1999, reflecting some
larger, more expensive acquisitions during Fiscal 1999. The Company's cash
flows from financing activities increased $183.5 million from $60.7 million
provided in Fiscal 1998 to $244.2 million provided in Fiscal 1999, due primarily
to borrowings related to acquisitions (see also financial statement footnote
No. 2).
22
<PAGE>
Fiscal 1998 Cash Flows Compared to Fiscal 1997 Cash Flows
Working capital increased to $196.6 million at September 30, 1998 from
$153.2 million at September 30, 1997, resulting primarily from increased
business volumes and good management of the Company's working capital. The
Company's cash flows from operating activities decreased by $14.3 million from
$132.3 million in Fiscal 1997 to $118.0 million in Fiscal 1998. Offsetting the
Company's improved profitability was a large increase in accounts receivable,
both at same hospitals and newly-acquired hospitals. This increase was due to
higher volumes at same hospitals and acquisition hospitals, as well as temporary
delays in billing of Medicare and Medicaid accounts receivable while waiting for
assignment of applicable third-party provider numbers at those newly-acquired
hospitals. The use of the Company's cash in investing activities increased from
$110.4 million in Fiscal 1997 to $233.4 million in Fiscal 1998, reflecting an
increased number of acquisitions during Fiscal 1998. The Company's cash flows
from financing activities increased $46.4 million from $14.3 million provided in
Fiscal 1997 to $60.7 million provided in Fiscal 1998, due primarily to
borrowings related to acquisitions(see also financial statement footnote No. 2).
Capital Resources
During November 1999 the Company closed on a $600 million Credit Agreement
(the "Agreement"), thereby refinancing and replacing its existing $300 million
Credit Agreement which expired on November 30, 1999. The Agreement is an
unsecured revolving credit loan, comprised of a $150 million 364-day credit loan
and a $450 million 5-year credit loan. Similar to the Credit Agreement, the new
Agreement permits the Company to borrow under either loan at any time through
the respective loan's termination date, at which time all outstanding revolving
credit loans become due and payable. Under either loan, the Company may choose
a Base Rate Loan (prime interest rate) or a Eurodollar Rate Loan (LIBOR interest
rate). The initial interest rate for a Eurodollar Rate Loan is set at LIBOR
plus 1.00 percent, and will increase or decrease in relation to a change in the
Company's credit rating. As of November 30, 1999 the outstanding balance was
$293 million.
The Company also has a revolving credit facility with a bank which provides
a $10 million unsecured line of credit commitment through January 31, 2000. All
outstanding loans under this revolving credit facility are due on January 31,
2000. Interest on the outstanding loans is payable at the bank's Index Rate
(prime) less 1/2%. As of November 30, 1999, there were no amounts outstanding
under this line.
The Company is obligated to pay certain commitment fees based upon amounts
borrowed and available for borrowing during the terms of both such credit
facilities ("Credit Facilities").
The credit agreements for the Credit Facilities contain certain covenants
which, without prior consent of the banks, limit certain activities of the
Company and its subsidiaries, including those relating to merger, consolidation
and the Company's ability to secure indebtedness, make guarantees and grant
security interests. The Company must also maintain minimum levels of
consolidated net worth, interest coverage and debt to cash flow.
23
<PAGE>
Effective October 28, 1998 the Company completed a Form S-3 to register
$300 million of senior unsecured debt securities. The Company intends to
deregister such securities early in the second quarter of Fiscal 2000.
Legislative and regulatory action has resulted in continuing change in the
Medicare and Medicaid reimbursement programs which will continue to limit
payment increases under these programs. However, the Company believes that
these continued changes will not have a material adverse effect on the Company's
future revenue or liquidity. Within the statutory framework of the Medicare and
Medicaid programs, there are substantial areas subject to administrative
rulings, interpretations and discretion which may further affect payments made
under those programs, and the federal and state governments might, in the
future, reduce the funds available under those programs or require more
stringent utilization and quality reviews of hospital facilities, either of
which could have a material adverse effect on the Company's future revenue and
liquidity. Additionally, any future restructuring of the financing and delivery
of health care in the United States and the continued rise in managed care
programs could have an effect on the Company's future revenue and liquidity. See
Item 1. "Sources of Revenue" and "Regulation and Other Factors."
Capital Expenditures
Effective April 1, 1999 the Company acquired a 473-bed health system
located in Jackson, Mississippi pursuant to an asset purchase and lease
agreement. The consideration totaled approximately $134 million in cash,
including $19 million in net working capital.
Effective May 1, 1999 the Company acquired a 167-bed hospital system
located in Key West, Florida pursuant to asset purchase and lease agreements.
The consideration totaled approximately $49.9 million, which included $27
million in cash paid at closing, $18.6 recorded as the net present value of
lease payments required over the 30 year term of the lease, and the assumption
of $4.3 million in debt. The agreements included the assumption of working
capital balances at closing, and also entitle the Company to receive $1.5
million per year in cash from the seller for the first ten years of the lease to
support indigent care programs.
Effective July 1, 1999 the Company acquired a 204-bed acute care hospital
located in Lancaster, Pennsylvania pursuant to a definitive purchase agreement.
The Company paid $15 million in cash, which included approximately $1 million in
net working capital. The Company is committed to the construction of a
replacement hospital, subject to obtaining all required governmental and
regulatory approvals.
During 1999 the Company repurchased 7.5 million shares of its stock at a
total cost of $69.1 million, which completed a stock repurchase plan approved by
the Board of Directors in February 1998. In September 1999 the Board of
Directors approved a stock repurchase program of up to 25 million shares of
common stock. On October 14, 1999 the Company executed a share repurchase
agreement with an independent third party, whereby the third party agreed to
"sell short" 5 million shares of the Company's common stock to the Company. As
of October 19, 1999 the 5 million shares were delivered to the Company and
became treasury stock. From October 15, 1999 to December 15, 1999, a period of
60 days, the third party covered the "short sale" by buying shares on the open
market. On December 15, 1999 the Company reimbursed the third party the cost of
the common stock purchased plus a commission plus interest (at LIBOR) on the
outstanding balance of funds used to purchase the common stock. The total
cost
24
<PAGE>
for the purchase of the 5 million shares of treasury stock was approximately
$40 million.
The Company had a number of hospital renovation/expansion projects underway
at September 30, 1999. In addition, the Company plans to complete and open two
replacement hospitals before June 30, 2000. At September 30, 1999 there were
hospital renovation and expansion commitments of approximately $91.0 million
outstanding, of which $60.0 million was paid at September 30, 1999.
The Company anticipates spending approximately $90,000,000 for capital
equipment and renovations during the fiscal year ending September 30, 2000
("Fiscal 2000"). At the present time, cash on hand, internally generated funds
in Fiscal 2000, and funds available under the Credit Facilities are expected to
be sufficient to satisfy the Company's requirements for capital expenditures,
future acquisitions and working capital in Fiscal 2000.
Impact of Seasonality and Inflation
Our business is seasonal, with higher patient volumes and net patient
service revenue in the second and third quarters of the Company's fiscal year.
This seasonality occurs because more people become ill during the winter months,
which results in significant increases in the number of patients treated in our
hospitals during those months.
The health care industry is labor intensive. Wages and other expenses
increase especially during periods of inflation and when shortages in the
marketplace occur. In addition, suppliers pass along rising costs to the
Company in the form of higher prices. The Company has, to date, offset
increases in operating costs to the Company by increasing charges for services
and expanding services. The Company has also implemented cost control measures
to curb increases in operating costs and expenses. The Company cannot predict
its ability to cover or offset future cost increases.
Year 2000 Computer Issues
The Year 2000 Computer Issue is the result of most computer programs using
two digits rather than four to identify a year in a data field. These programs
were designed and developed without considering the impact of the upcoming
change in the century. If not corrected, many computer applications could fail
or create erroneous results on or after January 1, 2000.
The Company has implemented a plan to evaluate and correct the effect of
this problem on the Company's computer system and programs. As part of the
plan, the Company has contacted its principal vendors and suppliers to identify
and correct the potential effects of this problem relating to embedded systems
of certain computer aided medical and other equipment. In addition, the Company
has contacted the Federal and State governments, other payors and other
companies with which the Company's systems interface or on which they rely to
secure their timely completion of necessary upgrades.
The Company's financial systems, including general ledger, accounts
payable, cash management, payroll and patient accounting are Year 2000
compliant. The Company has completed the implementation of the compliant
financial systems at all facilities, including its recently acquired hospitals.
The Company has utilized both internal and external resources to complete the
Year 2000 modifications. The majority of the costs relating to the Year 2000
Issue have been expensed as incurred, and to date have not had a material
adverse impact on the Company's results of operations. However, there can be no
guarantee that possible future expenditures could have a material adverse effect
on future
25
<PAGE>
results of operations. Factors that might cause material increases include, but
are not limited to, the future availability and cost of trained personnel and
the ability to correct all relevant computer coding and all medical equipment
that could potentially arise after December 31, 1999, relating either to the
Company's systems and equipment or external systems with which the Company's
systems interface or rely upon.
As noted above, the Company has contacted its principal suppliers, other
vendors and payors, including Federal and State governments, Medicare fiscal
intermediaries, insurance companies and managed care companies, concerning the
status of their Year 2000 compliance. In its June 30, 1999 Quarterly Progress
Report, HCFA stated that all of its 25 internal mission critical systems and 75
million critical external claims processing systems were Year 2000 compliant.
The Company has received similar assurances from other fiscal intermediaries and
third party payors that their systems are Year 2000 compliant.
Each of the Company's hospitals have contingency plans which management
believes will reduce any disruption in service that may be caused by a Year 2000
problem. The hospitals have reviewed, updated and, as practical, rehearsed
alternative procedures that would ensure continued service to patients. Our
Corporate office has also developed a disaster contingency plan.
The Company believes its systems and the critical systems with which the
Company interfaces are Year 2000 compliant, but the Company is unable to
estimate the impact on the Company if one or more of those systems fail after
December 31, 1999. For the foregoing reasons, the Company is not able to
determine whether the Year 2000 Computer Issue will materially affect its future
financial results or financial condition.
Income Tax Examinations
The Internal Revenue Service (the "IRS") is examining our federal income
tax returns for fiscal years 1996 through 1998. To date, the IRS has proposed
adjustments to our returns for years 1996 and 1997. The adjustments proposed
thus far are "temporary," or timing differences, and relate primarily to the
areas of depreciation and amortization and bad debt expense. The Company is
protesting a number of the proposed adjustments through the appeals process of
the IRS. In management's opinion, the ultimate outcome of the IRS examinations
will not have a material effect on the Company's results of operations or
financial condition.
Forward-Looking Statements
Certain statements contained in this Form 10-K, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are based upon the Company's current plans,
expectations and projections about future events. However, such statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions, both nationally and in
the regions in which the Company operates; demographic changes; existing
governmental regulations and changes in, or the failure to comply with,
governmental regulations; legislative proposals for health care reform; the
ability to enter into managed care provider arrangements on acceptable terms;
changes in Medicare and Medicaid payment levels; liability and other claims
asserted against the Company; competition; the loss of any significant ability
to attract and retain
26
<PAGE>
qualified personnel, including physicians; the availability and terms of capital
to fund additional acquisitions or replacement facilities. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such factors or to publicly announce the results of any revision to
any of the forward-looking statements contained herein to reflect future events
or developments.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rates
The Company is exposed to interest rates, primarily as a result of its $600
million revolving credit agreement with a floating interest rate (see financial
statement footnote No. 3). The following table summarizes principal cash flows
and related weighted average interest rates by expected maturity dates. The
fair value of the Company's long-term debt at September 30, 1999 approximates
its carrying value.
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total
----- ----- ----- ----- ---- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Long term debt
(in millions):
Fixed rate long-term
debt $ 9.4 $16.4 $16.3 $ 3.7 $3.9 $ 68.2 $117.9
Average interest rates 7.6% 7.6% 7.7% 7.9% 7.9% 7.4% 7.5%
Variable rate
long-term debt $293.0 $293.0
Average interest rate LIBOR+ LIBOR+
Spread Spread
</TABLE>
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Page
----
Health Management Associates, Inc.
Consolidated Financial Statements:
Report of Independent Auditors.............................. 28
Consolidated Statements of Income -- for the years ended
September 30, 1999, 1998 and 1997......................... 29
Consolidated Balance Sheets --September 30, 1999 and 1998... 30
Consolidated Statements of Stockholders' Equity -- for the
years ended September 30, 1999, 1998 and 1997............. 32
Consolidated Statements of Cash Flows -- for the years
ended September 30, 1999, 1998 and 1997................... 33
Notes to Consolidated Financial Statements.................. 35
27
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Health Management Associates, Inc.
We have audited the accompanying consolidated balance sheets of Health
Management Associates, Inc. as of September 30, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended September 30, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule 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 Health
Management Associates, Inc. at September 30, 1999 and 1998 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1999, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Atlanta, Georgia
October 22, 1999, except for Note 3,
as to which the date is November 30, 1999
28
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year ended September 30,
--------------------------------
1999 1998 1997
---------- ---------- --------
(in thousands, except per share data)
Net patient service revenue........ $1,355,707 $1,138,802 $895,482
Costs and expenses:
Salaries and benefits............ 486,003 402,133 310,992
Supplies and other............... 390,229 331,006 269,570
Provision for doubtful accounts.. 130,013 98,258 76,894
Depreciation and amortization.... 61,278 50,437 36,561
Rent expense..................... 33,146 26,930 19,444
Interest, net.................... 8,385 4,759 3,712
---------- ---------- --------
Total costs and expenses..... 1,109,054 913,523 717,173
---------- ---------- --------
Income before income taxes......... 246,653 225,279 178,309
Provision for income taxes......... 96,808 88,435 69,987
---------- ---------- --------
Net income ........................ $ 149,845 $ 136,844 $108,322
========== ========== ========
Net income per share:
Basic ............................ $ .60 $ .55 $ .44
========== ========== ========
Diluted .......................... $ .59 $ .54 $ .43
========== ========== ========
Weighted average number of
shares outstanding:
Basic ............................ 250,467 249,049 242,767
========== ========== ========
Diluted .......................... 255,067 255,575 249,130
========== ========== ========
See accompanying notes.
29
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
------------------------
1999 1998
----------- ----------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 12,926 $ 12,685
Accounts receivable, less allowance for doubtful
accounts of $114,792,000 and $87,800,000 in 1999
and 1998, respectively............................ 311,988 219,162
Accounts receivable -- other....................... 26,917 24,380
Supplies, at cost.................................. 32,038 24,425
Prepaid expenses and other assets.................. 9,324 8,558
Funds held by trustee.............................. 1,764 1,458
Deferred income taxes.............................. 30,515 26,456
---------- ----------
Total current assets............................. 425,472 317,124
Property, plant and equipment:
Land and improvements.............................. 40,212 29,572
Buildings and improvements......................... 610,292 436,639
Leaseholds......................................... 91,528 79,145
Equipment.......................................... 331,961 244,127
Construction in progress........................... 68,463 47,546
---------- ----------
1,142,456 837,029
Less accumulated depreciation and amortization..... 229,967 188,201
---------- ----------
Net property, plant and equipment................. 912,489 648,828
Funds held by trustee............................... 4,131 3,932
Excess of cost over acquired net assets, net........ 158,499 121,101
Deferred charges and other assets................... 16,709 15,037
---------- ----------
$1,517,300 $1,106,022
========== ==========
See accompanying notes.
30
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
---------------------
1999 1998
--------- ---------
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 73,595 $ 44,300
Accrued interest.................................... 989 1,648
Accrued payroll and related taxes................... 29,402 20,968
Accrued expenses and other liabilities.............. 29,615 20,056
Due to third party payors........................... 11,991 14,844
Income taxes - currently payable and deferred....... 20,278 10,186
Current maturities of long-term debt................ 9,351 8,544
---------- ----------
Total current liabilities......................... 175,221 120,546
Deferred income taxes................................ 32,579 33,520
Other long-term liabilities.......................... 17,455 17,878
Long-term debt....................................... 401,522 134,217
Obligation under put option contracts................ - 43,036
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized........................................ - -
Common stock, Class A, $.01 par value, 300,000,000
shares authorized, 253,405,000 and 251,558,000
shares issued and outstanding at
September 30, 1999 and 1998, respectively......... 2,534 2,491
Additional paid-in-capital.......................... 294,579 241,677
Retained earnings................................... 662,502 512,657
---------- ----------
959,615 756,825
Less: treasury stock............................... (69,092) -
---------- ----------
Total stockholders' equity....................... 890,523 756,825
---------- ----------
$1,517,300 $1,106,022
========== ==========
See accompanying notes.
31
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended September 30, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Common Stock
---------------------- Additional
Par Paid-in Retained Treasury
Shares Value Capital Earnings Stock
---------- ---------- ----------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1996........... 237,824 $ 2,378 $ 147,870 $ 267,491
Exercise of stock options............... 6,234 63 16,097 -
Income tax benefit from exercise
of stock options...................... - - 17,999 -
Net income.............................. - - - 108,322
---------- ---------- ----------- ----------
Balance at September 30, 1997........... 244,058 2,441 181,966 375,813
Exercise of stock options.............. 2,636 26 12,080 -
Income tax benefit from exercise
of stock options...................... - - 8,601 -
Issuance of common stock for
acquisition........................... 4,864 49 79,951 -
Proceeds from sale of
equity put options.................... - - 2,090 -
Reclassification of put
option obligation..................... - (25) (43,011) -
Net income............................. - - - 136,844
---------- ---------- ----------- ----------
Balance at September 30, 1998........... 251,558 2,491 241,677 512,657
Expiration of put option
obligation............................ - 25 43,011 -
Purchase of treasury stock,
at cost............................... - - - - $ (69,092)
Exercise of stock options.............. 1,847 18 6,436 - -
Income tax benefit from exercise
of stock options...................... - - 3,455 - -
Net income............................. - - - 149,845 -
---------- ---------- ----------- ---------- ----------
Balance at September 30, 1999........... 253,405 $ 2,534 $ 294,579 $ 662,502 $ (69,092)
========== ========== =========== ========== ==========
</TABLE>
See accompanying notes.
32
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended September 30,
-------------------------------------------
1999 1998 1997
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................ $ 149,845 $ 136,844 $ 108,322
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization......... 61,278 50,437 36,561
Loss (gain) on sale of fixed
assets............................... 171 14 (92)
Decrease in deferred
income taxes......................... (5,000) (2,914) (400)
Changes in assets and liabilities,
net of effects of acquisitions
and dispositions:
Accounts receivable................ (65,055) (63,382) (12,648)
Supplies........................... (3,834) (3,029) (2,372)
Prepaid expenses and
other assets...................... (441) (567) (478)
Deferred charges and
other assets...................... (3,954) (3,706) (3,302)
Accounts payable................... 22,878 5,182 2,425
Accrued payroll, interest and
other liabilities................. 3,371 (4,658) 4,938
Income taxes -- currently
payable........................... 10,092 1,965 (1,459)
Other long-term liabilities........ (1,002) 1,765 841
----------- ----------- -----------
Net cash provided by
operating activities...................... 168,349 117,951 132,336
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of facilities, net of
cash acquired............................ (183,967) (169,484) (51,467)
Additions to property, plant
and equipment............................ (159,392) (67,931) (59,349)
Proceeds from sale of assets.............. 111 4,047 388
Purchase of treasury stock, at cost....... (69,092) - -
----------- ----------- -----------
Net cash used in investing
activities................................ (412,340) (233,368) (110,428)
----------- ----------- -----------
</TABLE>
See accompanying notes.
33
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Year ended September 30,
-------------------------------------------
1999 1998 1997
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from long-term borrowings......... $ 249,645 $ 80,996 $ 520
Principal payments on debt................. (17,229) (39,850) (20,621)
Proceeds from issuance of common
stock.................................... 11,999 20,706 34,159
Proceeds from sale of equity
put options.............................. - 2,090 -
(Increase) decease in funds
held by trustee.......................... (183) (3,221) 243
----------- ----------- -----------
Net cash provided by
financing activities....................... 244,232 60,721 14,301
----------- ----------- -----------
Net increase (decrease) in cash.............. 241 (54,696) 36,209
Cash and cash equivalents at
beginning of year.......................... 12,685 67,381 31,172
----------- ----------- -----------
Cash and cash equivalents at
end of year................................ $ 12,926 $ 12,685 $ 67,381
=========== =========== ===========
Supplemental schedule of noncash
investing and financing activities:
Fair value of assets acquired
(including cash)........................ $ 218,863 $ 288,903 $ 57,896
Consideration: Cash paid................. 183,967 169,484 51,467
Stock issued.............. - 80,000 -
----------- ----------- -----------
Liabilities assumed...................... $ 34,896 $ 39,419 $ 6,429
=========== =========== ===========
</TABLE>
See accompanying notes.
34
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and summary of significant accounting policies
Health Management Associates, Inc. ("the Company"), through its subsidiary
companies, substantially all of which are wholly-owned, provides health care
services to patients in owned and leased facilities and provides management
services under contracts to other health care organizations in the southeast and
southwest United States. The Company consistently applies the following
significant accounting policies:
a. Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. The Company has a 30-year management agreement with a
hospital which commenced in January 1997. Since the agreement provides that the
Company exercise complete control over the operations of the hospital, and bears
the risks and rewards of ownership, the financial results of the hospital have
been included in the accompanying consolidated statements of income since the
commencement date of the agreement. All significant intercompany accounts and
transactions have been eliminated.
b. Cash equivalents
The Company considers all highly liquid investments purchased with a
maturity of less than three months to be cash equivalents. The Company's cash
equivalents consist principally of investment grade instruments which are tax
exempt or qualify for dividend exclusion.
c. Property, plant and equipment
Property, plant and equipment are carried at cost and include major
expenditures which increase their values or extend their useful lives.
Depreciation and amortization are computed using the straight line method based
on estimated useful lives. Estimated useful lives for buildings and improvements
range from twenty to forty years and for equipment range from three to ten
years. Leaseholds are amortized on a straight-line basis over the terms of the
respective leases.
d. Excess of cost over acquired net assets, net and deferred charges and
other assets
Excess of cost over acquired net assets is being amortized on a straight-
line basis over lives ranging from three to twenty-five years. Accumulated
amortization relating thereto is $15.2 million and $8.1 million at September 30,
1999 and 1998, respectively. Deferred charges and other assets consist
principally of deferred financing costs and certain non-productive assets held
for sale. The financing costs are being amortized over the life of the related
debt (see Note 3).
Certain long-lived assets and the related excess of cost over acquired net
assets may become impaired, requiring a writedown of the assets to their
estimated fair values. The Company periodically reviews future cash flows
related to these assets, and if necessary, reduces such assets to their
estimated fair values.
e. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
35
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Business and summary of significant accounting policies (continued)
f. Net patient service revenue and accounts receivable
Approximately 58%, 59% and 66% of gross patient service revenue for the
years ended September 30, 1999, 1998 and 1997, respectively, relates to services
rendered to patients covered by Medicare and Medicaid programs. Payments for
services rendered to patients covered by these programs are generally less than
billed charges. Provisions for contractual adjustments are made to reduce the
charges to these patients to estimated receipts based upon the programs'
principles of payment/reimbursement (either prospectively determined or
retrospectively determined costs). Final settlements under these programs are
subject to administrative review and audit, and provision is currently made for
adjustments which may result. Revenues and receivables from government programs
are significant to the Company's operations, but the Company does not believe
that there are significant credit risks associated with these government
programs.
Net patient service revenue is presented net of provisions for contractual
adjustments and other allowances of $1.748 billion, $1.391 billion and $1.039
billion in 1999, 1998 and 1997, respectively, in the accompanying consolidated
statements of income. In the ordinary course of business the Company renders
services in its facilities to patients who are financially unable to pay for the
hospital care. The value of these services to patients who are unable to pay is
not material to the Company's consolidated results of operations.
g. Income taxes
Deferred income taxes at September 30, 1999 and 1998 relate principally to
differences in the recognition of certain income and expense items for income
tax and financial reporting purposes (see Note 5).
h. Net income per share
Net income per share is based on the weighted average number of common and
common equivalent shares (stock options) outstanding during the periods
presented (see Note 7).
i. Recently issued accounting pronouncements
In 1998 the Financial Accounting Standards Board (FASB) issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
the Company will adopt October 1, 2000. Because of the Company's minimal use of
derivatives, the Company does not believe the new standard will have a material
effect on the earnings or financial position of the Company.
j. Reclassifications
Certain amounts have been reclassified in prior years to conform with
the current year presentation.
2. Acquisitions and dispositions
During 1999 the Company acquired certain assets of four hospitals through
one purchase and two long-term lease agreements for consideration totaling
$218.9 million, including $184.0 million in cash. During 1998 the Company
acquired certain assets of six hospitals through various acquisition and long-
term lease agreements for consideration totaling $288.9 million, which included
$169.5 million in cash, $80.0 million in Company stock, and the assumption of
$39.4 million in long-term debt. During 1997 the Company acquired certain
assets of two hospitals through one long-term lease agreement and one long-term
management agreement for consideration totaling $57.9 million, including $51.5
million in cash. The foregoing acquisitions were accounted for using the
purchase method of accounting. The allocation of the purchase price has been
determined by the Company based upon available information and is subject to
further refinement.
36
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Acquisitions and dispositions (continued)
The operating results of the foregoing hospitals have been included in the
accompanying consolidated statements of income from the respective dates of
acquisition. The following unaudited pro forma combined summary of operations
of the Company for each of the three years ended September 30, 1999 give effect
to the operation of the hospitals purchased in 1999, 1998 and 1997 as if the
acquisitions had occurred as of October 1, 1997, 1996 and 1995, respectively:
1999 1998 1997
-------- -------- --------
(In millions, except per share data)
Net patient service revenue............ $1,463.0 $1,404.4 $1,125.4
Net income............................. $ 146.9 $ 132.6 $ 112.3
Net income per share - Basic........... $ .59 $ .53 $ .46
Net income per share - Diluted......... $ .58 $ .52 $ .45
3. Long-term debt
The Company's long-term debt consists of the following:
September 30,
---------------------
1999 1998
-------- --------
(in thousands)
Revolving Credit Agreements (a)............. $293,000 $ 50,000
Industrial Revenue Bond Issue (b)........... 6,270 6,580
Mortgage notes, secured by real and
personal property (c)....................... 75,360 69,987
Various mortgage and installment notes and
debentures, some secured by equipment,
at interest rates ranging from 6% to
prime plus 1%, payable through 2005........ 6,162 5,800
Capitalized lease obligations (see Note 4).. 30,081 10,394
-------- --------
410,873 142,761
Less current maturities..................... 9,351 8,544
-------- --------
$401,522 $134,217
======== ========
a. Revolving Credit Agreements
In December 1994 the Company executed a $300 million Amended and Restated
Credit Agreement ("Credit Agreement"). The Company may choose the prime rate of
interest, a fixed certificate of deposit interest rate of the Agent bank or a
LIBOR interest rate. Under any of the interest alternatives, quarterly interest
payments are required. The interest rate on the outstanding balance at
September 30, 1999 was 5.81%.
The Credit Agreement is a revolving and term loan agreement which permits
the Company to borrow under an unsecured revolving credit loan at any time
through November 30, 1999, at which time the agreement terminates and all
outstanding revolving credit loans become due and payable. The Company also has
a $10 million unsecured revolving credit commitment with a bank. The $10
million credit is a working capital commitment which is tied to the Company's
cash management system, and renews annually on November 1. Currently, interest
on any outstanding balance is payable monthly at a fluctuating rate not to
exceed the bank's prime rate less 1/4%.
37
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Long-term debt (Continued)
In addition, the Company is obligated to pay certain commitment fees based
upon amounts borrowed and available for borrowing during the terms of the credit
agreements described above.
The credit agreements contain covenants which, without prior consent of the
Banks, limit certain activities, including those relating to mergers,
consolidations and the Company's ability to secure indebtedness, make
guarantees, grant security interests and declare dividends. The Company must
also maintain minimum levels of consolidated tangible net worth, debt service
coverage, liabilities to net worth, current assets to current liabilities and
working capital.
During November 1999 the Company closed on a $600 million Credit Agreement
(the "Agreement"), thereby refinancing and replacing its existing $300 million
Credit Agreement which was to expire on November 30, 1999. The Agreement is an
unsecured revolving credit loan, comprised of a $150 million 364-day credit loan
and a $450 million 5-year credit loan. Similar to the Credit Agreement, the new
Agreement permits the Company to borrow under either loan at any time through
the respective loan's termination date, at which time all outstanding revolving
credit loans become due and payable. Under either loan, the Company may choose
a Base Rate Loan (prime interest rate) or a Eurodollar Rate Loan (LIBOR interest
rate). The initial interest rate for a Eurodollar Rate Loan is set at LIBOR
plus 1.00 percent, and will increase or decrease in relation to a change in the
Company's credit rating. The Company is also obligated to pay certain
commitment fees based upon amounts available for borrowing during the term of
the agreement. The Agreement contains various financial and other covenants
which are similar to those in the Credit Agreement.
b. Industrial Revenue Bond Issue
The Company has one Industrial Revenue Bond issue outstanding at September
30, 1999 and 1998, which is secured by all real and personal property of the
facility with aggregate net book value of $10.8 million and $11.7 million,
respectively, and a pledge of the stock of the subsidiary owning the facility;
payment of principal and interest is unconditionally guaranteed by the Company.
The bonds are serial bonds with maturities and rates ranging from September 1,
2005 to September 1, 2011 and 8.5% to 8.75%, respectively. The Company makes
monthly sinking-fund payments in amounts sufficient to cover principal and
interest payment requirements.
c. Mortgage Notes
The Company has six mortgage notes which are secured by all the real and
personal property related to five facilities with a net book value of $ 88.9
million and $113.5 million at September 30, 1999 and 1998, respectively. The
notes are payable in various installments with maturity dates ranging from 2000
through 2007 and carry interest rates ranging from prime to 11.5%.
38
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Long-term debt (Continued)
Maturities of long-term debt and capital leases for the next five years,
adjusted for the $600 million new Agreement referred to above, are as follows
(in thousands):
2000 $ 9,351
2001 16,374
2002 16,327
2003 3,743
2004 3,890
Thereafter 361,188
The Company paid interest of $14.4 million, $8.6 million and $6.6 million
for the years ended September 30, 1999, 1998 and 1997, respectively.
Capitalized interest totaled $4.3 million, $1.3 million and $.5 million for the
years ended September 30, 1999, 1998 and 1997 respectively.
4. Leases
The Company leases real estate properties, equipment and vehicles under
cancelable and non-cancelable leases. Future minimum operating and capital
lease payments, including amounts relating to leased hospitals, are as follows
at September 30, 1999 (in thousands):
<TABLE>
<CAPTION>
Operating Capital
----------------------- ------------
Real
Real Property and
September 30, Property Equipment Equipment Total
- ------------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
2000............................................................................ $ 4,803 $13,481 $ 5,445 $ 23,729
2001............................................................................ 3,536 10,288 3,561 17,385
2002............................................................................ 3,079 7,644 3,352 14,075
2003............................................................................ 2,588 4,721 3,233 10,542
2004............................................................................ 1,781 2,659 3,102 7,542
Thereafter...................................................................... 19,205 1,874 43,921 65,000
-------- -------- ------- --------
Total minimum payments $ 34,992 $40,667 62,614 $138,273
======== ======== ========
Less amounts
representing interest 32,533
-------
Present value of
minimum lease
payments..................................................................... $30,081
=======
</TABLE>
The following summarizes amounts related to assets leased by the Company
under capital leases (in thousands):
September 30,
------------------------
1999 1998
--------- --------
Cost........................................ $69,855 $33,219
Accumulated amortization.................... 9,943 6,932
--------- --------
Net book value.............................. $59,912 $26,287
========= ========
39
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Leases (continued)
The Company entered into capitalized leases for equipment of $.8 million,
$.1 million and $.8 million for the years ended September 30, 1999, 1998 and
1997, respectively.
5. Income taxes
The significant components of the provision for income taxes are as follows
(in thousands):
<TABLE>
<CAPTION>
Year ended September 30,
------------------------------------
1999 1998 1997
---------- ---------- ---------
<S> <C> <C> <C>
Federal:
Current.................................................................... $85,248 $80,086 $63,957
Deferred:
Current................................................................... (4,673) (3,752) 90
Non-current............................................................... 1,896 (324) (229)
------- ------- -------
Total Federal........................................................... 82,471 76,010 63,818
State:
Current and deferred....................................................... 14,337 12,425 6,169
------- ------- -------
Total.................................................................... $96,808 $88,435 $69,987
======= ======= =======
</TABLE>
An analysis of the Company's effective income tax rates is as follows:
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------------------------------
1999 1998 1997
---------------- --------------- ----------------
<S> <C> <C> <C>
Statutory income
tax rate..................................................... $86,329 35.0% $78,848 35.0% $62,408 35.0%
State income taxes, net
of Federal benefit........................................... 9,319 3.8 8,076 3.6 4,010 2.2
Other items (each less
than 5% of computed
tax)......................................................... 1,160 .5 1,511 .7 3,569 2.1
------- ---- ------- ---- ------- ----
Total....................................................... $96,808 39.3% $88,435 39.3% $69,987 39.3%
======= ==== ======= ==== ======= ====
</TABLE>
40
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Income taxes (continued)
The tax effects of temporary differences that give rise to significant portions
of the Federal and state deferred income tax assets and liabilities are
comprised of the following:
<TABLE>
<CAPTION>
September 30,
------------------------
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Deferred income tax liabilities:
Depreciable assets $32,579 $33,520
Deferred income tax assets:
Self insurance liability risks 4,507 4,135
Allowance for doubtful accounts 21,286 17,136
Cash basis method of accounting 4,722 5,185
------- -------
30,515 26,456
Valuation allowance for
deferred income tax assets - -
------- -------
Net deferred income tax assets 30,515 26,456
------- -------
Net deferred income tax liabilities $ 2,064 $ 7,064
======= =======
</TABLE>
Income taxes paid (net of refunds) amounted to $79.3 million,$77.8 million,
and $53.8 million for the years ended September 30, 1999, 1998 and 1997,
respectively.
6. Retirement plan
The Company has a defined contribution retirement plan which covers all
eligible employees at its hospitals and the corporate office. This plan
includes a provision for the Company to match a portion of employee
contributions. Total retirement program expense was $3.8 million, $3.2 million
and $2.4 million for the years ended September 30, 1999, 1998 and 1997,
respectively.
7. Earnings per share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
41
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Earnings Per Share (continued)
Year ended September 30,
----------------------------
1999 1998 1997
-------- -------- --------
Numerator:
Net income $149,845 $136,844 $108,322
======== ======== ========
Denominator:
Denominator for basic earnings
per share-weighted average shares 250,467 249,049 242,767
Effect of dilutive securities-
employee stock options 4,600 6,526 6,363
-------- -------- --------
Denominator for diluted
earnings per share 255,067 255,575 249,130
======== ======== ========
Basic earnings per share $ .60 $ .55 $ .44
======== ======== ========
Diluted earnings per share $ .59 $ .54 $ .43
======== ======== ========
8. Stockholders' equity
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, since
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized. Pro forma disclosure of alternative fair value accounting is then
required under FASB Statement No. 123, "Accounting for Stock-Based Compensation"
(Statement 123), utilizing an option valuation model.
The Company has a 1991 Stock Option Plan, a 1993 Stock Option Plan and a
1996 Executive Incentive Compensation Plan for the granting of options to key
employees of the Company. All options granted have 10 year terms and vest and
become fully exercisable at the end of either 3 or 4 years of continued
employment.
42
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Stockholders' equity (continued)
Pertinent information covering the plans is summarized below:
<TABLE>
<CAPTION>
Price Weighted
Shares Range Average Price
------------- -------------- -------------
(in thousands)
<S> <C> <C> <C>
Balance at September 30, 1996 18,323 $ 1.24 - 5.16 $ 4.30
Granted 7,263 12.72 12.72
Exercised (5,783) 1.24 - 10.33 2.93
Terminated (41) 4.49 - 12.72 9.98
---------
Balance at September 30, 1997 19,762 1.24 - 10.33 3.58
Granted 1,690 21.63 21.63
Exercised (2,237) 1.24 - 12.72 4.89
Terminated (838) 5.16 - 21.63 9.84
---------
Balance at September 30, 1998 18,377 1.24 - 21.63 8.36
Granted 3,688 8.25 - 13.00 12.72
Exercised (1,623) 2.07- 12.72 3.43
Terminated (204) 10.33 - 21.63 18.61
---------
Balance at September 30, 1999 20,238
=========
Exercisable at
September 30, 1999 13,254
=========
</TABLE>
The following table summarizes information concerning currently outstanding and
exercisable options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------------- -------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------------- ----------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 1.24-$10.50 8,408,000 4.5 $ 5.21 8,191,000 $ 5.13
$12.72-$21.63 11,830,000 8.0 $13.93 5,063,000 $13.59
</TABLE>
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1995 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997: risk-free interest rate of 5.81% -
6.18%,5.78% and 6.36%; no dividend yields; volatility factor of the expected
market price of the Company's common stock of .446, .342 and .350; and weighted
average expected lives of the options of 7 years, 7 years and 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing
43
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Stockholders' equity (continued)
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.
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 (in thousands, except per share data):
1999 1998 1997
-------- --------- --------
Pro forma net income $138,588 $132,112 $98,627
Pro forma earnings per share:
Basic $ .55 $ .53 $ .41
Diluted $ .54 $ .52 $ .40
At September 30, 1999 there were approximately 1.9 million shares of common
stock reserved for future issuance under the plans. In addition, the Company
has granted options for shares of Class A Common Stock to four non-employee
directors. At September 30, 1999 there were approximately 175,000 options
outstanding at $2.07 to $21.63 per share, expiring in 2002 through 2009.
The Company also has a Stock Incentive Plan for corporate officers and
management staff. This plan provides for the awarding of additional
compensation to key personnel in the form of Company stock. The stock will be
issued to the grantee four years after the date of grant, provided the
individual is still an employee of the Company. At September 30, 1999 there
were approximately 466,000 shares reserved under the plan, for which the Company
has recorded $1.5 million, $1.2 million and $1.2 million of compensation expense
for the years ended September 30, 1999, 1998 and 1997, respectively.
In February 1998 the Board of Directors approved a stock repurchase
program. In connection with the program, put options were sold to an independent
third party in September 1998. Proceeds of $2,090,000 from the issuance of the
put options were accounted for as additional paid-in-capital. Each put option
entitled the holder to sell one share of the Company's common stock to the
Company at a price of $17.50 per share. At September 30, 1998 2,459,000 put
options were outstanding, which were exercisable only at maturity and expired at
various dates from November 1998 to December 1998. The potential repurchase
obligation of $43,036,000 was reclassified from stockholders' equity to a
liability as of September 30, 1998. Subsequent to year end, the liability was
eliminated in connection with the expiration of the put options.
During 1999 the Company repurchased 7.5 million shares of its stock, which
completed the February 1998 stock repurchase plan referred to above. In
September 1999 the Board of Directors approved a stock repurchase program of up
to 25 million shares of common stock. On October 14, 1999 the Company executed
a share repurchase agreement with an independent third party, whereby the third
party agreed to "sell short" 5 million shares of the Company's common stock to
the Company. As of October 19, 1999 the 5 million shares were delivered to the
Company and became treasury stock. From October 15, 1999 to December 15, 1999,
a period of 60 days, the third party will cover the "short sale" by buying
shares on the open market. On December 15, 1999 the Company will be required to
reimburse the third party the cost of the common stock purchased plus a
commission plus interest (at LIBOR) on the outstanding balance of funds used to
purchase the common stock. The Company anticipates the
44
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Stockholders' equity (continued)
total cost for the purchase of the 5 million shares of treasury stock will be
approximately $40 million.
9. Professional and liability risks
The Company has a layered self-insurance program with a major insurance
carrier for its professional liability risks. An umbrella policy provides $35
million of coverage in excess of an underlying limit of $4.5 million (as of
October 1, 1999) depending upon layer structures and the dollar amounts of
claims settled.
Accruals for self-insured professional liability risks are determined using
asserted and unasserted claims identified by the Company's incident reporting
system and actuarially determined estimates based on Company and industry
historical loss payment patterns. Although the ultimate settlement of these
accruals may vary from these estimates, management believes that the amounts
provided in the Company's consolidated financial statements are adequate.
10. Commitments
The Company has a number of hospital renovation/expansion projects underway
at September 30, 1999. In addition, the Company plans to replace two of its
existing hospitals over the next year. At September 30, 1999 there were hospital
renovation and expansion commitments of approximately $91.0 million outstanding,
of which approximately $60.0 million was paid at September 30, 1999.
45
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Quarterly data (unaudited)
Years ended September 30, 1999 and 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter
1st 2nd 3rd 4th Total
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1999
- -----------
Net patient
service revenue............ $305,496 $339,748 $352,473 $357,990 $1,355,707
Income before income
taxes...................... 50,953 78,534 63,796 53,370 246,653
Net income................... 30,955 47,707 38,757 32,426 149,845
Net income per share:
Basic.............. $ .12 $ .19 $ .15 $ .13 $ .60
Diluted............ $ .12 $ .19 $ .15 $ .13 $ .59
Weighted average
number of shares:
Basic.............. 251,653 251,905 251,972 247,805 250,467
Diluted............ 258,114 256,497 256,513 250,617 255,067
1998
- -----------
Net patient
service revenue............ $234,570 $302,922 $302,150 $299,160 $1,138,802
Income before income
taxes...................... 40,885 66,663 63,628 54,103 225,279
Net income................... 24,837 40,498 38,655 32,854 136,844
Net income per share:
Basic.............. $ .10 $ .16 $ .15 $ .13 $ .55
Diluted............ $ .10 $ .16 $ .15 $ .13 $ .54
Weighted average
number of shares:
Basic.............. 244,829 249,157 250,871 251,371 249,049
Diluted............ 251,135 255,453 257,882 258,295 255,575
</TABLE>
46
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is (i) incorporated herein by
reference to the Company's proxy statement to be issued in connection with the
Annual Meeting of Stockholders of the Company to be held on February 15, 2000
under "Election of Directors", which proxy statement will be filed within 120
days after the end of the Company's fiscal year and (ii) set forth under
"Executive Officers of the Registrant" in Part I of this Report.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of the Stockholders of the Company to be held on February 15, 2000 under
"Executive Compensation", which proxy statement will be filed within 120 days
after the end of the Company's fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on February 15, 2000 under
"Security Ownership of Certain Beneficial Owners and Management", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on February 15, 2000 under
"Certain Transactions", which proxy statement will be filed within 120 days
after the end of the Company's fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
Item 14(a)(1), 14(a)(2) and 14(d):
The following financial statement schedule is filed as part of this Report
at page 46 hereof:
Schedule II - Valuation and Qualifying Accounts
47
<PAGE>
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(continued)
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements and notes thereto.
Item 14(a)(3) and 14(c): See Index to Exhibits.
Item 14(b):
During the last quarter of the fiscal year ended September 30, 1999, the
Registrant did not file a Current Report on Form 8-K.
48
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands of dollars)
<TABLE>
<CAPTION>
Balance at Acquisitions Charged Balance at
Beginning of and Charges to to other End of
Period Dispositions Operations(a) Accounts Deductions(b) Period
------------ ------------ ------------- -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Year ended September 30, 1997
Allowance for doubtful
accounts......................... $64,125 $ 2,831 $ 90,301 $ - $103,202 $ 54,055
======= ======= ======== ====== ======== ========
Year ended September 30, 1998
Allowance for doubtful
accounts......................... $54,055 $16,388 $119,797 $ - $102,440 $ 87,800
======= ======= ======== ====== ======== ========
Year ended September 30, 1999
Allowance for doubtful
accounts......................... $87,800 $20,818 $153,021 $ - $146,847 $114,792
======= ======= ======== ====== ======== ========
</TABLE>
_________________
(a) Charges to operations include amounts related to provisions for
doubtful accounts, before recoveries.
(b) Includes amounts written-off as uncollectible.
49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HEALTH MANAGEMENT ASSOCIATES, INC.
By /s/ William J. Schoen Chairman of the Board
---------------------------
William J. Schoen and December 7, 1999
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
/s/ William J. Schoen Chairman of the Board
- -------------------------------
William J. Schoen and December 7, 1999
Chief Executive Officer
(Principal Executive
Officer)
/s/ Stephen M. Ray Executive Vice President -
- -------------------------------
Stephen M. Ray Finance December 7, 1999
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ Kent P. Dauten
- -------------------------------
Kent P. Dauten Director December 7, 1999
_______________________________
Robert A. Knox Director December 7, 1999
/s/ Charles R. Lees
- -------------------------------
Charles R. Lees Director December 7, 1999
/s/ Kenneth D. Lewis
- -------------------------------
Kenneth D. Lewis Director December 7, 1999
/s/ William E. Mayberry, M.D.
- -------------------------------
William E. Mayberry, M.D. Director December 7, 1999
50
<PAGE>
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession
Not applicable.
(3) (i) Articles of Incorporation
3.1/(i)/ Fifth Restated Certificate of Incorporation. (Exhibit 3.1)
3.2 Certificate of Amendment to Fifth Restated Certificate of
Incorporation is filed as part of this Report as Exhibit 3.2 at
page 57 hereof.
(ii) By-laws
3.3 By-laws, as amended are filed as part of this Report as Exhibit
3.3 at page 59 hereof.
(4) Instruments defining rights of security holders, including indentures
The Exhibits referenced under (3) of this Index to Exhibits are incorporated
herein by reference.
4.1/(f)/ Specimen Stock Certificate. (Exhibit 4.11)
4.2/(h)/ Fourth Amended and Restated Credit and Reimbursement Agreement
among the Company and NationsBank of Florida National Association
and the Banks named therein, dated December 1, 1994. (Exhibit
4.12)
4.3/(o)/ Credit Agreement dated May 6, 1996 between First Union National
Bank of Florida and the Company pertaining to a $10 million
working capital and cash management line of credit. (Exhibit 4.3)
4.4/(q)/ Amendment Agreement No. 1 to Fourth Amended and Restated
Revolving Credit and Reimbursement Agreement made as of September
30, 1996. (Exhibit 4.1)
4.5 Credit Agreement by and among Health Management Associates, Inc.,
as Borrower, Bank of America, N.A., as Administrative Agent and
as Lender, First Union National Bank, as Syndication Agent and as
Lender, and the Chase Manhattan Bank, as Syndication Agent and as
Lender, and The Lenders Party Hereto From Time To Time, dated
November 30, 1999, is included herein as Exhibit 4.5 at page 72
of this Report.
(9) Voting Trust Agreement
Not applicable.
(10) Material Contracts
The Exhibits referenced under (4) of this Index to Exhibits are incorporated
herein by reference.
10.1/(i)/ First Amended and Restated Lease Agreement, dated as of January 1,
1995 between The Board of Commissioners of the Highlands County
Hospital District and Sebring Hospital Management Associates, Inc.
(Exhibit 10.1)
10.2/(c)/ Lease dated as of July 1, 1986 between Fishermen's Hospital, Inc. and
Marathon H.M.A., Inc. (Exhibit 28.1)
10.3/(e)/ First Amendment of the July 1, 1986 Lease Agreement by and between
Fishermen's Hospital, Inc. and Marathon H.M.A., Inc. dated December
18, 1991. (Exhibit 28.1)
51
<PAGE>
10.4/(a)/ Lease Agreement dated January 12, 1990 between Biloxi Regional
Medical Center, Inc. and Biloxi H.M.A., Inc. (Exhibit 10.54)
10.5/(g)/ Lease Agreement between Heart of Florida Hospital Association,
Inc., Haines City HMA, Inc. and the Company, dated April 30,
1993. (Exhibit 10.49)
10.6/(f)/ Amended and Restated Employment Agreement dated December 15, 1992
between Health Management Associates, Inc. and William J. Schoen.
(Exhibit 10.46)
10.7/(d)/ Health Management Associates, Inc. Stock Incentive Plan for
Corporate Officers and Management Staff. (Exhibit 10.56)
10.8/(i)/ Amendment No. 1 to the Health Management Associates, Inc. Stock
Incentive Plan for Corporate Officers and Management Staff.
(Exhibit 10.2)
10.9/(g)/ Health Management Associates, Inc. Supplemental Executive
Retirement Plan, dated July 12, 1990. (Exhibit 10.22)
10.10/(h)/ First Amendment to the Health Management Associates, Inc.
Supplemental Executive Retirement Plan, dated January 1, 1994.
(Exhibit 10.51)
10.11/(a)/ Registration Agreement dated September 2, 1988 between HMA
Holding Corp., First Chicago Investment Corporation, Madison
Dearborn Partners IV, Prudential Venture Partners, Prudential
Venture Partners II, William J. Schoen, Kelly E. Curry, Stephen
M. Ray, Robb L. Smith, George A. Taylor and Earl P. Holland.
(Exhibit 10.23)
10.12/(b)/ Health Management Associates, Inc. 1991 Non-Statutory Stock
Option Plan. (Exhibit 10.67)
10.13/(f)/ Amendment No. 1 and Amendment No. 2 to the Health Management
Associates, Inc. 1991 Non-Statutory Stock Option Plan. (Exhibit
10.44)
10.14/(f)/ Health Management Associates, Inc. 1993 Non-Statutory Stock
Option Plan. (Exhibit 10.45)
10.15/(i)/ Health Management Associates, Inc. Stock Option Plan for Outside
Directors. (Exhibit 10.5)
10.16/(f)/ Stock Option Agreement, dated May 14, 1992, between the Company
and Charles R. Lees. (Exhibit 10.42)
10.17/(g)/ Stock Option Agreement, dated May 18, 1993, between the Company
and Charles R. Lees. (Exhibit 10.48)
10.18/(h)/ Stock Option Agreement dated May 20, 1994, between the Company
and Charles R. Lees. (Exhibit 10.52)
10.19/(h)/ Stock Option Agreement dated May 17, 1994, between the Company
and Kenneth D. Lewis. (Exhibit 10.53)
10.20/(j)/ Amendment No. 5 to the Health Management Associates, Inc. 1991
Non-Statutory Stock Option Plan. (Exhibit 10.57)
10.21/(j)/ Amendment No. 3 to the Health Management Associates, Inc. 1993
Non-Statutory Stock Option Plan. (Exhibit 10.58)
10.22/(j)/ Amendment No. 1 to the Health Management Associates, Inc. Stock
Option Plan for Outside Directors. (Exhibit 10.59)
52
<PAGE>
10.23/(l)/ Lease Agreement dated as of December 28, 1995 among Coahoma
County, Mississippi, Clarksdale HMA, Inc. and the Company.
(Exhibit 10.1)
10.24/(n)/ Lease Agreement dated May 21, 1996 among Midwest City Memorial
Hospital Authority, an Oklahoma Public Trust, and Midwest City
HMA, Inc. and Health Management Associates, Inc. (Exhibit 2.1)
10.25/(l)/ Amendment No. 6 to the Health Management Associates, Inc. 1991 Non-
Statutory Stock Option Plan. (Exhibit 10.2)
10.26/(l)/ Amendment No. 7 to the Health Management Associates, Inc. 1991 Non-
Statutory Stock Option Plan. (Exhibit 10.3)
10.27/(l)/ Amendment No. 4 to the Health Management Associates, Inc. 1993 Non-
Statutory Stock Option Plan. (Exhibit 10.4)
10.28/(l)/ Amendment No. 5 to the Health Management Associates, Inc. 1993 Non-
Statutory Stock Option Plan. (Exhibit 10.5)
10.29/(k)/ Health Management Associates, Inc. 1996 Executive Incentive
Compensation Plan. (Exhibit 99.15)
10.30/(m)/ Amendment No. 1 to the Health Management Associates, Inc. 1996
Executive Incentive Compensation Plan. (Exhibit 10.1)
10.31/(o)/ Second Amendment to the Health Management Associates, Inc.
Supplemental Executive Retirement Plan, dated September 17, 1996.
(Exhibit 10.64)
10.32/(p)/ Hospital Management Agreement by and between Anniston HMA, Inc.
and the Trust created under the last will and testament of Susie
P. Stringfellow, entered into on January 24, 1997. (Exhibit 10.1)
10.33/(r)/ Asset Purchase Agreement dated as of January 7, 1998 among Riley
Development Systems, Inc., Meridian HMA, Inc. and Meridian HMA
Nursing Home, Inc. (Exhibit 10.2)
10.34/(s)/ Definitive Agreement dated March 12, 1998 and Amendment to Definitive
Agreement between Regional Healthcare, Inc., Hernando Healthcare,
Inc., Spring Hill Regional Hospital, Inc., Hernando County,
Florida and Health Management Associates, Inc. (Exhibit 10.1)
10.35/(s)/ Lease Agreement made as of June 1, 1998 between Hernando County,
Florida and Hernando HMA, Inc. (Exhibit 10.2)
10.36/(t)/ Agreement by and among Methodist Healthcare-Jackson Hospitals,
Methodist Healthcare Central Mississippi Medical Associates,
Jackson HMA, Inc., Health Management Associates, Inc. and
Methodist Healthcare, as Guarantor, dated February 16, 1999
(Exhibit 10.1).
(11) Statement re computation of per share earnings
Not applicable.
(12) Statements re computation of ratios
Not applicable.
(13) Annual report to security holders, Form 10-Q or quarterly report to
security holders
Not applicable.
(16) Letter re change in certifying accountant
53
<PAGE>
Not applicable.
(18) Letter re change in accounting principles
Not applicable.
(21) Subsidiaries of the registrant
21.1 Subsidiaries of the registrant are listed on Exhibit 21.1 included
herein at page 168 of this Report.
(22) Published report regarding matters submitted to vote of security
holders
None.
(23) Consents of experts and counsel
23.1 Consents of Ernst & Young LLP are filed as part of this Report as
23.2 Exhibits 23.1, 23.2 and 23.3 at pages 169-171 hereof.
23.3
(24) Power of Attorney
Not applicable.
(27) Financial Data Schedule
27.1 Financial Data Schedule is filed as part of this Report as
Exhibit 27.1 at page 172 hereof.
(99) Additional Exhibits
None.
______________________________
(a) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Registration Statement on Form S-1
(Registration No. 33-36406). The exhibit number contained in
parenthesis refers to the exhibit number in such Registration
Statement.
(b) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Registration Statement on Form S-1
(Registration No. 33-43193). The exhibit number contained in
parenthesis refers to the exhibit number in such Registration
Statement.
(c) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Current Report on Form 8-K dated July 1,
1986. The exhibit number contained in parenthesis refers to the
exhibit number in such Form 8-K.
(d) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q .
54
<PAGE>
(e) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1991. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
(f) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1992. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-K.
(g) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1993. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-K.
(h) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1994. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-K.
(i) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
(j) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-K.
(k) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Registration Statement on Form S-8
(Registration No. 33-80433). The exhibit number contained in
parenthesis refers to the exhibit number in such Registration
Statement.
(l) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
(m) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
(n) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Current Report on Form 8-K dated June 10,
1996. The exhibit number contained in parenthesis refers to the
exhibit number in such Form 8-K.
(o) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1996. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-K.
(p) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
(q) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
(r) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
(s) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
55
<PAGE>
(t) Exhibit previously filed as part of and is incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999. The exhibit number contained in
parenthesis refers to the exhibit number in such Form 10-Q.
56
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF THE
FIFTH RESTATES CERTIFICATE OF INCORPORATION
OF
HEALTH MANAGEMENT ASSOCIATES, INC.
HEALTH MANAGEMENT ASSOCIATES, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is Health Management Associates, Inc.
The name under which the Corporation was formed was H.M.A., Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on September 26, 1979. The Fifth Restated Certificate
of Incorporation of the Corporation was filed by the Department of State on
February 21, 1995. A Certificate of Amendment of the Fifth Restated Certificate
of Incorporation of the Corporation was filed by the Department of State on
March 6, 1997.
THIRD: The first paragraph of Article 4 of the Fifth Restated Certificate
of Incorporation is hereby amended in its entirety to provide as follows:
Article 4. The total number of shares of capital stock which the
corporation has authority to issue is 755,000,000 shares, consisting
of:
A. 750,000,000 shares of Class A Common Stock, par value $.01
per share ("Common Stock"); and
B. 5,000,000 shares of Preferred Stock, par value $.01 per
share ("Preferred Stock").
All of the provisions of Article 4 of the Fifth Restated Certificate of
Incorporation other than the first paragraph thereof shall remain in full force
and effect, unchanged by this Amendment.
FOURTH: This Amendment of the Fifth Restated Certificate of Incorporation
was duly adopted by the Board of Directors of the Corporation, declaring its
advisability, at a meeting duly called and held on December 15, 1998.
Thereafter, on February 16, 1999, the annual meeting of stockholders of the
Corporation was duly called and held, upon notice in accordance with the
provisions of Section 222 of the General Corporation Law of the State of
Delaware, at which meeting a majority of the outstanding stock entitled to vote
thereon was voted in favor of this Amendment.
<PAGE>
FIFTH: This Amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation of the State of Delaware.
SIXTH: The capital of the Corporation shall not be reduced under or by
reason this Amendment.
IN WITNESS WHEREOF, HEALTH MANAGEMENT ASSOCIATES, INC. has caused this
Certificate to be signed by William J. Schoen, its Chairman of the Board and
Chief Executive Officer, and Timothy R. Parry, its Corporate Secretary, this
3/rd/ day of March, 1999.
/s/ William J. Schoen
---------------------------------------------
William J. Schoen,
Chairman of the Board and Chief
Executive Officer
CORPORATE SEAL
Attest: /s/ Timothy R. Parry
--------------------------------------
Timothy R. Parry
Corporate Secretary
<PAGE>
Exhibit 3.3
Certified to be a true and correct copy
of the By-laws of the Corporation, as
amended through September 21, 1999.
/s/ Timothy R. Parry
--------------------------------------------
Timothy R. Parry, Secretary
HEALTH MANAGEMENT ASSOCIATES, INC.
BY-LAWS
Article I
Offices
Section 1. The registered office shall be in the City of Wilmington,
----------
County of New Castle, State of Delaware.
Section 2. 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 or the business of the corporation may require.
Article II
Meeting of Stockholders
Section 1. Except as otherwise provided in the certificate of
----------
incorporation, meetings of the stockholders for the election of directors shall
be held in the City of Fort Myers, Florida, at such place as may be fixed from
time to time by the board of directors, or at such other place either within or
without the State of Delaware as shall be designated from time to time by the
board of directors and stated in the notice of the meeting.
Section 2. Annual meetings of stockholders, commencing with the year 1980,
----------
shall be held on the first Wednesday of February if not a legal holiday, and if
a holiday, then on the next secular day following or as shall be designated from
time to time by the board of directors and stated in the notice of the meeting,
at which they shall elect by a plurality vote a board of directors (except as
otherwise provided in the certificate of incorporation), and transact such other
business as may properly be brought before the meeting.
<PAGE>
Section 3. Written notice of the annual meeting stating the place, date
----------
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten or more than sixty days before the date of the
meeting.
Section 4. The officer 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 who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
----------
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chief executive officer and shall be called
by the chief executive officer or secretary at the request in writing of a
majority of the board of directors, or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
----------
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten or nor more than sixty days before the date of
the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
----------
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the 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 except as otherwise provided by statute or by the certificate of
incorporation. 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, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum
<PAGE>
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
----------
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation
-----------
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
-----------
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent 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. 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.
Article III
Directors
Section 1. Except as otherwise provided in the certification of
----------
incorporation, the number of directors which shall constitute the whole board
shall be not less than five nor more than nine, and, within such limits, the
number of directors shall be determined by resolution of the board of directors
or by the stockholders at the annual meeting. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of this
Article and except as provided in the certificate of incorporation, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
<PAGE>
Section 2. Except as otherwise provided in the certificate of
----------
incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled 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 shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
----------
the direction of its 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 directed or required to
be exercised or done by the stockholders.
Meetings of the Board of Directors
Section 4. The board of directors of the corporation may hold meetings,
----------
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
----------
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held without
----------
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the chief
----------
executive officer on three
<PAGE>
days' notice to each director, either personally or by mail or by telegram;
special meetings shall be called by the chief executive officer or secretary in
like manner and on like notice on the written request of two directors unless
the board consists of only one director; in which case special meetings shall be
called by the chief executive officer or secretary in like manner and on like
notice on the written request of the sole director.
Section 8. At all meetings of the board a majority of the 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, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. 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, until a quorum shall be present.
Section 9. Unless otherwise restricted by 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
meetings, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceeding of the board or committee.
Section 10. Unless otherwise restricted by the certificate of incorporation
-----------
or these by-laws, members of the board of directors, or any committee designated
by the board of directors, may participate in a meeting of the board of
directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
<PAGE>
Committees Of Directors
Section 11. The board of directors may, by resolution passed by a majority
-----------
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member.
Any such committee, to the extent provided in the resolution of the board
of directors, 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; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings and
-----------
report the same to the board of directors when required.
Compensation of Directors
Section 13. Unless otherwise restricted by the certificate of
-----------
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. 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. 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.
<PAGE>
Removal of Directors
Section 14. Unless otherwise restricted by the certificate of incorporation
-----------
or by-law, any director or the entire board of directors may be removed, with or
without cause, by the holders of a majority of shares entitled to vote at an
election of directors.
Article IV
Notices
Section 1. Whenever, under the provisions of the statutes or of the
----------
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his 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.
Notice to directors may also be given by telegram or telecopier.
Section 2. Whenever any notice is required to be given under the
----------
provisions of the statutes or of the certificate of incorporation of these by-
laws, 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.
Article V
Officers
Section 1. The officers of the corporation shall be chosen by the board of
----------
directors and shall be a chief executive officer, a president, a secretary and a
treasurer. The board of directors may also choose vice-presidents, giving them
such designations (including without limitation the designations of executive
vice-president and senior vice-president) as the board may determine, and one or
more assistant vice-presidents, assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
----------
meeting of stockholders shall choose a chief executive officer, a president, one
or more vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
----------
agents as it shall deem
<PAGE>
necessary 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.
Section 4. The salaries of all officers and agents of the corporation
----------
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
----------
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
The Chief Executive Officer
Section 6. The chief executive officer shall preside at all meetings of
----------
the stockholders and the board of directors, shall have general and active
management of the business of the corporation and shall see that all orders and
resolutions of the board of directors are carried into effect. He shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation. In the absence of the chief executive officer or in the event
of his inability or refusal to act, the powers and duties of the chief executive
officer shall be exercised and performed by such executive officer or officers
as may be designated by the board of directors.
Vice Chairman
Section 7. The Vice Chairman shall be the Vice Chairman of the Corporation
----------
and shall perform such duties and have such powers as the Board of Directors or
the Chief Executive Officer may from time to time prescribe.
The President
Section 8. The president shall perform such duties and have such powers as
----------
the board of directors or the chief executive officer may from time to time
prescribe.
The Vice-Presidents
Section 9. The vice-presidents shall have such designations (including
----------
without limitation the designations of executive vice-president and senior vice-
president) as the board of directors may determine. The vice-presidents shall
perform such duties and have such powers as the board of directors or the chief
executive officer may from time to time prescribe
<PAGE>
The Secretary
Section 10. The secretary shall attend all meetings of the board of
-----------
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He 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 or the
chief executive officer, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
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 the
affixing by his signature.
The Treasurer
Section 11. 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 monies
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.
Section 12. 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 chief executive officer and the board of
directors, at its regular meetings, or when the board of directors so requires,
an account of all his transactions as treasurer and of the financial condition
of the corporation.
Section 13. If required by the board of directors, the treasurer shall
-----------
give the corporation a bond (which shall be renewed every six years) 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 his office and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Assistant Officers
Section 14. The assistant vice-presidents, assistant secretaries and
-----------
assistant treasurers whom the board of directors may appoint from time to time,
as it may deem proper, shall perform such duties and have such powers as the
board of directors or the chief executive officer may from time to time
prescribe.
<PAGE>
Article VI
Certificates Of Stock
Section 1. Every holder of stock in the corporation shall be entitled to
----------
have a certificate, signed by, or in the name of the corporation by, (a) the
chairman or vice-chairman of the board of directors, or the chief executive
officer, or the president or a vice-president, and (b) the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation shall furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
----------
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 he were
such officer, transfer agent or registrar at the date of issue.
<PAGE>
Lost Certificates
Section 3. The board of directors may direct a new certificate or
----------
certificates to be issued in place of any certificate or certificates
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 or certificates, 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 certificates, or his
legal representative, to advertise the same in such manner as it 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.
Transfer of Stock
Section 4. Upon surrender to the corporation or the transfer agent of the
----------
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Fixing Record Date
Section 5. 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or 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, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. 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; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
Registered Stockholders
Section 6. 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
<PAGE>
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
Article VII
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the corporation, subject to
----------
the provisions of the certificate of incorporation, if any, may be declared by
the board of the directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. 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
directors from time to time, in their absolute discretion, think 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 such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Annual Statement
Section 3. The board of directors shall present at each annual meeting,
----------
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
Checks
Section 4. 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.
Fiscal Year
Section 5. The fiscal year of the corporation shall be fixed by resolution
----------
of the board of directors.
Seal
Section 6. 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.
<PAGE>
Article VIII
Florida General Corporation Act - Section 607.109
Section 1. As permitted by Section 607.109(5) of the Florida General
----------
Corporation Act, the provisions of Section 607.109(5) of the Florida General
Corporation Act shall not apply to control-share acquisitions of shares of the
corporation.
Section 2. As permitted by Section 607.109(11) of the Florida General
----------
Corporation Act, the corporation hereby elects not to be governed by the
provisions of Section 607.109(11); accordingly, in the event control shares
acquired in a control-share acquisition are accorded full voting rights and the
acquiring person has acquired control shares with a majority or more of all
voting power, shareholders of the corporation shall not have dissenters' rights
as provided under Section 607.109(11) of the Florida General Corporation Act.
Article IX
Amendments
Section 1. These by-laws may be altered, amended or repealed or new by-
----------
laws may be adopted by the stockholders or by the board of directors, when such
power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new by-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
* * * * *
<PAGE>
EXHIBIT 4.3
CREDIT AGREEMENT
by and among
HEALTH MANAGEMENT ASSOCIATES, INC.
as Borrower,
BANK OF AMERICA, N.A.,
as Administrative Agent and as Lender,
FIRST UNION NATIONAL BANK.,
as Syndication Agent and as Lender,
and
THE CHASE MANHATTAN BANK,
as Syndication Agent and as Lender,
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
November 30, 1999
BANC OF AMERICA SECURITIES LLC,
as Sole Lead Arranger and Sole Book Manager
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definitions and Terms
1.1. Definitions................................................... 2
1.2. Rules of Interpretation....................................... 25
ARTICLE II
The Credit Facilities
2.1. Five Year Revolving Credit Facility........................... 27
2.2. 364 Day Revolving Credit Facility............................. 27
2.3. Amounts....................................................... 27
2.4. Advances............................. ........................ 28
2.5. Repayment of Loans............................................ 29
2.6. Reductions.................................................... 29
2.7. 364 Day Term Loan Option...................................... 30
2.8. Use of Proceeds............................................... 31
2.9. Notes......................................................... 31
2.10. Guaranty...................................................... 31
ARTICLE III
Letters of Credit
3.1. Letters of Credit............................................. 32
3.2. Reimbursement and Participations.............................. 32
ARTICLE IV
Eurodollar Funding, Fees, and Payment Conventions
4.1 Interest Rate Options......................................... 36
4.2 Conversions and Elections of Subsequent Interest Periods...... 36
4.3 Payment of Interest........................................... 37
4.4 Prepayments of Eurodollar Rate Loans.......................... 37
4.5 Manner of Payment............................................. 37
4.6 Fees.......................................................... 38
4.7 Pro Rata Payments............................................. 39
4.8 Computation of Rates and Fees................................. 39
4.9 Deficiency Advances; Failure to Purchase Participations....... 39
4.10 Intraday Funding.............................................. 40
ARTICLE V
Change in Circumstances
5.1. Increased Cost and Reduced Return.............................. 41
5.2. Limitation on Types of Loans................................... 42
5.3. Illegality..................................................... 42
5.4. Treatment of Affected Loans.................................... 43
5.5. Compensation................................................... 43
5.6. Taxes.......................................................... 44
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
6.1. Conditions of Initial Advance.................................. 46
6.2. Conditions of Revolving Loans and Letter of Credit............. 48
ARTICLE VII
Representations and Warranties
7.1. Organization and Authority..................................... 50
7.2. Loan Documents................................................. 50
7.3. Solvency....................................................... 51
7.4. Subsidiaries and Stockholders.................................. 51
7.5. Ownership Interests............................................ 51
7.6. Financial Condition............................................ 51
7.7. Title to Properties............................................ 52
7.8. Taxes.......................................................... 52
7.9. Other Agreements............................................... 52
7.10. Contract Providers. To the best knowledge of the
Borrower, n.................................................... 53
7.11. Litigation..................................................... 53
7.12. Margin Stock................................................... 54
7.13. Investment Company............................................. 54
7.14. Patents, Etc................................................... 54
7.15. No Untrue Statement............................................ 54
7.16. No Consents, Etc............................................... 54
7.17. Employee Benefit Plans......................................... 55
7.18. No Default..................................................... 56
7.19. Environmental Laws............................................. 56
7.20. Employment Matters............................................. 56
7.21. RICO........................................................... 57
7.22. Year 2000 Compliance........................................... 57
7.23. Reimbursement from Third Party Payors.......................... 57
7.24. Fraud and Abuse................................................ 57
7.25. Licensing and Accreditation.................................... 58
ARTICLE VIII
Affirmative Covenants
8.1. Financial Reports, Etc......................................... 59
8.2. Maintain Properties............................................ 60
8.3. Existence, Qualification, Etc.................................. 60
8.4. Regulations and Taxes.......................................... 60
8.5. Insurance...................................................... 61
8.6. True Books..................................................... 61
8.7. Year 2000 Compliance........................................... 61
8.8. Right of Inspection............................................ 61
8.9. Observe all Laws............................................... 61
8.10. Governmental Licenses.......................................... 61
8.11. Covenants Extending to Other Persons........................... 62
8.12. Officer's Knowledge of Default................................. 62
8.13. Suits or Other Proceedings..................................... 62
8.14. Notice of Environmental Complaint or Condition................. 62
8.15. Environmental Compliance....................................... 62
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.16. Indemnification................................................ 63
8.17. Further Assurances............................................. 63
8.18. Employee Benefit Plans......................................... 63
8.19. Continued Operations........................................... 64
8.20. New Subsidiaries............................................... 64
ARTICLE IX
Negative Covenants
9.1. Financial Covenants............................................ 66
9.2. Acquisitions................................................... 66
9.3. Liens.......................................................... 67
9.4. Indebtedness................................................... 68
9.5. Transfer of Assets............................................. 68
9.6. Investments.................................................... 69
9.7. Merger or Consolidation........................................ 69
9.8. Restricted Payments............................................ 69
9.9. Transactions with Affiliates................................... 70
9.10. Compliance with ERISA, the Code and Foreign Benefit Laws....... 70
9.11. Fiscal Year.................................................... 71
9.12. Dissolution, etc............................................... 71
9.13. Limitations on Sales and Leasebacks............................ 71
9.14. Change in Control.............................................. 71
9.15. Rate Hedging Obligations....................................... 71
9.16. Negative Pledge Clauses........................................ 71
9.17. Retirement of Treasury Stock................................... 71
9.18. Capital Expenditures of Restricted Subsidiaries................ 71
ARTICLE X
Events of Default and Acceleration
10.1. Events of Default.............................................. 73
10.2. Agent to Act................................................... 76
10.3. Cumulative Rights.............................................. 76
10.4. No Waiver...................................................... 76
10.5. Allocation of Proceeds......................................... 76
ARTICLE XI
The Agent
11.1. Appointment, Powers, and Immunities............................ 78
11.2. Reliance by Agent.............................................. 78
11.3. Defaults....................................................... 79
11.4. Rights as Lender............................................... 79
11.5. Indemnification................................................ 79
11.6. Non-Reliance on Agent and Other Lenders........................ 80
11.7. Resignation of Agent........................................... 80
</TABLE>
iii
<PAGE>
<TABLE>
ARTICLE XII
Miscellaneous
<S> <C>
12.1. Assignments and Participations............................... 81
12.2. Notices...................................................... 83
12.3. Right of Set-off; Adjustments................................ 84
12.4. Survival..................................................... 84
12.5. Expenses..................................................... 84
12.6. Amendments and Waivers....................................... 85
12.7. Counterparts; Facsimile Signatures........................... 85
12.8. Termination.................................................. 85
12.9. Indemnification; Limitation of Liability..................... 86
12.10. Severability.......................................... 87
12.11. Entire Agreement...................................... 87
12.12. Agreement Controls.................................... 87
12.13. Usury Savings Clause.................................. 87
12.14. Payments.............................................. 88
12.15. Governing Law; Waiver of Jury Trial................... 88
</TABLE>
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 30, 1999 (the "Agreement"), is
made by and among
HEALTH MANAGEMENT ASSOCIATES, INC., a Delaware corporation having its
principal place of business in Naples, Florida (the "Borrower"),
BANK OF AMERICA, N.A., a national banking association organized and
existing under the laws of the United States, in its capacity as a Lender ("Bank
of America"), and each other financial institution executing and delivering a
signature page hereto and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 12.1 (hereinafter such financial institutions may be
referred to individually as a "Lender" or collectively as the "Lenders"),
BANK OF AMERICA, N.A., a national banking association organized and
existing under the laws of the United States, in its capacity as Administrative
Agent for the Lenders (in such capacity, and together with any successor agent
appointed in accordance with the terms of Section 11.7, the "Agent"),
FIRST UNION NATIONAL BANK, a national banking association organized and
existing under the laws of the United States, in its capacity as a Syndication
Agent, and
THE CHASE MANHATTAN BANK, a state bank chartered under the laws of New
York, in its capacity as a Syndication Agent;
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower has requested that the Lenders make available to the
Borrower (a) a 364 day revolving credit facility of up to $150,000,000, and (b)
a five year revolving credit facility of up to $450,000,000, which shall include
a letter of credit facility of up to $15,000,000 for the issuance of standby
letters of credit, the proceeds of which are to be used (i) to refinance
Indebtedness for Money Borrowed owing by the Borrower under the Existing Credit
Agreement and (ii) for general corporate purposes, including permitted
Acquisitions and the repurchase of up to $250,000,000 of the Borrower's capital
stock; and
WHEREAS, the Lenders are willing to make such revolving credit and letter
of credit facilities available to the Borrower upon the terms and conditions set
forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
1
<PAGE>
ARTICLE I
Definitions and Terms
---------------------
1.1. Definitions. For the purposes of this Agreement, in addition to
-----------
the definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling equity
interest in another Person (including the purchase of an option, warrant or
convertible or similar type security to acquire such a controlling interest
at the time it becomes exercisable by the holder thereof), whether by
purchase of such equity interest or upon exercise of an option or warrant
for, or conversion of securities into, such equity interest, or (ii) assets
of another Person which constitute all or substantially all of the assets
of such Person or of a line or lines of business conducted by such Person.
"Advance" means a borrowing under the Five Year Revolving Credit
Facility or the 364 Day Revolving Credit Facility consisting of a Base Rate
Loan or a Eurodollar Rate Loan.
"Affiliate" means any Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under
common control with the Borrower; or (ii) which beneficially owns or holds
5% or more of any class of the outstanding voting stock (or in the case of
a Person which is not a corporation, 5% or more of the equity interest) of
the Borrower; or 5% or more of any class of the outstanding voting stock
(or in the case of a Person which is not a corporation, 5% or more of the
equity interest) of which is beneficially owned or held by the Borrower.
The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting stock, by contract or
otherwise.
"Applicable Commitment Percentage" means, for each Lender at any time,
with respect to the Five Year Revolving Credit Facility, the 364 Day
Revolving Credit Facility and the Letter of Credit Facility, a fraction,
the numerator of which shall be the sum of such Lender's Five Year
Commitment and 364 Day Commitment and the denominator of which shall be the
sum of the Total Five Year Commitment and Total 364 Day Commitment, which
Applicable Commitment Percentage for each Lender as of the Closing Date is
as set forth in Exhibit A; provided that the Applicable Commitment
Percentage of each Lender shall be increased or decreased to reflect any
assignments to or by such Lender effected in accordance with Section 12.1.
"Applicable Lending Office" means, for each Lender and for each Type
of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or
such other office of such Lender (or an affiliate of such Lender) as such
Lender may from time to time specify to the Agent and the Borrower by
written notice in accordance with the terms hereof as the office by which
its Loans of such Type are to be made and maintained.
"Applicable Margin" means that percent per annum set forth below under
the heading "Applicable Margin for Eurodollar Rate
2
<PAGE>
Loans" or "Applicable Margin for Base Rate Loans", as appropriate, as
specified in the table below opposite the applicable Tier determined by the
Ratings as in effect at the time of determination:
<TABLE>
<CAPTION>
Rating
------
Tier S&P Moody's Applicable Margin for Applicable Margin for
---- --- ------- --------------------- ---------------------
Eurodollar Rate Loans Base Rate Loans
--------------------- ---------------
<S> <C> <C> <C> <C>
I *BBB+ *Baa1 1.000% 0.000%
II BBB Baa2 1.250% 0.250%
III BBB- Baa3 1.500% 0.500%
IV **BB+ **Ba1 1.750% 0.750%
</TABLE>
** less than or equal to
* greater than or equal to
provided, however that until May 30, 2000, Tier I shall not be available
and Tier II shall apply in its stead. The Applicable Margin shall be
established from time to time based upon the Ratings in effect from time to
time. Any change in the Applicable Margin due to a change in any Rating
shall be effective on the date of such change in such Rating. In the event
of a split Rating where the Ratings are one level apart, the higher Rating
shall determine the Applicable Margin. In the event of a split Rating where
the Ratings are more than one level apart, the Applicable Margin shall be
determined by the Tier that is one level below the Tier corresponding to
the higher Rating. In the event that the Borrower shall have not have a
Rating from either S&P or Moody's, the Applicable Margin shall remain at
the last applicable Tier until the earlier of (i) thirty (30) days and (ii)
the date a mutual agreement is reached between the Borrower, the Agent and
the Lenders. If such mutual agreement is not reached within thirty (30)
days, the Applicable Margin shall be Tier IV until such mutual agreement is
reached.
"Applicable Five Year Facility Fee" means that percent per annum set
forth below under the heading "Applicable Five Year Facility Fee" as
specified in the table below opposite the applicable Tier determined by the
Ratings as in effect at the time of determination:
Rating
------
Tier S&P Moody's Applicable Five Year
---- --- ------- --------------------
Facility Fee
------------
I **BBB+ *Baa1 0.175%
II BBB Baa2 0.200%
III BBB- Baa3 0.250%
IV * BB+ **Ba1 0.300%
** less than or equal to
* greater than or equal to
The Applicable Five Year Facility Fee shall be established from time to
time based upon the Ratings in effect from time to time; provided that
until May 30, 2000, Tier I shall not be available and Tier II
3
<PAGE>
shall apply in its stead. Any change in the Applicable Five Year Facility
Fee due to a change in any Rating shall be effective on the date of such
change in such Rating. In the event of a split Rating where the Ratings are
one level apart, the higher Rating shall determine the Applicable Five Year
Facility Fee. In the event of a split Rating where the Ratings are more
than one level apart, the Applicable Five Year Facility Fee shall be
determined by the Tier that is one level below the Tier corresponding to
the higher Rating. In the event that the Borrower shall have not have a
Rating from either S&P or Moody's, the Applicable Five Year Facility Fee
shall remain at the last applicable Tier until the earlier of (i) thirty
(30) days and (ii) the date a mutual agreement is reached between the
Borrower, the Agent and the Lenders. If such mutual agreement is not
reached within thirty (30) days, the Applicable Five Year Facility Fee
shall be Tier IV until such mutual agreement is reached.
"Applicable 364 Day Facility Fee" means that percent per annum set
forth below under the heading "Applicable 364 Day Facility Fee" as
specified in the table below opposite the applicable Tier determined by the
Ratings as in effect at the time of determination:
Rating
------
Tier S&P Moody's Applicable 364 Day
---- --- ------- ------------------
Facility Fee
------------
I *BBB+ *Baa1 0.150%
II BBB Baa2 0.175%
III BBB- Baa3 0.225%
IV **BB+ **Ba1 0.275%
** less than or equal to
* greater than or equal to
The Applicable 364 Day Facility Fee shall be established from time to time
based upon the Ratings in effect from time to time; provided that until May
30, 2000, Tier I shall not be available and Tier II shall apply in its
stead. Any change in the Applicable 364 Day Facility Fee due to a change
in any Rating shall be effective on the date of such change in such Rating.
In the event of a split Rating where the Ratings are one level apart, the
higher Rating shall determine the Applicable 364 Day Facility Fee. In the
event of a split Rating where the Ratings are more than one level apart,
the Applicable 364 Day Facility Fee shall be determined by the Tier that is
one level below the Tier corresponding to the higher Rating. In the event
that the Borrower shall have not have a Rating from either S&P or Moody's,
the Applicable 364 Day Facility Fee shall remain at the last applicable
Tier until the earlier of (i) thirty (30) days and (ii) the date a mutual
agreement is reached between the Borrower, the Agent and the Lenders. If
such mutual agreement is not reached within thirty (30) days, the
Applicable 364 Day Facility Fee shall be Tier IV until such mutual
agreement is reached.
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit, or
similar documentation, executed by the Borrower from time to time
4
<PAGE>
and delivered to the Issuing Bank to support the issuance of Letters of
Credit.
"Assignment and Acceptance" shall mean an Assignment and Acceptance in
the form of Exhibit B (with blanks appropriately filled in) delivered to
the Agent in connection with an assignment of a Lender's interest under
this Agreement pursuant to Section 12.1.
"Authorized Representative" means any of the President, Executive Vice
President - Finance and Vice President - General Counsel, or Vice
President-Controller of the Borrower or, with respect to financial matters,
the chief financial officer of the Borrower, or any other Person expressly
designated by the Board of Directors of the Borrower (or the appropriate
committee thereof) as an Authorized Representative of the Borrower, as set
forth from time to time in a certificate in the form of Exhibit C.
"Bank of America" means Bank of America, N.A.
"BAS" means Banc of America Securities LLC and its successors.
"Base Rate" means, for any day, the rate per annum equal to the sum of
(a) the higher of (i) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (ii) the Prime Rate for such day plus (b) the
Applicable Margin. Any change in the Base Rate due to a change in the
Prime Rate or the Federal Funds Rate shall be effective on the effective
date of such change in the Prime Rate or Federal Funds Rate.
"Base Rate Loan" means a Loan or a Segment of the Term Loan for which
the rate of interest is determined by reference to the Base Rate.
"Base Rate Refunding Loan" means a Base Rate Loan made to satisfy
Reimbursement Obligations arising from a drawing under a Letter of Credit.
"Base Rate Segment" means a Segment bearing interest or to bear
interest at the Base Rate.
"Board" means the Board of Governors of the Federal Reserve System (or
any successor body).
"Borrower's Account" means any demand deposit account with the Agent,
which may be maintained at one or more offices of the Agent or an agent of
the Agent.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Five Year Revolving
Credit Facility or the 364 Day Revolving Credit Facility, in the form of
Exhibit D.
"Business Day" means, (i) except as expressly provided in clause (ii),
any day which is not a Saturday, Sunday or a day on which banks in the
States of New York or North Carolina are authorized or obligated by law,
executive order or governmental decree to be closed and, (ii) with respect
to the selection,
5
<PAGE>
funding, interest rate, payment, and Interest Period of any Eurodollar Rate
Loan, any day which is a Business Day, as described above, and on which the
relevant international financial markets are open for the transaction of
business contemplated by this Agreement in London, England, New York, New
York and Charlotte, North Carolina.
"Capital Expenditures" means, with respect to the Borrower and its
Subsidiaries, for any period the sum of (without duplication) (i) all
expenditures (whether paid in cash or accrued as liabilities) by the
Borrower or any Subsidiary during such period for items that would be
classified as "property, plant or equipment" or comparable items on the
consolidated balance sheet of the Borrower and its Subsidiaries, including
without limitation all transactional costs incurred in connection with such
expenditures provided the same have been capitalized, excluding, however,
the amount of any Capital Expenditures paid for with proceeds of casualty
insurance as evidenced in writing and submitted to the Agent together with
any compliance certificate delivered pursuant to Section 8.1(a) or (b), and
(ii) with respect to any Capital Lease entered into by the Borrower or its
Subsidiaries during such period, the present value of the lease payments
due under such Capital Lease over the term of such Capital Lease applying a
discount rate equal to the interest rate provided in such lease (or in the
absence of a stated interest rate, that rate used in the preparation of the
financial statements described in Section 8.1(a)), all the foregoing in
accordance with GAAP applied on a Consistent Basis.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board and
any successor thereof.
"Change of Control" means, at any time:
(i) an event by which any "person" or "group" (each as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) either (A)
becomes the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), indirectly, of Voting Securities of the Borrower (or
securities convertible into or exchangeable for such Voting
Securities) representing 33-1/3% or more of the combined voting power
of all Voting Securities of the Borrower (on a fully diluted basis) or
(B) otherwise acquires the ability, directly or indirectly, to elect a
majority of the board of directors of the Borrower;
(ii) during any period of up to 12 consecutive months,
commencing on the Closing Date, individuals who at the beginning of
such 12-month period were directors of the Borrower shall cease for
any reason (other than the death, disability or retirement of an
officer of the Borrower that is serving as a director at such time so
long as another officer of the Borrower replaces such Person as a
director) to constitute a majority of the board of directors of the
Borrower; or
(iii) any Person or two or more Persons acting in concert
shall have acquired by contract or otherwise, or shall have
6
<PAGE>
entered into a contract or arrangement that, upon consummation
thereof, will result in its or their acquisition of the power to
exercise, directly or indirectly, a controlling influence on the
management or policies of the Borrower.
"Closing Date" means the date as of which this Agreement is executed
by the Borrower, the Lenders and the Agent and on which the conditions set
forth in Section 6.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.
"Consistent Basis" in reference to the application of GAAP means the
accounting principles observed in the period referred to are comparable in
all material respects to those applied in the preparation of the audited
financial statements of the Borrower referred to as of the Closing Date in
Section 7.6(a).
"Consolidated EBITDA" means, with respect to the Borrower and its
Subsidiaries for any Four-Quarter Period ending on the date of computation
thereof, the sum of, without duplication, (i) Consolidated Net Income less
all non-cash income, (ii) Consolidated Interest Expense, (iii) taxes on
income, (iv) amortization, (v) depreciation, and (vi) non-cash liabilities
otherwise deducted in calculating Consolidated Net Income resulting from
FASB No. 106 Adjustments or FASB No. 121 Adjustments, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent Basis.
"Consolidated Interest Coverage Ratio" means, with respect to the
Borrower and its Subsidiaries for any Four-Quarter Period ending on the
date of computation thereof, the ratio of (i) Consolidated EBITDA for such
period less Capital Expenditures (excluding Costs of Acquisitions) for such
period, to (ii) Consolidated Interest Expense for such period.
"Consolidated Indebtedness" means all Indebtedness for Money Borrowed
of the Borrower and its Subsidiaries, all determined on a consolidated
basis.
"Consolidated Interest Expense" means, with respect to any period of
computation thereof, the gross interest expense of the Borrower and its
Subsidiaries, including without limitation (i) the current amortized
portion of debt discounts to the extent included in gross interest expense,
(ii) the current amortized portion of all fees (including fees payable in
respect of any Rate Hedging Obligation) payable in connection with the
incurrence of Indebtedness to the extent included in gross interest expense
and (iii) the portion of any payments made in connection with Capital
Leases and Synthetic Leases allocable to interest expense, all determined
on a consolidated basis in accordance with GAAP applied on a Consistent
Basis.
"Consolidated Leverage Ratio" means, as of the date of computation
thereof, the ratio of (i) Consolidated Indebtedness (determined as at such
date) to (ii) Consolidated EBITDA (for the Four-Quarter Period ending on
(or most recently ended prior to) such date).
7
<PAGE>
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Subsidiaries (including payments received by the Borrower and its
Subsidiaries of (i) interest income, and (ii) dividends and distributions
made in the ordinary course of their businesses by Persons in which
investment is permitted pursuant to this Agreement and not related to an
extraordinary event), less all operating and non-operating expenses of the
Borrower and its Subsidiaries including taxes on income, all determined on
a consolidated basis in accordance with GAAP applied on a Consistent Basis;
but excluding as income: (i) net gains on the sale, conversion or other
disposition of capital assets, (ii) net gains on the acquisition,
retirement, sale or other disposition of capital stock and other securities
of the Borrower or its Subsidiaries, (iii) net gains on the collection of
proceeds of life insurance policies, (iv) any write-up of any asset, and
(v) any other net gain or credit of an extraordinary nature as determined
in accordance with GAAP applied on a Consistent Basis; provided that in
making any computation or determining any amount by reference to any item
appearing on the financial statements of the Borrower and its Subsidiaries,
all FASB 133 Adjustments to such computation or amount shall be
disregarded.
"Consolidated Net Worth" means, as of any date on which the amount
thereof is to be determined, Consolidated Shareholders' Equity minus
(without duplication of deductions in respect of items already deducted in
arriving at surplus and retained earnings) all reserves (other than
contingency reserves not allocated to any particular purpose), including
without limitation reserves for depreciation, depletion, amortization,
obsolescence, deferred income taxes, insurance and inventory valuation all
as determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis; provided that in making any computation or determining
any amount by reference to any item appearing on the financial statements
of the Borrower and its Subsidiaries, all FASB 133 Adjustments to such
computation or amount shall be disregarded.
"Consolidated Shareholders' Equity" means, as of any date on which the
amount thereof is to be determined, the sum of the following in respect of
the Borrower and its Subsidiaries (determined on a consolidated basis and
excluding any upward adjustment after the Closing Date due to revaluation
of assets): (i) the amount of issued and outstanding share capital, plus
(ii) the amount of additional paid-in capital and retained earnings (or, in
the case of a deficit, minus the amount of such deficit), plus (iii) the
amount of any foreign currency translation adjustment (if positive, or, if
negative, minus the amount of such translation adjustment), minus (iv) the
amount of any treasury stock, all as determined in accordance with GAAP
applied on a Consistent Basis.
"Consolidated Total Assets" means, as of any date on which the amount
thereof is to be determined, the net book value of all assets of the
Borrower and its Subsidiaries as determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation (each a "primary
obligation") of another Person (the "primary
8
<PAGE>
obligor"), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire any such primary obligation or any property constituting
direct or indirect security therefor, or (b) to advance or provide funds
(i) for the payment or discharge of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor in
respect of any such primary obligation or otherwise to maintain the net
worth or solvency or any balance sheet item, level of income or financial
condition of such primary obligor, or (c) 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 thereof to make
payment of such primary obligation, or (d) otherwise to assure or hold
harmless the owner of any such primary obligation against loss or failure
or inability to perform in respect thereof. 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 not stated or determinable, the
maximum reasonably anticipated liability in respect thereof.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 4.2 hereof of a Eurodollar Rate Loan of
one Type as a Eurodollar Rate Loan of the same Type from one Interest
Period to the next Interest Period.
"Contract Provider" means any Person who provides professional health
care services under or pursuant to any contract with the Borrower or any
Subsidiary.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 4.2 of one Type of Loan into another Type of Loan.
"Cost of Acquisition" means, with respect to any Acquisition, as at
the date of entering into any agreement therefor, the sum of the following
(without duplication): (i) the value of the capital stock, warrants or
options to acquire capital stock of Borrower or any Subsidiary to be
transferred in connection therewith, (ii) the amount of any cash and fair
market value of other property (excluding property described in clause (i)
and the unpaid principal amount of any debt instrument) given as
consideration, (iii) the amount (determined by using the face amount or the
amount payable at maturity, whichever is greater) of any Indebtedness
incurred, assumed or acquired by the Borrower or any Subsidiary in
connection with such Acquisition, (iv) all additional purchase price
amounts in the form of earnouts and other contingent obligations that
should be recorded on the financial statements of the Borrower and its
Subsidiaries in accordance with GAAP, (v) all amounts paid in respect of
covenants not to compete, consulting agreements that should be recorded on
financial statements of the Borrower and its Subsidiaries in accordance
with GAAP, and other affiliated contracts in connection with such
Acquisition, (vi) the aggregate fair market value of all other
consideration given by the Borrower or any Subsidiary in connection with
such Acquisition, and (vii) out of pocket transaction costs for the
services and expenses of attorneys, accountants and other consultants
incurred in effecting such transaction, and other similar transaction costs
so incurred. For purposes of determining the Cost of Acquisition for any
transaction,
9
<PAGE>
(A) the capital stock of the Borrower shall be valued as the last price
reported on the national securities exchange on which it is listed, (B) the
capital stock of any Subsidiary shall be valued as determined by the Board
of Directors of such Subsidiary and, if requested by the Agent, determined
to be a reasonable valuation by the independent public accountants referred
to in Section 8.1(a), and (C) with respect to any Acquisition accomplished
pursuant to the exercise of options or warrants or the conversion of
securities, the Cost of Acquisition shall include both the cost of
acquiring such option, warrant or convertible security as well as the cost
of exercise or conversion.
"Credit Parties" means, collectively, the Borrower and each Guarantor.
"Default" means any event or condition which, with the giving or
receipt of notice or lapse of time or both, would constitute an Event of
Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate Loan,
until the end of the Interest Period applicable thereto, a rate of two
percent (2%) above the Eurodollar Rate applicable to such Loan, and
thereafter at a rate of interest per annum which shall be two percent (2%)
above the Base Rate, (ii) with respect to Base Rate Loans, Reimbursement
Obligations, fees, and other amounts payable in respect of Obligations or
(except as otherwise expressly provided therein) the obligations of any
other Credit Party under any of the other Loan Documents, a rate of
interest per annum which shall be two percent (2%) above the Base Rate and
(iii) in any case, the maximum rate permitted by applicable law, if lower.
"Dollars" and the symbol "$" means dollars constituting legal tender
for the payment of public and private debts in the United States of
America.
"Domestic Subsidiary" means any Subsidiary of the Borrower organized
under the laws of the United States of America, any state or territory
thereof or the District of Columbia.
"Eligible Assignee" means (i) a Lender, (ii) an affiliate of a
Lender, and (iii) any other commercial bank or financial institution
approved by the Agent, such approval not to be unreasonably withheld or
delayed by the Agent, and, unless a Default or an Event of Default has
occurred and is continuing at the time any assignment is effected in
accordance with Section 12.1, the Borrower, such approval not to be
unreasonably withheld or delayed by the Borrower and such approval to be
deemed given by the Borrower (in the absence of notice to the contrary,
effective upon receipt) within five Business Days after notice of such
proposed assignment has been provided by the assigning Lender to the
Borrower; provided, however, that neither the Borrower nor an affiliate of
the Borrower shall qualify as an Eligible Assignee.
"Eligible Securities" means the following obligations and any other
obligations previously approved in writing by the Agent:
(a) Government Securities;
10
<PAGE>
(b) obligations of any corporation organized under the laws of
any state of the United States of America or under the laws of any
other nation, payable in the United States of America, expressed to
mature not later than 92 days following the date of issuance thereof
and rated in an investment grade rating category by S&P and Moody's;
(c) interest bearing demand or time deposits issued by any Lender
or certificates of deposit maturing within one year from the date of
issuance thereof and issued by a bank or trust company organized under
the laws of the United States or of any state thereof having capital
surplus and undivided profits aggregating at least $400,000,000 and
being rated "A" or better by S&P or "A" or better by Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations;
(f) Pre-Refunded Municipal Obligations;
(g) shares of mutual funds which invest in obligations described
in paragraphs (a) through (f) above, the shares of which mutual funds
are at all times rated "AAA" by S&P;
(h) tax-exempt or taxable adjustable rate preferred stock issued
by a Person having a rating of its long term unsecured debt of "A" or
better by S&P or "A-2" or better by Moody's; and
(i) asset-backed remarketed certificates of participation
representing a fractional undivided interest in the assets of a trust,
which certificates are rated at least "A-1" by S&P and "P-1" by
Moody's.
"Employee Benefit Plan" means (i) any employee benefit plan, including
any Pension Plan, within the meaning of Section 3(3) of ERISA which (A) is
maintained for employees of the Borrower or any of its ERISA Affiliates, or
any Subsidiary or is assumed by the Borrower or any of its ERISA
Affiliates, or any Subsidiary in connection with any Acquisition or (B) has
at any time been maintained for the employees of the Borrower, any current
or former ERISA Affiliate, or any Subsidiary and (ii) any plan,
arrangement, understanding or scheme maintained by the Borrower or any
Subsidiary that provides retirement, deferred compensation, employee or
retiree medical or life insurance, severance benefits or any other benefit
covering any employee or former employee and which is administered under
any Foreign Benefit Law or regulated by any Governmental Authority other
than the United States of America.
"Environmental Laws" means any foreign, federal, state or local
statute, law, ordinance, code, rule, regulation, order, decree, permit or
license regulating, relating to, or imposing liability or standards of
conduct concerning, any environmental matters or conditions, environmental
protection or conservation, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended;
the Superfund Amendments and Reauthorization Act of 1986, as amended; the
Resource
11
<PAGE>
Conservation and Recovery Act, as amended; the Toxic Substances Control
Act, as amended; the Clean Air Act, as amended; the Clean Water Act, as
amended; together with all regulations promulgated thereunder, and any
other "Superfund" or "Superlien" law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to the Borrower, means any Person or
trade or business which is a member of a group which is under common
control with the Borrower, who together with the Borrower, is treated as a
single employer within the meaning of Section 414(b) and (c) of the Code.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
Rate _____________________________________ Margin
1- Reserve Requirement
"Eurodollar Rate Loan" means a Loan or Segment of the Term Loan for
which the rate of interest is determined by reference to the Eurodollar
Rate.
"Eurodollar Rate Segment" means a Segment bearing interest or to bear
interest at the Eurodollar Rate.
"Event of Default" means any of the occurrences set forth as such in
Section 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder.
"Existing Credit Agreement" means that certain Fourth Amended and
Restated Credit and Reimbursement Agreement dated as of December 1, 1994
among the Borrower, Bank of America and the lenders party thereto, as
amended by Amendment Agreement No. 1 to Fourth Amended and Restated
Revolving Credit and Reimbursement Agreement dated as of September 30,
1996.
"Facility Guaranty" means each Guaranty Agreement between one or more
Guarantors and the Agent for the benefit of the Agent and the Lenders, as
the same may be amended, modified or supplemented.
"Facility Termination Date" means such date as all of the following
shall have occurred: (a) the Borrower shall have permanently terminated the
Five Year Revolving Credit Facility and the 364 Day Revolving Credit
Facility by payment in full of all Five Year Outstandings, 364 Day
Outstandings and Letter of Credit Outstandings, together with all accrued
and unpaid interest thereon, except for the undrawn portion of Letters of
Credit as have been fully cash collateralized in a manner consistent with
the terms of Section 10.1(B), (b) all Five Year Commitments, 364 Day
Commitments and Letter of Credit Commitments shall have terminated or
expired, (c) the Borrower shall have permanently terminated the Term Loan
by payment in full of all Term Loan Outstandings, together will all accrued
and unpaid interest thereon and (d) the Borrower shall have
12
<PAGE>
fully, finally and irrevocably paid and satisfied in full all Obligations
(other than Obligations consisting of continuing indemnities and other
Contingent Obligations of the Borrower or any Guarantor that may be owing
to the Lenders pursuant to the Loan Documents and which expressly survive
termination of this Agreement).
"FASB No. 106 Adjustments" means adjustments to income (or loss) less
actual cash payments resulting from "retirement benefits other than
pensions" (as defined in the Statement of Financial Accounting Standards
No. 106).
"FASB No. 121 Adjustments" means adjustments charged to income (or
loss) resulting from impairment of long-lived assets (as defined in the
Statement of Financial Accounting Standards No. 121).
"FASB 133 Adjustments" means entries on or adjustments to any balance
sheet or statement of income in respect of derivatives or hedging
instruments as required or permitted by Statement of Financial Accounting
Standards No. 133.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) 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 by the Federal Reserve Bank of New York on the Business
Day next succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on the
next succeeding Business Day, and (b) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate charged to the Agent (in its individual capacity)
on such day on such transactions as determined by the Agent.
"Federal health care offense" has the same meaning as the definition
at subsection (a) of 18 U.S.C. (S) 24, and any statutes succeeding thereto.
"Federal health care program" has the same meaning as the definition
at subsection (f) of 42 U.S.C. (S) 1320a-7b, and any statutes succeeding
thereto.
"Fiscal Year" means the twelve month fiscal period of the Borrower and
its Subsidiaries commencing on October 1 of each calendar year and ending
on September 30 of the next calendar year.
"Five Year Commitment" means, with respect to each Lender, the
obligation of such Lender to make Five Year Loans to the Borrower up to an
aggregate principal amount at any time outstanding equal to such Lender's
Applicable Commitment Percentage of the Total Five Year Commitment.
"Five Year Loans" means, any Advance under the Five Year Revolving
Credit Facility.
"Five Year Notes" means, collectively, the promissory notes of
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the Borrower evidencing Five Year Loans executed and delivered to the
Lenders as provided in Section 2.9(a) substantially in the form of Exhibit
F-1, with appropriate insertions as to amounts, dates and names of Lenders.
"Five Year Outstandings" means, as of any date of determination, the
aggregate principal amount of all Five Year Loans then outstanding.
"Five Year Revolving Credit Facility" means the facility described in
Section 2.1 hereof providing for Loans to the Borrower by the Lenders in
the aggregate principal amount of up to the Total Five Year Commitment.
"Five Year Stated Termination Date" means November 29, 2004.
"Five Year Termination Date" means (i) the Five Year Stated
Termination Date or (ii) such earlier date of termination of the Lenders'
obligations pursuant to Section 10.1 upon the occurrence of an Event of
Default, or (iii) such earlier date as the Borrower may voluntarily and
permanently terminate the Five Year Revolving Credit Facility by payment in
full of all Five Year Outstandings and all Letter of Credit Outstandings,
together with all accrued and unpaid interest thereon, and the cancellation
of or cash collateralization acceptable to the Issuing Bank of all Letters
of Credit.
"Foreign Benefit Law" means any applicable statute, law, ordinance,
code, rule, regulation, order or decree of any foreign nation or any
province, state, territory, protectorate or other political subdivision
thereof regulating, relating to, or imposing liability or standards of
conduct concerning, any Employee Benefit Plan.
"Four-Quarter Period" means a period of four full consecutive fiscal
quarters of the Borrower and its Subsidiaries, taken together as one
accounting period.
"GAAP" or "Generally Accepted Accounting Principles" means generally
accepted accounting principles, being those principles of accounting set
forth in pronouncements of the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants, or which have other
substantial authoritative support and are applicable in the circumstances
as of the date of a report.
"Government Securities" means direct obligations of, or obligations
the timely payment of principal and interest on which are fully and
unconditionally guaranteed by, the United States of America.
"Governmental Authority" means any Federal, state, municipal, national
or other governmental department, commission, board, bureau, court, agency
or instrumentality or political subdivision thereof or any entity or
officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court,
in each case whether associated with a state of the United States, the
United States, or a foreign entity or government.
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"Guarantors" means, at any date, the Subsidiaries who are required to
be parties to a Facility Guaranty at such date.
"Hazardous Material" means and includes any pollutant, contaminant, or
hazardous, toxic or dangerous waste, substance or material (including
without limitation petroleum products, asbestos-containing materials and
lead), the generation, handling, storage, transportation, disposal,
treatment, release, discharge or emission of which is subject to any
Environmental Law.
"HCFA" means the Health Care Financing Administration of the United
States Department of Health and Human Services, and any successor thereto.
"HHS" means the United States Department of Health and Human Services,
and any successor thereto.
"Hospital Facility" means a general acute care or psychiatric
hospital.
"Indebtedness" means as to any Person, without duplication, (a) all
Indebtedness for Money Borrowed of such Person, (b) all Rate Hedging
Obligations of such Person, (c) all indebtedness secured by any Lien on any
property or asset owned or held by such Person regardless or whether the
indebtedness secured thereby shall have been assumed by such Person or is
non-recourse to the credit of such Person, and (d) all Contingent
Obligations of such Person.
"Indebtedness for Money Borrowed" means with respect to any Person,
without duplication, all indebtedness in respect of money borrowed,
including without limitation, all obligations under Capital Leases and
Synthetic Leases, the deferred purchase price of any property or services,
the aggregate face amount of all surety bonds, letters of credit, and
bankers' acceptances, and (without duplication) all payment and
reimbursement obligations in respect thereof whether or not matured,
evidenced by a promissory note, bond, debenture or similar written
obligation for the payment of money (including reimbursement agreements and
conditional sales or similar title retention agreements).
"Interbank Offered Rate" means, with respect to any Eurodollar Rate
Loan for the Interest Period applicable thereto, the rate per annum
(rounded upwards, if necessary), to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered
rate for deposits in Dollars at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Interbank Offered Rate" shall mean, with respect to
any Eurodollar Rate Loan for the Interest Period applicable thereto, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate
for deposits in Dollars at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period, provided, however; if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates (rounded upwards, if necessary, to
the nearest
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1/100 of 1%).
"Interest Period" means, for each Eurodollar Rate Loan, a period
commencing on the date such Eurodollar Rate Loan is made or Converted or
Continued and ending, at the Borrower's option, on the date one, two, three
or six months thereafter as notified to the Agent by the Authorized
Representative in accordance with the terms hereof; provided that,
(i) if an Interest Period for a Eurodollar Rate Loan would
end on a day which is not a Business Day, such Interest Period shall
be extended to the next Business Day (unless such extension would
cause the applicable Interest Period to end in the succeeding calendar
month, in which case such Interest Period shall end on the next
preceding Business Day); and
(ii) any Interest Period which begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month.
"Interest Rate Selection Notice" means the written notice delivered by
an Authorized Representative in connection with the election of a
subsequent Interest Period for any Eurodollar Rate Loan or the Conversion
of any Eurodollar Rate Loan into a Base Rate Loan or the Conversion of any
Base Rate Loan into a Eurodollar Rate Loan, in the form of Exhibit E.
"Issuing Bank" means Bank of America as issuer of Letters of Credit
under Article III.
"LC Account Agreement" means the LC Account Agreement dated as of the
date hereof between the Borrower and the Agent, as amended, modified or
supplemented from time to time.
"Letter of Credit" means a standby letter of credit issued by the
Issuing Bank pursuant to Article III hereof for the account of the Borrower
in favor of a Person advancing credit or securing an obligation on behalf
of the Borrower.
"Letter of Credit Commitment" means, with respect to each Lender, the
obligation of such Lender to acquire Participations in respect of Letters
of Credit and Reimbursement Obligations up to an aggregate amount at any
one time outstanding equal to such Lender's Applicable Commitment
Percentage of the Total Letter of Credit Commitment as the same may be
increased or decreased from time to time pursuant to this Agreement.
"Letter of Credit Facility" means the facility described in Article
-------
III hereof providing for the issuance by the Issuing Bank for the account
---
of the Borrower of Letters of Credit in an aggregate stated amount at any
time outstanding not exceeding the Total Letter of Credit Commitment minus
outstanding Reimbursement Obligations.
"Letter of Credit Outstandings" means, as of any date of
determination, the aggregate amount available to be drawn under all Letters
of Credit plus Reimbursement Obligations then outstanding.
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"Lien" means any interest in property securing any obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but
not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes. For the
purposes of this Agreement, the Borrower and any Subsidiary shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement, financing lease, or other arrangement pursuant
to which title to the property has been retained by or vested in some other
Person for security purposes.
"Loans" means, collectively, the Five Year Loans, the 364 Day Loans
and the Term Loan (including each Segment thereof).
"Loan Documents" means this Agreement, the Notes, the Facility
Guaranties, the LC Account Agreement, the Applications and Agreements for
Letter of Credit, and all other instruments and documents heretofore or
hereafter executed or delivered to or in favor of any Lender (including the
Issuing Bank) or the Agent in connection with the Loans made and
transactions contemplated under this Agreement, as the same may be amended,
supplemented or replaced from the time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business, properties, operations, prospects or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole, (ii) the
ability of any Credit Party to pay or perform its respective obligations,
liabilities and indebtedness under the Loan Documents as such payment or
performance becomes due in accordance with the terms thereof, or (iii) the
rights, powers and remedies of the Agent or any Lender under any Loan
Document or the validity, legality or enforceability thereof.
"Medicaid Certification" means certification by HCFA or a state agency
or entity under contract with HCFA that health care operations are in
compliance with all the conditions of participation set forth in the
Medicaid Regulations.
"Medicaid Provider Agreement" means an agreement entered into between
a state agency or other such entity administering the Medicaid program and
a health care operation under which the health care operation agrees to
provide services for Medicaid beneficiaries in accordance with the terms of
the agreement and Medicaid Regulations.
"Medicaid Regulations" means, collectively, (i) all federal statutes
(whether set forth in Title XIX of the Social Security Act or elsewhere)
affecting the medical assistance program established by Title XIX of the
Social Security Act and any statutes succeeding thereto; (ii) all
applicable provisions of all federal rules, regulations, manuals and orders
of all Governmental Authorities promulgated pursuant to or in connection
with the statutes described in clause (i) above and all federal
administrative, reimbursement and other guidelines of all Governmental
Authorities having the force of law promulgated pursuant to or in
connection with the statutes described in clause (i) above; (iii) all state
statutes and
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plans for medical assistance enacted in connection with the statutes and
provisions described in clauses (i) and (ii) above; and (iv) all applicable
provisions of all rules, regulations, manuals and orders of all
Governmental Authorities promulgated pursuant to or in connection with the
statutes described in clause (iii) above and all state administrative,
reimbursement and other guidelines of all Governmental Authorities having
the force of law promulgated pursuant to or in connection with the statutes
described in clause (ii) above, in each case as may be amended,
supplemented or otherwise modified from time to time.
"Medicare Certification" means certification by HCFA or a state agency
or entity under contract with HCFA that the health care operation is in
compliance with all the conditions of participation set forth in the
Medicare Regulations.
"Medicare Provider Agreement" means an agreement entered into between
a state agency or other such entity administering the Medicare program and
a health care operation under which the health care operation agrees to
provide services for Medicare beneficiaries in accordance with the terms of
the agreement and Medicare Regulations.
"Medicare Regulations" means, collectively, all federal statutes
(whether set forth in Title XVIII of the Social Security Act or elsewhere)
affecting the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act and any statutes
succeeding thereto; together with all applicable provisions of all
rules, regulations, manuals and orders and administrative, reimbursement
and other guidelines having the force of law of all Governmental
Authorities (including without limitation, HHS, HCFA, the Office of the
Inspector General for HHS, or any person succeeding to the functions of any
of the foregoing) promulgated pursuant to or in connection with any of the
foregoing having the force of law, as each may be amended, supplemented or
otherwise modified from time to time.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making, or is accruing an obligation to make, contributions or has made, or
been obligated to make, contributions within the preceding six (6) Fiscal
Years.
"Municipal Obligations" means general obligations issued by, and
supported by the full taxing authority of, any state of the United States
of America or of any municipal corporation or other public body organized
under the laws of any such state which are rated in the highest investment
rating category by both S&P and Moody's.
"Notes" means, collectively, the Five Year Notes and the 364 Day
Notes.
"Obligations" means the obligations, liabilities and Indebtedness of
the Borrower with respect to (i) the principal and interest on the Loans as
evidenced by the Notes, (ii) the Reimbursement
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<PAGE>
Obligations and otherwise in respect of the Letters of Credit, (iii) all
liabilities of Borrower to any Lender (or any affiliate of any Lender)
which arise under a Swap Agreement, and (iv) the payment and performance of
all other obligations, liabilities and Indebtedness of the Borrower to the
Lenders (including the Issuing Bank), the Agent or BAS hereunder, under any
one or more of the other Loan Documents or with respect to the Loans.
"Operating Documents" means with respect to any corporation, limited
liability company, partnership, limited partnership, limited liability
partnership or other legally authorized incorporated or unincorporated
entity, the bylaws, operating agreement, partnership agreement, limited
partnership agreement or other applicable documents relating to the
operation, governance or management of such entity.
"Organizational Action" means with respect to any corporation, limited
liability company, partnership, limited partnership, limited liability
partnership or other legally authorized incorporated or unincorporated
entity, any corporate, organizational or partnership action (including any
required shareholder, member or partner action), or other similar official
action, as applicable, taken by such entity.
"Organizational Documents" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, the articles of incorporation, certificate of
incorporation, articles of organization, certificate of limited
partnership or other applicable organizational or charter documents
relating to the creation of such entity.
"Outstandings" means, collectively, at any date, the Letter of Credit
Outstandings, the Five Year Outstanding, the 364 Day Outstandings and the
Term Loan Outstandings on such date.
"Participation" means, with respect to any Lender (other than the
Issuing Bank) and a Letter of Credit, the extension of credit represented
by the participation of such Lender hereunder in the liability of the
Issuing Bank in respect of a Letter of Credit issued by the Issuing Bank in
accordance with the terms hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" means any employee pension benefit plan within the
meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is
subject to the provisions of Title IV of ERISA or Section 412 of the Code
and which (i) is maintained for employees of the Borrower or any of its
ERISA Affiliates or is assumed by the Borrower or any of its ERISA
Affiliates in connection with any Acquisition or (ii) has at any time been
maintained for the employees of the Borrower or any current or former ERISA
Affiliate.
"Person" means an individual, partnership, corporation, limited
liability company, limited liability partnership, trust, unincorporated
organization, association, joint venture or a government or agency or
political subdivision thereof.
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"Pre-Refunded Municipal Obligations" means obligations of any state of
the United States of America or of any municipal corporation or other
public body organized under the laws of any such state which are rated,
based on the escrow, in the highest investment rating category by both S&P
and Moody's and which have been irrevocably called for redemption and
advance refunded through the deposit in escrow of Government Securities or
other debt securities which are (i) not callable at the option of the
issuer thereof prior to maturity, (ii) irrevocably pledged solely to the
payment of all principal and interest on such obligations as the same
becomes due and (iii) in a principal amount and bear such rate or rates of
interest as shall be sufficient to pay in full all principal of, interest,
and premium, if any, on such obligations as the same becomes due as
verified by a nationally recognized firm of certified public accountants.
"Prime Rate" means the per annum rate of interest established from
time to time by Bank of America as its prime rate, which rate may not be
the lowest rate of interest charged by Bank of America to its customers.
"Principal Office" means the principal office of Bank of America,
presently located at 101 North Tryon Street, 15th Floor, NC1 001-15-04,
Charlotte, North Carolina 28255, Attention: Agency Services, or such other
office and address as the Agent may from time to time designate.
"Rate Hedging Obligations" means, without duplication, any and all
obligations of the Borrower or any Subsidiary, whether absolute or
contingent and howsoever and whensoever created, arising, evidenced or
acquired (including all renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from
the fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange transactions,
including, but not limited to, Dollar-denominated or cross-currency
interest rate exchange agreements, forward currency exchange agreements,
interest rate cap or collar protection agreements, forward rate currency or
interest rate options, puts, warrants and those commonly known as interest
rate "swap" agreements; (ii) all other "derivative instruments" as defined
in FASB 133 and which are subject to the reporting requirements of FASB
133; and (iii) any and all cancellations, buybacks, reversals, terminations
or assignments of any of the foregoing.
"Rating" means the rating of senior, unsecured, non-credit enhanced
Indebtedness for Money Borrowed of the Borrower in effect at any time,
which rating is made by either of S&P or Moody's.
"Regulation D" means Regulation D of the Board as the same may be
amended or supplemented from time to time.
"Reimbursement Obligation" shall mean at any time, the obligation of
the Borrower with respect to any Letter of Credit to reimburse the Issuing
Bank and the Lenders to the extent of their respective Participations
(including by the receipt by the Issuing Bank of proceeds of Loans pursuant
to Section 2.4(c)) for amounts theretofore paid by the Issuing Bank
pursuant to a drawing under
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such Letter of Credit.
"Repurchase Agreement" means a repurchase agreement entered into with
any financial institution whose debt obligations or commercial paper are
rated "A" by either of S&P or Moody's or "A-1" by S&P or "P-1" by Moody's.
"Required Lenders" means, as of any date, Lenders on such date having
Credit Exposures (as defined below) aggregating more than 50% of the
aggregate Credit Exposures of all the Lenders on such date. For purposes
of the preceding sentence, the amount of the "Credit Exposure" of each
Lender shall be equal at all times (a) other than following the occurrence
and during the continuance of an Event of Default, to the sum of its Five
Year Commitment plus 364 Day Commitment or Term Loan Outstandings if the
Borrower has converted all 364 Day Loans into the Term Loan in accordance
with Section 2.7, and (b) following the occurrence and during the
continuance of an Event of Default, to the sum of (i) the aggregate
principal amount of such Lender's Applicable Commitment Percentage of Five
Year Outstandings plus (ii) the amount of such Lender's Applicable
Commitment Percentage of 364 Day Outstandings plus (without duplication)
(iii) the amount of such Lender's Applicable Commitment Percentage of the
Term Loan Outstandings plus (iv) the amount of such Lender's Applicable
Commitment Percentage of Letter of Credit Outstandings; provided that, for
the purpose of this definition only, (A) if any Lender shall have failed to
fund its Applicable Commitment Percentage of any Advance, then the Five
Year Commitment or 364 Day Commitment, as the case may be, of such Lender
shall be deemed reduced by the amount it so failed to fund for so long as
such failure shall continue and such Lender's Credit Exposure attributable
to such failure shall be deemed held by any Lender making more than its
Applicable Commitment Percentage of such Advance to the extent it covers
such failure, (B) if any Lender shall have failed to pay to the Issuing
Bank upon demand its Applicable Commitment Percentage of any drawing under
any Letter of Credit resulting in an outstanding Reimbursement Obligation
(whether by funding its Participation therein or otherwise), such Lender's
Credit Exposure attributable to all Letter of Credit Outstandings shall be
deemed to be held by the Issuing Bank until such Lender shall pay such
deficiency amount to the Issuing Bank together with interest thereon as
provided in Section 4.9.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) by member banks of the Federal
Reserve System against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by
such member banks with respect to (i) any category of liabilities which
includes deposits by reference to which the Eurodollar Rate is to be
determined, or (ii) any category of extensions of credit or other assets
which include Eurodollar Rate Loans. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.
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"Restricted Payment" means (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of
Borrower or any Subsidiary Securities of its Subsidiaries (other than those
payable or distributable solely to the Borrower or any Subsidiary) now or
hereafter outstanding, except a dividend payable solely in shares of a
class of stock to the holders of that class; (b) any redemption,
conversion, exchange, retirement or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of
stock of Borrower or any of its Subsidiaries (other than those payable or
distributable solely to the Borrower or any Subsidiary) now or hereafter
outstanding; (c) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any
class of stock of Borrower or any Subsidiary Securities of its Subsidiaries
now or hereafter outstanding; and (d) any issuance and sale of Subsidiary
Securities of any Subsidiary of the Borrower (or any option, warrant or
right to acquire such stock) other than to the Borrower or any Subsidiary.
"Restricted Subsidiary" means each of River Oaks Medical Office
Building, Inc., River Oaks Hospital, Inc., ROH, Inc. and Paintsville Hospital
Company so long as each such Person is unable to guarantee the Obligations of
the Borrower hereunder.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-
Hill Companies, Inc.
"Segment" means a portion of the Term Loan (or all thereof) with
respect to which a particular interest rate is (or is proposed to be)
applicable.
"Solvent" means, when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and
at present fair saleable value on an orderly basis) is in excess of
the total amount of its liabilities, including Contingent Obligations;
and
(ii) it is then able and expects to be able to pay its debts
as they mature; and
(iii) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
"Subsidiary" means any corporation or other entity in which more than
50% of its outstanding Voting Securities or more than 50% of all equity
interests is owned directly or indirectly by the Borrower and/or by one or
more of the Borrower's Subsidiaries.
"Subsidiary Securities" means the shares of capital stock or the other
equity interests issued by or equity participations in any Subsidiary,
whether or not constituting a "security" under Article 8 of the Uniform
Commercial Code as in effect in any jurisdiction.
"Swap Agreement" means one or more agreements between the Borrower and
any Person with respect to Indebtedness evidenced by any or all of the
Notes, on terms mutually acceptable to Borrower
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and such Person and approved by the Required Lenders, which agreements
create Rate Hedging Obligations; provided, however, that no such approval
of the Lenders shall be required to the extent such agreements are entered
into between the Borrower and any Lender or any affiliate of any Lender.
"Synthetic Lease" means a leveraged leasing arrangement under which
the lease of property is treated as an operating lease under GAAP but is
treated as a financing lease arrangement for legal and tax purposes.
"Term Loan" has the meaning assigned in Section 2.7.
"Term Loan Maturity Date" has the meaning assigned in Section 2.7.
"Term Loan Outstandings" means, as of any date of determination, the
aggregate principal amount of the Term Loan then outstanding.
"Term Loan Termination Date" means (i) the Term Loan Maturity Date or
(ii) such earlier date of termination of Lenders' obligations pursuant to
Section 10.1 upon the occurrence of an Event of Default, or (iii) such date
as the Borrower may voluntarily and permanently terminate the Term Loan by
payment in full of all Obligations incurred in connection with the Term
Loan.
"Term Note" has the meaning assigned in Section 2.7.
"Termination Event" means: (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (unless the
notice requirement has been waived by applicable regulation); or (ii) the
withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA or was deemed such under Section 4062(e) of
ERISA; or (iii) the termination of a Pension Plan, the filing of a notice
of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; or (iv) the
institution of proceedings to terminate a Pension Plan by the PBGC; or (v)
any other event or condition which would constitute grounds under Section
4042(a) of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; or (vi) the partial or complete withdrawal of
the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) the
imposition of a Lien pursuant to Section 412 of the Code or Section 302 of
ERISA; or (viii) any event or condition which results in the reorganization
or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of
ERISA, respectively; or (ix) any event or condition which results in the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by the PBGC of proceedings to terminate a Multiemployer Plan
under Section 4042 of ERISA; or (x) any event or condition with respect to
any Employee Benefit Plan which is regulated by any Foreign Benefit Law
that results in the termination of such Employee Benefit Plan or the
revocation of such Employee Benefit Plan's authority to operate under the
applicable Foreign Benefit Law.
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"364 Day Commitment" means, with respect to each Lender, the
obligation of such Lender to make 364 Day Loans to the Borrower up to an
aggregate principal amount at any one time outstanding equal to such
Lender's Applicable Commitment Percentage of the Total 364 Day Commitment.
"364 Day Loans" means any Advance under the 364 Day Revolving Credit
Facility.
"364 Day Notes" means, collectively, the promissory notes of the
Borrower evidencing 364 Day Loans executed and delivered to the Lenders as
provided in Section 2.9(b) substantially in the form of Exhibit F-2, with
appropriate insertions as to amounts, dates and names of Lenders.
"364 Day Outstandings" means as of any date of determination, the
aggregate principal amount of all 364 Day Loans then outstanding.
"364 Day Revolving Credit Facility" means the facility described in
Section 2.2 hereof providing for Loans to the Borrower by the Lenders in
the aggregate principal amount of up to the Total 364 Day Commitment.
"364 Day Stated Termination Date" means November 27, 2000.
"364 Day Termination Date" means (i) the 364 Day Stated Termination
Date or (ii) such earlier date of termination of the Lenders' obligations
pursuant to Section 10.1 upon the occurrence of an Event of Default, or
(iii) such earlier date as the Borrower may voluntarily and permanently
terminate the 364 Day Revolving Credit Facility by payment in full of all
364 Day Outstandings, together with all accrued and unpaid interest
thereon.
"Total Letter of Credit Commitment" means an amount not to exceed
$15,000,000.
"Total Five Year Commitment" means a principal amount equal to
$450,000,000 as reduced from time to time in accordance with Section 2.6.
"Total 364 Day Commitment" means a principal amount equal to
$150,000,000 as reduced from time to time in accordance with Section 2.6.
"Trigger Date" means the date the Rating is lower than BBB- by S&P or
Baa3 by Moody's.
"Type" shall mean any type of Loan (i.e., a Base Rate Loan or a
Eurodollar Rate Loan).
"Voting Securities" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for
the election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
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"Year 2000 Compliant" means all computer applications (including those
affected by information received from its suppliers and vendors) that are
material to the Borrower's and its Subsidiaries' business and operations,
taken as a whole, will on a timely basis be able to perform properly date-
sensitive functions involving all dates on and after January 1, 2000.
"Year 2000 Problem" means the risk that computer applications used by
the Borrower or any of its Subsidiaries (including those affected by
information received from its suppliers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain
dates on and after January 1, 2000.
1.2. Rules of Interpretation.
-----------------------
(a) All accounting terms not specifically defined herein shall have
the meanings assigned to such terms and shall be interpreted in accordance
with GAAP applied on a Consistent Basis.
(b) Each term defined in Articles 1, 8 or 9 of the Florida Uniform
Commercial Code shall have the meaning given therein unless otherwise
defined herein, except to the extent that the Uniform Commercial Code of
another jurisdiction is controlling, in which case such terms shall have
the meaning given in the Uniform Commercial Code of the applicable
jurisdiction.
(c) The headings, subheadings and table of contents used herein or in
any other Loan Document are solely for convenience of reference and shall
not constitute a part of any such document or affect the meaning,
construction or effect of any provision thereof.
(d) Except as otherwise expressly provided, references in any Loan
Document to articles, sections, paragraphs, clauses, annexes, appendices,
exhibits and schedules are references to articles, sections, paragraphs,
clauses, annexes, appendices, exhibits and schedules in or to such Loan
Document.
(e) All definitions set forth herein or in any other Loan Document
shall apply to the singular as well as the plural form of such defined
term, and all references to the masculine gender shall include reference to
the feminine or neuter gender, and vice versa, as the context may require.
(f) When used herein or in any other Loan Document, words such as
"hereunder", "hereto", "hereof" and "herein" and other words of like import
shall, unless the context clearly indicates to the contrary, refer to the
whole of the applicable document and not to any particular article,
section, subsection, paragraph or clause thereof.
(g) References to "including" means including without limiting the
generality of any description preceding such term, and for purposes hereof
the rule of ejusdem generis shall not be applicable to limit a general
statement, followed by or referable to an enumeration of specific matters,
to matters similar to those specifically mentioned.
(h) Except as otherwise expressly provided, all dates and
25
<PAGE>
times of day specified herein shall refer to such dates and times at
Charlotte, North Carolina.
(i) Whenever interest rates or fees are established in whole or in
part by reference to a numerical percentage expressed as "___%", such
arithmetic expression shall be interpreted in accordance with the
convention that 1% = 100 basis points.
(j) Each of the parties to the Loan Documents and their counsel have
reviewed and revised, or requested (or had the opportunity to request)
revisions to, the Loan Documents, and any rule of construction that
ambiguities are to be resolved against the drafting party shall be
inapplicable in the construing and interpretation of the Loan Documents and
all exhibits, schedules and appendices thereto.
(k) Any reference to an officer of the Borrower or any other Person
by reference to the title of such officer shall be deemed to refer to each
other officer of such Person, however titled, exercising the same or
substantially similar functions.
(l) All references to any agreement or document as amended, modified
or supplemented, or words of similar effect, shall mean such document or
agreement, as the case may be, as amended, modified or supplemented from
time to time only as and to the extent permitted therein and in the Loan
Documents.
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<PAGE>
ARTICLE II
The Credit Facilities
---------------------
2.1. Five Year Revolving Credit Facility. Subject to the terms and
-----------------------------------
conditions of this Agreement, each Lender severally agrees to make Advances to
the Borrower under the Five Year Revolving Credit Facility from time to time
from the Closing Date until the Five Year Termination Date on a pro rata basis
as to the total borrowing requested by the Borrower on any day determined by
such Lender's Applicable Commitment Percentage up to but not exceeding the Five
Year Commitment of such Lender, provided, however, that the Lenders will not be
required and shall have no obligation to make any such Advance (i) so long as a
Default or an Event of Default has occurred and is continuing or (ii) if the
Agent has accelerated the maturity of any of the Notes as a result of an Event
of Default; provided further, however, that immediately after giving effect to
each such Advance, the amount of Five Year Outstandings plus Letter of Credit
Outstandings shall not exceed the Total Five Year Commitment. Within such
limits and subject to the other terms and conditions of this Agreement, the
Borrower may borrow, repay and reborrow under the Five Year Revolving Credit
Facility on any Business Day from the Closing Date until, but (as to borrowings
and reborrowings) not including, the Five Year Termination Date.
2.2. 364 Day Revolving Credit Facility. Subject to the terms and
---------------------------------
conditions of this Agreement, each Lender severally agrees to make Advances to
the Borrower under the 364 Day Revolving Credit Facility from time to time from
the Closing Date until the 364 Day Termination Date on a pro rata basis as to
the total borrowing requested by the Borrower on any day determined by such
Lender's Applicable Commitment Percentage up to but not exceeding the 364 Day
Commitment of such Lender, provided, however, that the Lenders will not be
required and shall have no obligation to make any such Advance (i) so long as a
Default or an Event of Default has occurred and is continuing or (ii) if the
Agent has accelerated the maturity of any of any of the Notes as a result of an
Event of Default; provided further, however, that immediately after giving
effect to each such Advance, the amount of 364 Day Outstandings shall not exceed
the Total 364 Day Commitment. Within such limits and subject to the other terms
and conditions of this Agreement, the Borrower may borrow, repay and reborrow
under the 364 Day Revolving Credit Facility on any Business Day from the Closing
Date until, but (as to borrowings and reborrowings) not including, the 364 Day
Termination Date.
2.3. Amounts. (a) Except as otherwise permitted by the Lenders from time
-------
to time, the amount of Five Year Outstandings plus Letter of Credit Outstandings
shall not exceed at any time the Total Five Year Commitment, and, in the event
there shall be outstanding any such excess, the Borrower shall immediately make
such payments and prepayments as shall be necessary to comply with this
restriction. Each Advance under the Five Year Revolving Credit Facility, other
than Base Rate Refunding Loans, shall be in an amount of at least $10,000,000,
and, if greater than $10,000,000, an integral multiple of $5,000,000.
(b) Except as otherwise permitted by the Lenders from time to time, the
amount of 364 Day Outstandings shall not exceed at any time the Total 364 Day
Commitment, and, in the event there shall be outstanding any such excess, the
Borrower shall immediately make such payments and prepayments as shall be
necessary to comply with this restriction. Each
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<PAGE>
Advance under the 364 Day Revolving Credit Facility, shall be in an amount of at
least $5,000,000, and, if greater than $5,000,000, an integral multiple of
$1,000,000.
2.4. Advances. (a) An Authorized Representative shall give the Agent
--------
(i) at least three (3) Business Days' irrevocable telephonic notice of each
Eurodollar Rate Loan (whether representing an additional borrowing or the
Continuation of a borrowing hereunder or the Conversion of a borrowing hereunder
from a Base Rate Loan to a Eurodollar Rate Loan) prior to 10:30 A.M. and (ii)
irrevocable telephonic notice of each Base Rate Loan (other than Base Rate
Refunding Loans to the extent the same are effected without notice pursuant to
Section 2.4(d) and whether representing an additional borrowing hereunder or the
Conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate Loans)
prior to 10:30 A.M. on the day of such proposed Loan. Each such notice shall be
effective upon receipt by the Agent, shall specify the amount of the borrowing,
whether the borrowing is under the Five Year Revolving Credit Facility or the
364 Day Revolving Credit Facility, the type of Loan (Base Rate or Eurodollar
Rate), the date of borrowing and, if a Eurodollar Rate Loan, the Interest Period
to be used in the computation of interest. The Authorized Representative shall
provide the Agent written confirmation of each such telephonic notice in the
form of a Borrowing Notice or Interest Rate Selection Notice (as applicable)
with appropriate insertions but failure to provide such confirmation shall not
affect the validity of such telephonic notice. Notice of receipt of such
Borrowing Notice or Interest Rate Selection Notice, as the case may be, together
with the amount of each Lender's portion of an Advance requested thereunder,
shall be provided by the Agent to each Lender by telefacsimile transmission with
reasonable promptness, but (provided the Agent shall have received such notice
by 10:30 A.M.) not later than 1:00 P.M. on the same day as the Agent's receipt
of such notice.
(b) Not later than 2:00 P.M. on the date specified for each borrowing
under Section 2.1 or 2.2, each Lender shall, pursuant to the terms and subject
to the conditions of this Agreement, make the amount of the Advance or Advances
to be made by it on such day available by wire transfer to the Agent in the
amount of its pro rata share, determined according to such Lender's Applicable
Commitment Percentage of the Five Year Loan(s) or 364 Day Loan(s) to be made on
such day. Such wire transfer shall be directed to the Agent at the Principal
Office and shall be in the form of Dollars constituting immediately available
funds. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by delivery of
the proceeds thereof to the Borrower's Account or otherwise as shall be directed
in the applicable Borrowing Notice by the Authorized Representative and
reasonably acceptable to the Agent.
(c) Notwithstanding the foregoing, if a drawing is made under any Letter
of Credit, such drawing is honored by the Issuing Bank, and the Borrower shall
not immediately fully reimburse the Issuing Bank in respect of such drawing from
other funds available to the Borrower, (i) provided that the conditions to
making a Five Year Loan as herein provided shall then be satisfied, the
Reimbursement Obligation arising from such drawing shall be paid to the Issuing
Bank by the Agent without the requirement of notice to or from the Borrower from
immediately available funds which shall be advanced as a Base Rate Refunding
Loan to the Agent at its Principal Office by each Lender under the Five Year
Revolving Credit Facility in an amount equal to such Lender's Applicable
Commitment
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Percentage of such Reimbursement Obligation, and (ii) if the conditions to
making a Five Year Loan as herein provided shall not then be satisfied, each of
the Lenders shall fund by payment to the Agent (for the benefit of the Issuing
Bank) at its Principal Office in immediately available funds the purchase from
the Issuing Bank of their respective Participations in the related Reimbursement
Obligation based on their respective Applicable Commitment Percentages of the
Total Letter of Credit Commitment. If a drawing is presented under any Letter of
Credit in accordance with the terms thereof and the Borrower shall not
immediately reimburse the Issuing Bank in respect thereof, then notice of such
drawing or payment shall be provided promptly by the Issuing Bank to the Agent
and the Agent shall provide notice to each Lender by telephone or telefacsimile
transmission. If notice to the Lenders of a drawing under any Letter of Credit
is given by the Agent at or before 12:00 noon on any Business Day, each Lender
shall either make a Base Rate Refunding Loan or fund the purchase of its
Participation as specified above in the amount of such Lender's Applicable
Commitment Percentage of such drawing or payment and shall pay such amount to
the Agent for the account of the Issuing Bank at the Principal Office in Dollars
and in immediately available funds before 2:30 P.M. on the same Business Day. If
such notice to the Lenders is given by the Agent after 12:00 noon on any
Business Day, each Lender shall either make such Base Rate Refunding Loan or
fund such purchase before 12:00 noon on the next following Business Day.
2.5. Repayment of Loans The principal amount of each Five Year Loan shall
------------------
be due and payable to the Agent for the benefit of each Lender in full on the
Five Year Termination Date, or earlier as specifically provided herein. The
principal amount of each 364 Day Loan shall be due and payable to the Agent for
the benefit of each Lender in full on the 364 Day Termination Date, or earlier
as specifically provided herein. The principal amount of any Loan may be prepaid
in whole or in part on any Business Day, upon (a) at least three (3) Business
Days' irrevocable telephonic notice in the case of each Loan that is a
Eurodollar Rate Loan from an Authorized Representative (effective upon receipt)
to the Agent prior to 10:30 A.M. and (b) irrevocable telephonic notice in the
case of each Loan that is a Base Rate Loan from an Authorized Representative
(effective upon receipt) to the Agent prior to 10:30 A.M. on the day of such
proposed repayment. The Authorized Representative shall provide the Agent
written confirmation of each such telephonic notice but failure to provide such
confirmation shall not effect the validity of such telephonic notice. All
prepayments of Five Year Loans made by the Borrower shall be in the amount of
$5,000,000 or such greater amount which is an integral multiple of $1,000,000,
or the amount equal to all Five Year Outstandings, or such other amount as
necessary to comply with Section 2.3(a). All prepayments of 364 Day Loans made
by the Borrower shall be in the amount of $5,000,000 or such greater amount
which is an integral multiple of $1,000,000, or the amount equal to all 364 Day
Outstandings, or such other amount as necessary to comply with Section 2.3(b).
2.6. Reductions. (a) The Borrower shall, by notice from an Authorized
----------
Representative, have the right from time to time but not more frequently than
once each calendar month, upon not less than three (3) Business Days' written
notice to the Agent, effective upon receipt, to reduce the Total Five Year
Commitment. The Agent shall give each Lender, within one (1) Business Day of
receipt of such notice, telefacsimile notice, or telephonic notice (confirmed in
writing), of such reduction. Each such reduction shall be in the aggregate
amount of $5,000,000 or such greater amount which is in an integral multiple of
$1,000,000, or the
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<PAGE>
entire remaining Total Five Year Commitment, and shall permanently reduce the
Total Five Year Commitment. Each reduction of the Total Five Year Commitment
shall be accompanied by payment of the Five Year Loans to the extent that the
principal amount of Five Year Outstandings plus Letter of Credit Outstandings
exceeds the Total Five Year Commitment after giving effect to such reduction,
together with accrued and unpaid interest on the amounts prepaid.
(b) The Borrower shall, by notice from an Authorized Representative, have
the right from time to time but not more frequently than once each calendar
month, upon not less than three (3) Business Days' written notice to the Agent,
effective upon receipt, to reduce the Total 364 Day Commitment. The Agent shall
give each Lender, within one (1) Business Day of receipt of such notice,
telefacsimile notice, or telephonic notice (confirmed in writing), of such
reduction. Each such reduction shall be in the aggregate amount of $5,000,000
or such greater amount which is in an integral multiple of $1,000,000, or the
entire remaining Total 364 Day Commitment, and shall permanently reduce the
Total 364 Day Commitment. Each reduction of the Total 364 Day Commitment shall
be accompanied by payment of the 364 Day Loans to the extent that the principal
amount of 364 Day Outstandings exceeds the Total 364 Day Commitment after giving
effect to such reduction, together with accrued and unpaid interest on the
amounts prepaid.
2.7. 364 Day Term Loan Option. The Borrower shall have the option, so long
------------------------
as no Default or Event of Default shall have occurred and be continuing, to
convert all or any part of the 364 Day Outstandings as of the 364 Day Stated
Termination Date to a term loan maturing on the date (the "Term Loan Maturity
Date") that is one year after the 364 Day Stated Termination Date. The Borrower
may exercise such option by giving written notice to the Agent at least thirty
(30) days prior to the 364 Day Stated Termination Date. If the Agent does not
receive such notification within the time period specified in the preceding
sentence of this Section 2.7, the principal amount of all 364 Day Loans together
with all accrued interest thereon shall be due and payable on the 364 Day Stated
Termination Date. 364 Day Outstandings converted to a Term Loan at the election
of the Borrower in accordance with this Section 2.7 shall be referred to
collectively as the "Term Loan". The Term Loan may be comprised of Base Rate
Segments and Eurodollar Rate Segments as the Borrower may elect in accordance
with the provisions hereof. Amounts repaid or prepaid on the Term Loan may not
be reborrowed. For purposes of this Agreement, in the event that the Borrower
elects to convert all or any part of 364 Day Outstandings on the 364 Day Stated
Termination Date in accordance herewith, then on and after the 364 Day Stated
Termination Date (a) references herein to the "Total 364 Day Commitment" shall
mean the aggregate principal amount of the Term Loan as of the 364 Day Stated
Termination Date less all principal payments made with respect to the Term Loan
hereunder, whether voluntary or optional prepayment or otherwise, (b)
references herein to "364 Day Commitment" shall mean, with respect to each
Lender, (i) on the 364 Day Stated Termination Date, the obligation of such
Lender to permit such conversion of its 364 Day Loans to a portion of the Term
Loan in a principal amount equal to such Lender's Applicable Commitment
Percentage of the aggregate Term Loan and (ii) thereafter the obligation of such
Lender to maintain the Term Loan up to an aggregate principal amount at any time
outstanding equal to such Lender's Applicable Commitment Percentage of the Total
364 Day Commitment (as such term is modified by clause (a) above), (c)
references herein to the "364 Day Stated Termination Date" shall mean the Term
Loan Maturity Date and (d)
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the 364 Day Note of each Lender shall be deemed to evidence such Lender's
portion of the Term Loan, and references to "364 Day Notes" shall mean the Term
Notes. All Term Loan Outstandings plus all accrued and unpaid interest thereon
shall be due and payable on the Term Loan Maturity Date. The Borrower may make
optional prepayments of the Term Loan in accordance with Section 2.5. The
Segments of the Term Loan shall bear interest on the same terms in Article IV as
apply to 364 Day Loans prior to the 364 Day Termination Date.
2.8. Use of Proceeds. The proceeds of the Loans made pursuant to the
---------------
Five Year Revolving Credit Facility and 364 Day Revolving Credit Facility
hereunder shall be used by the Borrower (i) to refinance Indebtedness for Money
Borrowed owing by the Borrower under the Existing Credit Agreement and (ii) for
general corporate purposes, including permitted Acquisitions and the repurchase
of up to $250,000,000 of the Borrower's capital stock.
2.9. Notes.
-----
(a) Five Year Notes. Five Year Loans made by each Lender shall be
---------------
evidenced by the Five Year Note payable to the order of such Lender in the
respective amount of its Applicable Commitment Percentage of the Total Five Year
Commitment, which Five Year Note shall be dated the Closing Date or a later date
pursuant to an Assignment and Acceptance and shall be duly completed, executed
and delivered by the Borrower.
(b) 364 Day Notes. 364 Day Loans and the Term Loan made by each Lender
-------------
shall be evidenced by the 364 Day Note payable to the order of such Lender in
the respective amount of its Applicable Commitment Percentage of the Total 364
Day Commitment, which 364 Day Note shall be dated the Closing Date or a later
date pursuant to an Assignment and Acceptance and shall be duly completed,
executed and delivered by the Borrower.
2.10. Guaranty. As soon as practicable but in any event no later than
--------
twenty (20) days following the Trigger Date, the Borrower shall cause a Facility
Guaranty and the other documents described in Section 8.20 to be delivered by
each of its Domestic Subsidiaries (other than the Restricted Subsidiaries) in
form and substance reasonably acceptable to the Agent, as guaranteeing the full
and timely payment and performance of the Obligations then existing or
thereafter arising.
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ARTICLE III
Letters of Credit
-----------------
3.1. Letters of Credit. The Issuing Bank agrees, subject to the terms
-----------------
and conditions of this Agreement, upon request of the Borrower to issue from
time to time for the account of the Borrower Letters of Credit upon delivery to
the Issuing Bank of an Application and Agreement for Letter of Credit relating
thereto in form and content reasonably acceptable to the Issuing Bank; provided,
that (i) the Issuing Bank shall not be obligated to issue (or renew) any Letter
of Credit if it has been notified by the Agent or has actual knowledge that a
Default or Event of Default has occurred and is continuing, (ii) the Letter of
Credit Outstandings shall not exceed the Total Letter of Credit Commitment and
(iii) no Letter of Credit shall be issued (or renewed) if, after giving effect
thereto, Letter of Credit Outstandings plus Five Year Outstandings shall exceed
the Total Five Year Commitment. No Letter of Credit shall have an expiry date
(including all rights of the Borrower or any beneficiary named in such Letter of
Credit to require renewal) or payment date occurring later than the earlier to
occur of one year after the date of its issuance or the seventh Business Day
prior to the Five Year Stated Termination Date.
3.2. Reimbursement and Participations.
--------------------------------
(a) The Borrower hereby unconditionally agrees to pay to the Issuing
Bank immediately on demand at the Principal Office all amounts required to pay
all drafts drawn or purporting to be drawn under the Letters of Credit and all
reasonable expenses incurred by the Issuing Bank in connection with the Letters
of Credit, and in any event and without demand to place in possession of the
Issuing Bank (which shall include Advances under the Five Year Revolving Credit
Facility if permitted by Section 2.1) sufficient funds to pay all debts and
liabilities arising under any Letter of Credit. The Issuing Bank agrees to give
the Borrower prompt notice of any request for a draw under a Letter of Credit.
The Issuing Bank may charge any account the Borrower may have with it for any
and all amounts the Issuing Bank pays under a Letter of Credit, plus charges and
reasonable expenses as from time to time agreed to by the Issuing Bank and the
Borrower; provided that to the extent permitted by Section 2.4(c), amounts shall
be paid pursuant to Advances under the Five Year Revolving Credit Facility. The
Borrower agrees to pay the Issuing Bank interest on any Reimbursement
Obligations not paid when due hereunder at the Default Rate.
(b) In accordance with the provisions of Section 2.4(c), the Issuing
Bank shall notify the Agent of any drawing under any Letter of Credit promptly
following the receipt by the Issuing Bank of such drawing.
(c) Each Lender (other than the Issuing Bank) shall automatically
acquire on the date of issuance thereof, a Participation in the liability of the
Issuing Bank in respect of each Letter of Credit in an amount equal to such
Lender's Applicable Commitment Percentage of such liability, and to the extent
that the Borrower is obligated to pay the Issuing Bank under Section 3.2(a),
each Lender (other than the Issuing Bank) thereby shall absolutely,
unconditionally and irrevocably assume, and shall be unconditionally obligated
to pay to the Issuing Bank, its Applicable Commitment Percentage of the
liability of the Issuing Bank under such Letter of Credit in the manner and with
the effect provided in
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Section 2.4(c).
(d) Simultaneously with the making of each payment by a Lender to
the Issuing Bank pursuant to Section 2.4(c)(ii), such Lender shall,
automatically and without any further action on the part of the Issuing Bank or
such Lender, acquire a Participation in an amount equal to such payment
(excluding the portion thereof constituting interest accrued prior to the date
the Lender made its payment) in the related Reimbursement Obligation of the
Borrower. Each Lender's obligation to make payment to the Agent for the account
of the Issuing Bank pursuant to Section 2.4(c) and Section 3.2(c), and the right
of the Issuing Bank to receive the same, shall be absolute and unconditional,
shall not be affected by any circumstance whatsoever and shall be made without
any offset, abatement, withholding or reduction whatsoever. In the event the
Lenders have purchased Participations in any Reimbursement Obligation as set
forth above, then at any time payment (in fully collected, immediately available
funds) of such Reimbursement Obligation, in whole or in part, is received by the
Issuing Bank from the Borrower, the Issuing Bank shall promptly pay to each
Lender an amount equal to its Applicable Commitment Percentage of such payment
from the Borrower.
(e) Promptly following the end of each calendar quarter, the Issuing
Bank shall deliver to the Agent a notice describing the aggregate undrawn amount
of all Letters of Credit at the end of such quarter. Upon the request of any
Lender from time to time, the Issuing Bank shall deliver to the Agent, and the
Agent shall deliver to such Lender, any other information reasonably requested
by such Lender with respect to each Letter of Credit outstanding.
(f) The issuance by the Issuing Bank of each Letter of Credit shall,
in addition to the conditions precedent set forth in Article VI, be subject to
the conditions that such Letter of Credit be in such form and contain such terms
as shall be reasonably satisfactory to the Issuing Bank consistent with the then
current practices and procedures of the Issuing Bank with respect to similar
letters of credit, and the Borrower shall have executed and delivered such other
instruments and agreements relating to such Letters of Credit as the Issuing
Bank shall have reasonably requested consistent with such practices and
procedures and shall not be in conflict with any of the express terms herein
contained. All Letters of Credit shall be issued pursuant to and subject to the
Uniform Customs and Practice for Documentary Credits, 1993 revision,
International Chamber of Commerce Publication No. 500 or, if the Issuing Bank
shall elect by express reference in an affected Letter of Credit, the
International Chamber of Commerce International Standby Practices commonly
referred to as "ISP98", or any subsequent amendment or revision of either
thereof.
(g) The Borrower agrees that the Issuing Bank may, in its sole
discretion, accept or pay, as complying with the terms of any Letter of Credit,
any drafts or other documents otherwise in order which may be signed or issued
by an administrator, executor, trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, liquidator, receiver, attorney in fact or
other legal representative of a party who is authorized under such Letter of
Credit to draw or issue any drafts or other documents.
(h) Without limiting the generality of the provisions of Section
12.9, the Borrower hereby agrees to indemnify and hold harmless
33
<PAGE>
the Issuing Bank, each other Lender and the Agent from and against any and all
claims and damages, losses, liabilities, reasonable costs and expenses which the
Issuing Bank, such other Lender or the Agent may incur (or which may be claimed
against the Issuing Bank, such other Lender or the Agent) by any Person by
reason of or in connection with the issuance or transfer of or payment or
failure to pay under any Letter of Credit; provided that the Borrower shall not
be required to indemnify the Issuing Bank, any other Lender or the Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, (i) caused by the willful misconduct or gross negligence of the
party to be indemnified or (ii) caused by the failure of the Issuing Bank to pay
under any Letter of Credit after the presentation to it of a request for payment
strictly complying with the terms and conditions of such Letter of Credit,
unless such payment is prohibited by any law, regulation, court order or decree.
The indemnification and hold harmless provisions of this Section 3.2(h) shall
survive repayment of the Obligations, occurrence of the Five Year Termination
Date, the Facility Termination Date and expiration or termination of this
Agreement.
(i) Without limiting Borrower's rights as set forth in Section
3.2(h), the obligation of the Borrower to immediately reimburse the Issuing Bank
for drawings made under Letters of Credit and the Issuing Bank's right to
receive such payment shall be absolute, unconditional and irrevocable, and such
obligations of the Borrower shall be performed strictly in accordance with the
terms of this Agreement and such Letters of Credit and the related Application
and Agreement for any Letter of Credit, under all circumstances whatsoever,
including the following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, the obligation supported by the Letter of Credit or any other
agreement or instrument relating thereto (collectively, the "Related
LC Documents");
(ii) any amendment or waiver of or any consent to or departure
from all or any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense (other than
the defense of payment in accordance with the terms of this Agreement)
or other rights which the Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any persons or
entities for whom any such beneficiary or any such transferee may be
acting), the Agent, the Lenders or any other Person, whether in
connection with the Loan Documents, the Related LC Documents or any
unrelated transaction;
(iv) any breach of contract or other dispute between the
Borrower and any beneficiary or any transferee of a Letter of Credit
(or any persons or entities for whom such beneficiary or any such
transferee may be acting), the Agent, the Lenders or any other Person;
(v) any draft, statement or any other document presented under
the 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 whatsoever;
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(vi) any delay, extension of time, renewal, compromise or other
indulgence or modification granted or agreed to by the Agent, with or
without notice to or approval by the Borrower in respect of any of
Borrower's Obligations under this Agreement; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing;
provided, however, that nothing contained in this Section 3.2 shall be deemed to
release the Issuing Bank or any Lender of any liability for actual loss arising
as a result of its gross negligence or willful misconduct or out of the wrongful
dishonor by the Issuing Bank of a proper demand for payment made under and
strictly complying with the terms of any Letter of Credit.
35
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ARTICLE IV
Eurodollar Funding, Fees, and Payment Conventions
-------------------------------------------------
4.1 Interest Rate Options. Eurodollar Rate Loans and Base Rate Loans
---------------------
may be outstanding at the same time and, so long as no Default or Event of
Default shall have occurred and be continuing, the Borrower shall have the
option to elect the Type of Loan and the duration of the initial and any
subsequent Interest Periods and to Convert Loans in accordance with Sections
2.4(a) and 4.2, as applicable; provided, however, (a) there shall not be
outstanding at any one time Eurodollar Rate Loans (including Eurodollar Rate
Segments) having more than eight (8) different Interest Periods, (b) each
Eurodollar Rate Loan (including each Conversion into and each Continuation as a
Eurodollar Rate Loan) shall be in an amount of $10,000,000 or, if greater than
$10,000,000, an integral multiple of $1,000,000, and (c) no Eurodollar Rate
Loan shall have an Interest Period that extends beyond the Five Year Stated
Termination Date in the case of Five Year Loans, the 364 Day Stated Termination
Date in the case of 364 Day Loans, or the Term Loan Maturity Date in the case of
any Segment. If the Agent does not receive a Borrowing Notice or an Interest
Rate Selection Notice giving notice of election of the duration of an Interest
Period or of Conversion of any Loan or Segment to or Continuation of a Loan or
Segment as a Eurodollar Rate Loan by the time prescribed by Sections 2.4(a) and
4.2, as applicable, the Borrower shall be deemed to have elected to obtain or
Convert such Loan or Segment to (or Continue such Loan or Segment as) a Base
Rate Loan until the Borrower notifies the Agent in accordance with Section 4.2.
The Borrower shall not be entitled to elect to Continue any Loan or Segment as
or Convert any Loan or Segment into a Eurodollar Rate Loan if a Default or Event
of Default shall have occurred and be continuing.
4.2 Conversions and Elections of Subsequent Interest Periods. Subject
--------------------------------------------------------
to the limitations set forth in the definition of "Interest Period" and in
Section 4.1 and Article V, the Borrower may:
(a) upon delivery of telephonic notice to the Agent (which shall be
irrevocable) on or before 10:30 A.M. on any Business Day, Convert any Eurodollar
Rate Loan to a Base Rate Loan on the last day of the Interest Period for such
Eurodollar Rate Loan; and
(b) provided that no Default or Event of Default shall have occurred and
be continuing, upon delivery of telephonic notice to the Agent (which shall be
irrevocable) on or before 10:30 A.M. three (3) Business Days' prior to the date
of such Conversion or Continuation:
(i) elect a subsequent Interest Period for any Eurodollar Rate Loan
to begin on the last day of the then current Interest Period for such
Eurodollar Rate Loan; or
(ii) Convert any Base Rate Loan to a Eurodollar Rate Loan on any
Business Day.
Each such notice shall be effective upon receipt by the Agent, shall specify the
amount of the Eurodollar Rate Loan affected, and, if a Continuation as or
Conversion into a Eurodollar Rate Loan, the Interest Period to be used in the
computation of interest. The Authorized Representative shall provide the Agent
written confirmation of each such telephonic notice in the form of a Borrowing
Notice or Interest Rate
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Selection Notice (as applicable) with appropriate insertions but failure to
provide such confirmation shall not affect the validity of such telephonic
notice. Notice of receipt of such Borrowing Notice or Interest Rate Selection
Notice, as the case may be, shall be provided by the Agent to each Lender by
telefacsimile transmission with reasonable promptness, but (provided the Agent
shall have received such notice by 10:30 A.M.) not later than 3:00 P.M. on the
same day as the Agent's receipt of such notice. All such Continuations or
Conversions of Loans shall be effected pro rata based on the Applicable
Commitment Percentages of the Lenders.
4.3 Payment of Interest. The Borrower shall pay interest on the
-------------------
outstanding and unpaid principal amount of each Loan, commencing on the first
date of such Loan until such Loan shall be repaid, at the applicable Base Rate
or Eurodollar Rate as designated by the Borrower in the related Borrowing Notice
or Interest Rate Selection Notice or as otherwise provided hereunder. Interest
on each Loan shall be paid (a) in the case of any Base Rate Loan, quarterly in
arrears on the last Business Day of each March, June, September and December,
commencing on December 31, 1999, until (i) the Five Year Termination Date in the
case of Five Year Loans, (ii) the 364 Day Termination Date in the case of 364
Day Loans, subject to the conversion of any thereof to a Term Loan pursuant to
Section 2.7, and (iii) the Term Loan Maturity Date in the case of Term Loans, at
which date the entire principal amount of and all accrued interest on Loans
shall be paid in full, (b) in the case of any Eurodollar Rate Loan, on last day
of the applicable Interest Period for such Eurodollar Rate Loan and if such
Interest Period extends for more than three (3) months, at intervals of three
(3) months after the first day of such Interest Period, and (c) upon payment in
full of the related Loan; provided, however, that if any Event of Default shall
occur and be continuing, all amounts outstanding hereunder shall bear interest
thereafter until paid in full at the Default Rate.
4.4 Prepayments of Eurodollar Rate Loans. Whenever any payment of
------------------------------------
principal shall be made in respect of any Loan hereunder, whether at maturity,
on acceleration, by optional or mandatory prepayment or as otherwise required or
permitted hereunder, with the effect that any Eurodollar Rate Loan shall be
prepaid in whole or in part prior to the last day of the Interest Period
applicable to such Eurodollar Rate Loan, such payment of principal shall be
accompanied by the additional payment, if any, required by Section 5.5.
4.5 Manner of Payment. (a) Each payment of principal (including any
-----------------
prepayment) and payment of interest and fees, and any other amount required to
be paid by or on behalf of the Borrower to the Lenders, the Issuing Bank, the
Agent, or Bank of America with respect to any Loan, Letter of Credit, or
Reimbursement Obligation, shall be made to the Agent at the Principal Office in
Dollars in immediately available funds without condition or deduction or for any
setoff, recoupment, deduction or counterclaim on or before 12:30 P.M. on the
date such payment is due. The Agent may, but shall not be obligated to, debit
the amount of such payment from any one or more ordinary deposit accounts of the
Borrower with the Agent.
(b) Any payment made by or on behalf of the Borrower that is not made both
in Dollars in immediately available funds and prior to 12:30 P.M. on the date
such payment is to be made shall constitute a non-conforming payment. Any such
non-conforming payment shall not be deemed to be received until the later of (i)
the time such funds become available
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funds and (ii) the next Business Day. Any non-conforming payment may constitute
or become a Default or Event of Default as otherwise provided herein. Interest
shall continue to accrue at the Default Rate on any principal or fees as to
which no payment or a non-conforming payment is made from the date such amount
was due and payable until the later of (i) the date such funds become available
funds or (ii) the next Business Day.
(c) In the event that any payment hereunder or under any of the Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day unless provided otherwise
under the definition of "Interest Period"; provided, however, that interest
shall continue to accrue during the period of any such extension; and provided
further, however, that in no event shall any such due date be extended beyond
the Five Year Termination Date in the case of Five Year Loans, the 364 Day
Termination Date in the case of 364 Day Loans and the Term Loan Maturity Date in
the case of Term Loans.
4.6 Fees. (a) Five Year Facility Fee. For the period beginning on the
---- ----------------------
Closing Date and ending on the Five Year Termination Date, the Borrower agrees
to pay to the Agent, for the pro rata benefit of the Lenders based on their
Applicable Commitment Percentages, a facility fee equal to the Applicable Five
Year Facility Fee multiplied by the average daily amount by which the Total Five
Year Commitment exceeds the sum of (i) Five Year Outstandings plus (ii) Letter
of Credit Outstandings. Such fees shall be due in arrears on the last Business
Day of each March, June, September and December commencing December 31, 1999 to
and on the Five Year Termination Date. Notwithstanding the foregoing, so long
as any Lender fails to make available any portion of its Five Year Commitment
when requested, such Lender shall not be entitled to receive payment of its pro
rata share of such fee until such Lender shall make available such portion.
(b) 364 Day Facility Fee. For the period beginning on the Closing Date
--------------------
and ending on the 364 Day Termination Date, the Borrower agrees to pay to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, a facility fee equal to the Applicable 364 Day Facility
Fee multiplied by the average daily amount by which the Total 364 Day Commitment
exceeds the 364 Day Outstandings. Such fees shall be due in arrears on the last
Business Day of each March, June, September and December commencing December 31,
1999 to and on the 364 Day Termination Date. Notwithstanding the foregoing, so
long as any Lender fails to make available any portion of its 364 Day Commitment
when requested, such Lender shall not be entitled to receive payment of its pro
rata share of such fee until such Lender shall make available such portion.
(c) Letter of Credit Facility Fees. The Borrower shall pay to the Agent,
------------------------------
for the pro rata benefit of the Lenders based on their Applicable Commitment
Percentages, a fee on the aggregate amount available to be drawn on each
outstanding Letter of Credit at a rate equal to the Applicable Margin for
Eurodollar Rate Loans. Such fees shall be due with respect to each Letter of
Credit quarterly in arrears on the last day of each March, June, September and
December, the first such payment to be made on the first such date occurring
after the date of issuance of a Letter of Credit.
(d) Letter of Credit Fronting and Administrative Fees. The Borrower
-------------------------------------------------
38
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shall pay to the Issuing Bank a fronting fee of 0.125 percent per annum (0.125%)
on the aggregate amount available to be drawn on each outstanding Letter of
Credit, such fee to be payable on the date of the issuance or renewal of any
Letter of Credit. The Borrower shall also pay to the Issuing Bank such
administrative fee and other fees, if any, in connection with the Letters of
Credit in such amounts and at such times as the Issuing Bank and the Borrower
shall agree from time to time.
(e) Agent Fees. The Borrower agrees to pay to the Agent, for the Agent's
----------
individual account, an annual Agent's fee, such fee to be payable in such
amounts and at such dates as from time to time agreed to by the Borrower and
Agent in writing.
4.7 Pro Rata Payments. Except as otherwise specified herein, (a) each
-----------------
payment on account of the principal of and interest on Loans, the fees described
in Section 4.6(a), (b) and (c), and Reimbursement Obligations as to which the
Lenders have funded their respective Participations which remain outstanding,
shall be made to the Agent for the account of the Lenders pro rata based on
their Applicable Commitment Percentages, and (b) the Agent will promptly
distribute to the Lenders in immediately available funds payments received in
fully collected, immediately available funds from the Borrower.
4.8 Computation of Rates and Fees. Except as may be otherwise expressly
-----------------------------
provided, (a) interest on Base Rate Loans shall be computed on the basis of a
year of 365/366 days and calculated for the actual number of days elapsed and
(b) all other interest rates (including each Eurodollar Rate and the Default
Rate) and fees shall be computed on the basis of a year of 360 days and
calculated for actual days elapsed.
4.9 Deficiency Advances; Failure to Purchase Participations. No Lender
-------------------------------------------------------
shall be responsible for any default of any other Lender in respect to such
other Lender's obligation to make any Loan or Advance hereunder or to fund its
purchase of any Participation hereunder nor shall the Five Year Commitment, 364
Day Commitment or Letter of Credit Commitment of any Lender hereunder be
increased as a result of such default of any other Lender. Without limiting the
generality of the foregoing or the provisions of Section 4.10, in the event any
Lender shall fail to advance funds to the Borrower as herein provided, the Agent
may in its discretion, but shall not be obligated to, advance under the
applicable Note in its favor as a Lender all or any portion of such amount or
amounts (each, a "deficiency advance") and shall thereafter be entitled to
payments of principal of and interest on such deficiency advance in the same
manner and at the same interest rate or rates to which such other Lender would
have been entitled had it made such Advance under its Note; provided that, (i)
such defaulting Lender shall not be entitled to receive payments of principal,
interest or fees with respect to such deficiency advance until such deficiency
advance (together with interest thereon as provided in clause (ii)) shall be
paid by such Lender and (ii) upon payment to the Agent from such other Lender of
the entire outstanding amount of each such deficiency advance, together with
accrued and unpaid interest thereon, from the most recent date or dates interest
was paid to the Agent by a Borrower on each Loan comprising the deficiency
advance at the Federal Funds Rate, then such payment shall be credited against
the applicable Note of the Agent in full payment of such deficiency advance and
such Borrower shall be deemed to have borrowed the amount of such deficiency
39
<PAGE>
advance from such other Lender as of the most recent date or dates, as the case
may be, upon which any payments of interest were made by such Borrower thereon.
In the event any Lender shall fail to fund its purchase of a Participation after
notice from the Issuing Bank, such Lender shall pay to the Issuing Bank, such
amount on demand, together with interest on the amount so due from the date of
such notice at the Federal Funds Rate on the date such purchase price is
received by the Issuing Bank.
4.10 Intraday Funding. Without limiting the provisions of Section 4.9,
----------------
unless the Borrower or any Lender has notified the Agent not later than 12:00
Noon of the Business Day before the date any payment (including in the case of
Lenders any Advance) to be made by it is due, that it does not intend to remit
such payment, the Agent may, in its discretion, assume that Borrower or each
Lender, as the case may be, has timely remitted such payment in the manner
required hereunder and may, in its discretion and in reliance thereon, make
available such payment (or portion thereof) to the Person entitled thereto as
otherwise provided herein. If such payment was not in fact remitted to the
Agent in the manner required hereunder, then:
(i) if Borrower failed to make such payment, each Lender shall
forthwith on demand repay to the Agent the amount of such assumed payment
made available to such Lender, together with interest thereon in respect of
each day from and including the date such amount was made available by the
Agent to such Lender to the date such amount is repaid to the Agent at the
Federal Funds Rate; and
(ii) if any Lender failed to make such payment, the Agent shall be
entitled to recover such corresponding amount forthwith upon the Agent's
demand therefor, the Agent promptly shall notify the Borrower, and the
Borrower shall promptly pay such corresponding amount to the Agent in
immediately available funds upon receipt of such demand. The Agent also
shall be entitled to recover interest on such corresponding amount in
respect of each day from the date such corresponding amount was made
available by the Agent to the Borrower to the date such corresponding
amount is recovered by the Agent, (A) from such Lender at a rate per annum
equal to the daily Federal Funds Rate or (B) from the Borrower, at a rate
per annum equal to the interest rate applicable to the Loan which includes
such corresponding amount. Until the Agent shall recover such
corresponding amount together with interest thereon, such corresponding
amount shall constitute a deficiency advance within the meaning of Section
4.9. Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights
which the Agent or the Borrower may have against any Lender as a result of
any default by such Lender hereunder.
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ARTICLE V
Change in Circumstances
-----------------------
5.1. Increased Cost and Reduced Return.
---------------------------------
(a) If, after the date hereof, the adoption of any applicable law, rule,
or regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending Office) to
any tax, duty, or other charge with respect to any Eurodollar Rate Loans,
its Note, or its obligation to make Eurodollar Rate Loans, or change the
basis of taxation of any amounts payable to such Lender (or its Applicable
Lending Office) under this Agreement or its Note in respect of any
Eurodollar Rate Loans (other than taxes imposed on the overall net income
of such Lender by the jurisdiction in which such Lender has its principal
office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the Reserve
Requirement utilized in the determination of the Eurodollar Rate) relating
to any extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Lender (or its Applicable Lending
Office), including the Five Year Commitment and 364 Day Commitment of such
Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending Office)
or on the London interbank market any other condition affecting this
Agreement or its Note or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Loans or to reduce any sum received or receivable by such Lender
(or its Applicable Lending Office) under this Agreement or its Note with respect
to any Eurodollar Rate Loans, then the Borrower shall pay to such Lender on
demand such amount or amounts as will compensate such Lender for such increased
cost or reduction. If any Lender requests compensation by the Borrower under
this Section 5.1(a), the Borrower may, by notice to such Lender (with a copy to
the Agent), suspend the obligation of such Lender to make or Continue Loans of
the Type with respect to which such compensation is requested, or to Convert
Loans of any other Type into Loans of such Type, until the event or condition
giving rise to such request ceases to be in effect (in which case the provisions
of Section 5.4 shall be applicable); provided that such suspension shall not
affect the right of such Lender to receive the compensation so requested.
(b) If, after the date hereof, any Lender shall have determined that the
adoption of any applicable law, rule, or regulation regarding
41
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capital adequacy or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such governmental authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on the
capital of such Lender or any corporation controlling such Lender as a
consequence of such Lender's obligations hereunder to a level below that which
such Lender or such corporation could have achieved but for such adoption,
change, request, or directive (taking into consideration its policies with
respect to capital adequacy), then from time to time upon demand the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction.
(c) Each Lender shall promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section 5.1 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to it. Any
Lender claiming compensation under this Section 5.1 shall furnish to the
Borrower and the Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder and the basis therefor which shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
5.2. Limitation on Types of Loans. If on or prior to the first day of any
----------------------------
Interest Period for any Eurodollar Rate Loan:
(a) the Agent determines (which determination is on a reasonable
basis and absent manifest error shall be conclusive) that by reason of
circumstances affecting the relevant market, adequate and reasonable means
do not exist for ascertaining the Eurodollar Rate for such Interest Period;
or
(b) the Required Lenders determine (which determination is on a
reasonable basis and absent manifest error shall be conclusive) and notify
the Agent that the Eurodollar Rate will not adequately and fairly reflect
the cost to the Lenders of funding Eurodollar Rate Loans for such Interest
Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Type of Loans and the relevant amounts or periods, and so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Loans of such Type, Continue Loans of such Type, or to Convert Loans
of any other Type into Loans of such Type and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Loans of the
affected Type, either prepay such Loans or Convert such Loans into another Type
of Loan in accordance with the terms of this Agreement.
5.3. Illegality. Notwithstanding any other provision of this Agreement,
----------
in the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such
Lender shall promptly notify the Borrower thereof and such Lender's obligation
to make or Continue Eurodollar Rate Loans and to
42
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Convert other Types of Loans into Eurodollar Rate Loans shall be suspended until
such time as such Lender may again make, maintain, and fund Eurodollar Rate
Loans (in which case the provisions of Section 5.4 shall be applicable).
5.4. Treatment of Affected Loans. If the obligation of any Lender to make
---------------------------
a Eurodollar Rate Loan or to Continue, or to Convert Loans of any other Type
into, Loans of a particular Type shall be suspended pursuant to Section 5.1 or
5.3 hereof (Loans of such Type being herein called "Affected Loans" and such
Type being herein called the "Affected Type"), such Lender's Affected Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of the
then current Interest Period(s) for Affected Loans (or, in the case of a
Conversion required by Section 5.3 hereof, on such earlier date as such Lender
may specify to the Borrower with a copy to the Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 5.1 or 5.3 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Affected Loans shall be applied instead to its
Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Loans of the Affected Type shall be made or Continued instead as
Base Rate Loans, and all Loans of such Lender that would otherwise be
Converted into Loans of the Affected Type shall be Converted instead into
(or shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 5.1 or 5.3 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 5.4 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by the Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their respective Five Year
Commitments and 364 Day Commitments.
5.5. Compensation. Upon the request of any Lender, the Borrower shall pay
------------
to such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Rate Loan
for any reason (including, without limitation, the acceleration of the
Loans pursuant to Section 10.1) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article VI
to be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Rate
Loan on the date for such borrowing,
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Conversion, Continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation, or Conversion under this Agreement.
5.6. Taxes. (a) Any and all payments by the Borrower to or for the
-----
account of any Lender or the Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, excluding, in the case of each Lender and
the Agent, taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such Lender (or its Applicable Lending
Office) or the Agent (as the case may be) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable under this Agreement or any other Loan Document
to any Lender or the Agent, (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 5.6) such Lender or the Agent
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law, and (iv) the Borrower
shall furnish to the Agent, at its address referred to in Section 12.2, the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent for the
full amount of Taxes and Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 5.6) paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
or the Agent (but only so long as such Lender remains lawfully able to do so),
shall provide the Borrower and the Agent with (i) Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States, (ii) Internal Revenue Service Form
W-8 or W-9, as appropriate, or any successor form prescribed by the Internal
Revenue Service, and (iii) any other form or certificate required
44
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by any taxing authority (including any certificate required by Sections 871(h)
and 881(c) of the Code), certifying that such Lender is entitled to an exemption
from or a reduced rate of tax on payments pursuant to this Agreement or any of
the other Loan Documents.
(e) For any period with respect to which a Lender has failed to provide
the Borrower and the Agent with the appropriate form pursuant to Section 5.6(d)
(unless such failure is due to a change in treaty, law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under Section 5.6(a) or
5.6(b) with respect to Taxes imposed by the United States; provided, however,
that should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Lender shall reasonably request to assist such Lender to recover such Taxes at
no expense to the Borrower.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 5.6, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent the original or a certified copy of a
receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 5.6 shall survive the termination of the Five Year Commitment and
364 Day Commitment and the payment in full of the Notes and the Facility
Termination Date.
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ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
--------------------------------------------------------
6.1. Conditions of Initial Advance. The obligation of the Lenders to
-----------------------------
make the initial Advance under the Five Year Revolving Credit Facility and the
364 Day Revolving Credit Facility, and of the Issuing Bank to issue any Letter
of Credit, is subject to the conditions precedent that:
(a) the Agent shall have received on the Closing Date, in form and
substance satisfactory to the Agent and Lenders, the following:
(i) executed originals of each of this Agreement, the Notes,
the LC Account Agreement, the other Loan Documents, together with all
schedules and exhibits thereto;
(ii) the favorable written opinion or opinions with respect to
the Loan Documents and the transactions contemplated thereby of
counsel to the Credit Parties dated the Closing Date, addressed to the
Agent and the Lenders and satisfactory to Smith Helms Mulliss & Moore,
L.L.P., special counsel to the Agent, substantially in the form of
Exhibit G;
(iii) resolutions of the boards of directors or other
appropriate governing body (or of the appropriate committee thereof)
of each Credit Party certified by its secretary or assistant secretary
as of the Closing Date, approving and adopting the Loan Documents to
be executed by such Person, and authorizing the execution and delivery
thereof;
(iv) specimen signatures of officers or other appropriate
representatives executing the Loan Documents on behalf of each of the
Credit Parties, certified by the secretary or assistant secretary of
such Credit Party;
(v) the Organizational Documents of each of the Credit
Parties certified as of a recent date by the Secretary of State of its
state of organization;
(vi) Operating Documents of each of the Credit Parties
certified as of the Closing Date as true and correct by its secretary
or assistant secretary;
(vii) certificates issued as of a recent date by the
Secretaries of State of the respective jurisdictions of formation of
each of the Credit Parties as to the due existence and good standing
of such Person;
(viii) appropriate certificates of qualification to do
business, good standing and, where appropriate, authority to conduct
business under assumed name, issued in respect of each of the Credit
Parties as of a recent date by the Secretary of State or comparable
official of each jurisdiction in which the failure to be qualified to
do business or authorized so to conduct business could have a Material
46
<PAGE>
Adverse Effect;
(ix) evidence satisfactory in form and substance to the Agent
of repayment of all amounts due under and termination of the Existing
Credit Agreement;
(x) evidence of appropriate amendments to the credit
facilities providing financing for the Hospital Facilities of the
Borrower or one or more of its Subsidiaries located in Gadsden,
Alabama and Gaffney, South Carolina to permit the incurrence of the
Obligations;
(xi) a certificate of an Authorized Representative as to the
occurrence or truthfulness, as applicable, of the matters set forth in
Section 6.1(b);
(xii) notice of appointment of the initial Authorized
Representative(s);
(xiii) certificate of an Authorized Representative dated the
Closing Date demonstrating compliance with the financial covenants
contained in Sections 9.1(a) through 9.1(c) as of the end of the
fiscal quarter most recently ended prior to the Closing Date,
substantially in the form of Exhibit H;
(xiv) evidence of all insurance required by the Loan Documents;
(xv) an initial Borrowing Notice, if any, and, if elected by
the Borrower, Interest Rate Selection Notice;
(xvi) evidence that all fees payable by the Borrower on the
Closing Date to the Agent, BAS and the Lenders have been paid in full;
(xvii) such other documents, instruments, certificates and
opinions as the Agent or any Lender may reasonably request on or prior
to the Closing Date in connection with the consummation of the
transactions contemplated hereby; and
(b) In the good faith judgment of the Agent and the Lenders:
(i) there shall not have occurred or become known to the
Agent or the Lenders any event, condition, situation or status since
the date of the information contained in the audited and unaudited
financial statements, financial and business projections, budgets, pro
forma data and forecasts concerning the Borrower and its Subsidiaries
delivered to the Agent as of September 23, 1999 that has had or could
reasonably be expected to result in a Material Adverse Effect;
(ii) no litigation, action, suit, investigation or other
arbitral, administrative or judicial proceeding shall be pending or
threatened which could reasonably be likely to result in a Material
Adverse Effect; and
47
<PAGE>
(iii) the Borrower shall have received all approvals, consents
and waivers, and shall have made or given all necessary filings and
notices as shall be required to consummate the transactions
contemplated hereby without the occurrence of any default under,
conflict with or violation of (A) any applicable law, rule,
regulation, order or decree of any Governmental Authority or arbitral
authority or (B) any agreement, document or instrument to which any of
the Borrower or its Subsidiaries is a party or by which any of them or
their properties is bound, except where the failure to obtain such
approvals, consents, waivers, filings and notices will not have a
Material Adverse Effect.
6.2. Conditions of Revolving Loans and Letter of Credit. The
--------------------------------------------------
obligations of the Lenders to make any Loans, and the Issuing Bank to issue (or
renew) Letters of Credit, hereunder on or subsequent to the Closing Date are
subject to the satisfaction of the following conditions:
(a) the Agent shall have received a Borrowing Notice if required by
Article II;
(b) the representations and warranties of the Credit Parties set
forth in Article VII and in each of the other Loan Documents shall be true
and correct in all material respects on and as of the date of such Advance
or Letter of Credit issuance or renewal, with the same effect as though
such representations and warranties had been made on and as of such date,
except to the extent that such representations and warranties expressly
relate to an earlier date and except that the financial statements referred
to in Section 7.6(a) shall be deemed (solely for the purpose of the
representation and warranty contained in such Section 7.6(a) but not for
the purpose of any cross reference to such Section 7.6(a) or to the
financial statements described therein contained in any other provision of
Section 7.6 or elsewhere in Article VII) to be those financial statements
most recently delivered to the Agent and the Lenders pursuant to Section
8.1 from the date financial statements are delivered to the Agent and the
Lenders in accordance with such Section;
(c) in the case of the issuance of a Letter of Credit, the Borrower
shall have executed and delivered to the Issuing Bank an Application and
Agreement for Letter of Credit in form and content reasonably acceptable to
the Issuing Bank together with such other instruments and documents as it
shall request;
(d) at the time of (and after giving effect to) each Advance or the
issuance of a Letter of Credit, no Default or Event of Default specified in
Article X shall have occurred and be continuing; and
(e) immediately after giving effect to:
(i) a Five Year Loan, the aggregate principal balance of all
outstanding Five Year Loans for each Lender shall not exceed such
Lender's Five Year Commitment;
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<PAGE>
(ii) a 364 Day Loan, the aggregate principal balance of all
outstanding 364 Day Loans for each Lender shall not exceed such
Lender's 364 Day Commitment;
(iii) a Letter of Credit or renewal thereof, the aggregate
principal balance of all outstanding Participations in Letters of
Credit and Reimbursement Obligations (or in the case of the Issuing
Bank, its remaining interest after deduction of all Participations in
Letters of Credit and Reimbursement Obligations of other Lenders) for
each Lender and in the aggregate shall not exceed, respectively, (X)
such Lender's Letter of Credit Commitment or (Y) the Total Letter of
Credit Commitment;
(iv) a 364 Day Loan, the sum of 364 Day Outstandings shall not
exceed the Total 364 Day Commitment; and
(v) a Five Year Loan or a Letter of Credit or renewal
thereof, the sum of Letter of Credit Outstandings plus Five Year
Outstandings shall not exceed the Total Five Year Commitment.
49
<PAGE>
ARTICLE VII
Representations and Warranties
------------------------------
The Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery of
the documents mentioned herein and the making of Loans), that:
7.1. Organization and Authority.
--------------------------
(a) The Borrower and each Subsidiary is a corporation duly organized
and validly existing under the laws of the jurisdiction of its formation;
(b) The Borrower and each Subsidiary (x) has the requisite power and
authority to own its properties and assets and to carry on its business as
now being conducted and as contemplated in the Loan Documents, and (y) is
qualified to do business in every jurisdiction in which failure so to
qualify would have a Material Adverse Effect;
(c) The Borrower has the power and authority to execute, deliver and
perform this Agreement and the Notes, and to borrow hereunder, and to
execute, deliver and perform each of the other Loan Documents to which it
is a party;
(d) Each Credit Party (other than the Borrower) has the power and
authority to execute, deliver and perform the Facility Guaranty and each of
the other Loan Documents to which it is a party; and
(e) When executed and delivered, each of the Loan Documents to which
any Credit Party is a party will be the legal, valid and binding obligation
or agreement, as the case may be, of such Credit Party, enforceable against
such Credit Party in accordance with its terms, subject to the effect of
any applicable bankruptcy, moratorium, insolvency, reorganization or other
similar law affecting the enforceability of creditors' rights generally and
to the effect of general principles of equity (whether considered in a
proceeding at law or in equity).
7.2. Loan Documents. The execution, delivery and performance by each
--------------
Credit Party of each of the Loan Documents to which it is a party:
(a) have been duly authorized by all requisite Organizational Action
of such Credit Party required for the lawful execution, delivery and
performance thereof;
(b) do not violate any provisions of (i) any applicable law, rule or
regulation, (ii) any judgment, writ, order, determination, decree or
arbitral award of any Governmental Authority or arbitral authority binding
on such Credit Party or its properties, or (iii) the Organizational
Documents or Operating Documents of such Credit Party;
(c) does not and will not be in conflict with, result in a breach of
or constitute an event of default, or an event which,
50
<PAGE>
with notice or lapse of time or both, would constitute an event of default,
under any contract, indenture, agreement or other instrument or document to
which such Credit Party is a party, or by which the properties or assets of
such Credit Party are bound; and
(d) does not and will not result in the creation or imposition of any
Lien upon any of the properties or assets of such Credit Party or any
Subsidiary.
7.3. Solvency. Each Credit Party is Solvent after giving effect to the
--------
transactions contemplated by the Loan Documents.
7.4. Subsidiaries and Stockholders. The Borrower has no Subsidiaries
-----------------------------
other than those Persons listed as Subsidiaries in Schedule 7.4 and additional
Subsidiaries created or acquired after the Closing Date in compliance with
Section 8.20; Schedule 7.4 states as of the date hereof the organizational form
of each entity, the authorized and issued capitalization of each Subsidiary
listed thereon, the number of shares or other equity interests of each class of
capital stock or interest issued and outstanding of each such Subsidiary and the
number and/or percentage of outstanding shares or other equity interest
(including options, warrants and other rights to acquire any interest) of each
such class of capital stock or other equity interest owned by Borrower or by any
such Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable; and Borrower and each such Subsidiary owns beneficially and of
record all the shares and other interests it is listed as owning in Schedule
7.4, free and clear of any Lien.
7.5. Ownership Interests. Borrower owns no interest in any Person
-------------------
other than the Persons listed in Schedule 7.4, equity investments in Persons not
constituting Subsidiaries permitted under Section 9.7 and additional
Subsidiaries created or acquired after the Closing Date in compliance with
Section 8.20.
7.6. Financial Condition.
-------------------
(a) The Borrower has heretofore furnished to each Lender an audited
consolidated and related consolidating balance sheet of the Borrower and
its Subsidiaries as at September 30, 1998 and the notes thereto and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flows for the Fiscal Year then ended as examined and
certified by Ernst & Young, LLC. Except as set forth therein, such
financial statements (including the notes thereto) present fairly the
financial condition of the Borrower and its Subsidiaries as of the end of
such Fiscal Year and results of their operations and the changes in its
stockholders' equity for the Fiscal Year then ended, all in conformity with
GAAP applied on a Consistent Basis;
(b) since the later of (i) the date of the audited financial
statements delivered pursuant to Section 7.6(a) hereof or (ii) the date of
the audited financial statements most recently delivered pursuant to
Section 8.1(a) hereof, there has been no material adverse change in the
condition, financial or otherwise, of the Borrower or its Subsidiaries,
taken as a whole,
51
<PAGE>
or in the businesses, properties, performance, prospects or operations of
the Borrower and its Subsidiaries, taken as a whole, nor have such
businesses or properties been materially adversely affected as a result of
any fire, explosion, earthquake, accident, strike, lockout, combination of
workers, flood, embargo or act of God; and
(c) except as set forth in the financial statements referred to in
Section 7.6(a) or in Schedule 7.6 or permitted by Section 9.4, neither the
Borrower nor any Subsidiary has incurred, other than in the ordinary course
of business, any material Indebtedness, Contingent Obligation or other
commitment or liability which remains outstanding or unsatisfied.
7.7. Title to Properties. The Borrower and each of its Subsidiaries and
-------------------
each other Credit Party has good and marketable title to all its real and
personal properties, subject to no transfer restrictions or Liens of any kind,
except for the transfer restrictions and Liens described in Schedule 7.7 and
Liens permitted by Section 9.3.
7.8. Taxes. Except as set forth in Schedule 7.8, the Borrower and each of
-----
its Subsidiaries has filed or caused to be filed all federal, state and local
tax returns which are required to be filed by it and, except for taxes and
assessments being contested in good faith by appropriate proceedings diligently
conducted and against which reserves reflected in the financial statements
described in Section 7.6(a) or Sections 8.1(a) or (b) and satisfactory to the
Borrower's independent certified public accountants have been established, have
paid or caused to be paid all taxes as shown on said returns or on any
assessment received by it, to the extent that such taxes have become due.
7.9. Other Agreements. No Credit Party nor any Subsidiary is
----------------
(a) a party to or subject to any judgment, order, decree, agreement,
lease or instrument, or subject to other restrictions, which individually
or in the aggregate could reasonably be expected to have a Material Adverse
Effect;
(b) in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or
instrument to which such Credit Party or any Subsidiary is a party, which
default has, or if not remedied within any applicable grace period could
reasonably be likely to have, a Material Adverse Effect;
(c) convicted of an offense or committed an act or omission which
could reasonably form a basis under 42 U.S.C. (S) 1320a-7 and any statutes
succeeding thereto and any regulations promulgated thereunder for the
Secretary of HHS to exclude the Borrower or any Subsidiary from
participation in a Federal health care program, which exclusion from
participation could reasonably be likely to have a Material Adverse Effect;
(d) in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in (i) any Medicaid
Provider Agreement, Medicare Provider Agreement or other agreement or
instrument to which the Borrower
52
<PAGE>
or any Subsidiary is a party, which default has resulted in, or if not
remedied within any applicable grace period could result in, the
revocation, termination, cancellation or suspension of Medicaid
Certification or Medicare Certification of the Borrower or any Subsidiary
which could have a Material Adverse Effect or (ii) any other agreement or
instrument to which the Borrower or any Subsidiary is a party, which
default has, or if not remedied within any applicable grace period could
reasonably be likely to have, a Material Adverse Effect;
7.10. Contract Providers. To the best knowledge of the Borrower, no
------------------
Contract Provider is
(a) a party to any judgment, order, decree, agreement or instrument,
or subject to restrictions, which could individually or in the aggregate
reasonably be expected to have a Material Adverse Effect;
(b) in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any Medicaid
Provider Agreement, Medicare Provider Agreement or other agreement or
instrument to which such Person is a party, which default has resulted in,
or if not remedied within any applicable grace period could result in, the
revocation, termination, cancellation or suspension of the Medicaid
Certification or the Medicare Certification of such Person, which
revocation, termination, cancellation or suspension could reasonably be
likely to have a Material Adverse Effect;
(c) has been convicted of an offense or has committed an act or
omission which could reasonably form a basis under 42 U.S.C. (S) 1320a-7
and any statutes succeeding thereto and regulations promulgated thereunder
for the Secretary of HHS to exclude the Contract Provider from
participation in a Federal health care program, which exclusion from
participation could reasonably be likely to have a Material Adverse Effect.
7.11. Litigation. Except as set forth in Schedule 7.11, there is no
----------
action, suit, investigation or proceeding at law or in equity or by or before
any governmental instrumentality or agency or arbitral body pending, or, to the
knowledge of the Borrower, threatened by or against the Borrower, any
Subsidiary, any other Credit Party or, to the best knowledge of the Borrower,
any Contract Provider, or affecting the Borrower or any Subsidiary or other
Credit Party or, to the best knowledge of the Borrower, any Contract Provider or
any properties or rights of the Borrower or any Subsidiary or other Credit Party
or, to the best knowledge of the Borrower, any Contract Provider, which could
reasonably be expected (i) to result in the revocation, termination,
cancellation or suspension of Medicaid Certification or Medicare Certification
of such Person, which revocation, termination, cancellation or suspension could
reasonably be likely to have a Material Adverse Effect, (ii) to result in the
exclusion of such Person from participation in a Federal health care program,
which exclusion could reasonably be likely to have a Material Adverse Effect, or
(iii) to have a Material Adverse Effect.
53
<PAGE>
7.12. Margin Stock. The proceeds of the borrowings made hereunder
------------
will be used by the Borrower only for the purposes expressly authorized herein.
None of such proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any of the Loans
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 221) of the Board; provided, however, the
Borrower may purchase its own stock as permitted by Section 9.8 only so long as
the Loans are not considered "indirectly secured" by such stock pursuant to
Section 221.1(g)(2) of Regulation U. Neither the Borrower nor any agent acting
in its behalf has taken or will take any action which might cause this Agreement
or any of the documents or instruments delivered pursuant hereto to violate any
regulation of the Board or to violate the Securities Exchange Act of 1934, as
amended, or the Securities Act of 1933, as amended, or any state securities
laws, in each case as in effect on the date hereof.
7.13. Investment Company. No Credit Party nor any Subsidiary is an
------------------
"investment company," or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (15 U.S.C. (S) 80a-1, et seq.). The
application of the proceeds of the Loans and repayment thereof by the Borrower
and the performance by the Borrower and the other Credit Parties of the
transactions contemplated by the Loan Documents will not violate any provision
of said Act, or any rule, regulation or order issued by the Securities and
Exchange Commission thereunder, in each case as in effect on the date hereof.
7.14. Patents, Etc. The Borrower and each other Credit Party and each
------------
Subsidiary owns or has the right to use, under valid license agreements or
otherwise, all material patents, licenses, franchises, trademarks, trademark
rights, trade names, trade name rights, trade secrets and copyrights necessary
to or used in the conduct of its businesses as now conducted and as contemplated
by the Loan Documents, without known conflict with any patent, license,
franchise, trademark, trade secret, trade name, copyright, other proprietary
right of any other Person.
7.15. No Untrue Statement. Neither (a) this Agreement nor any other Loan
-------------------
Document or certificate or document executed and delivered by or on behalf of
the Borrower or any other Credit Party in accordance with or pursuant to any
Loan Document nor (b) any statement, representation, or warranty provided to the
Agent in connection with the negotiation or preparation of the Loan Documents
contains any misrepresentation or untrue statement of material fact or omits to
state a material fact necessary, in light of the circumstance under which it was
made, in order to make any such warranty, representation or statement contained
therein not misleading.
7.16. No Consents, Etc. Neither the respective businesses or properties of
----------------
the Credit Parties or any Subsidiary, nor any relationship among the Credit
Parties or any Subsidiary and any other Person, nor any circumstance in
connection with the execution, delivery and performance of the Loan Documents
and the transactions contemplated thereby, is such as to require a consent,
approval or authorization of,
54
<PAGE>
or filing, registration or qualification with, any Governmental Authority or any
other Person on the part of any Credit Party as a condition to the execution,
delivery and performance of, or consummation of the transactions contemplated by
the Loan Documents, which, if not obtained or effected, would be reasonably
likely to have a Material Adverse Effect, or if so, such consent, approval,
authorization, filing, registration or qualification has been duly obtained or
effected, as the case may be.
7.17. Employee Benefit Plans.
----------------------
(a) The Borrower and each ERISA Affiliate is in material compliance
with all applicable provisions of ERISA and the regulations and published
interpretations thereunder and in compliance with all Foreign Benefit Laws
with respect to all Employee Benefit Plans except for any required
amendments for which the remedial amendment period as defined in Section
401(b) of the Code has not yet expired. Each Employee Benefit Plan that is
intended to be qualified under Section 401(a) of the Code has been
determined or the Borrower or its Subsidiaries is in the process of
obtaining a determination by the Internal Revenue Service to be so
qualified, and therefore each trust related to such plan is presumed to be
exempt under Section 501(a) of the Code, and each Employee Benefit Plan
subject to any Foreign Benefit Law has received the required approvals by
any Governmental Authority regulating such Employee Benefit Plan. No
material liability has been incurred by the Borrower or any ERISA Affiliate
which remains unsatisfied for any taxes or penalties with respect to any
Employee Benefit Plan or any Multiemployer Plan;
(b) Neither the Borrower nor any ERISA Affiliate has (i) engaged in a
nonexempt prohibited transaction described in Section 4975 of the Code or
Section 406 of ERISA affecting any of the Employee Benefit Plans or the
trusts created thereunder which could subject any such Employee Benefit
Plan or trust to a material tax or penalty on prohibited transactions
imposed under Code Section 4975 or ERISA, (ii) incurred any accumulated
funding deficiency with respect to any Employee Benefit Plan, whether or
not waived, or any other liability to the PBGC which remains outstanding
other than the payment of premiums and there are no premium payments which
are due and unpaid, (iii) failed to make a required contribution or payment
to a Multiemployer Plan, (iv) failed to make a required installment or
other required payment under Section 412 of the Code, Section 302 of ERISA
or the terms of such Employee Benefit Plan, or (v) failed to make a
required contribution or payment, or otherwise failed to operate in
compliance with any Foreign Benefit Law regulating any Employee Benefit
Plan;
(c) No Termination Event has occurred with respect to any Pension
Plan or Multiemployer Plan, and neither the Borrower nor any ERISA
Affiliate has incurred any unpaid withdrawal liability with respect to any
Multiemployer Plan;
(d) The present value of all vested accrued benefits under each
Employee Benefit Plan which is subject to Title IV of ERISA, or the funding
of which is regulated by any Foreign Benefit Law did not, as of the most
recent valuation date for each such plan,
55
<PAGE>
exceed the then current value of the assets of such Employee Benefit Plan
allocable to such benefits;
(e) To the best of the Borrower's knowledge, each Employee Benefit
Plan which is subject to Title IV of ERISA or the funding of which is
regulated by any Foreign Benefit Law, maintained by the Borrower or any
ERISA Affiliate, has been administered in accordance with its terms in all
material respects and is in compliance in all material respects with all
applicable requirements of ERISA, applicable Foreign Benefit Law and other
applicable laws, regulations and rules;
(f) The consummation of the Loans and the issuance of the Letters of
Credit provided for herein will not involve any prohibited transaction
under ERISA which is not subject to a statutory or administrative
exemption; and
(g) No material proceeding, claim, lawsuit and/or investigation
exists or, to the best knowledge of the Borrower after due inquiry, is
threatened concerning or involving any Employee Benefit Plan;
7.18. No Default. As of the date hereof, there does not exist any
----------
Default or Event of Default hereunder.
7.19. Environmental Laws. Except as listed on Schedule 7.19, the
------------------
Borrower and each Subsidiary is in material compliance with all applicable
Environmental Laws and has been issued and currently maintains all required
foreign, federal, state and local permits, licenses, certificates and approvals.
Except as listed on Schedule 7.19, neither the Borrower nor any Subsidiary has
been notified of any pending or threatened action, suit, proceeding or
investigation, and neither the Borrower nor any Subsidiary is aware of any
facts, which (a) calls into question, or could reasonably be expected to call
into question, compliance by the Borrower or any Subsidiary with any
Environmental Laws, (b) seeks, or could reasonably be expected to form the basis
of a meritorious proceeding, to suspend, revoke or terminate any license, permit
or approval necessary for the operation of the Borrower's or any Subsidiary's
business or facilities or for the generation, handling, storage, treatment or
disposal of any Hazardous Materials, or (c) seeks to cause, or could reasonably
be expected to form the basis of a meritorious proceeding to cause, any property
of the Borrower or any Subsidiary or other Credit Party to be subject to any
restrictions on ownership, use, occupancy or transferability under any
Environmental Law, which in each of clauses (a), (b) and (c) could reasonably be
expected to have a Material Adverse Effect.
7.20. Employment Matters. (a) Except as set forth on Schedule 7.20,
------------------
none of the employees of the Borrower or any Subsidiary is subject to any
collective bargaining agreement and there are no strikes, work stoppages,
election or decertification petitions or proceedings, unfair labor charges,
equal opportunity proceedings, or other material labor/employee related
controversies or proceedings pending or, to the best knowledge of the Borrower,
threatened against the Borrower or any Subsidiary or between the Borrower or any
Subsidiary and any of its employees, other than employee grievances arising in
the ordinary course of business which could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
56
<PAGE>
Effect; and
(b) Except to the extent a failure to maintain compliance would not have a
Material Adverse Effect, the Borrower and each Subsidiary is in compliance in
all respects with all applicable laws, rules and regulations pertaining to labor
or employment matters, including without limitation those pertaining to wages,
hours, occupational safety and taxation and there is neither pending or
threatened any litigation, administrative proceeding nor, to the knowledge of
the Borrower, any investigation, in respect of such matters which, if decided
adversely, could reasonably be likely, individually or in the aggregate, to have
a Material Adverse Effect.
7.21. RICO. Neither the Borrower nor any Subsidiary is engaged in or has
----
engaged in any course of conduct that could subject any of their respective
properties to any Lien, seizure or other forfeiture under any criminal law,
racketeer influenced and corrupt organizations law, civil or criminal, or other
similar laws.
7.22. Year 2000 Compliance. The Borrower and its Subsidiaries have
--------------------
(i) initiated a review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by information
received from suppliers and vendors) that could reasonably be expected to be
adversely affected by the Year 2000 Problem, (ii) developed a plan and timeline
for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan substantially in accordance with that timetable. The
Borrower reasonably believes that all computer applications (including those
affected by information received from its suppliers and vendors) that are
material to its or any of its Subsidiaries' business and operations will on a
timely basis be Year 2000 Compliant, except to the extent that a failure to do
so could not reasonably be expected to have Material Adverse Effect.
7.23. Reimbursement from Third Party Payors. The accounts receivable
-------------------------------------
of the Borrower and each Subsidiary and, to the best knowledge of the Borrower,
each Contract Provider have been and will continue to be adjusted to reflect
reimbursement policies of third party payors such as Medicare, Medicaid, Blue
Cross/Blue Shield, private insurance companies, health maintenance
organizations, preferred provider organizations, alternative delivery systems,
managed care systems, government contracting agencies and other third party
payors. In particular, accounts receivable relating to such third party payors
do not and shall not exceed amounts any obligee is entitled to receive under any
capitation arrangement, fee schedule, discount formula, cost-based reimbursement
or other adjustment or limitation to its usual charges, except where the failure
to comply could not reasonably be expected to have a Material Adverse Effect.
7.24. Fraud and Abuse. Neither the Borrower nor any Subsidiary nor,
---------------
to the knowledge of Borrower's officers, any of its stockholders, officers or
directors, or any Contract Provider, have engaged in any activities which are
prohibited under federal Medicare and Medicaid statutes, 42 U.S.C. (S)1320a-7b,
or the regulations promulgated pursuant to such statutes or related state or
local statutes or regulations, or which are prohibited by binding rules of
professional conduct, or which are prohibited under any statute which
constitutes as a Federal health care offense, or the regulations
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promulgated pursuant to such statutes, including but not limited to the
following: (i) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any applications for any
benefit or payment; (ii) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in determining
rights to any benefit or payment; (iii) failing to disclose knowledge by a
claimant of the occurrence of any event affecting the initial or continued right
to any benefit or payment on its own behalf or on behalf of another, with intent
to secure such benefit or payment fraudulently; (iv) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind or
offering to pay such remuneration (a) in return for referring an individual to a
Person for the furnishing or arranging for the furnishing of any item or service
for which payment may be made in whole or in part by a Federal health care
program or other applicable third party payors, or (b) in return for purchasing,
leasing or ordering or arranging for or recommending the purchasing, leasing or
ordering of any good, facility, service, or item for which payment may be made
in whole or in part by a Federal health care program or other applicable third
party payors; (v) knowingly or willfully offering or paying any remuneration
(including any kickback, bribe, or rebate) directly or indirectly, overtly or
covertly, in cash or in kind to any Person to induce such Person (a) to refer an
individual to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part under a
Federal health care program, or (b) to purchase, lease, order, or arrange for or
recommend purchasing, leasing, or ordering any good, facility, service, or item
for which payment may be made in whole or in party under a Federal health care
program.
7.25. Licensing and Accreditation. Each of the Borrower and its
---------------------------
Subsidiaries and, to the knowledge of Borrower's officers, each Contract
Provider, has, to the extent applicable: (i) obtained (or been duly assigned)
and maintains all required certificates of need or determinations of need as
required by the relevant state Governmental Authority for the acquisition,
construction, expansion of, investment in or operation of its businesses as
currently operated; (ii) obtained and maintains in good standing all required
licenses; (iii) to the extent prudent and customary in the industry in which it
is engaged, obtained and maintains accreditation from all generally recognized
accrediting agencies; (iv) obtained and maintains Medicaid Certification and
Medicare Certification; and (v) entered into and maintains in good standing its
Medicare Provider Agreement and its Medicaid Provider Agreement. To the
knowledge of Borrower's officers, each Contract Provider is duly licensed (where
license is required) by each state or state agency or commission, or any other
Governmental Authority having jurisdiction over the provisions of such services
by such Person in the locations in which the Borrower or such Subsidiary conduct
business, required to enable such Person to provide the professional services
provided by such Person and otherwise as is necessary to enable the Borrower or
such Subsidiary to operate as currently operated and as presently contemplated
to be operated. To the knowledge of Borrower's officers, all such required
licenses are in full force and effect on the date hereof and have not been
revoked or suspended or otherwise limited.
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ARTICLE VIII
Affirmative Covenants
---------------------
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will, and where applicable will cause
each Subsidiary to:
8.1. Financial Reports, Etc. (a) As soon as practical and in any
----------------------
event within 90 days after the end of each Fiscal Year of the Borrower, deliver
or cause to be delivered to the Agent and each Lender (i) consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as at the end
of such Fiscal Year, and the notes thereto, and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows, and the
respective notes thereto, for such Fiscal Year, setting forth (other than for
consolidating statements) comparative financial statements for the preceding
Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis
and containing, with respect to the consolidated financial statements, opinions
of Ernst & Young, LLC, or other such independent certified public accountants
selected by the Borrower and approved by the Agent, which are unqualified as to
the scope of the audit performed and as to the "going concern" status of the
Borrower and without any exception not acceptable to the Lenders, and (ii) a
certificate of an Authorized Representative demonstrating compliance with
Sections 9.1(a) through 9.1(c), which certificate shall be in the form of
Exhibit H;
(b) as soon as practical and in any event within 45 days after the end of
each fiscal quarter (except the last fiscal quarter of the Fiscal Year), deliver
to the Agent and each Lender (i) consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal quarter, and the related
consolidated statements of income, stockholders' equity and cash flows for such
fiscal quarter and for the period from the beginning of the then current Fiscal
Year through the end of such reporting period, and accompanied by a certificate
of an Authorized Representative to the effect that such financial statements
present fairly the financial position of the Borrower and its Subsidiaries as of
the end of such fiscal period and the results of their operations and the
changes in their financial position for such fiscal period, in conformity with
the standards set forth in Section 7.6(a) with respect to interim financial
statements, and (ii) a summary of operations for such quarterly period for (x)
each Hospital Facility operated by the Borrower and (y) each Subsidiary, each
certified by an Authorized Representative to be true and correct, and (iii) a
certificate of an Authorized Representative containing computations for such
quarter comparable to that required pursuant to Section 8.1(a)(ii);
(c) together with each delivery of the financial statements required by
Section 8.1(a)(i), deliver to the Agent and each Lender a letter from the
Borrower's accountants specified in Section 8.1(a)(i) stating that in performing
the audit necessary to render an opinion on the financial statements delivered
under Section 8.1(a)(i), they obtained no knowledge of any Default or Event of
Default by the Borrower in the fulfillment of the terms and provisions of this
Agreement insofar as they relate to financial matters (which at the date of such
statement remains uncured); or if the accountants have obtained knowledge of
such Default or Event of Default, a statement specifying the nature and period
of existence thereof;
(d) not later than the last business day of each Fiscal Year, deliver to
the Agent and each Lender consolidated financial projections
59
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for the Borrower and its Subsidiaries for the next Fiscal Year, consisting of a
consolidated balance sheet, income statement and cash flow statement and the key
assumptions utilized in the preparation of such financial projections, and
demonstrating compliance with Section 9.1 hereof;
(e) promptly upon their becoming available to the Borrower, the Borrower
shall deliver to the Agent and each Lender a copy of (i) all regular or special
reports or effective registration statements which Borrower or any Subsidiary
shall file with the Securities and Exchange Commission (or any successor
thereto) or any securities exchange, (ii) any proxy statement distributed by the
Borrower or any Subsidiary to its shareholders, bondholders or the financial
community in general, and (iii) any management letter submitted to the Borrower
or any Subsidiary by independent accountants in connection with any annual audit
of the Borrower; and
(f) promptly, from time to time, deliver or cause to be delivered to the
Agent and each Lender such other information regarding Borrower's and any
Subsidiary's operations, business affairs and financial condition as the Agent
or such Lender may reasonably request;
The Agent and the Lenders are hereby authorized to deliver a copy of any
such financial or other information delivered hereunder to the Lenders (or any
affiliate of any Lender) or to the Agent, to any Governmental Authority having
jurisdiction over the Agent or any of the Lenders pursuant to any written
request therefor or in the ordinary course of examination of loan files, or to
any other Person who shall acquire or consider the assignment of, or acquisition
of any participation interest in, any Obligation permitted by this Agreement.
8.2. Maintain Properties. Maintain all properties necessary to its
-------------------
operations in good working order and condition, make all needed repairs,
replacements and renewals to such properties, and maintain free from Liens all
trademarks, trade names, patents, copyrights, trade secrets, know-how, and other
intellectual property and proprietary information (or adequate licenses
thereto), in each case as are reasonably necessary to conduct its business as
currently conducted or as contemplated hereby, all in accordance with customary
and prudent business practices.
8.3. Existence, Qualification, Etc. Except as otherwise expressly
-----------------------------
permitted under Section 9.7, do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and all material rights
and franchises, and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary except where the failure to so qualify would not have
a Material Adverse Effect.
8.4. Regulations and Taxes. Comply in all material respects with or
---------------------
contest in good faith all statutes and governmental regulations and pay all
taxes, assessments, governmental charges, claims for labor, supplies, rent and
any other obligation which, if unpaid, would become a Lien against any of its
properties except liabilities being contested in good faith by appropriate
proceedings diligently conducted and against which adequate reserves acceptable
to the Borrower's independent certified public accountants have been established
unless and until any Lien resulting therefrom attaches to any of its property
and becomes enforceable against its creditors.
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8.5. Insurance. (a) Keep all of its insurable properties adequately
---------
insured at all times with responsible insurance carriers against loss or damage
by fire and other hazards to the extent and in the manner as are customarily
insured against by similar businesses owning such properties similarly situated,
(b) maintain general public liability insurance at all times with responsible
insurance carriers against liability on account of damage to persons and
property and (c) maintain insurance under all applicable workers' compensation
laws (or in the alternative, maintain required reserves if self-insured for
workers' compensation purposes) and against loss by reason of business
interruption such policies of insurance to have such limits, deductibles,
exclusions, co-insurance and other provisions providing no less coverages than
are maintained by similar businesses that are similarly situated, such insurance
policies to be in form reasonably satisfactory to the Agent. Each of the
policies of insurance described in this Section 8.5 shall provide that the
insurer shall give the Agent not less than thirty (30) days' prior written
notice before any such policy shall be terminated, lapse or be altered in any
manner.
8.6. True Books. Keep true books of record and account in which
----------
full, true and correct entries will be made of all of its dealings and
transactions, and set up on its books such reserves as may be required by GAAP
with respect to doubtful accounts and all taxes, assessments, charges, levies
and claims and with respect to its business in general, and include such
reserves in interim as well as year-end financial statements.
8.7. Year 2000 Compliance. The Borrower will promptly notify the
--------------------
Agent and the Lenders in the event the Borrower discovers or determines that any
computer application (including those affected by information received from its
suppliers and vendors) that is material to its or any of its Subsidiaries'
business and operations will not be Year 2000 Compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect.
8.8. Right of Inspection. Permit any Person designated by any
-------------------
Lender or the Agent to visit and inspect any of the properties, corporate books
and financial reports of the Borrower or any Subsidiary and to discuss its
affairs, finances and accounts with its principal officers and independent
certified public accountants, all at reasonable times, at reasonable intervals
and with reasonable prior notice.
8.9. Observe all Laws. Conform to and duly observe in all material
----------------
respects all laws, rules and regulations and all other valid requirements of any
regulatory authority with respect to the conduct of its business, including
without limitation Titles XVIII and XIX of the Social Security Act, Medicare
Regulations, Medicaid Regulations, and all laws, rules and regulations of
Governmental Authorities pertaining to the licensing of professional and other
health care providers.
8.10. Governmental Licenses. Obtain and maintain all licenses, permits,
---------------------
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted and herein
contemplated, including without limitation professional licenses, Medicaid
Certifications and Medicare Certifications.
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8.11. Covenants Extending to Other Persons. Cause each of its
------------------------------------
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Borrower in Sections 8.2 through 8.10, and 8.19 and
8.20 inclusive.
8.12. Officer's Knowledge of Default. Upon any officer of the Borrower
------------------------------
obtaining knowledge of any Default or Event of Default hereunder or under any
other obligation of the Borrower or any Subsidiary or other Credit Party to any
Lender, or any event, development or occurrence which could reasonably be
expected to have a Material Adverse Effect, cause such officer or an Authorized
Representative to promptly notify the Agent (who shall promptly notify the
Lenders) of the nature thereof, the period of existence thereof, and what action
the Borrower or such Subsidiary or other Credit Party proposes to take with
respect thereto.
8.13. Suits or Other Proceedings. Upon any officer of the Borrower
--------------------------
obtaining knowledge of any litigation or other proceedings being instituted (i)
against the Borrower or any Subsidiary or other Credit Party, or any attachment,
levy, execution or other process being instituted against any assets of the
Borrower or any Subsidiary or other Credit Party, in an aggregate amount greater
than $10,000,000 not otherwise covered by insurance, (ii) against the Borrower,
any Subsidiary or any Contract Provider to suspend, revoke or terminate any
Medicaid Provider Agreement, Medicaid Certification, Medicare Provider Agreement
or Medicare Certification, which suspension, revocation or termination could
reasonably be likely to have a Material Adverse Effect, (iii) against the
Borrower, any Subsidiary or any Contract Provider, to suspend or exclude such
Person from participation in a Federal health care program which suspension or
exclusion could reasonably be likely to have a Material Adverse Effect, or (iv)
against the Borrower, any Subsidiary or any Contract Provider to revoke or
terminate any status of such Person as an entity exempt from taxation under
Section 501(c) of the Code or as a non-private foundation under Section 509(a)
of the Code, which revocation or termination could reasonably be likely to have
a Material Adverse Effect, promptly deliver to the Agent (who shall promptly
notify the Lenders) written notice thereof stating the nature and status of such
litigation, dispute, proceeding, levy, execution or other process.
8.14. Notice of Environmental Complaint or Condition. Promptly
----------------------------------------------
provide to the Agent (who shall promptly notify the Lenders) true, accurate and
complete copies of any and all notices, complaints, orders, directives, claims
or citations received by the Borrower or any Subsidiary relating to any material
(a) violation or alleged violation by the Borrower or any Subsidiary of any
applicable Environmental Law; (b) release or threatened release by the Borrower
or any Subsidiary, or by any Person handling, transporting or disposing of any
Hazardous Material on behalf of the Borrower or any Subsidiary, or at any
facility or property owned or leased or operated by the Borrower or any
Subsidiary, of any Hazardous Material, except where occurring legally pursuant
to a permit or license; or (c) liability or alleged liability of the Borrower or
any Subsidiary for the costs of cleaning up, removing, remediating or responding
to a release of Hazardous Materials.
8.15. Environmental Compliance. If the Borrower or any Subsidiary
------------------------
shall receive any letter, notice, complaint, order, directive, claim or citation
from a Governmental Authority alleging that the Borrower or any Subsidiary has
violated any Environmental Law, has released any Hazardous Material, or is
liable for the costs of cleaning up, removing, remediating or responding to a
release of
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Hazardous Materials, the Borrower and any Subsidiary shall, within the time
period permitted and to the extent required by the applicable Environmental Law
or the Governmental Authority responsible for enforcing such Environmental Law,
remove or remedy, or cause the applicable Subsidiary to remove or remedy, such
violation or release or satisfy such liability, unless and only during the
period that the applicability of the Environmental Law, the fact of such
violation or liability or the action required to remove or remedy such violation
is being contested by the Borrower or the applicable Subsidiary by appropriate
proceedings diligently conducted and all reserves with respect thereto as may be
required under GAAP, if any, have been made, and no Lien in connection therewith
shall have attached to any property of the Borrower or the applicable Subsidiary
which shall have become enforceable against creditors of such Person.
8.16. Indemnification. Without limiting the generality of Section
---------------
12.9, the Borrower hereby agrees to indemnify and hold the Agent and the Lenders
and any affiliate of any Lender party to a Swap Agreement, and their respective
officers, directors, employees and agents, harmless from and against any and all
claims, losses, penalties, liabilities, damages and expenses (including
assessment and cleanup costs and reasonable attorneys', consultants' or other
expert fees, expenses and disbursements) arising directly or indirectly from,
out of or by reason of (a) the violation of any Environmental Law by the
Borrower or any Subsidiary or with respect to any property owned, operated or
leased by the Borrower or any Subsidiary or (b) the handling, storage,
transportation, treatment, emission, release, discharge or disposal of any
Hazardous Materials by or on behalf of the Borrower or any Subsidiary, or on or
with respect to property owned or leased or operated by the Borrower or any
Subsidiary. The provisions of this Section 8.16 shall survive repayment of the
------------
Obligations or the Facility Termination Date and expiration or termination of
this Agreement.
8.17. Further Assurances. At the Borrower's cost and expense, upon
------------------
request of the Agent, duly execute and deliver or cause to be duly executed and
delivered, to the Agent such further instruments, documents, certificates,
financing and continuation statements, and do and cause to be done such further
acts that may be reasonably necessary or advisable in the reasonable opinion of
the Agent to carry out more effectively the provisions and purposes of this
Agreement and the other Loan Documents.
8.18. Employee Benefit Plans.
----------------------
(a) With reasonable promptness, and in any event within thirty (30)
days thereof, give notice to the Agent (who shall promptly notify the
Lenders) of (a) the establishment of any new Pension Plan (which notice
shall include a copy of such plan), (b) the commencement of contributions
to any Employee Benefit Plan to which the Borrower or any of its ERISA
Affiliates was not previously contributing, (c) any material increase in
the benefits of any existing Employee Benefit Plan, (d) each funding waiver
request filed with respect to any Pension Plan and all communications
received or sent by the Borrower or any ERISA Affiliate with respect to
such request and (e) the failure of the Borrower or any ERISA Affiliate to
make a required installment or payment under Section 302 of ERISA or
Section 412 of the Code (in
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the case of Employee Benefit Plans regulated by the Code or ERISA) or under
any Foreign Benefit Law (in the case of Employee Benefit Plans regulated by
any Foreign Benefit Law) by the due date;
(b) Promptly and in any event within fifteen (15) days of becoming
aware of the occurrence or forthcoming occurrence of any (a) Termination
Event or (b) nonexempt "prohibited transaction," as such term is defined in
Section 406 of ERISA or Section 4975 of the Code, in connection with any
Employee Benefit Plan or any trust created thereunder, deliver to the Agent
(who shall promptly notify the Lenders) a notice specifying the nature
thereof, what action the Borrower or any ERISA Affiliate has taken, is
taking or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto; and
(c) With reasonable promptness, but in any event within fifteen (15)
days, with respect to events described in clauses (a), (b) and (c), deliver
to the Agent (who shall promptly notify the Lenders) copies of (a) any
unfavorable determination letter from the Internal Revenue Service
regarding the qualification of an Employee Benefit Plan under Section
401(a) of the Code, (b) all notices received by the Borrower or any ERISA
Affiliate of the PBGC's or any Governmental Authority's intent to terminate
any Pension Plan or to have a trustee appointed to administer any Pension
Plan, (c) each Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the
Internal Revenue Service with respect to each Employee Benefit Plan and (d)
all notices received by the Borrower or any ERISA Affiliate from a
Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA. The Borrower will
notify the Agent (who shall promptly notify the Lenders) in writing within
five (5) Business Days of the Borrower or any ERISA Affiliate obtaining
knowledge or reason to know that the Borrower or any ERISA Affiliate has
filed or intends to file a notice of intent to terminate any Pension Plan
under a distress termination within the meaning of Section 4041(c) of
ERISA.
8.19. Continued Operations. Continue at all times to conduct its
--------------------
business and engage principally in the same line or lines of business
substantially as heretofore conducted.
8.20. New Subsidiaries. From and after the Trigger Date,
----------------
simultaneously with the acquisition or creation of any Domestic Subsidiary
(other than a Restricted Subsidiary), cause to be delivered to the Agent each
of the following:
(a) a Facility Guaranty executed by such Subsidiary substantially in
the form of Exhibit I;
(b) an opinion of counsel to the Subsidiary dated as of the date of
delivery of the Facility Guaranty provided for in this Section 8.20 and
addressed to the Agent and the Lenders, in form and substance reasonably
acceptable to the Agent (which opinion may include assumptions and
qualifications of similar
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effect to those contained in the opinions of counsel delivered pursuant to
Section 6.1(a)), to the effect that:
(i) such Subsidiary is duly organized, validly existing and in
good standing in the jurisdiction of its formation, has the requisite
power and authority to own its properties and conduct its business as
then owned and then conducted and proposed to be conducted and to
execute, deliver and perform the Facility Guaranty described in this
Section 8.20 to which such Subsidiary is a signatory, and is duly
qualified to transact business and is in good standing as a foreign
corporation or partnership in each other jurisdiction in which the
character of the properties owned or leased, or the business carried
on by it, requires such qualification and the failure to be so
qualified would reasonably be likely to result in a Material Adverse
Effect;
(ii) the execution, delivery and performance of the Facility
Guaranty described in this Section 8.20 to which such Subsidiary is a
signatory have been duly authorized by all requisite corporate or
partnership action (including any required shareholder or partner
approval), such agreement has been duly executed and delivered and
constitutes the valid and binding agreement of such Subsidiary,
enforceable against such Subsidiary in accordance with its terms,
subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the
enforceability of creditors' rights generally and to the effect of
general principles of equity (whether considered in a proceeding at
law or in equity);
(c) current copies of the Organizational Documents and Operating
Documents of such Subsidiary, minutes of duly called and conducted meetings
(or duly effected consent actions) of the Board of Directors, partners, or
appropriate committees thereof (and, if required by such Organizational
Documents, Operating Documents or applicable law, of the shareholders,
members or partners) of such Subsidiary authorizing the actions and the
execution and delivery of documents described in this Section 8.20.
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ARTICLE IX
Negative Covenants
------------------
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, nor will it permit any
Subsidiary to:
9.1. Financial Covenants.
-------------------
(a) Consolidated Net Worth. Permit Consolidated Net Worth to be less
----------------------
than (i) $801,500,000 from September 30, 1999 until (but excluding) the last day
of the fiscal quarter that includes the Closing Date (the "Closing Date
Quarter"), and (ii) as at the last day of each fiscal quarter of the Borrower
ending after the Closing Date and until (but excluding) the last day of the next
following fiscal quarter of the Borrower, the sum of (A) the amount of
Consolidated Net Worth required to be maintained pursuant to this Section 9.1(a)
as at the end of the immediately preceding fiscal quarter (or, in the case of
the Closing Date Quarter, required to be maintained as of September 30, 1999),
plus (B) 50% of Consolidated Net Income (with no reduction for net losses during
any period) for the fiscal quarter of the Borrower ending on such day, plus (C)
100% of the aggregate amount of all increases in the stated capital and
additional paid-in capital accounts of the Borrower resulting from the issuance
of equity securities or other capital investment, minus (D) the value of the
Borrower's stock repurchased in accordance with the terms hereof.
(b) Consolidated Leverage Ratio. Permit at any time the Consolidated
---------------------------
Leverage Ratio to be greater than 2.50 to 1.00.
(c) Consolidated Interest Coverage Ratio. Permit at any time the
------------------------------------
Consolidated Interest Coverage Ratio to be less than 4.50 to 1.00.
9.2. Acquisitions. Enter into any agreement, contract, binding
------------
commitment or other arrangement providing for any Acquisition, or take any
action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition, unless (i) the Person to be (or whose assets
are to be) acquired does not oppose such Acquisition and the line or lines of
business of the Person to be acquired are substantially the same as one or more
line or lines of business conducted by the Borrower and its Subsidiaries, (ii)
no Default or Event of Default shall have occurred and be continuing either
immediately prior to or immediately after giving effect to such Acquisition and,
(iii) if the Cost of Acquisition is in excess of $75,000,000 or if after giving
effect to such Acquisition, the aggregate Costs of Acquisition incurred in any
Fiscal Year (on a non-cumulative basis, with the effect that amounts not
incurred in any Fiscal Year may not be carried forward to a subsequent period
and determined by the date of incurrence of any Cost of Acquisition and not by
the date of the effectiveness of such Acquisition) shall exceed $125,000,000,
the Borrower shall have furnished to the Agent a certificate in the form of
Exhibit H prepared on a historical pro forma basis as of the most recent date
for which financial statements have been furnished pursuant to Section 7.6(a) or
Section 8.1(a) or (b) giving effect to such Acquisition, which certificate shall
demonstrate that no Default or Event of Default would exist immediately after
giving effect thereto, and (iv) the Person acquired shall be a wholly-owned
Subsidiary, or be
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merged into the Borrower or a wholly-owned Subsidiary (other than a Restricted
Subsidiary), immediately upon consummation of the Acquisition (or if assets are
being acquired, the acquiror shall be the Borrower or a wholly-owned Subsidiary
(other than a Restricted Subsidiary)).
9.3. Liens. Incur, create or permit to exist any Lien, charge or other
-----
encumbrance of any nature whatsoever with respect to any property or assets now
owned or hereafter acquired by the Borrower or any Subsidiary, other than
(a) Liens existing as of the date hereof as set forth in Schedule
7.7;
(b) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being contested
in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with GAAP and which Liens are not yet
enforceable against other creditors;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than 90
days from the date of creation thereof for amounts not yet due or which are
being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP and which Liens are
not yet enforceable against other creditors;
(d) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other
types of social security benefits or to secure the performance of tenders,
bids, leases, contracts (other than for the repayment of Indebtedness),
statutory obligations and other similar obligations or arising as a result
of progress payments under government contracts;
(e) easements (including reciprocal easement agreements and utility
agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions, charges or
encumbrances (whether or not recorded), which do not interfere materially
with the ordinary conduct of the business of the Borrower or any Subsidiary
and which do not materially detract from the value of the property to which
they attach or materially impair the use thereof to the Borrower or any
Subsidiary;
(f) Liens securing Indebtedness owing to the seller of a Hospital
Facility which Indebtedness is incurred to acquire such Hospital Facility;
provided, such Lien extends only to the Hospital Facility acquired with the
proceeds of such Indebtedness;
(g) Liens securing Indebtedness incurred to finance or
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refinance Indebtedness assumed in connection with the Acquisition of a
single Hospital Facility provided (i) the effective rate of interest
payable with respect to such Indebtedness does not exceed then prevailing
interest rates for a similar financing, (ii) such Indebtedness is secured
only by the Hospital Facility so financed, (iii) the Indebtedness and
interest thereon is amortized and payable on a level basis over a term of
15 years with a maturity of not less than 7 years, and (iv) the
Indebtedness represents not less than 70% of the Value of the Hospital
Facility. The term "Value" means the market value of the Hospital Facility
as determined by a then current appraisal of the facility for use as a
general acute care or psychiatric hospital, such appraiser to be selected
by the financial institution providing such loan; provided, however, any
such financing shall not prohibit the Borrower or its Subsidiary from
granting the Lenders a second mortgage lien on such Hospital Facility as
security for the Obligations;
(h) Liens on Indebtedness permitted by Section 9.4(f).
9.4. Indebtedness. Incur, create, assume or permit to exist any
------------
Indebtedness, howsoever evidenced, except:
(a) Indebtedness existing as of the Closing Date as set forth in
Schedule 7.6; provided, none of the instruments and agreements evidencing
or governing such Indebtedness shall be amended, modified or supplemented
after the Closing Date to change any terms of subordination, repayment or
rights of enforcement, conversion, put, exchange or other rights from such
terms and rights as in effect on the Closing Date;
(b) Indebtedness owing to the Agent or any Lender in connection with
this Agreement, any Note or other Loan Document;
(c) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(d) purchase money Indebtedness of the Borrower described in
Sections 9.3(f), (g) and 9.13 not to exceed an aggregate outstanding
principal amount at any time of $125,000,000;
(e) Indebtedness arising from Rate Hedging Obligations permitted
under Section 9.15; and
(f) additional Indebtedness for Money Borrowed not otherwise
covered by clauses (a) through (e) above, provided that the aggregate
outstanding principal amount of all such other Indebtedness permitted under this
clause (f), together with the Indebtedness permitted under clause (d), shall in
no event exceed $150,000,000 at any time.
9.5. Transfer of Assets. Sell, lease, transfer or otherwise dispose of
------------------
any assets of Borrower or any Subsidiary other than (a) dispositions of
inventory in the ordinary course of business, (b) dispositions of property that
is substantially worn, damaged, obsolete or, in the judgment of the Borrower, no
longer best used or useful in its business or that of any Subsidiary, (c)
transfers of
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assets necessary to give effect to merger or consolidation transactions
permitted by Section 9.7, (d) the disposition of Eligible Securities in the
ordinary course of management of the investment portfolio of the Borrower and
its Subsidiaries, and (e) dispositions of assets during the term of this
Agreement having an aggregate book value not exceeding 10% of Consolidated Total
Assets.
9.6. Investments. Purchase, own, invest in or otherwise acquire,
-----------
directly or indirectly, any stock or other securities, or make or permit to
exist any interest whatsoever in any other Person or permit to exist any loans
or advances to any Person, except that Borrower may maintain investments or
invest in:
(a) securities of any Person acquired in an Acquisition permitted
hereunder;
(b) Eligible Securities;
(c) investments existing as of the date hereof as set forth in
Schedule 7.4;
(d) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof in connection with accounts of financially
troubled Persons to the extent reasonably necessary in order to prevent or
limit loss;
(e) investments in Subsidiaries other than Restricted Subsidiaries;
and
(f) investments in Restricted Subsidiaries existing as of the date
hereof.
9.7. Merger or Consolidation. (a) Consolidate with or merge into any
-----------------------
other Person, or (b) permit any other Person to merge into it, or (c) sell,
transfer or lease or otherwise dispose of all or a substantial part of its
assets (other than sales permitted under Section 9.5); provided, however, (i)
any Subsidiary of the Borrower may merge or transfer all or substantially all of
its assets into or consolidate with the Borrower or any wholly-owned Subsidiary
(other than a Restricted Subsidiary) of the Borrower, and (ii) any other Person
may merge into or consolidate with the Borrower or any wholly-owned Subsidiary
and any Subsidiary may merge into or consolidate with any other Person in order
to consummate an Acquisition permitted by Section 9.2, so long as no Default or
Event of Default exists hereunder after giving effect to such merger or
consolidation, provided further, that any resulting or surviving entity shall
execute and deliver such agreements and other documents, including, in the case
of Subsidiaries (other than Restricted Subsidiaries), a Facility Guaranty if the
Trigger Date has occurred, and take such other action as the Agent may require
to evidence or confirm its express assumption of the obligations and liabilities
of its predecessor entities under the Loan Documents.
9.8. Restricted Payments. Make any Restricted Payment or apply or set
-------------------
apart any of their assets therefor or agree to do any of the foregoing;
provided, however, so long as no Default or Event of Default exists immediately
prior to and immediately after such payments, the
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Borrower may (a) pay cash dividends in the ordinary course of business and (b)
purchase its own stock so long as the aggregate purchase price of the stock
repurchased does not at any time exceed $250,000,000 and so long as the Borrower
is in compliance with Section 9.17.
------------
9.9. Transactions with Affiliates. Other than transactions permitted
----------------------------
under Sections 9.6 and 9.7, enter into any transaction after the Closing Date,
including, without limitation, the purchase, sale, lease or exchange of
property, real or personal, or the rendering of any service, with any Affiliate
of the Borrower, except (a) that such Persons may render services to the
Borrower or its Subsidiaries for compensation at the same rates generally paid
by Persons engaged in the same or similar businesses for the same or similar
services, (b) that the Borrower or any Subsidiary may render services to such
Persons for compensation at the same rates generally charged by the Borrower or
such Subsidiary and (c) in either case in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's (or any Subsidiary's)
business consistent with past practice of the Borrower and its Subsidiaries and
upon fair and reasonable terms no less favorable to the Borrower (or any
Subsidiary) than would be obtained in a comparable arm's-length transaction with
a Person not an Affiliate.
9.10. Compliance with ERISA, the Code and Foreign Benefit Laws. With
--------------------------------------------------------
respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would
result in a liability on the part of the Borrower or any ERISA Affiliate to
the PBGC or to any Governmental Authority; or
(b) permit the present value of all benefit liabilities under all
Pension Plans to exceed the current value of the assets of such Pension
Plans allocable to such benefit liabilities unless such event could not
reasonably be expected to result in a Material Adverse Effect; or
(c) permit any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code) with respect to any
Pension Plan, whether or not waived; or
(d) fail to make any contribution or payment to any Multiemployer
Plan which the Borrower or any ERISA Affiliate may be required to make
under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto; or
(e) engage, or permit any Borrower or any ERISA Affiliate to
engage, in any prohibited transaction under Section 406 of ERISA or
Sections 4975 of the Code for which a civil penalty pursuant to Section
502(I) of ERISA or a tax pursuant to Section 4975 of the Code may be
imposed; or
(f) permit the establishment of any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee Benefit
Plan which establishment or amendment could result in liability to the
Borrower or any ERISA Affiliate or increase the obligation of the Borrower
or any ERISA Affiliate to a Multiemployer Plan; or
(g) fail, or permit the Borrower or any ERISA Affiliate to fail, to
establish, maintain and operate each Employee Benefit Plan in material
compliance with the provisions of ERISA, the
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Code, all applicable Foreign Benefit Laws and all other applicable laws and
the regulations and interpretations thereof.
9.11. Fiscal Year. Change its Fiscal Year.
-----------
9.12. Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
----------------
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with a merger or
consolidation permitted pursuant to Section 9.7.
9.13. Limitations on Sales and Leasebacks. Enter into any arrangement
-----------------------------------
or arrangements with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal property, whether now owned or hereafter acquired
in a single transaction or series of related transactions, which has been or is
to be sold or transferred by the Borrower or any Subsidiary to such Person or to
any other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of the Borrower or any
Subsidiary unless, in such transaction, (a) the net sales price to the Borrower
or Subsidiary is equal to at least 95% of the appraised value of the property
subject to such transaction, (b) the term of the lease is not less than 20
years, and (c) the monthly lease payment shall not be more than 1.2 times a
Similar Loan Payment. "Similar Loan Payment" means the monthly payment with
respect to a loan equal to the actual sales price of and secured by the property
subject to such transaction, amortized over the period of the lease at the
prevailing market rate for a 15 year loan at the date of such transaction.
Should the Borrower or any Subsidiary enter into any lease-back transaction, the
full amount of the sales price of the property subject to such transaction shall
constitute Indebtedness under this Agreement so long as such lease remains in
effect.
9.14. Change in Control. Cause, suffer or permit to exist or occur any
-----------------
Change of Control.
9.15. Rate Hedging Obligations. Incur any Rate Hedging Obligations or
------------------------
enter into any agreements, arrangements, devices or instruments relating to Rate
Hedging Obligations, except pursuant to Swap Agreements.
9.16. Negative Pledge Clauses. Enter into or cause, suffer or permit to
-----------------------
exist any agreement (other than agreements existing as of the date hereof of
certain Subsidiaries relating to Indebtedness of any such Subsidiary and
applying only with respect to the assets of such Subsidiary) with any Person
other than the Agent and the Lenders pursuant to this Agreement or any other
Loan Documents which prohibits or limits the ability of any of the Borrower or
any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
provided that the Borrower and any Subsidiary may enter into such an agreement
in connection with, and that applies only to, property subject to any Lien
permitted by this Agreement and not released after the date hereof, when such
prohibition or limitation is by its terms effective only against the assets
subject to such Lien.
9.17. Retirement of Treasury Stock. At no time shall the value of
----------------------------
margin stock (as defined in Regulation U (12 C.F.R. Part 221) of the Board)
owned by the Borrower and its Subsidiaries on a consolidated basis exceed twenty
percent (20%) of Consolidated Total Assets. In the event there shall be any
such excess, the Borrower will immediately retire treasury stock as shall be
necessary to comply with
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this restriction.
9.18. Capital Expenditures of Restricted Subsidiaries. Permit any
-----------------------------------------------
Restricted Subsidiary to make or become committed to make Capital Expenditures
which exceed in any Four-Quarter Period the amount of Consolidated EBITDA
attributable to such Restricted Subsidiary in such Four Quarter Period.
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ARTICLE X
Events of Default and Acceleration
----------------------------------
10.1. Events of Default. If any one or more of the following events
-----------------
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority), that is to say:
(a) if default shall be made in the due and punctual payment of the
principal of any Loan, Reimbursement Obligation or other Obligation, when
and as the same shall be due and payable whether pursuant to any provision
of Article II or Article III or Article IV, at maturity, by acceleration or
otherwise; or
(b) if default shall be made in the due and punctual payment of any
amount of interest on any Loan, Reimbursement Obligation or other
Obligation or of any fees or other amounts payable to any of the Lenders or
the Agent within three (3) days of the date on which the same shall be due
and payable; or
(c) if default shall be made in the performance or observance of any
covenant set forth in Section 2.10, 8.8, 8.12, 8.13, 8.20 or Article IX;
(d) if a default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement or provision contained in
this Agreement or the Notes (other than as described in clauses (a), (b) or
(c) above) and such default shall continue for thirty (30) or more days
after the earlier of receipt of notice of such default by the Authorized
Representative from the Agent or an officer of the Borrower becomes aware
of such default, or if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement or provision
contained in any of the other Loan Documents (beyond any applicable grace
period, if any, contained therein) or in any instrument or document
evidencing or creating any obligation, guaranty, or Lien in favor of the
Agent or any of the Lenders or delivered to the Agent or any of the Lenders
in connection with or pursuant to this Agreement or any of the Obligations,
or if any Loan Document ceases to be in full force and effect (other than
as expressly provided for hereunder or thereunder), or if without the
written consent of the Lenders, this Agreement or any other Loan Document
shall be disaffirmed or shall terminate, be terminable or be terminated or
become void or unenforceable for any reason whatsoever (other than as
expressly provided for hereunder or thereunder); or
(e) if there shall occur (i) a default, which is not waived, in the
payment of any principal, interest, premium or other amount with respect to
any Indebtedness or Rate Hedging Obligation (other than the Loans and other
Obligations) of the Borrower or any Subsidiary in an amount not less than
$5,000,000 in the aggregate outstanding, or (ii) a default, which is not
waived, in the performance, observance or fulfillment of any term or
covenant contained in any agreement or instrument under or pursuant to
which any such Indebtedness or Rate Hedging Obligation may have been
issued, created, assumed, guaranteed or secured by the Borrower or any
Subsidiary, or (iii) any other
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event of default as specified in any agreement or instrument under or
pursuant to which any such Indebtedness or Rate Hedging Obligation may have
been issued, created, assumed, guaranteed or secured by the Borrower or any
Subsidiary, and such default or event of default shall continue for more
than the period of grace, if any, therein specified, or such default or
event of default shall permit the holder of any such Indebtedness (or any
agent or trustee acting on behalf of one or more holders) to accelerate the
maturity thereof; or
(f) if any representation, warranty or other statement of fact
contained in any Loan Document or in any writing, certificate, report or
statement at any time furnished to the Agent or any Lender by or on behalf
of the Borrower or any other Credit Party pursuant to or in connection with
any Loan Document, or otherwise, shall be false or misleading in any
material respect when given; or
(g) if the Borrower or any Subsidiary or other Credit Party shall be
unable to pay its debts generally as they become due; file a petition to
take advantage of any insolvency statute; make an assignment for the
benefit of its creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself or of the whole or
any substantial part of its property; file a petition or answer seeking
liquidation, reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute; or
(h) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of the Borrower or any Subsidiary or other Credit Party or of
the whole or any substantial part of its properties and such order,
judgment or decree continues unstayed and in effect for a period of sixty
(60) days, or approve a petition filed against the Borrower or any
Subsidiary seeking liquidation, reorganization or arrangement or similar
relief under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state, which petition is not
dismissed within sixty (60) days; or if, under the provisions of any other
law for the relief or aid of debtors, a court of competent jurisdiction
shall assume custody or control of the Borrower or any Subsidiary or other
Credit Party or of the whole or any substantial part of its properties,
which control is not relinquished within sixty (60) days; or if there is
commenced against the Borrower or any Subsidiary or other Credit Party any
proceeding or petition seeking reorganization, arrangement or similar
relief under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state which proceeding or
petition remains undismissed for a period of sixty (60) days; or if the
Borrower or any Subsidiary or other Credit Party takes any action to
indicate its consent to or approval of any such proceeding or petition; or
(i) if (i) one or more judgments or orders where the amount not
covered by insurance (or the amount as to which the insurer denies
liability) is in excess of $5,000,000 is rendered against the Borrower or
any Subsidiary, or (ii) there is any attachment, injunction or execution
against any of the Borrower's or Subsidiaries' properties for any amount in
excess of $5,000,000 in the aggregate; and such judgment, attachment,
injunction or execution remains unpaid, unstayed, undischarged,
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unbonded or undismissed for a period of thirty (30) days; or
(j) if the Borrower or any Subsidiary shall, other than in the
ordinary course of business (as determined by past practices), suspend all
or any part of its operations material to the conduct of the business of
the Borrower or such Subsidiary for a period of more than 60 days; or
(k) if the Borrower or any Subsidiary shall breach any of the
material terms or conditions of any agreement under which any Rate Hedging
Obligation permitted hereby is created and such breach shall continue
beyond any grace period, if any, relating thereto pursuant to the terms of
such agreement, or if the Borrower or any Subsidiary shall disaffirm or
seek to disaffirm any such agreement or any of its obligations thereunder;
or
(l) if there shall occur and not be waived an Event of Default as
defined in any of the other Loan Documents;
(m) (i) cancellation, revocation, suspension or termination of any
Medicare Certification, Medicare Provider Agreement, Medicaid Certification
or Medicaid Provider Agreement affecting the Borrower, any Subsidiary or
any Contract Provider, or (ii) the loss of any other permits, licenses,
authorizations, certifications or approvals from any federal, state or
local Governmental Authority or termination of any contract with any such
authority, in either case which cancellation, revocation, suspension,
termination or loss (X) in the case of any suspension or temporary loss
only, continues for a period greater than 60 days and (Y) results in the
suspension or termination of operations of the Borrower or any Subsidiary
or in the failure of the Borrower or any Subsidiaries or any Contract
Provider to be eligible to participate in Medicare or Medicaid programs or
to accept assignments of rights to reimbursement under Medicaid Regulations
or Medicare Regulations; provided that any such events described in this
Section 11.1(m)(i) shall result either singly or in the aggregate in the
termination, cancellation, suspension or material impairment of operations
or rights to reimbursement which produce 5% or more of the Borrower's gross
revenues (on an annualized basis);
then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be taken: (i)
the Agent may, and at the direction of the Required Lenders shall,
declare any obligation of the Lenders and the Issuing Bank to make
further Loans or to issue additional Letters of Credit terminated,
whereupon the obligation of each Lender to make further Loans and of
the Issuing Bank to issue additional Letters of Credit, hereunder
shall terminate immediately, and (ii) the Agent may and shall at the
direction of the Required Lenders, declare by notice to the Borrower
any or all of the Obligations to be immediately due and payable, and
the same, including all interest accrued thereon and all other
obligations of the Borrower to the Agent and the Lenders, shall
forthwith become immediately due and payable without presentment,
demand, protest, notice or other formality of any kind, all of which
are hereby expressly waived, anything contained herein or in any
instrument evidencing the Obligations to the contrary
notwithstanding; provided, however, that
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notwithstanding the above, if there shall occur an Event of Default
under clause (g) or (h) above, then the obligation of the Lenders to
make Loans and of the Issuing Bank to issue Letters of Credit
hereunder shall automatically terminate and any and all of the
Obligations shall be immediately due and payable without the
necessity of any action by the Agent or the Required Lenders or
notice to the Agent or the Lenders or the Borrower;
(B) The Borrower shall, immediately upon any Event of Default
under clause (g) or (h) above, and upon demand of the Agent or the
Required Lenders following any other Event of Default, deposit cash
with the Agent in an amount equal to the amount of any Letter of
Credit Outstandings, as collateral security for the repayment of any
future drawings or payments under such Letters of Credit, and such
amounts shall be held by the Agent pursuant to the terms of the LC
Account Agreement; and
(C) the Agent and each of the Lenders shall have all of the
rights and remedies available under the Loan Documents or under any
applicable law.
10.2. Agent to Act. In case any one or more Events of Default shall
------------
occur and not have been waived, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
10.3. Cumulative Rights. No right or remedy herein conferred upon the
-----------------
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
10.4. No Waiver. No course of dealing between the Borrower and any
---------
Lender or the Agent or any failure or delay on the part of any Lender or the
Agent in exercising any rights or remedies under any Loan Document or otherwise
available to it shall operate as a waiver of any rights or remedies and no
single or partial exercise of any rights or remedies shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder or of the
same right or remedy on a future occasion.
10.5. Allocation of Proceeds. If an Event of Default has occurred and
----------------------
not been waived, and the maturity of the Notes has been accelerated pursuant to
Article X hereof, all payments received by the Agent hereunder, in respect of
any principal of or interest on the Obligations or any other amounts payable by
the Borrower hereunder, shall be applied by the Agent in the following order:
(a) amounts due to the Lenders and the Issuing Bank pursuant to
Sections 4.6(a), 4.6(b), 4.6(c), 4.6(d) and 12.5;
(b) amounts due to the Agent pursuant to Section 4.6(e);
(c) payments of interest on Loans and Reimbursement Obligations, to
be applied for the ratable benefit of the
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Lenders;
(d) payments of principal of Loans and Reimbursement Obligations, to
be applied for the ratable benefit of the Lenders;
(e) payments of cash amounts to the Agent in respect of outstanding
Letters of Credit pursuant to Section 10.1(B);
(f) amounts due to the Issuing Bank, the Agent and the Lenders
pursuant to Sections 3.2(h), 8.16 and 12.9;
(g) payments of all other amounts due under any of the Loan
Documents, if any, to be applied for the ratable benefit of the Lenders;
(h) amounts due to any of the Lenders or their affiliates in respect
of Obligations consisting of liabilities under any Swap Agreement with any
of the Lenders or their affiliates on a pro rata basis according to the
amounts owed; and
(i) any surplus remaining after application as provided for herein,
to the Borrower or otherwise as may be required by applicable law.
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ARTICLE XI
The Agent
---------
11.1. Appointment, Powers, and Immunities. Each Lender hereby
-----------------------------------
irrevocably appoints and authorizes the Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in Section 11.5 and
the first sentence of Section 11.6 hereof shall include its affiliates and its
own and its affiliates' officers, directors, employees, and agents):
(a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender;
(b) shall not be responsible to the Lenders for any recital,
statement, representation, or warranty (whether written or oral) made in or
in connection with any Loan Document or any certificate or other document
referred to or provided for in, or received by any of them under, any Loan
Document, or for the value, validity, effectiveness, genuineness,
enforceability, or sufficiency of any Loan Document, or any other document
referred to or provided for therein or for any failure by any Credit Party
or any other Person to perform any of its obligations thereunder;
(c) shall not be responsible for or have any duty to ascertain,
inquire into, or verify the performance or observance of any covenants or
agreements by any Credit Party or the satisfaction of any condition or to
inspect the property (including the books and records) of any Credit Party
or any of its Subsidiaries or affiliates;
(d) shall not be required to initiate or conduct any litigation or
collection proceedings under any Loan Document except as provided in
Section 10.2 at the direction of the Required Lenders; and
(e) shall not be responsible for any action taken or omitted to be
taken by it under or in connection with any Loan Document, except for its
own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
11.2. Reliance by Agent. The Agent shall be entitled to rely upon any
-----------------
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telefacsimile) believed by it to
be genuine and correct and to have been signed, sent or made by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Credit Party), independent accountants, and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until the Agent
receives and accepts an Assignment and Acceptance executed in accordance with
Section 12.1 hereof. As to any matters not expressly provided for by this
Agreement, the Agent shall not be required to exercise any discretion or take
any action, but shall be
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required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding on all of the Lenders; provided, however,
that the Agent shall not be required to take any action that exposes the Agent
to personal liability or that is contrary to any Loan Document or applicable law
or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
11.3. Defaults. The Agent shall not be deemed to have knowledge or
--------
notice of the occurrence of a Default or Event of Default unless the Agent has
received written notice from a Lender or the Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default". In the
event that the Agent receives such a notice of the occurrence of a Default or
Event of Default, the Agent shall give prompt notice thereof to the Lenders.
The Agent shall (subject to Section 11.2 hereof) take such action with respect
to such Default or Event of Default as shall reasonably be directed by the
Required Lenders, provided that, unless and until the Agent shall have received
----
such directions, the 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 interest of the Lenders.
11.4. Rights as Lender. With respect to its Five Year Commitment and
----------------
364 Day Commitment and the Loans made by it and Letters of Credit issued by it,
Bank of America (and any successor acting as Agent) in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. Bank of America (and any
successor acting as Agent) and its affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, make investments
in, provide services to, and generally engage in any kind of lending, trust, or
other business with any Credit Party or any of its Subsidiaries or affiliates as
if it were not acting as Agent, and Bank of America (and any successor acting as
Agent) and its affiliates may accept fees and other consideration from any
Credit Party or any of its Subsidiaries or affiliates for services in connection
with this Agreement or otherwise without having to account for the same to the
Lenders.
11.5. Indemnification. The Lenders agree to indemnify the Agent (to the
---------------
extent not reimbursed under Section 12.9 hereof, but without limiting the
obligations of the Borrower under such Section) ratably in accordance with their
respective Five Year Commitments and 364 Day Commitments, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including attorneys' fees), or disbursements of any kind and
nature whatsoever that may be imposed on, incurred by or asserted against the
Agent (including by any Lender) in any way relating to or arising out of any
Loan Document or the transactions contemplated thereby or any action taken or
omitted by the Agent under any Loan Document; provided that no Lender shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Person to be indemnified. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any costs or expenses payable by the
Borrower under Section 12.5, to the extent that the Agent is not promptly
reimbursed for such costs and expenses by the Borrower and the Agent agrees to
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repay each Lender making such payments to the extent the Agent is subsequently
reimbursed by the Borrower. The agreements contained in this Section 11.5
shall survive payment in full of the Loans and all other amounts payable under
this Agreement.
11.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees that
---------------------------------------
it has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Credit Parties and their Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any
Credit Party or any of its Subsidiaries or affiliates that may come into the
possession of the Agent or any of its affiliates.
11.7. Resignation of Agent. The Agent may resign at any time by giving
--------------------
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America having combined capital
and surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article XI shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
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ARTICLE XII
Miscellaneous
-------------
12.1. Assignments and Participations. (a) Each Lender may assign to
------------------------------
one or more Eligible Assignees all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Loans, its Five Year Note, 364 Day Note and its Five Year Commitment and 364 Day
Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this Agreement, any
such partial assignment shall be in an amount at least equal to $10,000,000 or
an integral multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant, and
not varying, percentage of all of its rights and obligations under this
Agreement and both its Five Year Note and 364 Day Note and its Five Year
Commitment and 364 Day Commitment;
(iv) each such assignment by a Lender shall be the same ratable
assignment of such Lender's rights and obligations under both the 364 Day
Revolving Credit Facility and the Five Year Revolving Credit Facility; and
(v) the parties to such assignment shall execute and deliver to the
Agent for its acceptance an Assignment and Acceptance in the form of Exhibit B
hereto, together with any Notes subject to such assignment and a processing fee
of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section, the assignor, the Agent
and the Borrower shall make appropriate arrangements so that, if required, new
Notes are issued to the assignor and the assignee. If the assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Agent certification as to exemption
from deduction or withholding of Taxes in accordance with Section 5.6.
(b) The Agent shall maintain at its address referred to in Section 12.2 a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Five Year Commitment and 364 Day Commitment of, and principal amount of the
Loans owing to, each Lender from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Notes subject to such
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assignment and payment of the processing fee, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the form of
Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons in all or a
portion of its rights, obligations or rights and obligations under this
Agreement (including all or a portion of its Five Year Commitment and 364 Day
Commitment or its Loans); provided, however, that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the participant shall be entitled to the benefit of the
yield protection provisions contained in Article V and the right of set-off
contained in Section 12.3, and (iv) the Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right to
enforce the obligations of the Borrower relating to its Loans and its Notes and
to approve any amendment, modification, or waiver of any provision of this
Agreement (other than amendments, modifications, or waivers decreasing the
amount of principal of or the rate at which interest is payable on such Loans or
Notes, extending any scheduled principal payment date or date fixed for the
payment of interest on such Loans or Notes, or extending its Five Year
Commitment or 364 Day Commitment).
(e) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time assign and pledge all or any portion of its Loans and its
Notes to any Federal Reserve Bank as collateral security pursuant to Regulation
A and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning the Borrower or any
of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants).
(g) Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and permitted assigns
of such party and all covenants, provisions and agreements by or on behalf of
the Borrower which are contained in the Loan Documents shall inure to the
benefit of the successors and permitted assigns of the Agent, the Lenders, or
any of them. The Borrower may not assign or otherwise transfer to any other
Person any right, power, benefit, or privilege (or any interest therein)
conferred hereunder or under any of the other Loan Documents, or delegate (by
assumption or otherwise) to any other Person any duty, obligation, or liability
arising hereunder or under any of the other Loan Documents, and any such
purported assignment, delegation or other transfer shall be void.
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12.2. Notices. Any notice shall be conclusively deemed to have been
-------
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of transmission to such party, in the case
of notice by telefacsimile (where the proper transmission of such notice is
either acknowledged by the recipient or electronically confirmed by the
transmitting device), or (iii) on the fifth Business Day after the day on which
mailed to such party, if sent prepaid by certified or registered mail, return
receipt requested, in each case delivered, transmitted or mailed, as the case
may be, to the address or telefacsimile number, as appropriate, set forth below
or such other address or number as such party shall specify by notice hereunder:
(a) if to the Borrower or any Subsidiary:
Health Management Associates, Inc.
5811 Pelican Bay Boulevard, Suite 500
Naples, Florida 33963
Attn: Stephen M. Ray
Telephone: (941) 598-3104
Telefacsimile: (941) 596-1426
with a copy to:
Health Management Associates, Inc.
5811 Pelican Bay Boulevard, Suite 500
Naples, Florida 33963
Attn: Timothy R. Parry
Telephone: (941) 597-7161
Telefacsimile: (941) 597-5794
(b) if to the Agent:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 386-9371
Telefacsimile: (704) 386-9923
with a copy to:
Bank of America, N.A.
Bank of America Corporate Center
100 North Tryon Street, 17th Floor
NC1-001-17-11
Charlotte, North Carolina 28255
Attention: Marty Mitchell
Telephone: (704) 388-1115
Telefacsimile: (704) 388-6002
(c) if to the Lenders:
At the addresses set forth on the signature pages hereof and on
the signature page of each Assignment and Acceptance.
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12.3. Right of Set-off; Adjustments. (a) Upon the occurrence and
-----------------------------
during the continuance of any Event of Default, each Lender (and each of its
affiliates) is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender (or any of its affiliates)
to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Notes held by such Lender, irrespective of whether such Lender shall have
made any demand under this Agreement or such Notes and although such obligations
may be unmatured. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 12.3 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by set-
off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to it, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. The Borrower agrees that any Lender so
purchasing a participation from a Lender pursuant to this Section 12.3 may, to
the fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Person were the direct creditor of the Borrower in the amount of such
participation.
12.4. Survival. All covenants, agreements, representations and
--------
warranties made herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of Obligations remain outstanding or any Lender has any
Five Year Commitment and 364 Day Commitment hereunder or the Borrower has
continuing obligations hereunder unless otherwise provided herein.
12.5. Expenses. The Borrower agrees to pay on demand all costs and
--------
expenses of the Agent in connection with the syndication, preparation,
execution, delivery, administration, modification, and amendment of this
Agreement, the other Loan Documents, and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and expenses of
counsel for the Agent (including the cost of internal counsel) with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under the Loan Documents. The Borrower further agrees to pay
on demand all costs and expenses of the Agent and the Lenders, if any
(including, without limitation, reasonable attorneys' fees and expenses and the
cost of
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internal counsel), in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of the Loan Documents and the
other documents to be delivered hereunder.
12.6. Amendments and Waivers. Any provision of this Agreement or any
----------------------
other Loan Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower or other applicable Credit
Party party to such Loan Document and either the Required Lenders or (as to Loan
Documents other than the Credit Agreement) the Agent on behalf of the Required
Lenders (and, if Article XI or the rights or duties of the Agent are affected
thereby, by the Agent); provided that no such amendment or waiver shall, unless
signed by all the Lenders, (i) increase the Five Year Commitment or 364 Day
Commitments of the Lenders or the Total Five Year Commitment or 364 Day
Commitment, (ii) reduce the principal of or rate of interest on any Loan or any
fees or other amounts payable hereunder, (iii) postpone any date fixed for the
payment of any scheduled installment of principal of or interest on any Loan or
any fees or other amounts payable hereunder or for termination of any Five Year
Commitment or 364 Day Commitment, (iv) change the percentage of the Five Year
Commitment or 364 Day Commitment or of the unpaid principal amount of the Notes,
or the number of Lenders, which shall be required for the Lenders or any of them
to take any action under this Section 12.6 or any other provision of this
Agreement or to amend this Section 12.6, (v) from and after the Trigger Date,
release any Guarantor, or (vi) remove Section 2.10.
No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising any right, remedy or
option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.
12.7. Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such fully-
executed counterpart. Signatures on communications and other documents may be
transmitted by facsimile only with the consent of the Agent in its sole and
absolute discretion in each instance. The effectiveness of any such signatures
accepted by the Agent shall, subject to applicable law, have the same force and
effect as manual signatures and shall be binding on all parties. The Agent may
also require that any such signature be confirmed by a manually-signed hardcopy
thereof. Each party hereto hereby adopts as an original executed signature page
each signature page hereafter furnished by such party to the Agent (or an agent
of the Agent) bearing (with the consent of the Agent) a facsimile signature by
or on behalf of such party. Nothing contained in this Section shall limit the
provisions of Section 11.2.
12.8. Termination. The termination of this Agreement shall not affect
-----------
any rights of the Borrower, the Lenders or the Agent or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Obligations arising prior to or after such termination have been
irrevocably paid in full. The rights granted to the Agent for the benefit of
the Lenders under the Loan Documents shall continue in full force and
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effect, notwithstanding the termination of this Agreement, until all of the
Obligations have been paid in full after the termination hereof (other than
Obligations in the nature of continuing indemnities or expense reimbursement
obligations not yet due and payable, which shall continue) or the Borrower has
furnished the Lenders and the Agent with an indemnification satisfactory to the
Agent and each Lender with respect thereto. Notwithstanding the foregoing, if
after receipt of any payment of all or any part of the Obligations, any Lender
is for any reason compelled to surrender such payment to any Person because such
payment is determined to be void or voidable as a preference, impermissible
setoff, a diversion of trust funds or for any other reason, this Agreement shall
continue in full force and the Borrower shall be liable to, and shall indemnify
and hold the Agent or such Lender harmless for, the amount of such payment
surrendered until the Agent or such Lender shall have been finally and
irrevocably paid in full. The provisions of the foregoing sentence shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Agent or the Lenders in reliance upon such payment, and any such contrary
action so taken shall be without prejudice to the Agent or the Lenders' rights
under this Agreement and shall be deemed to have been conditioned upon such
payment having become final and irrevocable.
12.9. Indemnification; Limitation of Liability. (a) The Borrower
----------------------------------------
agrees to indemnify and hold harmless the Agent and each Lender and each of
their affiliates and their respective officers, directors, employees, agents,
and advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' fees) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation, or proceeding or preparation of defense in
connection therewith) the Loan Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Loans, except to the
extent such claim, damage, loss, liability, cost, or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
In the case of an investigation, litigation or other proceeding to which the
indemnity in this Section 12.9 applies, such indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by the
Borrower, its directors, shareholders or creditors or an Indemnified Party or
any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated. The
Borrower agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to it, any of its
Subsidiaries, any Guarantor, or any security holders or creditors thereof
arising out of, related to or in connection with the transactions contemplated
herein, except to the extent that such liability is found in a final non-
appealable judgment by a court of competent jurisdiction to have directly
resulted from such Indemnified Party's gross negligence or willful misconduct.
The Borrower agrees not to assert any claim against the Agent, any Lender, any
of their affiliates, or any of their respective directors, officers, employees,
attorneys, agents, and advisers, on any theory of liability, for special,
indirect, consequential, or punitive damages arising out of or otherwise
relating to the Loan Documents, any of the transactions contemplated herein or
the actual or proposed use of the proceeds of the Loans.
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(b) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 12.9 shall survive the payment in full of the Loans and all other
amounts payable under this Agreement.
12.10. Severability. If any provision of this Agreement or the other
------------
Loan Documents shall be determined to be illegal or invalid as to one or more of
the parties hereto, then such provision shall remain in effect with respect to
all parties, if any, as to whom such provision is neither illegal nor invalid,
and in any event all other provisions hereof shall remain effective and binding
on the parties hereto.
12.11. Entire Agreement. This Agreement, together with the other Loan
----------------
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto (except that those
provisions (if any) which by the express terms of the commitment letter dated as
of September 23, 1999, executed by Bank of America and BAS and accepted by the
Borrower, survive the closing of the Five Year Revolving Credit Facility and 364
Day Revolving Credit Facility, Letter of Credit Facility shall survive and
continue in effect).
12.12. Agreement Controls. In the event that any term of any of the
------------------
Loan Documents other than this Agreement conflicts with any express term of this
Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.
12.13. Usury Savings Clause. Notwithstanding any other provision
--------------------
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under applicable law shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest Lawful
Rate (as defined below), the outstanding amount of the Loans made hereunder
shall bear interest at the Highest Lawful Rate until the total amount of
interest due hereunder equals the amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect. In addition, if when the Loans made hereunder are repaid
in full the total interest due hereunder (taking into account the increase
provided for above) is less than the total amount of interest which would have
been due hereunder if the stated rates of interest set forth in this Agreement
had at all times been in effect, then to the extent permitted by law, the
Borrower shall pay to the Agent an amount equal to the difference between the
amount of interest paid and the amount of interest which would have been paid if
the Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of the Lenders and the Borrower to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts
for, charges, or receives any consideration which constitutes interest in excess
of the Highest Lawful Rate, then any such excess shall be cancelled
automatically and, if previously paid, shall at such Lender's option be applied
to the outstanding amount of the Loans made hereunder or be refunded to the
Borrower. As used in this paragraph, the term "Highest Lawful Rate" means the
maximum lawful interest rate, if any, that at any time or from time to time may
be contracted for, charged, or received under the laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which
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allow a higher maximum nonusurious interest rate than applicable laws now allow.
12.14. Payments. All principal, interest, and other amounts to be paid
--------
by the Borrower under this Agreement and the other Loan Documents shall be paid
to the Agent at the Principal Office in Dollars and in immediately available
funds, without setoff, recoupment, deduction or counterclaim. Subject to the
definition of "Interest Period" herein, whenever any payment under this
Agreement or any other Loan Document shall be stated to be due on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time in such case shall be included in the
computation of interest and fees, as applicable, and as the case may be.
12.15. Governing Law; Waiver of Jury Trial.
-----------------------------------
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE,
NOTWITHSTANDING THE EXECUTION OF THIS AGREEMENT OUTSIDE THE STATE OF
FLORIDA.
(b) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF COLLIER, STATE OF FLORIDA,
UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF
JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY
AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN
SECTION 12.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE
APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA.
(d) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE AGENT AND THE LENDERS
HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH
ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION,
SUIT OR PROCEEDING.
(e) THE BORROWER HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE
THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS
HEREOF IS AN INCONVENIENT FORUM.
12.16. Special Funding Option.
----------------------
(a) Notwithstanding anything to the contrary contained herein, any
Lender (for purposes of this Section 12.16, a "Granting
88
<PAGE>
Lender") may grant to a special purpose funding vehicle (for purposes of this
Section 12.16, an "SPC") the option to make, on behalf of such Granting Lender,
all or a portion of the Advances which such Granting Lender is obligated to make
(a "Funding Obligation") under the Five Year Revolving Credit Facility , the 364
Day Revolving Credit Facility and the Letter of Credit Facility, such option to
be exercisable in the sole discretion of the SPC; provided, however, that
notwithstanding the granting of such option to the SPC, or the exercise of such
option by the SPC:
(i) such Granting Lender's obligations under this Agreement and the
Loan Documents shall remain unchanged, including without limitation the
indemnification obligations of the Granting Lender pursuant to Section 11.5
------------
hereof;
(ii) such Granting Lender shall remain solely responsible to the
other parties hereto for the performance of all Funding Obligations;
(iii) the Borrower and the Lenders (other than the Granting Lender)
shall continue to deal solely and directly with such Granting Lender in
connection with such Granting Lender's rights and obligations under this
Agreement, and the Agent shall continue to deal directly with the Granting
Lender as agent for the SPC with respect to distribution of payments of
principal, interest and fees, notices of Conversion and Continuation and all
other matters;
(iv) such Granting Lender shall retain the sole right to (x) enforce
the obligations of the Borrower relating to its Loans, its Notes and its
Participations, and (y) to approve any amendment, modification or waiver of any
provision of this Agreement;
(v) shall not constitute as assignment to or participation of such
SPC of or in the Granting Lender's Commitments and Participations and
Obligations owing thereto;
(vi) such SPC shall not become a Lender hereunder;
(vii) such SPC shall not become obligated or committed to make
Advances; and
(viii) if such SPC elects not to exercise such option or otherwise
fails to make all or any part of an Advance, the Granting Lender shall retain
its Funding Obligation and be obligated to make the entire Advance or any
portion of such Advance not made by such SPC.
[Signatures on following pages]
89
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
made, executed and delivered by their duly authorized officers as of the day and
year first above written.
HEALTH MANAGEMENT ASSOCIATES, INC.
WITNESS:
____________________ By:_________________________________________
Name:_______________________________________
____________________ Title:______________________________________
BANK OF AMERICA, N.A.,
as Agent for the Lenders
WITNESS:
___________________ By:_________________________________________
Name:_______________________________________
___________________ Title:______________________________________
90
<PAGE>
BANK OF AMERICA, N.A.
WITNESS:
___________________ By:_________________________________________
Name:_______________________________________
___________________ Title:______________________________________
Lending Office for Base Rate Loans:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention:_____________________________
Telephone: (704) 386-
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
Bank of America, N.A.
ABA#: 053000196
---------------------------------
Account No.: 1366212250600
--------------------------
Reference: Health Management Associates
----------------------------
Attention: Corporate Credit Services
----------------------------
Lending Office for Eurodollar Rate Loans:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention:_____________________________
Telephone: (704) 386-
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
Bank of America, N.A.
ABA#___________________________________
Account No.:___________________________
Reference:_____________________________
Attention:_____________________________
91
<PAGE>
EXHIBIT 21.1
Subsidiaries of Registrant
--------------------------
Subsidiary
----------
Hospital Management Associates, Inc., a Kentucky Corporation
Health Management Associates, Inc., a Kentucky Corporation
Sebring Hospital Management Associates, Inc., a Florida Corporation
Mooresville Hospital Management Associates, Inc., a North Carolina Corporation
Marathon HMA, Inc., a Florida Corporation
Louisburg HMA, Inc., a North Carolina Corporation
Orlando HMA, Inc., a Florida Corporation
Biloxi HMA, Inc., a Mississippi Corporation
Health Management Investments, Inc., a Delaware Corporation
Gaffney HMA, Inc., a South Carolina Corporation
Durant HMA, Inc., an Oklahoma Corporation
Van Buren HMA, Inc., an Arkansas Corporation
Hamlet HMA, Inc., a North Carolina Corporation
Health Management Associates of West Virginia, Inc., a West Virginia Corporation
Paintsville Hospital Company, a Kentucky Corporation
Coffee Hospital Management Associates, Inc., a Tennessee Corporation
Riverview Regional Medical Center, Inc., an Alabama Corporation
Topeka HMA, Inc., a Kansas Corporation
Haines City HMA, Inc., a Florida Corporation
Natchez Community Hospital, Inc., a Mississippi Corporation
Sebastian Hospital, Inc., a Florida Corporation
Punta Gorda HMA, Inc., a Florida Corporation
Hartsville HMA, Inc., a South Carolina Corporation
Statesboro HMA, Inc., a Georgia Corporation
Clarksdale HMA, Inc., a Mississippi Corporation
Midwest City HMA, Inc., an Oklahoma Corporation
Brandon HMA, Inc., a Mississippi Corporation
Anniston HMA, Inc., an Alabama Corporation
Little Rock HMA, Inc., an Arkansas Corporation
Meridian HMA, Inc., a Mississippi Corporation
Meridian HMA Nursing Home, Inc., a Mississippi Corporation
River Oaks Hospital, Inc., a Mississippi Corporation
ROH, Inc., a Mississippi Corporation
River Oaks Management Company, a Mississippi Corporation
Hernando HMA, Inc., a Florida Corporation
Jackson HMA, Inc., a Mississippi Corporation
Key West HMA, Inc., a Florida Corporation
Key West HMA Physician Management, Inc.
Lancaster HMA, Inc., a Pennsylvania Corporation
Lancaster HMA Physician Management, Inc., a Pennsylvania Corporation
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 Nos. 33-43290, 33-65380, 33-65382 and 33-80433) pertaining to Health
Management Associates, Inc. Retirement Savings Plan and various employee and
directors stock option plans of Health Management Associates, Inc. of our report
dated October 22, 1999 (except for Note 3 as to which the date is November 30,
1999) with respect to the consolidated financial statements and schedule of
Health Management Associates, Inc. included in the Annual Report (Form 10-K) for
the year ended September 30, 1999.
ERNST & YOUNG LLP
Atlanta, Georgia
December 20, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to the Registration Statement (Form S-3 No. 333-46707) of Health Management
Associates, Inc. and in the related Prospectus of our report dated October 22,
1999,(except for Note 3 as to which the date is November 30, 1999) with respect
to the consolidated financial statements and schedule of Health management
Associates, Inc. included in the annual Report (Form 10-K) for the year ended
September 30, 1999.
ERNST & YOUNG LLP
Atlanta, Georgia
December 20, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-4 No. 333-41953) of Health Management Associates, Inc. and in the related
Prospectus of our report dated October 22, 1999,(except for Note 3 as to which
the date is November 30, 1999) with respect to the consolidated financial
statements and schedule of Health Management Associates, Inc. included in the
Annual Report (Form 10-K) for the year ended September 30, 1999.
ERNST & YOUNG LLP
Atlanta, Georgia
December 20, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Company's September 30, 1999 Form 10-K
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 12,926
<SECURITIES> 0
<RECEIVABLES> 426,780
<ALLOWANCES> 114,792
<INVENTORY> 32,038
<CURRENT-ASSETS> 425,472
<PP&E> 1,142,456
<DEPRECIATION> 229,967
<TOTAL-ASSETS> 1,517,300
<CURRENT-LIABILITIES> 175,221
<BONDS> 401,522
0
0
<COMMON> 2,534
<OTHER-SE> 887,989
<TOTAL-LIABILITY-AND-EQUITY> 1,517,330
<SALES> 0
<TOTAL-REVENUES> 1,355,707
<CGS> 0
<TOTAL-COSTS> 876,232
<OTHER-EXPENSES> 94,424
<LOSS-PROVISION> 130,013
<INTEREST-EXPENSE> 8,385
<INCOME-PRETAX> 246,653
<INCOME-TAX> 96,808
<INCOME-CONTINUING> 149,845
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149,845
<EPS-BASIC> .60
<EPS-DILUTED> .59
</TABLE>
