PART I
Item 1. Business
The Company
Healthtrust, Inc. - The Hospital Company ("Healthtrust"
or the "Company") is one of the largest providers of
health care services in the United States, delivering a
full range of inpatient, outpatient and other health
care services principally through its affiliated
hospitals. At October 31, 1994, the Company operated
116 acute care hospitals, all of which are owned or
leased by the Company through its subsidiaries or joint
venture arrangements. The Company is also an investor,
through joint ventures, in four other acute care
hospitals. The Company's affiliated hospitals are
located in rural, suburban and urban communities in 22
southern and western states. The Company's affiliated
hospitals generally provide a full range of inpatient
and outpatient health care services, including
medical/surgical, diagnostic, obstetric, pediatric and
emergency services. Many of the Company's affiliated
hospitals also offer certain specialty programs and
services, including occupational medicine programs,
home health care services, skilled nursing services,
physical therapy programs, rehabilitation services,
alcohol and drug dependency programs and selected
mental health services. The health care services
provided by each hospital are based upon the local
demand for such services and the ability to provide
such services on a competitive basis.
The Company was incorporated in 1985 as a subsidiary of
Hospital Corporation of America (together with its
subsidiaries, "HCA", a predecessor of Columbia/HCA
Healthcare Corporation) and had no significant assets,
liabilities or operations prior to its formation in
September 1987 through the acquisition of a group of
hospitals and related assets from HCA. In February
1994, HCA merged with Columbia Hospital Corporation to
form Columbia/HCA Healthcare Corporation ("Columbia").
Recent Events
On October 4, 1994, the Company, Columbia and COL
Acquisition Corporation, a wholly-owned subsidiary of
Columbia ("Merger Sub"), entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to
which Merger Sub will merge with and into the Company
and the Company will survive as a wholly-owned
subsidiary of Columbia (the "Merger"). Upon the
effectiveness of the Merger, each outstanding share of
Healthtrust common stock will be converted into the
right to receive 0.88 of a share of Columbia common
stock. Consummation of the Merger is subject to
certain conditions, including, among others, approval
by the shareholders of the Company and Columbia and the
expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. Shareholders meetings to
vote on the proposed merger transaction are anticipated
during the first quarter of 1995.
After the merger, Columbia will own and operate 311
hospitals with approximately 60,000 licensed beds and
125 outpatient centers in 37 states and 2 foreign
countries. The combined companies will have
approximately 170,000 employees and total assets and
annual revenues of over $15 billion. It is anticipated
that by leveraging the economies of scale and
collective strengths and efficiencies resulting from
the combination, the Merger will enhance each Company's
strategy of controlling healthcare costs while
maintaining quality patient care.
Strategy
The Company's principal objective is to be a
significant and growing provider of low cost, high
quality health care services in the markets in which it
operates. Although the means of achieving this
objective will vary depending upon the local market and
the relative position of the Company's affiliated
hospitals and other health care businesses in that
market, the strategies employed generally include (i)
expanding market share through improvements in quality
and reductions in cost for existing services and
through the provision of new or expanded services to
meet underserved needs, (ii) participating in quality
health care delivery networks through affiliations,
joint ventures, partnerships and other arrangements
with physicians, other hospitals and providers of other
health care related services, (iii) continuously
improving operating and financial performance, and (iv)
developing the resources needed by management to
operate more effectively in the changing health care
environment. In addition, the Company has pursued and
will continue to pursue other opportunities to grow
through the acquisition, construction or development of
hospital facilities or other health care related
businesses that are or can be positioned competitively
in their markets.
Consistent with the Company's strategy, in May 1994
Healthtrust acquired EPIC Holdings, Inc. ("EPIC
Holdings" and, together with its subsidiaries,
"EPIC")(the "EPIC Acquisition"). EPIC is a health care
services provider that owns and operates 32 general
acute care hospitals providing inpatient, outpatient
and other specialty services in 10 southern and western
states. During fiscal 1994, the Company also acquired
Nashville Memorial Hospital in Madison, Tennessee, Holy
Cross-Jordan Valley Hospital in Jordan Valley, Utah and
St. Benedict's Hospital in Ogden, Utah. These
acquisitions enhance the Company's presence in
geographic areas it presently serves and provide access
to new markets. In addition, the acquisitions will
allow the Company to expand its health care delivery
capabilities in such areas as home health care,
geropsychiatric care, rehabilitation services and
physical therapy services, thereby enhancing the
Company's development of integrated health care
delivery networks designed to provide a full range of
health care services to managed care plans, self-
insured employers and government payors.
In connection with the EPIC Acquisition, the Company
completed (i) the public offering of $200 million
aggregate principal amount of 10 1/4% Subordinated Notes
due 2004 and 5,980,000 shares of Common Stock (par
value $.001 per share) and (ii) the refinancing of the
Company's bank credit facility to provide for aggregate
commitments of up to $1.2 billion.
The Company operates its affiliated hospitals and other
health care businesses in three general types of market
settings: (i) small rural areas where the Company's
hospital is the only hospital in its community, (ii)
other generally rural areas where the Company's
hospital is one of two or three hospitals in its
community, and (iii) urban and suburban areas where the
Company's facility or facilities compete with a larger
number of other providers in the market. Approximately
37% of the Company's affiliated hospitals are located
in small rural communities, approximately 22% are
located in communities with two or three hospital
providers and approximately 41% of the Company's
hospitals are located in urban and suburban areas.
To meet the Company's objectives in the smaller rural
areas, the Company's affiliated hospitals generally
work in cooperation with local physicians and the
community to identify underserved needs and to meet
those needs in a cost effective manner. Examples
include the establishment of rural health clinics and
home health agencies, the introduction of new clinical
technologies and the recruitment of physicians to these
communities. In addition, such hospitals, together
with their local physicians, network with larger
tertiary care facilities to provide easy access to
specialized services which cannot be efficiently
provided in the rural community. In areas where the
Company's affiliated hospital has one or two hospital
competitors in the community, the Company's affiliated
hospitals work closely with their physicians to
position themselves as the lower cost, higher quality
provider in the community. Such facilities expand or
add services to gain market share and network with
larger tertiary hospitals and other providers to give
patients access to a broad continuum of care including
those services not provided by the local Healthtrust
affiliated facility. In urban and suburban areas, the
Company's affiliated hospitals have formed or jointed
physician hospital organizations ("PHOs") medical
service organizations ("MSOs") and other networks of
quality health care providers in order to offer one
package, to the buyers of care, a full range of health
care services over a broader geographic area. In some
markets, such networks may also develop programs for
sharing the financial risk of health care delivery.
Each of the Company's affiliated hospitals has also
implemented, and will continue to implement, programs
to maintain and enhance the range and quality of its
health care services. The Company uses patient and
physician surveys, employee training and education
programs relating to continuous quality improvement
methods and incentive compensation programs to enhance
the quality of care in its hospitals. The Company's
hospitals continue to focus on new or expanded programs
and cooperative relationships, affiliations and
agreements with its physicians to assist the hospitals
staff physicians in developing their practices based on
the physicians' needs and the needs of the community.
Such programs and cooperative relationships, like PHOs
and MSOs, also assist the hospitals and their staff
physicians in responding to the expected increased
significance of managed care purchasers in their
markets. Each hospital also has implemented physician
recruitment programs to increase and improve the
availability of physician services in the local market
and many now offer a variety of practice management
services to assist physicians in establishing and
managing their practices.
As part of the Company's strategy to increase its
market share by expanding its health care service
delivery capabilities, the Company has focused
principally on the expansion and improvement of
outpatient facilities and services to take advantage of
improved technologies and treatments, and on the
expansion of service delivery capability in such areas
as home health care services, skilled nursing care,
rehabilitation services, emergency care, women's health
services, cardiology, less invasive surgery,
diagnostics, occupational medicine programs, physical
therapy programs, preventative care services, wellness
services and other areas of specialized care for which
there is a defined need in the local community. In
implementing such programs, the Company works with
members of the local communities in which its hospitals
are located, especially local physicians and employers,
to be sure that these new services meet the communities
needs.
To further the Company's objectives, the Company's
affiliated hospitals continue to develop their ability
to efficiently deliver services to patients covered by
managed care contracts or by government payors
providing a fixed reimbursement for services. In order
to increase net revenue from these managed care and
government payors, many of the Company's affiliated
hospitals have developed (i) improved negotiation and
tracking methods for managed care contracts, (ii)
improved patient management and reporting procedures,
(iii) programs for the collection and sharing of
utilization and patient-mix data with physicians, other
providers, employers and payors and (iv) strategic
networking relationships with physicians, other
providers, employers and/or managed care programs
serving the local communities in which the Company's
hospitals are located.
Each of the Company's affiliated hospitals also
continue to implement a variety of cost reduction
programs. Such programs have included and are expected
to continue to include (i) more careful control of
staffing levels and expense, (ii) the renegotiation of
purchasing contracts and revision of purchasing
practices to take better advantage of volume purchasing
and low cost, quality products, (iii) more controlled
use of contract nursing, (iv) more efficient billing
and collection procedures, (v) more effective
management of the Company's own medical benefit costs
and (vi) the reduction or elimination of certain
services that no longer efficiently meet the needs of
the community. In addition, the Company's cost
reduction programs are increasingly focused on better
management of resource consumption. Since physicians
control what services or supplies are ordered for a
particular patient, the Company has made available to
its physicians better clinical and other information to
help improve the efficiency and cost-effectiveness of
their practices. Similarly, the Company's facilities
are focused on the use of more generic pharmaceutical
and surgical supplies and the general simplification of
supplies to only a limited variety of low cost, quality
products. With respect to labor expense, many of the
Company's hospitals are redesigning the manner in which
clinical and administrative work is performed, changing
the mix of skills required for various tasks and
consolidating traditionally fragmented departments
within the hospital.
The Company believes these and other programs along
with price increases have contributed, in part, to the
growth of the Company's net operating revenue, which
increased from $1,856.9 million in fiscal 1990 to
$2,970.0 million in fiscal 1994, and the improvement in
the operating margin from 19.9% for fiscal 1990 to
20.5% for fiscal 1994.
The Company believes that the success of each of its
hospitals is directly related to the quality of its
local management teams and other hospital employees.
The initiative, responsibility and accountability of
the local management teams have been emphasized through
significant incentive compensation programs based
primarily on the financial performance of, and the
quality of care delivered by, each hospital.
Similarly, the Company promotes the concept of
employee-ownership through its retirement program to
improve employee responsiveness and efficiency in
delivering services to patients and physicians and in
implementing the hospitals' programs. The Company's
retirement program owns approximately 28% of the Common
Stock outstanding.
In addition, the Company believes that it must continue
to develop and have access to the tools local
management needs to operate effectively in the changing
health care environment. The Company has invested, and
expects to continue to invest, in new or improved
information systems designed to provide better
information concerning clinical outcomes, resource
consumption and the cost of services provided.
Similarly, the Company has developed or is developing
the resources and expertise both within the Company and
with preferred outside vendors to manage its existing
and new services more efficiently.
Hospital Operations
The Company's hospitals generally operate in different
geographical markets and, consequently, under differing
market conditions. Approximately 28% of the Company's
hospitals are located in Texas and approximately 34%
are located in Florida, Louisiana, Tennessee and Utah.
Each Company hospital is managed on a day-to-day basis
by a hospital chief executive officer. The medical,
professional and ethical practices (including the
performance of medical and surgical procedures) of each
of the Company's hospitals generally are supervised and
regulated by the hospital's Board of Trustees, (which
includes practicing physicians, members of the
community and representatives of Company management),
and by the hospital's medical staff. The Company
provides a variety of management services to its
hospitals, the most significant of which include
information systems support, national purchasing
contracts, physician recruitment assistance, government
reimbursement assistance, strategic planning and
central financial and other systems.
The following table sets forth certain operating
statistics of the Company's hospitals for each of the
periods indicated. <PAGE>
<TABLE>
<CAPTION>
Year Ended August 31,
1994 1993 1992 1991 1990
(Dollars in millions)
<C> <C> <C> <C> <C>
Historical Operating Data:
Number of hospitals (at year end) 116 81 81 85 86
Bed capacity (1) 12,466 11,233 11,374 11,607 12,022
Gross revenue: (2)
Inpatient 3,154.9 $ 2,594.2 $2,439.3 $2,148.6 $1,994.4
Outpatient 1,625.8 $ 1,181.6 $1,021.9 $814.2 $642.6
Net operating revenue (3) 2,970.0 $ 2,394.6 $2,265.3 $2,025.7 $1,856.9
Patient days 1,732,610 1,541,536 1,616,340 1,658,061 1,792,461
Adjusted patient days (4) 2,625,426 2,243,677 2,293,453 2,286,357 2,369,995
Average length of stay (days) 5.2 5.4 5.5 5.7 5.8
Admissions 333,200 284,606 291,599 293,344 307,758
Adjusted admissions (5) 504,898 414,239 413,755 404,502 406,918
Occupancy rate 38% 38% 39% 39% 41%
Operating margin (6) 20.5% 21.1% 20.7% 20.2% 19.9%
Same Hospitals Operating Data: (7)
Gross revenue: (2)
Inpatient 2,622.8 $ 2,458.5 $2,240.9 $1,938.7 $1,706.3
Outpatient 1,310.2 $ 1,128.2 $ 948.5 $741.1 $558.1
Net operating revenue (3) 2,432.9 $ 2,271.5 $2,092.0 $1,835.3 $1,599.3
Patient days 1,436,797 1,470,713 1,517,226 1,531,693 1,565,793
Adjusted patient days (4) 2,154,520 2,145,598 2,159,393 2,115,382 2,077,163
Average length of stay (days) 5.1 5.4 5.5 5.6 5.7
Admissions 281,908 272,970 275,085 273,326 274,834
Adjusted admissions (5) 422,729 398,231 391,515 377,192 364,340
Occupancy rate 37% 38% 39% 40% 41%
Operating margin (6) 22.4% 21.8% 21.2% 20.7% 20.4%
</TABLE>
(1)Average number of licensed beds during the period. Licensed beds
are those beds for which a facility has been granted approval to
operate from the appropriate state licensing agency.
(2)Gross revenue represents the hospitals' standard charges for
services performed prior to any contractual adjustments and policy
discounts.
(3)Net operating revenue represents gross revenue less any
contractual adjustments and policy discounts.
(4)Represents actual patient days adjusted to include outpatient and
emergency room services by multiplying actual patient days by the
sum of gross inpatient and patient revenue and dividing the result
by gross inpatient revenue.
(5)Represents actual admissions adjusted to include outpatient and
emergency room services by multiplying actual admissions by the sum
of gross inpatient revenue and gross outpatient revenue and dividing
the result by gross inpatient revenue.
(6)Operating margin for each period presented refers to the result
obtained by dividing (i) net operating revenue less hospital service
costs by (ii) net operating revenue.
(7)Same hospitals operating data represents the operations of the 77
hospitals owned for all periods presented, and excludes the
operations of acquired and divested hospitals.
Consistent with industry trends, the Company's
hospitals have experienced a significant shift from
inpatient to outpatient care. Outpatient utilization
has increased significantly over the past three years.
Inpatient volume utilization has declined nationwide
over the same period. Healthtrust's growth in
outpatient gross revenue and more intensive utilization
of ancillary services, along with inpatient price
increases, have resulted in net revenue growth despite
decreases in inpatient volume. The Company is unable
to predict whether such trends will continue.
Health Care Industry Overview
According to industry sources, there are approximately
5,300 general acute care hospitals in the United
States. Investor-owned hospitals account for
approximately 720 or 14% of these hospitals. The
remaining hospitals are operated as not-for-profit
institutions or are government sponsored. According to
Commerce Department projections, health care
expenditures are expected to grow at a 10% to 14%
annual rate through 1995, despite industry-wide cost
containment pressures. These Commerce Department
health care spending projections assume that continued
cost containment measures will be more than offset by
demands resulting from current demographic trends, such
as the aging of the population, growth in income,
general inflation, new technology and diseases such as
AIDS.
Over the past decade, many hospitals have closed due to
cost containment pressures, changing technology,
changes in regulations and reimbursement, changes in
physician practice patterns and other factors. Another
result of these changes has been a significant shift
from inpatient to outpatient care. Outpatient
utilization, as reflected in outpatient gross revenue
and adjusted admissions, has increased significantly
over the past several years. The Company is unable to
predict whether such trends will continue. See
"Hospital Operations" and "Management's Discussion and
Analysis of Financial Condition and Results of
Operations."
During the past several years, the major third-party
payors of hospital services (Medicare, Medicaid and
private health care insurance companies) have
undertaken substantial revisions in their payment
methodologies and monitoring of health care
expenditures in order to contain health care costs.
Instead of reimbursing health care providers for
retrospectively determined actual costs, Medicare now
reimburses for inpatient services based on fixed
prospectively determined payments keyed to regional and
national rates under a system of specific diagnosis
related groups of services ("DRGs") determined by a
patient's principal diagnosis. Consequently, hospitals
bear the risk of providing care in that they receive a
specific, fixed reimbursement for each treatment
regardless of actual cost. This payment system was
established to control costs and reward hospitals for
efficient treatment of Medicare patients (which
patients, on an industry-wide basis, currently
represent approximately 50% of an average for-profit
hospital's gross revenue). The introduction of these
Medicare cost containment incentives, combined with
closer monitoring of health care expenditures by both
private health insurers and employers, has resulted
over the past several years in increased contractual
adjustments and policy discounts to hospitals' standard
charges for services performed, significant declines in
inpatient hospital utilization and increases in
outpatient hospital utilization. In addition, due in
part to these initiatives, managed care organizations,
such as health maintenance organizations ("HMOs") and
preferred provider organizations ("PPOs"), represent an
increasing segment of health care payors. For a more
complete discussion see "Reimbursement".
Sources of Revenue
The sources of the Company's hospital revenue are
charges related to the medical support activities
performed by the hospitals such as x-rays,
physiotherapy and laboratory procedures, and basic
charges for the hospital room and related services such
as general nursing care and meals.
The Company's hospitals receive payments for health
care services (i) from the federal Medicare program for
certain elderly and disabled patients, (ii) the federal
and state funded Medicaid programs, administered by the
states for certain indigent patients, (iii) private
insurance carriers such as Blue Cross Insurance
Companies ("Blue Cross") or other private insurance
plans for their insureds, (iv) employers, (v) managed
care programs and (vi) patients directly. The single
largest patient group is Medicare beneficiaries. The
following table sets forth the approximate percentages
of total net operating revenue of the Company's
hospitals from the sources and for the periods
indicated:
Year Ended August 31,
1994 1993 1992
Medicare........................ 36% 33% 33%
Medicaid........................ 9 9 9
Private Insurance and Patients.. 55 58 58
Total........................... 100% 100% 100%
Amounts received under Medicare, Medicaid and cost-
based Blue Cross and from managed care organizations
such as HMOs and PPOs, generally are less than the
hospitals' charges for the services provided. Patients
are generally not responsible for any difference
between hospital charges and amounts reimbursed under
these programs for such services, but are responsible
to the extent of any exclusions, deductibles or co-
insurance features of their coverage. The Company's
hospitals continue to experience an increase in the
amount of such exclusions, deductibles and co-
insurance. See "Reimbursement."
As with the hospital industry in general, the primary
component of the Company's working capital is accounts
receivable arising from services provided to its
patients. Payments on accounts receivable are made by
third-party payors (Medicare, Medicaid, Blue Cross, and
other private insurance carriers and insurance plans)
and directly by patients. The Company believes that
its average collection period is consistent with
industry experience.
Following the initiative taken by the federal
government to control health care costs, other major
purchasers of health care, including states, insurance
companies and employers, are increasingly negotiating
the amounts they will pay for services performed rather
than simply paying health care providers the amounts
billed. Managed care organizations such as HMOs and
PPOs, which offer prepaid and discounted medical
service packages, represent an increasing segment of
health care payors, thereby tending to reduce the
historical rate of growth of hospital revenues.
Medical Staffs and Employees
At August 31, 1994, approximately 8,380 active licensed
physicians were members of the medical staffs of the
Company's hospitals. A patient is usually admitted to
a hospital only at the request of a member of the
medical staff. Medical staff members are generally
independent contractors and not employees of a
hospital. Medical staff members may also serve on the
medical staffs of hospitals not owned by the Company,
and each may terminate his or her connection with a
Company-owned hospital at any time.
Wages and employee benefits constitute a significant
portion of the Company's hospital service costs. As of
August 31, 1994, the Company and its subsidiaries
employed approximately 41,000 persons full-time and
approximately 14,000 persons part-time. One of the
Company's hospitals is a party to a labor contract with
a union covering approximately 100 employees and
another of the Company's hospitals is a party to a
labor contract with a union representing approximately
85 employees. The Company experiences union
organizational efforts in its hospitals and other
facilities from time to time, but does not expect such
efforts to materially affect its future operations.
The Company considers its labor relations with its
employees to be good. The Company generally has not
experienced material difficulty in recruiting and
retaining employees, including nurses and professional
staff members.
Directors and Executive Officers
Set forth below are the names, ages, positions and
certain other information concerning the current
directors and executive officers of the Company.
Name Age Position
R. Clayton McWhorter 61 Chairman of the Board,
Chief Executive Officer and
President; Director
W. Hudson Connery, Jr. 45 Senior Vice President and
Chief Operating Officer;
Director
Michael A. Koban,Jr. 43 Senior Vice President;
Director
Harry N. Beaty, M.D. 62 Director
Alethea O. Caldwell 53 Director
Robert F. Dee 70 Director
Richard W. Hanselman 67 Director
William T. Hjorth 57 Director
Donald S. MacNaughton 77 Director
Kenneth C. Donahey 44 Senior Vice President and Controller
Richard E. Francis, Jr. 40 Senior Vice President
Philip D. Wheeler 38 Senior Vice President, General
Counsel and Secretary
Clifford G. Adlerz 40 Vice President
O. Ernest Bacon 57 Vice President
Yolanda D. Chesley 44 Vice President
Edward J. Driesse 47 Vice President
James M. Fleetwood, Jr. 47 Vice President
William L. Hough 43 Vice President
Jone Law Koford 38 Vice President
Robert M. Martin 45 Vice President
Dana C. McLendon, Jr. 52 Vice President
R. Parker Sherrill 50 Vice President
David L. Smith 39 Vice President
Robert A. Vraciu 47 Vice President
Kent H. Wallace 39 Vice President
Mr. McWhorter has been Chairman and Chief Executive
Officer of Healthtrust since its formation in 1987 and
was elected to the additional office of President of the
Company in 1991. Mr. McWhorter served as President and
Chief Operating Officer of HCA from 1985 to 1987, and as
a Director of HCA from 1983 to 1987. Mr. McWhorter
joined HCA in 1970 as Administrator of Palmyra Park
Hospital in Albany, Georgia. He was named Division Vice
President--Eastern Region in 1973, Senior Vice President
in 1976, Executive Vice President--Domestic Operations in
1980 and Executive Vice President--Operations in 1983.
Mr. McWhorter is a director of Third National Bank in
Nashville and Ingram Industries, Inc. and is a member of
the Board of the Foundation for State Legislatures. He
is also past Chairman of the Federation of American
Health Systems, a past member of the Board of Trustees of
the American Hospital Association, a Fellow of the
American College of Healthcare Executives and a Trustee
of the Committee for Economic Development.
Mr. Connery was elected a Director of the Company in
1992. He became a Vice President of the Company in 1989
and Senior Vice President and Chief Operating Officer of
the Company in 1991. Mr. Connery was Director of
Development for the Company from 1987 to 1989 and
Director, Acquisitions and Development, for HCA from 1983
to 1987. From 1981 to 1983, he was Administrator of
Margate General Hospital in Margate, Florida. He joined
HCA in 1981.
Mr. Koban was elected a Director of the Company in 1993.
Mr. Koban became Vice President and Treasurer of the
Company in 1987 and Senior Vice President for finance in
1992. He was Treasurer of HCA from 1985 to 1987 and
Assistant Treasurer from 1980 to 1985. Mr. Koban joined
HCA in 1976.
Dr. Beaty was elected a Director of the Company in 1993.
Dr. Beaty has been a Professor of Medicine and Dean of
the Northwestern University Medical School since 1983.
He is on the attending medical staff of Northwestern
Memorial Hospital and on the consulting staff of Veterans
Administration Lakeside Medical Center and is also
President of Northwestern Medical Faculty Foundation, an
academic multiple group practice with over 400
physicians. Dr. Beaty is a diplomat of the American
Board of Internal Medicine and a Fellow of the American
College of Physicians. Dr. Beaty is a member of the
American Federation of Clinical Research, the American
Medical Association, the American Society for Clinical
Investigation, the American Society for Microbiology and
the American Society of Internal Medicine. Dr. Beaty is
past Chairman of the Association of American Medical
Colleges' Council of Deans and Executive Council and
served on its Administrative Board before his election to
Chairman. He is also a member of the Board of Directors
of Becton, Dickinson and Company.
Ms. Caldwell was elected a Director of the Company in
1992. Ms. Caldwell is currently President and COO of
Managed Health Network, Inc. Prior thereto she was
Executive Vice President for Blue Cross of California;
Director of the Arizona Department of Health Services
from 1991 to 1993; President and Chief Executive Officer
of Ancilla Systems Incorporation in Chicago, Illinois
from 1987 to 1991; Chief Executive Officer of University
Medical Center Corporation of Tucson, Arizona from 1984
to 1987; and Executive Assistant Director and Chief
Operating Officer of University of California, Irvine
Medical Center from 1980 to 1984. She serves on the
Board of Managed Health Network; The National Board of
Advisors for the College of Business and Public
Administration at he University of Arizona and is a
Fellow in the American College of Health Care Executives.
Mr. Dee was elected a Director of the Company in 1992.
Mr. Dee retired in 1987 from SmithKline Beckman
Corporation (a predecessor of SmithKline Beecham
Corporation) having served as its Chairman of the Board
from 1976 to 1987 and as its Chief Executive Officer and
President from 1972 to 1982. Mr. Dee is a director of
United Technologies Corporation, Air Products and
Chemicals, Inc., Kabi Pharmacia and Volvo North America
Corporation. He also serves on the Board of Directors of
the U.S. Council for International Business and the
Committee for Economic Development and is a member of the
Business Council, The Conference Board and the Management
Executive's Society.
Mr. Hanselman was elected a Director of the Company in
1987. Mr. Hanselman is currently a private investor.
From 1981 to 1986, he was Chairman, President and Chief
Executive Officer of Genesco, Inc., a diversified
footwear and apparel business. Prior thereto, he held
senior management positions with Beatrice Companies,
Inc., Samsonite Corporation and RCA Corporation.
Mr. Hanselman is a director of Becton, Dickinson and
Company, Arvin Industries, Inc., The Bradford Funds, IMCO
Recycling, Inc., Foundation Health Corporation, Benson
Eye Corp. and Daisy Manufacturing. Mr. Hanselman is also
a Trustee of the Committee for Economic Development.
Mr. Hjorth was elected a Director of the Company in 1990.
Mr. Hjorth is currently a private investor. He was
Chairman, Chief Executive Officer and President of
Equicor-Equitable HCA Corporation from 1988 to 1990 when
Equicor was acquired by another company. From 1987 to
1988, he held various senior executive positions with
Equicor including Chief Financial Officer and Chief
Operating Officer. Prior thereto, he served in various
management capacities with Clark Equipment Company from
1980 to 1986 (including Senior Vice President, Chief
Financial Officer and Director) and with Chrysler
Corporation from 1964 to 1980. Mr. Hjorth is a member of
the Board of Directors of Coventry Corporation and
Managed Health Network, Inc.
Mr. MacNaughton has served as Chairman of the Executive
Committee of Healthtrust since its formation in 1987. He
retired as an employee of Healthtrust in 1991.
Mr. MacNaughton joined HCA in 1978 as Chairman and Chief
Executive Officer. He continued to serve as Chief
Executive Officer of HCA until 1982, Chairman of the
Board until 1985 and as Chairman of the Executive
Committee until 1987. Prior to 1978, Mr. MacNaughton was
Chairman and Chief Executive Officer of The Prudential
Insurance Company of America, where he served in various
management capacities for 23 years, including nine years
as Chairman and Chief Executive Officer. Mr. MacNaughton
is a member of The Business Council, a member of the
Board of Trustees of Vanderbilt University and a member
of the Board of Directors of Financial Securities
Advisers, Inc.
Mr. Donahey became Vice President and Controller of the
Company in 1987 and a Senior Vice President in April
1993. He was Vice President--Operations and Controller
of HCA from 1986 to 1987. Mr. Donahey joined HCA in
1977, became Director--Financial Support in 1981, and
Assistant Vice President and Controller--Business
Development in 1985. Prior to joining HCA, Mr. Donahey
was a senior auditor with Genesco, Inc.
Mr. Francis became a Vice President of the Company in
1990 and Senior Vice President for development in 1992.
Mr. Francis was a Director of Development of the Company
from 1987 to 1990 and a Director, Acquisition and
Development, for HCA from 1983 to 1987. Prior to joining
HCA, he was Vice President of MedAmerican Health System
and Miami Valley Hospital in Dayton, Ohio.
Mr. Wheeler became a Vice President of the Company in
1990 and a Senior Vice President in 1993. Mr. Wheeler
joined the Company in 1988 as General Counsel and
Secretary. Prior thereto, he was Senior Counsel with HCA
from 1984 to 1988 and associated with the predecessor of
the law firm of Chadbourne & Parke from 1981 to 1984.
Mr. Adlerz became a Vice President of the Company in
1992. Mr. Adlerz served as Chief Executive Officer of
the Company's South Bay Hospital in Sun City Center,
Florida from 1987 to 1992 and Associate Administrator at
Bayonet Point/Hudson Medical Center in Hudson, Florida
from 1985 to 1987. Prior thereto, Mr. Adlerz was
Assistant Administrator at North Beach Medical Center in
Fort Lauderdale, Florida.
Mr. Bacon became a Vice President of the Company in 1992.
Mr. Bacon served as Chief Executive Officer of the
Company's Lanier Park Regional Hospital from 1990 to
1992. Mr. Bacon previously served as Chief Executive
Officer of Hamilton Medical Center in Dalton, Georgia
from 1988 to 1990, Chief Executive Officer of Park View
Medical Center in Nashville, Tennessee from 1986 to 1988
and Chief Executive Officer of West Paces Ferry Hospital
in Atlanta, Georgia from 1979 to 1986.
Ms. Chesley became a Vice President of the Company in
1992. She was Director of Compensation and Benefits from
1991 to 1992 and Director of Compensation from 1987 to
1991. Ms. Chesley served as Director of Salary
Administration for HCA from 1985 to 1987, Manager of
Salary Administration from 1983 to 1985 and Senior
Compensation Analyst from 1982 to 1983. Prior to joining
HCA, Ms. Chesley was Manager of Compensation for
Provident Life Insurance Company.
Mr. Driesse became a Vice President of the Company in
1993. He served as senior partner in IBM's worldwide
consulting practice in Dallas, Texas from 1991 to 1993.
Prior thereto, Mr. Driesse was the Site Information
Systems Manager for IBM in Dallas, Texas from 1989 to
1991 and Manager of Information Systems planning and
strategy from 1984 to 1989.
Mr. Fleetwood became a Vice President of the Company in
1992. Mr. Fleetwood served as Chief Executive Officer of
the Company's Plantation General Hospital from 1989 to
1992. Prior thereto, Mr. Fleetwood served as Chief
Executive Officer at Coral Reef Hospital in Miami,
Florida from 1987 to 1989, Chief Executive Officer at
Larkin General Hospital in South Miami, Florida from 1980
to 1987 and prior thereto as Assistant Administrator of
Coral Gables Hospital in Coral Gables, Florida from 1978
to 1980.
Mr. Hough became a Vice President of the Company in 1990.
Mr. Hough was the Chief Executive Officer of the
Company's Bayshore Medical Center in Pasadena, Texas from
1987 to 1990 and Administrator of Gulf Coast Hospital in
Baytown, Texas from 1985 to 1987. Prior thereto, he was
Chief Financial Officer for Pasadena Bayshore Medical
Center and Park West Hospital in Knoxville, Tennessee and
a certified public accountant at the predecessor of Ernst
& Young LLP.
Ms. Koford became a Vice President of the Company in
1992. Ms. Koford was Chief Executive Officer of the
Company's Pioneer Valley Hospital in West Valley, Utah
from 1991 to 1992, Chief Executive Officer of the
Company's Brigham City Community Hospital in Brigham
City, Utah from 1989 to 1991 and Assistant Administrator
of Pioneer Valley Hospital from 1987 to 1989. Prior
thereto, Ms. Koford served as Senior Vice President for
Development at St. Benedict Health Systems, President of
St. Benedict's Management Company, and a Director of
Planning at Intermountain Health Care, Inc.
Mr. Martin became a Vice President of the Company in
1990. Mr. Martin was Chief Executive Officer of the
Company's Northeast Community Hospital in Bedford, Texas
from 1985 to 1990 and Chief Operating Officer of that
hospital from 1981 to 1985. Prior thereto, he was
associate administrator and Chief Financial Officer of
Cherry Hill Medical Center in Cherry Hill, New Jersey
from 1979 to 1981.
Mr. McLendon became a Vice President of the Company in
1993. Mr. McLendon was Director, Delivery System
Integration of Healthtrust from 1992 to 1993 and
Director, Development from 1991 to 1992. Prior thereto
he was President and Chief Executive Officer of First
American National Bank in Nashville, Tennessee from 1988
to 1990 and served in various management capacities with
First Union Corp. from 1977 to 1988.
Mr. Sherrill became a Vice President of the Company in
1993. Mr. Sherrill was Director of Government Affairs of
Healthtrust from 1990 to 1993 and Vice President for
Government Affairs for HCA from 1986 to 1990. Prior to
joining HCA, Mr. Sherrill served as Executive Director of
the State Health Planning and Resources Development
Authority in Tennessee.
Mr. Smith became a Vice President of the Company in 1990.
Mr. Smith was Director, Internal Audit of Healthtrust
from 1987 to 1990, Manager, Internal Audit for HCA from
1981 to 1987 and Supervisor, Internal Audit for HCA from
1979 to 1981. Prior to joining HCA, Mr. Smith was with
the predecessor of Ernst & Young LLP.
Mr. Vraciu became Vice President of the Company in 1987.
He was President of the Center for Health Studies at HCA
from 1986 to 1987. Mr. Vraciu joined HCA in 1980 as Vice
President--Strategic Planning. Prior thereto, he was an
Assistant Professor of Hospital Administration and
Medical Care Organization at the University of Michigan.
Mr. Wallace became a Vice President of the Company in
1991. Mr. Wallace was a Regional Assistant Vice
President of the Company from 1987 to 1991. Prior
thereto, he was the Chief Financial Officer of various
HCA hospitals from 1981 to 1987.
In general, officers are elected by the Board of
Directors annually and serve at the discretion of the
Board of Directors. There are no family relationships
between any of the directors or executive officers.
Properties
At October 31, 1994, the Company, through its
subsidiaries or joint venture arrangements, operated 116
hospitals. All such hospitals are wholly-owned by
subsidiaries of the Company, except that, as noted in the
following table, certain of the Company's hospitals have
minority interests held by physicians at such hospitals,
certain hospitals are held pursuant to leases and one
hospital is operated pursuant to a management contract.
The Company also owns (i) a 50% interest in a general
partnership with Orlando Regional Medical Center, Inc.
which partnership owns South Seminole Community Hospital
(126 beds) and West Lake Psychiatric Hospital (80 beds)
in Longwood, Florida; (ii) a 50% interest in a general
partnership with Presbyterian Hospital of Charlotte which
partnership owns Orthopaedic Hospital of Charlotte (166
beds) in Charlotte, North Carolina; and (iii) a 25%
interest in a general partnership with American Medical
International, Inc., which partnership owns Encino
Hospital (188 beds) in Encino, California and Tarzana
Medical Center (177 beds) in Tarzana, California. The
Company has also formed a joint venture with Austin
Diagnostic Clinic, P.A. for the purpose of constructing
and operating an integrated healthcare facility in
Austin, Texas. This facility, currently under
construction, will consist of a 180-bed hospital, a
diagnostic and treatment center and a medical office
building. Following completion of construction the
Company will manage the hospital.
In August 1994, the Company completed its acquisition of
three hospitals in Utah from Holy Cross Healthcare
Systems. However, pursuant to a consent decree and
settlement agreement with the Federal Trade Commission
("FTC") the Company has agreed to hold separate and
divest Holy Cross Hospital of Salt Lake City.
In addition, the Company, through its subsidiaries or
joint venture arrangements, owns, leases or manages
approximately 240 medical office buildings with
physicians' office space and various parcels of
undeveloped land, substantially all of which are adjacent
to its hospitals. See "Competition" and "Regulation."
In addition, the Company occupies approximately 70,000
square feet of corporate office space in Nashville,
Tennessee. The Company believes its headquarters,
hospitals and other facilities are suitable for their
respective uses and are, in general, adequate for the
Company's current needs.
The following table sets forth certain information
relating to each of the hospitals operated by the
Company, grouped by state, at November 1, 1994. The
Company is engaged from time to time in discussions
relating to proposed sales of certain of its hospitals
and of minority interests in, or joint ventures with
medical staff physicians or others with respect to,
certain other facilities. However, except as noted
below, as of November 1, 1994, no definitive arrangements
with respect to any sales or joint ventures have been
agreed upon and the facilities involved at the present
time are not, in the aggregate, material to the Company's
business. For a discussion concerning certain
regulations relating to joint venture and other financial
arrangements between health care providers and
physicians, see "Reimbursement."
Number of
Licensed
State Name Location Beds
Alabama Andalusia Hospital Andalusia 77
Crestwood Hospital Huntsville 120
Four Rivers Medical Center Selma 214
Arizona El Dorado Hospital & Medical Center Tucson 166
Northwest Hospital Tucson 150
Arkansas DeQueen Regional Medical Center DeQueen 122
Medical Park Hospital Hope 91
California Chino Community Hospital Chino 118
Healdsburg General Hospital Healdsburg 49
Mission Bay Memorial Hospital San Diego 150
Palm Drive Hospital Sebastopol 56
Westside Hospital(1) Los Angeles 87
Florida Clearwater Community Hospital(2) Clearwater 133
East Pointe Hospital Lehigh Acres 88
Edward White Hospital St. Petersburg 167
Lake City Medical Center Lake City 75
North Okaloosa Medical Center Crestview 110
Palm Beach Regional Hospital Lake Worth 200
Palms West Hospital Loxahatchee 117
Plantation General Hospital(3) Plantation 264
Santa Rosa Medical Center(4) Milton 129
South Bay Hospital Sun City Center 112
Georgia Barrow Medical Center Winder 60
Doctors Hospital(5) Columbus 248
Lanier Park Regional Hospital Gainesville 124
Idaho Eastern Idaho Regional Medical
Center Idaho Falls 286
West Valley Medical Center Caldwell 150
Indiana Terre Haute Regional Hospital Terre Haute 284
Kentucky Bourbon General Hospital Paris 60
Logan Memorial Hospital Russellville 100
Meadowview Regional Medical Center Maysville 111
PineLake Medical Center Mayfield 116
Scott General Hospital Georgetown 75
Spring View Hospital Lebanon 113
Louisiana Dauterive Hospital New Iberia 113
Doctor's Hospital of Opelousas(6)(7) Opelousas 133
Highland Park Hospital Covington 104
Lakeside Hospital Metairie 186
Medical Center of Baton Rouge Baton Rouge 225
Medical Center of SW Louisiana Lafayette 166
Riverview Medical Center Gonzales 104
Women's and Children's Hospital(8) Lafayette 93
Mississippi Garden Park Community Hospital(9) Gulfport 120
Vicksburg Medical Center Vicksburg 144
Missouri Springfield Community Hospital Springfield 200
North Carolina Davis Community Hospital Statesville 149
The Brunswick Hospital(10) Supply 60
Heritage Hospital Tarboro 127
Oklahoma Claremore Hospital Claremore 89
Doctor's Medical Center Tulsa 211
Edmond Regional Medical Center Edmond 139
Southwestern Medical Center Lawton 108
Wagoner Community Hospital(11) Wagoner 100
Oregon McMinnville Community Hospital McMinnville 80
Douglas Community Hospital Roseburg 118
South Carolina Chesterfield General Hospital Cheraw 72
Colleton Regional Hospital Walterboro 131
Marlboro Park Hospital Bennettsville 111
Tennessee Crockett Hospital Lawrenceburg 106
Hendersonville Hospital Hendersonville 120
Johnson City Specialty Hospital(12) Johnson City 39
Livingston Regional Hospital Livingston 106
Nashville Memorial Hospital Madison 341
North Side Hospital(13) Johnson City 154
River Park Hospital(14) McMinnville 89
Smith County Memorial Hospital Carthage 66
Southern Tennessee Medical Center(15) Winchester 212
South Pittsburg Municipal
Hospital(16) South Pittsburg 107
Stones River Hospital Woodbury 85
Sycamore Shoals Hospital Elizabethton 100
Trinity Hospital Erin 40
Texas Alice Physicians & Surgeons Hospital Alice 131
Alvin Community Hospital Alvin 86
Bayshore Medical Center Pasadena 469
Brownwood Regional Hospital(17) Brownwood 218
Coastal Bend Hospital Aransas Pass 75
Coronado Hospital Pampa 115
Denton Regional Medical Center Denton 297
Detar Hospital Victoria 303
Doctors Hospital(18) Conroe 135
Doctors Hospital of Laredo(19) Laredo 91
El Campo Memorial Hospital El Campo 41
Fort Bend Community Hospital Missouri City 80
Gilmer Medical Center Gilmer 46
Gulf Coast Medical Center Wharton 161
Katy Medical Center Katy 103
Longview Regional Hospital Longview 80
Mainland Regional Healthcare Texas City 430
System(20)
Medical Arts Hospital(21) Dallas 72
Medical Arts Hospital(21) Texarkana 110
Medical Center Hospital Conroe 182
Medical Plaza Hospital Sherman 164
Midway Park Medical Center Lancaster 90
Northeast Community Hospital Bedford 200
North Texas Medical Center McKinney 270
Parkway Hospital Houston 262
Riverside Hospital Corpus Christi 89
Round Rock Community Hospital Round Rock 75
Sun Belt Regional Medical Center(22) Houston 273
Terrell Community Hospital(23) Terrell 101
Valley Regional Medical Center Brownsville 158
Westbury Hospital Houston 134
Woodland Heights Medical Center Lufkin 117
Utah Ashley Valley Medical Center Vernal 39
Brigham City Community Hospital Brigham City 50
Castleview Hospital Price 88
Jordan Valley Hospital West Jordan 50
Lakeview Hospital Bountiful 128
Mountain View Hospital Payson 118
Ogden Regional Medical Center Ogden 239
Pioneer Valley Hospital West Valley City 139
Virginia Montgomery Regional Hospital Blacksburg 146
Northern Virginia Doctors Hospital Arlington 267
Pulaski Community Hospital Pulaski 153
Washington Capital Medical Center Olympia 110
Wyoming Riverton Memorial Hospital Riverton 70
(1) Owned by a limited partnership of which 28.7% of the interest is
held by minority owners. The limited partnership has leased the
hospital to a joint venture of which approximately 23.7% is held
by minority owners.
(2) Operated by a limited partnership of which approximately 18% of
the interest is held by minority owners.
(3) Operated by a partnership of which the Company is the general
partner owning 53% and certain physicians are limited partners
owning 47%.
(4) Lease expires 2005, unless landlord exercises option to purchase
facility for book value in 1995.
(5) Owned by the Company as a tenancy in common with physicians
having a minority interest of 40.5%.
(6) Operated by a limited partnership of which approximately 23% of
the interest is held by minority owners.
(7) The facility is leased.
(8) Ground lease expires 2011; there are two ten-year optional
renewal terms.
(9) Operated by a limited partnership in which the minority
investors receive the first $2 million earned by the partnership
after payment of the lease payments due to the Company ($3
million per year, increasing by 15% per year), and the Company
is entitled to 60% of all additional earnings.
(10) Lease expires in 2004.
(11) Lease expires in 2007.
(12) Owned by a partnership of which the Company is the general
partner owning 87% and certain physicians are limited partners
owning 13%.
(13) Owned by the Company as a tenancy in common with physicians
having a minority interest of 30.25%.
(14) Owned by a partnership of which the Company is the general
partner owning 78% and certain physicians are limited partners
owning 22%.
(15) Includes a leased (lease expires in 2020) hospital campus
located in Sewanee, Tennessee with 50 licensed beds.
(16) Managed by the Company for profits and losses attributable
thereto with an option to buy for $50,000 and the provision for
full payment of all outstanding indebtedness issued in
connection with the construction of the hospital. The
Company's management contract for this facility expires in 1999.
(17) Lease expires in 2000; there are two optional renewal terms of
ten years each.
(18) Initial term of lease expires in 2006; there are three optional
renewal terms of ten years each. The Company has an option to
buy this facility for an amount determined in accordance with a
specified formula.
(19) Operated by a limited partnership of which approximately 22.125%
of the interest is held by minority owners.
(20) Consists of two hospital facilities, one of which is leased.
(21) The facility is leased.
(22) Includes a hospital campus located at Channelview, Texas with 96
licensed beds.
(23) The hospital consists of two facilities, one of which is leased.
Competition
Many areas served by the Company's hospitals are
also served by other facilities which provide services
similar to those offered by the Company's hospitals.
In some cases, competing hospitals are more
established, better equipped or offer a wider range of
services than those of the Company or have financial
resources greater than those of the Company. In
addition, certain competing hospitals are owned by tax-
supported government agencies or by tax-exempt, not-
for-profit corporations, which may be supported by
endowments and charitable contributions. Such support
generally is not available to the Company's hospitals.
In certain localities served by the Company, large
regional teaching and tertiary care hospitals provide
highly specialized facilities, equipment and services
not available at most of the Company's hospitals. Even
in those communities where the Company's hospital is
the sole provider of general acute care hospital
services, the Company's hospital faces competition from
local providers of outpatient services and from
hospitals and other health care providers in nearby
communities.
Competition among hospitals and other health care
providers for patients has intensified in recent years
as occupancy rates have declined as a result of cost
containment pressures, changing technology, changes in
government regulation and reimbursement, and changes in
practice patterns (e.g., shifting from inpatient to
outpatient treatments), and other factors. New
competitive strategies of hospitals and other health
care providers place increasing emphasis on the use of
alternative health care delivery systems (such as home
health services, outpatient surgery and emergency and
diagnostic centers) that eliminate or reduce lengths of
hospital stays. In some cases, these strategies
include the use of larger regional facilities that
employ equipment and services more specialized than
those available at the Company's hospitals. The
Company's competitive position also is affected by the
ability of its hospitals to provide services to managed
care organizations, including HMOs, PPOs and other
purchasers of group health care services. HMOs and
PPOs attempt to direct and control the use of hospital
services through managed care programs and discounts or
other payment mechanisms that are lower than the
hospital's established standard charges. Generally,
hospitals compete for service contracts with HMOs, PPOs
and other group health care services on the basis of
geographic location, quality of services, quality of
medical staffs and price.
Since physicians generally control the majority of
hospital admissions, another significant factor in a
hospital's competitive position is the number and
quality of physicians on its medical staff. A
physician may at any time terminate his or her
affiliation with a Company-operated hospital. The
Company believes that physicians refer patients to a
hospital primarily on the basis of the quality of
services the hospital renders to patients and
physicians, the quality of other physicians on the
medical staff, the location of the hospital and the
quality of its facilities, equipment and employees.
Accordingly, the Company seeks to retain physicians of
varied specialties on its hospital staffs and to
attract other qualified physicians by maintaining high
quality facilities and equipment, dedicated employees
and comprehensive support services for physicians and
their patients, as well as high ethical and
professional standards. The Company also believes that
offering a variety of practice management services to
physicians and operating a medical office building
adjacent to a hospital attracts additional physicians
to the hospital's medical staff and, accordingly,
contributes to patient admissions and utilization at
the hospital facility. Substantially all of the
Company's hospitals have adjacent medical office
buildings and many are offering practice management
services. The Company's hospitals also frequently
participate in the same managed care contracts as its
medical staff physicians. The Company also has a
number of joint venture arrangements with medical staff
physicians relating to physician-hospital organizations
("PHOs") and to minority investments in Company
hospitals, outpatient facilities and other health care
businesses, and intends to pursue additional PHO and
joint venture opportunities in the future. See
"Reimbursement."
Certificate-of-need laws in some states place
limitations on the industry's ability to build new
hospitals, expand existing hospitals and convert
existing facilities to other uses. In those states
with certificate-of-need laws, applications for
approval of new hospitals or services are highly
competitive. See "Regulation."
Professional Liability
As is typical in the health care industry, the
Company is subject to claims and legal actions by
patients in the ordinary course of business. The
Company's current insurance program provides first
dollar coverage for professional and general liability
with commercial insurance carriers for the Company's
hospitals in all states except Florida, Louisiana and
Indiana on a claims-made basis with coverage limits of
$1.0 million for each occurrence and $3.0 million in
the aggregate annually, with no deductibles. In
Florida, such coverage is $2.0 million for each
occurrence, $2.5 million in the aggregate annually and,
in Indiana, such coverage for the Company's hospital is
$100,000 for each occurrence and $300,000 in the
aggregate annually with deductibles of $25,000 for each
occurrence and $125,000 in the aggregate annually. In
Louisiana, the liability of each of the Company's
hospitals is limited to $100,000 for each occurrence
and $300,000 in the aggregate annually, consistent with
Louisiana law and the Hospital's participation in
Louisiana's patient compensation fund. The Company
funds payments under these policies on a
dollar-for-dollar basis. All professional and general
liability in excess of such coverage limits is
self-insured.
The Company maintains an unfunded reserve for its
liability risks that is based on actuarial estimates
calculated and evaluated by an independent actuary.
Actual hospital professional and general liability
costs for a particular period are not normally known
for several years after the period has ended. The
delay in determining the actual cost associated with a
particular period is due to the time between the
occurrence of an incident, the reporting thereof and
the settlement of related claims. Because of this
delay in payment, reserves for losses and related
expenses, using expected loss reporting patterns
determined by the independent actuary, are discounted
using a rate of 6% to their present value. Adjustments
to the total reserves determined by the actuary on an
annual basis are recorded by the Company as an increase
or decrease in the current year's expense. For the
fiscal year ended August 31, 1994, the Company recorded
aggregate expense for professional liability risks of
$38.1 million. As of August 31, 1994, the unfunded
reserve for professional liability risks was $245.4
million.
While the Company's cash flow has been adequate to
provide for alleged and unforeseen liability claims in
the past, there can be no assurance that the Company's
cash flow will continue to be adequate. If payments
with respect to self-insured liabilities increase in
the future, the results of operations of the Company
could be adversely affected.
Regulation
Licensing and Accreditation
Hospital operations are subject to a variety of
federal, state and local regulations relating to the
adequacy of medical care, equipment, personnel,
operating policies and procedures, fire prevention,
rate-setting and compliance with building codes and
environmental protection laws. Various licenses and
permits also are required for the use and storage of
narcotics, the operation of pharmacies and the use of
radioactive material and certain equipment. 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 hospitals are
licensed under appropriate state laws and substantially
all of the Company's hospitals are certified under the
Medicare program and are accredited by the Joint
Commission on Accreditation of Health Care
Organizations (the "Joint Commission"). The Company
believes that its hospitals are in substantial
compliance with current federal, state, local and
independent review body regulations and standards. The
requirements for licensing, certificates of need, 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 qualifications, there is no assurance
that its hospitals will be able to comply in the
future.
Certificates of Need
Some states in which the Company owns hospitals
require a hospital or its owner to obtain a
certificate-of-need from regional and/or state health
planning agencies as a precondition to hospital
acquisitions, construction, expansion or modernization,
additions of equipment or initiation of major new
services involving capital expenditures in excess of
certain limits. Failure to obtain necessary state
approval can result in the inability to complete an
acquisition or change of ownership, the imposition of
civil or, in some cases, criminal sanctions, the inability to
receive Medicare or Medicaid reimbursement and/or the
revocation of a facility's license.
Utilization Review
The Company's hospitals are subject to various
forms of governmental and private utilization and
quality assurance review. Procedures mandated by the
Social Security Act to ensure that services rendered to
Medicare and Medicaid patients meet recognized
professional standards and are medically necessary
include review by a federally funded Peer Review
Organization ("PRO") of the appropriateness of Medicare
and Medicaid patient admissions and discharges, quality
of care, validity of DRG classifications and
appropriateness of services being provided in an
inpatient setting. PRO's also routinely review
outpatient services for quality and appropriateness and
review ambulatory surgery procedures for proper
classification. While no PRO has taken material
adverse action against any of the Company's hospitals,
negative PRO reviews may result in denial of
reimbursement of payments, assessments of fines or
exclusions from such programs.
Rate Review
Rate or budget review legislation is in effect in
a number of states where the Company owns hospitals.
For example, in Florida a budget review process and a
ceiling on revenue increases per admission has been in
effect with respect to the Company's hospitals since
1986. The ceiling on revenue increases per admission
limits hospital revenue increases to an
administratively determined cost of health care index
plus an additional percentage in excess thereof. This
law has limited the Company's ability to increase rates
at its Florida hospitals. A number of states also have
adopted taxes on hospital revenue and/or imposed
licensure fees to fund indigent health care within such
states. There can be no assurance that these states or
other states in which the Company operates hospitals
will not enact further or new rate-setting or other
regulations that may adversely affect the Company's
hospitals.
Reimbursement
Medicare
The Social Security Amendments of 1965 established
the Medicare program, which is designed to provide
health care services to the aged. Medicare Part A
provides health insurance benefits for covered hospital
and related health care services to most persons who
are 65 years old and are entitled to monthly social
security retirement benefits and to certain disabled
persons. Medicare Part B provides voluntary
supplemental medical benefits covering primarily
outpatient and physician care costs for covered
persons.
Operating Payments
Medicare originally 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 and
subsequent budget reconciliation act modifications, a
prospective payment system intended to cover the
routine and ancillary operating costs of most Medicare
inpatient hospital services was adopted to replace the
original cost-based reimbursement for impatient
services.
Under Medicare's prospective payment system for
inpatient hospital service, hospital discharges are
classified into approximately 500 DRGs, which classify
illnesses according to the estimated intensity of
hospital resources necessary to furnish care for each
principal diagnosis. Hospitals generally receive a
fixed amount based upon the assigned DRG, for each
Medicare patient. Such payment is made regardless of
how long the patient remains in the hospital or the
volume of ancillary services ordered by the attending
physician. Interim payments are made to rural
hospitals with less than 100 beds and hospitals that
serve a disproportionate share of elderly and Medicaid
patients. Approximately 29% of the Company's hospitals
are currently eligible for such payments. Additional
"outlier" payments are made to hospitals for cases
involving extremely long lengths of stay or unusually
high costs in comparison with other discharges in the
same DRG. Under this prospective payment system,
hospitals generally are encouraged to operate with
greater efficiency since they may retain payments in
excess of costs but must absorb costs in excess of such
payments.
The federal Health Care Financing Administration
(the "HCFA"), which administers the Medicare program,
periodically updates and recalibrates DRG rates. Such
updating and recalibrating has been affected by several
recent federal enactments. The Omnibus Budget
Reconciliation Act of 1987 ("OBRA-87") provided for an
increase in prospective payment system update factors
based upon the location of the hospital. As a result
of the Omnibus Budget Reconciliation Act of 1989
("OBRA-89"), future DRG recalibrations must be
undertaken on a budget-neutral basis effective with FY
1991.
In September 1993, the HCFA published final rules
implementing changes to the prospective payment system
which set 4.3% as the market basket increase to be used
in determining the update factor for the large urban,
other urban and rural hospitals in FY 1994. In
September 1994, the HCFA published changes to the
classification categories of the standardized payment
amounts to limit hospital classifications to either
large urban or other effective October 1, 1994. In
addition, the market basket increase used to determine
the annual update factor for urban hospitals was set at
3.6% and the update factor for other hospitals was the
amount needed to equalize the rural and other urban
rates.
Pursuant to OBRA-93, the net updates of DRG rates
for large urban and other urban hospitals are
established as follows: FY 1994 and FY 1995, market
basket minus 2.5%; FY 1996, market basket minus 2.0%;
and FY 1997, market basket minus 0.5%; and thereafter,
market basket. OBRA-93 established the rural hospital
update factors as follows: FY 1994, market basket minus
1.0%; FY 1995, the amount necessary to make the average
standardized amount for rural hospitals equal to that
for hospitals classified as other urban: FY 1996,
market basket minus 2.0%; FY 1997, market basket minus
0.5%; and thereafter, market basket. The hospital
market basket is a measure of the inflation experienced
by hospitals in purchasing the goods and services they
need to provide inpatient services. In FY 1993, the
market basket was 4.1% and the update DRG rate was
market basket minus 1.55% for urban hospitals and
market basket minus 0.55% for rural hospitals. Of the
Company's hospitals, 81 were located in urban areas and
38 were located in rural areas for reimbursement
purposes during fiscal year 1994. As of October 1,
1994, after giving effect to the reclassification of
certain of the Company's hospitals, the Company had 97
hospitals located in urban areas and 22 hospitals
located in rural areas for reimbursement purposes.
Medicare payments for outpatient hospital-based
services generally are the lower of hospital costs or
customary charges. The Omnibus Budget Reconciliation
Act of 1990 ("OBRA-90") directed that payments for the
reasonable cost for outpatient hospital services (other
than for capital related costs) be reduced by 5.8%
during federal fiscal year ("FY") 1991 through FY 1995.
The Omnibus Budget Reconciliation Act of 1993 ("OBRA-
93") extends this provision through FY 1998. Rural
primary care hospitals and sole community hospitals are
exempt from these reductions. Outpatient clinical
laboratory services are reimbursed based upon a fee
schedule substantially lower than customary charges.
Certain ambulatory surgery procedures and outpatient
diagnostic radiology procedures are reimbursed based on
a blend of hospital costs and the rate paid by Medicare
for similar procedures performed in free-standing
facilities. Effective January 1, 1992, the blend for
such procedures is 42% of the hospital costs and 58% of
the fees paid in free-standing facilities. All other
outpatient diagnostic procedures are based on a blend
of 50% of hospital costs and 50% of the fee schedule
amounts paid by Medicare for similar procedures
performed in non-hospital settings; provided, however,
hospitals may not receive more than costs for services
paid on a blend of costs and fees method. In an
effort to restrict unbundling, OBRA-90 directed that
diagnostic services, including clinical diagnostic
laboratory tests, and other admission-related services
provided on the day of hospital admission and up to
three business days immediately preceding the admission
date will no longer be reimbursable under Medicare
Part B if Medicare Part A is the primary payor. This
unbundling provision is applicable to diagnostic
services furnished on or after January 1, 1991 and any
other admission-related services furnished on or after
October 1, 1991. OBRA-90 further directed that the
unbundling apply in the case of any services provided
during the day immediately preceding admission, without
regard to whether the services are related to the
admission.
The original cost-based payment method for
facilities and units that are exempt from the DRG
prospective payment system, including inpatient
psychiatric and rehabilitation hospitals and units,
children's hospitals and long-term care hospitals was
modified by OBRA-90. Such units are reimbursed actual
cost subject to an aggregate limit based on a target
operating cost per discharge. If a hospital's actual
cost per discharge is less than the target cost, the
hospital receives an incentive payment of 50% of the
difference between the target costs and the actual cost
per discharge up to 5% of target operating cost.
OBRA-90 also reduced the penalty for hospitals that
incur actual operating costs in excess of the target
cost by reimbursing 50% of the cost in excess of the
limit up to 110% of the limit. The target cost per
discharge is updated annually by the increase in the
cost of the market basket of hospital goods and
services, which for FY 1993 was an effective increase
of 4.2%. For FY 1994, the market basket increase is
4.3% and for FY 1995 the market basket increase is
3.7%. OBRA-93 set the target cost per discharge update
increase at the market basket minus 1% for FY 1994
through FY 1997.
Capital Payments
Prior to October 1986, the Medicare program
reimbursed each hospital on a reasonable cost basis for
the Medicare program's pro rata share of the hospital's
allowable capital costs related to inpatient care.
Reimbursable capital costs generally include
depreciation, rent and lease expense, capital interest,
property taxes and insurance premiums related to each
of the physical plant, fixed equipment and movable
equipment. Since 1986, Congress has required the HCFA
to reduce capital-related payments below the amount
that was otherwise payable pursuant to increasing
capital payment discounts. Rural primary care
hospitals and sole community hospitals were generally
exempt from these reductions.
In 1991, HHS changed the reimbursement of capital
expenditures related to inpatient care from a cost
reimbursement basis to prospective payment effective
for hospital cost reporting periods beginning on or
after October 1, 1991. The payment system will be
phased in over ten years. The regulations establish a
standard federal rate per discharge for capital-related
inpatient hospital costs. The national rate is based
on the estimated FY 1992 average Medicare payment for
capital cost per discharge under cost reimbursement.
The rate is then adjusted for each hospital to reflect
the relative severity of diagnosis, higher cost of
certain geographic areas, disproportionate share of low
income patients, indirect medical education costs and
extremely high cost cases. Hospitals whose costs per
discharge were below the federal rate were paid on the
basis of a blend of 90% hospital-specific rate and 10%
federal rate in FY 1992. The federal portion is then
scheduled to be increased 10% each year until the
payment becomes 100% federal rate. Hospitals whose
costs per discharge are above the federal rate can
choose to be paid on the basis of 85% of reasonable
costs of "old capital" (costs reported before
December 31, 1990 or costs for capital-related items
and services legally obligated on or before
December 31, 1990 and put into use before October 1,
1994) plus a per case payment for new capital based on
the ratio of the hospital's cost for new capital to its
total capital costs. Hospitals will be eligible for
additional payments to provide minimum payment levels
during the 10-year transition period. The minimum
payment for sole community hospitals is 90% of their
Medicare inpatient capital costs; the minimum payment
for urban hospitals with 100 or more beds and a
disproportionate patient share percentage of at least
20.2% is 80% of their Medicare inpatient capital costs;
for all other hospitals, the minimum payment is 70% of
their Medicare inpatient capital costs. Funds
available for additional payments are limited to 10% of
aggregate inpatient capital payments. As a result,
sufficient funds may not be available to meet the
minimum payment levels. Also, as required by law,
payments will be adjusted in FY 1992 through FY 1995 so
that aggregate payments will not exceed 90% of the
amounts that would have been payable on a cost
reimbursement basis. However, this adjustment will not
apply to payments for old capital. Payments for
future years will be affected by annual updates in the
federal payment rate which cannot be predicted.
The final federal rate for prospective capital in
FY 1993 was $417.29, in FY 1994 was $378.34 and in FY
1995 is $376.83. OBRA-93 required a 7.4% reduction in
the federal rate to correct prior inflation forecast
errors.
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 10% during FY 1992 and
OBRA-90 further directs that outpatient capital
reimbursement be reduced by 10% in FY 1993 through FY
1995. OBRA-1993 extends this reduction through FY
1998. Rural primary care hospitals and sole community
hospitals are exempt from this reduction.
Other Medicare Payment System Initiatives
Considerable uncertainty surrounds the future
determination by the federal government of
reimbursement levels for DRG classifications and for
outpatient services and for capital expenditures.
Congress could consider further legislation in the
prospective payment area, such as reducing DRG payment
rate increases or otherwise revising DRG payment rates
to take into account evidence of historical reductions
in hospital operating costs. In addition, any
automatic spending cuts mandated under Gramm-Rudman
would reduce payments made to the Company's hospitals
under the Medicare program. However, because the
actual amount of the reduction for any fiscal year may
vary according to the federal deficit, the financial
impact on the Company of any such action by Congress or
of Gramm-Rudman cannot be predicted. In addition,
substantial areas of the Medicare programs are subject
to judicial interpretation, administrative rulings,
governmental funding restrictions and requirements for
utilization review (such as second opinions for surgery
and preadmission criteria). Such matters, as well as
more general governmental budgetary concerns, may
significantly reduce payments made to the Company's
hospitals under such programs, and there can be no
assurance that future Medicare payment rates will be
sufficient to cover costs in providing services to
Medicare patients.
The Company believes that the failure to provide
appropriate DRG rate increases, reductions in
reimbursement for capital costs and inadequate
reimbursement for extraordinary Medicare cases have had
a significant negative effect on its hospital operating
margins and the profitability of providing services for
Medicare patients. The continuing effect of the
Medicare prospective payment system on the Company
cannot be accurately predicted. Moreover, significant
operating costs are required to be incurred in order to
satisfy licensing laws, standards of the Joint
Commission and quality of care concerns. See "--
Regulation." Hospital costs also are affected by the
type and severity of each patient's illness, occupancy
rates and decisions of physicians regarding each
patient's length of stay and the number and type of
tests and other procedures ordered. The ability of the
Company's hospitals to control or influence these
factors is limited, as such decisions generally are
made by attending physicians.
Medicaid
The Medicaid program, created by the Social
Security Amendments 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. Reimbursement
rates under the Medicaid program are set by each
participating state, and rates and covered services may
vary from state to state. At least 50% of Medicaid
funding comes from the federal government, with the
balance shared by state and local
governments. The Company operates hospitals in a
number of states that currently levy taxes on provider
costs or revenues, in part, to fund their Medicaid
programs.
Effective January 1, 1992, Congress established a
national limit on additional amounts required to be
paid to hospitals defined as providing a
disproportionate amount of Medicaid and low-income
inpatient services equal to 12% of total Medicaid
spending for each fiscal year. However, states then
using a greater percentage of their Medicaid
expenditures for disproportionate share hospital
payments are allowed to continue at current levels and
adjustments may be made for states with unusually high
disproportionate share expenditures. After January 1,
1996, states which adopt certain criteria for defining
a hospital as a disproportionate share hospital will
not be subject to the disproportionate share payment
limits. In 1993, the HCFA published final regulations
which loosened national and state limits on
disproportionate share payments to hospitals by
interpreting the statute as setting target percentage
goals, rather than as establishing an absolute cap on
disproportionate share expenditures. The effect of
these regulations was to increase the percentage of FY
1993 Medicaid expenditures for disproportionate share
hospitals from 12% to 13.7%. OBRA-93 further limits
disproportionate share payments to the cost of services
provided to Medicaid and uninsured patients minus
Medicaid payments for state fiscal years beginning
during or after FY 1995.
Many state Medicaid payments are now made under a
prospective payment system. Medicaid payments
generally are substantially less than a hospital's cost
of services. In addition, states increasingly are
seeking and obtaining waivers from HCFA which allow the
provision of Medicaid services through contracts with
managed care organizations. The federal government and
many states are currently considering the use of
managed care and other ways to limit the increase in
the level of Medicaid funding, including replacement of
the current system with a federal system which, in
turn, could adversely affect future levels of Medicaid
reimbursement received by the Company's hospitals.
Annual Cost Reports
The Company's annual cost reports, which are
required under the Medicare and Medicaid programs
involving cost-based reimbursement payment systems, are
subject to audit which may result in adjustments to the
amounts ultimately determined to be due to the Company
under these programs. These audits often require
several years to reach the final determination of
amounts earned under the programs based on cost.
Providers also have rights of appeal. The Company is
currently contesting certain issues raised in audits of
prior years' reports. Management believes that
adequate provision has been made for any material
retroactive adjustments that might result from such
audits and that final results from these issues will
not have a material adverse effect upon the Company's
financial position or results of operations.
Commercial Insurance
The Company's hospitals provide services to
individuals covered by health care insurance offered by
private insurance carriers, such as Blue Cross. Blue
Cross generally pays hospitals for covered services at
their established hospital charges, at a percentage
thereof or at rates negotiated between Blue Cross and
the hospital. At a number of the Company's hospitals,
Blue Cross plans are administered under contracts
providing for payments based on the costs of services.
Other private insurance carriers also reimburse their
policyholders, or make direct payments to hospitals,
for covered hospital services at established hospital
charges or a percentage thereof. In addition, managed
care organizations, which offer prepaid and discounted
medical service packages, represent an increasing
segment of health care payors. Except for patients
covered under cost-based Blue Cross plans and many
managed care contracts, the privately insured patient
generally is responsible to the hospital for any
difference between covered items and the total charges.
Anti-Fraud and Similar Legislation
The Social Security Act imposes criminal and civil
penalties for making false claims to the Medicare or
Medicaid Programs for services not rendered or for
misrepresenting actual services rendered in order to
obtain higher reimbursement. In addition, the Social
Security Act contains prohibitions on offering, paying,
soliciting or receiving remuneration intended to induce
business reimbursed under Medicare or state health care
programs. Financial arrangements between hospitals and
persons, such as physicians, who are in a position to
refer patients or induce the acquisition of any goods
or services paid for by Medicare or state health care
programs must comply with the applicable provisions of
the Social Security Act. In addition to felony
criminal penalties (fines of up to $25,000 and
imprisonment for up to five years per referral), the
Social Security Act also establishes civil monetary
penalties and the sanction of excluding violators from
Medicare and Medicaid participation.
The federal anti-fraud provisions have been
interpreted broadly to include the intentional payment
of anything of value to influence the referral of
Medicare or Medicaid business. In order to provide
guidance to health care providers on ways to engage in
legitimate business practices and avoid scrutiny under
the statute, HHS has issued (i) "fraud alerts"
identifying features of transactions, which, if
present, may indicate that the transaction violates the
law, and (ii) regulations outlining certain "safe
harbor" practices, which, although potentially capable
of inducing prohibited referrals of business under
Medicare or state health programs, would not be subject
to enforcement action under the Social Security Act.
The practices covered by the regulations include
certain physician joint venture transactions, space and
equipment leases, personal services and management
contracts, sales of physician practices, referral
services, warranties, discounts, payments to employees,
group purchasing organizations and waivers of
beneficiary deductibles and co-payments. Additional
safe harbor regulations have been proposed which cover
certain managed care plans, certain investment
interests, physician recruitment, certain malpractice
insurance subsidies, referral agreements, purchases of
physician practices and other matters.
In addition, OBRA-93 included certain amendments
to Section 1877 of the Social Security Act dealing with
"Physician Ownership of, and Referral to, Healthcare
Entities," commonly known as the "Stark Bill." The
amendments significantly broadened the scope of
prohibited physician self-referrals contained in the
original Stark Bill to include referrals by physicians
to entities in which the physician has a financial
relationship and which provide certain "designated
health services" which are reimbursable by Medicare or
Medicaid. These services include, among other things,
clinical laboratory services, certain therapy services,
radiology or other diagnostic services, and inpatient
and outpatient hospital services. The amended Stark
Bill contains exceptions to the self-referral
prohibition, including an exception if the physician
has an ownership interest in the entire hospital. The
amendments become effective January 1, 1995 and
contemplate the promulgation of regulations
implementing the new provisions. The Company cannot
predict the final form that such regulations will take
or the effect that the Stark Bill amendment or the
regulations to be promulgated thereunder will have on
the Company.
Certain of the Company's current financial
arrangements with physicians, including joint ventures,
and the Company's future development of joint ventures
and other financial arrangements with physicians could
be adversely affected by the failure of such
arrangements to comply with federal anti-fraud
provisions, the Stark Bill or other legislation or
regulation in these areas adopted in the future. See
"Properties." The Company is unable to predict the
effect of such regulations on the Company or whether
other legislation or regulations on the federal or
state level in any of these areas will be adopted, what
form such legislation or regulations may take or their
impact on the Company. Although certain of the
Company's current financial arrangements with
physicians do not qualify for the safe harbor
exemptions, the Company exercises care in an effort to
structure its arrangements with health care providers
to comply in all material respects with the anti-fraud
provisions and the Stark Bill. However, there can be
no assurance that such laws will ultimately be
interpreted in a manner consistent with the practices
of the Company.
Corporate Practice of Medicine and Fee-Splitting
Prohibitions
Some of the states in which the Company operates
also have laws that prohibit corporations from
employing physicians and practicing medicine for a
profit or that prohibit certain direct and indirect
payments or fee-splitting arrangements between health
care providers that are designed to induce or encourage
the referral of patients to, or the recommendation of,
particular providers for medical products and services.
In addition, some states restrict certain business
relationships between physicians and pharmacies.
Possible sanctions for violation of these restrictions
include loss of licensure and civil and criminal
penalties. These statutes vary from state to state,
are often vague and have seldom been interpreted by the
courts or regulatory agencies. Although the Company
exercises care in an effort to structure its
arrangements with health care providers to comply with
the relevant state statutes, there can be no assurance
that such state laws will ultimately be interpreted in
a manner consistent with the practices of the Company.
Reform Efforts
In November 1993, President Clinton submitted
proposed comprehensive health care reform legislation
(the "Administration's Proposal") to Congress. Under
the Administration's Proposal, states would be required
to establish regional purchasing cooperatives, known as
"regional alliances," that would be the exclusive
source of coverage for individuals and employers with
less than 5,000 employees. All employers would be
required to make coverage available to their employees
and contribute 80% of the premium and all individuals
would be required to enroll in an approved health plan.
Regional alliances would contract with health plans
that demonstrate an ability to provide consumers with a
full range of benefits, including hospital services,
that would be guaranteed by the federal government.
The federal government would provide subsidies to low
income individuals and certain small businesses to help
pay for the cost of coverage. These subsidies and
other costs of the Administration's Proposal would be
funded in significant part by reductions in payments by
the Medicare and Medicaid programs to providers,
including hospitals. The Administration's Proposal
would also place stringent limits on the annual growth
in health plan premiums. Other comprehensive reform
proposals have been introduced in Congress. These
other proposals contain coverage guarantees, benefit
standards, financing and cost control mechanisms which
differ from the Administration's Proposal. In
addition, certain states have adopted or are
considering health care reform measures. Due to the
uncertainties regarding the ultimate features of reform
initiatives and their enactment, the Company is unable
to predict what, if any, reforms will be adopted in the
future, or when any such reforms will be implemented.
No assurance can be given that such reforms will not
have a material adverse impact on the Company's
revenues or earnings.
Environmental Matters
The Company is subject to various federal, state
and local statutes and ordinances regulating the
discharge of materials into the environment. Company
management does not believe that the Company will be
required to expend any material amounts in order to
comply with these laws and regulations or that
compliance will materially affect its capital
expenditures, earnings or competitive position.
Legal Proceedings
The Company is presently, and is from time to
time, subject to claims and suits arising in the
ordinary course of its business, including claims for
damages for personal injuries or for wrongful
restriction of or interference with physicians' staff
privileges. In certain such actions, plaintiffs
request punitive or other damages that may not be
covered by insurance. Except as described below, the
Company and its subsidiaries presently are not parties
to any legal proceeding in which, in management's
opinion, an adverse determination would have a material
adverse effect on the Company's financial position.
Certain of the Company's Utah hospitals, along
with other Utah hospitals, were the subject of a
federal grand jury investigation of possible criminal
violations of the federal antitrust laws in connection
with nursing compensation practices. Six of the
Company's affiliated hospitals along with a number of
other Utah hospitals have entered into consent decrees
with the Justice Department which settle all charges
against all named hospitals. Under the consent decree,
the Company's affiliated hospitals named in therein are
prohibited from entering into agreements with other
Utah hospitals to fix the compensation paid to nurses
and prohibited from exchanging information with other
Utah hospitals concerning current or prospective
compensation paid to nurses, except in limited
circumstances, for a period of five years. None of the
settling parties admitted any wrongdoing and no fines
or penalties were assessed.
The Internal Revenue Service (the "IRS") has
audited the Company's federal income tax returns for
taxable years ended in 1987 through 1990 and has
proposed certain adjustments thereto. A formal protest
has been filed with the IRS Appeals Office disputing
the proposed adjustments and the Company expects to
settle the disputed adjustments at the Appeals Office
level. Although the ultimate outcome of the
examination cannot be predicted with certainty, the
Company believes that the resolution of these matters
will not have a material adverse effect on the
Company's financial position.
Two purported class actions, entitled Alvarez v.
R. Clayton McWhorter, et al. and Swain vs. R. Clayton
McWhorter, et al., were commenced in Delaware Chancery
Court in October 1994 by two alleged stockholders of
Healthtrust against the Company and its Board of
Directors. The complaints in both actions allege that
the Company's Board of Directors breached their
fiduciary and common law duties to the Company's
stockholders by failing to maximize stockholder value
and obtain the highest price possible for the Company's
stockholders in connection with the Company's agreement
to merge with Columbia. The complaints seek (i) a
preliminary and permanent injunction against the
Merger; (ii) recision and recissionary damages in the
event the transaction is consummated; (iii) an
accounting of any profits that might be realized by the
company's directors through the Merger; (iv)
unspecified compensatory damages; and (v) attorneys'
and experts' fees. Healthtrust believes that the
allegations in the complaints are without merit and
intends to defend both actions vigorously.
Item 2. Properties
Information with respect to this Item is
incorporated herein by reference to Item 1 - Business -
Properties.
Item 3. Legal Proceedings
Information with respect to this Item is
incorporated herein by reference to Item 1 - Business -
Legal Proceedings.
Item 4. Submission of Matters to a Vote
of Security Holders
None.
PART II
Item 5. Market for the Company's Common Equity and
Related Stockholder Matters
The Company's Common Stock is listed on the New
York Stock Exchange and trades under the symbol "HTI".
At November 15, 1994, there were 2,711 holders of
record of the Company's Common Stock. The following
table sets forth the reported high and low sale prices
of the Company's Common Stock for the periods indicated
as reported by the New York Stock Exchange or the Wall
Street Journal:
Period High Low
FY 1993
1st Quarter ............................. $ 17 7/8 $ 11 7/8
2nd Quarter ............................. $ 19 7/8 $ 12
3rd Quarter ............................. $ 19 1/8 $ 13 3/8
4th Quarter ............................. $ 21 7/8 $ 17 3/8
Period High Low
FY 1994
1st Quarter ............................. $ 24 3/4 $ 19 3/4
2nd Quarter ............................. $ 29 5/8 $ 22 5/8
3rd Quarter ............................. $ 33 1/4 $ 27 3/4
4th Quarter ............................. $ 31 $ 26 1/2
FY 1995
1st Quarter (through November 15)........ $ 36 $ 29
Dividends
Each share of Common Stock has an equal and
ratable right to receive dividends to be paid from the
Company's assets legally available therefor when, as
and if declared by the Board of Directors. The
declaration and payment of dividends on the Common
Stock are restricted by the terms of the 1994 Credit
Agreement and the indentures governing the Company's
other long-term indebtedness. No dividends have been
paid on the Company's Common Stock.
Item 6. Selected Financial Data
The following tables set forth selected financial
information for the Company for each of the years in
the five-year period ended August 31, 1994 and
quarterly operations information for each of the fiscal
years ended August 31, 1994 and 1993.
The information in the following tables should be
read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of
Operations" and with the Consolidated Financial
Statements and related notes thereto.
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(In millions, except per share amounts)
Statements of Operations Data (Years Ended August 31):
<S> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990
Net operating revenue $2,970.0 $2,394.6 $2,265.3 $2,025.7 $1,856.9
Hospital service costs 2,361.6 1,888.6 1,796.0 1,615.8 1,488.2
608.4 506.0 469.3 409.9 368.7
Income (loss) before
extraordinary charges 173.2 135.2 93.2 6.6 (53.2)
Extraordinary charges
on early retirements
of debt (net of taxes) 0.0 13.6 136.3 0.0 5.8
Net income (loss)
(before preferred dividends) 173.2 121.6 (43.1) 6.6 (59.0)
Net income (loss) to common
stockholders $ 173.2 $ 121.6 $ (67.7) $ (69.7) $ (124.7)
Average shares and share
equivalents 87.4 83.5 76.8 60.4 58.5
Earnings (loss) per share:
Before extraordinary
charges $ 1.98 $ 1.62 $ 0.90 $ (1.15) $ (2.03)
Net income (loss) per share 1.98 1.46 (0.88) (1.15) (2.13)
Balance Sheet Data (At August 31):
Current assets $ 842.2 $ 670.9 $ 584.1 $ 676.9 $ 560.0
Property, plant and
equipment (net) 2,253.7 1,567.5 1,554.1 1,510.2 1,466.0
Excess of purchase price
over net assets acquired 736.2 178.6 176.7 180.9 194.5
Other assets 135.2 119.7 64.8 77.4 73.3
TOTAL ASSETS 3,967.3 2,536.7 2,379.7 2,445.4 2,293.8
Current liabilities 559.1 451.8 338.8 286.7 250.2
Long-term debt 1,740.9 948.6 1,033.9 1,150.0 1,155.6
Other liabilities 641.7 480.6 476.2 344.8 346.3
Redeemable preferred stock 0.0 0.0 0.0 575.9 499.6
Stockholders' equity 1,025.6 655.7 530.8 88.0 42.1
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,967.3 $2,536.7 $2,379.7 $2,445.4 $2,293.8
Cash Flow Data (Years Ended August 31):
Provided by operating
activities $ 368.8 $ 364.5 $ 430.1 $ 321.3 $ 348.6
Used in investing
activities (509.6) (290.8) (155.1) (93.5) (111.0)
Capital expenditures
(included in investing
activities) (221.0) (219.5) (178.1) (170.3) (120.8)
Provided by (used in) financing
activities 81.8 (95.0) (400.0) (74.3) (105.7)
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL INFORMATION
(In thousands, except per share amounts)
Fiscal 1994
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
8-31-94 5-31-94 2-29-94 11-30-93
<S> <C> <C> <C> <C>
Net operating revenue $ 941,905 $ 753,515 $ 652,521 $ 622,095
Hospital service costs 762,812 597,833 506,667 494,299
179,093 155,682 145,854 127,796
Income before income
taxes 65,766 78,335 79,758 65,411
Net income $ 41,320 $ 45,648 $ 47,376 $ 38,852
Net income per share $ 0.44 $ 0.52 $ 0.56 $ 0.46
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1993
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
8-31-93 5-31-93 2-28-93 11-30-92
<S> <C> <C> <C> <C>
Net operating revenue $ 608,178 $ 596,726 $ 597,884 $ 591,779
Hospital service costs 496,526 466,642 461,407 463,976
111,652 130,084 136,477 127,803
Income before income
taxes and extraordinary
charges 41,738 63,391 64,265 56,472
Extraordinary charges
(net of taxes) 923 12,710 0 0
Net income $ 25,623 $ 24,678 $ 37,935 $ 33,322
Income per share:
Before extraordinary
charges $ 0.32 $ 0.45 $ 0.45 $ 0.40
Extraordinary charges 0.01 0.15 0.00 0.00
Net income $ 0.31 $ 0.30 $ 0.45 $ 0.40
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
On October 4, 1994 the Company and Columbia/HCA
Healthcare Corporation announced the signing of a
definitive merger agreement under which the Company's
shareholders will receive 0.88 shares of Columbia
common stock in exchange for each share of Healthtrust
common stock they hold. The proposed transaction is
expected to be accounted for as a pooling of interests.
The completion of the transaction is subject, among
other things, to the approval of the shareholders of
both companies and certain regulatory approvals. The
shareholders' meetings to vote on the Merger
transaction are expected to be scheduled for the first
quarter of calendar 1995.
The following table sets forth certain data
relating to the Company's operations as a percentage of
net operating revenue for each of the past three years.
Year Ended August 31,
1994 1993 1992
Net operating revenue 100.0% 100.0% 100.0%
Hospital service costs:
Salaries and benefits 37.8 37.0 37.5
Supplies 13.6 14.5 14.4
Fees 10.8 11.3 11.5
Other expenses 10.7 10.0 9.8
Bad debt expense 6.6 6.1 6.1
79.5 78.9 79.3
Depreciation and amortization 5.6 5.5 5.6
Interest expense 3.8 4.2 5.2
ESOP/pension expense 1.5 1.6 1.7
Deferred compensation - 0.2 0.4
Other income (net) <0.5> <0.3> <0.2>
Income before minority
interests, income taxes and
extraordinary charges 10.1 9.9 8.0
Minority interests 0.4 0.5 0.7
Income before income taxes
and extraordinary charges 9.7 9.4 7.3
Income tax expense 3.9 3.8 3.2
Extraordinary charges (net) - 0.5 6.0
Net income (loss) 5.8% 5.1% (1.9)%
Results of Operations
General
The Company continues to experience gross and net
operating revenue increases and the Company's results
of operations continue to be affected by the trend
toward certain services being performed more frequently
on an outpatient basis. The Company has been able to
achieve increases in net operating revenue due to the
higher utilization of outpatient and ancillary
services, general price increases and increased
severity of illness of patients admitted. Although the
Company's net operating revenue has grown in each
period, the impact of price increases and increases in
patient acuity have been partially offset by the
increasing proportion of revenue derived from fixed
payment sources, including Medicare and Medicaid
(approximately 45% of the Company's net operating
revenue for fiscal 1994 is related to Medicare and
Medicaid patients).
The growth in outpatient services is expected to
continue as procedures currently being performed on an
inpatient basis become available on an outpatient basis
through continuing advances in pharmaceutical and
medical technologies. The redirection of certain
procedures to an outpatient basis has also been
influenced by pressures from payors to direct certain
procedures from inpatient care to outpatient care.
While the Company expects the growth in outpatient
services to continue, the rate of increase is expected
to decline.
The Company expects Medicare and Medicaid revenue
to continue to increase due to the general aging of the
population and the expansion of state Medicaid
programs. The Medicare program reimburses the
Company's hospitals primarily based on established
rates that are dependant on each patient's diagnosis,
regardless of the provider's cost to treat the patient
or the length of time the patient stays in the
hospital. The Medicare program's established rates are
indexed for inflation annually, but these increases
have historically been less than both the actual
inflation rate and the Company's increases to its
standard charges.
Insurance companies, government programs (other
than Medicare) and employers purchasing health care
services for their employees are negotiating the
amounts they will pay the health care providers rather
than paying the providers standard prices. This leads
to these purchasers of health care services becoming
managed care payors, similar to HMO's and PPO's, in
virtually all markets and making it increasingly
difficult for providers to maintain their historical
net revenue growth trends.
The Company acquired EPIC (which owned 34
hospitals and various related healthcare entities) and
three other hospital facilities during 1994.
Congress is currently considering a variety of
proposals for comprehensive health care reform, with
the objectives of providing health care coverage to
everyone, streamlining the administration of health
care delivery and public assistance programs,
developing a more rational payment approach for health
care services and creating a global strategy for
controlling health care costs. The Company cannot
predict what reforms the Congress will eventually enact
or the resulting implications for providers at this
time. However, the Company believes that the delivery
of primary care, emergency care, obstetrical services
and rehabilitative services, on a local basis, to rural
and suburban markets will be an integral component of
any strategy for controlling health care costs and the
Company believes it is well positioned to provide these
services.
Years Ended August 31, 1994 and 1993
Net operating revenue for the Company's hospitals
for the year ended August 31, 1994, increased 24.0%
(8.9% excluding EPIC) to $2.970 billion, while same
hospitals net operating revenue increased 7.1%. Gross
revenue during the year ended August 31, 1994,
increased 27.1% (11.7% excluding EPIC) due to a 37.6%
increase (18.2% excluding EPIC) in gross outpatient
revenue and a 21.6% increase (8.7% excluding EPIC) in
gross inpatient revenue. On a same hospitals basis,
gross revenue increased 9.7% compared to the prior
year, due to an 16.1% increase in gross outpatient
revenue and a 6.7% increase in gross inpatient revenue.
In each case, gross revenue grew faster than net
operating revenue, primarily because the patient day
mix became more heavily weighted to Medicare, Medicaid
and speciality unit patients (for which reimbursement
rate increases have been less than implemented price
increases) and increased utilization by managed care
programs.
Costs of hospital services (salaries and benefits,
fees, supplies, bad debt expense and other expenses)
for the year ended August 31, 1994 increased 25.0%.
The 24.0% increase in net operating revenue and 25.0%
increase in the costs of hospital services resulted in
the operating margin decreasing from 21.1% for 1993 to
20.5% for 1994. Salaries and benefits, the largest
component of hospital services, increased from 37.0% to
37.8% of net operating revenue due to higher than
average expense at the facilities acquired during 1994.
Supplies expense decreased from 14.5% of net operating
revenue for 1993 to 13.6% of net operating revenue for
1994, reflecting the benefits from the Company's
efforts to standardize supplies and consolidate
vendors. Bad debt expense has increased from 6.1% to
6.6% of net operating revenue for 1994, with higher
than average expense at the facilities acquired during
1994 and 1993 contributing to this increase.
Interest expense increased from $99.8 million to
$113.7 million for 1994, due primarily to the
additional debt incurred to finance the acquisition of
EPIC and the other 1994 acquisitions.
Income before income taxes and extraordinary
charges increased $63.4 million, due primarily to the
net effect of the $102.4 million increase in net
operating revenue less hospital service costs and $47.3
million increase in depreciation, amortization and
interest expense.
The Company's combined federal and state effective
tax rate was 40.1% for both 1994 and 1993. During
1993, the Company incurred an extraordinary charge of
$13.6 million (net of tax benefits) related to the
early retirement of certain long term debt. No
extraordinary charges where incurred during 1994.
The Company continues to generate significantl
levels of cash flows from operating activities, $368.8
million in 1994 and $364.5 million in 1993. Although
net income increased by $51.6 million, changes in
certain working capital items (primarily a decrease in
accounts payable and accrued expenses) offset the
increase in net income to result in cash flow from
operations remaining at a basically constant
level.
Years Ended August 31, 1993 and 1992
Net operating revenue for the Company's hospitals
for the year ended August 31, 1993, increased 5.7% to
$2.395 billion, while same hospitals net operating
revenue increased 8.6%. Gross revenue during the year
ended August 31, 1993, increased 9.1% due to a 15.6%
increase in gross outpatient revenue and a 6.4%
increase in gross inpatient revenue. On a same
hospitals basis, gross revenue increased 12.5% compared
to the prior year, due to an 18.9% increase in gross
outpatient revenue and a 9.7% increase in gross
inpatient revenue. In each case, gross revenue grew
faster than net operating revenue, primarily because
the patient day mix became more heavily weighted to
Medicare, Medicaid and specialty unit patients and
increased utilization by managed care programs.
Costs of hospital services (salaries and benefits,
fees, supplies, bad debt expense and other expenses)
for the year ended August 31, 1993 increased 5.2%. The
5.7% increase in net operating revenue and 5.2%
increase in the costs of hospital services resulted in
the operating margin increasing from 20.7% for 1992 to
21.1% for 1993. Salaries and benefits, the largest
component of hospital services, increased 4.2%. This
increase is lower than the rate of increase in net
revenue and was achieved through favorable changes in
work redesign, nursing skill mixes and employee
retention. Supplies expense increased from 14.4% of
net operating revenue for 1992 to 14.5% of net
operating revenue for 1993, primarily resulting from
additional expense due to changes in the Company's
capitalization policy, offsetting benefits derived from
the Company's efforts to consolidate vendors and
negotiate contracts on a consolidated basis. Bad debt
expense remained constant at 6.1% of net operating
revenue for both 1993 and 1992.
Interest expense was reduced from $119.6 million
for 1992 to $99.8 million for 1993, due primarily to
the Company refinancing $300 million of higher rate
debt at a fixed rate of 8.75% during 1993, lower
interest rates on the Company's variable rate debt and
benefits resulting from the Company's December 1991
Recapitalization Plan transactions.
Income before income taxes and extraordinary
charges increased $61.2 million, due primarily to the
$36.7 million increase in net operating revenue less
hospital service costs and the $19.8 million decrease
in interest expense.
The Company's combined federal and state effective
tax rate was 40.1% for 1993 and 43.4% for 1992.
Although the enactment of the Revenue Reconciliation
Act of 1993 increased 1993 tax expense by approximately
$5.0 million, the utilization of capital loss
carryforwards and lower effective state income tax
rates offset this federal rate increase. In 1992, the
effective income tax rate was increased by
approximately 2.4% due to the recognition of deferred
compensation expense in excess of the amount allowable
for tax purposes.
The Company incurred extraordinary charges (net of
tax benefits) on the early extinguishments of debts of
$13.6 million in 1993 and $136.4 million in 1992.
The Company incurred dividends on preferred stock
of $24.6 million during 1992. There were no preferred
stock dividends in 1993.
Liquidity and Capital Resources
Healthtrust ended fiscal 1994 in the strong
financial position: cash totaled $92.3 million; total
assets reached $3.97 billion; stockholders' equity
climbed to $1.03 billion; and debt as a percentage of
total capital was at 63.0%.
Cash provided from operations continued to satisfy
all of the Company's working capital, capital expenditure
(excluding EPIC and other facility acquisitions) and
debt principal payment requirements. The Company
generated $368.8 million of cash from operations in
1994, $364.5 million in 1993 and $430.1 million in
1992.
Management believes that, based upon its analysis
of the Company's financial condition, the cash flow
generated from operations in the future should provide
sufficient liquidity to meet all cash requirements for
at least the next year without substantial additional
borrowings. In addition, the Company believes, based
on current internal long-term projections of future
results of operations, that it will be able to satisfy
its current and expected obligations as they become due
without incurring substantial additional indebtedness,
and that satisfaction of such obligations will not
prevent the Company from meeting liquidity requirements
for operations and capital expenditures. However,
there can be no assurance that future developments in
the health care industry or general economic trends
will not adversely affect the Company's operations or
its ability to meet such obligations.
During April 1994, the Company entered into a
credit agreement with the Bank of Nova Scotia, acting
as administrative agent for the lenders (the "1994
Credit Agreement"). The 1994 Credit Agreement provides
for an aggregate of up to $1.2 billion in credit
available to the Company. Loans under the 1994
Credit Agreement bear interest at fluctuating rates, as
selected by the Company at specified times, equal to
either (i) an alternate base rate (the higher of the
Bank of Nova Scotia's base rate for dollar loans or the
Federal Funds rate plus 50 basis points) plus 50 basis
points or (ii) LIBO plus 150 basis points.
At August 31, 1994, the Company had outstanding
$415 million of term loans, $277 million of delayed
term loans and $55 million of revolving loans under the
1994 Credit Agreement. At August 31, 1994, the Company
had approximately $429 million of credit available
under the 1994 Credit Agreement.
The Company completed its acquisition of EPIC on
May 5, 1994. EPIC shareholders received $7.00 for each
share of EPIC common stock (approximately $249.4
million in the aggregate) and the Company refinanced
approximately $681 million and assumed approximately
$32 million of EPIC indebtedness. The acquisition was
financed through the public offering of 5,980,000
shares of Healthtrust common stock at $28.25 per share,
the public offering of $200 million of 10 1/4%
Subordinated Notes, borrowings under the Company's bank
credit agreement and cash on hand.
The Company acquired three other hospital
facilities during the fiscal year 1994 for an aggregate
purchase price of approximately $156.7 million. The
Company did not renew the lease on one of the
facilities acquired from EPIC that terminated in July
1994 and one of the facilities acquired from EPIC was
sold during August 1994.
During fiscal 1993, the Company acquired five
hospital facilities for an aggregate purchase price of
$90.1 million. The Company sold one hospital facility
during 1993 for approximately $85.1 million. The
proceeds from this sale were received in September
1993.
During 1994, the Company spent $221 million
(excluding the EPIC and other facility acquisitions)
for capital expenditures, primarily to renovate and add
new equipment and technology to existing facilities,
compared with $220 million in 1993 and $178 million in
1992. The Company intends to continue to invest in its
existing facilities and in new facilities within its
existing health care business and capital expenditures
for fiscal 1995 are expected to be approximately $300
million. The Company may seek to sell certain of its
hospitals from time to time. Management does not
consider the sale of any assets to be necessary to
repay the Company's indebtedness or to provide working
capital. The Company's cash, cash expected to be
generated from operations and available sources of
capital are believed by management to be adequate to
finance its planned future growth.
The Company receives payment for services rendered
from federal and state agencies (under the Medicare,
Medicaid and Champus programs), private insurance
carriers, employers, managed care programs and
patients. During the year ended August 31, 1994,
approximately 45% of the Company's net operating
revenue related to patients participating in the
Medicare and Medicaid programs. The Company recognizes
that revenue and receivables from government agencies
are significant to the Company's operations, but the
Company does not believe that there are any significant
credit risks associated with these government agencies.
The Company does not believe that there are any other
significant concentrations of revenue from any
particular payor that would subject the Company to any
significant credit risks in the collection of its
accounts receivable.
The Company is primarily self-insured for
professional and general liability risks. The unfunded
reserve for professional and general liability risks
was $245.4 million at August 31, 1994. Payments of
professional and general liability claims aggregated
$21.3 million for the year ended August 31, 1994. The
Company does not believe that the payment of these
self-insured risks will have any significant impact on
the Company's liquidity or working capital.
Revenue Reconciliation Act of 1993
Numerous provisions of the Code were revised by
the Revenue Reconciliation Act of 1993. As a result of
this Act, the Company's federal statutory rate was
increased to 35% for fiscal 1994 and thereafter.
Management does not believe that the increased tax rate
will have any significant effect on the Company's cash
flow during fiscal 1995.
Inflation
The health care industry is labor intensive.
Wages and other expenses increase 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 also has implemented
cost control measures to curb increases in operating
costs and expenses. The Company cannot predict its
ability to cover future cost increases, and the
Company's ability to increase prices is limited, in
certain cases, by various federal and state laws,
including federal laws that establish revenues per
admission for hospital services rendered to Medicare
and Medicaid patients.
Item 8. Financial Statements and Supplementary Data
The response to this Item is submitted in a
separate section of this report. See "Selected
Financial Data" and pages A-1 through A-31.
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
Information with respect to the Company's
executive officers is contained under Item 1,
"Directors and Executive Officers".
Base upon a review of reports filed with the
Securities and Exchange Commission (the "Commission")
under Section 16(a) of the Securities Exchange Act of
1934, as amended, and furnished to the Company during
the Company's most recent fiscal year, William T.
Hjorth, a director of the Company, failed to file one
report on Form 4 with the Commission on a timely basis.
Such report was filed eight calendar days after it was
due and one transaction was disclosed in such report.
Item 11. Executive Compensation
Directors who are not officers receive a fee of
$20,000 per year together with $1,000 plus expenses for
each Board or Committee meeting attended and are
eligible for participation in the Company's Amended and
Restated 1990 Directors Stock Compensation Plan (the
"Directors Plan"). Messrs. Hanselman and Hjorth were
each awarded 28,290 shares under the Directors Plan in
1990 and 1991, respectively, Mr. Dee and Ms. Caldwell
were each awarded stock options for 15,000 shares under
such Plan in 1992 and Dr. Beaty was awarded stock
options for 15,000 shares under such Plan in 1993.
Such shares or options generally vest or become
exercisable in five annual increments of 20% each. The
Directors Plan is of unlimited duration and is
administered by a committee of the Board of Directors,
which has discretion to select participants and to
determine the size of awards at the time of grant. To
enable the granting of awards tailored to changing
business conditions, the Directors Plan provides for
awards payable in stock options, stock appreciation
rights, restricted stock, restricted units, other
equity based units or cash, either singly or in any
combination thereof. Awards may be granted with an
exercise price of less than the fair market value of
the underlying Common Stock on the date of grant.
Shares will vest upon the participant's death,
disability or retirement and as otherwise determined by
the committee at the time of grant. The Directors Plan
authorized awards of up to 188,600 shares of Common
Stock.
Mr. MacNaughton, Chairman of the Executive
Committee of the Board of Directors of the Company
entered into a consulting agreement with the Company
pursuant to which Mr. MacNaughton agreed to serve as a
consultant to the Company following his retirement as
an employee. The agreement provides that Mr.
MacNaughton will receive consulting fees of $11,250 per
month plus reimbursement of expenses and certain
personal benefits for services rendered and in lieu of
director's fees. During fiscal year 1994 Mr.
MacNaughton received cash payments aggregating $135,000
pursuant to such consulting agreement.
In February, 1994, Ms. Caldwell entered into a
consulting agreement with the Company pursuant to which
Ms. Caldwell agreed to provide consulting services to
the Company in connection with the further development
of the Company's strategic planning. The Agreement
provides that Ms. Caldwell will receive consulting fees
of $1,000 per day plus reimbursement of expenses for
services rendered. During fiscal year 1994 Ms.
Caldwell received payments aggregating $23,000 pursuant
to such Consulting Agreement.
Compensation of Officers
The following table sets forth information
concerning the annual and long-term cash compensation
paid or to be paid by the Company to the Company's
Chief Executive Officer and the four most highly-
compensated executive officers of the Company for
services rendered to Healthtrust in all capacities
during the fiscal year ending August 31, 1994 as well
as the total compensation paid to each individual
during the Company's three previous fiscal years:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Name Other Restricted All Other
and Annual Stock LTIP Compen-
Principal Fiscal Salary Bonus Compen- Award(s) Options/ ayouts sation
Position Year ($) ($) sation($)(1) ($) SARs(#) ($) ($)(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. Clayton McWhorter 1994 $800,000 $400,000 - $400,000(3)333,333 0 $ 33,029(2)
Chairman of the 1993 750,000 375,000 - 0 100,000 0 24,190
Board, CEO 1992 750,000 150,000 - 0 565,800(4) 0 --
and President
W. Hudson Connery, Jr. 1994 $491,667 $200,000 - $200,000(3) 16,667 0 $25,806(2)
Senior Vice President 1993 441,667 175,000 - 0 60,000 0 20,590
and COO 1992 375,000 100,000 - 0 200,000 0 --
Richard E Francis, Jr. 1994 $306,667 $100,000 - $100,000(3) 9,042 0 $24,188(2)
Senior Vice President 1993 267,167 100,000 - 0 70,000 0 17,392
1992 192,666 75,000 - 0 30,000 0 --
Michael A. Koban, Jr. 1994 $295,000 $130,000 - $130,000(3) 10,833 0 $22,285(2)
Senior Vice President 1993 218,334 135,000 - 0 65,000 0 17,587
1992 171,666 75,000 - 0 35,000 0 -
Robert M. Martin 1994 $226,667 $271,400 - $149,270(3) 5,750 0 $22,878(2)
Vice President 1993 213,834 118,500 - 0 30,000 0 18,292
1992 192,666 80,000 - 0 30,000 0 -
</TABLE>
(1) In accordance with the Securities and Exchange Commission's
rules, perquisites and other personal benefits,
securities or property which, in the aggregate, do
not exceed the lesser of $50,000 or 10% of the annual
salary and bonus for each named executive are excluded
and amounts for 1992 have been omitted.
(2) In accordance with certain transition rules adopted
by the Securities and Exchange Commission amounts for
1992 have been omitted. Includes contributions made
by the Company during fiscal year 1994 under certain
defined contribution plans and the amount of premiums
paid by the Company under term life insurance and
long-term disability arrangements in the following
amounts respectively: McWhorter, $18,438, $6,300 and
$8,291; Mr. Connery, $18,438, $2,700, and $4,668;
Mr. Francis, $18,438, $2,700, and $3,050; Mr. Koban,
$16,535, $2,700 and $3,050; and Mr. Martin, $16,473,
$2,700 and $3,705.
(3) Pursuant to the Company's compensation program,
participants may elect to defer receipt of their annual
cash bonus and use up to 100% of such amount to
purchase restricted stock at a 50% discount to the
market price on the date of grant of such restricted
stock. Messrs. McWhorter, Connery, Francis and Koban
each deferred 100% and Mr. Martin deferred 55% of their
respective 1994 annual cash bonuses and were granted 22,858,
11,429, 6,200, 7,429 and 8,530 restricted shares,
respectively, all of which shares will vest on August 31,
1996. The value of such restricted shares on the grant
date were respectively: Mr. McWhorter, $800,000;
Mr. Connery, $400,000; Mr. Francis, $200,000; Mr. Koban,
$260,000; and Mr Martin, $298,540. Dividends, if
and when declared, will be paid on such restricted stock.
(4) Mr. McWhorter was awarded an option to purchase 565,800
shares of Common Stock at an option price per share
of $14.00 in fiscal year 1992. In connection with
such award Mr. McWhorter forfeited 282,900 unvested
shares of Restricted Stock previously awarded to him.
The following table sets forth certain information
concerning options granted during fiscal year 1994 to the named
executives:
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term(2)
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Base Price Expiration
Name Granted(#)(1) Fiscal Year ($/Share) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
R. Clayton McWhorter 333,333 39.50% $23.75 12/31/03 $4,999,995 $12,624,987
W. Hudson Connery, Jr. 16,667 1.97% 23.75 12/31/03 250,005 631,263
Richard E. Francis, Jr. 9,042 1.07% 23.75 12/31/03 135,630 342,466
Michael A. Koban, Jr. 10,833 1.28% 23.75 12/31/03 162,495 410,300
Robert M. Martin 5,750 0.06% 23.75 12/31/03 86,250 217,781
</TABLE>
(1) All such options vest and become exercisable on August 31, 1997
except 300,000 for Mr. McWhorter vest on August 31, 1996.
(2) Potential realizable value is based on an assumption that
the stock price of the Company's common stock appreciates
at the annual rate shown (compounded annually) from the date
of grant until the end of the option term. These numbers
are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price growth.
The following table summarizes options exercised during
fiscal year 1994 and presents the value of unexercised options
held by the named executives at fiscal year end:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/ Options/
Shares at Fiscal at Fiscal
Acquired Value Year-End(#) Year-End($)*
on Exercise Realized* Exercisable(E)/ Exercisable(E)/
Name (#) ($) Unexercisable(U) Unexercisable (U)
<S> <C> <C> <C> <C>
R. Clayton McWhorter 0 0 565,800/433,333 $9,477,150/$3,570,831
W. Hudson Connery, Jr. 0 0 100,000/176,667 $1,600,000/$2,459,169
Richard E. Francis, Jr. 0 0 20,000/89,042 $ 247,500/$1,162,044
Michael A. Koban, Jr. 0 0 20,000/90,833 $ 247,500/$1,192,706
Robert M. Martin 0 0 0/65,750 $ 0/$ 891,500
</TABLE>
* For all unexercised in-the-money options, values are
calculated using the difference between fair
market value per share of the stock at the close
of business on August 31, 1994 of $30.75 and the
exercise price of the option.
Employment Agreement
In December, 1993, the Company entered into an
employment agreement (the "Employment Agreement") with
Mr. McWhorter providing for a three-year term of
employment commencing September 1, 1993 and ended
August 31, 1996. Under the Employment Agreement,
Mr. McWhorter is entitled to an annual base salary of
$800,000, subject to increases by the Board of
Directors, and is eligible to participate in all
executive compensation and employee benefit plans or
programs applicable to senior management employees of
the Company including such incentive bonuses as the
Board of Directors may determine from time to time.
Under the Employment Agreement, Mr. McWhorter's
employment may be terminated by the Company for cause,
in which event the Company's obligation to pay
Mr. McWhorter's salary after termination would cease.
In the event Mr. McWhorter becomes disabled or dies
during the term of the Employment Agreement, the
Company could terminate his employment and pay to him
or his estate, as the case may be, disability or death
benefits, equal to his salary then in effect, until the
later of (i) August 31, 1996 and (ii) one year from the
date of such termination.
Severance Protection Agreements
The Company's Board of Directors has authorized
the Company to enter into Severance Protection
Agreements with approximately 70 employees
("Executives"), including the named executives. Such
agreements are expected to provide that if, within 24
months following a Change of Control (as defined
therein), the Executive's employment is terminated by
the Company without Cause (as defined therein) or due
to a Disability (as defined therein) or by the
Executive with Good Reason (as defined therein), the
Executive will be entitled to receive a lump sum
severance payment equal to one, two or three times
annual base salary (two times annual base salary for
Mr. Martin and three times annual base salary for each
of the other named executives) plus a pro rata bonus
for the fiscal year in which termination occurs. In
addition, the Executive would be entitled to continued
coverage under the Company's medical benefit plans for
up to 18 months (or until such earlier date as the
Executive obtains comparable medical coverage from a
new employer).
The Severance Protection Agreements are expected
to provide that if any payment made thereunder would be
subject to an excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, such payment
will be reduced to the extent necessary such that the
remaining payment would not be subject to the excise
tax. It is anticipated that each Severance Protection
Agreement will have a two-year term, provided that no
agreement will expire earlier than two years after the
occurrence of a Change in Control.
Compensation Committee Interlocks and Insider
Participation.
Directors Hanselman, Hjorth and MacNaughton
comprise the Committee. Mr. MacNaughton is a former
employee of the Company and currently performs
consulting services for the Company. The Company
intends to retain the services of Mr. MacNaughton in
the next fiscal year.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth as of November 15,
1994 the number of shares of Common Stock of the
Company held beneficially, directly or indirectly, by
each person or entity owning of record, or known by the
Company to own beneficially, more than five percent of
the outstanding Common Stock of the Company, by each
director and each executive officer named in the
Summary Compensation Chart below, individually, and by
all officers and directors as a group, together with
the percentage of the outstanding shares which such
ownership represents.
<PAGE>
Name and Address Beneficial Ownership(1)
of Beneficial Owner(2) No. of Shares Percent
Healthtrust, Inc.-The Hospital
Company 401(k) Retirement Plan(3) 25,768,044 28.4%
Mellon Bank Corporation(4) 5,230,000 5.8%
R. Clayton McWhorter 1,200,264 1.3%
W. Hudson Connery, Jr. 240,178 *
Michael A. Koban, Jr. 143,004 *
Harry N. Beaty, M.D. 3,500 *
Alethea O. Caldwell 6,000 *
Robert F. Dee 7,000 *
Richard W. Hanselman 10,000 *
William T. Hjorth 21,941 *
Donald S. MacNaughton 208,754 *
Richard E. Francis 112,857 *
Robert M. Martin 110,026 *
All directors and officers
as a group (25 persons) 2,847,991 3.0%
(1) The beneficial owner has both sole voting and sole investment
power with respect to these shares except as set forth in this
or other footnotes below. Not included in such number of
shares beneficially owned are shares subject to options
becoming exercisable in more than sixty days. Included in
such number of shares beneficially owned are options which are
currently exercisable or will be exercisable within sixty days
as follows: Mr. McWhorter, 565,800 options; Mr. Connery,
100,000 options; Mr. Koban, 20,000 options; Dr. Beaty, 3,000
options; Ms. Caldwell, 6,000 options; Mr. Dee, 6,000 options;
Mr. Francis, 20,000 options; and all 25 directors and officers
as a group, 1,031,800 options. In addition, one director
shares investment power with such director's spouse with
respect to 500 shares and one director and one officer share
voting power with such director's or officer's spouse with
respect to 150,000 and 12,000 shares respectively. Included
are shares allocated to such persons under the Company's
retirement plans as follows: Mr. McWhorter, 17,424 shares;
Mr. Connery, 8,948 shares; Mr. Koban, 9,103 shares; Mr.
Francis, 8,476 shares; Mr. Martin, 8,039 shares; and all 25
directors and officers as a group, 131,687 shares.
(2) The address for the Retirement Plan and for Ms. Caldwell and
Messrs. McWhorter, Connery, Koban, Beaty, Dee, Hanselman,
Hjorth, MacNaughton, Francis and Martin is c/o Healthtrust,
Inc. - The Hospital Company, 4525 Harding Road, Nashville,
Tennessee 37205.
(3) Shares held by the Retirement Plan are voted by the Trustee in
accordance with directions given by employees participating in
the Plan. Shares allocated to participants are voted with
respect to all matters submitted to stockholders only in
accordance with instructions of such participants. The
Trustee may respond to tender or exchange offers only in
accordance with the instructions of participants to whom
shares have been allocated. Under certain circumstances, the
Trustee may be required to override participants' voting
directions or vote allocated shares for which no directions
are received.
(4) Based upon information set forth in the report on Schedule 13G
dated February 10, 1994 filed with the Securities and Exchange
Commission by Mellon BankCorporation and certain of its
subsidiaries ("Mellon"). According to such Schedule 13G
report, Mellon has sole voting power over 3,657,000 of such
shares and shared investment power over 1,232,000 of such
shares. According to such Schedule 13G report, Mellon's
address is one Mellon Bank Center, Pittsburgh, Pennsylvania
15258.
(*) Less than 1%
Item 13. Certain Relationships and Related Transactions
Except as described under Executive Compensation
with respect to certain directors and executive
officers, during fiscal year 1994 the Company's
executive officers and directors were not indebted to,
and did not have significant business relations with,
the Company. In addition, none of these individuals
expect to become indebted to, or have such significant
business relations with, the Company during fiscal year
1995.
In general, officers are elected by the Board of
Directors annually and serve at the discretion of the
Board of Directors. There are no family relationships
between any of the directors or executive officers.
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Report on Form 8-K
(a)(1) and (2) List of Financial Statements and
Financial Statement Schedules. The response to this portion of
Item 14 is submitted as a separate section of this
report. See page A-1.
(a)(3) List of Exhibits.
<PAGE>
Page Description
2.1 -Agreement and Plan of Merger, dated
October 4, 1994, among Columbia/HCA Healthcare
Corporation, COL Acquisition Corporation and
the Company.
2.2 -Agreement and Plan of Merger, dated as of
January 9, 1994, among the Company, Odyssey
Acquisition Corp. and EPIC Holdings.
Incorporated by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K
dated January 10, 1994.
3.1 -Restated Certificate of Incorporation of the
Company, as amended to date. Incorporated by
reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended
August 31, 1993.
3.2 -Bylaws of the Company, as amended to date.
4.1 -Rights Agreement, dated as of July 8, 1993,
between the Company and First Union National Bank
of North Carolina, as Rights Agent. Incorporated
by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A dated July 12, 1993.
4.2 -Indenture, dated as of March 30, 1993, between the
Company and The First National Bank of Boston, as
Trustee, relating to the Company's 8-3/4% Subordinated
Debentures due 2005 and the Company's 10 1/4% Subordinated
Notes due 2004. Incorporated by reference to
Exhibit 2 to the Company's Registration Statement
on Form 8-A dated April 22, 1993.
4.3 -Indenture, dated as of May 1, 1992, between the
Company and The First National Bank of Boston, as
Trustee, relating to the Company's 10 3/4% Subordinated
Notes due 2002. Incorporated by reference to Exhibit 4.5
to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1992.
4.4 -Warrant Certificate, dated September 17, 1987.
Incorporated by reference to Exhibit 4.7 to the
Company's Registration Statement on Form S-1
No. 33-19163.
4.5 -Warrants and Common Stock Registration
Rights Agreement, dated as of September 17,
1987, by and between the Company and the
Purchasers set forth therein. Incorporated
by reference to Exhibit 4.9 to the Company's
Registration Statement on Form S-1 No. 33-19163.
4.6 -Credit Agreement, dated as of April 28, 1994,
as amended as of May 1994, by and among the
Company, certain financial institutions as
lenders and The Bank of Nova Scotia ("Scotia Bank")
as Administrative Agent. Incorporated by
reference to Exhibit 99.4 to the Company's
Current Report Form 8-K dated May 5, 1994.
4.6(a) -Subsidiary Guaranty Agreement, dated as of
April 28, 1994, by the Subsidiaries of the Company,
in favor of Scotiabank as collateral agent for and
representative of the Guarantied Parties.
4.6(b) -Borrower Stock Pledge Agreement, dated as of
April 28, 1994, by the Company, in favor of
Scotiabank as collateral agent for and
representative of the Lender Parties.
4.6(c) -Subsidiary Stock Pledge Agreement, dated as of
April 28, 1994, by the Subsidiaries of the Company,
in favor of Scotiabank as collateral agent for and
representative of the Secured Parties.
10.1 -Healthtrust, Inc. - The Hospital Company
Employee Stock Ownership Trust Agreement,
dated as of September 17, 1987, by and
between the Company and First American
Trust Company, as trustee of the Healthtrust,
Inc. - The Hospital Company Employee Stock
Ownership Trust ("First American").
Incorporated by reference to Exhibit 10.1
to the Company's Registration Statement
on Form S-1 No. 33-19163.
10.1(a) -Healthtrust, Inc. - The Hospital Company
Employee Stock Ownership Plan, effective
September 17, 1987. Incorporated by
reference to Exhibit 10.1(a) to the
Company's Registration Statement on
Form S-1 No. 33-19163.
10.1(b) -First Amendment to the Healthtrust, Inc. - The
Hospital Company Employee Stock Ownership
Plan adopted June 23, 1988. Incorporated
by reference to Exhibit 10.1(h) to the
Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1988, on file
at the Securities and Exchange Commission Public
Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549, File No. 1-10915.
10.1(c) -Second Amendment to Healthtrust, Inc. - The
Hospital Company Employee Stock Ownership
Plan adopted April 7, 1989. Incorporated by
reference to Exhibit 10.1(i) to Company's
Registration Statement on Form S-1 No. 33-19660.
10.1(d) -Third Amendment to Healthtrust, Inc. - The
Hospital Company Employee Stock Ownership
Plan adopted October 15, 1991. Incorporated
by reference to Exhibit 10.4(i) to the Company's
Registration Statement on Form S-1 No. 33-42225.
10.1(e) -Memorandum of Understanding, dated November
15, 1991, by and between the Company and the
Administrative Committee of the Healthtrust, Inc.-
The Hospital Company Employee Stock Ownership
Plan. Incorporated by reference to Exhibit
10.4(m) to the Company's Registration Statement
on Form S-1 No. 33-42225.
10.2 -Employment Agreement, dated as December 21,
1993, by and between the Company and
R. Clayton McWhorter.
10.3 -Amended and Restated 1990 Directors Stock
Compensation Plan of the Company, adopted on
October 15, 1991. Incorporated by reference
to Exhibit 28.8 to the Company's Current
Report on Form 8-K dated February 4, 1992.
10.4 -Amended and Restated 1990 Stock Compensation
Plan of the Company adopted, October 15, 1991.
Incorporated by reference to Exhibit 28.7 to
the Company's Current Report on Form 8-K
dated February 4, 1992.
10.5 -1988 Supplemental Stock Plan of Company,
adopted September 8, 1988. Incorporated by
referenced to Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the fiscal year
ended August 31, 1988, on file at the Securities
and Exchange Commission Public Referenced Room,
450 Fifth Street, N.W., Washington, D.C., 20549,
File No. 1-10915.
10.6 -Trust Agreement, dated as of August 31, 1988,
by and between the Company and Dominion Trust
Company of Tennessee ("Dominion"). Incorporated
by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the fiscal year
ended August 31, 1988, on file at the Securities
and Exchange Commission Public Reference Room,
450 Fifth Street, N.W., Washington, D.C., 20549,
File No. 1-10915.
10.6(a) -First Amendment to Trust Agreement, dated as
of January 31, 1990, between the Company and
Dominion. Incorporated by reference to
Exhibit 10.36(a) to the Company's Registration
Statement on Form S-1 No. 33-19960.
10.7 -Description of Healthtrust, Inc. Transferred
Assets Retirement Program. Incorporated by
reference to Exhibit 10.38 to the Company's
Annual Report on Form 10-K for the fiscal year
ended August 31, 1988, on file at the Securities
and Exchange Commission Public Reference Room,
450 Fifth Street, N.W., Washington, D.C. 20549,
File No. 1-10915.
10.7(a) -First Amendment to the Healthtrust, Inc.
Transferred Assets Retirement Program.
Incorporated by reference to Exhibit 10.38(a)
to the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1988, on
file at the Securities and Exchange Commission
Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, File No. 1-10915.
10.7(b) -Second Amendment to the Healthtrust, Inc.
Transferred Assets Retirement Program.
Incorporated by reference to Exhibit 10.38(b)
to the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1988, on
file at the Securities and Exchange Commission
Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, File No. 1-10915.
10.7(c) -Trust Agreement for Healthtrust, Inc. Frozen
Money Purchase Plan. Incorporated by reference
to Exhibit 10.38(c) to the Company's Annual
Report on Form 10-K for the fiscal year ended
August 31, 1988, on file at the Securities and
Exchange Commission Public Reference Room, 450
Fifth Street, N.W., Washington, D.C., 20549,
File No. 1-10915.
10.7(d) -Trust Agreement for Healthtrust, Inc. Frozen
Profit Sharing Plan. Incorporated by reference
to Exhibit 10.38(d) to the Company's Annual
Report on Form 10-K for the fiscal year ended
August 31, 1988, on file at the Securities and
Exchange Commission Public Reference Room, 450
Fifth Street, N.W., Washington, D.C. 20549,
File No. 1-10915.
10.7(e) -Trust Agreement for Healthtrust, Inc.
Frozen 401(k) Plan. Incorporated by
reference to Exhibit 10.38(e) to the Company's
Annual Report on Form 10-K for the fiscal
year ended August 31, 1988, on file at the
Securities and Exchange Commission Public
Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, File No. 1-10915.
10.8 -Healthtrust, Inc. - The Hospital Company 401(k)
Retirement Program effective January 1, 1992.
Incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1992.
10.8(a) -Trust Agreement, effective as of January, 1992,
by and between the Company and Third National
Bank of Tennessee. Incorporated by reference
to Exhibit 10.8(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended August 31,
1992.
10.9 -Consulting Agreement, dated April 14, 1994,
between the Company and Donald S. MacNaughton.
10.10 -Consulting Agreement, dated February 28, 1994,
between the Company and Alethea O. Caldwell.
10.11 -Form of Severance Protection Agreement.
10.12 -Amended and Restated ESOP Agreement, dated as of
March 17, 1994, among the Company, Odyssey Acquisition
Corp., EPIC Holdings, Inc., EPIC Healthcare Group, Inc.,
U.S. Trust Company of California, N.A. and the
ESOP Committee. Incorporated by reference to
Exhibit 2.2 to the Company's Registration Statement
on Form S-3 No. 33-52401.
10.13 -Executive Management Total Direct Compensation Program
11 -Statement re: Computation of Per Share Earnings.
22 -List of Subsidiaries of the Company.
24 -Consent of Ernst & Young LLP.
25 -Powers of Attorney.
27 -Financial Data Schedule
<PAGE>
Exhibits are included in a separate bound volume or
volumes.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the
quarter ended August 31, 1994.
(c) Exhibits.
The exhibits required by Item 601 of Regulation S-
K are filed with this report or are incorporated by
this reference herein and are contained in the Exhibits
listed in response to Item 14(a)(3).
(d) Financial Statement Schedules Required by
Regulation S-X.
Reference is hereby made to page A-1 and pages A-29 through
A-31 of this report for the financial statement
schedules required by Regulation S-X.
<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, on the 22nd day of November, 1994.
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By:s/ R. Clayton McWhorter
R. Clayton McWhorter
Chairman, Chief Executive
Officer and President
<PAGE>
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the
Company and in the capacities and on the dates
indicated.
Name Title Date
s/R. Clayton McWhorter Chairman, Chief November 22, 1994
R. Clayton McWhorter Executive Officer
and President; Director
(Principal Executive
Officer)
*/W. Hudson Connery, Jr. Senior Vice President November 22, 1994
W. Hudson Connery, Jr. and Chief Operating
Officer; Director
*/Donald S. MacNaughton Director November 22, 1994
Donald S. MacNaughton
*/Richard W. Hanselman Director November 22, 1994
Richard W. Hanselman
*/Robert F. Dee Director November 22, 1994
Robert F. Dee
*/Alethea O. Caldwell Director November 22, 1994
Alethea O. Caldwell
*/William T. Hjorth Director November 22, 1994
William T. Hjorth
*/Harry N. Beaty, M.D. Director November 22, 1994
Harry N. Beaty, M.D.
s/Michael A. Koban, Jr. Senior Vice President November 22, 1994
Michael A. Koban, Jr. (Principal Financial
Officer) Director
s/Kenneth C. Donahey Senior Vice President November 22, 1994
Kenneth C. Donahey (Principal Accounting
Officer)
*By:s/ Michael A. Koban, Jr. November 22, 1994
Michael A. Koban, Jr.
(Attorney-in-Fact)
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a)(1) and (2)
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
The following consolidated financial statements of the Company
are included in response to Item 8:
Page No.
Report of Independent Auditors........................... A-2
Consolidated Balance Sheets - August 31, 1994 and 1993... A-3
Consolidated Statements of Operations - Years
Ended August 31, 1994, 1993 and 1992................. A-5
Consolidated Statements of Stockholders'
Equity - Years Ended August 31, 1994, 1993 and 1992.. A-6
Consolidated Statements of Cash Flows -
Years Ended August 31, 1994, 1993 and 1992........... A-7
Notes to Consolidated Financial Statements............... A-9
The following financial statement schedules of
the Company are included in Item 14(d):
Schedule V - Property, Plant and Equipment............... A-29
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment........ A-30
Schedule VIII - Valuation and Qualifying Accounts........ A-31
All other schedules of the Company for which provision is made
in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions,
are inapplicable or have been disclosed in the notes to financial
statements and therefore have been omitted.
Audited Consolidated
Financial Statements
Healthtrust, Inc. - The Hospital Company
Years Ended August 31, 1994, 1993 and 1992
with Report of Independent Auditors
Report of Independent Auditors
Board of Directors
Healthtrust, Inc.-The Hospital Company
We have audited the accompanying consolidated balance sheets of
Healthtrust, Inc.-The Hospital Company as of August 31, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended August 31,
1994. Our audits also included the financial statement schedules listed in the
Index at item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Healthtrust, Inc.-The Hospital Company at August 31, 1994 and 1993, and
the consolidated results of operations and cash flows for each of the three
years in the period ended August 31, 1994 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Nashville, Tennessee
October 14, 1994
Healthtrust, Inc. - The Hospital Company
Consolidated Balance Sheets
August 31,
1994 1993
(In Thousands)
Assets
Current assets:
Cash and cash equivalents $ 92,327 $ 151,346
Accounts receivable, less allowances
for doubtful accounts of $175,838
in 1994 and $107,758 in 1993 549,554 346,491
Receivables from hospital sales - 95,653
Supplies 86,576 51,740
Other current assets 113,752 25,692
Total current assets 842,209 670,922
Property, plant and equipment:
Land 214,536 141,148
Buildings and improvements 1,495,829 987,372
Equipment 1,168,015 895,190
Construction in progress 112,179 144,655
2,990,559 2,168,365
Less accumulated depreciation 736,863 600,853
2,253,696 1,567,512
Excess of purchase price over net assets
acquired 736,189 178,549
Unamortized loan costs 26,768 16,978
Investments in affiliates 58,404 56,154
Other assets 50,016 46,598
$3,967,282 $ 2,536,713
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 153,821 $ 109,545
Employee compensation and benefits 189,317 118,545
Interest payable 43,373 29,229
Income taxes payable - 26,047
Other accrued liabilities 128,011 67,848
Current maturities of long-term debt 44,543 100,605
Total current liabilities 559,065 451,819
Long-term debt 1,740,872 948,604
Deferred income taxes 91,230 133,385
Deferred professional liability risks 215,503 140,124
Other liabilities 335,008 207,124
Stockholders' equity:
Common stock, $.001 par value - authorized
400,000,000 shares, issued and
outstanding 90,733,447 in 1994 and
81,065,074 in 1993 91 81
Paid-in capital 1,021,929 826,350
Deferred compensation - (1,162)
Retained earnings (deficit) 3,584 (169,612)
1,025,604 655,657
$3,967,282 $ 2,536,713
See accompanying notes.
Healthtrust, Inc. - The Hospital Company
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended August 31,
1994 1993 1992
(In Thousands, except per share data)
<S> <C> <C> <C>
Net operating revenue $ 2,970,036 $ 2,394,567 $ 2,265,265
Costs and expenses:
Hospital service costs:
Salaries and benefits 1,121,496 886,645 850,723
Supplies 404,734 346,972 325,874
Fees 321,973 270,063 259,745
Other expenses 317,395 239,333 222,582
Bad debt expense 196,013 145,538 137,074
2,361,611 1,888,551 1,795,998
Depreciation and amortization 166,001 132,688 127,509
Interest 113,741 99,787 119,556
ESOP/pension expense 44,497 38,991 38,725
Deferred compensation expense 1,162 4,279 8,104
Other income (net) (15,686) (7,553) (4,617)
2,671,326 2,156,743 2,085,275
Income before minority interests,
income taxes and extraordinary
charges 298,710 237,824 179,990
Minority interests 9,440 11,958 15,316
Income before income taxes
and extraordinary charges 289,270 225,866 164,674
Income tax expense 116,074 90,675 71,432
Income before extraordinary charges 173,196 135,191 93,242
Extraordinary charges on early
extinguishments of debt (net of tax
benefits of $7,723 and $27,959) - 13,633 136,352
Net income (loss) 173,196 121,558 (43,110)
Dividends paid and discount accretion on
preferred stock - - 24,582
Net income (loss) to common stockhold $ 173,196 $ 121,558 $ (67,692)
Weighted average common shares 87,444,065 83,540,815 76,769,481
Income (loss) per common share:
Income before extraordinary charges $ 1.98 $ 1.62 $ 0.90
Extraordinary charges - 0.16 1.78
Net income (loss) $ 1.98 $ 1.46 $ (0.88)
</TABLE>
See accompanying notes.
Healthtrust, Inc. - The Hospital Company
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Notes Retained
Common Paid-In Receivable Deferred Earnings
Stock Capital From ESOP Compensation (Deficit)
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balances at September 1, 1991 $ 60 $ 748,612 $(392,739) $ (19,890) $ (248,060)
Issuance of common stock 40 525,209
Purchase of common stock (3) (31,291)
Receipt and retirement of
common stock in
satisfaction of notes
receivable from ESOP (24) (384,728) 384,752
Shares forfeited under
stock benefit plans (6,264) 6,264
Deferred compensation
accrual 8,104
ESOP accrual 7,987
Dividends paid and discount
accretion on preferred
stock (24,582)
Other 8 491
Net loss (43,110)
Balances at August 31, 1992 81 827,447 0 (5,522) (291,170)
Deferred compensation
accrual 4,279
Other (1,097) 81
Net income 121,558
Balances at August 31, 1993 81 826,350 0 (1,162) (169,612)
Issuance of common stock 10 196,535
Deferred compensation
accrual 1,162
Other (956)
Net income 173,196
Balances at August 31, 1994 $ 91 $1,021,929 $ 0 $ 0 $ 3,584
</TABLE>
See accompanying notes.
Healthtrust, Inc. - The Hospital Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended August 31,
1994 1993 1992
(In Thousands)
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 173,196 $ 121,558 $ (43,110)
Adjustments to reconcile net income
(loss) to cash flows provided by operating
activities:
Depreciation 151,955 124,781 119,993
Extraordinary charges - 21,356 164,311
Noncash ESOP/pension expense 32,413 13,467 38,725
Noncash professional liability expense 15,570 12,112 21,079
Amortization 14,046 7,907 7,516
Deferred tax expense (benefit) 71,231 (31,735) 35,300
Decrease in accounts
and agency receivables 7,683 10,151 41,605
Increase (decrease) in accounts payable
and accrued liabilities (89,725) 78,413 19,302
Other (7,618) 6,529 25,386
Net cash provided by operating activities 368,751 364,539 430,107
Investing activities
Acquisition of hospital facilities (380,916) (101,935) -
Purchases of property, plant and
equipment (220,975) (219,506) (178,138)
Proceeds from sales of property, plant
and equipment 97,349 38,583 24,282
Other (5,054) (7,977) (1,250)
Net cash used in investing activities $ (509,596) $ (290,835) $ (155,106)
Financing activities
Principal payments on long-term debt $ (452,682) $ (628,750) $ (613,521)
Proceeds from long-term borrowings 1,128,000 832,000 1,440,000
Proceeds from common stock issuances 172,849 - 525,249
Purchase of common stock - (4,498) (31,294)
Purchase of preferred stock and warrants - - (600,000)
Purchase of long-term debt securities (754,081) (283,483) (1,070,411)
Payment of debt issuance costs (12,260) (10,227) (50,039)
Net cash provided by (used in) financing activities 81,826 (94,958) (400,016)
Increase (decrease) in cash and cash
equivalents (59,019) (21,254) (125,015)
Cash and cash equivalents at beginning
of year 151,346 172,600 297,615
Cash and cash equivalents at end of year $ 92,327 $ 151,346 $ 172,600
Cash paid during the year for:
Interest $ 101,481 $ 103,236 $ 97,096
Income taxes $ 90,585 $ 83,931 $ 9,996
</TABLE>
See accompanying notes.
Healthtrust, Inc. - The Hospital Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended August 31,
1994 1993 1992
(In Thousands)
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 173,196 $ 121,558 $ (43,110)
Adjustments to reconcile net income
(loss) to cash flows provided by operating
activities:
Depreciation 151,955 124,781 119,993
Extraordinary charges - 21,356 164,311
Noncash ESOP/pension expense 32,413 13,467 38,725
Noncash professional liability expense 15,570 12,112 21,079
Amortization 14,046 7,907 7,516
Deferred tax expense (benefit) 71,231 (31,735) 35,300
Decrease in accounts
and agency receivables 7,683 10,151 41,605
Increase (decrease) in accounts payable
and accrued liabilities (89,725) 78,413 19,302
Other (7,618) 6,529 25,386
Net cash provided by operating activities 368,751 364,539 430,107
Investing activities
Purchases of property, plant and
equipment (601,891) (321,441) (178,138)
Proceeds from sales of property, plant
and equipment 97,349 38,583 24,282
Other (5,054) (7,977) (1,250)
Net cash used in investing activities $ (509,596) $ (290,835) $ (155,106)
Financing activities
Principal payments on long-term debt $ (452,682) (628,750) $ (613,521)
Proceeds from long-term borrowings 1,128,000 832,000 1,440,000
Proceeds from common stock issuances 172,849 - 525,249
Purchase of common stock - (4,498) (31,294)
Purchase of preferred stock and warrants - - (600,000)
Purchase of long-term debt securities (754,081) (283,483) 1,070,411
Payment of debt issuance costs (12,260) (10,227) (50,039)
Net cash provided by (used in) financing
activities 81,826 (94,958) (400,016)
Increase (decrease) in cash and cash
equivalents (59,019) (21,254) (125,015)
Cash and cash equivalents at beginning
of year 151,346 172,600 297,615
Cash and cash equivalents at end of year $ 92,327 $ 151,346 $ 172,600
Cash paid during the year for:
Interest $ 101,481 $ 103,236 $ 97,096
Income taxes $ 90,585 $ 83,931 $ 9,996
</TABLE>
See accompanying notes.
1. Accounting Policies
Healthtrust, Inc. - The Hospital Company (the "Company") is engaged
primarily in the operation of hospitals and other medical facilities.
The majority of the Company's hospitals and other medical facilities
were acquired from a subsidiary of Hospital Corporation of America
("HCA") during September 1987. HCA merged with Columbia Hospital
Corporation to form Columbia/HCA Healthcare Corporation ("Columbia")
during 1994.
The Company is structured so that employees of the Company have a
significant beneficial ownership of the Company's common stock through
their participation in the Company's benefit plans.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts
of the Company and all its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation. Investments in affiliates (20% to 50% ownership) are recorded
using the equity method of accounting.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash and cash
equivalents are stated at cost, which approximates fair value.
Accounts Receivable
The Company receives payment for services rendered from federal and state
agencies (under the Medicare, Medicaid and Champus programs), private
insurance carriers, employers, managed care programs and patients. During
the years ended August 31, 1994 and 1993, approximately 45% and 42%,
respectively, of the Company's net operating revenue related to patients
participating in the Medicare and Medicaid programs. The Company
recognizes that revenue and receivables from government agencies are
significant to the Company's operations, but the Company does not believe
that there are any significant credit risks associated with these government
agencies. 1. Accounting Policies (continued)
The Company does not believe that there are any other significant
concentrations of revenue from any particular payor that would subject the
Company to any significant credit risks in the collection of its accounts
receivable.
Supplies
Supplies are recorded at the lower of cost (first-in, first-out) or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost.
Depreciation is computed by the straight-line method over the estimated
useful lives of the buildings and improvements (principally 20 to 40 years)
and equipment (principally 4 to 20 years).
Interest incurred during the construction or improvement of a facility is
capitalized as part of the cost of the constructed assets. Interest
capitalized totaled $4.7 million, $8.4 million and $5.0 million for
fiscal 1994, 1993, and 1992, respectively.
Intangible Assets
The excess of purchase price over the fair value of net assets of purchased
subsidiaries is being amortized over periods of 5 to 40 years using the
straight-line method. Accumulated amortization of the excess of purchase
price over net assets acquired was $50.1 million and $37.8 million at August
31, 1994 and 1993, respectively. The carrying value of goodwill is reviewed
if the facts and circumstances suggest that it may be impaired. If this
review indicates that goodwill will not be recoverable, as determined based
on the undiscounted cash flows of the entity acquired over the remaining
amortization period, the Company's carrying value of the goodwill is reduced
by the estimated shortfall of cash flows. Costs incurred in obtaining long-term
financing are deferred and amortized by the interest method over the term of
the related debt and such amortization is included in interest expense.
Accumulated amortization of deferred financing costs was $4.5 million and
$2.0 million at August 31, 1994 and 1993, respectively.
1. Accounting Policies (continued)
Net Operating Revenue
Net operating revenue is based on established billing rates less allowances
and discounts for patients covered by Medicare, Medicaid and other contractual
programs. Payments received under these programs, which are based on
either predetermined rates or the costs of services, are generally less than
the established billing rates of the Company's hospitals, and the differences
are recorded as contractual adjustments or policy discounts. Net operating
revenue is net of contractual adjustments and policy discounts of $1,864.9
million, $1,409.6 million and $1,227.4 million for fiscal 1994, 1993, and 1992,
respectively. The provision for bad debts is included in operating expenses.
Income Taxes
The Company files a consolidated federal income tax return which includes
all of its eligible subsidiaries.
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". Under SFAS No. 109, deferred tax assets and/or liabilities
are determined by multiplying the difference between the financial reporting
and tax reporting bases of assets and liabilities by the tax rate, determined
in accordance with enacted tax laws, that will be effective when such
differences reverse.
Income (Loss) Per Common Share
Income (loss) per share of common stock is based upon the net income (loss)
applicable to common stockholders and the weighted average number of
shares and share equivalents outstanding during each period.
Fully diluted per common share data is not presented since the effect would
be antidilutive or dilute earnings per share by less than three percent (3%).
2. Acquisitions, Dispositions, and Joint Ventures
1994 Activities
Acquisition of EPIC Holdings
The Company completed its acquisition of EPIC Holdings, Inc. (EPIC) on
May 5, 1994 (effective May 1, 1994 for accounting purposes). EPIC currently
owns and operates 32 hospitals in 10 states.
EPIC shareholders received $7.00 for each share of EPIC common stock
(approximately $249.4 million in the aggregate) and the Company refinanced
approximately $681 million and assumed approximately $32 million of EPIC
indebtedness. The acquisition was financed through the public offering of
5,980,000 shares of Healthtrust common stock at $28.25 per share, the public
offering of $200 million of 10 1/4% Subordinated Notes, borrowings under
the Company's bank credit agreement and cash on hand.
The acquisition was recorded using the purchase method of accounting and
EPIC's results of operations are included in the Company's consolidated
financial statements for periods subsequent to April 30, 1994. The purchase
price was allocated to the assets acquired and liabilities assumed based upon
their respective fair values. Goodwill resulting from the purchase price
allocation (approximately $545.8 million) is being amortized over 40 years
using the straight-line method.
The following unaudited pro forma information has been prepared assuming
the acquisition occurred at the beginning of the periods presented (dollars in
millions, except per share data).
Year Ended
August 31
1994 1993
Net operating revenue $ 3,718.4 $3,413.7
Net income before extraordinary charge $ 166.3 $ 125.9
Net income $ 166.3 $ 90.4
Earnings per share:
Net income before extraordinary
charge $ 1.82 $ 1.42
Net income $ 1.82 $ 1.02
2. Acquisitions, Dispositions, and Joint Ventures (continued)
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any operational efficiencies that might be obtained
from combined operations.
Other Acquisitions and Dispositions
The Company acquired three other hospital facilities during fiscal 1994 for
an aggregate purchase price of approximately $156.7 million. These
acquisitions were recorded using the purchase method of accounting and the
aggregate purchase price in excess of the fair value of net assets acquired
was approximately $17.7 million. The results of operations of the acquired
facilities subsequent to the acquisition dates have been included in the
consolidated statements of operations.
The Company did not renew the lease on one of the facilities acquired from
EPIC that terminated in July 1994 and one of the facilities acquired from
EPIC was sold during August 1994. No gain or loss was recognized on either
of these transactions.
1993 Activities
During August 1993, the Company sold one facility for approximately $85.1
million (recognizing a pretax gain of approximately $38.3 million) and sold
its 40% interest in a two-hospital joint venture for approximately $14.3
million (recognizing a pretax loss of approximately $3.0 million). The
Company also recorded reserves of approximately $38.5 million related to
certain facilities that were expected to be sold or closed. These transactions
were all recorded in other income (net). Approximately $95.7 million of the
proceeds from the hospital sales was not received until September 1993 and
such amount was recorded as a receivable at August 31, 1993.
The Company acquired five hospital facilities during fiscal 1993 for an
aggregate purchase price of approximately $90.1 million. These acquisitions
were recorded using the purchase method of accounting and the aggregate
purchase price in excess of the fair value of net assets acquired was
approximately $11.2 million. The results of operations of the acquired
facilities subsequent to the acquisition dates have been included in the
consolidated statements of operations.
2. Acquisitions, Dispositions, and Joint Ventures (continued)
Three of the Company's hospitals entered into joint venture alliances with
other health care providers during the 1993 fiscal year. The Company does
not own a majority interest in these ventures and is using the equity method
of accounting to record its share of their operations.
1992 Activities
During fiscal 1992, the Company completed the sale of four hospitals. The
losses incurred on three of these facilities had been recorded during fiscal
1991. The loss incurred on the fourth facility sold during fiscal 1992 of
approximately $0.5 million is included in other income (net).
3. Long-Term Debt
The Company's long-term debt is summarized below:
August 31
1994 1993
(In Thousands)
Bank credit agreements, interest is paid
at fluctuating rates (7.25% effective
August 31, 1994) $ 747,000 $ 232,000
Subordinated Notes, interest is paid
semiannually at 10.75% 500,000 500,000
Subordinated Debentures, interest is
paid semiannually at 8.75% 300,000 300,000
Subordinated Notes, interest is
paid semiannually at 10.25% 200,000 ---
Other debt 38,415 17,209
1,785,415 1,049,209
Less current portion 44,543 100,605
$1,740,872 $ 948,604
3. Long-Term Debt (continued)
Bank Credit Agreements
During April 1994, the Company entered into a new bank credit agreement
(the "1994 Credit Agreement") with the Bank of Nova Scotia, acting as
administrative agent for the lenders. The 1994 Credit Agreement provides for
an aggregate of up to $1.2 billion in credit available to the Company,
consisting of up to $415 million in term loans, up to $385 million of delayed
term loans and up to $400 million of revolving loans (including up to $150
million of letters of credit). The Company used $202 million of proceeds
from the 1994 Credit Agreement to repay all the outstanding loans under
1992 Credit Agreement.
At August 31, 1994, the Company had $415 million of term loans, $277
million of delayed term loans and $55 million of revolving loans outstanding
and had approximately $429 million (net of outstanding letters of credit) of
credit available under the delayed term loan and revolving loan facilities.
Loans under the 1994 Credit Agreement bear interest at fluctuating rates, as
selected by the Company at specified times, equal to either (i) an alternate
base rate (the higher of the Bank of Nova Scotia's base rate for dollar loans
or the Federal Funds rate plus 50 basis points) plus 50 basis points or (ii)
LIBO plus 150 basis points. The term loans and delayed term loans are subject
to mandatory semiannual principal reductions (beginning December 1, 1994 for
the term loans and June 1, 1995 for the delayed term loans) and are payable
in full on June 1, 2001. The revolving loan commitment amount will be
payable in full on June 1, 2001.
10.75% Subordinated Notes
During May 1992, the Company completed an offering of $500 million of
Subordinated Notes due May 1, 2002 (the "Notes"). The Notes are unsecured
subordinated obligations of the Company and bear interest at 10.75%,
payable semiannually on May 1 and November 1 of each year. The Notes are
redeemable at the option of the Company, in whole or in part, at any time
on or after May 1, 1997 at 104% of par (declining to 102% of par on May 1,
1998 and 100% of par on May 1, 1999 and thereafter).
<PAGE>
3. Long-Term Debt (continued)
8.75% Subordinated Debentures
During March 1993, the Company completed an offering of $300 million of
Subordinated Debentures due March 15, 2005 (the "Debentures"). The
Debentures are unsecured subordinated obligations of the Company and bear
interest at 8.75%, payable semiannually on March 15 and September 15 of
each year. The Debentures are redeemable at the option of the Company, in
whole or in part, at any time on or after March 15, 1998 at 104.375% of par
(declining to 100% of par on March 15, 2001 and thereafter).
10.25% Subordinated Notes
During May 1994, the Company completed an offering of $200 million of
Subordinated Notes due April 15, 2004 (the "1994 Notes"). The 1994 Notes
are unsecured subordinated obligations of the Company and bear interest at
10.25%, payable semiannually on April 15 and October 15 of each year,
commencing October 15, 1994. The 1994 Notes are redeemable at the option
of the Company, in whole or in part, at any time on or after April 15, 1999
at 103.84% of par (declining to 102.56% of par on April 15, 2000, 101.28% of
par on April 15, 2001 and 100% of par on April 15, 2002 and thereafter).
Extraordinary Charges - Early Extinguishments of Debt
Fiscal 1993 Transactions
During 1993, the Company recorded an extraordinary charge of $13.6 million
(net of tax benefits of $7.7 million) due to premiums paid and the write-off
of unamortized loan costs related to the early extinguishment of $569.2
million of debt. The debts extinguished included $300.0 million of term loans
under the 1992 Credit Agreement, the Guaranteed Subordinated Debentures
($240.0 million) and Senior Subordinated Debentures ($29.2 million).
Fiscal 1992 Transactions
The Company completed a recapitalization plan (the "Recapitalization Plan")
that included the initial public offering of 40 million shares of its common
stock, the reacquisition of certain preferred stock and warrants from HCA
and the termination of future contributions to the ESOP.
3. Long-Term Debt (continued)
In association with the Recapitalization Plan transactions and certain related
transactions, the Company incurred extraordinary charges of $136.4 million
(net of $28.0 million in net tax benefits) due to the premiums and consent fees
paid, expenses incurred and the write-off of the unamortized loan costs
related to the completion of the tender offers for certain debt securities and
prepaying the loans outstanding under the bank credit agreements. The net
tax benefit of $28.0 million represents a tax benefit of $63.9 million and a
$35.9 million tax charge due to the early extinguishment of the ESOP debt
and termination of contributions to the ESOP resulting in a permanent
difference between ESOP expense for financial and tax reporting purposes.
Other Debt Information
At August 31, 1994, all the shares of common stock of the Company's
subsidiaries have been pledged as collateral for certain outstanding debt
agreements.
Maturities of long-term debt for the fiscal years subsequent to August 31,
1994 are as follows: 1995--$44.5 million; 1996--$66.4 million; 1997--$96.6
million; 1998--$115.4 million; 1999--$117.9 million; and thereafter--$1,344.6
million.
The credit agreements and/or debt indentures require the Company to (1)
maintain net worth at specific levels, (2) pay no cash dividends on common
stock and limit other restricted payments, (3) limit additional debt, liens and
material acquisitions, (4) meet certain ratios related to operations, and (5)
limit the use of funds derived from the sale of assets and business segments.
At August 31, 1994, the fair value (based upon quoted market prices) of the
Company's publicly traded $500 million, 10.75% Subordinated Notes, $300
million, 8.75% Subordinated Debentures and $200 million, 10.25%
Subordinated Notes was $517.5 million, $276.8 million and $202.0 million,
respectively. The carrying amount of the Company's indebtedness under the
1994 Credit Agreement approximates fair value.
4. Income Taxes
The Company's income tax expense, net of the effect of extraordinary items,
consisted of the following:
Year Ended August 31
1994 1993 1992
(In Thousands)
Current expense:
Federal $ 38,664 $ 95,283 $ 3,838
State 6,179 19,404 4,335
Deferred expense (benefit):
Federal 60,817 (25,667) 32,731
State 10,414 (6,068) 2,569
Income tax expense $116,074 $ 82,952 $ 43,473
The net income tax expense includes tax benefits of approximately $7.7
million and $28.0 million for the years ended August 31, 1993 and 1992,
respectively, related to the extraordinary charges incurred on early
extinguishments of debt.
During the years ended August 31, 1994 and 1993, certain tax benefits were
recorded as increases to paid-in capital ($3.6 million and $1.6 million,
respectively) and reductions to the excess of purchase price over net assets
acquired ($139.3 million and $6.7 million, respectively).
On August 10, 1993, the Revenue Reconciliation Act of 1993 was enacted.
As a result, the Company's federal statutory rate was increased to 34.67% for
the fiscal year ended August 31, 1993 and 35% thereafter. The effect of this
rate increase was a $2.0 million increase to current federal tax expense and a
$3.0 million increase to deferred federal tax expense, for year ended August
31, 1993.
4. Income Taxes (continued)
The Company's consolidated effective tax rate differed from the federal
statutory rate as set forth in the following table:
Year Ended August 31
1994 1993 1992
(In Thousands)
Tax expense computed at federal
statutory rate (35% for 1994,
34.67% for 1993 and 34%
for 1992 ) $101,225 $ 78,309 $ 55,990
State and local income taxes,
net of federal taxes 10,785 9,031 8,619
Goodwill amortization 2,962 3,051 2,451
Extraordinary charges on early
extinguishments of debt --- (7,723) (27,959)
Other, net 1,102 284 4,372
Income tax expense $116,074 $ 82,952 $ 43,473
At August 31, 1994, net operating loss carryforwards from various states
(expiring in years 1995 through 2009) of approximately $435 million
(including $98 million from EPIC) are available to offset future state
taxable income. In addition, EPIC has approximately $105 million of
federal net operating loss carryforwards (expiring in years 2002 through
2008).
For financial reporting purposes, the tax benefits of the preacquisition EPIC
federal and state net operating loss carryforwards were used to reduce the
Company's deferred tax liability by approximately $43 million. During 1994,
the Company established a valuation allowance of approximately $5 million
to offset the deferred tax asset related to the preacquistion state net
operating loss carryforwards due to the uncertainty of realizing these
benefits. If the state net operating loss carryforwards of EPIC are realized,
the tax benefits from the utilization of such losses will be used to reduce
the excess of purchase price over net assets acquired.
4. Income Taxes (continued)
For federal income tax purposes, as a result of the change in ownership of
EPIC, the utilization of the federal net operating loss carryforwards is
limited to approximately $11 million per year. If the full amount of the
limitation is not used in any year, the amount not used increases the
allowable limit in subsequent years.
The approximate tax effect of each type of temporary difference and
carryforward that gives rise to a significant portion of deferred tax
liabilities and deferred tax assets are as follows:
August 31
1994 1993
(In Thousands)
Deferred tax liabilities:
Property, plant and equipment $268,110 $257,642
Deferred gain 16,090 ---
Change in tax accounting method 4,466 7,962
Bad debt reserve --- 8,077
Other, net 48,502 39,466
Total deferred tax liabilities 337,168 313,147
Deferred tax assets:
Insurance reserves 114,777 77,738
Agency receivables 85,138 75,350
State net operating loss carryforwards 25,150 22,307
Federal net operating loss carryforwards 30,876 ---
Bad debt reserve 23,164 ---
Deferred compensation 5,348 1,863
Accrued vacation 14,279 10,365
Other, net 18,201 28,189
Total deferred tax assets 316,933 215,812
Valuation allowance (31,198) (25,818)
Net deferred tax assets 285,735 189,994
Net deferred tax liability $ 51,433 $123,153
The net deferred tax liabilities at August 31, 1994 and 1993 of $51.4 million
and $123.2 million, respectively, are comprised of current assets of $39.8
million and $10.2 million and noncurrent liabilities of $91.2 million and
$133.4 million, respectively.
5. Preferred Stock
The Company has 78 million authorized shares of $.001 par value preferred
stock of which 46 million shares were originally designated Class A Preferred
Stock and 26 million shares were originally designated Class B Preferred
Stock. No preferred stock was outstanding at August 31, 1994 or 1993.
6. Preferred Stock Purchase Rights
On July 8, 1993, the Company declared a dividend distribution of one
preferred stock purchase right (a "Right") for each outstanding share of
common stock. The Rights are not currently exercisable, but would become
exercisable if certain events occurred relating to a person or group acquiring
or attempting to acquire 15% or more of the outstanding shares of common
stock. In the event that the Rights become exercisable, each right (except for
Rights beneficially owned by the acquiring person or group, which become
null and void) would entitle the holder to purchase from the Company, one
one-hundredth (1/100) of a share of preferred stock of the Company
(designated as Series A Junior Preferred Stock) at a price of $75 per one one-
hundredth (1/100) of a share, subject to adjustments.
Each share of preferred stock will have 100 votes, voting together with the
common stock. In the event of any merger, consolidation or other
transaction in which the Company's common stock is exchanged, each share
of preferred stock will be entitled to receive 100 times the amount received
per common share.
In the event that the Company is acquired in a transaction that has not been
approved by the Board of Directors, the Rights Agreement provides that each
Right holder of record will receive (upon payment of the exercise price)
shares of common stock of the acquiring company having a market value at
the time of such transaction equal to two times the exercise price.
The Rights may be redeemed by the Board of Directors in whole, but not in
part, at a price of $.01 per Right. The Rights have no voting or dividend
privileges and are attached to and do not trade separately from, the common
stock. The Rights expire on July 8, 2003.
7. Common Stock Warrants
Warrants to purchase 814,979 shares of the Company's common stock are
outstanding at August 31, 1994. The warrants may be exercised at any time
through September 17, 2007. The exercise price after October 1, 1993 is $5.30
per warrant and is reduced to $3.18 per warrant if the market value of the
Company's common stock exceeds certain per share values ($30.75 through
September 30, 1995) for certain periods. Warrants for 2,588,770, and 3,772
shares were exercised during fiscal 1994 and 1992, respectively.
8. Stock Benefit Plans
The Company has adopted the 1988 Supplemental Stock Plan (the
"Supplemental Plan"), the Amended and Restated 1990 Stock Compensation
Plan (the "1990 Plan") and the Amended and Restated 1990 Directors Stock
Compensation Plan (the "Directors Plan") to promote the long-term growth
of the Company by enabling officers, other key employees and directors who
are not employees of the Company to acquire shares of common stock.
Supplemental Plan
The Supplemental Plan authorized awards of up to 9,503,707 shares of
common stock. At August 31, 1994 all shares that had been awarded under
the Supplemental Plan (8,483,381 shares) had been distributed to the plan
participants. Shares of common stock reserved for issuance under the
Supplemental Plan, but not awarded, will be transferred to the 1990 Plan.
During fiscal 1994, vesting was accelerated with respect to 384,879 shares
awarded under the Supplemental Plan that would otherwise have vested
September 30, 1994. During fiscal 1993, vesting was accelerated with respect
to 520,673 shares and 197,087 shares awarded under the Supplemental Plan
that would otherwise have vested on September 30, 1993 and 1994,
respectively. During fiscal 1992, as part of the Recapitalization Plan,
vesting was accelerated with respect to 5,185,573 shares of common stock
awarded under the Supplemental Plan that otherwise would have vested on
September 30, 1992. The distribution of vested shares results in the
recognition of income to the beneficiaries. To satisfy the beneficiaries'
federal and state income tax liabilities resulting from such distributions
of vested shares, the Company withheld 142,565, 218,524 and 2,195,169 of the
vested shares of common stock designated to be distributed for the accelerated
vesting in fiscal 1994, 1993 and 1992, respectively, and remitted amounts
equal to the value of those shares to the relevant tax authorities.
<PAGE>
8. Stock Benefit Plan (continued)
Supplemental Plan transactions are as follows:
Year Ended August 31
1994 1993 1992
Shares issued at September 1 384,879 1,108,294 8,926,591
Awarded --- --- ---
Fully vested and distributed (384,879) (717,757) (7,380,745)
Surrendered --- (5,658) (437,552)
Shares issued at August 31 --- 384,879 1,108,294
Stock Option Plans - 1990 Plan and Directors Plan
The 1990 Plan presently authorizes distributions of up to 6,601,000 shares to
officers and other key employees, to enable the granting of awards payable in
stock options (nonqualified and incentive), stock appreciation rights,
restricted stock, restricted units, performance shares, performance units,
other equity based units or cash, either singly or in any combination thereof.
The 1990 Plan is of unlimited duration and is administered by a committee
of the Board of Directors. The committee has discretion to (i) select the
participants to whom awards will be granted and to determine the form and
terms of each award, (ii) modify within certain limits the terms of any award
that has been granted, (iii) establish and modify performance objectives and
(iv) make all other determinations that it deems necessary or desirable in the
interpretation and administration of the 1990 Plan. Awards may be granted
with an exercise price less than the fair market value of the underlying
common stock on the date of grant.
8. Stock Benefit Plans (continued)
The Directors Plan authorizes awards of up to 188,600 shares of common
stock. Nonemployee directors are eligible to participate in the Directors
Plan. The Directors Plan is of unlimited duration and is administered by a
committee of the Board of Directors, which has discretion to select
participants and to determine the size of awards. To enable the granting of
awards tailored to changing business conditions, the Directors Plan provides
for awards payable in stock options, stock appreciation rights, restricted
stock, restricted units, other equity based units or cash, either singly or in
any combination thereof. Awards may be granted with an exercise price of less
than the fair market value of the underlying common stock on the date of
grant.
The options granted generally vest over periods of three to five years.
Information with respect to options under the plans is summarized as
follows:
Year Ended August 31
1994 1993 1992
Options outstanding at September 1 3,689,700 2,641,700 ---
---
Granted 930,683 1,113,000 2,671,700
Surrendered (161,585) (65,000) (30,000)
Exercised (223,788) --- ---
Options outstanding at August 31 4,235,010 3,689,700 2,641,700
Options available for grant at
August 31 2,474,222 3,243,320 4,091,320
Options exercisable at August 31 847,488 200,000 ---
Option prices per share:
Outstanding at September 1 $14.00-$18.38 $14.00-$17.88 ---
Granted $ 0.01-$30.13 $17.88-$18.38 $14.00-$17.88
Surrendered $14.75-$23.75 $14.75-$15.25 $14.75
Exercised $0.01-$18.38 --- ---
Outstanding at August 31 $0.01-$30.13 $14.00-$18.38 $14.00-$17.88
9. Employee Benefit Plans
Retirement Plan
The Company adopted its retirement plan (the "Retirement Plan"), effective
January 1, 1992. The Retirement Plan is designed to provide retirement
income to employees, an incentive for employees to remain at Healthtrust
and an opportunity for employees to save for retirement on a tax-advantaged
basis. All employees of the Company who have completed three months of
service are eligible to participate in the Retirement Plan. Participants may
make salary deferral (pretax) contributions of up to 10% of their
compensation to the Retirement Plan. The Company will make a matching
contribution equal to the participant's salary deferral contribution (up to 3%
of the participant's compensation) if the participant has 1,000 hours of
service during the plan year and is employed by the Company on the last day of
the plan year. In addition, the Company, at its discretion, may make profit
sharing contributions to the Retirement Plan. If profit sharing contributions
are made for a plan year, such contributions will be allocated to each
participant who has completed 1,000 hours of service and is employed by the
Company on the last day of the plan year, on the basis that the participant's
compensation bears to the compensation of all participants in the Retirement
Plan. Under the Retirement Plan, participants are fully vested in their salary
deferral contributions and, after five years of vesting service, will fully
vest in Company matching and profit sharing contributions. Vesting service
includes service with Healthtrust prior to adoption of the Retirement Plan
and service with Columbia for those employees who became Healthtrust
employees during September 1987. During the 1994, 1993 and 1992 fiscal
years, the Company recorded expense of approximately $37.9 million, $39.0
million and $30.7 million, respectively, pursuant to the Retirement Plan.
The Retirement Plan provides for payment of benefits at retirement, death
or disability. In addition, account balances may be withdrawn after age 59 1/2
and distributions of salary deferral contributions and certain 401(k) accounts
may be made on account of hardship. The Company's matching and profit
sharing contributions may be made in cash or stock, at the election of the
Company. Cash balances are invested in mutual funds at the participant's
direction. Participants are entitled to liquidate up to 25% of the Company
stock held in their plan accounts in each of the first four years following
attainment of age 55 and ten years of vesting service and up to 50% of such
stock in the fifth year.
9. Employee Benefit Plans (continued)
Healthtrust ESOP
The Company adopted the Healthtrust, Inc. - The Hospital Company
Employee Stock Ownership Plan (the "ESOP") on September 17, 1987. All
employees were eligible to participate in the ESOP, except for employees
who were covered by a collective bargaining agreement (unless the collective
bargaining agreement provided for participation) or who were nonresident
aliens.
As a result of the termination of future contributions to the ESOP due to the
Recapitalization Plan, ESOP participants became fully vested in shares of
common stock allocated to their accounts (26,715,646 shares). The
participants' ESOP account balances were transferred to the Retirement Plan.
Distributions of allocated shares for retirement, disability or death generally
will commence within one year after the close of the year in which
retirement, death or disability occurs.
The Company recorded ESOP expense (and corresponding reductions in the
ESOP notes receivable) of $8.0 million for fiscal 1992. Interest expense
incurred on ESOP debt totaled $12.1 million during fiscal 1992 and is
included in interest expense.
EPIC ESOP
In connection with the acquisition of EPIC and the related Amended and
Restated ESOP Agreement, all shares of EPIC common stock not allocated
or allocatable to EPIC ESOP participants were returned to EPIC in full
satisfaction of certain loans granted by EPIC to the EPIC ESOP.
Subsequent to the acquisition, the Company has agreed to provide certain
minimum retirement benefits to the former EPIC ESOP participants. These
benefits include a profit sharing contribution by the Company on behalf of
EPIC ESOP participants who participate in the Company retirement plan of
4% of aggregate compensation from the May 5, 1994 through December 31,
1994 and a matching contribution by the Company of 100% of participants'
salary deferrals (up to a maximum of 3% of compensation) for the period
from May 5, 1994 through December 31, 1998. During fiscal 1994, the
Company recorded expense of approximately $6.6 million pursuant to the
retirement plan for the former EPIC ESOP participants.
10. Relationship with Columbia
The Company purchases computer time and services from Columbia. Rates
for the data processing services rendered (approximately $18.6 million, $15.5
million and $15.8 million for fiscal 1994, 1993 and 1992, respectively) are
based on customary and reasonable rates for such services.
11. Commitments and Contingencies
The Company is self-insured for a substantial portion of its professional and
general liability risks. The Company recorded self-insurance expense of $38.1
million, $29.5 million and $33.9 million during fiscal 1994, 1993 and 1992,
respectively. At August 31, 1994, the reserve for professional and general
liability risks was $245.4 million, of which $29.9 million is included in
current liabilities. The reserves for self-insured professional and general
liability losses and loss adjustment expenses are based on actuarially
projected estimates discounted to their present value using a rate of 6%.
Columbia retains the liability for all professional liability claims and claims
which would be covered by a policy of comprehensive general liability insurance
with a date of occurrence prior to September 1, 1987.
Final determination of amounts earned under prospective payment and cost
reimbursement activities is subject to review by appropriate governmental
authorities or their agents. In the opinion of management, adequate
provision has been made for any adjustments that could result from such
reviews.
The Company and its subsidiaries are currently, and from time to time are
expected to be, subject to claims and suits arising in the ordinary course of
business. In the opinion of management, the ultimate resolution of such
pending legal proceedings will not have a material effect on the Company's
financial position or results of operations.
12. Supplementary Statement of Operations Information
Maintenance and repairs expense was $57.5 million, $44.4 million and $40.6
million during fiscal 1994, 1993 and 1992, respectively. Taxes other than
payroll and income taxes, were $38.6 million, $30.6 million and $29.3 million
during fiscal 1994, 1993 and 1992, respectively.
13. Subsequent Event
On October 4, 1994 the Company and Columbia/HCA Healthcare
Corporation jointly announced the signing of a definitive merger agreement
under which the Company's shareholders will receive 0.88 shares of
Columbia common stock in exchange for each share of Healthtrust common
stock they hold. The proposed transaction is expected to be accounted for
as a pooling of interests.
The completion of the transaction is subject to the approval of the
shareholders of both companies and regulatory approvals. The shareholders
meetings to vote on the proposed merger transaction are expected to be
scheduled for the first quarter of calendar 1995.
Healthtrust, Inc. - The hospital Company
Schedule V - Property, Plant and Equipment
Three Years Ended August 31, 1994
<TABLE>
<CAPTION>
Beginning End of
of Period Additions Other Period
Description Balance at Cost Retirements Charges Balance
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED AUGUST 31, 1994:
Land $ 141,148 $ 5,962 $ 1,697 $ 65,121 (A) $ 214,536
2,002 (B)
2,000 (E)
Buildings and improvements 987,372 30,040 2,862 372,488 (A) 1,495,829
108,791 (B)
Equipment 895,190 99,341 14,019 128,573 (A) 1,168,015
58,930 (B)
Construction in progress 144,655 85,632 212 51,827 (A) 112,179
(169,723)(B)
$ 2,168,365 $ 220,975 $ 18,790 $ (16,038)(D) $ 2,990,559
YEAR ENDED AUGUST 31, 1993:
Land $ 150,760 $ 1,837 $ 15,893 $ 8,421 (A) $ 141,148
1,008 (B)
(4,985)(C)
Buildings and improvements 1,013,483 9,411 53,532 24,256 (A) 987,372
38,145 (B)
(17,182)(C)
(27,209)(D)
Equipment 844,119 69,140 40,145 42,850 (A) 895,190
19,124 (B)
(23,860)(C)
(16,038)(D)
Construction in progress 66,203 139,118 324 63 (A) 144,655
(58,277)(B)
(2,128)(C)
$ 2,074,565 $ 219,506 $109,894 $(15,812) $2,168,365
YEAR ENDED AUGUST 31, 1992:
Land $ 149,483 $ 2,542 $ 1,648 $ 383 (B) $ 150,760
Buildings and improvement 948,642 20,904 16,310 51,294 (B) 1,013,483
12,445 (E)
(3,492)(D)
Equipment 776,183 65,003 23,106 23,839 (B) 844,119
2,200 (E)
Construction in progress 53,552 89,689 1,527 (75,516)(B) 66,203
$1,927,860 $ 178,138 $ 42,591 $ 11,158 $2,074,565
</TABLE>
(A) Fixed assets of acquired facilities.
(B) Reclassification of completed construciton to property, plantand equipment.
(C) Assets contributed to/from joint ventures.
(D) Reserves for losses on dispositions.
(E) Reclassification from/to other assets.
Healthtrust, Inc. - The Hospital Company
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Three Years Ended August 31, 1994
<TABLE>
<CAPTION>
Beginning Additions End of
of Period Charged to Other Period
Description Balance Expense Retirements Charges Balance
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED AUGUST 31, 1994:
Buildings and improvements $ 183,869 $ 47,177 $ 2,385 $ 228,661
Equipment 416,984 104,778 13,560 508,202
$ 600,853 $ 151,955 $ 15,945 $ -0- $ 736,863
YEAR ENDED AUGUST 31, 1993:
Buildings and improvements $ 157,651 $ 38,213 $ 11,995 $ 183,869
Equipment 362,756 86,568 32,340 416,984
$ 520,407 $ 124,781 $ 44,335 $ -0- $ 600,853
YEAR ENDED AUGUST 31, 1992:
Buildings and improvements $ 130,488 $ 36,010 $ 8,847 $ 157,651
Equipment 287,210 83,983 8,437 362,756
$ 417,698 $ 119,993 $ 17,284 $ -0- $ 520,407
</TABLE>
Healthtrust, Inc. - The Hospital Company
Schedule VII - Valuation and Qualifying Accounts
Three Years Ended August 31, 1994
<TABLE>
<CAPTION>
Additions
Beginning Charged End of
of Period Bad Debt to Other Period
Description Balance Expense Accounts Deductions Balance
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED AUGUST 31, 1994:
Allowance for doubtful accounts $ 107,758 $ 196,013 $ 44,800 (B) $ 172,733 (A) $ 175,838
YEAR ENDED AUGUST 31, 1993:
Allowance for doubtful accounts $ 102,564 $ 145,538 $ -0- $ 140,344 (A) $ 107,758
YEAR ENDED AUGUST 31, 1992:
Allowance for doubtful accounts $ 108,082 $ 137,074 $ -0- $ 142,592 (A) $ 102,564
</TABLE>
(A) Accounts written off.
(B) Reserves of acquired facilities.
AGREEMENT AND PLAN OF MERGER
between
COLUMBIA/HCA HEAlTHCARE CORPORATION,
COL ACQUISITION CORPORATION
and
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
Dated as of October 4, 1994
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of October 4, 1994, between Columbia/HCA Healthcare
Corporation, a Delaware corporation ("Columbia"), COL
Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of Columbia ("Merger Sub"), and
Healthtrust, Inc. The Hospital Company, a Delaware
corporation ("Company").
RECITALS
A. The Boards of Directors of Columbia and Company each
have determined that a business combination between
Columbia and Company is in the best interests of their
respective companies and stockholders and presents an
opportunity for their respective companies to achieve
long-term strategic and financial benefits, and
accordingly have agreed to effect the merger provided
for herein upon the terms and subject to the conditions
set forth herein.
B. For federal income tax purposes, it is intended that
the merger provided for herein shall qualify as a
reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"),
and for financial accounting purposes shall be
accounted for as a pooling of interests.
C. Columbia and Company have each received a fairness
opinion relating to the transactions contemplated
hereby as more fully described herein.
D. Columbia, Merger Sub and Company desire to make
certain representations, warranties and agreements in
connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and
of the representations, warranties, covenants and
agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE 1
1. The Merger.
1.1. The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into
Company in accordance with this Agreement, and the
separate corporate existence of Merger Sub shall
thereupon cease (the "Merger"). Company shall be the
surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving
Corporation"). The Merger shall have the effects
specified in the Delaware General Corporation Law (the
"DGCL").
1.2. The Closing. Subject to the terms and conditions
of this Agreement, the closing of the Merger (the
"Closing") shall take place (a) at the offices of
Fried, Frank, Harris, Shriver & Jacobson, One New York
Plaza, New York, New York, at 10:00 a.m., local time,
on the first business day immediately following the day
on which the last to be fulfilled or waived of the
conditions set forth in Article 8 shall be fulfilled or
waived in accordance herewith or (b) at such other
time, date or place as Columbia and Company may agree.
The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
1.3. Effective Time. If all the conditions to
the Merger set forth in Article 8 shall have been
fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in
Article 9, the parties hereto shall cause a Certificate
of Merger meeting the requirements of Section 251 of
the DGCL to be properly executed and filed in
accordance with such Section on the Closing Date. The
Merger shall become effective at the time of filing of
the Certificate of Merger with the Secretary of State
of the State of Delaware in accordance with the DGCL or
at such later time which the parties hereto shall have
agreed upon and designated in such filing as the
effective time of the Merger (the "Effective Time").
ARTICLE 2
2. Certificate of Incorporation and Bylaws of the
Surviving Corporation.
2.1. Certificate of Incorporation. The
Certificate of Incorporation of Merger Sub in effect
immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with
applicable law.
2.2. Bylaws. The Bylaws of Merger Sub in
effect immediately prior to the Effective Time shall be
the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 3
3. Directors and Officers of the Surviving
Corporation.
3.1. Directors. The directors of Merger Sub
immediately prior to the Effective Time, a majority of
whom shall not have been directors of the Company prior
to the Effective Time, shall be the directors of the
Surviving Corporation as of the Effective Time and
until their successors are duly appointed or elected in
accordance with applicable law.
3.2. Officers. The officers of Merger Sub
immediately prior to the Effective Time shall be the
officers of the Surviving Corporation as of the
Effective Time and until their successors are duly
appointed or elected in accordance with applicable law.
ARTICLE 4
4. Effect of the Merger on Securities of Merger
Sub and Company.
4.1. Merger Sub Stock. At the Effective Time,
each share of Common Stock, $.01 par value, of Merger
Sub outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly
issued, fully paid and non assessable share of Common
Stock, $.01 par value, of the Surviving Corporation.
4.2. Company Securities.
(a) At the Effective Time, each share of
Common Stock, $.001 par value (the "Company Common
Stock"), of Company issued and outstanding immediately
prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder
thereof, be converted into the right to receive 0.88 of
a share of Common Stock, $.01 par value (the "Columbia
Common Stock"),of Columbia (the "Exchange Ratio"). Each
share of Columbia Common Stock issued to holders of
Company Common Stock in the Merger shall be issued
together with one associated preferred stock purchase
right (a "Right") in accordance with the Amended and
Restated Rights Agreement dated as of February 10,
1994, between Columbia and Mid-America Bank of
Louisville & Trust Company. References herein to the
shares of Columbia Common Stock issuable in the Merger
shall be deemed to include the associated Rights.
(b) As a result of the Merger and
without any action on the part of the holder thereof,
at the Effective Time all shares of Company Common
Stock shall cease to be outstanding and shall be
cancelled and retired and shall cease to exist, and
each holder of shares of Company Common Stock shall
thereafter cease to have any rights with respect to
such shares of Company Common Stock, except the right
to receive, without interest, the Columbia Common Stock
and cash for fractional shares of Columbia Common Stock
in accordance with Sections 4.3(b) and 4.3(e) upon the
surrender of a certificate (a "Certificate")
representing such shares of Company Common Stock.
(c) Each share of Company Common Stock
issued and held in Company's treasury at the Effective
Time shall, by virtue of the Merger, cease to be
outstanding and shall be cancelled and retired without
payment of any consideration therefor.
(d) All options (individually, a
"Company Option" and collectively, the "Company
Options") outstanding at the Effective Time under any
Company stock option plan (the "Company Stock Option
Plans") shall remain outstanding following the
Effective Time. At the Effective Time, such Company
Options shall, by virtue of the Merger and without any
further action on the part of Company or the holder of
any such Company Options, be assumed by Columbia in
such manner that Columbia (i) is a corporation
"assuming a stock option in a transaction to which
Section 424(a) applied" within the meaning of Section
424 of the Code, or (ii) to the extent that Section 424
of the Code does not apply to any such Company Options,
would be such a corporation were Section 424 applicable
to such option. Each Company Option assumed by Columbia
shall be exercisable upon the same terms and conditions
as under the applicable Company Stock Option Plan and
the applicable option agreement issued thereunder,
except that (i) each such Company Option shall be
exercisable for that whole number of shares of Columbia
Common Stock (to the nearest whole share) into which
the number of shares of Company Common Stock subject to
such Company Option immediately prior to the Effective
Time would be converted under this Section 4.2, and
(ii) the option price per share of Columbia Common
Stock shall be an amount equal to the option price per
share of Company Common Stock subject to such Company
Option in effect immediately prior to the Effective
Time divided by the Exchange Ratio (the option price
per share, as so determined, being rounded upward to
the nearest full cent). No payment shall be made for
fractional interests. From and after the date of this
Agreement, except as provided in Section 7.2(a)(vi), no
additional options shall be granted by Company or its
Subsidiaries (as defined in Section 10.14 hereof) under
the Company Stock Option Plans or otherwise.
4.3. Exchange of Certificates Representing
Company Common Stock.
(a) As of the Effective Time, Columbia
shall deposit, or shall cause to be deposited, with an
exchange agent selected by Columbia, which shall be
Columbia's Transfer Agent or such other party
reasonably satisfactory to Company (the "Exchange
Agent"), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with
this Article 4, certificates representing the shares of
Columbia Common Stock and the cash in lieu of
fractional shares (such cash and certificates for
shares of Columbia Common Stock, together with any
dividends or distributions with respect thereto
(relating to record dates for such dividends or
distributions after the Effective Time), being
hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Section 4.2 and paid pursuant to
this Section 4.3 in exchange for outstanding shares of
Company Common Stock.
(b) Promptly after the Effective Time,
Columbia shall cause the Exchange Agent to mail to each
holder of record of shares of Company Common Stock (i)
a letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title
to such shares of Company Common Stock shall pass, only
upon delivery of the Certificates representing such
shares to the Exchange Agent and which shall be in such
form and have such other provisions as Columbia may
reasonably specify and (ii) instructions for use in
effecting the surrender of such Certificates in
exchange for certificates representing shares of
Columbia Common Stock and cash in lieu of fractional
shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such
letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of
the shares represented by such Certificate shall be
entitled to receive in exchange therefor (x) a
certificate representing that number of whole shares of
Columbia Common Stock and (y) a check representing the
amount of cash in lieu of fractional shares, if any,
and unpaid dividends and distributions, if any, which
such holder has the right to receive in respect of the
Certificate surrendered pursuant to the provisions of
this Article 4, after giving effect to any required
withholding tax, and the shares represented by the
Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on the
cash in lieu of fractional shares and unpaid dividends
and distributions, if any, payable to holders of shares
of Company Common Stock. In the event of a transfer of
ownership of Company Common Stock which is not
registered in the transfer records of Company, a
certificate representing the proper number of shares of
Columbia Common Stock, together with a check for the
cash to be paid in lieu of fractional shares, may be
issued to such a transferee if the Certificate
representing such Company Common Stock is presented to
the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to
evidence that any applicable stock transfer taxes have
been paid.
(c) Notwithstanding any other
provisions of this Agreement, no dividends or other
distributions declared after the Effective Time on
Columbia Common Stock shall be paid with respect to any
shares of Company Common Stock represented by a
Certificate until such Certificate is surrendered for
exchange as provided herein. Subject to the effect of
applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the
certificates representing whole shares of Columbia
Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date
after the Effective Time theretofore payable with
respect to such whole shares of Columbia Common Stock
and not paid, less the amount of any withholding taxes
which may be required thereon, and (ii) at the
appropriate payment date, the amount of dividends or
other distributions with a record date after the
Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to
such whole shares of Columbia Common Stock, less the
amount of any withholding taxes which may be required
thereon.
(d) At or after the Effective Time,
there shall be no transfers on the stock transfer books
of Company of the shares of Company Common Stock which
were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates for shares of
Columbia Common Stock and cash in lieu of fractional
shares, if any, deliverable in respect thereof pursuant
to this Agreement in accordance with the procedures set
forth in this Article 4. Certificates surrendered for
exchange by any person constituting an "affiliate" of
Company for purposes of Rule 145(c~ under the
Securities Act of 1933, as amended (the "Securities
Act"), shall not be exchanged until Columbia has
received a written agreement from such person as
provided in Section 7.10.
(e) No fractional shares of Columbia
Common Stock shall be issued pursuant hereto. In lieu
of the issuance of any fractional share of Columbia
Common Stock pursuant to Section 4.2(b), cash
adjustments will be paid to holders in respect of any
fractional share of Columbia Common Stock that would
otherwise be issuable, and the amount of such cash
adjustment shall be equal to such fractional proportion
of the "Average Price" of a share of Columbia Common
Stock. The "Average Price" of a share of Columbia
Common Stock shall be the average of the closing sales
prices thereof as reported on The New York Stock
Exchange (the "NYSE") Composite Tape (as reported by
The Wall Street Journal or, if not reported thereby, by
another authoritative source) over the ten (10)
business days immediately preceding the Closing Date.
(f) Any portion of the Exchange Fund
(including the proceeds of any investments thereof and
any shares of Columbia Common Stock) that remains
unclaimed by the former stockholders of Company one
year after the Effective Time shall be delivered to the
Surviving Corporation. Any former stockholders of
Company who have not theretofore complied with this
Article 4 shall thereafter look only to the Surviving
Corporation for payment of their shares of Columbia
Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions on the Columbia
Common Stock deliverable in respect of each share of
Company Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case,
without any interest thereon.
(g) None of Columbia, Company, the
Surviving Corporation, the Exchange Agent or any other
person shall be liable to any former holder of shares
of Company Common Stock for any amount properly
delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(h) In the event any Certificate shall
have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by
such person of a bond in such reasonable amount as the
Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to
such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate
the shares of Columbia Common Stock and cash in lieu of
fractional shares, and unpaid dividends and
distributions on shares of Columbia Common Stock as
provided in Section 4.3(c), deliverable in respect
thereof pursuant to this Agreement.
4.4. Adjustment of Exchange Ratio.
In the event that, subsequent to the date of this
Agreement but prior to the Effective Time, the
outstanding shares of Columbia Common Stock or Company
Common Stock, respectively, shall have been changed
into a different number of shares or a different class
as a result of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, split,
combination, exchange, recapitalization or other
similar transaction, the Exchange Ratio shall be
appropriately adjusted.
ARTICLE 5
5. Representations and Warranties of Company.
Except as set forth in the disclosure letter
delivered at or prior to the execution hereof to
Columbia (the "Company Disclosure Letter") or in the
Company Reports (as defined below), Company represents
and warrants to Columbia as of the date of this
Agreement as follows:
5.1. Existence; Good Standing: Corporate
Authority; Compliance With Law. Company is a
corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of
incorporation. Company is duly licensed or qualified to
do business as a foreign corporation and is in good
standing under the laws of any other state of the
United States in which the character of the properties
owned or leased by it or in which the transaction of
its business makes such qualification necessary, except
where the failure to be so qualified or to be in good
standing would not have a material adverse effect on
the business, results of operations or financial
condition of Company and its Subsidiaries (as defined
in Section 10.14) taken as a whole (a "Company Material
Adverse Effect"). Company has all requisite corporate
power and authority to own, operate and lease its
properties and carry on its business as now conducted.
Each of Company's Significant Subsidiaries (as defined
in Section 10.14 hereof) is a corporation or
partnership duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate or
partnership power and authority to own its properties
and to carry on its business as it is now being
conducted, and is duly qualified to do business and is
in good standing in each jurisdiction in which the
ownership of its property or the conduct of its
business requires such qualification, except for
jurisdictions in which such failure to be so qualified
or to be in good standing would not have a Company
Material Adverse Effect. Neither Company nor any of its
Subsidiaries is in violation of any order of any court,
governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or
regulation to which Company or any of its Subsidiaries
or any of their respective properties or assets is
subject, where such violation would have a Company
Material Adverse Effect. Company and its Subsidiaries
have obtained all licenses, permits and other
authorizations and have taken all actions required by
applicable law or governmental regulations in
connection with their business as now conducted, where
the failure to obtain any such item or to take any such
action would have a Company Material Adverse Effect.
The copies of Company's Certificate of Incorporation
and Bylaws previously delivered to Columbia are true
and correct.
5.2. Authorization. Validity and Effect of
Agreements. Company has the requisite corporate power
and authority to execute and deliver this Agreement and
all agreements and documents contemplated hereby.
Subject only to the approval of this Agreement and the
transactions contemplated hereby by the holders of a
majority of the outstanding shares of Company Common
Stock, the consummation by Company of the transactions
contemplated hereby has been duly authorized by all
requisite corporate action. This Agreement constitutes,
and all agreements and documents contemplated hereby
(when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally
binding obligations of Company, enforceable in
accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general
principles of equity.
5.3. Capitalization. The authorized capital stock
of Company consists of 400,000,000 shares of Company
Common Stock and 78,000,000 shares of preferred stock,
$.OOl par value (the "Company Preferred Stock"). As of
October 3, 1994, there were 90,598,279 shares of
Company Common Stock, and no shares of Company
Preferred Stock, issued and outstanding. Since such
date, no additional shares of capital stock of Company
have been issued, except pursuant to the exercise of
options outstanding under the Company Stock Option
Plans or the exercise of warrants to purchase shares of
Company Common Stock outstanding on October 3, 1994.
Company has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right
to vote (or which are convertible into or exercisable
for securities having the right to vote) with the
stockholders of Company on any matter. All issued and
outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. There are not at the
date of this Agreement any existing options, warrants,
calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate
Company or any of its Subsidiaries to issue, transfer
or sell any shares of capital stock of Company or any
of its Subsidiaries. After the Effective Time, the
Surviving Corporation will have no obligation to issue,
transfer or sell any shares of capital stock of Company
or the Surviving Corporation pursuant to any Company
Benefit Plan (as defined in Section 5.11).
5.4. Subsidiaries. Company owns directly or
indirectly each of the outstanding shares of capital
stock (or other ownership interests having by their
terms ordinary voting power to elect a majority of
directors or others performing similar functions with
respect to such Company Subsidiary) of each of
Company's Subsidiaries. Each of the outstanding shares
of capital stock of each of Company's Subsidiaries is
duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by
Company free and clear of all liens, pledges, security
interests, claims or other encumbrances other than
liens imposed by local law which are not material. The
following information for each Subsidiary of Company
has been previously provided to Columbia, if
applicable: (i) its name and jurisdiction of
incorporation or organization; (ii) its authorized
capital stock or share capital; and (iii) the number of
issued and outstanding shares of capital stock or share
capital.
5.5. Other Interests. Except for interests in
the Company Subsidiaries, neither Company nor any
Company Subsidiary owns directly or indirectly any
interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business,
trust or entity (other than investments held by
Company's captive insurance subsidiaries, investments
in short term investment securities and corporate
partnering, development, cooperative marketing and
similar undertakings, arrangements entered into in the
ordinary course of business and other investments the
aggregate market value of which is less than
$50,000,000).
5.6. No Violation. Neither the execution and
delivery by Company of this Agreement nor the
consummation by Company of the transactions
contemplated hereby in accordance with the terms
hereof, will: (i) conflict with or result in a breach
of any provisions of the Certificate of Incorporation
or Bylaws of Company; (ii) result in a breach or
violation of, a default under, or the triggering of any
payment or other material obligations pursuant to, or
accelerate vesting under, any of its existing Company
Stock Option Plans, or any grant or award made under
any of the foregoing; (iii) violate, conflict with,
result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of
time or both, would constitute a default) under, result
in the termination or in a right of termination or
cancellation of, accelerate the performance required
by, result in the triggering of any payment or other
material obligations pursuant to, result in the
creation of any lien, security interest, charge or
encumbrance upon any of the material properties of
Company or its Subsidiaries under, or result in being
declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or
any material license, franchise, permit, lease,
contract, agreement or other instrument, commitment or
obligation to which Company or any of its Subsidiaries
is a party, or by which Company or any of its
Subsidiaries or any of their respective properties is
bound or affected, except for any of the foregoing
matters which would not have a Company Material Adverse
Effect; or (iv) other than the filings provided for in
Article 1, applicable federal, state and local
regulatory filings, filings required under the Hart
Scott Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of
1933, as amended (the "Securities Act"), or applicable
state securities and "Blue Sky" laws or filings in
connection with the maintenance of qualification to do
business in other jurisdictions (collectively, the
"Regulatory Filings), require any material consent,
approval or authorization of, or declaration, filing or
registration with, any domestic governmental or
regulatory authority, the failure to obtain or make
which would have a Company Material Adverse Effect.
5.7. SEC Documents. Company has delivered to
Columbia each registration statement, report, proxy
statement or information statement (as defined in
Regulation 14C under the Exchange Act) prepared by it
since August 31, 1993, including, without limitation,
(i) its Annual Report on Form 10-K for the year ended
August 31, 1993, as amended, (ii) its Quarterly Reports
on Form 10-Q for the periods ended November 30, 1993,
February 28, 1994, and May 31, 1994, (iii) its Current
Reports on Form 8-K dated January 10, 1994 and May 5,
1994, (iv) its Proxy Statement for the Annual Meeting
of Stockholders held January 13, 1994, (v) its
Registration Statement on Form S-3, as amended,
Registration No. 33-52403, and (vi) its Registration
Statement on Form S-3, as amended, Registration No. 33
52401, each in the form (including exhibits and any
amendments thereto) filed with the Securities and
Exchange Commission (the "SEC") (collectively, the
"Company Reports"). As of their respective dates, the
Company Reports (i) complied as to form in all material
respects with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or
necessary to make the statements made therein, in the
light of the circumstances under which they were made,
not misleading. Each of the consolidated balance sheets
of Company included in or incorporated by reference
into the Company Reports (including the related notes
and schedules) fairly presents the consolidated
financial position of Company and the Company
Subsidiaries as of its date, and each of the
consolidated statements of income, retained earnings
and cash flows of Company included in or incorporated
by reference into the Company Reports (including any
related notes and schedules) fairly presents the
results of operations, retained earnings or cash flows,
as the case may be, of Company and the Company
Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be
material in amount or effect), in each case in
accordance with generally accepted accounting
principles consistently applied during the periods
involved, except as may be noted therein. Neither
Company nor any of the Company Subsidiaries has any
material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved
against in, a balance sheet of Company or in the notes
thereto, prepared in accordance with generally accepted
accounting principles consistently applied, except
liabilities arising in the ordinary course of business
since August 31, 1993.
5.8. Litigation. There are no actions, suits
or proceedings pending against Company or the Company
Subsidiaries or, to the actual knowledge of the
executive officers of Company, threatened against
Company or the Company Subsidiaries, at law or in
equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality,
that are reasonably likely to have a Company Material
Adverse Effect.
5.9. Absence of Certain Changes. Since
August 31, 1993, Company has conducted its business
only in the ordinary course of such business, and there
has not been (i) any Company Material Adverse Effect
(other than as a result of changes in conditions,
including economic or political developments,
applicable to the health care industry generally); (ii)
any declaration, setting aside or payment of any
dividend or other distribution with respect to its
capital stock; or (iii) any material change in its
accounting principles, practices or methods.
5.10. Taxes. Company and each of its
Subsidiaries (i) have timely filed all material
federal, state and foreign tax returns required to be
filed by any of them for tax years ended prior to the
date of this Agreement or requests for extensions have
been timely filed and any such request shall have been
granted and not expired, and all such returns are
complete in all material respects, (ii) have paid or
accrued all taxes shown to be due and payable on such
returns, (iii) have properly accrued all such taxes for
such periods subsequent to the periods covered by such
returns, and (iv) have "open" years for federal income
tax returns only as set forth in the Company Reports.
5.11 Employee Benefit Plans.
(a) All employee benefit plans and other
benefit arrangements covering employees of Company and
the Company Subsidiaries (the "Company Benefit Plans")
and all employee agreements providing compensation,
severance or other benefits to any employee or former
employee of Company or any of its Subsidiaries are
listed in the Company Reports or are set forth in the
Company Disclosure Letter, except Company Benefit Plans
which are not material. True and complete copies of the
Company Benefit Plans have been made available to
Columbia. To the extent applicable, the Company Benefit
Plans comply, in all material respects, with the
requirements of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and the Code, and
any Company Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined by the
Internal Revenue Service (the "IRS") to be so
qualified. Neither Company nor any ERISA Affiliate of
Company (during the period of its affiliated status and
prior thereto, to its knowledge) maintains, contributes
to or has in the past maintained or contributed to any
benefit plan which is covered by Title IV of ERISA or
Section 412 of the Code. No Company Benefit Plan nor
Company has incurred any liability or penalty under
Section 4975 of the Code or Section 502(i) of ERISA.
Each Company Benefit Plan has been maintained and
administered in all material respects in compliance
with its terms and with ERISA and the Code to the
extent applicable thereto. To the knowledge of the
executive officers of Company, there are no pending or
anticipated material claims against or otherwise
involving any of the Company Benefit Plans and no suit,
action or other litigation (excluding claims for
benefits incurred in the ordinary course of Company
Benefit Plan activities) has been brought against or
with respect to any such Company Benefit Plan, except
for any of the foregoing which would not have a Company
Material Adverse Effect. All material contributions
required to be made as of the date hereof to the
Company Benefit Plans have been made or provided for.
Since September 25, 1980, neither Company nor any ERISA
Affiliate of Company (during the period of its
affiliated status and prior thereto, to its knowledge)
has contributed to, or been required to contribute to,
any "multiemployer plan" (as defined in Sections 3(37)
and 4001(a)(3) of ERISA). Company does not maintain or
contribute to any plan or arrangement which provides or
has any liability to provide life insurance or medical
or other employee welfare benefits to any employee or
former employee upon his retirement or termination of
employment, and Company has never represented, promised
or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be
provided. The execution of, and performance of the
transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any
benefit plan, policy, arrangement or agreement or any
trust or loan that will or may result in any payment
(whether of severance pay or otherwise~, acceleration,
forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits
with respect to any employee. The only severance
agreements or severance policies applicable to Company
or its Subsidiaries are the agreements and policies
specifically referred to in the Company Disclosure
Letter (and, in the case of such agreements, the form
of which is attached to the Company Disclosure Letter).
(b) (i) From the date of its inception
until its termination, each of the HealthTrust Employee
Stock Ownership Plan and the EPIC Employee Stock
Ownership Plan (the "ESOPs") were qualified under
Section 401(a) of the Code and a determination letter
has been issued by the IRS to the effect that each such
ESOP was so qualified and that each trust forming a
part of any such ESOP was exempt from tax pursuant to
Section 501(a) of the Code and no circumstances existed
or now exist which would adversely affect this
qualification or exemption. The termination of any of
the ESOPs has not had a Company Material Adverse
Effect.
(ii) No "prohibited transaction," within the
meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any ESOP.
(iii) All contributions and other payments
required to be made by the Company, its Subsidiaries or
ERISA Affiliates to the ESOPs prior to the date hereof
have been made and no contributions have been made to
the ESOPs that would be considered non-deductible under
the Code, except as would not have a Company Material
Adverse Effect.
(iv) Company, its Subsidiaries and ERISA
Affiliates have complied with and performed all
obligations required to be performed by them under or
with respect to the ESOPs, or any related trust and
have complied with all applicable federal, state and
local laws, rules or regulations with respect to the
ESOPs, except as would not have a Company Material
Adverse Effect.
For purposes of this Agreement "ERISA Affiliate" means
any business or entity which is a member of the same
"controlled group of corporations," under "common
control" or an "affiliated service group" with an
entity within the meanings of Sections 414(b), (c) or
(m) of the Code, or required to be aggregated with the
entity under Section 414(o) of the Code, or is under
"common control" with the entity, within the meaning of
Section 4001(a)(14) of ERISA, or any regulations
promulgated or proposed under any of the foregoing
Sections.
5.12. Labor Matters. Neither Company nor
any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor
organization. There is no unfair labor practice or
labor arbitration proceeding pending or, to the
knowledge of the executive officers of Company,
threatened against Company or its Subsidiaries relating
to their business, except for any such proceeding which
would not have a Company Material Adverse Effect. To
the knowledge of the executive officers of Company,
there are no organizational efforts with respect to the
formation of a collective bargaining unit presently
being made or threatened involving employees of Company
or any of its Subsidiaries.
5.13. No Brokers. Company has not entered
into any contract, arrangement or understanding with
any person or firm which may result in the obligation
of Company or Columbia to pay any finder's fees,
brokerage or agent's commissions or other like payments
in connection with the negotiations leading to this
Agreement or the consummation of the transactions
contemplated hereby, except that Company has retained
Merrill lynch & Co. as its financial advisor, the
arrangements with which have been disclosed in writing
to Columbia prior to the date hereof. Other than the
foregoing arrangements, Company is not aware of any
claim for payment of any finder's fees, brokerage or
agent's commissions or other like payments in
connection with the negotiations leading to this
Agreement or the consummation of the transactions
contemplated hereby.
5.14. Opinion of Financial Advisor.
Company has received the opinion of Merrill Lynch & Co.
to the effect that, as of the date hereof, the Exchange
Ratio is fair to the holders of Company Common Stock
from a financial point of view.
5.15. Columbia Stock Ownership. Neither
Company nor any of its Subsidiaries owns any shares of
Columbia Common Stock or other securities convertible
into Columbia Common Stock.
5.16. Medicare
Participation/Accreditation. All of Company's hospitals
are certified for participation or enrollment in the
Medicare and Medicaid programs, have a current and
valid provider contract with the Medicare and Medicaid
programs, are in substantial compliance with the
conditions of participation of such programs and have
received all approvals or qualifications necessary for
capital reimbursement of Company's assets. Neither
Company nor any of its Subsidiaries has received notice
from the regulatory authorities which enforce the
statutory or regulatory provisions in respect of either
the Medicare or the Medicaid program of any pending or
threatened investigations or surveys, and neither
Company nor any of its Subsidiaries has any reason to
believe that any such investigations or surveys are
pending, threatened or imminent which may have a
Company Material Adverse Effect. All of Company's
hospitals are accredited by the Joint Commission on
Accreditation of Healthcare Organizations.
5.17. Pooling of Interests; Tax
Reorganization. To the actual knowledge of the
executive officers of Company, Company has not taken or
failed to take any action which would prevent the
accounting for the Merger as a pooling of interests in
accordance with Accounting Principles Board Opinion No.
16, the interpretative releases issued pursuant
thereto, and the pronouncements of the SEC. To the
actual knowledge of the executive officers of Company,
Company has not taken or failed to take any action
which would prevent the Merger from constituting a
reorganization within the meaning of section 368(a) of
the Code.
5.18 EPIC Transaction. To the actual
knowledge of the executive officers of Company, the
representations and warranties of EPIC Holdings, Inc.
("EPIC") set forth in the Agreement and Plan of Merger
(the "EPIC Merger Agreement") dated as of January 9,
1994 among Company, Odyssey Acquisition Corp. and EPIC
were true and correct in all material respects as of
the closing date of the merger contemplated by the EPIC
Merger Agreement.
ARTICLE 6
6. Representations and Warranties of Columbia
and Merger Sub.
Except as set forth in the disclosure letter delivered
at or prior to the execution hereof to Company (the
"Columbia Disclosure Letter") or in the Columbia
Reports (as defined below), Columbia and Merger Sub
represent and warrant to Company as of the date of this
Agreement as follows:
6.1. Existence; Good Standing; Corporate
Authority; Compliance With Law. Each of Columbia and
Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of its
jurisdiction of incorporation. Columbia is duly
licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of
any other state of the United States in which the
character of the properties owned or leased by it or in
which the transaction of its business makes such
qualification necessary, except where the failure to be
so qualified or to be in good standing would not have a
material adverse effect on the business, results of
operations or financial condition of Columbia and its
Subsidiaries taken as a whole (a "Columbia Material
Adverse Effect"). Columbia has all requisite corporate
power and authority to own, operate and lease its
properties and carry on its business as now conducted.
Each of Columbia's Significant Subsidiaries is a
corporation or partnership duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the
corporate or partnership power and authority to own its
properties and to carry on its business as it is now
being conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which
the ownership of its property or the conduct of its
business requires such qualification, except for
jurisdictions in which such failure to be so qualified
or to be in good standing would not have a Columbia
Material Adverse Effect. Neither Columbia nor any
Columbia Subsidiary is in violation of any order of any
court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or
regulation to which Columbia or any of its Subsidiaries
or any of their respective properties or assets is
subject, where such violation would have a Columbia
Material Adverse Effect. Columbia and its Subsidiaries
have obtained all licenses, permits and other
authorizations and have taken all actions required by
applicable law or governmental regulations in
connection with their business as now conducted, where
the failure to obtain any such item or to take any such
action would have a Columbia Material Adverse Effect.
The copies of Columbia's Certificate of Incorporation
and Bylaws previously delivered to Company are true and
correct.
6.2. Authorization, Validity and Effect of
Agreements. Each of Columbia and Merger Sub has the
requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents
contemplated hereby. The consummation by Columbia and
Merger Sub of the transactions contemplated hereby has
been duly authorized by all requisite corporate action.
This Agreement constitutes, and all agreements and
documents contemplated hereby (when executed and
delivered pursuant hereto for value received) will
constitute, the valid and legally binding obligations
of Columbia and Merger Sub, enforceable in accordance
with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general
principles of equity.
6.3. Capitalization. The authorized capital
stock of Columbia consists of 800,000,000 shares of
Columbia Common Stock, 25,000,000 shares of nonvoting
common stock, $.01 par value (the "Columbia Nonvoting
Common Stock"), and 25,000,000 shares of preferred
stock, $.01 par value (the "Columbia Preferred Stock").
As of September 30, 1994, there were 347,845,336 shares
of Columbia Common Stock, 14,189,999 shares of Columbia
Nonvoting Common Stock, and no shares of Columbia
Preferred Stock, issued and outstanding. Since such
date, no additional shares of capital stock of Columbia
have been issued except pursuant to the exercise of
options outstanding under Columbia's stock option and
employee stock purchase plans (the "Columbia Stock
Option Plans"). Columbia has no outstanding bonds,
debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible
into or exercisable for securities having the right to
vote) with the stockholders of Columbia on any matter.
All such issued and outstanding shares of Columbia
Common Stock are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights.
Except as contemplated by this Agreement, there are not
at the date of this Agreement any existing options,
warrants, calls, subscriptions, convertible securities,
or other rights, agreements or commitments which
obligate Columbia or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock of
Columbia or any of its Subsidiaries.
6.4 Subsidiaries.
(a) Columbia owns directly or indirectly
each of the outstanding shares of capital stock of each
of Columbia's Subsidiaries (or other ownership
interests having by their terms ordinary voting power
to elect a majority of directors or others performing
similar functions with respect to such Columbia
Subsidiary). Each of the outstanding shares of capital
stock of each of Columbia's Subsidiaries is duly
authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by
Columbia free and clear of all liens, pledges, security
interests, claims or other encumbrances other than
liens imposed by local law which are not material. The
following information for each Subsidiary of Columbia
has been previously provided to Company, if applicable:
its name and jurisdiction of incorporation or
organization; (ii) its authorized capital stock or
share capital; and (iii) the number of issued and
outstanding shares of capital stock or share capital.
(b) The authorized capital stock of Merger
Sub consists of 1,000 shares of Common Stock, $.01 par
value, all of which shares are issued and outstanding
and owned by Columbia. Notwithstanding any provisions
to the contrary, Columbia may, in its sole discretion,
increase the number of shares of authorized Common
Stock of Merger Sub and the number of shares of Common
Stock of Merger Sub issued and outstanding owned by
Columbia. Merger Sub has not engaged in any activities
other than in connection with the transactions
contemplated by this Agreement.
6.5. Other Interests. Except for interests in
the Columbia Subsidiaries, neither Columbia nor any
Columbia Subsidiary owns directly or indirectly any
interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business,
trust or entity (other than investments in Quorum
Health Group Inc., investments held by two captive
insurance companies and investments in short term
investment securities and corporate partnering,
development, cooperative marketing and similar
undertakings and arrangements entered into in the
ordinary course of business and other investments the
aggregate market value of which is less than
$50,000,000).
6.6. No Violation. Neither the execution and
delivery by Columbia and Merger Sub of this Agreement,
nor the consummation by Columbia and Merger Sub of the
transactions contemplated hereby in accordance with the
terms hereof, will: (i) conflict with or result in a
breach of any provisions of the Certificate of
Incorporation or Bylaws of Columbia or Merger Sub; (ii)
result in a breach or violation of, a default under, or
the triggering of any payment or other material
obligations pursuant to, or accelerate vesting under,
any of the Columbia Stock Option Plans, or any grant or
award under any of the foregoing; (iii) violate,
conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default)
under, result in the termination or in a right of
termination or cancellation of, accelerate the
performance required by, result in the triggering of
any payment or other material obligations pursuant to,
result in the creation of any lien, security interest,
charge or encumbrance upon any of the material
properties of Columbia or its Subsidiaries under, or
result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed
of trust or any material license, franchise, permit,
lease, contract, agreement or other instrument,
commitment or obligation to which Columbia or any of
its Subsidiaries is a party, or by which Columbia or
any of its Subsidiaries or any of their respective
properties is bound or affected, except for any of the
foregoing matters which would not have a Columbia
Material Adverse Effect; or (iv) other than the
Regulatory Filings, require any material consent,
approval or authorization of, or declaration, filing or
registration with, any domestic governmental or
regulatory authority, the failure to obtain or make
which would have a Columbia Material Adverse Effect.
6.7. SEC Documents. Columbia has delivered to
Company each registration statement, report, proxy
statement or information statement prepared by it since
December 31, 1993, including, without limitation, (i)
its Annual Report on Form 10-K for the year ended
December 31, 1993, as amended, (ii) its Quarterly
Reports on Form 10-Q for the periods ended March 31,
1994 and June 30, 1994, (iii) its Proxy Statement for
the Annual Meeting of Stockholders held May 12, 1994,
and (iv) its Registration Statement on Form S-4, as
amended, Registration No. 33-54475, each in the form
(including exhibits and any amendments thereto) filed
with the SEC (collectively, the "Columbia Reports"). As
of their respective dates, the Columbia Reports (i)
complied as to form in all material respects with the
applicable requirements of the Securities Act, the
Exchange Act, and the rules and regulations thereunder
and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the
statements made therein, in the light of the
circumstances under which they were made, not
misleading. Each of the consolidated balance sheets
included in or incorporated by reference into the
Columbia Reports (including the related notes and
schedules) fairly presents the consolidated financial
position of Columbia and the Columbia Subsidiaries as
of its date, and each of the consolidated statements of
income, retained earnings and cash flows included in or
incorporated by reference into the Columbia Reports
(including any related notes and schedules) fairly
presents the results of operations, retained earnings
or cash flows, as the case may be, of Columbia and the
Columbia Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to
normal year end audit adjustments which would not be
material in amount or effect), in each case in
accordance with generally accepted accounting
principles consistently applied during the periods
involved, except as may be noted therein. Neither
Columbia nor any of the Columbia Subsidiaries has any
material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved
against in, a balance sheet of Columbia or in the notes
thereto, prepared in accordance with generally accepted
accounting principles consistently applied, except
liabilities arising in the ordinary course of business
since December 31, 1993.
6.8. Litigation. There are no actions, suits
or proceedings pending against Columbia or the Columbia
Subsidiaries or, to the actual knowledge of the
executive officers of Columbia, threatened against
Columbia or the Columbia Subsidiaries, at law or in
equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality,
that are reasonably likely to have a Columbia Material
Adverse Effect.
6.9. Absence of Certain Changes. Since
December 31, 1993, Columbia has conducted its business
only in the ordinary course of such business, and there
has not been (i) any Columbia Material Adverse Effect
(other than as a result of changes in conditions,
including economic or political developments,
applicable to the health care industry generally); (ii)
any declaration, setting aside or payment of any
dividend or other distribution with respect to its
capital stock (other than the regular quarterly cash
dividends of $.03 per share, payable on the Columbia
Common Stock and the Columbia Nonvoting Common Stock);
or (iii) any material change in its accounting
principles, practices or methods.
6.10. Taxes. Columbia and each of its
Subsidiaries (i) have timely filed all material
federal, state and foreign tax returns required to be
filed by any of them for tax years ended prior to the
date of this Agreement or requests for extensions have
been timely filed and any such request shall have been
granted and not expired, and all such returns are
complete in all material respects, (ii) have paid or
accrued all taxes shown to be due and payable on such
returns, (iii) have properly accrued all such taxes for
such periods subsequent to the periods covered by such
returns, and (iv) have "open" years for federal income
tax returns only as set forth in the Columbia
Disclosure Letter.
6.11. Employee Benefit Plans. All
employee benefit plans and other benefit arrangements
covering employees of Columbia and the Columbia
Subsidiaries (the "Columbia Benefit Plans") and all
employee agreements providing compensation, severance
or other benefits to any employee or former employee of
Columbia or any of the Columbia Subsidiaries are listed
in the Columbia Reports, except Columbia Benefit Plans
which are not material. True and complete copies of the
Columbia Benefit Plans have been made available to
Company. To the extent applicable, the Columbia Benefit
Plans comply, in all material respects, with the
requirements of ERISA and the Code, and any Columbia
Benefit Plan intended to be qualified under Section
401(a) of the Code has been determined by the IRS to be
so qualified. Neither Columbia nor any ERISA Affiliate
of Columbia l(during the period of its affiliated
status and prior thereto, to its knowledge) maintains,
contributes to or has in the past maintained or
contributed to any benefit plan which is covered by
Title IV of ERISA or Section 412 of the Code. No
Columbia Benefit Plan nor Columbia has incurred any
liability or penalty under Section 4975 of the Code or
Section 502(i) of ERISA. Each Columbia Benefit Plan has
been maintained and administered in all material
respects in compliance with its terms and with ERISA
and the Code to the extent applicable thereto. To the
knowledge of the executive officers of Columbia, there
are no pending or anticipated claims against or
otherwise involving any of the Columbia Benefit Plans,
and no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of
Columbia Benefit Plan activities) has been brought
against or with respect to any such Columbia Benefit
Plan, except for any of the foregoing which would not
have a Columbia Material Adverse Effect. All material
contributions required to be made as of the date hereof
to the Columbia Benefit Plans have been made or
provided for. Since September 25, 1980, neither
Columbia nor any ERISA Affiliate of Columbia (during
the period of its affiliated status and prior thereto
to its knowledge) has contributed to, or been required
to contribute to, any "multiemployer plan" (as defined
in Sections 3(37) and 4001(a)(3) of ERISA). Columbia
does not maintain or contribute to any plan or
arrangement which provides or has any liability to
provide life insurance or medical or other employee
welfare benefits to any employee or former employee
upon his retirement or termination of employment, and
Columbia has never represented, promised or contracted
(whether in oral or written form) to any employee or
former employee that such benefits would be provided.
Except as disclosed in the Columbia Reports, the
execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone
or upon the occurrence of any additional or subsequent
events) constitute an event under any benefit plan,
policy, arrangement or agreement or any trust or loan
that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to
any employee.
6.12. Labor Matters. Neither Columbia nor
any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor
organization. There is no unfair labor practice or
labor arbitration proceeding pending or, to the
knowledge of the executive officers of Columbia,
threatened against Columbia or its Subsidiaries
relating to their business, except for any such
proceeding which would not have a Columbia Material
Adverse Effect. To the knowledge of the executive
officers of Columbia, there are no organizational
efforts with respect to the formation of a collective
bargaining unit presently being made or threatened
involving employees of Columbia or any of its
Subsidiaries.
6.13. Opinion of Financial Advisor.
Columbia has received the opinion of Morgan Stanley &
Co. Incorporated to the effect that as of the date
hereof, the consideration to be paid by Columbia
pursuant to the Merger is fair to Columbia from a
financial point of view.
6.14. Company Stock Ownership. Neither
Columbia nor any of its Subsidiaries owns any shares of
Company Common Stock or other securities convertible
into shares of Company Common Stock.
6.15. Columbia Common Stock. The issuance
and delivery by Columbia of shares of Columbia Common
Stock in connection with the Merger and this Agreement
have been duly and validly authorized by all necessary
corporate action on the part of Columbia. The shares of
Columbia Common Stock to be issued in connection with
the Merger and this Agreement, when issued in
accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable.
6.16. Convertible Securities. Columbia
has no outstanding options, warrants or other
securities exercisable for, or convertible into, shares
of Columbia Common Stock, the terms of which would
require any anti-dilution adjustments by reason of the
consummation of the transactions contemplated hereby.
6.17. Medicare
Participation/Accreditation. All of Columbia's
hospitals are certified for participation or enrollment
in the Medicare and Medicaid programs, have a current
and valid provider contract with the Medicare and
Medicaid programs, are in substantial compliance with
the conditions of participation of such programs and
have received all approvals or qualifications necessary
for capital reimbursement of the Columbia assets.
Neither Columbia nor any of its Subsidiaries has
received notice from the regulatory authorities which
enforce the statutory or regulatory provisions in
respect of either the Medicare or the Medicaid program
of any pending or threatened investigations or surveys,
and neither Columbia nor any of its Subsidiaries has
any reason to believe that any such investigations or
surveys are pending, threatened or imminent which may
have a Columbia Material Adverse Effect. All of
Columbia's hospitals are accredited by the Joint
Commission on Accreditation of Healthcare
Organizations.
6.18. Pooling of Interests; Tax
Reorganization. To the actual knowledge of the
executive officers of Columbia, Columbia has not taken
or failed to take any action which would prevent the
accounting for the Merger as a pooling of interests in
accordance with Accounting Principles Board Opinion No.
16, the interpretative releases issued pursuant
thereto, and the pronouncements of the SEC. To the
actual knowledge of the executive officers of Columbia,
Columbia has not taken or failed to take any action
which would prevent the Merger from constituting a
reorganization within the meaning of section 368(a) of
the Code.
6.19. No Brokers. Columbia has not
entered into any contract, arrangement or understanding
with any person or firm which may result in the
obligation of Company or Columbia to pay any finder's
fee, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions
contemplated hereby, except that Columbia has retained
Morgan Stanley & Co. Incorporated as its financial
advisor, the arrangements with which have been
disclosed in writing to Company prior to the date
hereof. Other than the foregoing arrangements, Company
is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE 7
7. Covenants.
7.1. Alternative Proposals. Prior to the
Effective Time, Company agrees (a) that neither it nor
any of its Subsidiaries shall, and it shall direct and
use its best efforts to cause its officers, directors,
employees, agents and representatives (including,
without limitation, any investment banker, attorney or
accountant retained by it or any of its Subsidiaries)
not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or
implementation of any proposal or offer (including,
without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any
purchase of all or any significant portion of the
assets or any equity securities of, Company or any of
its Significant Subsidiaries (any such proposal or
offer being hereinafter referred to as an "Alternative
Proposal") or engage in any negotiations concerning, or
provide any confidential information or data to, or
have any discussions with, any person relating to an
Alternative Proposal, or otherwise facilitate any
effort or attempt to make or implement an Alternative
Proposal; (b) that it will immediately cease and cause
to be terminated any existing activities, discussions
or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and it will take
the necessary steps to inform the individuals or
entities referred to above of the obligations
undertaken in this Section 7.1; and (c) that it will
notify Columbia immediately if any such inquiries or
proposals are received by, any such information is
requested from, or any such negotiations or discussions
are sought to be initiated or continued with, it;
provided, however, that nothing contained in this
Section 7.1 shall prohibit the Board of Directors of
Company from (i) furnishing information to or entering
into discussions or negotiations with, any person or
entity that makes an unsolicited bona fide proposal to
acquire Company pursuant to a merger, consolidation,
share exchange, purchase of a substantial portion of
assets, business combination or other similar
transaction, if, and only to the extent that, (A) the
Board of Directors of Company determines in good faith
that such action is required for the Board of Directors
to comply with its fiduciary duties to stockholders
imposed by law, (B) prior to furnishing such
information to, or entering into discussions or
negotiations with, such person or entity, Company
provides written notice to Columbia to the effect that
it is furnishing information to, or entering into
discussions or negotiations with, such person or
entity, and (C) subject to any confidentiality
agreement with such person or entity (which Company
determined in good faith was required to be executed in
order for its Board of Directors to comply with
fiduciary duties to stockholders imposed by law),
Company keeps Columbia informed of the status (not the
terms) of any such discussions or negotiations; and
(ii) to the extent applicable, complying with Rule
14e-2 promulgated under the Exchange Act with regard to
an Alternative Proposal. Nothing in this Section 7.1
shall (x) permit Company to terminate this Agreement
(except as specifically provided in Article 9 hereof),
(y) permit Company to enter into any agreement with
respect to an Alternative Proposal during the term of
this Agreement (it being agreed that during the term of
this Agreement, Company shall not enter into any
agreement with any person that provides for, or in any
way facilitates, an Alternative Proposal (other than a
confidentiality agreement in customary form)), or (z)
affect any other obligation of Company under this
Agreement.
7.2. Interim Operations.
(a) Prior to the Effective Time, except as set forth in
the Company Disclosure Letter or as contemplated by any
other provision of this Agreement, unless Columbia has
consented in writing thereto, Company:
(i) Shall, and shall cause each of its
Subsidiaries to, conduct its operations according to
their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(ii) Shall use its reasonable efforts, and shall cause
each of its Subsidiaries to use its reasonable efforts,
to preserve intact their business organizations and
goodwill, keep available the services of their
respective officers and employees and maintain
satisfactory relationships with those persons having
business relationships with them;
(iii) Shall not amend its Certificate of
Incorporation or Bylaws or comparable governing
instruments;
(iv) Shall promptly notify Columbia of any material
emergency or other material change in its condition
(financial or otherwise), business, properties, assets,
liabilities, prospects or the normal course of its
business or of its properties any material litigation
or material governmental complaints, investigations or
hearings (or communications indicating that the same
may be contemplated), or the breach in any material
respect of any representation or warranty contained
herein;
(v) Shall promptly deliver to Columbia true and correct
copies of any report, statement or schedule filed with
the SEC subsequent to the date of this Agreement;
(vi) Shall not (x) except pursuant to the
exercise of options, warrants, conversion rights and
other contractual rights existing on the date hereof
and disclosed pursuant to this Agreement, issue any
shares of its capital stock, effect any stock split or
otherwise change its capitalization as it existed on
the date hereof, (y) grant, confer or award any option,
warrant, conversion right or other right not existing
on the date hereof to acquire any shares of its capital
stock, other than employee stock options, stock
benefits and stock purchases under any stock option,
stock benefit or stock purchase plan existing on the
date hereof, provided that the aggregate amount of
employee stock options granted pursuant to such
employee stock option plans shall not exceed 50,000,
(z) increase any compensation or enter into or amend
any employment agreement with any of its present or
future officers or directors, except for normal
increases consistent with past practice and the payment
of cash bonuses to officers pursuant to and consistent
with existing plans or programs, or (aa) adopt any new
employee benefit plan (including any stock option,
stock benefit or stock purchase plan) or amend any
existing employee benefit plan in any material respect,
except for changes which are less favorable to
participants in such plans;
(vii) Shall not (i) declare, set aside or pay
any dividend or make any other distribution or payment
with respect to any shares of its capital stock or
other ownership interests or (ii) except in connection
with the use of shares of capital stock to pay the
exercise price or tax withholding in connection with
its stock based employee benefit plans, directly or
indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or capital stock of any of
its Subsidiaries, or make any commitment for any such
action; and
(viii) Shall not, and shall not permit any of
its Subsidiaries to, sell, lease or otherwise dispose
of any of its assets (including capital stock of
Subsidiaries) which are material, individually or in
the aggregate, except in the ordinary course of
business.
(b) Prior to the Effective Time, except as set forth in
the Columbia Disclosure Letter or as contemplated by
any other provision of this Agreement, unless Company
has consented in writing thereto, Columbia:
(i) Shall conduct its operations in the
ordinary course in substantially the same manner as
heretofore conducted;
(ii) Shall not amend its Certificate of Incorporation;
(iii) Shall promptly deliver to Company true and
correct copies of any report, statement or schedule
filed with the SEC subsequent to the date of this
Agreement;
(iv) Shall not sell, lease or otherwise
dispose of any of its assets (including capital stock
of Subsidiaries) which are material, individually or in
the aggregate, except in the ordinary course of
business;
(v) Shall not redeem, purchase or otherwise acquire, or
propose to redeem, purchase or acquire, a material
amount of the outstanding Columbia Common Stock; and
(vi) Shall not declare or make any
extraordinary distributions with respect to its capital
stock, which distributions are individually, or in the
aggregate, material; provided, however, that scheduled
quarterly cash dividends payable on the Columbia Common
Stock shall not be deemed "extraordinary."
7.3. Meetings of Stockholders. Each of
Columbia and Company will take all action necessary in
accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its
stockholders as promptly as practicable to consider and
vote upon (i) in the case of Columbia, the approval of
the issuance of the shares of Columbia Common Stock
pursuant to the Merger contemplated hereby and the
approval of an amendment to Columbia's Certificate of
Incorporation to increase the maximum number of
directors constituting the entire Board of Directors of
Columbia from 15 to 18 persons and (ii) in the case of
Company, the approval of this Agreement and the
transactions contemplated hereby. The Board of
Directors of each of Columbia and Company shall
recommend such approval and Columbia and Company shall
each take all lawful action to solicit such approval,
including, without limitation, timely mailing the Proxy
Statement/Prospectus (as defined in Section 7.7);
provided, however, that such recommendation or
solicitation is subject to any action (including any
withdrawal or change of its recommendation) taken by,
or upon authority of, the Board of Directors of
Columbia or Company, as the case may be, in the
exercise of its good faith judgment as to its fiduciary
duties to its stockholders imposed by law. It shall be
a condition to the mailing of the Proxy
Statement/Prospectus that (i) Columbia shall have
received a "comfort" letter from Ernst & Young,
independent public accountants for Company, dated the
date of the Proxy Statement/Prospectus, with respect to
the financial statements of Company included in the
Proxy Statement/Prospectus, substantially in the form
described in Section 8.3(c), and (ii) Company shall
have received a "comfort" letter from Ernst & Young,
independent public accountants for Columbia, dated the
date of the Proxy Statement/Prospectus, with respect to
the financial statements of Columbia included in the
Proxy Statement/Prospectus, substantially in the form
described in Section 8.2(c).
7.4. Filings; Other Action. Subject to the
terms and conditions herein provided, Company and
Columbia shall: (a) promptly make their respective
filings and thereafter make any other required
submissions under the HSR Act with respect to the
Merger; (b) use all reasonable efforts to cooperate
with one another in (i) determining which filings are
required to be made prior to the Effective Time with,
and which consents, approvals, permits or
authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory
authorities of the United States, the several states
and foreign jurisdictions in connection with the
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby
and
(ii) timely making all such filings and
timely seeking all such consents, approvals, permits or
authorizations; and (c) use all reasonable efforts to
take, or cause to be taken, all other action and do, or
cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the
transactions contemplated by this Agreement. With
respect to obtaining approval under the HSR Act,
Columbia's reasonable efforts shall be deemed to
include divesting or otherwise holding separate, or
taking such other action (or otherwise agreeing to do
any of the foregoing) with respect to any of its
Subsidiaries or any of the Surviving Corporation's
assets and properties necessary to obtain such
approval, except to the extent that such actions would,
in the aggregate, have a material adverse effect on the
business, financial condition or results of operations
of Company and its Subsidiaries taken as a whole (it
being understood that for purposes of applying this
provision, if one or more assets or properties owned by
Columbia in a particular market are divested or held
separate, comparable assets or properties owned by
Company in such market shall be deemed to have been
divested or held separate). If, at any time after the
Effective Time, any further action is necessary or
desirable to carry out the purpose of this Agreement,
the proper officers and directors of Columbia and
Company shall take all such necessary action.
7.5. Inspection of Records. From the date
hereof to the Effective Time, each of Company and
Columbia shall (i) allow all designated officers,
attorneys, accountants and other representatives of the
other reasonable access at all reasonable times to the
offices, records and files, correspondence, audits and
properties, as well as to all information relating to
commitments, contracts, titles and financial position,
or otherwise pertaining to the business and affairs, of
Company and Columbia and their respective Subsidiaries,
as the case may be, (ii) furnish to the other, the
other's counsel, financial advisors, auditors and other
authorized representatives such financial and operating
data and other information as such persons may
reasonably request and (iii) instruct the employees,
counsel and financial advisors of Company or Columbia,
as the case may be, to cooperate with the other in the
other's investigation of the business of it and its
Subsidiaries.
7.6. Publicity. The initial press release
relating to this Agreement shall be a joint press
release and thereafter Company and Columbia shall,
subject to their respective legal obligations
(including requirements of stock exchanges and other
similar regulatory bodies), consult with each other,
and use reasonable efforts to agree upon the text of
any press release, before issuing any such press
release or otherwise making public statements with
respect to the transactions contemplated hereby and in
making any filings with any federal or state
governmental or regulatory agency or with any national
securities exchange with respect thereto.
7.7. Registration Statement. Columbia and
Company shall cooperate and promptly prepare and
Columbia shall file with the SEC as soon as practicable
a Registration Statement on Form S-4 (the "Form S-4")
under the Securities Act, with respect to the Columbia
Common Stock issuable in the Merger, a portion of which
Registration Statement shall also serve as the joint
proxy statement with respect to the meetings of the
stockholders of Company and of Columbia in connection
with the Merger (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to
form in all material respects with the applicable
provisions of the Securities Act, the Exchange Act and
the rules and regulations thereunder. Columbia shall
use all reasonable efforts, and Company will cooperate
with Columbia, to have the Form S-4 declared effective
by the SEC as promptly as practicable. Columbia shall
use its best efforts to obtain, prior to the effective
date of the Form S-4, all necessary state securities
law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto.
Columbia agrees that the Proxy Statement/Prospectus and
each amendment or supplement thereto at the time of
mailing thereof and at the time of the respective
meetings of stockholders of Company and Columbia, or,
in the case of the Form S-4 and each amendment or
supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading; provided,
however, that the foregoing shall not apply to the
extent that any such untrue statement of a material
fact or omission to state a material fact was made by
Columbia in reliance upon and in conformity with
written information concerning Company furnished to
Columbia by Company specifically for use in the Proxy
Statement/Prospectus. Company agrees that the written
information concerning Company provided by it for
inclusion in the Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing
thereof and at the time of the respective meetings of
stockholders of Company and Columbia, or, in the case
of written information concerning Company provided by
Company for inclusion in the Form S-4 or any amendment
or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement
of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading. No amendment or
supplement to the Proxy Statement/Prospectus will be
made by Columbia or Company without the approval of the
other party. Columbia will advise Company, promptly
after it receives notice thereof, of the time when the
Form S-4 has become effective or any supplement or
amendment has been filed, the issuance of any stop
order, the suspension of the qualification of the
Columbia Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments
thereon and responses thereto or requests by the SEC
for additional information.
7.8. Listing Application. Columbia shall promptly
prepare and submit to the NYSE a listing application
covering the shares of Columbia Common Stock (and
associated Rights) issuable in the Merger, and shall
use its best efforts to obtain, prior to the Effective
Time, approval for the listing of such Columbia Common
Stock (and associated Rights), subject to official
notice of issuance.
7.9. Further Action. Each party hereto shall, subject
to the fulfillment at or before the Effective Time of
each of the conditions of performance set forth herein
or the waiver thereof, perform such further acts and
execute such documents as may be reasonably required to
effect the Merger.
7.10. Affiliate letters. (i) At least 30 days prior to
the Closing Date, Company shall deliver to Columbia a
list of names and addresses of those persons who were,
in Company's reasonable judgment, at the record date
for its stockholders' meeting to approve the Merger,
"affiliates" (each such person, an "Affiliate") of
Company within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act.
Company shall provide Columbia such information and
documents as Columbia shall reasonably request for
purposes of reviewing such list. Company shall use all
reasonable efforts to deliver or cause to be delivered
to Columbia, prior to the Closing Date, from each of
the Affiliates of Company identified in the foregoing
list, an Affiliate Letter in the form attached hereto
as Exhibit A. Columbia shall be entitled to place
legends as specified in such Affiliate letters on the
certificates evidencing any Columbia Common Stock to be
received by such Affiliates pursuant to the terms of
this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Columbia
Common Stock, consistent with the terms of such
Affiliate Letters.
(ii) At least 30 days prior to the Closing Date,
Columbia shall deliver to Company a list of names and
addresses of those persons who were, in Columbia's
reasonable judgment, at the record date for its
stockholders' meeting to approve the issuance of the
Columbia Common Stock in the Merger, Affiliates of
Columbia. Columbia shall provide Company such
information and documents as Company shall reasonably
request for purposes of reviewing such list. Columbia
shall use all reasonable efforts to deliver or cause to
be delivered to Company, prior to the Closing Date,
from each of the Affiliates of Columbia identified in
the foregoing list, an Affiliate Letter in the form
attached hereto as Exhibit B.
7.11. Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in
connection with this Agreement and the transactions
contemplated hereby shall be paid by the party
incurring such expenses except as expressly provided
herein and except that (a) the filing fee in connection
with the HSR Act filing, (b) the filing fee in
connection with the filing of the Form S-4 or Proxy
Statement/Prospectus with the SEC and (c) the expenses
incurred in connection with printing and mailing the
Form S-4 and the Proxy Statement/Prospectus, shall be
shared equally by Company and Columbia.
7.12. Insurance; Indemnity. (al From and after the
Effective Time, Columbia shall indemnify, defend and
hold harmless to the fullest extent permitted under
applicable law each person who is now, or has been at
any time prior to the date hereof, an officer,
director, employee, trustee or agent of Company (or any
Subsidiary or division thereof), including, without
limitation, each person controlling any of the
foregoing persons (individually, an "Indemnifiied
Party" and collectively, the "Indemnified Parties"),
against all losses, claims, damages, liabilities, costs
or expenses (including attorneys' fees), judgments,
fines, penalties and amounts paid in settlement in
connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to acts or
omissions, or alleged acts or omissions, by them in
their capacities as such, whether commenced, asserted
or claimed before or after the Effective Time and
including, without limitation, liabilities arising
under the Securities Act, the Exchange Act and state
corporation laws in connection with the Merger. In the
event of any such claim, action, suit, proceeding or
investigation (an "Action"), (i) Columbia shall pay the
reasonable fees and expenses of counsel selected by the
Indemnified Party, which counsel shall be reasonably
acceptable to Columbia, in advance of the final
disposition of any such Action to the full extent
permitted by applicable law, upon receipt of any
undertaking required by applicable law, and (ii) the
Surviving Corporation will cooperate in the defense of
any such matter; provided, however, that Columbia shall
not be liable for any settlement effected without its
written consent (which consent shall not be
unreasonably withheld) and provided, further, that
Columbia shall not be obligated pursuant to this
Section to pay the fees and disbursements of more than
one counsel for all Indemnified Parties in any single
Action except to the extent that, in the opinion of
counsel for the Indemnified Parties, two or more of
such Indemnified Parties have conflicting interests in
the outcome of such action.
(b) Columbia shall cause the Surviving Corporation to
keep in effect provisions in its Certificate of
Incorporation and Bylaws providing for exculpation of
director and officer liability and its indemnification
of the Indemnifiied Parties to the fullest extent
permitted under the DGGL, which provisions shall not be
amended except as required by applicable law or except
to make changes permitted by law that would enlarge the
Indemnified Parties' right of indemnification.
(c) For a period of six years after the Effective Time,
Columbia shall cause to be maintained officers' and
directors' liability insurance covering the Indemnified
Parties who are currently covered, in their capacities
as officers and directors, by Company's existing
officers' and directors' liability insurance policies
on terms substantially no less advantageous to the
Indemnified Parties than such existing insurance;
provided, however, that Columbia shall not be required
in order to maintain or procure such coverage to pay an
annual premium in excess of three times the current
annual premium paid by Company for its existing
coverage (the "Cap"); and provided, further, that if
equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of
the Cap, Columbia shall only be required to obtain as
much coverage as can be obtained by paying an annual
premium equal to the Cap.
(d) Columbia shall pay all expenses, including
attorneys' fees, that may be incurred by any
Indemnified parties in enforcing the indemnity and
other obligations provided for in this Section 7.12.
(e) The rights of each Indemnified Party hereunder
shall be in addition to any other rights Indemnified
Party may have under the Certificate of Incorporation
or Bylaws of Company, under the DGCL or otherwise. The
provisions of this Section shall survive the
consummation of the Merger and expressly are intended
to benefit each of the Indemnified Parties.
7.13. Restructuring of Merger. Upon the mutual
agreement of Columbia and Company, the Merger shall be
restructured in the form of a forward subsidiary merger
of Company into Merger Sub, with Merger Sub being the
surviving corporation, or as a merger of Company into
Columbia, with Columbia being the surviving
corporation. In such event, this Agreement shall be
deemed appropriately modified to reflect such form of
merger.
7.14. Rights Agreement. Company shall take all
necessary action prior to the Effective Time to cause
the dilution provisions of that certain Rights
Agreement dated as of July 8, 1993, between Company and
First Union National Bank of North Carolina, as Rights
Agent, to be inapplicable to the Merger, without any
payment to holders of rights issued pursuant to such
Rights Agreement.
7.15. Governance. (a) Subject to approval by the
stockholders of Columbia of the amendment to Columbia's
Certificate of Incorporation referred to in Section
7.3, Columbia's Board of Directors shall take all
action necessary to cause the directors comprising the
full Board of Directors of Columbia at the Effective
Time to be increased by three directors and shall take
all such action necessary to cause R. Clayton McWhorter
to be elected as a director of Columbia for a term
expiring at the third annual meeting of stockholders
following the Effective Time, and two other members of
the present Board of Directors of Company designated by
Company and reasonably acceptable to Columbia to be
elected as directors of Columbia for terms expiring at
the first and second annual meetings of stockholders
following the Effective Time, in order to fill the
vacancies resulting from such newly created
directorships. If, prior to the Effective Time, any of
such persons shall decline or be unable to serve as a
director, Company shall designate another person to
serve in such person's stead, which person shall be
reasonably acceptable to Columbia.
(b) Richard L. Scott shall continue to be President and
Chief Executive Officer of Columbia at the Effective
Time and David T. Vandewater shall continue to be Chief
Operating Officer of Columbia at the Effective Time.
The Board of Directors of Columbia shall take all
necessary action to cause R. Clayton McWhorter to be
elected as Chairman of the Board of Columbia and Dr.
Thomas F. Frist, Jr. to be elected as Vice Chairman of
the Board of Columbia at the Effective Time. Carl F.
Pollard shall continue to be Chairman of the Executive
Committee of Columbia at the Effective Time. The Board
of Directors of Columbia shall take all necessary
action to cause R. Clayton McWhorter to be elected to
the Executive Committee of Columbia at the Effective
Time.
7.16. Pooling; Reorganization. From and after the date
hereof and until the Effective Time, neither Columbia
nor Company nor any of their respective subsidiaries or
other affiliates shall (i) knowingly take any action,
or knowingly fail to take any action, that would
jeopardize the treatment of the Merger as a "pooling of
interests" for accounting purposes; (ii) knowingly take
any action, or knowingly fail to take any action, that
would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of
the Code; or (iii) enter into any contract, agreement,
commitment or arrangement with respect to either of the
foregoing. Following the Effective Time, Columbia shall
use its best efforts to conduct its business in a
manner that would not jeopardize the characterization
of the Merger as a "pooling of interests" for
accounting purposes and as a reorganization within the
meaning of Section 368(al of the Code.
7.17. Employee Benefit Plans. As of the Closing Date,
Company shall take, or cause to be taken, all such
action as may be necessary to effect the cessation of
active participation of employees in the Company
Benefit Plans and the future accrual of benefits
thereunder. With respect to Company's retirement plans,
Company and Columbia shall mutually agree as to the
future disposition of such plans and their assets.
After the Effective Time Columbia shall provide
benefits to employees of Company and its Subsidiaries
which are substantially similar to the benefits
provided to similarly situated employees of Columbia
and its Subsidiaries. With respect to the Columbia
Benefit Plans, Columbia shall grant all employees of
Company and its Subsidiaries who become participants in
such plans after the Closing Date credit for all
service with the Company and its Subsidiaries and their
respective predecessors prior to the Closing Date for
all purposes for which such service was recognized by
Company. To the extent the Columbia Benefit Plans
provide medical or dental welfare benefits after the
Closing Date, Columbia shall cause all pre-existing
condition exclusions and actively at work requirements
to be waived and Columbia shall provide that any
expenses incurred on or before the Closing Date shall
be taken into account under the Columbia Benefit Plans
for purposes of satisfying the applicable deductible,
coinsurance and maximum out of pocket provisions for
such employees and their covered dependents.
ARTICLE 8
8. Conditions.
8.1. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to
effect the Merger shall be subject to the fulfillment
at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the transactions
contemplated hereby shall have been approved in the
manner required by applicable law or by the applicable
regulations of any stock exchange or other regulatory
body, as the case may be, by the holders of the issued
and outstanding shares of capital stock of Company and
Columbia, respectively.
(b) The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or
been terminated.
(c) Neither of the parties hereto shall be subject to
any order or injunction of a court of competent
jurisdiction which prohibits the consummation of the
transactions contemplated by this Agreement. In the
event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts
to have any such injunction lifted.
(d) The Form S-4 shall have become effective and shall
be effective at the Effective Time, and no stop order
suspending effectiveness of the Form S-4 shall have
been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing,
and all necessary approvals under state securities laws
relating to the issuance or trading of the Columbia
Common Stock to be issued to Company stockholders in
connection with the Merger shall have been received.
(e) All consents, authorizations, orders and approvals
of (or filings or registrations with) any governmental
commission, board or other regulatory body required in
connection with the execution, delivery and performance
of this Agreement shall have been obtained or made,
except for filings in connection with the Merger and
any other documents required to be filed after the
Effective Time and except where the failure to have
obtained or made any such consent, authorization,
order, approval, filing or registration would not have
a material adverse effect on the business of Columbia
and Company (and their respective Subsidiaries), taken
as a whole, following the Effective Time.
(f) Columbia and Company shall each have received from
Ernst & Young an opinion that the Merger will be
treated as a "pooling of interests" under applicable
accounting standards.
(g) The Columbia Common Stock to be issued to Company
stockholders in connection with the Merger shall have
been approved for listing on the NYSE, subject only to
official notice of issuance.
8.2. Conditions to Obligation of Company to Effect the
Merger. The obligation of Company to effect the Merger
shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) Columbia shall have performed in all material
respects its agreements contained in this Agreement
required to be performed on or prior to the Closing
Date, the representations and warranties of Columbia
and Merger Sub contained in this Agreement and in any
document delivered in connection herewith shall be true
and correct as of the Closing Date, and Company shall
have received a certificate of the President or a Vice
President of Columbia, dated the Closing Date,
certifying to such effect; provided however, that
notwithstanding anything herein to the contrary, this
Section 8.2(a) shall be deemed to have been satisfied
even if such representations or warranties are not true
and correct, unless the failure of any of the
representations or warranties to be so true and correct
would have or would be reasonably likely to have a
Columbia Material Adverse Effect.
(b) Company shall have received the opinion of Dewey
Ballantine, special counsel to Company, dated the
Closing Date, to the effect that the Merger will be
treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of
the Code, and that Company and Columbia will each be a
party to that reorganization within the meaning of
Section 368(b) of the Code.
(c) Company shall have received a "comfort" letter from
Ernst & Young, of the kind contemplated by the
Statement of Auditing Standards with respect to Letters
to Underwriters promulgated by the American Institute
of Certified Public Accountants (the "AICPA
Statement"), dated the Closing Date, in form and
substance reasonably satisfactory to Company, in
connection with the procedures undertaken by them with
respect to the financial statements of Columbia and its
Subsidiaries contained in the Form S-4 and the other
matters contemplated by the AICPA Statement and
customarily included in comfort letters relating to
transactions similar to the Merger.
(d) From the date of this Agreement through the
Effective Time, there shall not have occurred any
change in the financial condition, business, operations
or prospects of Columbia and its Subsidiaries, taken as
a whole, that would have or would be reasonably likely
to have a Columbia Material Adverse Effect, other than
as a result of changes in conditions, including
economic or political developments, applicable to the
health care industry generally.
8.3. Conditions to Obligation of Columbia and Merger
Sub to Effect the Merger. The obligations of Columbia
and Merger Sub to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the
following conditions:
(a) Company shall have performed in all material
respects its agreements contained in this Agreement
required to be performed on or prior to the Closing
Date, the representations and warranties of Company
contained in this Agreement and in any document
delivered in connection herewith shall be true and
correct as of the Closing Date, and Columbia shall have
received a certificate of the President or a Vice
President of Company, dated the Closing Date,
certifying to such effect; provided, however, that
notwithstanding anything herein to the contrary, this
Section 8.3(a) shall be deemed to have been satisfied
even if such representations or warranties are not true
and correct, unless the failure of any of the
representations or warranties to be so true and correct
would have or would be reasonably likely to have a
Company Material Adverse Effect.
(b) Columbia shall have received the opinion of Fried,
Frank, Harris, Shriver & Jacobson, special counsel to
Columbia, dated the Closing Date, to the effect that
the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of
Section 368(a) of the Code, and that Company and
Columbia will each be a party to that reorganization
within the meaning of Section 368(b) of the Code.
(c) Columbia shall have received a "comfort" letter
from Ernst & Young, of the kind contemplated by the
AICPA Statement, dated the Closing Date, in form and
substance reasonably satisfactory to Columbia, in
connection with the procedures undertaken by them with
respect to the financial statements and other financial
information of Company and its Subsidiaries contained
in the Form S-4 and the other matters contemplated by
the AICPA Statement and customarily included in comfort
letters relating to transactions similar to the Merger.
(d) From the date of this Agreement through the
Effective Time, there shall not have occurred any
change in the financial condition, business, operations
or prospects of Company and its Subsidiaries, taken as
a whole, that would have or would be reasonably likely
to have a Company Material Adverse Effect, other than
as a result of changes in conditions, including
economic or political developments, applicable to the
health care industry generally.
ARTICLE 9
9. Termination.
9.1. Termination by Mutual Consent. This Agreement may
be terminated and the Merger may be abandoned at any
time prior to the Effective Time, before or after the
approval of this Agreement by the stockholders of
Company, by the mutual consent of Columbia and Company.
9.2. Termination by Either Columbia or Company. This
Agreement may be terminated and the Merger may be
abandoned by action of the Board of Directors of either
Columbia or Company if (a) the Merger shall not have
been consummated by May 31, 1995, or (b) the approval
of Company's stockholders required by Section 8.1(a)
shall not have been obtained at a meeting duly convened
therefor or at any adjournment thereof, or (c) the
approval of Columbia's stockholders required by Section
8.1(a) shall not have been obtained at a meeting duly
convened therefor or at any adjournment thereof, or (d)
a United States federal or state court of competent
jurisdiction or United States federal or state
governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling
or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and
non-appealable; provided, that the party seeking to
terminate this Agreement pursuant to this clause (d)
shall have used all reasonable efforts to remove such
injunction, order or decree; and provided, in the case
of a termination pursuant to clause (a) above, that the
terminating party shall not have breached in any
material respect its obligations under this Agreement
in any manner that shall have proximately contributed
to the failure to consummate the Merger by May 31,
1995.
9.3. Termination by Company. This Agreement may be
terminated and the Merger may be abandoned at any time
prior to the Effective Time, before or after the
adoption and approval by the stockholders of Company
referred to in Section 8.1(a), by action of the Board
of Directors of Company, if (a) in the exercise of its
good faith judgment as to fiduciary duties to its
stockholders imposed by law, the Board of Directors of
Company determines that such termination is required by
reason of an Alternative Proposal being made, or (b)
there has been a breach by Columbia or Merger Sub of
any representation or warranty contained in this
Agreement which would have or would be reasonably
likely to have a Columbia Material Adverse Effect, or
(c) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on
the part of Columbia, which breach is not curable or,
if curable, is not cured within 30 days after written
notice of such breach is given by Company to Columbia.
9.4. Termination by Columbia. This Agreement may be
terminated and the Merger may be abandoned at any time
prior to the Effective Time, before or after the
approval by the stockholders of Columbia referred to in
Section 8.1(a), by action of the Board of Directors of
Columbia, if (a) the Board of Directors of Company
shall have withdrawn or modified in a manner materially
adverse to Columbia its approval or recommendation of
this Agreement or the Merger or shall have recommended
an Alternative Proposal to Company stockholders, or (b)
there has been a breach by Company of any
representation or warranty contained in this Agreement
which would have or would be reasonably likely to have
a Company Material Adverse Effect, or (c) there has
been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of
Company, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such
breach is given by Columbia to Company.
9.5. Effect of Termination and Abandonment.
(a) In the event that any person shall have made
an Alternative Proposal for Company and thereafter this
Agreement is terminated by either party (other than
pursuant to the breach of this Agreement by Columbia),
then Company shall promptly, but in no event later than
two days after such termination, pay Columbia a fee of
$100,000,000, which amount shall be payable by wire
transfer of same day funds. Company acknowledges that
the agreements contained in this Section 9.5(a) are an
integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Columbia
and Merger Sub would not enter into this Agreement;
accordingly, if Company fails to promptly pay the
amount due pursuant to this Section 9.5(a), and, in
order to obtain such payment, Columbia or Merger Sub
commences a suit which results in a judgment against
Company for the fee set forth in this Section 9.5(a),
Company shall pay to Columbia its costs and expenses
(including attorneys' fees) in connection with such
suit, together with interest on the amount of the fee
at the rate of 12% per annum.
(b) In the event of termination of this Agreement and
the abandonment of the Merger pursuant to this Article
9, all obligations of the parties hereto shall
terminate, except the obligations of the parties
pursuant to this Section 9.5 and Section 7.11 and
except for the provisions of Sections 10.3, 10.4, 10.6,
10.8, 10.9, 10.12, 10.13 and 10.14. Moreover, in the
event of termination of this Agreement pursuant to
Section 9.3 or 9.4, nothing herein shall prejudice the
ability of the non breaching party from seeking damages
from any other party for any breach of this Agreement,
including without limitation, attorneys' fees and the
right to pursue any remedy at law or in equity; and
provided further, that in the event Columbia has
received the fee payable under Section 9.5(a) hereof,
it shall not (i) assert or pursue in any manner,
directly or indirectly, any claim or cause of action
based in whole or in part upon alleged tortious or
other interference with rights under this Agreement
against any entity or person submitting an Alternative
Proposal or (ii) assert or pursue in any manner,
directly or indirectly, any claim or cause of action
against Company or any of its officers or directors
based in whole or in part upon its or their receipt,
consideration, recommendation, or approval of an
Alternative Proposal.
9.6. Extension; Waiver. At any time prior to the
Effective Time, any party hereto, by action taken by
its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any
of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the
representations and warranties made to such party
contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 10
10. General Provisions
10.1. Nonsurvival of Representations, Warranties and
Agreements. All representations, warranties and
agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall be deemed to
the extent expressly provided herein to be conditions
to the Merger and shall not survive the Merger,
provided, however, that the agreements contained in
Article 4, Sections 7.12, 7.15, 7.16 and 7.17 and this
Article 10 and the agreements delivered pursuant to
this Agreement shall survive the Merger.
10.2. Notices. Any notice required to be given
hereunder shall be sufficient if in writing, and sent
by facsimile transmission and by courier service (with
proof of service), hand delivery or certified or
registered mail (return receipt requested and first
class postage prepaid), addressed as follows:
If to Columbia or Merger Sub: If to Company:
Richard L. Scott R. Clayton McWhorter
President and Chairman of the Board,
Chief Executive Officer Chief Executive Officer and President
Columbia/HCA Healthcare Healthtrust, Inc. - The
Corporation Hospital Company
201 West Main Street 4525 Harding Road
Louisville, KY 40202 Nashville, Tennessee 37205
Facsimile: (502) 572-2161 Facsimile: (615) 298-6122
With copies to: With copies to:
Mr. Stephen T. Braun Mr. Philip Wheeler
Senior Vice President Senior Vice President
and General Counsel and General Counsel
Columbia/HCA Healthcare Healthtrust, Inc. - The Hospital
Corporation Company
201 West Main Street 4525 Harding Road
Louisville, KY 40201-7433 Nashville, Tennessee 37205
Facsimile: (502) 572-2163 Facsimile: (615) 298-6122
Jeffrey Bagner Morton A. Pierce
Fried, Frank, Harris, Dewey Ballantine
Shriver & Jacobson 1301 Avenue of the Americas
One New York Plaza New York, New York 10019
New York, New York 10004 Facsimile: (212) 259-6333
Facsimile: (212) 820-8586
or to such other address as any party shall specify by
written notice so given, and such notice shall be
deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3. Assignment; Binding Effect. Neither this
Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or
otherwise) without the prior written consent of the
other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for
the provisions of Article 4 and Sections 3.1, 7.12,
7.15 and 7.16 nothing in this Agreement, expressed or
implied, is intended to confer on any person other than
the parties hereto or their respective heirs,
successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or
by reason of this Agreement.
10.4. Entire Agreement. This Agreement, the Exhibits,
the Company Disclosure Letter, the Columbia Disclosure
Letter, the Confidentiality Agreement dated May 18,
1994, between Company and Columbia and any documents
delivered by the parties in connection herewith
constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties
with respect thereto. No addition to or modification of
any provision of this Agreement shall be binding upon
any party hereto unless made in writing and signed by
all parties hereto.
10.5. Amendment. This Agreement may be amended by the
parties hereto, by action taken by their respective
Boards of Directors, at any time before or after
approval of matters presented in connection with the
Merger by the stockholders of Company and Columbia, but
after any such stockholder approval, no amendment shall
be made which by law requires the further approval of
stockholders without obtaining such further approval.
This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the
parties hereto.
10.6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the
State of Delaware without regard to its rules of
conflict of laws. Each of Company and Columbia hereby
irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State
of Delaware and of the United States of America located
in the State of Delaware (the "Delaware Courts") for
any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the
laying of venue of any such litigation in the Delaware
Courts and agrees not to plead or claim in any Delaware
Court that such litigation brought therein has been
brought in an inconvenient forum.
10.7. Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of
which when so executed and delivered shall be an
original, but all such counterparts shall together
constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by
all of the parties hereto.
10.8. Headings. Headings of the Articles and Sections
of this Agreement are for the convenience of the
parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.9. Interpretation. In this Agreement, unless the
context otherwise requires, words describing the
singular number shall include the plural and vice
versa, and words denoting any gender shall include all
genders and words denoting natural persons shall
include corporations and partnerships and vice versa.
10.10. Waivers. Except as provided in this Agreement,
no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by
the party taking such action of compliance with any
representations, warranties, covenants or agreements
contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not
operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision
hereunder.
10.11. Incorporation of Exhibits. The Company
Disclosure Letter, the Columbia Disclosure Letter and
all Exhibits attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
10.12. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or
unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of
this Agreement or affecting the validity or
enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
10.13. Enforcement of Agreement. The parties hereto
agree that irreparable damage would occur in the event
that any of the provisions of this Agreement was not
performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof
in any Delaware Court, this being in addition to any
other remedy to which they are entitled at law or in
equity.
10.14. Subsidiaries. As used in this Agreement, the
word "Subsidiary" when used with respect to any party
means any corporation or other organization, whether
incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a
majority of the securities or other interests having by
their terms ordinary voting power to elect a majority
of the board of directors or others performing similar
functions with respect to such corporation or other
organization, or any organization of which such party
is a general partner. When a reference is made in this
Agreement to Significant Subsidiaries, the words
"Significant Subsidiaries" shall refer to Subsidiaries
(as defined above) which constitute "significant
subsidiaries" under Rule 405 promulgated by the SEC
under the Securities Act.
IN WITNESS WHEREOF, the parties have executed this
Agreement and caused the same to be duly delivered on
their behalf on the day and year first written above.
COLUMBIA/HCA HEALTHCARE CORPORATION
By: s/Richard L. Scott
Richard L. Scott
President and
Chief Executive Officer
ATTEST:
By: s/Stephen T. Braun
Stephen T. Braun
Secretary
COL ACQUISITION CORPORATION
By: s/Richard L. Scott
Richard L. Scott
President
ATTEST:
By: s/Stephen T. Braun
Stephen T. Braun
Secretary
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By: s/R. Clayton McWhorter
R. Clayton McWhorter
Chairman of the Board,
Chief Executive Officer
and President
ATTEST:
By: s/Philip D. Wheeler
<PAGE>
EXHIBIT A
FORM OF AFFILIATE LETTER
Columbia/HCA Healthcare Corporation
201 West Main Street
Louisville, Kentucky 40202
Ladies and Gentlemen:
I have been advised that as of the date of this letter
I may be deemed to be an "affiliate" of [Company], a
Delaware corporation ("Company"), as the term
"affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations
(the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), or (ii)
used in and for purposes of Accounting Series, Releases
130 and 135, as amended, of the Commission. Pursuant to
the terms of the Agreement and Plan of Merger dated as
of October 4, 1994 (the "Agreement"), between
Columbia/HCA Healthcare Corporation, a Delaware
corporation ("Columbia"), COL Acquisition Corporation,
a Delaware corporation and a wholly owned subsidiary of
Columbia ("Merger Sub"), and Company, Merger Sub will
be merged with and into Company (the "Merger").
As a result of the Merger, I may receive shares of
Common Stock, par value $.01 per share, of Columbia
(the "Columbia Securities") in exchange for shares
owned by me of Common Stock, par value $.001 per share,
of Company.
I represent, warrant and covenant to Columbia that in
the event I receive any Columbia Securities as a result
of the Merger:
A. I shall not make any sale, transfer or other
disposition of the Columbia Securities in violation of
the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement
and discussed the requirements of such documents and
other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the Columbia
Securities to the extent I felt necessary, with my
counsel or counsel for Company.
C. I have been advised that the issuance of Columbia
Securities to me pursuant to the Merger has been
registered with the Commission under the Act on a
Registration Statement on Form S-4. However, I have
also been advised that, since at the time the Merger
was submitted for a vote of the stockholders of
Company, I may be deemed to have been an affiliate of
Company and the distribution by me of the Columbia
Securities has not been registered under the Act, I may
not sell, transfer or otherwise dispose of the Columbia
Securities issued to me in the Merger unless (i) such
sale, transfer or other disposition has been registered
under the Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145
promulgated by the Commission under the Act, or (iii)
in the opinion of counsel reasonably acceptable to
Columbia, or pursuant to a "no action" letter obtained
by the undersigned from the staff of the Commission,
such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
<PAGE>
D. I understand that Columbia is under no obligation to
register the sale, transfer or other disposition of the
Columbia Securities by me or on my behalf under the Act
or to take any other action necessary in order to make
compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions
will be given to Columbia's transfer agents with
respect to the Columbia Securities and that there will
be placed on the certificates for the Columbia
Securities issued to me, or any substitutions therefor,
a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
BETWEEN THE REGISTERED HOLDER HEREOF AND
COLUMBIA/HCA HEALTHCARE CORPORATION, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
COLUMBIA/HCA HEALTHCARE CORPORATION "
F. I also understand that unless the transfer by me of
my Columbia Securities has been registered under the
Act or is a sale made in conformity with the provisions
of Rule 145, Columbia reserves the right to put the
following legend on the certificates issued to my
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
It is understood and agreed that the legends set forth
in paragraphs E and F above shall be removed by
delivery of substitute certificates without such legend
if such legend is not required for purposes of the Act
or this Agreement. It is understood and agreed that
such legends and the stop orders referred to above will
be removed if (i) two years shall have elapsed from the
date the undersigned acquired the Columbia Securities
received in the Merger and the provisions of Rule
145(d)(2) are then available to the undersigned, (ii)
three years shall have elapsed from the date the
undersigned acquired the Columbia Securities received
in the Merger and the provisions of Rule 145(d)(3) are
then available to the undersigned, or (iii) Columbia
has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to
Columbia, or a "no action" letter obtained by the
undersigned from the staff of the Commission, to the
effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
I further represent to and covenant with Columbia that
I will not sell, transfer or otherwise dispose of any
Columbia Securities received by me in the Merger or any
other shares of the capital stock of Columbia until
after such time as results covering at least 30 days of
combined operations of Company and Columbia have been
published by Columbia, in the form of a quarterly
earnings report, an effective registration statement
filed the Commission, a report to the Commission on
Form 10-K, 10-Q or 8-K, or any other public filing or
announcement which includes such combined results of
operations. Columbia shall notify the "affiliates" of
<PAGE>
the publication of such results. Notwithstanding the
foregoing, I understand that I will not be prohibited
from selling up to 10% of the Columbia Securities
received by me in the Merger during the aforementioned
period.
Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of
Company as described in the first paragraph of this
letter or as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or
after the date of this letter.
Very truly yours,
Name:
Accepted this day of
, 199_ by
COLUMBIA/HCA HEALTHCARE CORPORATION
By:
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF AFFILIATE LETTER
Columbia/HCA Healthcare Corporation
201 West Main Street
Louisville, Kentucky 40202
Ladies and Gentlemen:
I have been advised that as of the date of this letter
I may be deemed to be an "affiliate" of Columbia/HCA
Healthcare Corporation, a Delaware corporation
("Columbia"), as the term "affiliate" is (i) defined
for purposes of paragraphs (c) and (d) of Rule 145 of
the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as
amended (the "Act"), or (ii) used in and for purposes
of Accounting Series, Releases 130 and 135, as amended,
of the Commission. Pursuant to the terms of the
Agreement and Plan of Merger dated as of October 4,
1994 (the "Agreement"), between Columbia, COL
Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of Columbia ("Merger Sub"),
[Company], a Delaware corporation ("Company"), Merger
Sub will be merged with and into Company (the
"Merger").
I represent to and covenant with Company that I will
not sell, transfer or otherwise dispose of any shares
of Common Stock, par value $.01 per share, of Columbia
("Columbia Common Stock") that I may hold until after
such time as results covering at least 30 days of
combined operations of Company and Columbia have been
published by Columbia, in the form of a quarterly
earnings report, an effective registration statement
filed with the commission, a report to the Commission
on Form 10-K, 10-Q or 8-K, or any other public filing
or announcement which includes such combined results of
operations. Notwithstanding the foregoing, I understand
that I will not be prohibited from selling up to 10% of
the Columbia Common Stock held by me at the time of the
Merger during the aforementioned period.
Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of
Columbia as described in the first paragraph of this
letter, or as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or
after the date of this letter.
Very truly yours,
Name:
Accepted this day of
, 199_ by
Company
By:
Name:
Title:
BYLAWS
OF
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered
office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation may
also have offices at such other places both within and
without the State of Delaware as the Board of Directors
may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the
stockholders for the election of directors or for any
other purpose shall be held at such time and place,
either within or without the State of Delaware, as
shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof. In the
absence of any such designation, stockholders' meeting
shall be held at 4525 Harding Road, in the City of
Nashville, State of Tennessee.
Section 2. Annual Meetings. The Annual Meetings
of Stockholders shall be held on such date and at such
time as shall be designated from time to time by the
Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall
elect, in accordance with the Certificate of
Incorporation as amended or restated from time to time,
by a plurality vote a Board of Directors, and transact
such other business as may properly be brought before
the meeting. 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 nor more than sixty days
before the date of the meeting.
Section 3. Special Meetings. Unless otherwise
prescribed by law or by the Restated Certificate of
Incorporation of the Corporation (the "Certificate of
Incorporation"), Special Meetings of Stockholders, for
any purpose or purposes, may be called by either (i)
the Chairman, (ii) the President, (iii) any Vice
President, (iv) the Secretary or (v) any Assistant
Secretary and shall be called by any such officer at
the request in writing of a majority of the Board of
Directors or at the request in writing by one or more
stockholders holding not less than one-fifth (1/5) of
any class of equity securities of the Corporation.
Such request shall state the purpose or purposes of the
proposed meeting. 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 nor more than sixty
days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided
by law or by the Certificate of Incorporation, the
holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the
transaction of business. 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 the power to adjourn the meeting from time
to time, without notice other than announcement at the
meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a
quorum shall be present or represented, any business
may be transacted which might have been transacted at
the meeting as originally noticed. 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 entitled to vote at
the meeting.
Section 5. Voting. Unless otherwise required by
law, the certificate of Incorporation or these Bylaws,
any question brought before any meeting of stockholders
shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote
thereat. Unless otherwise required by law or the
Certificate of Incorporation, each stockholder
represented at a meeting of stockholders shall be
entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such
stockholder. Such votes may be cast in person or by
proxy but no proxy shall be voted on or after three
years form its date, unless such proxy provides for a
longer period. The Board of Directors, in its
discretion, or the officer of the Corporation presiding
at a meeting of stock holders, in his discretion, may
require that any votes cast at such meeting shall be
cast by written ballot.
Section 6. Consent of Stockholders in Lieu of
Meeting. Unless otherwise provided in the Certificate
of Incorporation, any action required or permitted to
be taken at any Annual or Special Meeting of
Stockholders of the Corporation, may be taken without a
meeting, without proper 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.
Section 7. List of Stockholders Entitled to Vote.
The officer of the Corporation who has charge of the
stock ledger of the Corporation shall prepare and make
available, at least ten days before every meeting of
stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each
stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours,
for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is
to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the
Corporation shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger,
the list required by Section 7 of this Article II or
the books of the Corporation, or to vote in person or
by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The
number of directors which shall constitute the whole
Board shall be fixed by the Certificate of
Incorporation. Subject to the Certificate of
Incorporation as amended or restated from time to time,
except as provided in Section 2 of this Article,
directors shall be elected by a plurality of the votes
cast at Annual Meetings of Stockholders, and each
director so elected shall hold office until the next
Annual Meeting for the year in which his term expires
in accordance with the terms of the Certificate of
Incorporation as amended or restated from time to time,
and until his successor is duly elected and qualified,
or until his earlier resignation or removal. Any
director may resign at any time upon notice to the
Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly
created directorships resulting from any increase in
the authorized number of directors may filled, in
accordance with the Certificate of Incorporation as
amended or restated from time to time, and the
directors so chosen shall hold office until the next
annual election for the year in which his term expires,
or such earlier time, in accordance with the terms of
the Certificate of Incorporation as amended or restated
from time to time, and until their successors are duly
elected and qualified, or until their earlier
resignation or removal.
Section 3. Duties and Powers. The business of
the Corporation shall be managed by or under the
direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the
stockholders.
Section 4. Meetings. The Board of Directors of
the Corporation may hold meetings, both regular and
special, either within or without the State of
Delaware. Regular meetings of the Board of Directors
may be held without notice at such time and at such
place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of
Directors may be called by the Chairman, the President
or any director. Notice thereof stating the place,
date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48)
hours before the date of the meeting, by telephone or
telegram on twenty-four (24) hours' notice, or on such
shorter notice as the person or persons calling such
meeting may deem necessary or appropriate in the
circumstances.
Section 5. Quorum. Except as may be otherwise
specifically proved by law, the Certificate of
Incorporation or these Bylaws, at all meetings of the
Board of Directors, a majority of the entire Board of
Directors shall constitute a quorum for the transaction
of business and the act of a majority of the directors
present at any meeting at which there is a quorum shall
be the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn
the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall
be present.
Section 6. Actions of the Board. Unless
otherwise provided by the Certificate of Incorporation
or these Bylaws, any action required or permitted to be
taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting,
if all the members of the Board of Directors or
committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference
Telephone. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, members
of the Board of Directors of the Corporation, or any
committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or
similar communications equipment by means of which all
persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this
Section 7 shall constitute presence in person at such
meeting.
Section 8. Committees. The Board of Directors
may, be resolution passed by a majority of the entire
Board of Directors, designate one or more committees,
each committee to consist of one or more of the
directors of the Corporation. The Board of Directors
may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of any such
committee. In the absence or disqualification of a
member of a committee, and in the absence of a
designation of the Board of Directors of an alternate
member to replace the absent or disqualified member,
the member or members thereof present at any meeting
and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting
in the place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have
and may exercise all the powers and authority of the
Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of
Directors when required.
The Executive Committee shall have and may
exercise all the powers and authority of the Board of
Directors during the intervals between the meetings of
the Board of Directors, including the power and
authority to declare a dividend and to authorize the
issuance of stock options and stock, subject only to
such limitations as may be provided by applicable law,
these bylaws, or resolutions of the Board of Directors.
A majority of the members of the Executive Committee
shall constitute a quorum.
Section 9. Compensation. The directors may be
paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board
of Directors or a stated salary as director. No such
payment shall preclude any director from serving the
Corporation in any other capacity and receiving
compensation therefor. Members of special or standing
committees may be allowed like compensation for
attending committee meetings.
Section 10. Interested Directors. No contract or
transaction between the Corporation and one or more of
its directors or officers, or between the Corporation
and any other corporation, partnership, association, or
other organization in which one or more of its
directors or officers are directors of officers, or
have a financial interest, shall be void or voidable
solely for this reason, or solely because the director
or officer is present at or participates in the meeting
of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose
if (i) the material facts as to his or their
relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors
or committee in good faith authorized the contract or
transaction by the affirmative votes of a majority of
the disinterested directors, even though the
disinterested directors may be less than a quorum; (ii)
the material facts as to his or their relationship or
interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction are
disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in
determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the
Corporation shall be chosen by the Board of Directors
and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also
choose a Chairman of the Board of Directors (who must
be a director) and one or more Vice-Presidents,
Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the
same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these Bylaws. The
officers of the Corporation need not be stockholders of
the Corporation nor, except in the case of the Chairman
of the Board of Directors, need such officers be
directors of the Corporation.
Section 2. Election. The Board of Directors at
its first meeting held after each Annual Meeting of
Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms
and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board
of Directors; and all officers of the Corporation shall
hold office until their successors are chosen and
qualified, or until their earlier resignation or
removal. Any officer elected 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 salaries of all
officers of the Corporation shall be fixed by the Board
of Directors.
Section 3. Voting Securities Owned by the Corporation.
Powers of attorney, proxies, waivers of notice of
meeting, consents and other instruments relating to
securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the
President or any Vice-President and any such officer
may, in the name of and on behalf of the Corporation,
take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting
of security holders of any corporation in which the
Corporation may own securities and at any such meeting
shall possess and may exercise any and all rights and
power incident to the ownership of such securities and
which, as the owner thereof, the Corporation might have
exercised and possessed if present. The Board of
Directors may, be resolution, from time to time confer
like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors.
The Chairman of the Board of Directors shall preside at
all meetings of the stockholders and of the Board of
Directors. He shall be the Chief Executive Officer of
the Corporation, and except where by law the signature
of the President is required, the Chairman of the Board
of Directors shall possess the same power as the
President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized
by the Board of Directors. During the absence or
disability of the President, the Chairman of the Board
of Directors shall exercise all the powers and
discharge all the duties of the President. The
Chairman of the Board of Directors shall also perform
such other duties and may exercise such other powers as
from time to time may be assigned to him by these
Bylaws or by the Board of Directors.
Section 5. President. The President shall,
subject to the control of the Board of Directors and
the Chairman of the Board of Directors, have general
supervision of the business of the Corporation and
shall see that all orders and resolutions of the Board
of Directors are carried into effect. He shall execute
all bonds, mortgages, contracts and other instruments
of the Corporation requiring a seal, under the seal of
the Corporation, except where required or permitted by
law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and
execute documents when so authorized by these Bylaws,
the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of
Directors, the President shall preside at all meetings
of the stockholders and the Board od Directors. If
there be no Chairman of the Board of Directors, the
President shall be the Chief Executive Officer of the
Corporation. The President shall also perform such
other duties and may exercise such other powers as from
time to time may be assigned to him by these Bylaws or
by the Board of Directors.
Section 6. Vice-Presidents. At the request of
the President or in his absence or in the event of his
inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice-President
or the Vice-Presidents if there is more than one (in
the order designated by the Board of Directors) shall
perform the duties of the President, and when so
acting, shall have all the powers of and be subject to
all the restrictions upon the President. Each
Vice-President shall perform such other duties and have
such other powers as the Board of Directors from time
to time may prescribe. If there be no Chairman of the
Board of Directors and no Vice-President, the Board of
Directors shall designate the officer of the
Corporation who, in the absence of the President or in
the event of the inability or refusal of the President
to act, shall perform the duties of the President, and
when so acting, shall have all the powers of and be
subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend
all meetings of the Board of Directors and all meetings
of stockholders and record all the proceedings thereat
in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the
standing committees when required. The Secretary shall
give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President,
under whose supervision he shall be. If the Secretary
shall be unable or shall refuse to cause to be given
notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no
Assistant Secretary, then either the Board of Directors
or the President may choose another officer to cause
such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the
Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be
attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other
officer to affix the seal of the Corporation and to
attests the affixing by his signature. The Secretary
shall see that all books, reports, statements,
certificates and other documents and records required
by law to be kept or filed are properly kept or filed,
as the case may be.
Section 8. Treasurer. The Treasurer shall have
the custody of the corporate funds and securities and
shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such
depositories as may be designated by the Board of
directors. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such
disbursements, and shall render to the President and
the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board
of Directors, the Treasurer shall give the Corporation
a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the
faithful performance of the duties of 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.
Section 9. Assistant Secretaries. Except as may
be otherwise provided in these Bylaws, Assistant
Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be
assigned to them by the Board of Directors, the
President, the Vice-President, or the Secretary, and in
the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties
of the Secretary, and when so acting, shall have all
the powers of and be subject to all the restrictions
upon the Secretary.
Section 10. Assistant Treasurers. Assistant
Treasurers, if there be any, shall perform such duties
and have such powers as form time to time may be
assigned to them by the Board of Directors, the
President, any Vice-President, or the Treasurer, and in
the absence of the Treasurer or in the event of his
disability or refusal to act, shall perform the duties
of the Treasurer, and when so acting, shall have all
the powers of and be subject to all the restrictions
upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of
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.
Section 11. Other Officers. Such other officers
as of the Board of Directors may choose shall perform
such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The
Board of Directors may delegate to any other officer of
the Corporation the power to choose such other officers
and to prescribe their respective duties and powers.<PAGE>
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of
stock in the Corporation shall be entitled to have a
certificate signed, in the name of the Corporation (i)
by the Chairman of the Board of Directors, the
President or a Vice-President and (ii) by the Treasurer
or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is
countersigned by (i) a transfer agent other than the
Corporation or its employee, or (ii) a registrar other
than the Corporation or its employee, any other
signature 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
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.
Section 3. Lost Certificates. The Board of
Directors may direct a new certificate to be issued in
place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact
by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue
of a new certificate, the Board of Directors may, in
its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as
the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against
the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation
shall be transferable in the manner prescribed by law
and in these Bylaws. Transfers of stock shall be made
on the books of the Corporation only by the person
named in the certificate or by his attorney lawfully
constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a
new certificate shall be issued.
Section 5. Record Date. 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 entitled 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 days 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 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.
Section 6. Beneficial Owners. The Corporation
shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person
registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the
part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise
provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is
required by law, the Certificate of Incorporation or
these Bylaws, to be given to any director, member of a
committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee
or stockholder, at 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. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any
notice is required by law, the Certificate of
Incorporation or these Bylaws, a written waiver, signed
by the person entitled to notice, whether before or
after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because
the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the
purpose of any regular or special meeting of the
stockholders, directors, or members of a committee of
directors need be specified in any written waiver of
notice unless so required by the Certificate of
Incorporation or these Bylaws.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital
stock of the Corporation, subject to the provisions of
the Certificate of Incorporation, may be declared by
the Board of Directors at any regular or special
meeting, and may be paid in cash, in property or in
shares of the capital stock of the Corporation. Before
payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends
such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or
abolish any such reserve.
Section 2. Disbursements. All checks or demands
for money and notes of the Corporation shall be signed
by such officer or officers or such other person or
persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board
of Directors.
Section 4. Corporation Seal. The Corporation
shall have no seal, and any instruments or documents
upon which a seal might be imprinted will have the same
legal efficacy as if there were a corporate seal
imprinted thereon, as executed by duly authorized
officers of the Corporation.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits
or Proceedings other Than Those by or in the Right of
the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who
was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right
of the Corporation) by reason of the fact that he is or
was a director, officer, employee or agent of the
Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in
good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits
or Proceedings by or in the Right of the Corporation.
Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any
threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the
Corporation, or is or was a director or officer of the
Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against
expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the
defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests
of the Corporation; except that no indemnification
shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent
that the Court of Chancery sitting in the State of
Delaware or the court in which such action or suit was
brought shall determine upon application that, despite
the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses
which the Court of Chancery sitting in the State of
Delaware or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered
by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination
that indemnification of the director, officer, employee
or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the
case may be. Such determination shall be made (i) by
the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such
action, suit or proceeding, (ii) if such a quorum is
not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent
legal counsel in a written opinion or (iii) by the
stockholders. To the extent, however, that a director,
officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in
connection therewith, without the necessity of
authorization in the specific case.
Section 4. Good Faith Defined. For purposes of
any determination under Section 3 of this Article VIII,
a person shall be deemed to have acted in good faith
and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, or,
with respect to any criminal action or proceeding, to
have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or
books of account of the Corporation or another
enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another
enterprise or on information or records given or
reports made to the Corporation or another enterprise
by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care
by the Corporation or another enterprise. The term
"another enterprise" as used in this Section 4 shall
mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at
the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4
shall not be deemed to be exclusive or to limit in any
way the circumstances in which a person may be deemed
to have met the applicable standard of conduct set
forth in Sections 1 or 2 of this Article VIII, as the
case may be.
Section 5. Indemnification by a Court.
Notwithstanding any contrary determination in the
specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination
thereunder, any director, officer, employee or agent
may apply to any court of competent jurisdiction in the
State of Delaware for indemnification to the extent
otherwise permissible under Sections 1 and 2 of this
Article VIII. The basis of such indemnification by a
court shall be a determination by such court that
indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met
the applicable standards of conduct set forth in
Sections 1 or 2 of this Article VIII, as the case may
be. Neither a contrary determination in the specific
case under Section 3 of this Article VIII nor the
absence of any determination thereunder shall be a
defense to such application or create a presumption
that the director, officer, employee or agent seeking
indemnification has not met any applicable standard of
conduct. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such
application. If successful, in whole or in part, the
director, officer, employee or agent seeking
indemnification shall also be entitled to be paid the
expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses
incurred by a director or officer in defending or
investigating a threatened or pending action, suit or
proceeding shall be paid by the Corporation in advance
of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on
behalf of such director, officer, employee or agent to
repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the
Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and
Advancement of Expenses. The indemnification and
advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of
any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any
provision of the Certificate of Incorporation or any
Bylaw, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction
(howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity
while holding such office, it being the policy of the
Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII but
whom the Corporation has the power or obligation to
indemnify under the provisions of the General
Corporation Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may
purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of
the Corporation, or is or was a director or officer of
the Corporation serving at the request of the
Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise
against any liability asserted against him and incurred
by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would
have the power or the obligations to indemnify him
against such liability under the provisions of this
Article VIII.
Section 9. Certain Definitions. For purposes of
this Article VIII, references to "the Corporation"
shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a
consolidation or merger which, if its separate
existence had continued, would have had power and
authority to indemnify its directors, officers,
employees or agents, so that any person who is or was a
director, officer, employee or agent of such
constituent corporation, or is or was a director or
officer of such constituent corporation serving at the
request of such constituent corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit
plan or other enterprise, shall stand in the same
position under the provisions of this Article VIII with
respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation
if its separate existence had continued. For purposes
of this Article VIII, references to "fines" shall
include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to
"serving at the request of the Corporation" shall
include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee
or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted
in good faith and in a manner he reasonably believed to
be in the interest of the participants and
beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the
best interests of the Corporation" as referred to in
this Article VIII.
Section 10. Survival of Indemnification and
Advancement of Expenses. The indemnification and
advancement of expenses provided by, or granted
pursuant to, this Article VIII shall, unless otherwise
provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE IX
AMENDMENTS
Section 1. These Bylaws may be altered, amended
or repealed, in whole or in part, or new Bylaws may be
adopted by the stockholders or by the Board of
Directors; provided, however, that notice of such
alteration, amendment, repeal or adoption of new Bylaws
be contained in the notice of such meeting of
stockholders or Board of Directors as the case may be.
All such amendments must be approved by either the
holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire
Board of Directors then in office.
Section 2. Entire Board of Directors. As used in
this Article IX and in these Bylaws generally, the term
"entire Board of Directors" means the total number of
directors which the Corporation would have if there
were no vacancies.
<PAGE>
AMENDMENT TO THE BYLAWS
OF
Healthtrust, Inc. - The Hospital Company
I.
Delete in its entirety Article IV, Section 1
entitled, "General," and substitute in lieu thereof the
following:
The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a
Secretary and a Treasurer. The Board of Directors, in
its discretion, may also choose a Chairman of the Board
of directors (who must be a director) and one or more
Vice-Presidents, (one or more of whom may be designated
as Senior Vice-President), Assistant Secretaries,
Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of
Incorporation or these Bylaws. The officers of the
Corporation need not be stockholders of the Corporation
nor, except in the case of the Chairman of the Board of
Directors, need such officers be directors of the
Corporation.
II.
Delete in its entirety Article IV, Section 6
entitled "Vice-Presidents," and substitute in lieu
thereof the following:
At the request of the President or in his absence
or in the event of his inability or refusal to act (and
if there be no Chairman of the Board of Directors), the
Senior Vice-President or the Senior Vice-Presidents if
there is more than one, or the Vice-President or the
Vice-Presidents if there is more than one (in the order
designated by the Board of Directors) shall perform the
duties of the President, and when so acting, shall have
all the powers of and be subject to all the
restrictions upon the President. Each Vice-President
shall perform such other duties and have such other
powers as the Board of Directors from time to time may
prescribe. If there be no Chairman of the Board of
Directors, no Senior Vice-President, and no
Vice-President, the Board of Directors shall designate
the officer of the Corporation who, in the absence of
the President or in the event of the inability or
refusal of the President to act, shall perform the
duties of the President, and when so acting, shall have
all the powers of and be subject to all the
restrictions upon the President.
III.
This Amendment is effective October 10, 1990.
IV.
In all other respects, said Bylaws are ratified.<PAGE>
AMENDMENT TO THE BYLAWS
OF
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
I.
Add to the end of Section I, Article III entitled
"Number and Election of Directors" the following
sentences:
"No person who shall have attained the age of 72
years shall be eligible for election as a Director of
the Corporation. Any person elected a Director prior
to age 72 shall retire at the next Annual Meeting of
the Shareholders after attaining that age, provided,
however, that any person serving as a Director on the
date of the adoption of this Bylaw provision shall be
entitled to serve out the remainder of his term."
II.
This Amendment is effective April 10, 1992.
III.
In all other respects, said Bylaws are ratified.<PAGE>
AMENDMENT TO THE BYLAWS
OF
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
I.
Amend the last two sentences of Section 1, Article
III entitled "Number and Election of Directors" to read
as follows:
No person who shall have attained the age of 72
years shall be eligible for election as a Director of
the Corporation. Any person elected a Director prior
to age 72 shall retire at the next Annual Meeting of
the Shareholders after attaining that age, provided,
however, than any person serving as a Director on April
10, 1992 shall not be subject to any such age
limitation contained in these Bylaws.
II.
This Amendment is effective November 1, 1994.
III.
In all other respects, said Bylaws are ratified.
[EXECUTION COPY]
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY AGREEMENT (this "Guaranty"),
dated as of April 28, 1994, made by each of the
undersigned Subsidiaries (as defined below) of
HEALTHTRUST, INC. - THE HOSPITAL COMPANY, a Delaware
corporation (the "Company") and any Subsidiary of the
Company that after the date hereof executes an
acknowledgment to this Guaranty substantially in the
form of Exhibit A hereto (each such undersigned and
other Subsidiary being referred to individually as a
"Guarantor" and collectively as the "Guarantors"), in
favor of and for the benefit of THE BANK OF NOVA SCOTIA
("Scotiabank"), as collateral agent for and
representative of the Guarantied Parties (as defined
below) (in such capacity, together with any successor,
or other representative for the Guarantied Parties
being collectively referred to herein as the
"Collateral Agent"). Capitalized terms used herein
without definition shall have the same meanings herein
as set forth in the Credit Agreement referred to below.
W I T N E S S E T H
WHEREAS each Guarantor is a direct or indirect
wholly-owned Subsidiary (other than a JV Subsidiary) of
the Company; and
WHEREAS, the Company has heretofore entered into a
certain Credit Agreement, dated as of September 29,
1992 (as amended, modified or amended and restated or
otherwise modified to the date hereof, the "1992 Credit
Agreement") with the financial institutions parties
thereto, Scotiabank, ABN AMRO Bank N.V., Bank of
America National Trust and Savings Association, The
Chase Manhattan Bank, N.A., Citibank, N.A., Continental
Bank N.A., Deutsche Bank A.G., New York Branch, LTCB
Trust Company, Swiss Bank Corporation, and The
Toronto-Dominion Bank, as co-agents and Scotiabank, as
administrative agent for the lenders; and
WHEREAS, pursuant to a Credit Agreement, dated as of
April 28, 1994 (together with all amendments and other
modifications, if any, from time to time thereafter
made thereto, the "Credit Agreement"), among the
Company, the various financial institutions
(individually a "Lender" and collectively the
"Lenders") as are, or may from time to time become,
parties thereto, Scotiabank and ABN AMRO Bank, N.V.,
Bank of America National Trust and Savings Association,
The Chase Manhattan Bank, N.A., Chemical Bank, Citicorp
USA, Inc., Continental Bank N.A., Deutsche Bank AG, New
York Branch, First Union National Bank of North
Carolina, General Electric Capital Corporation, The
Industrial Bank of Japan, Limited, New York Branch, The
Long-Term Credit Bank of Japan, Limited, New York
Branch, NationsBank of Tennessee, N.A., Swiss Bank
Corporation, San Francisco Branch, Third National Bank
in Nashville, and The Toronto-Dominion Bank, as
co-agents, and Scotiabank, as administrative agent, the
Lenders have agreed to refinance all amounts
outstanding or otherwise due under the 1992 Credit
Agreement and have extended commitments to make Credit
Extensions to the Company; and
WHEREAS, the Company has and may hereafter from time to
time enter into arrangements designed to protect the
Company against fluctuations in interest rates (such
arrangements (if any) which are entered into with one
or more Lenders or which have been entered into with
one or more lenders under the 1992 Credit Agreement
(collectively, the "Interest Rate Exchangers", and
together with the Lenders, collectively, the
"Guarantied Parties") being collectively referred to
herein as the "Interest Rate Aqreements"); and
WHEREAS, as a condition precedent to the making of the
initial Credit Extensions under the Credit Agreement,
each Guarantor is required to execute and deliver this
Guaranty; and
WHEREAS, each Guarantor has duly authorized the
execution, delivery and performance of this Guaranty;
and
WHEREAS, each Guarantor will derive substantial direct
and indirect benefits from the Credit Extensions made
from time to time to the Company pursuant to the Credit
Agreement and the entering into of Interest Rate
Agreements with Interest Rate Exchangers, which
benefits are hereby acknowledged, and each Guarantor,
accordingly, desires to enter into this Guaranty in
order to satisfy the condition precedent described in
the foregoing recital;
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration,
the receipt of which is hereby acknowledged, each
Guarantor hereby agrees as follows:
A G R E E M E N T :
Guarantors hereby, jointly and severally,
unconditionally and irrevocably guarantee as primary
obligors and not merely as sureties the prompt payment
in full when due, whether at stated maturity, by
acceleration, demand or otherwise (including, without
limitation, obligations that would become due but for
the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. 362(a)) (a)
to the Lenders, of Obligations of the Company and (b)
to each Interest Rate Exchanger, if any, of all
obligations of the Company owing to such Interest Rate
Exchanger under any Interest Rate Agreement whether, in
the case of clauses (a) and (b), now existing or
hereafter arising, whether, in each case, for
principal, premium, interest (including, without
limitation, interest that, but for the filing of a
petition in bankruptcy with respect to the Company
would accrue on such obligations, whether or not a
claim is allowed against the Company for interest in
any such proceeding), payments for early termination,
fees, expenses or otherwise (all such liabilities and
obligations described in the foregoing clauses (a) and
(b) being the "Guarantied Obligations" provided,
however, that the guarantee made under this Guaranty
shall be effective as to (i) any obligations
refinancing all or any portion of the Obligations under
the Credit Agreement only if the holders of such
obligations or their representative shall have executed
an acknowledgment to this Guaranty substantially in the
form of Exhibit C hereto acknowledged by each
Guarantor, (ii) any Interest Rate Obligations only if
the Interest Rate Exchanger to whom such Interest Rate
Obligations are owed shall have executed and delivered
an acknowledgment to this Guaranty substantially in the
form of Exhibit C hereto acknowledged by each Guarantor
and (iii) EPIC and its Subsidiaries only from and after
the 90th day following the Closing Date.
Anything contained in this Guaranty to the contrary
notwithstanding if the transactions contemplated hereby
would be usurious under applicable law, then, in that
event, it is agreed that the aggregate of all that is
taken, reserved, contracted for, charged or received
under this Guaranty shall under no circumstances exceed
the maximum amount of interest allowed by applicable
law. If under any circumstances the Guarantied Parties
should ever receive as interest an amount that would
exceed the highest lawful rate, then such amount that
would be excessive interest shall be applied to the
reduction of the principal amount owing under the
Credit Agreement and not to the payment of interest.
In addition, the liability of each Guarantor under this
Guaranty shall not exceed the greater of (a) the net
value of the benefits realized by such Guarantor
(including the value of the benefits realized by the
subsidiaries of such Guarantor) as of the Ending Date
(as defined in Exhibit B hereto) from Credit Extensions
and (b) the Maximum Guaranty Amount (as defined in
Exhibit B hereto) for such Guarantor determined as of
the Ending Date (such limitation being the "Net Worth
Cap").
Each Guarantor agrees that the Guarantied Obligations
may be extended or renewed, in whole or in part,
without notice or further assent from it, that such
Guarantor will remain bound upon this Guaranty
notwithstanding any extension, renewal or other
alteration of any Guarantied Obligation and that the
guaranty herein made shall apply to the Guarantied
Obligations as so amended, renewed or altered.
Each Guarantor waives notice of acceptance of this
Guaranty and notice of any liability to which it may
apply, and waives presentation of, demand of, and
protest of any of the Guarantied Obligations and also
waives notice of protest for nonpayment.
The obligations of each Guarantor under this Guaranty
are absolute and unconditional and shall not be
impaired by:
(a) the failure of any Guarantied Party to assert any
claim or demand or to enforce any right or remedy
against the Company under the provisions of the Credit
Agreement, any other Loan Document or any other
agreement or otherwise;
(b) any extension, renewal or other alteration of any
provision thereof;
(c) any rescission, waiver, amendment or modification
of any of the terms or provisions of the Credit
Agreement, any other Loan Document or any instrument or
agreement executed pursuant thereto;
(d) the Guarantied Obligations, or any agreement
relating thereto at any time being found to be illegal,
invalid or unenforceable in any respect;
(e) the failure of any Guarantied Party to exercise
any right or remedy against any other guarantor of any
of the Guarantied Obligations;
(f) the sale, exchange, release, surrender,
realization upon, failure to perfect with respect to or
otherwise deal with in any manner and in any order any
property by whomsoever at any time pledged or mortgaged
to secure, or howsoever securing, the Guarantied
Obligations or any liabilities (including any of those
hereunder) incurred directly or indirectly in respect
thereof or hereof or any offset there-against;
(g) the settlement or compromise of any of the
Guarantied Obligations, any security therefor or any
liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, or
any subordination of the payment of all or any part
thereof to the payment of any liability (whether due or
not) of the Company to creditors of the Company other
than Guarantied Parties and Guarantors;
(h) application of any sums by whomsoever paid or
h~wsoever realized to any liability or liabilities of
the Company to the Guarantied Parties regardless of
what liability or liabilities of the Company remain
unpaid; or
(i) the act or failure to act in any manner referred
to in this Guaranty which may deprive any Guarantor of
its right to subrogation against the Company to recover
full indemnity for any payments made pursuant to this
Guaranty.
Each Guarantor further agrees that this Guaranty
constitutes a guaranty of payment when due and not of
collection and waives any right to require that any
resort be had by any Guarantied Party to any of the
security held for payment of any of the Guarantied
Obligations or to any balance of any deposit account or
credit on the books of any Guarantied Party in favor of
the Company or any other Person.
Except as expressly limited by the second paragraph of
this Guaranty and the Net Worth Cap, the obligations of
each Guarantor under this Guaranty shall not be subject
to any reduction, limitation, impairment, or
termination for any reason, including, without
limitation, any claim of waiver, release, surrender,
alteration or compromise of any of the Guarantied
Obligations, and shall not be subject to any defense or
setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or
unenforceability of any of the Guarantied Obligations
or any discharge of the Company from any of the
Guarantied Obligations in a bankruptcy or similar
proceeding or otherwise. Without limiting the
generality of the foregoing, the obligations of each
Guarantor under this Guaranty shall not be discharged
or impaired or otherwise affected by the failure of any
Guarantied Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any
other Loan Document, or any other agreement, by any
waiver or modification of any thereof, by any default,
waiver or delay, or by any other act or thing or
omission or delay to do any other act or thing that may
or might in any manner or to any extent vary the risk
of any Guarantor or that would otherwise operate as a
discharge of any Guarantor as a matter of law or
equity.
Each Guarantor assumes all responsibility for being and
keeping itself informed of the condition (financial or
otherwise) and assets of the Company and its
Subsidiaries, and of all other circumstances bearing
upon the risk of nonpayment of the indebtedness and the
nature, scope and extent of the risks which such
Guarantor assumes and incurs hereunder, and agrees that
no Guarantied Party shall have any duty to advise
Guarantor of information known to any of them regarding
such circumstances or rlsks.
Each Guarantor further agrees that this Guaranty shall
continue to be effective or be reinstated, as the case
may be, if at any time any payment, or any part
thereof, of principal of, interest on or any other
amount with respect to any Guarantied Obligations is
rescinded or must otherwise be restored by any
Guarantied Party upon the bankruptcy or reorganization
of the Company, any other Person or otherwise.
Each Guarantor further agrees, in furtherance of the
foregoing and not in limitation of any other right that
any Guarantied Party may have at law or in equity
against such Guarantor by virtue hereof, upon the
failure of the Company to pay any of the Guarantied
Obligations when and as the same shall become due,
whether by required prepayment, declaration or
otherwise (including amounts that would become due but
for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. 362(a)), such
Guarantor will, subject to the second paragraph of this
Guaranty and to the Net Worth Cap, forthwith pay, or
cause to be paid, in cash, to Collateral Agent for the
ratable benefit of Guarantied Parties, an amount equal
to the sum of the unpaid principal amount of such
Guarantied Obligations then due as aforesaid, accrued
and unpaid interest on sucn Guarantied Obligations
(including, without limitation, interest that, but for
the filing of a petition in bankruptcy with respect to
the Company, would have accrued on such Guarantied
Obligations, whether or not a claim is allowed against
the Company for such interest in any such bankruptcy
proceeding) and all other Guarantied Obligations then
owed to Guarantied Parties as aforesaid. All such
payments shall be applied promptly, from time to time,
by Collateral Agent:
first, to the payment of the costs and expenses of any
collection or other realization under this Guaranty,
including reasonable compensation to Collateral Agent
as it may be entitled thereto under the tenms of the
Loan Documents and its agents and counsel, and all
reasonable expenses, liabilities and advances made or
incurred by Collateral Agent in connection therewith;
second, after payment in full of the amounts specified
in the preceding subparagraph, to the ratable payment
of all other Guarantied Obligations; and
third, after payment in full of all Guarantied
Obligations, to such Guarantor, or its successors or
assigns, or to whomsoever may be lawfully entitled to
receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining
from such payments.
Each Guarantor further agrees that any rights of
subrogation such Guarantor may have against the Company
or against any collateral or security, and any rights
of contribution such Guarantor may have against the
Company or against any collateral or security, and any
rights of contribution such Guarantor may ha~e against
any other guarantor, shall be junior and subordinate to
any rights any Guarantied Party may have against the
Company, to all right, title and interest any
Guarantied Party may have in any such collateral or
security, and to any right any Guarantied Party may
have against such other guarantor. Collateral Agent,
on behalf of Guarantied Parties, may use, sell or
dispose of any item of collateral or security as it
sees fit without regard to any surrogation rights
arising out of this Guaranty such Guarantor may have,
and upon any such disposition or sale any rights of
subrogation such Guarantor may have shall terminate. If
any amount shall be paid to such Guarantor on account
of such subrogation rights at any time when all
Guarantied Obligations shall not have been paid in
full, such amount shall be held in trust for Collateral
Agent on behalf of Guarantied Parties and shall
forthwith be paid over to Collateral Agent for the
benefit of Guarantied Parties to be credited and
applied against the Guarantied Obligations, whether
matured or unmatured, in accordance with the terms of
the Credit Agreement or any applicable Loan Document.
No delay or omission by any Guarantied Party in the
exercise of any right under this Guaranty shall impair
any such right, nor shall it be construed to be a
waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or
further exercise of any other right.
Anything contained in this Guaranty to the contrary
notwithstanding, no Guarantied Party shall be entitled
to take any action whatsoever to enforce any term or
provision of this Guaranty except through the
Collateral Agent in accordance with the terms of the
Credit Aqreement.
No amendment, modification or waiver to this Guaranty
shall be binding (i) on the Collateral Agent without
the written consent of the Collateral Agent or (ii) on
any Guarantor without the written consent of such
Guarantor. No waiver of any single breach or default
under this Guaranty shall be deemed a waiver of any
other breach or default.
This Guaranty is a continuing guaranty and shall be
binding upon each Guarantor and its successors and
assigns and shall inure to the benefit of the
successors and assigns of Guarantied Parties and, in
the event of any transfer or assignment of rights by
any Guarantied Party, the rights and privileges herein
conferred upon that Guarantied Party shall
automatically extend to and be vested in such
transferee or assignee, all subject to the terms and
conditions hereof; provided, that if (a) a Permitted
Disposition occurs and the assets subject to such
Permitted Disposition are Securities owned by the
Company in a Guarantor and, after giving effect to such
Permitted Disposition, such Guarantor ceases to be a
Subsidiary of the Company, (b) the corporate existence
of a Guarantor is terminated in accordance with the
Credit Agreement or (c) a Guarantor becomes a JV
Subsidiary, then in the case of clauses (a), (b) and
(c), the obligations of any such Guarantor under this
Guaranty shall be deemed terminated upon the occurrence
of such Permitted Disposition or termination or upon
the occasion of such Guarantor becoming a JV
Subsidiary, as the case may be. Upon the termination
of the obligation of any Guarantor under this Guaranty,
in accordance with the provisions of the preceding
sentence, the Collateral Agent will, upon the reguest
of the Company, execute and deliver to the Company such
instruments as may be reasonably requested by the
Company to evidence such termination.
In addition to any rights now or hereafter granted
under applicable law (including, without limitation,
Section 151 of the New York Debtor and Creditor Law)
and not by way of limitation of any such rights, upon
the occurrence of an Event of Default, each Guarantied
Party is hereby authorized at any time or from time to
time, without notice to any Guarantor or to any other
Person, any such notice being expressly waived, to set
off and to appropriate and apply any and all deposits
(general or special) and any other indebtness at any
time held or owing by such Guarantied Party to or for
the credit or the account of a Guarantor, against and
on account of the obligations and liabilities of such
Guarantor to such Guarantied Party under this Guaranty,
irrespective of whether or not such Guarantied Party
shall have made any demand hereunder and although said
obligations, liabilities, deposits or claims, or any of
them, shall be contingent or unmatured.
This Guaranty is the independent and several obligation
of each Guarantor and may be enforced against each
Guarantor separately, whether or not enforcement of any
right or remedy hereunder has been sought against any
other Guarantor.
THIS GUARANTY, AND ANY INSTRUNENT OR AGREEMENT REQUIRED
HEREUNDER, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR
WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORK AND, BY EXECUTION AND DELIVERY OF
THIS GUARANTY, EACH GUARANTOR ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WRITE THIS
GUARANTY. EACH GUARANTOR HEREBY DESIGNATES AND
APPOINTS DEWEY BALLANTINE, 1301 AVENUE OF THE AMERICAS,
NEW YORK, NEW YORK 10019, ATTENTION: MORTON A.
PIERCE, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE
SELECTED BY SUCH GUARANTOR IRREVOCABLY AGREEING IN
WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS
BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS
IN SUCH COURT, SUCH SERVICE BEING EEREBY ACKNOWLEDGED
BY EACH SUCH GUARANTOR TO BE EPFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS
SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
GUARANTORS AT THE ADDRESS PROVIDED IN THE APPLICABLE
SIGNATURE PAGE HERETO EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH
COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. IF ANY AGENT APPOINTED BY A GUARANTOR REFUSES
TO ACCEPT SERVICE, SUCH GUARANTOR EEREBY AGREES THAT
SERVICE UPON IT BY REGISTERED MAIL SHALL CONSTITUTE
SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF ANY GUARANTIED PARTY
OTHERWISE SO ENTITLED TO BRING PROCEEDINGS AGAINST ANY
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
EACH OF THE PARTIES TO THIS GUARANTY HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING
TO THIS GUARANTY, THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. The scope
of this waiver is intended to be all encompassing of
any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction,
including, without limitation, contract claims, tort
claims, breach of duty claims and all other common law
and statutory claims. Each Guarantor and, by its
acceptance of the benefits hereof, the Collateral Agent
each (i) acknowledges that this waiver is a material
inducement for Guarantor and the Collateral Agent to
enter into a business relationship, that Guarantor and
Collateral Agent have already relied on this waiver in
entering into this Guaranty or accepting the benefits
thereof, as the case may be, and that each will
continue to rely on this waiver in their related future
dealings and (ii) further warrants and represents that
each has reviewed this waiver with its legal counsel
and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel.
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY. In the
event of litigation, this Guaranty may be f iled as a
written consent to a trial by the court.
IN WITNESS WHEREOF, the parties hereto have caused this
Guaranty to be executed as of the date first above
written by their respective officers thereunto duly
authorized.
COMMUNITY HOSPITAL OF ANDALUSIA, INC.
CRESTWOOD HOSPITAL & NURSING HOME, INC.
DOCTORS HOSPITAL OF MOBILE, INC.
SELMA MEDICAL CENTER HOSPITAL, INC.
TRI-CITY MED, INC.
HTI TUCSON REHABILITATION, INC.
HOSPITAL CORPORATION OF ARIZONA
HOSPITAL CORPORATION OF NORTHWEST, INC.
DEQUEEN HEALTH SERVICES. INC.
CH SYSTEMS
C.H.L.H, INC.
CHINO COMMUNITY HOSPITAL CORPORATION, INC.
COMMUNITY HOSPITAL OF GARDENA CORPORATION, INC.
ENCINO HOSPITAL CORPORATION, INC.
SEBASTOPOL HOSPITAL CORPORATION
UKIAH HOSPITAL CORPORATION
GENERAL HEALTH SERVICES, INC.
HOSPITAL DEVELOPMENT PROPERTIES, INC.
ODYSSEY ACQUISITION CORP.
EASTE POINT HOSPITAL, INC.
EAST POINTE PHO, INC.
EDWARD WHITE HOSPITAL, INC.
HOSPITAL CORPORATION OF LAKE WORTH
HOSPITAL DEVELOPMENT & SERVICE CORP
MEDICAL CARE OF BROWARD, INC.
MEDICAL CENTER OF SANTA ROSA, INC.
NORTH BEACH HOSPITAL, INC.
NORTH OKALOOSA MEDICAL CENTER, INC.
PALMS WEST HOSPITAL, INC.
PHYSICIAN SERVICES OF PALM BEACH COUNTY, INC.
SANTA ROSA EMERGENCY MEDICAL SERVICES, INC.
SOUTH SEMINOLE HOSPITAL, INC.
ST. AUGUSTINE HOSPITAL, INC.
SUN CITY HOSPITAL, INC.
VISIONS HEALTHCARE, INC.
COLUMBUS CARDIOLOGY INC.
COLUMBUS DOCTORS HOSPITAL, INC.
GAINESVILLE CARDIOLOGY, INC.
HOSPITAL CORPORATION OF LANIER, INC.
EASTERN IDAHO HEALTH SERVICES, INC.
MED CENTRAL, INC.
WEST VALLEY MEDICAL CENTER, INC.
HTI HEALTH SERVICES OF INDIANA, INC.
TERRE HAUTE REGIONAL HOSPITAL, INC.
COMMUNITY HOSPITAL, INC.
LOGAN MEMORIAL HOSPITAL, INC.
HOSPITAL CORPORATION OF KENTUCKY
SPRINGVIEW HOSPITAL, INC.
DAUTERIVE HOSPITAL CORPORATION
HAMILTON MEDICAL CENTER, INC.
MEDICAL CENTER OF BATON ROUGE, INC.
WOMEN'S AND CHILDREN'S HOSPITAL, INC.
HTI HEALTH SERVICES, INC.
HTI HEALTH SERVICES OF NORTH CAROLINA, INC.
HERITAGE HOSPITAL, INC.
HOSPITAL CORPORATION OF NORTH CAROLINA
EDMOND PHYSICIAN HOSPITAL ORGANIZATION, INC.
HOSPITAL CORPORATION OF SEILING, INC.
HOSPITAL CORPORATION OF DOUGLAS, INC.
MCMINNVILLE HOSPITAL, INC.
ROSEBURG AMBULANCE, INC.
CHESTERFIELD GENERAL HOSPITAL, INC.
HTI SOUTH CAROLINA, INC.
WALTERBORO COMMUNITY HOSPITAL, INC.
BENTON COMMUNITY HOSPITAL, INC.
CROCKETT GENERAL HOSPITAL, INC.
EASTERN TENNESSEE MEDICAL SERVICES, INC.
HTI EDGEFIELD, INC.
HTI MEDICAL SERVICES CORPORATION
HTI MEMORIAL HOSPITAL CORPORATION
HTI TRI-CITIES REHABILITATION, INC.
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
HENDERSONVILLE HOSPITAL CORPORATION
HOSPITAL CORPORATION OF SMITH AND
OVERTON COUNTY
HUMBOLDT CEDAR CREST HOSPITAL, INC.
IPN SERVICES, INC.
JOHNSON CITY EYE & EAR HOSPITAL,INC.
JOHNSON CITY MEDICAL SERVICES, INC.
MEDICAL RESOURCE GROUP, INC.
MIDDLE TENNESSEE MEDICAL SERVICES
CORPORATION
NORTH SIDE HOSPITAL, INC.
RIVER PARK HOSPITAL, INC.
SP ACQUISITION CORP.
STONES RIVER HOSPITAL, INC.
SYCAMORE SHOALS HOSPITAL, INC.
TRINITY HOSPITAL CORPORATION
AUSTIN MEDICAL CENTER, INC.
BEDFORD - NORTHEAST COMMUNITY HOSPITAL, INC.
BROWNSVILLE - VALLEY REGIONAL MEDICAL CENTER, INC.
BROWNWOOD REGIONAL HOSPITAL, INC.
CONROE HOSPITAL CORPORATION
CORONADO COMMUNITY HOSPITAL, INC.
DETAR HOSPITAL, INC.
DFW PHYSICIAN SERVICES CORPORATION
DOCTORS HOSPITAL (CONROE), INC.
HTI GULF COAST, INC.
LONGVIEW REGIONAL HOSPITAL, INC.
MANSFIELD HOSPITAL, INC.
MIDWAY PARK HEALTH NETWORK, INC.
MIDWAY PARK MEDICAL CENTER CORPORATION
NORTHEAST PHO, INC.
PASADENA BAYSHORE HOSPITAL, INC.
SUNBELT REGIONAL MEDICAL CENTER, INC.
WHARTON HOSPITAL CORPORATION
WOODLAND HEIGHTS GENERAL HOSPITAL,INC.
BRIGHAM CITY COMMUNITY HOSPITAL, INC.
CASTLEVIEW HOSPITAL, INC.
HTI OF UTAH, INC.
HTI - MANAGED CARE OF UTAH, INC.
HTI PHYSICIAN SERVICES OF UTAH, INC.
HOSPITAL CORPORATION OF UTAH
MEDICAL SERVICES OF SALT LAKE CITY, INC.
MOUNTAIN VIEW HOSPITAL, INC.
OGDEN MEDICAL CENTER, INC.
PIONEER VALLEY HOSPITAL, INC.
WEST JORDAN HOSPITAL CORPORATION
MONTGOMERY REGIONAL HOSPITAL, INC.
NEW RIVER HEALTHCARE PLAN, INC.
NORTHERN VIRGINIA HOSPITAL CORPORATION
PULASKI COMMUNITY HOSPITAL, INC.
OLYMPIA HOSPITAL CORPORATION
RAINIER REGIONAL REHABILITATION HOSPITAL, INC.
WYOMING HEALTH SERVICES, INC.
By: S/Glenn D. Davis
Name:
Title:
Address: c/o Healthtrust, Inc. - The Hospital Company
4525 Harding Road
Nashville, Tennesee 37205
Telecopier No.: (615) 298-6377
Attention: President
THE BANK OF NOVA SCOTIA,
as Collateral Agent
By: s/Mary K. Munoz
Authorized Signatory
Address: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Telecopier No.: (404) 888-8998
Attention: Ms. Mary Munoz
EXHIBIT A
TO
THE SUBSIDIARY GUARANTY
FORM OF ACKNOWLEDGEMENT (SUBSIDIARY) TO SUBSIDIARY
GUARANTY
[TO BE EXECUTED AND DELIVERED BY EPIC AND ITS
SUBSIDIARIES AND EACH OTHER PERSON THAT BECOMES A
SUBSIDIARY OF THE COMPANY (OTHER THAN A JV SUBSIDIARY)
AFTER THE CLOSING DATE]
Reference is hereby made to the Subsidiary Guaranty
Agreement, dated as of April 28, 1994 (the "Guaranty";
capitalized terms defined therein being used herein as
therein defined) in which this Acknowledgement is
incorporated.
The undersigned acknowledges the terms of the Guaranty
and agrees to be bound thereby.
[NAME]
By
Title
Notice Address:
A-1
EXHIBIT B
TO
THE SUBSIDIARY GUARANTY
Set forth below are the definitions used in the
Guaranty to determine the maximum liability of a
Guarantor thereunder with respect to the Guarantied
Obligations. These definitions and their use in the
Guaranty should be construed in a manner that gives
effect to the following intent: the parties intend that
each Guarantor shall be liable in an amount equal to
the benefit it has received or, if greater, in an
amount equal to 95% of the value of its assets after
subtracting its liabilities (as determined using the
definitions below), in either case with the goal of
maximizing the amount payable by such Guarantor without
rendering it insolvent, leaving it with an unreasonably
small amount of capital with which to conduct its
business or leaving it unable to pay its debts as they
mature. Each of the defined terms set forth below is
intended to apply to each of the Guarantors separately.
"Endinq Date" means the earlier of the date of the
commencement of a case under Title 11 of the United
States Code involving the Company or such Guarantor or
the date enforcement of this Guaranty is sought.
"Fair Saleable Value" of any assets means the amount
which may be realized, as of a Calculation Date, within
a reasonable time, either through collection of such
assets or sale of such assets at the regular market
value, understanding "regular market value" to mean the
amount which could be obtained for the assets in
question within such period by a capable and diligent
businessman from an interested buyer who is willing to
purchase under ordinary selling conditions.
"Adjusted Indebtedness" means the present value, as of
a Calculation Date, of known probable liabilities,
whether matured or unmatured, liquidated or
unliquidated, absolute, fixed or contingent, but
excluding (i) any liabilities of such Guarantor under
this Guaranty and (ii) all intercompany indebtedness,
up to an amount not exceeding the amount of the
Guarantied Obligations, owed by such Guarantor to the
Company, it being understood that a portion of such
indebtedness shall be discharged in full in an amount
equal to the amount paid by such Guarantor hereunder.
Contingent or unliquidated liabilities shall be valued
as of a Calculation Date at the amount which, in light
of all the facts and circumstances existing at such
time, represents the amount which could reasonably be
expected to become an actual matured liability.
"Adjusted Net Worth" means, as of a Calculation Date,
the excess of (i) the Fair Saleable Value of the assets
of such Guarantor on such Calculation Date, over (ii)
the amount of Adjusted Indebtedness of such Guarantor
on such Calculation Date.
"Calculation Date" means the date of the initial Credit
Extension and each date thereafter on or prior to the
Ending Date.
"Calculation Date Amount" shall be calculated as of
each Calculation Date, and means the lesser of (i) the
aggregate amount of outstanding Credit Extensions on
such Calculation Date, and (ii) 95% of Adjusted Net
Worth as of such Calculation Date.
"Maximum Guaranty Amount" means the greatest
Calculation Date Amount; provided that if the aggregate
amount of Credit Extensions decreases after the
Calculation Date in respect of such Calculation Date
Amount, the Maximum Guaranty Amount shall be the lesser
of (i) such Calculation Date Amount and (ii) the lowest
aggregate amount of Credit Extensions on any date after
such Calculation Date; provided further that if there
are one or more Calculation Dates after such
Calculation Date with respect to which there is a
higher Calculation Date Amcunt than the Ma~imum
Guaranty Amount calculated in accordance with the
preceding proviso, the Maximum Guaranty Amount shall be
determined on the basis that the greatest of the
Calculation Date Amounts in respect of such subsequent
Calculation Dates is the "Greatest Calculation Date
Amount" first referred to above and the procedures
contained in the preceding proviso and this proviso
shall be repeated if the provisions of the preceding
proviso would then be applicable.
B-2
EXHIBIT C
TO
THE SUBSIDIARY GUARANTY
ACKNOWLEDGMENT (GUARANTEED PARTY) TO SUBSIDIARY
GUARANTY
The undersigned, as representative of the holders of
obligations refinancing or extending all or any portion
of the Obligations under the Credit Agreement, hereby
acknowledges the terms of this Guaranty and agrees to
be bound hereby. The Credit Agreement to which the
undersigned is a party [Insert description of new
Credit Agreement].] [The undersigned has entered into
an Interest Rate Agreement with the Company pursuant to
which obligations thereunder are to be guaranteed under
this Guaranty. The undersigned acknowledges the terms
of this Guaranty and agrees to be bound hereby.]
[Collateral Agent:
[Insert name of successor Collateral Aqent]
[INTEREST RATE EXCHANGER]
By:
Title:
Date:
Address:
Acknowledged and agreed:
GUARANTORS:
By:
Title:
Date:
C - 1
[EXECUTION COPY]
BORROWER STOCK PLEDGE AGREEMENT
THIS BORROWER STOCK PLEDGE AGREEMENT (this
"Agreement"), dated as of April 28, 1994, made by
HEALTHTRUST, INC. - THE HOSPITAL COMPANY, a Delaware
corporation (the "Pledgor"), in favor of THE BANK OF
NOVA SCOTIA ("Scotiabank") in its individual capacity
and as collateral agent for and representative of the
Lender Parties (as defined below) (in such capacity,
together with any successor, or other representative
for the Lender Parties being collectively referred to
herein as the "Collateral Agent"). Capitalized terms
used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement
referred to below.
W I T N E S S E T H
WHEREAS, the Pledgor has heretofore entered into a
certain Credit Agreement, dated as of September 29,
1992 (as amended, modified or amended and restated or
otherwise modified to the date hereof, the "1992 Credit
Agreement") with the financial institutions parties
thereto, Scotiabank, ABN AMRO Bank, N.V., Bank of
America National Trust and Savings Association, The
Chase Manhattan Bank, N.A., Citibank, N.A., Continental
Bank N.A., Deutsche Bank AG, New York Branch, LTCB
Trust Company, Swiss Bank Corporation, and The
Toronto-Dominion Bank, as co-agents and Scotiabank, as
administrative agent for the lenders; and
WHEREAS, pursuant to a Credit Agreement, dated as of
April 28, 1994 (together with all amendments and other
modifications, if any, from time to time thereafter
made thereto, the "Credit Agreement"), among the
Pledgor, the various financial institutions
(individually a "Lender" and collectively the
"Lenders") as are, or may from time to time become,
parties thereto, Scotiabank and ABN AMRO Bank, N.V.,
Bank of America National Trust and Savings Association,
The Chase Manhattan Bank, N.A., Chemical Bank, Citicorp
USA, Inc., Continental Bank N.A., Deutsche Bank AG, New
York Branch, First Union National Bank of North
Carolina, General Electric Capital Corporation, The
Industrial Bank of Japan, Limited, New York Branch, The
Long Term Credit Bank of Japan, Limited, New York
Branch, NationsBank of Tennessee, N.A., Swiss Bank
Corporation, San Francisco Branch, Third National Bank
in Nashville, and The Toronto-Dominion Bank, as
co-agents, and Scotiabank, as administrative agent, the
Lenders have agreed to refinance all amounts
outstanding or otherwise due under the 1992 Credit
Agreement and have extended Commitments to make Credit
Extensions to the Pledgor; and
WHEREAS, the Pledgor has and may hereafter from time to
time enter into arrangements designed to protect the
Pledgor against fluctuations in interest rates (such
arrangements (if any) which are entered into with one
or more Lenders or which have been entered into with
one or more lenders under the 1992 Credit Agreement
(collectively, the "Lender Interest Rate Exchangers")
being collectively referred to herein as the "Lender
Interest Rate Agreements") and it is desired that the
obligations of the Pledgor under such agreements,
including the obligation to make payments in the event
of early termination thereunder (all such obligations
owed to the Lender Interest Rate Exchangers being the
"Lender Interest Rate Obligations"; and
WHEREAS, the Lenders have agreed to permit the
Indebtedness evidenced by the Lender Interest Rate
Agreements to be secured pari passu with the
Obligations; and
WHEREAS, the Pledgor desires to enter into this
Agreement to grant to the Collateral Agent for the
benefit of the Lenders a first priority security
interest in the Pledged Collateral and to grant to the
Lender Interest Rate Exchangers a first priority
security interest in the Pledged Collateral pari passu
with the Lenders (the Lender Interest Rate Exchangers
and the Credit Agreement Parties are collectively
referred to herein as the "Secured Parties"); and
WHEREAS, the Pledgor has duly authorized the execution,
delivery and performance of this Agreement;
NOW THEREFORE, in consideration of the foregoing
premises the parties hereto agree as follows:
A G R E E M E N T:
SECTION 1. Pledges; Agreements to Share.
The Pledgor hereby pledges and grants to the Collateral
Agent for the benefit of the Secured Parties a first
priority security interest in the following (the
"Pledged Collateral") to secure the Secured Obligations
(as defined in Section 2);
(a) the Pledged Shares and the certificates
representing the Pledged Shares and any interest of the
Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and,
subject to Section 6, all dividends, cash, options,
warrants, rights, instruments and other property or
proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) from and after the 90th day following the Closing
Date, all of the issued and outstanding shares of EPIC
and the certificates representing such Pledged Shares
and any interest of the Pledgor in the entries on the
books of any financial intermediary pertaining to such
Pledged Shares, and, subject to Section 6, all
dividends, cash, options, warrants, rights, instruments
and other property or proceeds from time to time
received, receivable or otherwise distributed in
respect of or in exchange for any or all of such
Pledged Shares;
(c) all additional shares of stock of any issuer of
the Pledged Shares from time to time acquired by the
Pledgor in any manner (which shares shall be deemed to
be part of the Pledged Shares), and the certificates
representing such additional shares and any interest of
the Pledgor in the entries on the books of any
financial intermediary pertaining to such additional
shares, and, subject to Section 6, all dividends, cash,
options, warrants, rights, instruments and other
property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such shares;
(d) all shares of any Person directly owned or held by
the Pledgor which, after the date of this Agreement, is
or becomes, as a result of any occurrence, a Subsidiary
of the Pledgor (which shares shall be deemed to be part
of the Pledged Shares) and the certificates
representing such shares and any interest of the
Pledgor in the entries on the books of any financial
intermediary pertaining to such shares, and subject to
Section 6, all dividends, cash, options, warrants,
rights, instruments and other property or proceeds from
time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all
of such shares; and
(e) all proceeds of the foregoing items described in
clauses (a). (b). (c), and (d).
The Lenders hereby agree that the pledge and grant of a
security interest in the Pledged Collateral to the
Collateral Agent for the benefit of the Secured Parties
shall rank pari passu with the security interest of the
Lenders pledged and granted hereby.
SECTION 2. Secured Obligations.
This Agreement secures, and the Pledged Collateral is
collateral security for, the prompt payment or
performance in full when due, whether at stated
maturity, by acceleration or otherwise (including the
payment of amounts which would become due but for the
operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C 362(a)), of all
Obligations now or hereafter existing under or in
respect of the Credit Agreement (the "Credit Agreement
Obligations"), all Obligations of the Pledgor now or
hereafter existing under all other Loan Documents and
all obligations of the Pledgor now or hereafter
existing under the Lender Interest Rate Agreements, in
each case whether for principal, premium or interest
(including, without limitation, interest which, but for
the filing of a petition in bankruptcy with respect to
the Pledgor would accrue on such obligations) payments
for early termination, fees, expenses or otherwise and
all obligations of the Pledgor now or hereafter
existing under this Agreement (all such obligations
being the "Secured Obligations"); provided, however,
that the pledge made and the security interest granted
in Section 1 and any other provisions of this Agreement
shall be effective as to any obligations in respect of
any obligations refinancing or extending all or any
portion of the Credit Agreement Obligations, or Lender
Interest Rate Agreements, only if the holders of such
obligations or their representatives, or the Lender
Interest Rate Exchangers, as the case may be, shall
have executed and delivered to the Collateral Agent an
acknowledgement to this Agreement acknowledged by the
Pledgor.
SECTION 3. Delivery of Pledqed Collateral.
All certificates or instruments representing or
evidencing the Pledged Collateral shall be delivered to
and held by or on behalf of the Collateral Agent
pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by, as
applicable, the Pledgor's endorsement where necessary,
or appropriate stock powers or other instruments of
transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent. The
Collateral Agent shall have the right, at any time upon
or after the occurrence of an Event of Default and
without notice to the Pledgor, to transfer to or
register in the name of the Collateral Agent or any of
its nominees any or all of the Pledged Collateral. In
addition, the Collateral Agent shall have the right at
any time to exchange certificates or instruments
representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger
denominations.
SECTION 4. Representations and Warranties.
The Pledgor represents and warrants as follows:
(a) The Pledgor is, and at the time of delivery of the
Pledged Collateral to the Collateral Agent pursuant to
Section 3 of this Agreement will be, the legal and
beneficial owner of the Pledged Collateral free and
clear of any Lien except for the liens and security
interests created or continued by this Agreement.
(b) The Pledgor has full power, authority and legal
right to pledge all the Pledged Collateral pursuant to
this Agreement.
(c) No consent of any other party (including, without
limitation, stockholders or creditors of the Pledgor)
and no consent, authorization, approval, or other
action by, and no notice to or filing with, any
governmental authority or regulatory body is required
either (x) for the pledge by the Pledgor of the Pledged
Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by
the Pledgor or (y) for the exercise by the Collateral
Agent of the voting or other rights provided for in
this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement other
than as set forth in the Credit Agreement.
(d) All of the Pledged Shares have been duly
authorized and validly issued and are fully paid and
nonassessable.
(e) The pledge of the Pledged Shares pursuant to this
Agreement creates a valid and perfected first priority
se~urity interest in the Pledged Shares securing the
payment of the Secured Obligations.
(f) As of the date hereof, the Pledged Shares
consisting of capital stock of the Persons identified
in Schedule I hereto constitute the percentage of the
issued and outstanding shares of stock of such Persons
as identified in Schedule I hereto.
(g) Except as otherwise permitted by the Credit
Agreement, the Pledgor at all times will be the sole
beneficial owner of the Pledged Collateral.
(h) All information set forth herein relating to the
Pledged Collateral is accurate and complete in all
material respects.
(i) The pledge of the Pledged Collateral pursuant to
this Agreement does not violate Regulations G, U or X
of the Federal Reserve Board.
(j) The Pledgor does not directly own any other shares
of capital stock of any Subsidiary of the Pledgor other
than the shares of capital stock described in Schedule
I hereto.
SECTION 5. Supplements; Further Assurances.
The Pledgor agrees that at any time and from time to
time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all instruments and
documents, and take all further action, that may be
necessary or that the Collateral Agent may reasonably
request, in order to perfect and protect any security
interest granted or purported to be granted hereby or
to enable the Collateral Agent to exercise and enforce
its rights and remedies hereunder with respect to any
Pledqed Collateral.
The Pledgor further agrees that it will, upon obtaining
any shares of any Person required to be pledged
pursuant to clauses (c) or (d) of Section 1, promptly
(and in any event within five (5) Business Days)
deliver to the Collateral Agent a pledge amendmen.,
duly executed by the Pledgor, in substantially the form
cf Schedule II hereto (a "Pledge Amendment"), in
respect of the additional Pledged Shares which are to
be pledged pursuant to this Agreement. ~he Pledgor
hereby authorizes the Collateral Agent to attach each
Pledge Amendment to this Agreement and agrees that all
Pledged Shares listed on any Pledge Amendment delivered
to the Collateral Agent shall for all purposes
hereunder be considered Pledged Collateral.
SECTION 6. Votinq Riqhts; Dividends; etc.
(a) So long as no Event of Default has occurred and is
continuing:
(i) The Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to
the Pledged Collateral or any part thereof for any
purpose not inconsistent with the tenms of this
Agreement or the Credit Agreement.
(ii) The Pledgor shall be entitled to receive and
retain any and all cash dividends or other
distributions in respect of the Pledged Shares.
(b) Upon the occurrence and during the continuance of
an Event of Default
(i) Upon written notice from the Collateral Agent to
the Pledgor, all rights of the Pledgor to exercise the
voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to clause
(a)(i) of Section 6 above shall cease, and all such
rights shall thereupon become vested in the Collateral
Agent which shall thereupon have the sole right to
exercise such voting and other consensual rights during
the continuance of such Event of Default.
(ii) All rights of the Pledgor to receive the
dividends or other distributions which it would
otherwise be authorized to receive and retain pursuant
to clause (a)(ii) of Section 6 above shall cease and
all such rights shall thereupon become vested in the
Collateral Agent who shall thereupon have the sole
right to receive and hold as Pledged Collateral such
dividends or other distributions during the continuance
of such Event of Default.
(c) In order to permit the Pledgor to exercise the
voting and other rights which it is entitled to
exercise pursuant to clause (a)(i) of Section 6 above
and to receive the dividends or other distributions
which it is authorized to receive and retain pursuant
to clause (a)(ii) of Section 6 above, the Collateral
agent shall, if necessary, upon written request of the
Pledgor from time to time execute and deliver (or cause
to be executed and delivered) to the Pledgor all such
proxies, dividend payment orders and other instruments
as the Pledgor may reasonably request. In order to
permit the Collateral Agent to exercise the voting and
other consensual rights which it may be entitled to
exercise pursuant to clause (b)(i) of Section 6 above,
and to receive all dividends or other distributions
which it may be entitled to receive under clause
(b)(ii) of Section 6 above, the Pledgor shall, if
necessary, upon written notice from the Collateral
Agent, from time to time execute and deliver to the
Collateral Agent appropriate proxies, dividend payment
orders and other instruments as the Collateral Agent
may reasonably reguest.
(d) All dividends and distributions which are received
by the Pledgor contrary to the provisions of clause
(b)(ii) of Section 6 above shall be received in trust
for the benefit of the Collateral Agent, shall be
segregated from other funds of the Pledgor and shall be
forthwith paid over to the Collateral Agent as Pledged
Collateral in the same form as so received (with any
necessary endorsement).
SECTION 7. Transfers and Other Liens: Additional
Shares.
A. Transfers and Other Liens. The Pledgor agrees
that it will not, except as permitted by the Credit
Agreement (i) sell or otherwise dispose of, or grant
any option or warrant with respect to, any of the
Pledged Collateral, (ii) create or permit to exist any
Lien upon or with respect to any of the Pledged
Collateral, except for the liens and security interests
under this Agreement, or (iii) permit any issuer of
Pledged Shares to merge or consolidate unless all the
outstanding capital stock of the surviving or resulting
corporation is, upon such merger or consolidation,
pledged hereunder and no cash, securities, or other
property is distributed in respect of the outstanding
shares of any other constituent corporation; provided,
however, that in the event of a sale of Pledged Shares
permitted by the Credit Agreement, the Collateral Agent
shall release the Pledged Shares that are the subject
of such sale to the Pledgor free and clear of the lien
and security interest under this Agreement (a) so long
as any Credit Agreement Obligations remain outstanding,
concurrently with the receipt of advice from the
Administrative Agent that arrangements satisfactory to
it have been made for delivery to it of the Net
Disposition Proceeds received in connection with any
Permitted Disposition to which the Lenders are entitled
under the Credit Agreement and the other Loan
Documents, (b) after such time as all Credit Agreement
Obligations have been indefeasibly paid in full in the
event that any other Secured Parties are entitled to
receive any portion of the Net Disposition Proceeds
received in connection with any Perm~tted Disposition,
concurrently with the receipt of advice from the agent
or trustee for such Secured Parties that arrangements
satisfactory to it have been made for delivery to it of
the amounts required to be paid to such Secured Parties
out of the Net Disposition Proceeds received in
connection with any Permitted Disposition and (c) in
the event no Secured Party is entitled to receive any
portion of the Net Disposition Proceeds received in
connection with any Permitted Disposition, concurrently
with the sale of such Pledged Shares.
B. Additional Shares. Except as otherwise permitted
by the Credit Agreement, the Pledgor agrees that it
will (i) cause each issuer of Pledged Shares not to
issue any stock or other securities in addition to or
in substitution for the Pledged Shares issued by such
issuer, except to the Pledgor, and (ii) pledge
hereunder, immediately upon its acquisition (directly
or indirectly) thereof, any and all additional shares
of stock or other equity securities of each issuer of
Pledged Shares.
SECTION 8. Collateral Agent Appointed
Attorney-In-Fact.
The Pledgor hereby appoints the Collateral Agent the
Pledgor's attorney-in-fact, with full authority in the
place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the
Collateral Agent's discretion to take any action and to
execute any instrument which the Collateral Agent may
deem reasonably necessary or advisable to accomplish
the purposes of this Agreement, including, without
limitation, to receive, endorse and collect all
instruments made payable to the Pledgor representing
any dividend or other distribution in respect of the
Pledged Collateral or any part thereof and to give full
discharqe for the same.
SECTION 9. Collateral Aqent May Perform.
If the Pledgor fails to perform any agreement contained
herein after receipt of a written request to do so from
the Collateral Agent, the Collateral Agent may itself
perform, or cause performance of, such agreement, and
the expenses of the Collateral Agent, including the
reasonable fees and expenses of its counsel, incurred
in connection therewith shall be payable by the Pledgor
under Section_13 hereof.
SECTION 10. Reasonable Care.
The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged
Collateral is accorded treatment substantially
equivalent to that which the Collateral Agent, in its
individual capacity, accords its own property
consisting of negotiable securities, it being
understood that neither the Collateral Agent nor any
other Secured Party shall have responsibility for (i)
acscertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or
not the Collateral Agent or any other Secured Party has
or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps (other than steps taken in
accordance with the standard of care set forth above to
maintain possession of the Pledged Collateral) to
preserve rights against any Person with respect to any
Pledged Collateral.
SECTION 11. Remedies Upon Default: Decisions Relating
to Exercise of Remedies.
A. Remedies Upon Default. Subject to Section llB, if
any Event of Default or, after such time as the Credit
Agreement Obligations shall have been indefeasibly paid
in full and provided that the Pledged Collateral then
secures the payment and performance of Lender Interest
Rate Obligations, if any event of default under any
Lender Interest Rate Agreement or, after such time as
all Secured Obligations shall have been indefeasibly
paid in full:
(a) (i) The Collateral Agent may exercise in respect
of the Pledged Collateral, in addition to other rights
and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party
on default under the Uniform Commercial Code (the
"Code") in effect in the State of New York at that
time, and the Collateral Agent may also in its sole
discretion, without notice except as specified below,
sell the Pledged Collateral or any part thereof in one
or more parcels at public or private sale, at any
exchange, broker's board or at any of the Collateral
Agent's offices or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and
upon such other terms as the Collateral Agent may deem
commercially reasonable, irrespective of the impact of
any such sales on the market price of the Pledged
Collateral. The Collateral Agent or any other Secured
Party may be the purchaser of any or all of the Pledged
Collateral at any such sale but shall not be entitled,
for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of
the Pledged Collateral sold at such sale, to use and
apply any of the Secured Obligations owed to such
Person as a credit on account of the purchase price of
any Pledged Collateral payable by such Person at such
sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right
on the part of the Pledgor, and the Pledgor hereby
waives (to the extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or
may at any time in the future have under any rule of
law or statute now existing or hereafter enacted. The
Piedgor agrees that, to the extent notice of sale shall
be required by law, at least ten days' notice to the
Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. The Collateral
Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place
to which it was adjourned. The Pledgor, to the fullest
extent allowable under applicable law, hereby waives
and agrees not to assert any rights or privileges it
may acquire under Sections 9-504 or 9-507 of the Code
and any claims against the Collateral Agent arising by
reason of the fact that the price at which any Pledged
Collateral may have been sold at such a private sale
was less than the price which might have been obtained
at a public sale, even if the Collateral Agent accepts
the first offer received and does not offer such
Pledged Collateral to more than one offeree.
(ii) The Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933,
as amended (the "Securities Act"), and applicable state
securities laws, the Collateral Agent may be compelled,
with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to those who
will agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and
not with a view to the distribution or resale thereof.
The Pledgor acknowledges that any such private sales
may be at prices and on terms less favorable to the
Collateral Agent than those obtainable through a public
sale without such restrictions (including, without
limitation, a public offering made pursuant to a
registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in
a commercially reasonable manner and that the
Collateral Agent shall have no obligation to engage in
public sales and no obligation to delay the sale of any
Pledged Collateral for the period of time necessary to
permit the issuer thereof to register it for a form of
public sale requiring registration under the Securities
Act or under applicable state securities laws, even if
the Pledgor would aqree to do so.
(b) If the Collateral Agent determines to exercise its
right to sell any or all of the Pledged Collateral,
upon written request, the Pledgor shall and shall cause
each issuer of any Pledged Shares to be sold hereunder
from time to time to furnish to the Collateral Agent
all such information as the Collateral Agent may
request in order to determine the number of shares and
other instruments included in the Pledged Collateral
which may be sold by the Collateral Agent as exempt
transactions under the Securities Act and the rules of
the Securities and Exchange Commission thereunder, as
the same are from time to time in effect.
B. Decisions Relating to Exercise of Remedies.
Notwithstanding anything in this Agreement to the
contrary, the Collateral Agent shall exercise, or shall
refrain from exercising, any remedy provided for in
Section llA in accordance with the instructions of the
Required Lenders and the Co-Agents, the Administrative
Agent, the Lenders and the Lender Interest Rate
Exchangers shall be bound by such instructions; and the
sole rights of the Administrative Agent, the Lenders
and the Interest Rate Exchangers under this Agreement
shall be secured by the Pledged Collateral and to
receive the payments provided for in Section 12 hereof.
SECTION 12. Application of Proceeds.
After and during the continuance of an Event of
Default or event of default described in Section llA,
any cash held by the Collateral Agent as Pledged
Collateral and all cash proceeds received by the
Collateral Agent (all such cash being "Proceeds") in
respect of any sale of, collection from, or other
realization upon all or any part of the Pledged
Collateral pursuant to the exercise by the Collateral
Agent of its remedies as a secured creditor as provided
in Section 11 of this Agreement shall be applied
promptly from time to time by the Collateral Agent as
follows:
first, to the payment of the costs and expenses of such
sale, collection or other realization, including
reasonable fees of the Collateral Agent and reasonable
fees and expenses of its agents and counsel, and all
other expenses, liabilities, and advances made or
incurred by the Collateral Agent in connection
therewith;
second, to the payment of the Secured Obligations;
third, after payment in full of all Secured Obligations
and any other amount required by any provision of law,
including, without limitation, Section 9-502(2) and
9504(1)(a) of the Code, to the Pledgor, or its
successors or assigns, or to whomsoever may be lawfully
entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining
from such Proceeds.
SECTION 13. Expenses.
The Pledgor will upon demand pay to the Collateral
Agent the amount of any and all expenses, including the
reasonable fees and expenses of its counsel and of any
experts and agents, which the Collateral Agent may
incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the
sale of collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral
Agent or any other Secured Party hereunder or (iv) the
failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 14. No Waiver.
No failure on the part of the Collateral Agent to
exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise by the Collateral Agent
of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of
any other right, power or remedy. The remedies herein
provided are to the fullest extent permitted by law
cumulative and are not exclusive of any remedies
provided by law.
SECTION 15. Indemnification.
The Pledgor hereby agrees to indemnify the Collateral
Agent for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or
asserted against the Collateral Agent in any way
relating to or arising out of this Agreement, the
Credit Agreement, the other Loan Documents, the Lender
Interest Rate Agreements, or any other documents
contemplated by or referred to therein or the
transactions contemplated thereby or the enforcement of
any of the terms hereof or of any such other documents;
provided, however, that the Pledgor shall not be liable
for any of the foregoing to the extent they arise from
the gross negligence or willful misconduct of the
Collateral Agent or failure by the Collateral Agent to
exercise reasonable care in the custody and
preservation of the Pledged Collateral as provided in
Section 10.
SECTION 16. Amendments. etc.
No amendment, modification or waiver to this Agreement
shall be binding (i) on the Collateral Agent without
the written consent of the Collateral Agent or (ii) on
the Pledgor without the written consent of the Pledgor.
SECTION 17. Termination.
When all Secured Obligations have been indefeasibly
paid in full and no Commitment or Letter of Credit
remains outstanding, this Agreement shall terminate,
and the Collateral Agent shall, upon the request and at
the expense of the Pledgor, forthwith assign, transfer
and deliver, against receipt and without recourse to
the Collateral Agent, such of the Pledged Collateral as
shall not have been sold or otherwise applied pursuant
to the terms hereof to or on the order of the Pledgor
and shall execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to
evidence such terminations.
SECTION 18. Addresses for Notices.
All notices and other communications provided for
hereunder shall be in writing (including telegraphic or
telecopy communication) and mailed, telegraphed,
telecopied or delivered, if to the Pledgor, addressed
to it at the address set forth on the signature page of
this Agreement or as to any party at such other address
as shall be designated by such party in a written
notice to each other party complying as to delivery
with the terms of this Section 18. All such notices
and other communications shall, when mailed or
telegraphed, respectively, be effective when deposited
in the mails or delivered to the telegraph company,
respectively, addressed as aforesaid and shall, when
delivered or telecopied, be effective when received
SECTION 19. Continuinq Security Interest; Releases.
Subject to Section 17 hereof and to the Credit
Agreement, this Agreement shall create a continuing
security interest in the Pledged Collateral and shall
(i) remain in full force and effect until indefeasible
payment in full of all Secured Obligations and all
Commitments have been terminated and all Letters of
Credit cancelled, (ii) be binding upon the Pledgor,
its successors and assigns, and (iii) inure, together
with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent and
each other Secured Party and each of their respective
successors, transferees and assigns. Without limiting
the generality of the foregoing clause (iii) and
subject to the provisions of the Credit Agreement, any
Secured Party may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to
any other person or entity, and such other person or
entity shall thereupon become vested with all the
benefits in respect thereof granted to such Secured
Party herein or otherwise.
SECTION 20. Governinq Law; Terms.
THIS AGREEMENT, AND ANY INSTRUMENT OR AGREEMENT
REQUIRED HEREUNDER, SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. Unless otherwise
defined herein or in the Credit Agreement, terms
defined in Articles 8 and 9 of the Code in the State of
New York are used herein as therein defined.
SECTION 21. Consent to Jurisdiction and Service of
Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR
WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORY AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PLEDGOR ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION 0F THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. EACH PLEDGOR HEREBY DESIGNATES AND APPOINTS
DEWEY BALLANTINE, 1301 AVENUE OF THE AMERICAS, NEW
YORK, NEW YORK 10019, ATTENTION: MORTON A. PIERCE, AND
SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY SUCH
PLEDGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS
ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL
PROCESSING ANY SUCH PROCEEDINGS IN SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY EACH SUCH PLEDGOR
TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO THE PLEDGORS AT THE ADDRESS PROVIDED
IN THE APPLICABLE SIGNATURE PAGE HERETO EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL AFFECT THE VALIDITY OF
SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY
PLEDGOR REFUSES TO ACCEPT SERVICE, SUCH PLEDGOR HEREBY
AGREES THAT SERVICE UPON IT BY REGISTERED MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST ANY
PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. The scope
of this waiver is intended to be all encompassing of
any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction
including, without limitation, contract claims, tort
claims, breach of duty claims and all other common law
and statutory claims. The Collateral Agent and the
Pledgors each (i) acknowledge that this waivers
material inducement for the Collateral Agent and the
Pledgors to enter into a business relationship, that
the Collateral Agent and the Pledgors have already
relied on this waiver in entering into this Agreement
or accepting the benefits thereof, as the case may be,
and that each will continue to rely on this waiver in
their related future dealings and (ii) further warrant
and represent that each has reviewed this waiver with
its legal counsel and that each knowingly and
voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS OF THIS AGREEMENT. In the event of
litigation, the Agreement may be filed as a written
consent to a trial by the Court.
SECTION 22. Security Interest Absolute.
All rights of the Collateral Agent and security
interests hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional
irrespective of:
(i) any lack of validity or enforceability of the
Credit Agreement, the other Loan Documents, the Lender
Interest Rate Agreements or any other agreement or
instrument relating thereto.
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit
Agreement, the other Loan Documents or the Lender
Interest Rate Agreements;
(iii) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver
of or consent to any departure from any guaranty, for
all or any of the Secured Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of,
the Pledgor.
IN WITNESS WHEREOF, each party has caused this
Agreement to be duly executed and delivered by its
officer thereunto duly authorized as of the date first
above written.
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By s/Glenn D. Davis
Name:
Title:
Address: 4225 Harding Road
Nashville, Tennessee 37205
Telecopier No.: (615) 298-6377
Attention: President
THE BANK OF NOVA SCOTIA,
as Collateral Agent
By s/Mary K. Munoz
Authorized Signatory
Address: 600 Peachtree Street, N. E .
Suite 2700
Atlanta, Georgia 30308
Telecopier No.: (404) 888-8998
Attention: Ms. Mary Munoz
IN WITNESS WHEREOF, each party has caused this
Agreement to be duly executed and delivered by its
officer thereunto duly authorized as of the date first
above written.
HEALTHTRUST,- INC. - THE HOSPITAL COMPANY
By
Name:
Title:
Address: 4225 Harding Road
Nashville, Tennessee 37205
Telecopier No
(615) 298-6377
Attention: President
THE BANK OF NOVA SCOTIA, as Collateral Agent
By
Authorized Signatory
Address: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Telecopier No.: (404) 888-8998
Attention: Ms. Mary Munoz
[EXECUTION COPY]
SUBSIDIARY STOCK PLEDGE AGREEMENT
THIS SUBSIDIARY STOCK PLEDGE AGREEMENT (this
"Agreement"), dated as of April 28, 1994, made by each
of the undersigned Subsidiaries (as defined below) of
HEALTHTRUST, INC. - THE HOSPITAL COMPANY, a Delaware
corporation (the "Company") and any Subsidiary of
Company that after the date hereof executes an
acknowledgment to this Agreement substantially in the
form of Exhibit B hereto (each such undersigned
Subsidiary and other Subsidiary being referred to
individually as a "Pledgor" and collectively as the
"Pledgors"), in favor of and for the benefit of THE
BANK OF NOVA SCOTIA ("Scotiabank"), as collateral agent
for and representative of the Secured Parties (as
defined below) (in such capacity, together with any
successor or other representative of the Secured
Parties being collectively referred to herein as the
"Collateral Agent"). Capitalized terms used herein
without definition shall have the same meanings herein
as set forth in the Credit Agreement referred to below.
W I T N E S E T H
WHEREAS, the Company has heretofore entered into a
certain Credit Agreement, dated as of September 29,
1992 (as amended, modified or amended and restated or
otherwise modified to the date hereof, the "1992 Credit
Agreement") with the financial institutions parties
thereto, Scotiabank, ABN AMRO Bank, N.V., Bank of
America National Trust and Savings Association, The
Chase Manhattan Bank, N.A., Citibank, N.A., Continental
Bank N.A., Deutsche Bank AG, New York Branch, LTCB
Trust Company, Swiss Bank Corporation, and The
Toronto-Dominion Bank, as co-agents and Scotiabank, as
administrative agent for the lenders; and
WHEREAS, pursuant to a Credit Agreement, dated as of
April 28, 1994 (together with all amendments and other
modifications, if any, from time to time thereafter
made thereto, the "Credit Agreement"), among the
Company, the various financial institutions
(individually a "Lender" and collectively the
"Lenders") as are, or may from time to time become,
parties thereto, Scotiabank and ABN AMRO Bank, N.V.,
Bank of America National Trust and Savings Association,
The Chase Manhattan Bank, N.A., Chemical Bank, Citicorp
USA, Inc., Continental Bank N.A., Deutsche Bank AG, New
York Branch, First Union National Bank of North
Carolina, General Electric Capital Corporation, The
Industrial Bank of Japan, Limited, New York Branch, The
Long-Term Credit Bank of Japan, Limited, New York
Branch, NationsBank of Tennessee, N.A., Swiss Bank
Corporation, San Francisco Branch, Third National Bank
in Nashville, and The Toronto-Dominion Bank, as
co-agents, and Scotiabank, as administrative agent, the
Lenders have agreed to refinance all amounts
outstanding or otherwise due under the 1992 Credit
Agreement and have extended commitments to make Credit
Extensions to the Company; and
WHEREAS, the Company has and may hereafter from time to
time enter into arrangements designed to protect the
Company against fluctuations in interest rates (such
arrangements (if any) which have been or are entered
into with one or more Lenders or one or more lenders
under the 1992 Credit Agreement (collectively, the
"Interest Rate Exchangers" and together with the
Lenders, collectively, the "Secured Parties") being
collectively referred to herein as the "Interest Rate
Agreements" and the obligations of the Company under
such agreements, including the obligation to make
payments in the event of early termination thereunder,
being the "Interest Rate Obligations"); and
WHEREAS, each Pledgor has entered into the Subsidiary
Guaranty, dated as of April 28, 1994 (as amended from
time to time, the "Subsidiary Guaranty"), pursuant to
which such Pledgor guarantees the Obligations under the
Credit Agreement and the Interest Rate Obligations; and
WHEREAS, each Pledgor wishes to grant pledges, and
security interests in favor of the Collateral Agent for
the benefit of the Secured Parties to secure the
obligations of such Pledgor with respect to the
Subsidiary Guaranty;
WHEREAS, as a condition precedent to the making of the
initial Credit Extensions under the Credit Agreement,
each Pledgor is required to execute and deliver this
Agreement; and
WHEREAS, each Pledgor has duly authorized the
execution, delivery and performance of this Agreement;
and
WHEREAS, each Pledgor will derive substantial direct
and indirect benefits from the Credit Extensions made
from time to time to the Company pursuant to the Credit
Agreement and the entering into of Interest Rate
Agreements with Interest Rate Exchangers, which
benefits are hereby acknowledged, and each Pledgor,
accordingly, desires to enter into this Agreement in
order to satisfy the condition precedent described in
the foregoing recital;
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration,
the receipt of which is hereby acknowledged, each
Pledgor hereby agrees as follows:
A G R E E M E N T :
SECTION 1. Grants of Security.
Each Pledgor, to the extent of its interest therein,
hereby pledges and grants to the Collateral Agent for
its benefit and the benefit of the Secured Parties, and
hereby grants to the Collateral Agent for its benefit
and the benefit of the Secured Parties, a first
priority security interest in, the following (the
"Collateral") to secure the Secured Obligations (as
defined in Section 2):
(i) the shares of capital stock listed in Exhibit A
hereto and in Annex A to each Exhibit B hereto executed
by each Pledgor (the "Pledqed Shares"), the
certificates representing the Pledged Shares and all
interest in the entries on the books of any Person
registering ownership of all Pledged Shares that are
not represented by certificates and all dividends,
cash, instruments and other properties from time to
time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged
Shares;
(ii) from and after the 90th day following the Closing
Date (or if an earlier date, upon delivery thereof),
all of the issued and outstanding shares of EPIC and
its Subsidiaries (other than EPIC Properties, Inc.),
and from and after the date on which all of the CMOs
have been redeemed or otherwise retired, all of the
issued and outstanding shares of EPIC Properties, Inc.,
in each case together with the certificates
representing all such Pledged Shares and any interest
of the Pledgor in the entries on the books of any
financial intermediary pertaining to all such Pledged
Shares, and, subject to Section 6, all dividends, cash,
options, warrants, rights, instruments and other
property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Shares;
(iii) all additional shares of stock of any issuer of
the Pledged Shares from time to time acquired by the
Pledgors in any manner (which shares shall be deemed to
be part of the Pledged Shares), and the certificates
representing such additional shares and all interest in
the entries on the books of any Person registering
ownership of such additional shares that are not
represented by certificates and all dividends, cash,
instruments and other properties from time to time
received, receivable or otherwise distributed in
respect of or in exchange for any or all of such
shares; and
(iv) all proceeds of any and all of the foregoing
Collateral.
SECTION 2. Secured Obliqations.
This Agreement secures, and the Collateral pledged by
each Pledgor is collateral security for, the prompt
payment or performance in full when due, whether at
stated maturity, by acceleration or otherwise
(including the payment of amounts that would become due
but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C.
362(a)), of all obligations of such Pledgor under the
Subsidiary Guaranty, whether now or hereafter existing,
whether for principal, premium or interest (including,
without limitation, interest which, but for the filing
of a petition in bankruptcy with respect to the Company
or a particular Pledgor, would accrue on such
obligations), payments for early termination, fees,
expenses or otherwise, together with all obligations of
each Pledgor now or hereafter existing under this
Agreement (all such obligations being the "Secured
Obligations") provided, however, that the pledge made
and the security interest granted in Section 1 and any
other provision of this Agreement shall be effective as
to any obligations under the Subsidiary Guaranty in
respect of (a) any obligations refinancing or extending
all or any portion of the Obligations under the Credit
Agreement only if the holders of such obligations or
their representatives shall have executed and delivered
an acknowledgement to this Agreement substantially in
the form of Exhibit C hereto acknowledged by each
Pledgor, and (b) any Interest Rate Obligations only if
the Interest Rate Exchanger to whom such Interest Rate
Obligations are owed shall have executed and delivered
an acknowledgement to this Agreement acknowledged by
each Pledgor, and provided, further, that the
provisions of this Agreement shall not be effective as
to EPIC and its Subsidiaries until the 91st day
following the Closing Date.
SECTION 3. Delivery of Pledqed Collateral.
All certificates or instruments representing or
evidencing the Collateral shall be delivered in
accordance with Section 5.1.5 of the Credit Agreement
or Section 7.1.9 of the Credit Agreement, as the case
may be, to and held by the Collateral Agent on behalf
of the Secured Parties pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance
reasonably satisfactory to the Collateral Agent. The
Collateral Agent shall have the right, at any time upon
or after the occurrence and during the continuance of
an Event of Default in its discretion and without
notice to any Pledgor, except as required by clause
(b)(l) of Section 10, to transfer to or to register in
the name of the Collateral Agent or any of its nominees
any or all of the Collateral.
SECTION 4. Representations and Warranties.
Each Pledgor, as of the date of execution of this
Agreement or as of the date of execution by such
Pledgor of an acknowledgment to this Agreement
substantially in the form of Exhibit B hereto, as
applicable, represents and warrants as follows as to
itself and any Collateral pledged by it:
(a) Such Pledgor is duly organized, validly existing
and, in the case of each Pledgor that is a corporation,
in good standing under the laws of its respective
jurisdiction of incorporation or organization and has
full corporate, partnership or other appropriate power
and authority to own its assets and properties, to
operate its business as now conducted and proposed to
be conducted, to enter into this Agreement, to invest
in the subject Subsidiary, and to carry out the
transactions contemplated hereby.
(b) The subject Subsidiary is a corporation,
partnership or other similar arrangement duly
organized, validly existing and, in the case of each
subject Subsidiary that is a corporation, in good
standing under the laws of its respective jurisdiction
of incorporation or organization and has full
corporate, partnership or other appropriate power and
authority to own its assets and properties, to operate
its business as now conducted and proposed to be
conducted, to issue the Pledged Shares, if any, or
partnership or other ownership interests, as the case
may be, and to carry out the transactions contemplated
thereby.
(c) Each of such Pledgor and such subject Subsidiary
that is a corporation is in good standing wherever
necessary to carry on its present business and
operations, except in jurisdictions in which the
failure to be in good standing has no material adverse
effect on the Company and its Subsidiaries, taken as a
whole.
(d) The execution, delivery and performance by such
Pledgor of this Agreement, and the issuance of the
Pledged Shares, if any, or partnership or other
ownership interests have been duly authorized by all
necessary corporate, partnership or other appropriate
action by the Pledgor and the subject Subsidiary.
(e) The execution, delivery and performance by such
Pledgor of this Agreement, and the issuance of the
Pledged Shares, if any, or partnership or other
ownership interests do not and will not (i) violate any
provision of law applicable to such Pledgor or the
subject Subsidiary, the Certificate or Articles of
Incorporation or Bylaws or any partnership or other
appropriate charter documents, as applicable, of such
Pledgor or any order, judgment or decree of any court
or other agency of government binding on such Pledgor
or the subject Subsidiary, (ii) conflict with, result
in a ~reach of or constitute (with due notice or lapse
of time or both) a default under any material
contractual obligation of such Pledgor or the subject
Subsidiary, (iii) result in or require the creation or
imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets
of such Pledgor or the subject Subsidiary, other than
as provided in the Collateral Documents or as permitted
under Section 7.2.3 of the Credit Agreement, or (iv)
require any approval of stockholders, partners or other
owners of security interests or any approval or consent
of any Person under any material contractual obligation
of such Pledgor or the subject ~ubsidiary, other than
approvals or consents which have been obtained and
disclosed in writing to the Secured Parties.
(f) This Agreement constitutes the legally valid and
binding obligation of such Pledgor enforceable against
it in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable
principles (whether at law or in equity) relating to or
limiting creditors' rights generally.
(g) There is no action, suit, proceeding or
arbitration (whether or not purportedly on behalf of
such Pledgor or the subject Subsidiary) at law or in
equity or before or by any federal, state, municipal or
other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign,
pending or, to the knowledge of such Pledgor,
threatened against or affecting such Pledgor or the
subject Subsidiary, or any of their respective
properties which would materially adversely affect the
ability of ~uch Pledgor to perform its obligations
under this Agreement, and there is no basis known to
such Pledgor for any such action, suit or proceeding.
Neither such Pledgor nor the subject Subsidiary is (i)
in violation of any applicable law which materially
adversely affects or may materially adversely affect
the ability of such Pledgor to perform its obligations
under this Agreement, (ii) subject to or in default
with respect to any final judgment, writ, injunction,
decree, rule or regulation of any court or federal,
state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, which would materially adversely
affect the ability of such Pledgor to perform its
obligations under this Agreement. There is no action,
suit, proceeding or investigation pending, or to the
knowledge of such Pledgor, threatened against or
affecting the Pledgor or the subject Subsidiary, which
contests the validity or enforceability of this
Agreement.
(h) All of the Pledged Shares, if any, ha~e been duly
authorized and validly issued and are fully paid and
nonassessable.
(i) Such Pledgor is the legal and beneficial owner, or
at the time of delivery of such Collateral to the
Collateral Agent pursuant to Section 3 of this
Agreement will be such owner, of the Collateral free
and clear of any Lien except for the security interest
created by this Agreement.
(j) The pledge of the Pledged Shares pursuant to this
Agreement and the pledge and delivery of the
certificates and other instruments evidencing the same
create a valid and perfected first priority security
interest therein, securing the payment of the Secured
Obligations.
(k) Except as has already been obtained by Pledgor, no
consent of any other party (including, without
limitation, stockholders or partners, or other Persons
owning equity interests in, or creditors of such
Pledgor) and no consent, authorization, approval, or
other action by, and no notice to or filing with, any
governmental authority or regulatory body is required
either (i) for the pledge by such Pledgor of the
Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by
such Pledgor or (ii) for the exercise by the Collateral
Agent of the voting or other rights provided for in
this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement (except as may be
required in connection with such disposition by laws
affecting the offering and sale of securities
generally).
(l) The Pledged Shares, if any, constitute the
percentage of the issued and outstanding shares of
capital stock of the issuer thereof set forth opposite
the name of such issuer in Part I of Exhibit A hereto
and in Part I of Annex A to Exhibit B hereto executed
and delivered by such Pledgor.
(m) Such Pledgor has received all permission necessary
by the subject Subsidiary and the equity participants
therein to encumber the Collateral.
SECTION 5. Further Assurances.
(a) Each Pledgor agrees that at any time and from time
to time, at the expense of such Pledgor, such Pledgor
will promptly execute and deliver all further
instruments and documents, and take all further action,
that may be necessary, or that the Collateral Agent may
reasonably request, in order to perfect and protect any
security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with
respect to any Collateral.
(b) Each Pledgor further agrees that it will, upon
obtaining any shares of any Person required to be
pledged pursuant to clause (iii) of Section 1, promptly
(and in any event within five (5) Business Days)
deliver to the Collateral Agent a pledge amendment,
duly executed by such Pledgor, in substantially the
form of Exhibit D hereto (a "Pledge Amendment"), in
respect of the additional Pldged Shares which are to be
pledged pursuant to this Agreement. Each Pledgor
hereby authorizes the Collateral Agent to attach each
Pledge Amendment to this Agreement and agrees that all
Pledged Shares listed on any Pledge Amendment delivered
to the Collateral Agent shall for all purposes
hereunder be considered Collateral.
(c) Each Pledgor will not make any changes in its
corporate name or conduct its business operations under
any fictitious business name or trade name without
giving to the Collateral Agent at least 30 days prior
written notice of such changes or new name.
SECTION 6. Transfers and Other Liens.
Except as otherwise permitted by the Credit Agreement,
no Pledgor shall: (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of any of the
Collateral, (ii) create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure
the debt of any person or entity, except for the
security interest created by this Agreement, or (iii)
permit any issuer of any Pledged Shares pledged by such
Pledgor to terminate its corporate, partnership or
other existence; provided, however, that if a Permitted
Disposition occurs and the assets subject to such
Penmitted Disposition are Collateral, the Collateral
Agent shall release the Pledged Shares that are the
subject of such Permitted Disposition to the applicable
Pledgor free and clear of the Lien and security
interest under this Agreement effective as of the time
of such Permitted Disposition; provided, further, that
notwithstanding anything herein to the contrary, the
Collateral Agent may release such Collateral from the
lien and security interest of this Agreement upon the
approval of the release of such Collateral by the
Lenders under the Credit Agreement.
SECTION 7. The Collateral Aqent Appointed
Attorney-in-Fact
Each Pledgor hereby irrevocably appoints the Collateral
Agent its attorney-in-fact, with full authority in the
place and stead of such Pledgor and in the name of such
Pledgor, the Collateral Agent or otherwise, from time
to time in the Collateral Agent's discretion (which
discretion shall be exercised reasonably) to take any
action and to execute any instrument that the
Collateral Agent may reasonably deem necessary or
advisable to accomplish the purposes of this Agreement,
including, without limitation:
(i) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any
of the Collateral,
(ii) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in
connection with clause (i) above, and
(iii) to file any claims or take any action or
institute any proceedings that the Collateral Agent may
deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the
Collateral; and, in the case of each of clauses (i).
(ii) and (iii) above, the Collateral Agent shall use
its best efforts to give the affected Pledgor notice of
any action taken by the Collateral Agent in accordance
with this Section 7 as soon as practicable after such
action is taken; provided, however, that a failure to
give such notice shall not in any way impair the
authority of the Collateral Agent pursuant to this
Section 7 or the validity of any action taken by the
Collateral Agent pursuant thereto; provided, further,
that it is expressly agreed that (y) in the case of any
JV Subsidiary that is a partnership, the exercise by
the Collateral Agent of the authority granted pursuant
to this Section 7 shall not cause the Collateral Agent
to become subject to any of the liabilities or
obligations of a general partner of the subject JV
Subsidiary and (z) each Pledgor hereby agrees to
indemnify the Collateral Agent against any and all
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the
Collateral Agent in any way relating to or arising out
of the Collateral or any action taken by the Collateral
Agent with respect thereto pursuant to this Section 7,
except as such result from the Collateral Agent's gross
negligence or willful misconduct or the failure by the
Collateral Agent to exercise reasonable care in the
custody and preservation of the Collateral as provided
in Section 9.
SECTION 8. The Collateral Agent May Perform.
If any Pledgor fails to perform any agreement contained
herein after written request to do so by the Collateral
Agent, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the
reasonable expenses so incurred in connection therewith
shall be payable by such Pledgor pursuant to Section
13.
SECTION 9. The Collateral Agent's Duties.
The powers conferred on the Collateral Agent hereunder
are solely to protect its interest in the Collateral
and shall not impose any duty upon it to exercise any
such powers. Except for treatment of the Collateral in
its possession in a manner substantially equivalent to
that which the Collateral Agent, in its individual
capacity, accords its own property of a similar nature,
and the accounting for moneys actually received by it
hereunder, the Collateral Agent shall have no duty as
to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
SECTION 10. Voting Riqhts; Dividends; etc.
(a) So long as no Event of Default has occurred and is
continuing:
(i) Each Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to
the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement or the
Credit Agreement; provided, however, that such Pledgor
shall not exercise or refrain from exercising any such
right if the Collateral Agent shall have notified such
Pledgor that, in the Collateral Agent's reasonable
judgment, such action would have a material adverse
effect on the value of the Collateral or any part
thereof.
(ii) Each Pledgor shall be entitled to receive and
retain any and all dividends paid in respect of the
Collateral pledged by such Pledgor; provided, however,
that any and all dividends paid or payable in the form
of Securities shall be, and shall be forthwith
delivered to the Collateral Agent to hold as,
Collateral and shall, if received by such Pledgor, be
received in trust for the benefit of the Collateral
Agent, be segregated from the property or funds of such
Pledgor, and be forthwith delivered to the Collateral
Agent as Collateral in the same form as so received
(with any necessary indorsement).
(iii) The Collateral Agent shall execute and deliver
(or cause to be executed and delivered) to each Pledgor
all such proxies and other instruments as such Pledgor
may reasonably request for the purpose of enabling such
Pledgor to exercise the voting and other rights that it
is entitled to exercise pursuant to paraqraph (i) above
and to receive the dividends that it is authorized to
receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of
an Event of Default:
(i) All rights of each Pledgor to exercise the voting
and other consensual rights that it would otherwise be
entitled to exercise pursuant to clause (a)(i) of
Section 10 and to receive the dividends that it would
otherwise be authorized to receive and retain pursuant
to clause (a) of Section 10 shall cease, and all such
right shall thereupon become vested in the Collateral
agent who shall thereupon have the sole right to
exercise such voting and other consensual rights and to
receive and hold as Collateral such dividends;
provided, however, that the right of any Pledgor to
exercise such voting and other consensual rights shall
cease only upon written notice from the Collateral
Agent to such Pledgor.
ii) All dividends that are received by any Pledgor
contrary to the provisions of paragraph (i) of this
clause (b) shall be received in trust for the benefit
of the Collateral Agent, shall be segregated from other
funds of such Pledgor and shall be forthwith paid over
to the Collateral Agent as Collateral in the same form
as so received twith any necessary indorsement).
(iii) Each Pledgor shall execute and deliver (or cause
to be executed and delivered) to the Collateral Agent
all such proxies and other instruments as the
Collateral Agent may reasonably request for the purpose
of enabling the Collateral Agent to exercise the voting
and other rights that it is entitled to exercise
pursuant to paragraph (i) above and to receive the
dividends that it is authorized to receive and
retain pursuant to paragraph (ii) above.
SECTION 11. Remedies upon Default: Decisions Relating
to Exercise of Remedies.
A. Remedies Upon Default.
If any Event of Default under the Credit Agreement
shall have occurred and be continuing:
(a) The Collateral Agent may exercise in respect of
the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party in
default under the Uniform Commercial Code (the "UCC")
in effect in the State of New York at that time, and
the Collateral Agent may also without notice (except as
specified below) sell the Collateral or any part
thereof in one or more parcels, at public or private
sale, at any exchange, broker's board or at any of the
Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times
and at such price or prices and upon such other terms
as the Collateral Agent may deem commercially
reasonable, irrespective of the impact of any such
sales on the market price of the Collateral. The
Collateral Agent or any Secured Party may be the
purchaser of any or all of the Collateral at any such
sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price
for all or any portion of the Collateral sold at any
such public sale, to use and apply any of the Secured
Obligations owed to such Person as a credit on account
of the purchase price of any Collateral payable by such
Person at such sale. Each purchaser at any such sale
shall hold the property sold absolutely free from any
claim or right on the part of any Pledgor, and each
Pledgor hereby waives (to the extent permitted by law)
all rights of redemption, stay and/or appraisal that it
now has or may at any time in the future have under any
rule of law or statute now existing or hereafter
enacted. Each Pledgor agrees that, to the extent
notice of sale shall be required by law, at least ten
days' notice to such Pledgor of the time and place of
any public sale or the time after which any private
sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be
obligated to make any sale of Collateral regardless of
notice of sale having been given. The Collateral Agent
may adjourn any public or private sale from time to
time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be
made at the time and place to which it was 80
adjourned. Each Pledgor hereby waives, to the fullest
extent permitted by law, any claims against the
Collateral Agent arising by reason of the fact that the
price at which any Collateral may have been sold at
such a private sale was less than the
price that might have been obtained at a public sale,
even if the Collateral Agent accepts the first offer
received and does not offer such Collateral to more
than one offeree.
(b) Each Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933,
as from time to time amended (the "Securities Act"),
and applicable state securities laws, the Collateral
Agent may be compelled, with respect to any sale of all
or any part of the Collateral conducted without prior
registration or gualification of such Collateral under
the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among
other things, to acguire the Collateral for their own
account, for investment and not with a view to the
distribution or resale thereof. Each Pledgor
acknowledges that any such private sales may be at
prices and on terms less favorable to the Collateral
Agent than those obtainable through a public sale
without such restrictions (including, without
limitation, a public offering made pursuant to a
registration statement under the Securities Act) and
such Pledgor agrees that any such private sale shall be
deemed to have been made in a commercially reasonable
manner and that the Collateral Agent shall have no
obligation to engage in public sales and no obligation
to delay the sale of any Collateral for the period of
time necessary to permit the issuer thereof to register
it for a form of public sale requiring registration
under the Securities Act or under applicable state
securities laws.
(c) If the Collateral Agent determines to exercise its
right to sell any or all of the Collateral, upon
written request, each Pledgor shall, and shall cause
each issuer of any Pledged Shares pledged by such
Pledgor to be sold hereunder from time to time to,
furnish to the Collateral Agent all such information as
the Collateral Agent may request in order to determine
the number of shares and other instruments included in
the Collateral which may be sold by the Collateral
Agent as exempt transactions under the Securities Act
and the rules of the Securities and Exchange Commission
thereunder, as the same are from time to time in
effect.
B. Decisions Relating to Exercise of Remedies.
Notwithstanding anything in this Agreement to the
contrary, as provided in the Credit Agreement, the
Collateral Agent shall exercise, or shall refrain from
exercising, any remedy provided for in Subsection A
above in accordance with the instructions of the
Required Lenders and the Co-Agents, the Administrative
Agent, the Lenders and the Interest Rate Exchangers
shall be bound by such instructions; Agent, the Lenders
Agreement shall be and the sole rights of the
Administrative and the Interest Rate Exchangers under
this to be secured by the Pledged Collateral and
receive the payments provided for in Section 12 hereof.
SECTION 12. Application of Proceeds.
All proceeds received by the Collateral Agent in
respect of any sale of, collection from, or any
realization upon all or any part of the Collateral
shall be applied promptly in whole or in part by the
Collateral Agent against the Secured Obligations in the
following order of priority:
first, to the payment of the costs and expenses of such
sale, collection or other realization, including
reasonable compensation to the Collateral Agent and its
agents and counsel, and all expenses, liabilities and
advances made or incurred by Collateral Agent in
connection therewith, in accordance with Section 13;
second, to the payment of all or any part of the
Secured Obligations; and
third, after payment in full of the amounts specified
in the preceding subparagraphs, to the payment to or
upon the order of the applicable Pledgor, or to
whomsoever may be lawfully entitled to receive the same
or as a court of competent jurisdiction may direct, of
any surplus then remaining from such proceeds.
SECTION 13. Indemnity and Expenses.
(a) Each Pledgor agrees to indemnify the Collateral
Agent and each Secured Party from and against any and
all claims, losses and liabilities growing out of or
resulting from this Agreement, the Credit Agreement, or
any other documents contemplated by or referred to
therein or herein or the transactions contemplated
thereby or hereby or the enforcement of any of the
terms hereof or of any such other documents, except
claims, losses or liabilities resulting from the
Collateral Agent's or that Secured Party's gross
negligence or willful misconduct or failure by the
Collateral Agent to exercise reasonable care in the
custody and preservation of the Collateral as provided
in Section 9.
(b) Each Pledgor agrees to pay upon demand to the
Collateral Agent the amount of any and all expenses,
including the reasonable fees and disbursements of
counsel and of any experts and agents, that the
Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of
the rights of the Collateral Agent hereunder, or (iv)
the failure by such Pledgor to perform or observe any
of the provisions hereof.
SECTION 14. Amendments; Termination.
(a) No amendment, modification or waiver to this
Agreement shall be binding (i) on the Collateral Agent
without the written consent of the Collateral Agent or
(ii) on any Pledgor without the written consent of such
Pledgor.
(b) When all Secured Obligations have been
indefeasibly paid in full and no Commitment or Letter
of Credit remains outstanding, this Agreement #hall
tenminate, and the Collateral Agent shall, upon the
reguest and at the expense of any Pledgor, forthwith
assign, transfer and deliver, against receipt and
without recourse to the Collateral Agent, such of the
Collateral pledged by such Pledgor as shall not have
been sold or otherwise applied pursuant to the terms
hereof to or on the order of such Pledgor and shall
execute and deliver to such Pledgor such documents as
such Pledgor shall reasonably request to evidence such
termination.
SECTION 15. Addresses for Notices.
All notices and other communications to any party
provided for hereunder shall be in writing and may be
personally delivered, telecopied, telexed or sent by
United States mail. For the purposes hereof, the
addresses of the parties hereto shall be as set forth
under each party's name on the appropriate signature
page hereof, or as to any party at such other address
as shall be designated by such party in a written
notice to each other party complying as to delivery
with the terms of this Section 15. All such notices
and other collullunications shall be deemed to have
been given when delivered in person, upon receipt of
telecopy or telex, or four Business Days after deposit
in the United States mail, registered or certified,
with postage prepaid and properly addressed as
aforesaid.
SECTION 16. Continuing Security Interest; Assignments
by the Secured Parties.
Subject to the provisos to Section 6 hereof and to
Section 14 hereof and to the Credit Agreement, this
Agreement shall create a continuing security interest
in the Collateral and shall (i) remain in full force
and effect until indefeasible payment in full of the
Secured Obligations and all Commitments have been
terminated and all Letters of Credit cancelled, (ii) be
binding upon each Pledgor, its successors and assigns
and (iii) inure to the benefit of the Secured Parties
and the Collateral Agent, on behalf of the Secured
Parties, and their successors, transferees and assigns.
Without limiting the generality of the foregoing clause
(iii) but subject to the provisions of the Credit
Agreement, any Secured Party may assign or otherwise
transfer the indebtedness held by it to any other
Person and such other Person shall thereupon become
vested with all the benefits in respect thereof granted
to such Secured Party herein or otherwise.
SECTION 17. Governinq Law; Terms.
THIS AGREEMENT, AND ANY INSTRUMENT OR AGREEMENT
REQUIRED EERE~NDBR, SHALL BE GOVERNED BY, AND SHALL BB
CONSTRUED AND ENFORCED IN ACCORDANCB WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. Unless otherwise
defined herein or in the Credit Agreement, terms used
in Articles 8 and 9 of the UCC as in effect in the
State of New York are used herein as therein defined.
SECTION 18. Consent to Jurisdiction and Service of
Process
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR
WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORK AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PLEDGOR ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. EACH PLEDGOR HEREBY DESIGNATES AND APPOINTS
DEWEY BALLANTINB, 1301 AVENUE OF THE AMERICAS, NEW
YORK, NEW YORK 10019, ATTENTION: MORTON A. PIERCE, AND
SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY SUCH
PLEDGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS
ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL
PROCESSING ANY SUCH PROCBEDINGS IN SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY EACH SUCH PLEDGOR
TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO THE PLEDGORS AT THE ADDRESS
PROVIDED IN THE APPLICABLE SIGNATURE PAGE HERETO EXCEPT
THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL AFFECT THE VALIDITY OF
SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY
PLEDGOR REFUSES TO ACCEPT SERVICE, SUCH PLEDGOR HEREBY
AGREES THAT SERVICE UPON IT BY REGISTERED MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST ANY
PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. The scope
of this waiver is intended to be all encompassing of
any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction
including, without limitation, contract claims, tort
claims, breach of duty claims and all other common law
and statutory claims. The Collateral Agent and the
Pledgors each (i) acknowledge that this waiver is a
material inducement for The Collateral Agent to enter
into a business relationship, that The Collateral Agent
and the Pledgors have already relied on this waiver in
entering into this Agreement and that each will
continue to rely on this waiver in their related future
dealings and (ii) further warrant and represents that
each has reviewed this waiver with its legal counsel
and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel.
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS OF THIS AGREEMENT. In the
event of litigation, the Agreement may be filed as a
written consent to a trial by the Court.
SECTION 19. Counterparts
This Agreement and any amendments, waivers, consents or
supplements may be executed in any number of
counterparts, each of which when so executed and
delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, each pledgor and the
Collaterall Agent have caused this Agreement to be duly
executed and delivered by their officers thereunto duly
authorized as of the date first above written.
TRI-CITY MED, INC
MED CENTRAL, INC.
ROSEBURG AMBULANCE, INC.
By s/Glenn D. Davis
Name:
Title:
Address: c/o Healthtrust, Inc. - The
Hospital Company
4525 Harding Road
Nashville, TN 37205
Telecopier No.: (615) 298-6377
Attention: President
THE BANK OF NOVA SCOTIA,
as Collateral Agent
By s/ Mary K. Munoz
Authorized Signatory
Address: 600 Peachtree Street, N.E.
Suite 2700
Altanta, GA 30308
Telecopier No.: (404) 888-8998
Attention: Ms. Mary Munoz
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of December 31,
1994, by and between HEALTHTRUST, INC. - THE HOSPITAL
COMPANY, a Delaware corporation (the "Corporation"),
and R. CLAYTON MCWHORTER ("Employee").
W I T N E S S E T H
WHEREAS, the Corporation desires to recognize
the outstanding contributions made by Employee to the
Corporation and to secure the continuation of his
services with the Corporation; and
WHEREAS, the Compensation Committee of the
Board of Directors of the Corporation (the "Board") at
a meeting held on December 31, 1993, at which meeting a
quorum was present and voted, authorized and directed
the Corporation to enter into an Employment Agreement
with Employee;
NOW THEREFORE, in consideration of the
foregoing and of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
1. Terms and Duties
(a) The Corporation hereby employs Employee
for a term commencing on September 1, 1993, and ending
on August 31, 1996 and Employee hereby agrees to serve
as Chairman of the Board, Chief Executive Officer and
President of the Corporation during said period upon
the terms and conditions herein contained. As used in
this Agreement, the phrase "term of this Agreement"
shall mean the period of time from September 1, 993, to
August 31, 1996, unless the parties agree to extend
this Agreement, pursuant to Paragraph 1(c) below, in
which case the term of this Agreement shall also
include the extension of such period pursuant to such
agreement.
(b) During the term of this Agreement,
Employee shall perform such duties and assignments for
the Corporation as may be determined from time to time
by the Board of Directors of the Corporation and as are
reasonable and customary for a Chairman of the Board,
Chief Executive Officer and President.
(c) The Corporation and Employee hereby
acknowledge that this Agreement may be extended for an
additional period, provided both parties agree on the
terms and conditions in writing at any time prior to
September 1, 1996.
2. Minimum Base Compensation and Bonus
(a) Commencing as of September 1, 1993, the
Corporation agrees to pay Employee a base salary (in
addition to the other compensation and benefits
provided herein) at the rate per year of $800,000.00
Employee's annual base salary payable pursuant to this
Paragraph (including any changes thereto pursuant to
Paragraph 2(b) below) is hereinafter sometimes referred
to as "Employee's Base Compensation". Employee's Base
Compensation shall be payable in accordance with the
customary payroll practices of the Corporation, but in
no event less frequently than monthly. The Board may
increase but no decrease Employee's Base Compensation
at any time by such amounts as it deems proper.
(b) Employer shall be eligible to receive
such bonus awards or other incentive compensation as
shall be determined from time to time by the Board in
its sole discretion. Nothing contained in this
Agreement shall preclude the Board from eliminating,
reducing or otherwise changing any term or condition of
any such bonus award.
3. Participation in Benefit Plans
While employed under this Agreement, Employee
shall be eligible to participate in all executive
compensation and employee benefit plans or programs
generally applicable to senior management employees of
the Corporation. Except as otherwise provided herein,
any such participation shall be in accordance with the
provisions of such plans or programs and nothing
contained in this Agreement is intended to or shall be
deemed to affect adversely any of the Employee's rights
as a participant under any such plan or program.
Nothing in this Agreement shall preclude the
Corporation from terminating or amending any such plan
or program so as to eliminate, reduce or otherwise
change any benefit payable thereunder.
4. Vacation
Employee shall be entitled to vacation in
accordance with the policies of the Corporation in
effect from to time.
5. Reimbursement of Business Expenses
Employee is authorized to incur reasonable
expenses related to and for promoting the business of
the Corporation, including expenses for entertainment,
travel and similar items, and any such expenses paid by
Employee from his own funds shall be promptly
reimbursed to him by the Corporation in accordance with
the policies and procedures of the Corporation in
effect from time to time.
6. Source of Payments
In any case were coverage or benefits are
required to be provided under this Agreement but cannot
be provided in accordance with the terms of the
Corporation's plans which are maintained for the
Corporation's senior executive or other employees
generally, or both, such coverage and benefits shall be
provided from the general assets of the Corporation.
No special or separate fund shall be established and no
other segregation of assets shall be made to assure the
payment of any such amounts. To the extent that any
person acquires a right to receive payments from the
Corporation under this Agreement, such right shall be
no greater than the right of an unsecured general
creditor of the Corporation.
7. Termination by the Corporation of
Employee's Employment for Cause
(a) Notwithstanding any other provision of
this Agreement, the Corporation shall have the right to
terminate Employee's employment upon written notice to
Employee that the Board has found, based upon
reasonable evidence presented in writing to Employee,
that Employee has materially breached this Agreement by
engaging in dishonest or fraudulent actions or willful
misconduct or has materially harmed the Corporation by
performing his duties in a grossly negligent manner.
Employee shall upon receipt of such written notice and
evidence immediately cease to be an employee of the
Corporation.
(b) In case of a termination by the
Corporation on account of breach hereunder pursuant to
Paragraph 7(a) above, the Corporation's obligations to
Employee under this Agreement shall cease upon the
effective date of such termination and the Corporation
shall not be liable to continue paying Employee the
Employee's Base Compensation nor shall Employee be
entitled to any rights or benefits pursuant to
Paragraph 3 above, other than as may be provided under
the terms of such plans which are generally applicable
to participants who have terminated employment under
similar circumstances.
8. Disability
(a) In the event of the total disability (as
hereinafter defined) of Employee during the term of
this Agreement, the Corporation shall continue to pay
Employee's Base Compensation and shall continue
Employee's participation in its various executive
compensation and employee benefit plans and programs
pursuant to Paragraph 3 above during the period of this
total disability until the end of the term of this
Agreement; provided, however, that in the event
Employee is totally disabled for a continuous period
exceeding one hundred fifty (150) days the Corporation
may, at its election, terminate Employee's employment
upon thirty (30) days' written notice, in which event
Employee shall be entitled to receive the benefits
described in Paragraph 8(b) below. As used in this
Agreement, the term "total disability" shall mean the
complete inability of Employee to perform all of the
duties of his position with the Corporation by reason
of any physical or mental ailment.
(b) In the event that Employee is totally
disabled for a period described in Paragraph 8(a) above
and the Corporation elects to terminate Employee's
employment, the Corporation shall continue to pay
Employee a disability benefit ("Disability Benefit")
equal to Employee's Base Compensation in effect at the
time of such termination for the greater of (i) the
entire term of this Agreement and (ii) one year from
the date of termination. Payment of the Disability
Benefit under this Paragraph 8(b) shall commence within
thirty (30) days of the termination of Employee's
participation (including dependent coverage) in any
life, accident, disability, health and dental insurance
plans, and any other similar welfare plans of the
Corporation in effect immediately prior to the
effective date of the termination shall be continued,
or equivalent benefits provided, by the Corporation
during the period in which the Disability Benefit is
paid at no cost to Employee or his dependents.
(c) If Employee becomes entitled to and
receives other disability benefits under any disability
payment plan paid for by the Corporation, including
disability insurance, the Disability Benefit otherwise
payable by the Corporation to Employee pursuant to
Paragraph 8(b) above shall be reduced (but not below
zero) by the amount of any such other disability
benefits received by him, but only to the extent such
benefits are attributable to payments made by the
Corporation.
9. Death
If Employee should die during the term of
this Agreement, the Corporation shall continue to pay
his estate or designated beneficiary or beneficiaries a
death benefit ("Death Benefit") equal to Employee's
Base Compensation in effect at the date of his death
for the greater of (i) the entire term of this
Agreement or (ii) one year from the date of his death.
Payment of the Death Benefit shall commence within
thirty (30) days of the date of Employee's death. The
Corporation shall also pay Employee's estate or
designated beneficiary or beneficiaries such other
death benefits as become payable under the terms of
such travel accident, life insurance, and employee
stock ownership plan, and other executive compensation
and employee benefit plans and programs of the
Corporation in which Employee was a participant on his
date of death. In addition, dependent coverage
provided by any life, accident, disability, health and
dental insurance plans, and any other similar welfare
plans of the Corporation in effect immediately prior to
the date of Employee's death shall be continued, or
equivalent benefits provided, by the Corporation during
the period in which the Death Benefit is paid at no
cost to Employee or his dependents.
10. Resignation as Board Member
In any instance where Employee ceases to be
an employee of the Corporation, no matter what the
reason, and if Employee is then a member of the board,
Employee hereby agrees that, unless otherwise requested
by the board, he shall simultaneously submit his
resignation as a member of the Board in writing on or
before the date he ceases to be an employee of the
Corporation. If Employee fails or neglects to submit
such resignation in writing, this Paragraph 10 may be
deemed by the Corporation to constitute Employee's
written resignation as a member of the Board effective
on the same date that Employee ceases to be an employee
of the Corporation.
11. Waiver
Failure of either party hereto to insist upon
strict compliance by the other party with any term,
covenant or condition hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall
any waiver or relinquishment or failure to insist upon
strict compliance of any right or power hereunder at
any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time
or times.
12. Withholding of Taxes
The Corporation may withhold from any
benefits payable under this Agreement all federal,
state, city or other taxes as shall be required
pursuant to any law or governmental regulation or
ruling.
13. Facility of Payment
If the Board shall find the person to whom
any amount is or was payable hereunder is unable to
care his affairs because of illness or accident, or is
a minor, or has dies, then the Board, if it so elects,
may direct than any payment due him or his estate
(unless a prior claim therefore has been made by a duly
appointed legal representative) or any part hereof be
paid or applied for the benefit of such person or to or
for the benefit of his spouse, children or other
dependents, an institution maintaining or having
custody of such person, any other person deemed by said
Board to be a proper recipient on behalf of such person
otherwise entitled to payment, or any of them, in such
manner and proportion as the Board may deem proper.
Any such payment shall be in complete discharge of the
liability of the Corporation therefor.
14. Prior Agreements
This instrument sets forth the entire
agreement between the parties hereto with respect to
the subject matter hereof.
15. Consolidation or Merger
Nothing in this Agreement shall preclude the
Corporation from consolidating or merging into or with,
or transferring all or substantially all of its assets
to, another corporation or other entity (the "Successor
Employer") which assumes this Agreement and all
obligations of the Corporation hereunder by operation
of law or affirmative action. Upon such a
consolidation, merger or transfer of assets and
assumption, the term "Corporation" shall refer to the
Successor Employer and this Agreement shall continue in
full force and effect.
16. Unsecured Creditor Status
Employee shall have no right, title or
interest whatsoever in or to any investments which the
Corporation may make to aid it in meeting its
obligations under this Agreement. Nothing contained in
this Agreement, and no action taken pursuant to its
provision, shall create or be construed to create a
trust of any kind, or a fiduciary relationship between
the Corporation and Employee, his beneficiary, legal
representative or any other person. To the extent that
any person acquires a right to receive payments from
the Corporation under this Agreement, such right shall
be no greater than the right of an unsecured general
creditor of the Corporation. All payments to be made
hereunder shall be paid from the general funds of the
Corporation and no special or separate fund shall be
established and no segregation of assets shall be made
to assure payment of such amounts.
17. Non-Alienation of Benefits
Except insofar as applicable law may
otherwise require, no amount payable to or in respect
of Employee at any time under this Agreement shall be
subject in any manner to alienation by anticipation,
sale, transfer, assignment, bankruptcy, pledge,
attachment, change or encumbrance of any kind, and any
attempt to so alienate, sell, transfer, assign, pledge,
attach, charge or otherwise encumber any such amount,
whether presently or thereafter payable shall be void;
provided, however, that nothing in this Paragraph 17
shall preclude Employee from designating a beneficiary
or beneficiaries to receive any benefit on his death.
18. Benefits
Except as otherwise expressly provided
herein, this Agreement shall inure to the benefit of
and be binding upon the Corporation, its successors and
assigns, and upon Employee, his beneficiaries, heirs,
executors and administrators.
19. Amendment
No amendment or modification of this
Agreement shall be deemed effective unless and until
executed in writing by Employee and the Corporation.
20. Severability
If for any reason any provision of this
Agreement shall be held invalid, such invalidity shall
not affect any other provision of this Agreement not
held so invalid, and all other such provisions shall t
the full extent consistent with law continue in full
force and effect. If any such provision shall be held
invalid in part, such invalidity shall in no way affect
the remaining portion of such provision not held so
invalid, and the remaining portion of such provision,
together with all other provisions of this Agreement,
shall likewise to the full extent consistent with law
continue in full force and effect.
21. Headings
The headings of paragraphs are included
solely for convenience of reference and shall not
control the meaning or interpretation of any of the
provisions of this Agreement.
22. Governing Law
This Agreement shall be governed by the laws
of the State of Tennessee.
23. Notices
Any notices required or desired to be given
pursuant to this Agreement shall be sufficient if in
writing and transmitted by hand delivery or by
registered or certified mail. All communications to
Employee shall be addressed to:
R. Clayton McWhorter
4500 Post Road, #F66
Nashville, TN 37205
All communications to the Corporation shall
be addressed to:
Board of Directors
Healthtrust, Inc. - The Hospital Company
4525 Harding Road
Nashville, TN 37205
Notwithstanding the foregoing, the
Corporation and Employee may, by notice in accordance
herewith, designate a different address than contained
herein.
IN WITNESS WHEREOF, the Corporation has
caused its name to be ascribed to this Agreement by its
duly authorized representative and Employee has
executed this Agreement as of the day and year first
above written.
HEALTHTRUST, INC. - THE
HOSPITAL COMPANY
By: s/Richard W. Hanselman
Name: Richard W. Hanselman
Title: Chairman of the
Compensation Committee
s/R. Clayton McWhorter
R. Clayton McWhorter
CONSULTING AGREEMENT
This Agreement, dated as of April 14, 1994, is by and between Healthtrust,
Inc. - The Hospital Company, a Delaware corporation ("HTI") and Donald S.
MacNaughton, ("Consultant").
1. Engagement. HTI hereby engages the Consultant, as an independent
contractor, for services to be rendered to HTI from time to time as
reasonably and specifically requested by HTI (the "Services"), and the
Consultant hereby accepts the engagement upon the terms and conditions
of this Agreement.
2. Term. The term of this Agreement shall begin on January 1, 1994 and
shall terminate on December 31, 1994.
3. Compensation. The Consultant shall be paid by HTI for the Services
at a rate of $135,000 per year (less Board of Director fees, if any)
payable in monthly installments during the term hereof beginning February 1,
1994 and ending on January 1, 1995. For any monthly period in which this
Agreement is terminated, Consultant shall be paid on a prorata basis for
Services rendered up to the date of termination. In addition, HTI shall
provide bookkeeping services to Consultant up to an aggregate amount not to
be reimbursed by Consultant.
4. Expenses. HTI will reimburse Consultant for reasonable travel
expenses in connection with any meetings attended by Consultant at the
request of HTI upon the Consultant presenting an itemized statement of
such expenses. Other expenses shall not be reimbursed by HTI without HTI's
prior authorization.
5. Business Practices. Consultant will comply with all applicable laws
in acting on HTI's behalf.
6. Confidentiality. (a) Consultant agrees that documents, data and other
information furnished Consultant by HTI shall be held in strict confidence
and Consultant shall not use such data or information or disclose the same
to others or use such data or information for the Consultant's own benefits
except such data or information as is published, is a matter of public
record or is required to be disclosed to governmental or health care agencies.
(b) The parties to this Agreement agree that the Controller General of
the United States, Secretary of the HHS and their duly authorized
representatives, may, upon written request, have access to those books,
documents and records relating to the services provided under this
Agreement, for a period of four (4) years after the furnishing of such
services in accordance with the applicable regulations issued pursuant to
42 CFR, Part 420, Regulation 420.300. Any subcontractor or related party
to the contracts privileged under the applicable attorney-client,
accountant-client, or other legal privilege shall not be deemed waived by
virtue of this contract.
(c) In the event of a breach or threatened breach by the Consultant of
the provisions of this paragraph, HTI shall be entitled to an injunction
restraining the Consultant from disclosing, in whole or in part, documents,
dates or other information. Nothing herein shall be construed as
prohibiting HTI from pursuing any other remedies available to HTI for
breach or threatened breach, including the recovery of damages from the
Consultant.
7. Termination Without Cause. Without cause, either Consultant or HTI
may terminate this Agreement at any time upon 10 days' prior written notice
to the other party. In such event, Consultant, if requested by HTI, shall
continue to render services, and shall be paid up to the date of termination.
8. Notices. Any notice required or desired to be given under this
Agreement shall be deemed given if in writing sent by certified mail as
follows:
If to HTI: Healthtrust, Inc. - The Hospital Company
4525 Harding Road
Nashville, Tennessee 37205
Attention: Chairman and Chief Executive Officer
If to Consultant: Donald S. MacNaughton
7017 S. E. Harbor Circle
Stuart, FL 34996
9. Waiver of Breach. The waiver by HTI of a breach of any provision of
this Agreement by the Consultant shall not operate or be construed as a
waiver of any subsequent breach by the Consultant. No waiver shall be
valid unless in writing and signed by an authorized officer of HTI.
10. Assignment. The Consultant acknowledges that the services to be
rendered by it are unique and personal. Accordingly, the Consultant may
not assign any of its rights or delegate any of its duties or obligations
under this Agreement. The rights and obligations of HTI under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of HTI.
11. Relationship of Parties. Consultant is an independent contractor,
and neither Healthtrust nor any of its affiliates shall have any actual,
potential, or other control or authority over Consultant. Consultant shall
not have the right or authority to assume or create any obligation or
responsibility whatsoever, express or implied, on behalf of or in the name
of Healthtrust or its affiliates or to bind any of them in any respect
whatsoever. The parties do not intend to create a partnership, joint venture
or similar relationship.
12. Entire Agreement. This Agreement contains the entire understanding of
the parties. It may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
IN WITNESS WHEREOF the parties have executed this Agreement on the date
first above written.
HEALTHTRUST, INC. - THE HOSPITAL
COMPANY
By: s/R. Clayton McWhorter
Title: Chairman of the Board,
Chief Executive Officer
and President
s/Donald S. MacNaughton
Donald S. MacNaughton
CONSULTING AGREEMENT
Agreement dated as of February 28, 1994 between
Healthtrust, Inc. - The Hospital Company, a Delaware
corporation ("HTI") and Alethea O. Caldwell,
("Consultant").
1. Engagement.
HTI hereby engages the Consultant, as an independent
contractor, for services to be rendered to HTI from
time to time as reasonably and specifically requested
by HTI (the "Services"), and the Consultant hereby
accepts the engagement upon the terms and conditions of
this Agreement.
2. Term.
The term of this Agreement shall begin on February 1,
1994 and shall terminate on August 31, 1994.
3. Compensation.
The Consultant shall be paid by HTI for the Services on
a per diem basis at a rate of $1,000.00 per day payable
within 15 days after HTI's receipt of appropriate
invoices describing the Services performed and time
spent during the previous month pursuant to this
Agreement.
4. Expenses.
HTI will reimburse Consultant for reasonable travel
expenses in connection with any meetings attended by
Consultant at the request of HTI upon the Consultant
presenting an itemized statement of such expenses.
Other expenses shall not be reimbursed by HTI without
HTI's prior authorization.
5. Business Practices.
Consultant will comply with all applicable laws in
acting on HTI's behalf.
6. Confidentiality.
(a) Consultant agrees that documents, data and other
information furnished Consultant by HTI shall be held
in strict confidence and Consultant shall not use such
data or information or disclose the same to others or
use such data or information for the Consultant's own
benefits except such data or information as is
published, is a matter of public record or is required
to be disclosed to governmental or health care
agencies.
(b) The parties to this Agreement agree that the
Controller General of the United States, Secretary of
the HHS and their duly authorized representatives, may,
upon written request, have access to those books,
documents and records relating to the services provided
under this Agreement, for a period of four (4) years
after the furnishing of such services in accordance
with the applicable regulations issued pursuant to 42
CFR, Part 420, Regulation 420.300. Any subcontractor
or related party to the contract shall also be deemed
to have agreed to these terms and conditions. The
parties agree that any documents privileged under the
applicable attorney-client, accountant-client, or other
legal privilege shall not be deemed waived by virtue of
this contract.
(c) In the event of a breach or threatened breach by
the Consultant of the provisions of this paragraph, HTI
shall be entitled to an injunction restraining the
Consultant from disclosing, in whole or in part,
documents, dates or other information. Nothing herein
shall be construed as prohibiting HTI from pursuing any
other remedies available to HTI for breach or
threatened breach, including the recovery of damages
from the Consultant.
7. Termination Without Cause.
Without cause, either Consultant or HTI may terminate
this Agreement at any time upon 10 days' prior written
notice to the other party. In such event, Consultant,
if requested by HTI, shall continue to render services,
and shall be paid up to the date of termination.
8. Notices.
Any notice required or desired to be given under this
Agreement shall be deemed given if in writing sent by
certified mail as follows:
If to HTI:
Healthtrust, Inc. - The Hospital Company
4525 Harding Road
Nashville, Tennessee 37205
Attention: Chairman and Chief Executive Officer
If to Consultant:
Alethea O. Caldwell
6880 Pico Del Monte
Tucson, AZ 85715
9. Waiver of Breach.
The waiver by HTI of a breach of any provision of this
Agreement by the Consultant shall not operate or be
construed as a waiver of any subsequent breach by the
Consultant. No waiver shall be valid unless in writing
and signed by an authorized officer of HTI.
10. Assignment.
The Consultant acknowledges that the services to be
rendered by it are unique and personal. Accordingly,
the Consultant may not assign any of its rights or
delegate any of its duties or obligations under this
Agreement. The rights and obligations of HTI under
this Agreement shall inure to the benefit of and shall
be binding upon the successors and assigns of HTI.
11. Relationship of Parties.
Consultant is an independent contractor, and neither
Healthtrust nor any of its affiliates shall have any
actual, potential, or other control or authority over
Consultant. Consultant shall not have the right or
authority to assume or create any obligation or
responsibility whatsoever, express or implied, on
behalf of or in the name of Healthtrust or its
affiliates or to bind any of them in any respect
whatsoever. The parties do not intend to create a
partnership, joint venture, or similar relationship.
12. Entire Agreement.
This Agreement contains the entire understanding of the
parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom
enforcement of any waiver, change, modification,
extension, or discharge is sought.
IN WITNESS WHEREOF the parties have executed this
Agreement on the date first above written.
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By:s/Robert A. Vraciu
Title: Vice-President
s/Alethea O. Caldwell
Alethea O. Caldwell
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the ___ day of
________________, by and between the "Company" (as
hereinafter defined) and _____________________ (the
"Executive").
WHEREAS, the Board of Directors of the Company (the
"Board") recognizes that the possibility of a Change in
Control (as hereinafter defined) exists and that the
threat or the occurrence of a Change in Control can
result in significant distractions of its key
management personnel because of the uncertainties
inherent in such a situation;
WHEREAS, the Board has determined that it is essential
and in the best interest of the Company and its
stockholders to retain the services of the Executive in
the event of a threat or occurrence of a Change in
Control and to ensure the Executive's continued
dedication and efforts in such event without undue
concern for the Executive's personal financial and
employment security; and
WHEREAS, in order to induce the Executive to remain in
the employ of the Company, particularly in the event of
a threat or the occurrence of a Change in Control, the
Company desires to enter into this Agreement with the
Executive to provide the Executive with certain
benefits in the event the Executive's employment is
terminated as a result of, or in connection with, a
Change in Control.
NOW, THEREFORE, in consideration of the respective
agreements of the parties contained herein, it is
agreed as follows:
1. Term of Agreement. This Agreement shall commence
as of October 1, 1994 and shall continue in effect
until October 1, 1996; provided, however, that the term
of this Agreement shall not expire prior to the
expiration of 24 months after the occurrence of a
Change in Control.
2. Definitions.
2.1 Accrued Compensation. For purposes of this
Agreement, "Accrued Compensation" shall mean an amount
which shall include all amounts earned or accrued
through the "Termination Date" (as hereinafter defined)
but not paid as of the Termination Date including (i)
base salary and (ii) vacation pay.
2.2 Base Amount. For purposes of this Agreement,
"Base Amount" shall mean the Executive's annual base
salary in effect as of the date of this Agreement,
determined without regard to any salary reduction
elections made by the Executive.
2.3 Cause. For purposes of this Agreement, a
termination of employment is for "Cause" if the
Executive has been convicted of a felony or the
Executive (a) failed substantially to perform
reasonably assigned duties with the Company (other than
a failure resulting from the Executive's incapacity due
to physical or mental illness), or (b) engaged in
conduct in connection with his or her employment which
is dishonest, fraudulent or unlawful or which
constitutes gross negligence or willful misconduct and
which results in economic harm to the Company.
2.4 Change in Control. For purposes of this
Agreement, a "Change in Control" shall mean any of the
following events:
(a) An acquisition (other than directly from the
Company) of any voting securities of the Company (the
"Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding Voting Securities; provided,
however, that in determining whether a Change in
Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (1) an
employee benefit plan (or a trust forming a part
thereof) maintained by (x) the Company or (y) any
corporation or other Person of which a majority of its
voting power or its equity securities or equity
interest is owned directly or indirectly by the Company
(a "Subsidiary"), (2) the Company or any Subsidiary, or
(3) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined).
(b) The individuals who, as of October 1, 1994, are
members of the Board (the "Incumbent Board"), cease for
any reason to constitute at least two-thirds of the
Board; provided, however, that if the election, or
nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director
shall, for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided, further,
however, that no individual shall be considered a
member of the Incumbent Board if such individual
initially assumed office as a result of either an
actual or threatened "Election Contest" (as described
in Rule 14a-11 promulgated under the 1934 Act) or other
actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization
involving the Company; unless
(i) the stockholders of the Company, immediately
before such merger, consolidation or reorganization,
own, directly or indirectly immediately following such
merger, consolidation or reorganization, at least
eighty percent (80%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of
the Voting Securities immediately before such merger,
consolidation or reorganization, and
(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least two-thirds of the
members of the board of directors of the Surviving
Corporation or the ultimate parent of the Surviving
Corporation, and
(iii) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust
forming a part thereof) maintained by the Company, the
Surviving Corporation or any Subsidiary, or any Person
who, immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of twenty
percent (20%) or more of the then outstanding Voting
Securities) has Beneficial Ownership of twenty percent
(20%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting
securities, and
(iv) a transaction described in clauses (i) through
(iii) shall herein be referred to as a "Non-Control
Transaction";
(2) A complete liquidation or dissolution of the
Company; or
(3) An agreement for the sale or other disposition of
all or substantially all of the assets of the Company
to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person
(the "Subject Person") acquired Beneficial Ownership of
more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the
number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the
Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as
a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
2.5 Company. For purposes of this Agreement, the
"Company" shall mean Healthtrust, Inc. - The Hospital
Company.
2.6 Disability. For purposes of this Agreement,
"Disability" shall mean a physical or mental infirmity
which impairs the Executive's ability to substantially
perform his or her duties with the Company for a period
of one hundred twenty (120) consecutive days and the
Executive has not returned to his or her full time
employment prior to the Termination Date as stated in
the "Notice of Termination" (as hereinafter defined).
2.7 Good Reason. (a) For purposes of this Agreement,
"Good Reason" shall mean the occurrence after a Change
in Control of any of the events or conditions described
in subsections (1) through (4) hereof:
(1) a significant adverse change in the Executive's
duties or responsibilities as in effect at any time
within ninety (90) days preceding the date of a Change
in Control, it being understood that the failure of the
Executive to have duties or responsibilities for the
consolidated enterprise after the Change in Control
comparable to those in effect immediately prior to the
Change in Control shall constitute a significant
adverse change in duties or responsibilities;
(2) a material reduction in the Executive's base
salary;
(3) the failure by the Company to provide employee
benefits to the Executive which are comparable to those
provided to similarly situated employees of the Company
or its ultimate parent corporation;
(4) the relocation of the Executive's office at which
he or she is to perform his or her duties, to a
location more than fifty (50) miles from the location
at which the Executive performed his or her duties
immediately prior to the Change in Control, except for
required travel on the Company's business to an extent
substantially consistent with his or her business
travel obligations prior to the Change in Control;
(b) The Executive must notify the Company within
thirty (30) days of the occurrence of an event or
condition he or she believes constitutes "Good Reason"
and such event will not constitute Good Reason for
purposes of this Agreement if the Company, within a
reasonable period of time not to exceed thirty (30)
days after receipt of such notice, cures or remedies
the event or condition identified in such notice.
2.8 Notice of Termination. For purposes of this
Agreement, following a Change in Control, "Notice of
Termination" shall mean a written notice of termination
of the Executive's employment which indicates the
specific termination provision in this Agreement, if
any, relied upon and which sets forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment
under the provision so indicated.
2.9 Successors and Assigns. For purposes of this
Agreement, "Successors and Assigns" shall mean a
corporation or other entity acquiring all or
substantially all the assets and business of the
Company (including this Agreement) whether by operation
of law or otherwise.
2.10 Termination Date. For purposes of this Agreement,
"Termination Date" shall mean in the case of the
Executive's death, his or her date of death, in the
case of Good Reason, the last day of his or her
employment (which shall not be more than five (5) days
after the date the Notice of Termination is delivered),
and in all other cases, the date specified in the
Notice of Termination.
3. Termination of Employment.
3.1 If, during the term of this Agreement, the
Executive's employment with the Company and its
affiliates shall be terminated within twenty-four (24)
months following a Change in Control, the Executive
shall be entitled to the following compensation and
benefits:
(a) If the Executive's employment with the Company and
its affiliates shall be terminated (1) by the Company
for Cause or Disability, (2) by reason of the
Executive's death, or (3) by the Executive other than
for Good Reason, the Company shall pay to the Executive
the Accrued Compensation.
(b) If the Executive's employment with the Company and
its affiliates shall be terminated for any reason other
than as specified in Section 3.1(a), the Executive
shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation;
(ii) the Company shall pay the Executive as severance
pay and in lieu of any further compensation for periods
subsequent to the Termination Date, in a single payment
an amount in cash equal to [one, two or three, as the
case may be] times the Executive's Base Amount;
(iii) the Company shall maintain in full force and
effect for the benefit of the Executive and the
Executive's dependents and beneficiaries, at the
Company's expense (less the amount such individual
would have paid for such coverage had his or her
employment not terminated) until the earlier of (A) the
expiration of 18 months following the Termination Date
or (B) the effective date of the Executive's coverage
under a medical benefit plan of a new employer (which
is comparable in the aggregate to coverage under the
Company's medical benefit plan), all medical insurance,
under plans and programs in which the Executive and/or
the Executive's dependents and beneficiaries
participated immediately prior to the Termination Date,
provided that continued participation is possible under
the general terms and provisions of such plans and
programs. If participation in any such plan or program
is barred, the Company shall arrange at its own expense
(less the amount such individual would have paid for
such coverage had his or her employment not terminated)
to provide the Executive with benefits substantially
similar to those which he or she was entitled to
receive under such plans and programs;
(iv) the Company shall pay a pro rata bonus for the
fiscal year of employment in which the Termination Date
occurs, which shall equal the product obtained by
multiplying the Executive's target bonus percentage for
such year by (A) the monthly Base Salary rate in effect
at the Termination Date and (B) the number of complete
and partial calendar months that have elapsed in the
fiscal year through the Termination Date; provided,
however, that notwithstanding anything contained in
this Agreement to the contrary, to the extent that the
payments and benefits provided under this Agreement and
benefits provided to, or for the benefit of, the
Executive under any other Company plan or agreement
(such payments or benefits are collectively referred to
as the "Payments") would be subject to the excise tax
(the "Excise Tax") imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"),
the Payments shall be reduced (but not below zero) to
the extent necessary so that no Payment to be made or
benefit to be provided to the Executive shall be
subject to the Excise Tax. Unless the Executive shall
have given prior written notice specifying a different
order to the Company to effectuate the limitation in
the preceding sentence, the Company shall reduce or
eliminate the Payments, by first reducing or
eliminating those payments or benefits which are not
payable in cash and then by reducing or eliminating
cash payments, in each case in reverse order beginning
with payments or benefits which are to be paid the
farthest in time from the Executive's Termination Date.
(c) The amounts provided for in Sections 3.1(a) and
3.1(b)(i), (ii) and (iv) shall be paid in a single lump
sum cash payment within fifteen (15) days after the
Executive's Termination Date (or earlier, if required
by applicable law).
(d) The Executive shall not be required to mitigate
the amount of any payment provided for in this
Agreement by seeking other employment or otherwise and
no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the
Executive in any subsequent employment except as
provided in Section 3.1(b)(iii).
(e) The severance pay and benefits provided for in
this Section 3 shall be in lieu of any other severance
or termination pay to which the Executive may be
entitled.
4. Notice of Termination. Following a Change in
Control, any purported termination of the Executive's
employment by the Company and/or the Employer shall be
communicated by Notice of Termination to the Executive.
5. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall
inure to the benefit of the Company, its Successors and
Assigns and the Company shall require any Successors
and Assigns to expressly assume and agree to perform
this Agreement in the same manner and to the same
extent that the Company would be required to perform it
if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the
Executive, his or her beneficiaries or legal
representatives, except by will or by the laws of
descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's
legal personal representative.
6. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be
settled by arbitration, conducted before a panel of
three arbitrators sitting in a location selected by the
Executive within fifty (50) miles from the location of
his or her principal place of employment in accordance
with the commercial rules of the American Arbitration
Association then in effect. Judgment may be entered on
the award of the arbitrators in any court having
jurisdiction. The Company shall pay any fees and
expenses associated with the arbitration, including the
reasonable fees and disbursements of the Executive's
attorney. Any determination by such panel of
arbitrators shall be consistent with the provisions of
this Agreement as set forth herein.
7. Notice. For the purposes of this Agreement,
notices and all other communications provided for in
the Agreement (including the Notice of Termination)
shall be in writing and shall be deemed to have been
duly given when personally delivered or sent by
certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses last
given by each party to the other, provided that all
notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of
the Company. All notices and communications shall be
deemed to have been received on the date of delivery
thereof or on the third business day after the mailing
thereof, except that notice of change of address shall
be effective only upon receipt.
8. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and
signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the
other party hereto of, or compliance with, any
condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No
agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter
hereof have been made by either party which are not
expressly set forth in this Agreement.
9. Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the
laws of the State of Tennessee without giving effect to
the conflict of laws principles thereof. Any action
brought by any party to this Agreement shall be brought
and maintained in a court of competent jurisdiction in
Davidson County in the State of Tennessee.
10. Severability. The provisions of this Agreement
shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the
validity or enforceability of the other provisions
hereof.
11. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto and
supersedes all prior agreements, if any, understandings
and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized officer
and the Executive has executed this Agreement as of the
day and year first above written.
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By:___________________________
Name:
Title:
ATTEST:
______________________________
[Name]
Schedule to Exhibit 10.11
Form of Severance Protection Agreement
The following are the differences in the
Severance Protection Agreements authorized to be
executed with the Company's executive officers:
Executive Section 3.1(b)(ii)
R. Clayton McWhorter The Company shall pay the W.
Hudson Connery, Jr. Executive as severance pay
Michael A. Koban, Jr. and in lieu of any further
Richard E. Francis, Jr. compensation for periods
Kenneth C. Donahey subsequent to the Termination
Philip D. Wheeler Date, in a single payment an
amount in cash equal to three
times the Executive's Base
Amount.
Clifford G. Adlerz The Company shall pay the
O. Ernest Bacon Executive as severance pay
Yolanda D. Chesley and in lieu of any further
James M. Fleetwood, Jr. compensation for periods
William L. Hough subsequent to the Termination
Jone Law Koford Date, in a single payment an
Robert M. Martin amount in cash equal to two
Dana C. McLendon, Jr. times the Executive's Base
R. Parker Sherrill Amount.
David L. Smith
Robert A. Vraciu
Kent H. Wallace
EXECUTIVE MANAGEMENT
TOTAL DIRECT COMPENSATION PROGRAM
November 22, 1994
EXECUTIVE MANAGEMENT
TOTAL DIRECT COMPENSATION PROGRAM
OVERVIEW
- - - - Executive Compensation Program Goals:
- - - - Facilitate and encourage stock ownership by
executives
- - - - Promote a firm-wide culture
- - - - Emphasize performance-sensitivity in the executive
compensation area
- - - - Shift pay from fixed to variable, from short-term
to long-term
- - - - Provide a program which is viewed favorably by
shareholders
EXECUTIVE MANAGEMENT
TOTAL DIRECT COMPENSATION PROGRAM
OVERVIEW
- - - - Compensation Objective:
Salary
Total Annual Compensation (TAC)
(Salary + Target Bonus)
Total Direct Compensation (TDC)
(TAC + Long-Term Incentive Opportunity)
Relative to the Marketplace
60th Percentile*
Expected Performance: 75th Percentile
Expected Performance: 75th Percentile
TOTAL DIRECT COMPENSATION (TDC)
TDC =
Annual Salary
+
Annual Bonus
+
Long Term Incentives
EXECUTIVE MANAGEMENT
TOTAL DIRECT COMPENSATION PROGRAM
PROGRAM COMPONENTS
1) ANNUAL SALARY
2) ANNUAL BONUS
3) LONG TERM INCENTIVE PLANS (LTIP)
- Stock Option Program
- Purchased Restricted Stock Program
EXECUTIVE MANAGEMENT
TOTAL DIRECT COMPENSATION PROGRAM
ANNUAL SALARY
ANNUAL SALARY
- - - - Amount Determined By:
- Market Competitive Data Provided by The HAY
Group, a National Compensation Consulting
Firm
- Executive Management Recommendations
- Compensation Committee of the Board Approval
- - - - General Guidelines:
- 50-60th Percentile of Market Competitive Data
Used as the Midpoint Range
- For-Profit Hospital Management Companies Used
as Benchmarks (See Appendix A)
- Comparisons also made to General Industry and
Not-For-Profit Hospital Companies
EXECUTIVE MANAGEMENT
TOTAL DIRECT COMPENSATION PROGRAM
ANNUAL BONUS
ANNUAL BONUS
- - - - Bonus Percent Determined By:
- Market Competitive Data as Reported by The
HAY Group
- Executive Management Recommendations
- Compensation Committee of the Board Approval
- - - - General Guidelines:
- Base Salary + Annual Bonus = Total Annual
Compensation (TAC)
- TAC = 75th Percentile of Market Competitive
Data
ANNUAL BONUS
- - - - Bonus Objectives: Each participant in the
program will have specific objectives established for
each criterion.
Corporate objectives will be established by Executive
Management.
Business Unit and Individual* objectives will be
established by the participant and his/her supervisor.
*Individual and/or Business Unit objectives should
contain specific goals pertaining to the Employee
Attitude Survey
ANNUAL BONUS
- - - - Targeted Incentive: Percent of Base Salary (Varies
by Position)
- - - - Bonus Opportunity: Each participant will be
assigned a Target Incentive Award opportunity.
Executive Management will review performance
contributions and achievement of objectives after the
end of the fiscal year to determine what, if any, bonus
is paid.
Individuals who exceed the performance expectations in
a material manner may be eligible for a bonus award
greater than the Targeted Incentive.
EXAMPLE
Target Incentive Award: 15% of Base Salary
ANNUAL BONUS
- - - - BONUS CRITERIA: Corporate
Business Unit
Individual
- - - - CRITERIA WEIGHTINGS: Varies by Position
EXAMPLE
VP, HRD Corporate: 50%
Business Unit: 35%
Individual: 15%
RVP Corporate: 35%
Business Unit: 55%
Individual: 10%
ANNUAL BONUS
- - - - CRITERIA ACCOMPLISHMENTS:
- Each criterion will be evaluated based on its
own merit
* Corporate: If the corporation meets
its financial goals, a bonus will be
paid to the executive (as long as he/she
is actively employed at the time bonuses
are paid out and as long as individual
performance throughout the fiscal year
was satisfactory)
* Business Unit: If the executive does
not meet all of his/her business unit
objectives, executive management (and
for executive management, the Board)
will determine the portion, if any, of
the bonus payout to be made
* Individual: If the executive does not
meet all of his/her individual
objectives, executive management (and
for executive management, the Board)
will determine the portion, if any, of
the bonus payout to be made
-- See the plan document for plan details --
ANNUAL BONUS
- - - - CRITERIA DEFINITIONS:
- Corporate: Accomplishment of Pro Forma
financial objectives
- Business Unit: Performance and contributions
of business unit(s) in supporting the overall
strategies of the company
- Individual: The accomplishment of specific
objectives; contributions considered "above
and beyond"
ANNUAL BONUS
EXAMPLE
HUMAN RESOURCES
- - - - Target Bonus Potential: 15% of Base Salary
Corporate (50%) 7.5%
Business Unit (35%) 5.0%
Individual (15%) 2.5%
ANNUAL BONUS
EXAMPLE
HUMAN RESOURCES
- Corporate:
Accomplishment of Company Pro Forma Financial
Objectives
- Business Units:
(Specific objectives for each unit to be
established)
1) Benefits
2) Recruiting
3) Compensation
4) Employee Relations
5) General Services
- Individual
1) Management of Staff
2) Management Development (Personal &
Staff)
3) Community Involvement
4) Employee Attitude Survey (Human
Resources Department plus Corporate
Office)
5) Teamwork
EXECUTIVE MANAGEMENT
TOTAL DIRECT COMPENSATION PROGRAM
LONG TERM INCENTIVE PLAN (LTIP)
LONG TERM INCENTIVE PLAN (LTIP)
- - - - PARTICIPANTS AND PLAN SPECIFICATIONS
- Executive Management Recommendations
- Compensation Committee of the Board Approval
- - - - PLAN COMPONENTS:
1) Stock Options Program
2) Purchased Restricted Stock (PRS) Program
LONG TERM INCENTIVE PLAN (LTIP)
- - - - PARTICIPATION:
- Stock Options Program:
Company Directed*
- Purchased Restricted Stock (PRS)
Program:
Individual Directed
* Subject to eligibility rules, performance,
vesting and other provisions as outlined in
the plan document
LONG TERM INCENTIVE PLAN (LTIP)
- - - - STOCK OPTION PROGRAM
- Non-Qualified Stock Options
- Stock Option Formula: LTIP Award Percent (%)
times annual salary ($) times 50% divided by
the fair market value (FMV) of stock options.
The LTIP Award % is determined by Executive
Management at the beginning of each fiscal
year and approved by the Compensation
Committee of the Board.
- Fair market value (FMV) of the stock option
is determined by Compensation Committee of
the Board (expected to be approximately one-
fourth of Market Price of Common Stock
LONG TERM INCENTIVE PLAN (LTIP)
- - - - STOCK OPTIONS PROGRAM (Continued)
- Price = 100% of the fair market value on the
date of grant
- Granted to participants regardless of
participation in the Purchased Restricted
Stock (PRS) Program
- No option to take cash instead of Stock
Options
- Option awards granted at the beginning of the
program year, but will be subject to
satisfactory performance of bonus criteria
- Three-year cumulative (cliff) vesting
- Option Term = 10 years
LONG TERM INCENTIVE PLAN (LTIP)
- - - - STOCK OPTIONS PROGRAM (Continued)
EXAMPLE
Annual Salary: $100,000
Target Annual Bonus: $ 15,000 (15%)
Fair Mkt Value of Stock Option: $6.00
Stock Options Granted: 2,500 shares
(Formula: Annual Salary x LTIP Award % x 50% Divided
by FMV)
($100,000 x 15% x 50% = $7,500 divided by $6.00 = 2,500
Options Granted)
LONG TERM INCENTIVE PLAN (LTIP)
- - - - PURCHASED RESTRICTED STOCK PROGRAM
- Participation in this program is optional
- Opportunity to give up portion or all of
bonus to purchase Restricted Stock at 50% of
current stock price (discounted stock price)
- Executive determines the percent of bonus (or
flat dollar amount) to allocate toward the
purchase of discounted restricted stock
EXAMPLES
(A) (B)
Annual Salary = $100,000 $100,000
Target Bonus = 15% or $15,000 15% or
$15,000
LTIP Award % = 15% 15%
Elected Deferral = 50% of Target Bonus 1st $10,000
Actual Award = $10,000 $10,000
Amount Deferred = $5,000 $10,000
Cash Received = $5,000 $0.00
LONG TERM INCENTIVE PLAN (LTIP)
- - - - PURCHASED RESTRICTED STOCK PROGRAM
(Continued)
- Allocations to the Purchased Restricted Stock
Program must be made in advance consistent
with deferred compensation rules
- Vesting = 3-year cliff vesting
- Maximum deferral: 100% of Annual Bonus
LONG TERM INCENTIVE PLAN (LTIP)
TREATMENT OF CHANGES IN EXECUTIVES' STATUS
CHANGE IN EMPLOYMENT TREATMENT
STATUS DURING PURCHASED
RESTRICTION RESTRICTED
REQUIRED STOCK OPTIONS
Death,
Disability,
Retirement Restrictions 100% vesting
lapse on shares
Termination by
the Company
without cause
(layoff) Stock payment equal Vesting to the
to the stock's fair to the date of
market value on the termination.
last day of Other options
employment. forfeit
Termination by Cash payment equal Forfeiture
the Company with to the lesser of
Cause the stock's fair
market value on the
last day of employment
or the purchase amount
of the stock
Other Terminations Cash payment equal to Forfeiture
the lesser of the
stock's fair market
value on the last
day of employment or
the purchase amount
of the stock
LONG TERM INCENTIVE PLAN (LTIP)
- - - - PURCHASED RESTRICTED STOCK PROGRAM
(CONTINUED)
EXAMPLE A
- Annual Salary: $100,000
- Annual Bonus: $ 15,000
- Elected Deferral to Stock: 60% of Bonus or
$42,000
- Cash Received $28,000
- Current Stock Price: $25.00 per share
- Discounted Stock Price (50%): $12.50 per
share
- LTIP Purchased Restricted Stock: 3,360 shares
- Value of PRS shares:$84,000 (3,360 x $25)
LONG TERM INCENTIVE PLAN (LTIP)
- - - - PURCHASED RESTRICTED STOCK PROGRAM
(CONTINUED)
EXAMPLE B
- - - - Annual Salary: $200,000
- - - - Annual Bonus: $ 70,000
- - - - Elected Deferral to Stock: 30% of Bonus or
$21,000
- - - - Cash Received $49,000
- - - - Current Stock Price: $25.00 per
share
- - - - Discounted Stock Price (50%): $12.50 per share
- - - - LTIP Purchased Restricted Stock: 1,680 shares
- - - - Value of PRS shares: $42,000 (1,680 x $25)
TOTAL DIRECT COMPENSATION
EXAMPLE A: CURRENT VALUE
Annual Salary $200,000
Annual Cash Bonus Paid ($70,000 - $42,000 Deferred)
$ 28,000
Long Term Incentives* $119,000
Total Direct Compensation $347,000
*Long Term Incentives
LTIP Stock Options 5,600 x $ 6.25 $ 35,000
LTIP PR Stock 3,360 x $25.00 $ 84,000
Estimated Value of LTIP Incentives $119,000
TOTAL DIRECT COMPENSATION
EXAMPLE B: CURRENT VALUE
Annual Salary $200,000
Annual Cash Bonus Paid ($70,000 - $21,000) $ 49,000
Long Term Incentives* $ 77,000
Total Direct Compensation $326,000
*Long Term Incentives
LTIP Stock Options 5,600 x $ 6.25 $ 35,000
LTIP PR Stock 1,680 x $25.00 $ 42,000
Estimated Value of LTIP Incentives $ 77,000
TOTAL DIRECT COMPENSATION
STOCK OWNERSHIP GUIDELINES
NUMBER OF TIMES SALARY
FOR EXECUTIVES WHO RETENTION GOALS FOR
DIDN'T PARTICIPATE THOSE WHO ALREADY
IN FOUNDERS STOCK OWN SIGNIFICANT
GROUP STOCK
Chairman and CEO - 7x
SVP and COO - 5x
SVP, Finance - 5x
SVP, G.C. & Corp
Sec'y
SVP, Development
SVP, Controller .5x 3x
RVPs .5x 3x
Other Officers .5x 1x
Regional AVPs .5x 1x
Certain Corporate
Directors/Managers .15x .5x
Hospital CEOs .25x -
Hospital CNOs,
CFOs, COOs .15x -
- - - - Goal to be met in three years
APPENDIX A
ANNUAL SALARY
For-Profit Hospital Management Companies
- - - - American Healthcare Management, Inc.
- - - - American Medical Holdings, Inc.
- - - - Charter Medical Corporation
- - - - Galen Health Care, Inc.
- - - - Hospital Corporation of America
- - - - National Medical Enterprises, Inc.
Healthtrust, Inc. - The Hospital Company
Exhibit 11 - Statement RE: Computation of Per Share Earnings
Three Years Ended August 31, 1994
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992
<S> <C> <C> <C>
Primary:
Average shares outstanding 84,344,108 81,209,686 74,968,388
Net effect of dilutive warrants 2,123,265 2,112,334 1,742,167
Net effect of dilutive stock options 976,692 218,795 58,926
Total weighted average common shares 87,444,065 83,540,815 76,769,481
Net income before extraordinary charges $ 173,196 $ 135,191 $ 68,660
Extraordinary charges - 13,633 136,352
Net income (loss) $ 173,196 $ 121,558 $ (67,692)
Net income per share
before extraordinary charges $ 1.98 $ 1.62 $ 0.90
Extraordinary charges - 0.16 1.78
Net income (loss) per common share $ 1.98 $ 1.46 $ (0.88)
Fully Diluted:
Average shares outstanding 84,344,108 81,209,686 74,968,388
Net effect of dilutive warrants 2,165,914 2,296,859 1,742,167
Net effect of dilutive stock options 1,175,219 466,804 62,720
Total weighted average common shares 87,685,241 83,973,349 76,773,275
Net income before extraordinary charges $ 173,196 $ 135,191 $ 68,660
Extraordinary charges - 13,633 136,352
Net income (loss) $ 173,196 $ 121,558 $ (67,692)
Net income per share
before extraordinary charges $ 1.98 $ 1.61 $ 0.90
Extraordinary charges - 0.16 1.78
Net income (loss) per common share $ 1.98 $ 1.45 $ (0.88)
</TABLE>
Exhibit 22
Healthtrust Subsidiary Corporations
Alabama
Community Hospital of Andalusia, Inc.
Crestwood Hospital & Nursing Home, Inc.
Doctors Hospital of Mobile, Inc.
Four Rivers Medical Center PHO, Inc.
Selma Medical Center Hospital, Inc.
Arizona
HTI Tuscon Rehabilitation, Inc.
Hospital Corporation of Arizona
Hospital Corporation of Northwest, Inc.
Tri-City Med, Inc.
Arkansas
DeQueen Health Services, Inc.
HCMH, Inc.
California
Amisub (Westside), Inc.
CH Systems
C.H.L.H., Inc.
Chino Community Hospital Corporation, Inc.
Community Hospital of Gardena Corporation, Inc.
Encino Hospital Corporation, Inc.
Healdsburg General Hospital, Inc.
Mission Bay Memorial Hospital, Inc.
Notami Hospitals of California, Inc.
Sebastopol Hospital Corporation
Ukiah Hospital Corporation
VMC-GP, Inc.
VMC Management, Inc.
Visalia Community Hospital, Inc.
West Los Angeles Physicians' Hospital, Inc.
Westside Hospital
Delaware
Alice Physicians and Surgeons Hospital, Inc.
Alvin Community Hospital, Inc.
BMC-CT, Inc.
CBH-CT, Inc.
Coastal Bend Hospital, Inc.
Coastal Healthcare Services, Inc.
Coralstone Management, Inc.
Cornerstone Health Management Company
DHL Corporation
DHL Management, Inc.
Danforth Hospital, Inc.
Denton Regional Medical Center, Inc.
Doctors' Hospital of Laredo, Inc.
Drake Development Company
Drake Development Company II
Drake Development Company III
Drake Development Company IV
Drake Development Company V
Drake Development Company VI
Drake Management Company
EPIC Development, Inc.
EPIC Diagnostic Management Company
EPIC Holdings, Inc.
EPIC Healthcare Group, Inc.
EPIC Healthcare Services, Inc.
EPIC Healthcare Management Company
EPIC Master Leasing, Inc.
EPIC Surgery Centers, Inc.
EPIC Technology, Inc.
Earthstone HomeHealth Company
Eastside Hospital Holding, Inc.
Forest Park Surgery Pavilion, Inc.
Fort Bend Hospital, Inc.
GPCH-GP, Inc.
GPCH Management, Inc.
General Health Services, Inc.
Greystone Healthcare, Inc.
Healthtrust Texas Management Services, Inc.
Hearthstone Home Health, Inc.
Hearthstone Management Company
Hospital Development Properties, Inc.
Katy Medical Center, Inc.
Keystone HomeHealth Management, Inc.
Lake City Health Centers, Inc.
Loon Investments, Inc.
MRT & C, Inc.
Mallard Finance Company
Medical Arts Corporation
Medical Arts Hospital of Texarkana, Inc.
Medical Plaza Hospital, Inc.
Medistone Healthcare Ventures, Inc.
Medistone Management Company
Mid-Continent Health Services, Inc.
Milestone Healthcare, Inc.
Milestone Healthcare Management, Inc.
North Texas Medical Center, Inc.
Notami Holdco, Inc.
Notami (Texas), Inc.
Notami Service Company
NTMC Venture, Inc.
NTMC Management Company
PSS-GP, Inc.
Parkway Cardiac Center Management Company
Parkway Hospital, Inc.
Pinnacle Management Group, Inc.
Riverside Hospital, Inc.
Round Rock Hospital, Inc.
Westbury Hospital, Inc.
Florida
CCH Management, Inc.
CCH-GP, Inc.
Easte Point Hospital, Inc.
Gateway Medical Services Organization,Inc.
Home Health of Citrus County, Inc.
Hospital Corporation of Lake Worth
Hospital Development & Service Corp.
Medical Care of Broward, Inc.
Medical Center of Santa Rosa,Inc.
Notami (Clearwater), Inc.
Notami Hospitals of Florida, Inc.
North Beach Hospital, Inc.
North Okaloosa Medical Center, Inc.
Palms West Hospital, Inc.
Palms West Physician Hospital Organization, Inc.
Physician Services of Palm Beach County, Inc.
Santa Rosa Emergency Medical Services,Inc.
South Bay Physician Clinics, Inc.
South Seminole Hospital, Inc.
St. Augustine Hospital, Inc.
Sun City Hospital,Inc.
Visions Healthcare, Inc.
Georgia
Amisub of Georgia, Inc.
Barrow Medical Ventures, Inc.
Barrow Mesh Enterprises, Inc.
Columbus Cardiology, Inc.
Columbus Doctors Hospital, Inc.
Gainesville Cardiology, Inc.
Hospital Corporation of Lanier, Inc.
Hawaii
Nenalani Insurance Services Corporation
Idaho
Eastern Idaho Health Services, Inc.
Med Central, Inc.
West Valley Medical Center, Inc.
Indiana
HTI Health Services of Indiana, Inc.
Terre Haute Regional Hospital, Inc.
Kentucky
Community Hospital, Inc.
Hospital Corporation of Kentucky
Logan Memorial Hospital, Inc.
Medical Services of Kentucky, Inc.
Springview Hospital, Inc.
Louisiana
Acadiana Practice Management, Inc.
Dauterive Hospital Corporation
Doctors Hospital of Opelousas Management, Inc.
Hamilton Medical Center, Inc.
Highland Park Hospital, Inc.
Mandeville Surgery Center, Inc.
Medical Center of Baton Rouge, Inc.
Notami Hospitals of Louisiana, Inc.
Notami (Opelousas), Inc.
Riverview Medical Center, Inc.
Select Healthcare Services, Inc.
Women's and Children's Hospital, Inc.
Mississipi
Brookwood Medical Center of Gulfport, Inc.
Coastal Imaging Center of Gulfport, Inc.
GOSC-GP, Inc.
Gulf Coast Medical Ventures, Inc.
HTI Health Services, Inc.
Missouri
Notami Hospitals of Missouri, Inc.
North Carolina
Brunswick Health Alliance, Inc.
HTI Health Services of North Carolina, Inc.
Heritage Hospital, Inc.
Hospital Corporation of North Carolina
Oklahoma
Claremore Regional Hospital, Inc.
Doctors' Hospital - Tulsa, Inc.
Edmond Physician Hospital Organization, Inc.
Hospital Corporation of Seiling, Inc.
Lake Region Health Alliance Corporation
Medical Imaging, Inc.
Notami Hospitals of Oklahoma, INc.
Southwestern Medical Center, Inc.
Oregon
Hospital Corporation of Douglas, Inc.
McMinnville Hospital, Inc.
Roseburg Ambulance, Inc.
South Carolina
Chesterfield General Hospital, Inc.
Doctors Memorial Hospital, Inc.
DMH Spartanburg Management, Inc.
DMH Spartanburg, Inc.
HTI South Carolina, Inc.
Walterboro Community Hospital, Inc.
Tennessee
Benton Community Hospital, Inc.
Crockett General Hospital,Inc.
Eastern Tennessee Medical Services, Inc.
HTI Edgefield, Inc.
HTI Medical Services Corporation
HTI Memorial Hospital Corporation
HTI Tri-Cities Rehabilitation, Inc.
Healthtrust, Inc. - The Hospital Company
Hendersonville Hospital Corporation
HomeTrust Management Services, Inc.
Hospital Corporation of Smith and Overton County
Humboldt Cedar Crest Hospital, Inc.
IPN Services, Inc.
Johnson City Eye & Ear Hospital, Inc.
Johnson City Medical Services, Inc.
Medical Resource Group, Inc.
Middle Tennessee Medical Services Corporation
North Side Hospital, Inc.
River Park Hospital, Inc.
SP Acquisition Corp.
Southern Tennessee Ambulance Service, Inc.
Stones River Hospital, Inc.
Sycamore Shoals Hospital, Inc.
Trinity Hospital Corporation
Texas
Austin Medical Center, Inc.
Bedford-Northeast Community Hospital, Inc.
Brownsville-Valley Regional Medical Center, Inc.
Brownwood Regional Hospital, Inc.
Conroe Hospital Corporation
Coronado Community Hospital, Inc.
DFW Physician Services Corporation
DeTar Hospital, Inc.
Doctors Hospital (Conroe), Inc.
EPIC Properties, Inc.
HTI Gulf Coast, Inc.
Longview Regional Hospital, Inc.
Mansfield Hospital, Inc.
Medical Arts Hospital of Dallas, Inc.
Midway Park Health Network, Inc.
Midway Park Medical Center Corporation
Northeast PHO, Inc.
Panhandle Medical Management Services, Inc.
Pasadena Bayshore Hospital, Inc.
Terrell Community Hospital, Inc.
Texas Medical Technologies, Inc.
Trucare Health Systems, Inc.
Trucare Physical Therapy Services, Inc.
Trucare Rehabilitation Services, Inc.
Wharton Hospital Corporation
Woodland Heights General Hospital, Inc.
Utah
Brigham City Community Hospital, Inc.
Castleview Hospital, Inc.
HTI HomeMed of Utah, Inc.
HTI of Utah, Inc.
HTI - Managed Care of Utah, Inc.
HTI Physician Services of Utah, Inc.
HTI Utah Data Corporation
Healthtrust Utah Management Services, Inc.
Hospital Corporation of Utah
MHHE Corporation
Medical Services of Salt Lake City, Inc.
Mountain View Hospital, Inc.
Ogden Medical Center, Inc.
Pioneer Valley Hospital, Inc.
West Jordan Hospital Corporation
Virginia
Montgomery Regional Hospital, Inc.
New River Healthcare Plan, Inc.
Northern Virginia Hospital Corporation
Pulaski Community Hospital, Inc.
Washington
Capital Network Services, Inc.
Olympia Hospital Corporation
Rainier Regional Rehabilitation Hospital, Inc.
Wyoming
Riverton MSO, Inc.
Wyoming Health Services, Inc.
Exhibit 24
Consent of Independent Auditors
We consent to the incorporation by reference in
the following Healthtrust, Inc. - The Hospital Company
Registration Statements:
a. Form S-8 Registration Statement (No. 33-44636)
pertaining to the 1988 Supplemental Stock Plan, filed
on December 19, 1991;
b. Form S-8 Registration Statement (No. 33-44732)
pertaining to the Amended and Restated 1990 Directors
Stock Compensation Plan, filed on December 23, 1991;
c. Form S-8 Registration Statement (No. 33-44733)
pertaining to the Amended and Restated 1990 Stock
Compensation Plan, filed on December 23, 1991;
d. Form S-8 Registration Statement (No. 33-44730)
pertaining to 47,645 shares of Common Stock issuable
under the Employee Stock Ownership Plan (the "ESOP"),
filed on December 23, 1991;
e. Form S-8 Registration Statement (No. 33-47161)
pertaining to 59,290 shares of Common Stock issuable
under the ESOP, filed on April 13, 1992;
f. Form S-8 Registration Statement (No. 33-53090)
pertaining to 78,392 shares of Common Stock issuable
under the ESOP, filed on October 8, 1992;
g. Form S-8 Registration Statement (No. 33-54958)
pertaining to 26,122,193 shares of Common Stock
issuable under the ESOP, filed November 24, 1992;
of our report dated October 14, 1994 with respect to
the consolidated financial statements and schedules of
Healthtrust, Inc. - The Hospital Company included in
the Annual Report (Form 10-K) for the year ended August
31, 1994.
ERNST & YOUNG LLP
Nashville, Tennessee
November 22, 1994
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below constitutes and appoints
R. Clayton McWhorter, Chairman, President and Chief
Executive Officer of Healthtrust, Inc. - The Hospital
Company (hereinafter referred to as the "Company")
Michael A. Koban, Jr., Senior Vice-President of the
Company, and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each
of them, jointly and severally, his true and lawful
attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter
referred to as the "Commission") the Company's Annual
Report pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934 on Form 10-K for the
year ended August 31, 1994, and all amendments thereto,
and all matters required by the Commission in
connection with such report under The Securities
Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every
act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, or
their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
s/Donald S. MacNaughton 10/28/94
Donald S. MacNaughton Date
Director
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below constitutes and appoints
R. Clayton McWhorter, Chairman and Chief Executive
Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company") Michael A.
Koban, Jr., Senior Vice-President of the Company, and
Philip D. Wheeler, Senior Vice-President, Secretary and
General Counsel of the Company, and each of them,
jointly and severally, his true and lawful
attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter
referred to as the "Commission") the Company's Annual
Report pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934 on Form 10-K for the
year ended August 31, 1994, and all amendments thereto,
and all matters required by the Commission in
connection with such report under The Securities
Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every
act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, or
their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
s/W. Hudson Connery, Jr. 10/31/94
W. Hudson Connery, Jr. Date
Senior Vice-President, Chief
Operating Officer and Director
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below constitutes and appoints
R. Clayton McWhorter, Chairman and Chief Executive
Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A.
Koban, Jr., Senior Vice-President of the Company, and
Philip D. Wheeler, Senior Vice-President, Secretary and
General Counsel of the Company, and each of them,
jointly and severally, his true and lawful
attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter
referred to as the "Commission") the Company's Annual
Report pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934 on Form 10-K for the
year ended August 31, 1994, and all amendments thereto,
and all matters required by the Commission in
connection with such report under The Securities
Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every
act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, or
their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
s/Richard W. Hanselman 11/22/94
Richard W. Hanselman Date
Director
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below constitutes and appoints
R. Clayton McWhorter, Chairman and Chief Executive
Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A.
Koban, Jr., Senior Vice President of the Company, and
Philip D. Wheeler, Senior Vice-President, Secretary and
General Counsel of the Company, and each of them,
jointly and severally, his true and lawful
attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter
referred to as the "Commission") the Company's Annual
Report pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934 on Form 10-K for the
year ended August 31, 1994, and all amendments thereto,
and all matters required by the Commission in
connection with such report under The Securities
Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every
act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, or
their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
s/William T. Hjorth 10/31/94
William T. Hjorth Date
Director
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below constitutes and appoints
R. Clayton McWhorter, Chairman and Chief Executive
Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A.
Koban, Jr., Senior Vice-President of the Company, and
Philip D. Wheeler, Senior Vice-President, Secretary and
General Counsel of the Company, and each of them,
jointly and severally, his true and lawful
attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter
referred to as the "Commission") the Company's Annual
Report pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934 on Form 10-K for the
year ended August 31, 1994, and all amendments thereto,
and all matters required by the Commission in
connection with such report under The Securities
Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every
act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, or
their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
s/Robert F. Dee 10/30/94
Robert F. Dee Date
Director
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below constitutes and appoints
R. Clayton McWhorter, Chairman and Chief Executive
Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A.
Koban, Jr., Senior Vice President of the Company, and
Philip D. Wheeler, Senior Vice-President, Secretary and
General Counsel of the Company, and each of them,
jointly and severally, his true and lawful
attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter
referred to as the "Commission") the Company's Annual
Report pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934 on Form 10-K for the
year ended August 31, 1994, and all amendments thereto,
and all matters required by the Commission in
connection with such report under The Securities
Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every
act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, or
their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
s/Alethea O. Caldwell 10/31/94
Alethea O. Caldwell Date
Director
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below constitutes and appoints
R. Clayton McWhorter, Chairman and Chief Executive
Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A.
Koban, Jr., Senior Vice-President of the Company, and
Philip D. Wheeler, Senior Vice-President, Secretary and
General Counsel of the Company, and each of them,
jointly and severally, his true and lawful
attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter
referred to as the "Commission") the Company's Annual
Report pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934 on Form 10-K for the
year ended August 31, 1994, and all amendments thereto,
and all matters required by the Commission in
connection with such report under The Securities
Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every
act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, or
their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
s/Harry N. Beaty 11/1/94
Harry N. Beaty, M.D. Date
Director
[ARTICLE] 5
[MULTIPLIER] 1000
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] YEAR YEAR
[FISCAL-YEAR-END] AUG-31-1994 AUG-31-1993
[PERIOD-END] AUG-31-1994 AUG-31-1993
[CASH] 92327 151346
[SECURITIES] 0 0
[RECEIVABLES] 725392 454249
[ALLOWANCES] 175838 107758
[INVENTORY] 86576 51740
[CURRENT-ASSETS] 842209 670922
[PP&E] 2990559 2168365
[DEPRECIATION] 736863 600853
[TOTAL-ASSETS] 3967282 2536713
[CURRENT-LIABILITIES] 559065 451819
[BONDS] 1740872 948604
[COMMON] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 91 81
[OTHER-SE] 1025513 655576
[TOTAL-LIABILITY-AND-EQUITY] 3967282 2536713
[SALES] 0 0
[TOTAL-REVENUES] 2970036 2394567
[CGS] 0 0
[TOTAL-COSTS] 2211257 1786283
[OTHER-EXPENSES] 159755 137093
[LOSS-PROVISION] 196013 145538
[INTEREST-EXPENSE] 113741 99787
[INCOME-PRETAX] 289270 225866
[INCOME-TAX] 116074 90675
[INCOME-CONTINUING] 173196 135191
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 13633
[CHANGES] 0 0
[NET-INCOME] 173196 121558
[EPS-PRIMARY] 1.98 1.46
[EPS-DILUTED] 1.98 1.45
</TABLE>
