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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 1994
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 1-10915 62-1234332
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(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
4525 Harding Road, Nashville, Tennessee 37205
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 383-4444
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None
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On May 5, 1994, the Registrant completed its acquisition (the
"Acquisition") of EPIC Holdings, Inc. ("EPIC"). Pursuant to the Acquisition,
Odyssey Acquisition Corp., a wholly owned subsidiary of the Registrant, was
merged with and into EPIC, and EPIC survived the Acquisition as a wholly owned
subsidiary of the Registrant. As a result of the Acquisition, the holders of
outstanding common stock, par value $.01 per share, of EPIC (and securities
exercisable therefor) will receive $7.00 per share. The amount and nature of
the consideration was the result of arms-length negotiation between the
parties. The Registrant hereby incorporates by reference into this Current
Report on Form 8-K certain information with respect to the Acquisition set
forth (i) in the press release of the Registrant dated May 5, 1994 (such press
release being Exhibit 99.1 attached hereto) and (ii) under the headings "The
Acquisition and the Financing Plan" and "Description of EPIC" in the Final U.S.
Prospectus filed pursuant to Rule 424(b) relating to the Registrant's
Registration Statement on Form S-3, file no. 33-52401 (such Final U.S.
Prospectus being Exhibit 99.2 attached hereto).
A portion of the EPIC acquisition was financed through the
public offering by the Registrant of 5,980,000 shares of its common stock, par
value $.001 per share, at a public offering price of $28.25 per share. The
balance of the EPIC acquisition was financed with cash on hand and borrowings
under the Registrant's Credit Agreement (the "1992 Credit Agreement"), dated as
of September 29, 1992, among the Registrant, The Bank of Nova Scotia, as
Administrative Agent, and the financial institutions named therein, as amended
as of March 31, 1994 and May 4, 1994 (such amendments being Exhibit 99.3
hereto). The 1992 Credit Agreement was subsequently refinanced with borrowings
on May 12, 1994, under the Credit Agreement, dated as of April 28, 1994, among
the Registrant, the Bank of Nova Scotia, as Administrative Agent and the
financial institutions named therein, as amended as of May 9, 1994 (such Credit
Agreement being Exhibit 99.4 hereto).
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
and
(b) Pro Forma Financial Information.
The financial statements and pro forma financial information
required by Items 7(a) and 7(b) are incorporated herein by reference to the
financial statements and pro forma financial information set forth in the Final
U.S. Prospectus filed pursuant to Rule 424(b) relating to the Registrant's
Registration Statement on Form S-3 (file no. 33-52401).
(c) Exhibits.
1.1 U.S. Purchase Agreement, dated April 28,
1994, among the Registrant, the selling
stockholders named therein
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and Merrill Lynch & Co. and Donaldson, Lufkin
& Jenrette Securities Corporation as
representatives of the U.S. underwriters.
1.2 International Purchase Agreement, dated April
28, 1994, among the Registrant, the selling
stockholders named therein and Merrill Lynch
International Limited and Donaldson, Lufkin &
Jenrette Securities Corporation as
representatives of the international
underwriters.
1.3 Purchase Agreement, dated April 28, 1994,
between the Registrant, Donaldson, Lufkin &
Jenrette Securities Corporation and Merrill
Lynch & Co.
23.1 Consent of Ernst & Young.
99.1 Registrant's press release, dated January 10,
1994.
99.2 Final U.S. Prospectus filed pursuant to Rule
424(b) relating to the Registrant's
Registration Statement on Form S-3, file no.
33-52401.
99.3 Amendment No. 1, dated as of March 31, 1994,
and Amendment No. 2, dated as of May 4, 1994,
to the Credit Agreement, dated as of
September 29, 1992, among the Registrant, The
Bank of Nova Scotia, as Administrative Agent
and the financial institutions named therein.
99.4 Credit Agreement, dated as of April 28, 1994,
as amended as of May 9, 1994, among the
Registrant, The Bank of Nova Scotia, as
Administrative Agent and the financial
institutions named therein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
HEALTHTRUST, INC. - THE HOSPITAL
COMPANY
By /s/ Michael A. Koban, Jr.
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Michael A. Koban, Jr.
Senior Vice President
Date: May 13, 1994
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EXHIBIT INDEX
Number Subject Matter
- - ------ --------------
1.1 U.S. Purchase Agreement, dated April 28, 1994, among
the Registrant, the selling stockholders named therein
and Merrill Lynch & Co. and Donaldson, Lufkin &
Jenrette Securities Corporation as representatives of
the U.S. underwriters.
1.2 International Purchase Agreement, dated April 28, 1994,
among the Registrant, the selling stockholders named
therein and Merrill Lynch International Limited and
Donaldson, Lufkin & Jenrette Securities Corporation as
representatives of the international underwriters.
1.3 Purchase Agreement, dated April 28, 1994, between the
Registrant, Donaldson, Lufkin & Jenrette Securities
Corporation and Merrill Lynch & Co.
23.1 Consent of Ernst & Young.
99.1 Registrant's press release, dated May 5, 1994.
99.2 Final U.S. Prospectus filed pursuant to Rule 424(b)
relating to the Registrant's Registration Statement on
Form S-3, file no. 33-52401.
99.3 Amendment No. 1, dated as of March 31, 1994, and
Amendment No. 2, dated as of May 4, 1994, to the Credit
Agreement, dated as of September 29, 1992, among the
Registrant, The Bank of Nova Scotia, as Administrative
Agent and the financial institutions named therein.
99.4 Credit Agreement, dated as of April 28, 1994, as
amended as of May 9, 1994, among the Registrant, The
Bank of Nova Scotia, as Administrative Agent and the
financial institutions named therein.
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EXHIBIT 1.1
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HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(A DELAWARE CORPORATION)
4,976,323 SHARES OF COMMON STOCK
U.S. PURCHASE AGREEMENT
DATED: APRIL 28, 1994
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HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(a Delaware corporation)
4,976,323 Shares of Common Stock
U.S. PURCHASE AGREEMENT
April 28, 1994
MERRILL LYNCH & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
As Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1201
Ladies and Gentlemen:
Healthtrust, Inc. - The Hospital Company, a Delaware corporation
(the "Company"), proposes to issue and sell to the underwriters named in
Schedule A hereto (collectively, the "U.S. Underwriters"), for whom you are
acting as representatives (the "U.S. Representatives"), an aggregate of
4,160,000 authorized but unissued shares of the Company's Common Stock, par
value $.001 per share (shares of which class of stock of the Company are
hereinafter referred to as "Common Stock") and certain shareholders of the
Company (the "Selling Shareholders") named in Schedule B hereto severally
propose to sell to the several U.S. Underwriters an aggregate of 816,323 shares
of Common Stock. Such shares of Common Stock are to be sold to each U.S.
Underwriter, acting severally and not jointly, in such amounts as are set forth
in Schedule A opposite the name of such U.S. Underwriter. The Company also
grants to the U.S. Underwriters, severally and not jointly, the option
described in Section 2 to purchase all or any part of 624,000 additional shares
of Common Stock to cover over-allotments. The aforesaid 4,976,323 shares of
Common Stock (the "Initial U.S. Shares"), together with all or any part of the
624,000 additional shares of Common Stock subject to the option described in
Section 2 (the "U.S. Option Shares"), are collectively herein called the "U.S.
Shares". The U.S. Shares are more fully described in the U.S.
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Prospectus referred to below. The Company and the Selling Shareholders are
hereinafter sometimes collectively referred to as the Sellers.
It is understood that the Company and the Selling Shareholders are
concurrently entering into an agreement, dated the date hereof (the
"International Purchase Agreement"), providing for the issuance and sale by the
Company of 1,040,000 shares of Common Stock and the sale by the Selling
Shareholders of 204,081 shares of Common Stock (together, the "International
Shares") through arrangements with certain underwriters outside the United
States and Canada (the "International Underwriters"), for whom Merrill Lynch
International Limited and Donaldson, Lufkin & Jenrette Securities Corporation
are acting as representatives (the "International Representatives"). The U.S.
Shares and the International Shares are hereinafter collectively referred to as
the "Offered Shares".
The Sellers understand that the U.S. Underwriters will
simultaneously enter into an agreement with the International Underwriters
dated the date hereof (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the U.S. Underwriters and the
International Underwriters, under the direction of Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
You have advised us that you and the other U.S. Underwriters,
acting severally and not jointly, desire to purchase the Initial U.S. Shares
and, if the U.S. Underwriters so elect, the U.S. Option Shares, and that you
have been authorized by the other U.S. Underwriters to execute this Agreement
and the U.S Price Determination Agreement referred to below on their behalf.
The initial public offering price per share for the U.S. Shares
and the purchase price per share for the U.S. Shares to be paid by the several
U.S. Underwriters shall be agreed upon by the Company, the Selling Shareholders
and the U.S. Representatives, acting on behalf of the several U.S.
Underwriters, and such agreement shall be set forth in a separate written
instrument substantially in the form of Exhibit A hereto (the "U.S. Price
Determination Agreement"). The U.S. Price Determination Agreement may take the
form of an exchange of any standard form of written telecommunication among the
Company, the Selling Shareholders and the U.S. Representatives and shall
specify such applicable information as is indicated in Exhibit A hereto. The
offering of the U.S. Shares will be governed by this Agreement, as supplemented
by the U.S. Price Determination Agreement. From and after the date of
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the execution and delivery of the U.S Price Determination Agreement, this
Agreement shall be deemed to incorporate, and all references herein to "this
Agreement" or "herein" shall be deemed to include, the U.S Price Determination
Agreement.
The initial public offering price per share and the purchase price
per share for the International Shares to be paid by the International
Underwriters pursuant to the International Purchase Agreement shall be set
forth in a separate agreement (the "International Price Determination
Agreement"), the form of which is attached to the International Purchase
Agreement. The purchase price per share for the International Shares to be
paid by the several International Underwriters shall be identical to the
purchase price per share for the U.S. Shares to be paid by the several U.S.
Underwriters hereunder.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 33-52401) covering the registration of the Offered Shares under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
preliminary prospectuses, and either (A) has prepared and proposes to file,
prior to the effective date of such registration statement, an amendment to
such registration statement, including final prospectuses, or (B) if the
Company has elected to rely upon Rule 430A ("Rule 430A") of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations"),
will prepare and file prospectuses, in accordance with the provisions of Rule
430A and Rule 424(b) ("Rule 424(b)") of the 1933 Act Regulations, promptly
after execution and delivery of the U.S. Price Determination Agreement.* The
information, if any, included in such prospectuses that was omitted from any
prospectus included in such registration statement at the time it becomes
effective but that is deemed, pursuant to Rule 430A(b), to be part of such
registration statement at the time it becomes effective is referred to herein
as the "Rule 430A Information". Each
__________________________________
* Two forms of prospectus are to be used in connection with the offering
and sale of the Offered Shares: one relating to the U.S. Shares (the "Form of
U.S. Prospectus") and one relating to the International Shares (the "Form of
International Prospectus"). The Form of International Prospectus is identical
to the Form of U.S. Prospectus, except for the front cover page, inside front
cover page, the section captioned "Underwriting" and the back cover page.
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Form of U.S Prospectus and Form of International Prospectus used before the
time such registration statement becomes effective, and any Form of U.S.
Prospectus and Form of International Prospectus that omits the Rule 430A
Information that is used after such effectiveness and prior to the execution
and delivery of the U.S. Price Determination Agreement or the International
Price Determination Agreement, respectively, is herein called a "preliminary
prospectus". Such registration statement, including the exhibits thereto, as
amended at the time it becomes effective and including, if applicable, the Rule
430A Information, is herein called the "Registration Statement", and the Form
of U.S. Prospectus and Form of International Prospectus included in the
Registration Statement at the time it becomes effective is herein called the
"U.S. Prospectus" and the "International Prospectus", respectively, and,
collectively, the "Prospectuses" and, individually, a "Prospectus", except
that, if the final U.S. Prospectus or International Prospectus, as the case may
be, first furnished to the U.S. Underwriters or the International Underwriters
after the execution of the U.S. Price Determination Agreement or the
International Price Determination Agreement for use in connection with the
offering of the Offered Shares differs from the prospectuses included in the
Registration Statement at the time it becomes effective (whether or not such
prospectuses are required to be filed pursuant to Rule 424(b)), the terms "U.S.
Prospectus", "International Prospectus", "Prospectuses" and "Prospectus" shall
refer to the final U.S. Prospectus or International Prospectus, as the case may
be, first furnished to the U.S. Underwriters or the International Underwriters,
as the case may be, for such use.
The Company and the Selling Shareholders understand that the U.S.
Underwriters propose to make a public offering of the U.S. Shares as soon as
you deem advisable after the Registration Statement becomes effective and the
U.S. Price Determination Agreement has been executed and delivered.
The parties hereto acknowledge that the Shares of Common Stock
that will be sold by the Selling Shareholders are being sold upon the exercise
of warrants owned by the Selling Shareholders.
The parties hereto further acknowledge that for purposes of this
Agreement, the "Company" and the "Company's Subsidiaries" shall refer to the
Company and the Company's subsidiaries on the date of this Agreement.
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Section 1. Representations and Warranties. (a) The Company
represents and warrants to and agrees with each of the U.S. Underwriters that:
(i) When the Registration Statement shall become effective, if the
Company has elected to rely upon Rule 430A, on the date of the U.S. Price
DeterminationAgreement, on the effective or issue date of each amendment or
supplement to the Registration Statement or the Prospectuses, at the
Closing Time referred to below, and, if, any U.S. Option Shares are
purchased, on the Date of Delivery referred to below, (A) the Registration
Statement and any amendments and supplements thereto will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations; (B) neither the Registration Statement nor any amendment or
supplement thereto will contain 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 not misleading; and (C) neither of the
Prospectuses nor any amendment or supplement to either of them will include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Notwithstanding
the foregoing, this representation and warranty does not apply to
statements or omissions from the Registration Statement or the Prospectuses
made in reliance upon and in conformity with information furnished or
confirmed in writing to the Company by or on behalf of any Underwriter
through you or the International Representatives expressly for use in the
Registration Statement or the Prospectuses.
(ii) This Agreement has been duly authorized, executed and delivered by
the Company.
(iii) The consolidated financial statements of the Company included in
the Registration Statement present fairly the consolidated financial
position of the Company and the Company's Subsidiaries (as hereinafter
defined) as of the dates indicated and the consolidated statements of
operations, stockholders' equity and cash flows of the Company and the
Company's Subsidiaries for the periods specified. Except as otherwise
stated in the Registration Statement, such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved. The
financial statement schedules, if any, included in the
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Registration Statement present fairly the information required to be stated
therein. The pro forma financial statements and other pro forma financial
information included in the Prospectuses present fairly the information
shown therein, have been prepared in all material respects in accordance
with the Commission's rules and guidelines with respect to pro forma
financial statements, have been properly compiled on the pro forma bases
described therein, and, in theopinion of the Company, the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions or circumstances
referred to therein.
(iv) To the Company's knowledge, the consolidated financial statements
of EPIC Holdings, Inc. ("EPIC") and EPIC's subsidiaries (including the
financial statements of EPIC Healthcare Group, Inc. ("EPIC Group"), EPIC's
wholly-owned subsidiary) included in the Registration Statement present
fairly the consolidated financial position of EPIC and EPIC's Subsidiaries
(as hereinafter defined) as of the dates indicated and the consolidated
statements of operations, stockholders' equity (deficit) and cash flows of
EPIC and EPIC's Subsidiaries for the periods specified. To the Company's
knowledge, except as otherwise stated in the Registration Statement, such
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(v) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware with corporate
power under such laws to own, lease and operate its properties and conduct
its business as described in the Prospectuses; and the Company is duly
qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases property of
a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on
the Company and the Company's Subsidiaries, considered as one enterprise.
(vi) To the Company's knowledge, EPIC is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware with corporate power under such laws to own, lease and
operate its properties and conduct its business as
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described in the Prospectuses and EPIC is duly qualified to transact
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary, except to
the extent that the failure to so qualify or be in good standing would not
have a material adverse effect on EPIC and EPIC's Subsidiaries, considered
as one enterprise.
(vii) Each of the Company's subsidiaries (collectively, the "Company's
Subsidiaries") is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation with
corporate power under such laws to own, lease and operate its properties
and conduct its business as described in the Prospectuses; and each of the
Company's Subsidiaries is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in which it
owns or leases property of a nature, or transacts business of a type, that
would make such qualification necessary, except to the extent that the
failure to so qualify or be in good standing would not have a material
adverse effect on the Company and the Company's Subsidiaries, considered as
one enterprise. Except as set forth in the Registration Statement, all of
the outstanding shares of capital stock of each of the Company's
Subsidiaries have been duly authorized and validly issued and are fully
paid and non-assessable, and are owned by the Company, directly or through
one or more Subsidiaries, free and clear of any pledge, lien, perfected
security interest, claim or encumbrance of any kind or, to the knowledge of
the Company, any unperfected security interest.
(viii) To the Company's knowledge, each of EPIC's subsidiaries
(collectively, "EPIC's Subsidiaries") is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation with corporate power under such laws to own, lease and
operate its properties and conduct its business as described in the
Prospectuses and each of EPIC's Subsidiaries is duly qualified to transact
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary, except to
the extent that the failure to so qualify or be in good standing would not
have a material adverse effect on EPIC and EPIC's Subsidiaries, considered
as
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one enterprise. To the Company's knowledge, except as set forth in the
Registration Statement, all of the outstanding shares of capital stock of
each of EPIC's Subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable, and except as set forth in the
Disclosure Schedule (as hereinafter defined), are owned by EPIC, directly
or through one or more Subsidiaries, free and clear of any pledge, lien,
perfected security interest, claim or encumbrance of any kind or, to the
knowledge of the Company, any unperfected security interest.
(ix) The shares to be sold by the Company (whether to you or the Selling
Shareholders upon exercise of their warrants) pursuant to this Agreement
and the International Purchase Agreement have been duly authorized and,
when issued and delivered by the Company upon receipt of the payment
therefor in accordance with this Agreement and the International Purchase
Agreement, will be validly issued, fully paid and non-assessable; such
shares are not subject to the preemptive or other similar rights of any
stockholder of the Company arising by operation of law, under the charter
and bylaws of the Company or under any agreement to which the Company or
any of the Company's Subsidiaries is a party.
(x) All of the outstanding shares of capital stock of the Company other
than the Offered Shares have been duly authorized and validly issued and
are fully paid and non-assessable; and none of the outstanding shares of
Common Stock of the Company was issued in violation of the preemptive or
other similar rights of any stockholder of the Company arising by operation
of law, under the charter and bylaws of the Company or under any agreement
to which the Company or any of the Company's Subsidiaries is a party.
(xi) To the Company's knowledge, all of the outstanding shares of
capital stock of EPIC have been duly authorized and validly issued and are
fully paid and non-assessable and none of the outstanding shares of Common
Stock of EPIC was issued in violation of the preemptive or other similar
rights of any stockholder of EPIC arising by operation of law, under the
charter and bylaws of EPIC or under any agreement to which EPIC or any of
EPIC's Subsidiaries is a party.
(xii) Since the respective dates as of which information is given in the
Registration Statement and the Prospectuses, except as otherwise stated
therein or
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contemplated thereby, there has not been any material adverse change in the
condition (financial or otherwise), earnings or business affairs of the
Company and the Company's Subsidiaries, considered as one enterprise,
whether or not arising in the ordinary course of business.
(xiii) To the Company's knowledge, since the respective dates as of which
information is given in the Registration Statement and the Prospectuses,
except as otherwise stated therein or contemplated thereby, there has not
been (A) any change in the condition (financial or otherwise), earnings or
business affairs of EPIC or EPIC's Subsidiaries that would be material and
adverse to the Company, its Subsidiaries, EPIC and EPIC's Subsidiaries,
considered as one enterprise (the "Combined Company"), whether or not
arising in the ordinary course of business, or (B) any dividend or
distribution of any kind declared, paid or made by EPIC on its capital
stock.
(xiv) Neither the Company nor any of the Company's Subsidiaries is in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which it is a
party or by which it is bound or to which any of its properties is subject,
except as disclosed in the Prospectuses and except for such defaults that
would not have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of the Company and the Company's
Subsidiaries, considered as one enterprise. The execution and delivery of
this Agreement by the Company, the issuance and delivery by the Company of
the Offered Shares (whether to you or the Selling Shareholders upon
exercise of their warrants), the consummation by the Company of the
transactions contemplated in this Agreement and the consummation of the
Acquisition, the Subordinated Debt Offering, the Tender Offers, the Debt
Redemption, the 1994 Credit Agreement and the transactions described in the
ESOP Agreement (all as defined in the Registration Statement) and
compliance by the Company with the terms of this Agreement have been duly
authorized by all necessary corporate action on the part of the Company and
do not and will not result in any violation of the charter or by-laws of
the Company or any of the Company's Subsidiaries, and do not and will not
conflict with, or result in a breach of any of the terms or provisions of,
or constitute a default under,
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or result in the creation or imposition of any lien or encumbrance upon any
property or assets of the Company or any of the Company's Subsidiaries
under (A) any indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or any of the Company's
Subsidiaries is a party or by which it is bound or to which any of its
properties is subject (assuming that the amendment to the Credit Agreement
dated as of September 29, 1992 among the Company and the financial
institutions named therein is effective at the time of the Acquisition), or
(B) any existing applicable law (including any environmental law), rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over the Company or any of the
Company's Subsidiaries or any of their respective properties, in each case,
except as disclosed in the Prospectuses and except for such conflicts,
breaches or defaults or liens or encumbrances that would not have a
material adverse effect on the condition (financial or otherwise), earnings
or business affairs of the Company and the Company's Subsidiaries,
considered as one enterprise.
(xv) To the Company's knowledge, neither EPIC nor any of EPIC's
Subsidiaries is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which it is a party or by which it is bound or to which any
of its properties is subject, except as disclosed in the Prospectuses and
except for such defaults that would not have a material adverse effect on
the condition (financial or otherwise), earnings or business affairs of
EPIC and EPIC's Subsidiaries, considered as one enterprise. To the
Company's knowledge, the consummation by EPIC of the transactions
contemplated in this Agreement and in the ESOP Agreement and the
consummation of the Acquisition and the Tender Offers have been duly
authorized by all necessary corporate action on the part of EPIC and the
consummation of the foregoing and the Debt Redemption do not and will not
result in any violation of the charter or by-laws of EPIC or any of EPIC's
Subsidiaries, and do not and will not conflict with, or result in a breach
of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien or encumbrance upon any
property or assets of EPIC or any of EPIC's Subsidiaries under (A) any
indenture, mortgage, loan agreement, note, lease or other
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agreement or instrument to which EPIC or any of EPIC's Subsidiaries is a
party or by which it is bound or to which any of its properties is subject,
or (B) any existing applicable law (including any environmental law), rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over EPIC or any of EPIC's
Subsidiaries or any of their respective properties, in each case, except as
disclosed in the Prospectuses and except for such conflicts, breaches or
defaults or liens or encumbrances that would not have a material adverse
effect on the condition (financial or otherwise), earnings or business
affairs of the Combined Company.
(xvi) Except as disclosed in the Registration Statement, no
authorization, approval, consent or license of any government,
governmental instrumentality or court (other than under the 1933 Act and
the 1933 Act Regulations, the Trust Indenture Act of 1939, as amended and
the applicable rules and regulations promulgated thereunder (the "Trust
Indenture Act") and the securities or blue sky laws of the various states
and the securities laws of any jurisdiction outside the United States in
which International Shares are offered or sold by the International
Underwriters pursuant to the International Purchase Agreement) is required
for the valid issuance, sale and delivery of the Offered Shares by the
Company (whether to you or the Selling Shareholders upon exercise of their
warrants) or for the consummation by the Company of the transactions
described in the Prospectuses under the caption "The Acquisition and the
Financing Plan".
(xvii) Except as disclosed in the Prospectuses, there is no action, suit
or proceeding before or by any government, governmental instrumentality or
court, now pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of the Company's Subsidiaries that is
required to be disclosed in the Prospectuses or that could reasonably be
expected to result in any material adverse change in the condition
(financial or otherwise), earnings or business affairs of the Company and
the Company's Subsidiaries, considered as one enterprise, or that could
reasonably be expected to materially and adversely affect the consummation
of the transactions contemplated in this Agreement and described in the
Registration Statement under the caption "The Acquisition and the Financing
Plan".
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<PAGE> 13
(xviii) To the Company's knowledge, except as disclosed in the
Prospectuses, there is no action, suit or proceeding before or by any
government, governmental instrumentality or court, now pending or, to the
knowledge of the Company, threatened against or affecting EPIC or any of
EPIC's Subsidiaries that is required to be disclosed in the Prospectuses or
that could reasonably be expected to result in any material adverse change
in the condition (financial or otherwise), earnings or business affairs of
the Combined Company, or that could reasonably be expected to materially
and adversely affect the consummation of the transactions contemplated in
this Agreement and described in the Registration Statement under the
caption "The Acquisition and the Financing Plan".
(xix) In the Company's judgment, there are no contracts or documents of a
character required to be described in the Registration Statement or the
Prospectuses or to be filed as exhibits to the Registration Statement that
are not described and filed as required.
(xx) Each of the Company and the Company's Subsidiaries own or possess
all governmental licenses, permits, certificates (including, without
limitation, certificate of need approvals and certification under the
Medicare program), consents, orders, approvals and other authorizations
(collectively, "Governmental Licenses") necessary to own or lease, as the
case may be, and to operate its properties and to carry on its business as
presently conducted, except where the failure to possess such Governmental
Licenses could reasonably be expected to not have a material adverse effect
on the condition (financial or otherwise), earnings or business affairs of
the Company and the Company's Subsidiaries, considered as one enterprise,
and neither the Company nor any of the Company's Subsidiaries has received
any notice of proceedings relating to revocation or modification of any
such Governmental Licenses that, in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Company and the Company's Subsidiaries,
considered as one enterprise. All of the hospitals operated by the
Company and the Company's Subsidiaries are "providers of services" as
defined in the Social Security Act and the regulations promulgated
thereunder, and are eligible to participate in the Medicare program, except
as would not have a
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<PAGE> 14
material adverse effect on the condition (financial or other), earnings or
business affairs of the Company and the Company's Subsidiaries, taken as
one enterprise.
(xxi) To the Company's knowledge, each of EPIC and EPIC's Subsidiaries
own or possess all governmental licenses, permits, certificates
(including, without limitation, certificate of need approvals and
certification under the Medicare program), consents, orders, approvals and
other authorizations (collectively, "Governmental Licenses") necessary to
own or lease, as the case may be, and to operate its properties and to
carry on its business as presently conducted, except where the failure to
possess such Governmental Licenses could reasonably be expected to not have
a material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Combined Company, and neither EPIC nor
any of EPIC's Subsidiaries has received any notice of proceedings relating
to revocation or modification of any such Governmental Licenses that, in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, could reasonably be expected to have a material adverse effect on
the condition (financial or otherwise), earnings or business affairs of the
Combined Company. To the Company's knowledge, all of the hospitals
operated by EPIC and EPIC's Subsidiaries are "providers of services" as
defined in the Social Security Act and the regulations promulgated
thereunder, and are eligible to participate in the Medicare program, except
as would not have a material adverse effect on the condition (financial or
other), earnings or business affairs of the Combined Company.
(xxii) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in stabilization or
manipulation of the price of the Common Stock; and the Company has not
distributed and will not distribute any prospectus (as such term is defined
in the 1933 Act and the 1933 Act Regulations) in connection with the
offering and sale of the Offered Shares other than any preliminary
prospectus filed with the Commission or the Prospectuses or other material
permitted by the 1933 Act or the 1933 Act Regulations.
(xxiii) Except as disclosed in the Prospectuses, all United States federal
income tax returns of the Company and the Company's Subsidiaries required
by law to be filed have been filed and all taxes shown by such returns or
otherwise assessed, which are due and payable, have been paid, except tax
assessments, if
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<PAGE> 15
any, as are being contested in good faith and as to which adequate reserves
have been provided, in each case except as would not have a material
adverse effect on the condition (financial or otherwise), earnings or
business affairs of the Company and the Company's Subsidiaries, considered
as one enterprise. Except as disclosed in the Prospectuses, all other
franchise and income tax returns of the Company and the Company's
Subsidiaries required to be filed pursuant to applicable foreign, state or
local law have been filed, except insofar as the failure to file such
returns would not have a material adverse effect on the condition
(financial or otherwise), earnings or business affairs of the Company and
the Company's Subsidiaries, considered as one enterprise, and all taxes
shown on such returns or otherwise assessed which are due and payable have
been paid, except for such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided. To the best of
the Company's knowledge, the charges, accruals and reserves on the books of
the Company and the Company's Subsidiaries in respect of any income and
corporate franchise tax liability for any years not finally determined are
adequate to meet any assessments or reassessments for additional income or
corporate franchise tax for any years not finally determined, except as
disclosed in the Prospectuses and except to the extent of any inadequacy
that would not have a material adverse effect on the condition (financial
or otherwise), earnings or business affairs of the Company and the
Company's Subsidiaries, considered as one enterprise.
(xxiv) To the Company's knowledge, except as disclosed in the
Prospectuses, all United States federal income tax returns of EPIC and
EPIC's Subsidiaries required by law to be filed have been filed and all
taxes shown by such returns or otherwise assessed, which are due and
payable, have been paid, except tax assessments, if any, as are being
contested in good faith and as to which adequate reserves have been
provided, in each case except as would not have a material adverse effect
on the condition (financial or otherwise), earnings or business affairs of
the Combined Company. To the Company's knowledge, except as disclosed in
the Prospectuses, all other franchise and income tax returns of EPIC and
EPIC's Subsidiaries required to be filed pursuant to applicable foreign,
state or local law have been filed, except insofar as the failure to file
such returns would not have a material adverse effect on the condition
(financial or otherwise),
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<PAGE> 16
earnings or business affairs of the Combined Company, and all taxes shown
on such returns or otherwise assessed which are due and payable have been
paid, except for such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided, in each case except
as would not have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of the Combined Company. To the
Company's knowledge, the charges, accruals and reserves on the books of
EPIC and EPIC's Subsidiaries in respect of any income and corporate
franchise tax liability for any years not finally determined are adequate
to meet any assessments or reassessments for additional income or
corporate franchise tax for any years not finally determined, except as
disclosed in the Prospectuses and except to the extent of any inadequacy
that would not have a material adverse effect on the condition (financial
or otherwise), earnings or business affairs of the Combined Company.
(xxv) The Company has obtained the written agreement of R. Clayton
McWhorter, Michael A. Koban, Jr. and W. Hudson Connery, Jr. substantially
in the form previously furnished to you that, for a period of 90 days from
the date hereof, such persons will not, without the prior written consent
of the U.S. Representatives (which consent shall not be unreasonably
withheld), directly or indirectly, sell, offer to sell, contract to sell,
grant any option for the sale of, or otherwise dispose of any shares of
Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock ("convertible securities"); provided, however, that during
such 90 day period, such persons may without such prior written consent (i)
transfer such shares of Common Stock or convertible securities by will or
the laws of descent and distribution, (ii) make gifts of shares of Common
Stock or convertible securities or transfer such shares of Common Stock or
convertible securities to (A) family members (by trust or otherwise), so
long as the donee agrees to be bound by the foregoing restriction in the
same manner as it applies to such persons, or (B) charitable organizations
and (iii) sell, transfer or otherwise dispose of shares of Common Stock or
convertible securities to the Company in connection with any of the
transactions contemplated by the Registration Statement.
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<PAGE> 17
(xxvi) To the Company's knowledge, EPIC's Employee Stock Ownership Plan
(the "EPIC ESOP") and the trust created pursuant to the Trust Agreement for
the EPIC ESOP between EPIC Group and U.S. Trust Company of California,
N.A., as trustee under the EPIC ESOP (the "EPIC Trustee"), dated as of
September 30, 1988 (the "EPIC ESOP Trust"), meet all applicable
requirements of qualification and exemption from taxation under Sections
401(a) and 501(a), respectively, of the Internal Revenue Code of 1986, as
amended (the "Code"), except as would not have a material adverse effect on
the condition (financial or other), earnings or business affairs of the
Combined Company.
(xxvii) To the Company's knowledge, the EPIC ESOP constitutes an "employee
stock ownership plan," as defined in Section 4975(e)(7) of the Code and the
Treasury Regulations promulgated thereunder, and as defined in Section
407(d)(6) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(xxviii) To the Company's knowledge, each of the loans to the EPIC ESOP
Trust pursuant to the EPIC ESOP Loan Agreement and the Substitute EPIC ESOP
Loan Agreement, each between EPIC Group and the EPIC ESOP Trustee and dated
as of September 30, 1988 and July 30, 1991, respectively (collectively, the
"ESOP Loan Agreements"), and each of the pledges of shares of EPIC Group
Common Stock, par value $.01 per share (the "EPIC Group Common Stock"), by
the EPIC ESOP Trust pursuant to the Pledge Agreement and the Amendment to
the Pledge Agreement, each between EPIC Group and the EPIC ESOP Trustee and
dated as of September 30, 1988 and July 30, 1991, respectively
(collectively, the "EPIC ESOP Pledge Agreements"), satisfies the
requirements of Section 4975(d)(3) of the Code and Section 408(b)(3) of
ERISA, and will not subject EPIC to a tax imposed under Section 4975 of the
Code or a civil penalty assessed under Section 502(i) of ERISA, in each
case except as would not have a material adverse effect on the condition
(financial or other), earnings or business affairs of the Combined Company.
(xxix) To the Company's knowledge, the EPIC Common Stock is a "qualifying
employer security," within the meaning of Section 4975(e)(8) of the Code
and Section 407(d)(5) of ERISA, except as would not have a material adverse
effect on the condition (financial or other), earnings or business affairs
of the Combined Company.
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<PAGE> 18
(xxx) To the Company's knowledge, the sales of shares of EPIC Group
Common Stock to the EPIC ESOP Trust pursuant to the Subscription
Agreement between EPIC Group and the EPIC ESOP Trustee (the "EPIC ESOP
Subscription Agreement"), satisfies the requirements of Section 4975(d)(13)
of the Code and Section 408(e) of ERISA, and will not subject EPIC to a tax
imposed under Section 4975 of the Code or a civil penalty assessed under
Section 502(i) of ERISA, in each case except as would not have a material
adverse effect on the condition (financial or other), earnings or business
affairs of the Combined Company.
(xxxi) To the Company's knowledge, and except as disclosed in the
Prospectuses, no opinion, correspondence or other communication, whether
written or otherwise, has been received by EPIC or any of its agents,
affiliates, associates, officers or directors, or any fiduciary of the EPIC
ESOP, from the United States Department of Labor, the Internal Revenue
Service or any other Federal or state governmental or regulatory agency,
body or authority, to the effect that either of the loans to the EPIC ESOP
Trust pursuant to the EPIC ESOP Loan Agreements, either of the pledges of
shares of EPIC Group Common Stock by the EPIC ESOP Trust pursuant to the
EPIC ESOP Pledge Agreements or the sales of shares of EPIC Group Common
Stock to the EPIC ESOP Trust pursuant to the EPIC ESOP Subscription
Agreement may or will constitute a violation of or result in any liability
under ERISA or the Code, in each case except as would not have a material
adverse effect on the condition (financial or other), earnings or business
affairs of the Combined Company.
(xxxii) None of the transactions contemplated by the ESOP Agreement should
constitute a material violation of or result in any material liability
under ERISA or the Code (including, without limitation, any tax under
Section 4978B of the Code), except as would not have a material adverse
effect on the condition (financial or other), earnings or business affairs
of the Combined Company.
(b) Any certificate signed by any officer of the Company and
delivered to you or to Davis Polk & Wardwell as counsel for the U.S.
Underwriters pursuant to this Agreement or at the Closing contemplated hereby
shall be deemed a representation and warranty by the Company to each U.S.
Underwriter as to the matters covered thereby.
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<PAGE> 19
(c) Representations and warranties in this Agreement which are
given "to the Company's knowledge" are based solely upon (i) the Company's
actual knowledge and (ii) the representations and warranties of EPIC set forth
in the Merger Agreement, dated as of January 9, 1994, among the Company,
Odyssey Acquisition Corp. and EPIC (the "Merger Agreement"). For purposes of
this Agreement, "Disclosure Schedule" means the disclosure schedule of EPIC
relating to the Merger Agreement.
(d) Each of the Selling Shareholders represents and warrants to
each of the Underwriters that:
(i) This Agreement and the International Purchase Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling
Shareholder.
(ii) The execution and delivery by such Selling Shareholder of, and the
performance by such Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement signed by such Selling Shareholder and
First Union National Bank of North Carolina, as Custodian, relating to the
deposit of Shares to be sold by such Selling Shareholder (the "Custody
Agreement") and the Power of Attorney appointing certain individuals as
such Selling Shareholder's attorneys-in-fact to the extent set forth
therein, relating to the transactions contemplated hereby and by the
Registration Statement (the "Power of Attorney") will not contravene any
provision of applicable law, or the certificate of incorporation (or
charter) or by-laws of such Selling Shareholder (if such Selling
Shareholder is a corporation), or, in any material respects, any agreement
or other instrument binding upon such Selling Shareholder or, in any
material respects, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over such Selling Shareholder, and no
consent, approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by such Selling
Shareholder of its obligations under this Agreement or the Custody
Agreement or Power of Attorney of such Selling Shareholder, except such as
have already been obtained or as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Shares.
(iii) On the Closing Date, such Selling Shareholder, upon due
authorization and issuance of the Shares by the Company to the Selling
Shareholder, will have,
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<PAGE> 20
valid marketable title to the Shares to be sold by such Selling Shareholder
and the legal right and power, and all authorization and approval required
by law, to enter into this Agreement, the Custody Agreement and the Power
of Attorney and to sell, transfer and deliver the Shares to be sold by such
Selling Shareholder.
(iv) The Custody Agreement and the Power of Attorney have been duly
authorized, executed and delivered by such Selling Shareholder and are
valid and binding agreements of such Selling Shareholder.
(v) Assuming that the Company duly authorizes, issues and delivers the
Shares to be sold by the Selling Shareholder on the Closing Date to the
Selling Shareholder free and clear of any security interests, claims,
liens, equities and other encumbrances, delivery of the Shares to be sold
by such Selling Shareholder pursuant to this Agreement will pass marketable
title to such Shares free and clear of any security interests, claims,
liens, equities and other encumbrances.
(vi) The Selling Shareholder is not an investment company under the
Investment Company Act of 1940 or is registered under the Investment
Company Act of 1940.
(vii) All information furnished to the Company in writing by or on behalf
of such Selling Shareholder for use in the Registration Statement and
Prospectus is, and on the Closing Date will be, true, correct, and
complete, and does not, and on the Closing Date will not, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
(viii) The Selling Shareholder has not taken, and will not take, directly
or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Shares pursuant to the distribution contemplated by this Agreement, and
other than as permitted by the Act, such Selling Shareholder has not
distributed and will not distribute any prospectus or other offering
material in connection with the offering and sale of the Shares.
(ix) The part of the preliminary prospectus under the caption "Selling
Shareholders" which specifically
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<PAGE> 21
relates to such Selling Shareholder or such Selling Shareholder's
affiliates does not, and will not on the Closing Date (and Option Closing
Date, if applicable), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of circumstances under which they
were made, not misleading.
(x) At any time during such period as in the opinion of counsel for the
Underwriters a prospectus is required by law to be delivered in connection
with sales by an Underwriter or a dealer, if there is any change in the
information referred to in Section 1(d)(viii) above, the Selling
Shareholder will immediately notify you of such change.
Section 2. Sale and Delivery to the U.S. Underwriters; Closing.
(a) On the basis of the representations and warranties herein contained, and
subject to the terms and conditions herein set forth, the Company and each
Selling Shareholder severally agree to sell to each U.S. Underwriter, and each
U.S. Underwriter agrees, severally and not jointly, to purchase from the
Company and each Selling Shareholder, at the purchase price per share for the
Initial U.S. Shares to be agreed upon by the U.S. Representatives and the
Company in accordance with Section 2(b) or 2(c) and set forth in the U.S. Price
Determination Agreement, the number of Initial U.S. Shares set forth opposite
the name of such U.S. Underwriter in Schedule A, plus such additional number of
Initial U.S. Shares that such U.S. Underwriter may become obligated to purchase
pursuant to Section 11 hereof. If the Company elects to rely on Rule 430A,
Schedule A may be attached to the U.S. Price Determination Agreement.
(b) If the Company has elected not to rely upon Rule 430A, the
initial public offering price per share for the Initial U.S. Shares and the
purchase price per share for the Initial U.S. Shares to be paid by the several
U.S. Underwriters shall be agreed upon and set forth in the U.S. Price
Determination Agreement, dated the date hereof, and an amendment to the
Registration Statement containing such per share price information will be
filed before the Registration Statement becomes effective.
(c) If the Company has elected to rely upon Rule 430A, the
initial public offering price per share for the Initial U.S. Shares and the
purchase price per share for the Initial U.S. Shares to be paid by the several
U.S. Underwriters shall be agreed upon and set forth in the U.S.
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<PAGE> 22
Price Determination Agreement. In the event that the U.S. Price Determination
Agreement has not been executed by the close of business on the fourth business
day following the date on which the Registration Statement becomes effective,
this Agreement shall terminate forthwith, without liability of any party to any
other party except that Sections 7 and 8 shall remain in effect.
(d) In addition, on the basis of the representations and
warranties herein contained, and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the U.S. Underwriters, severally
and not jointly, to purchase up to an additional 624,000 U.S. Option Shares at
the same purchase price per share as shall be applicable to the Initial U.S.
Shares. The option hereby granted will expire 30 days after the date upon
which the Registration Statement becomes effective or, if the Company has
elected to rely upon Rule 430A, the date of the U.S. Price Determination
Agreement, and may be exercised in whole or from time to time in part only for
the purpose of covering over-allotments that may be made in connection with the
offering and distribution of the Initial U.S. Shares upon notice by you to the
Company setting forth the number of U.S. Option Shares as to which the several
U.S. Underwriters are exercising the option, and the time and date of payment
and delivery thereof. Such time and date of delivery (the "Date of Delivery")
shall be determined by you but shall not be later than five full business days
after the exercise of such option, nor in any event prior to the Closing Time.
If the option is exercised as to all or any portion of the U.S. Option Shares,
the U.S. Option Shares as to which the option is exercised shall be purchased
by the U.S. Underwriters, severally and not jointly, in the respective
proportions that bear the same relationship to the number of U.S. Option Shares
to be purchased at the Date of Delivery as the number of Initial U.S. Shares
set forth opposite the name of each U.S. Underwriter in Schedule A hereto bears
to the total number of Initial U.S. Shares (such proportions are hereinafter
referred to as each U.S. Underwriter's "underwriting obligation proportions").
(e) Payment of the purchase price for, and delivery of
certificates for, the Initial U.S. Shares shall be made at the offices of Dewey
Ballantine, 1301 Avenue of the Americas, New York, New York 10019, or at such
other place as shall be agreed upon by the Company and you, at 10:00 A.M.
either (i) on the fifth full business day after the effective date of the
Registration Statement, or (ii) if the Company has elected to rely upon Rule
430A, the fifth full business day after execution of the U.S. Price
Determination Agreement (unless, in either case, postponed
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<PAGE> 23
pursuant to Section 11), or at such other time not more than ten full business
days thereafter as you and the Company shall determine (such date and time of
payment and delivery being herein called the "Closing Time"). In addition, in
the event that any or all of the U.S. Option Shares are purchased by the U.S
Underwriters, payment of the purchase price for, and delivery of certificates
for, such U.S. Option Shares shall be made at the offices of Dewey Ballantine
set forth above, or at such other place as the Company and you shall determine,
on the Date of Delivery as specified in the notice from you to the Company.
Payment shall be made to the Company and the Selling Shareholders by certified
or official bank check or checks in New York Clearing House funds payable to
the order of the Company or the Selling Shareholders against delivery to you
for the respective accounts of the several U.S. Underwriters of certificates
for the U.S. Shares to be purchased by them.
(f) Certificates for the Initial U.S. Shares and U.S. Option
Shares to be purchased by the U.S. Underwriters shall be in such denominations
and registered in such names as you may request in writing at least two full
business days before the Closing Time or the Date of Delivery, as the case may
be. The certificates for the Initial U.S. Shares and U.S. Option Shares will
be made available in New York City for examination and packaging by you not
later than 10:00 A.M. on the business day prior to the Closing Time or the Date
of Delivery, as the case may be.
(g) It is understood that each U.S. Underwriter has authorized
you, for its account, to accept delivery of, receipt for, and make payment of
the purchase price for, the U.S. Shares that it has agreed to purchase. You,
individually and not as U.S. Representatives, may (but shall not be obligated
to) make payment of the purchase price for the Initial U.S. Shares, or U.S.
Option Shares, to be purchased by any U.S. Underwriter whose check or checks
shall not have been received by the Closing Time or the Date of Delivery, as
the case may be.
(h) It is understood that the obligations of the Company to sell the
Offered Shares being sold by it hereunder are subject to the consummation of
the Acquisition (as defined in the Registration Statement). If the Acquisition
is not consummated, this Agreement may be terminated by the Company upon
notice to the U.S. representatives at or prior to the Closing Time, and such
Termination shall be without liability of any party to any other party except
as provided in Section 4 herein. Notwithstanding any such termination, the
provisions of Sections 7 and 8 herein shall remain in effect.
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<PAGE> 24
Section 3. Certain Covenants of the Company. The Company
covenants with each U.S. Underwriter as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and, if the Company elects to rely
upon Rule 430A and subject to Section 3(b), will comply in all material
respects with the requirements of Rule 430A and will notify you promptly, (i)
when the Registration Statement, or any post-effective amendment to the
Registration Statement, shall have become effective, or any supplement to the
Prospectuses or any amended Prospectuses shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission to amend the Registration Statement or amend or supplement any
Prospectus or for additional information and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Offered Shares for
offering or sale in any jurisdiction, or of the institution or threatening of
any proceedings for any of such purposes. The Company will make every
reasonable effort to prevent the issuance of any such stop order or of any
order preventing or suspending such use and, if any such order is issued, to
obtain the lifting thereof at the earliest possible moment.
(b) The Company will not at any time file or make any amendment
to the Registration Statement, or any amendment or supplement (i) if the
Company has not elected to rely upon Rule 430A, to the Prospectuses or (ii) if
the Company has elected to rely upon Rule 430A, to either the prospectus
included in the Registration Statement at the time it becomes effective or to
the Prospectuses, of which you shall not have previously been advised and
furnished a copy or to which you or Davis Polk & Wardwell as counsel for the
U.S. Underwriters shall have promptly and reasonably objected in writing.
(c) The Company has furnished or will furnish to you and Davis
Polk & Wardwell as counsel for the U.S. Underwriters, without charge, as many
signed copies (as reasonably requested) of the Registration Statement as
originally filed and of all amendments thereto, whether filed before or after
the Registration Statement becomes effective, copies of all exhibits and
documents filed therewith and signed copies of all consents and certificates of
experts, as you may reasonably request and has furnished or will furnish to
you, for each other U.S. Underwriter, one conformed copy of the Registration
Statement as originally filed and each amendment thereto (without exhibits).
23
<PAGE> 25
(d) The Company will deliver to each U.S. Underwriter, without
charge, from time to time until the effective date of the Registration
Statement (or, if the Company has elected to rely upon Rule 430A, until the
time the U.S. Price Determination Agreement is executed and delivered), as many
copies of each preliminary prospectus as such U.S. Underwriter may reasonably
request, and the Company hereby consents to the use of such copies for purposes
permitted by the 1933 Act. The Company will deliver to each Underwriter,
without charge, as soon as the Registration Statement shall have become
effective (or, if the Company has elected to rely upon Rule 430A, as soon as
practicable after the U.S. Price Determination Agreement has been executed and
delivered) and thereafter from time to time as requested during the period when
the Prospectus is required to be delivered under the 1933 Act, such number of
copies of the Prospectuses (as supplemented or amended) as such U.S.
Underwriter may reasonably request.
(e) The Company will comply in all material respects with the
1933 Act and the 1933 Act Regulations, and the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder so as to
permit the completion of the distribution of the Offered Shares as contemplated
in this Agreement and in the Prospectuses. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Offered Shares any event shall occur or condition exist as a result of which it
is necessary, in the opinion of counsel for the U.S. Underwriters or counsel
for the Company, to amend the Registration Statement or amend or supplement any
Prospectus in order that the Prospectuses will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of either such counsel, at any such time to amend the
Registration Statement or amend or supplement any Prospectus in order to comply
with the requirements of the 1933 Act or the 1933 Act Regulations, the Company
will promptly prepare and file with the Commission, subject to Section 3(b),
such amendment or supplement as may be necessary to correct such untrue
statement or omission or to make the Registration Statement or the Prospectuses
comply with such requirements.
(f) The Company will endeavor, in cooperation with the U.S.
Underwriters, to qualify the Offered Shares for offering and sale under the
applicable securities laws of such states and other jurisdictions as the
Company and you may mutually agree upon and to maintain such
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<PAGE> 26
qualifications in effect for a period of not less than one year from the
effective date of the Registration Statement; provided, however, that neither
the Company nor any of the Company's Subsidiaries shall be obligated to file
any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not
so qualified or to subject itself to taxation in respect of doing business in
any jurisdiction in which it is not otherwise so subject. The Company will
file such statements and reports as may be required by the laws of each such
jurisdiction to maintain the qualification of the Offered Shares as above
provided.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 60 days after the close of
the period covered thereby, an earnings statement of the Company (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations),
covering a period of 12 months beginning after the effective date of the
Registration Statement but not later than the first day of the Company's fiscal
quarter next following such effective date.
(h) For a period of 90 days from the date hereof, the Company
will not, without your prior written consent, which consent shall not be
unreasonably withheld, directly or indirectly, sell, offer to sell, contract to
sell, grant any option for the sale of, or otherwise dispose of, any Common
Stock or convertible securities, other than (i) to eligible participants in the
Company's employee benefit plans pursuant to the terms thereof and to the U.S.
Underwriters pursuant to this Agreement, (ii) contributions to the Company's
employee benefit plans in accordance with the terms thereof, (iii) upon
exercise of options or warrants to purchase Common Stock, (iv) to the
International Underwriters pursuant to the International Purchase Agreement and
(v) in connection with the transactions described in the Prospectuses
(including the transactions described under the caption "The Acquisition and
Financing Plan" in the Prospectuses).
(i) If the Company has elected to rely upon Rule 430A, it will
take such steps as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for filing by
the Commission and, in the event that it was not, it will promptly file such
prospectus.
(j) The Company, with respect to the offering of the Offered
Shares, has complied and will comply with all of the provisions of Florida H.B.
1771, codified as Section
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<PAGE> 27
517.075 of the Florida Statutes, and all regulations promulgated thereunder
relating to issuers doing business with Cuba.
Section 4. Payment of Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (a) the printing and filing of the Registration Statement (including
financial statements and exhibits), as originally filed and as amended, the
preliminary prospectuses and the Prospectuses and any amendments or supplements
thereto, and the cost of furnishing copies thereof to the U.S. Underwriters,
(b) the printing and distribution of this Agreement (including the U.S. Price
Determination Agreement), the Agreement among U.S. Underwriters, the
Intersyndicate Agreement, the Agreement among International Underwriters, the
certificates for the U.S. Shares and the Blue Sky Survey, (c) the delivery of
the certificates for the U.S. Shares to the U.S. Underwriters, (d) the fees and
disbursements of the Company's counsel and accountants, (e) the costs and
expenses in connection with the sale of the U.S. Shares by the Selling
Shareholders as are agreed upon by the Company and the Selling Shareholders
(but in no event shall the U.S. Underwriters pay any costs and expenses of the
Selling Shareholders), (f) the qualification of the Offered Shares under the
applicable securities laws in accordance with Section 3(f) and any filing for
review of the offering with the National Association of Securities Dealers,
Inc., including filing fees and reasonable fees and disbursements of Davis Polk
& Wardwell as counsel for the U.S. Underwriters, in connection with such
qualification of the Offered Shares and the Blue Sky Survey and (g) the listing
fees and expenses incurred in connection with listing the Shares on the New
York Stock Exchange.
If this Agreement is terminated by you in accordance with the
provisions of Section 5, 10(a)(i) or 12, or by the Company in accordance with
the provisions of Section 2(h), the Company shall reimburse the U.S.
Underwriters for all their reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of Davis Polk & Wardwell as counsel for the
U.S. Underwriters.
Section 5. Conditions of U.S. Underwriters' Obligations. In
addition to the execution and delivery of the U.S Price Determination
Agreement, the obligations of the several U.S. Underwriters to purchase and pay
for the U.S. Shares that they have respectively agreed to purchase hereunder
are subject to the accuracy of the representations and warranties of the
Company contained herein (including those contained in the U.S. Price
Determination Agreement)
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<PAGE> 28
or in certificates of the Company's officers delivered pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date of this Agreement or, with your consent, at a
later time and date not later, however, than 5:30 P.M. on the first business
day following the date hereof, or at such later time or on such later date as
you may agree to in writing with the approval of a majority in interest of the
several U.S. Underwriters; and at the Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or
shall be pending or, to your knowledge or the knowledge of the Company, shall
have been threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Davis Polk & Wardwell as counsel for the U.S.
Underwriters. If the Company has elected to rely upon Rule 430A, Prospectuses
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
(b) At the Closing Time, you shall have received a signed opinion
of Dewey Ballantine, counsel for the Company, dated as of the Closing Time, in
form and substance reasonably satisfactory to Davis Polk & Wardwell as counsel
for the U.S. Underwriters, to the effect that:
(i) This Agreement has been duly authorized, executed and delivered by the
Company.
(ii) The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware with corporate
power under such laws to own, lease and operate its properties and conduct
its business as described in the Prospectuses.
(iii) The Offered Shares sold by the Company pursuant to this Agreement
and the International Purchase Agreement have been duly authorized and,
when issued and delivered by the Company upon receipt of the payment
therefor in accordance with this Agreement and the International Purchase
Agreement, will be validly issued, fully paid and non-assessable. Such
Offered Shares are not subject to the preemptive or other
27
<PAGE> 29
similar rights of any stockholder of the Company arising by operation of
law, under the charter or bylaws of the Company or under any agreement
known to such counsel to which the Company is a party.
(iv) The Offered Shares conform in all material respects to the
description thereof contained in the Prospectuses.
(v) To the knowledge of such counsel, no authorization, approval, consent
or license of any government, governmental instrumentality or court (other
than under the 1933 Act and the 1933 Act Regulations, the Trust Indenture
Act and the securities or blue sky laws of the various states and the
securities laws of any jurisdiction in which the International Shares are
offered or sold by the International Underwriters pursuant to the
International Purchase Agreement), is required for the valid issuance, sale
and delivery of the Offered Shares by the Company (whether to you or the
Selling Shareholders upon exercise of their warrants).
(vi) Such counsel has been informed by the Commission that the
Registration Statement is effective under the 1933 Act; any required filing
of the Prospectuses or any supplement thereto pursuant to Rule 424(b) has
been made in the manner and within the time period required by Rule 424(b);
and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or have
been threatened by the Commission under the 1933 Act.
(vii) The Registration Statement (including the Rule 430A Information, if
applicable), the Prospectuses and each amendment or supplement to the
Registration Statement and Prospectuses, as of their respective effective
or issue dates (in each case, except for the financial statements,
supporting schedules and other financial or statistical data included
therein or omitted therefrom, as to which such counsel need express no
opinion), comply as to form in all material respects to the requirements of
the 1933 Act and the 1933 Act Regulations.
(viii) The Company is not an investment company under the Investment
Company Act of 1940.
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<PAGE> 30
(ix) The transactions contemplated in the Prospectuses under the heading
"The Acquisition and the Financing Plan", to the extent described therein,
have been duly authorized by the Company; to the knowledge of such counsel,
all of the necessary consents to consummate such transactions have been
obtained (other than the consent of EPIC and its Subsidiaries with respect
to the Debt Redemption and other than as disclosed in the Registration
Statement), except where the failure to obtain such consents would not have
a material adverse effect on the consummation of the Acquisition and the
Financing Plan; to the knowledge of such counsel, there has not been any
violation on the part of the Company of any of the terms of such consents
which violation would materially and adversely affect the consummation of
the Acquisition and the Financing Plan; and to the knowledge of such
counsel, except as disclosed in the Registration Statement there is no
pending or, threatened legal or governmental proceedings with respect to
any of the consents or the transactions described in the Prospectuses under
the caption "The Acquisition and the Financing Plan" that, if the subject
of an unfavorable decision, ruling or finding, would have a material
adverse effect on the consummation of the Acquisition and the Financing
Plan.
In addition, such opinion shall state that such counsel has
participated in the preparation of the Registration Statement and Prospectuses
and in conferences with officers and other representatives of the Company, and
your representatives and your counsel at which the contents of the Registration
Statement, the Prospectuses and related matters were discussed and, although
such counsel need not undertake to determine independently nor pass upon or
assume any responsibility, explicitly or implicitly, for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectuses on the basis of and subject to the foregoing, no
facts have come to the attention of such counsel to lead such counsel to
believe (A) that the Registration Statement (including the Rule 430A
Information, if applicable) or any amendment thereto (except for the financial
statements, supporting schedules and other financial or statistical data
included therein or omitted therefrom including without limitation the pro
forma financial information, and except for the information set forth under the
caption "EPIC Management's Discussion and Analysis of Financial Condition and
Results of Operations," as to which such counsel need express no opinion), as
of the date the Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
29
<PAGE> 31
fact required to be stated therein or necessary to make the statements therein
not misleading or (B) that the Prospectuses or any amendment or supplement
thereto (except for the financial statements, supporting schedules and other
financial or statistical data included therein or omitted therefrom including
without limitation the pro forma financial information, and except for the
information set forth under the caption "EPIC Management's Discussion and
Analysis of Financial Condition and Results of Operations," as to which such
counsel need express no opinion), at the time the Prospectuses were issued, at
the time any such amended or supplemented prospectuses were issued or at the
Closing Time, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and the Company's Subsidiaries and
certificates of public officials.
(c) At the Closing Time, you shall have received a signed opinion
of Philip D. Wheeler, General Counsel for the Company, dated as of the Closing
Time, together with reproduced copies of such opinion for each of the other
U.S. Underwriters, in form and substance reasonably satisfactory to Davis Polk
& Wardwell as counsel to the U.S. Underwriters, to the effect that:
(i) The Company is duly qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which it owns
or leases property of a nature, or transacts business of a type, that would
make such qualification necessary, except to the extent that the failure to
so qualify or be in good standing would not have a material adverse effect
on the Company and the Company's Subsidiaries, considered as one
enterprise.
(ii) Each of the Company's Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with corporate power under such laws to
own, lease and operate its properties and conduct its business as described
in the Prospectuses, or except to the extent that the failure to be in good
standing would not have a material adverse effect on the Company
30
<PAGE> 32
and the Company's Subsidiaries, considered as one enterprise.
(iii) Each of the Company's Subsidiaries is duly qualified to transact
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary, except to
the extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and the Company's
Subsidiaries, considered as one enterprise.
(iv) The Offered Shares sold by the Company pursuant to this Agreement and
the International Purchase Agreement have been duly authorized and, when
issued and delivered by the Company upon receipt of the payment therefor in
accordance with this Agreement and the International Purchase Agreement,
will be validly issued, fully paid and non-assessable. Such Offered Shares
are not subject to the preemptive or other similar rights of any
stockholder of the Company arising by operation of law, under the charter
or bylaws of the Company or under any agreement known to such counsel to
which the Company or any of the Company's Subsidiaries is a party. The
Offered Shares to be sold by each Selling Shareholder have been duly
authorized and are validly issued, fully paid and non-assessable.
(v) All of the outstanding shares of capital stock of the Company other
than the Offered Shares have been duly authorized and validly issued and
are fully paid and non-assessable; and none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or
other similar rights of any stockholder of the Company arising by operation
of law, under the charter or bylaws of the Company or under any agreements
known to such counsel to which the Company or any of the Company's
Subsidiaries is a party.
(vi) Based solely on an examination of relevant minute books and stock
records, except as disclosed in the Prospectuses, all of the outstanding
shares of capital stock of each of the Company's Subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable.
(vii) Such counsel does not know of any statutes or regulations, or any
pending or threatened legal or governmental proceedings, required to be
described in
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<PAGE> 33
the Prospectuses that are not described as required, nor of any contracts
or documents of a character required to be described in the Registration
Statement or the Prospectuses or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(viii) The statements made in the Prospectuses under "Reimbursement and
Regulation", to the extent that they constitute matters of law or legal
conclusions, have been reviewed by such counsel and fairly present the
information disclosed therein in all material respects.
(ix) The execution and delivery of this Agreement by the Company, the
issuance and delivery of the Offered Shares by the Company (whether to you
or the Selling Shareholders upon exercise of their warrants), the
consummation by the Company of the Acquisition, the Subordinated Debt
Offering, the Tender Offers, the Debt Redemption, the 1994 Credit Agreement
and the transactions described in the ESOP Agreement and compliance by the
Company with the terms of this Agreement have been duly authorized by all
necessary corporate action on the part of the Company and do not and will
not result in any violation of the charter or by-laws of the Company or any
of the Company's Subsidiaries, and, to the knowledge of such counsel, do
not and will not conflict with, or constitute a breach of any of the terms
or provisions of, or constitute a default under, or result in the creation
or imposition of any lien or encumbrance upon any property or assets of the
Company or any of the Company's Subsidiaries under (A) any indenture,
mortgage or loan agreement or any other agreement or instrument to which
the Company or any of the Company's Subsidiaries is a party or by which it
may be bound or to which any of their respective properties may be subject,
(B) any existing applicable law, rule or regulation (other than the
securities or blue sky laws of the various states and the securities laws
of any jurisdiction in which the International Shares are offered or sold
by the International Underwriters pursuant to the International Purchase
Agreement, as to which such counsel need express no opinion), or (C) any
judgment, order or decree of any government, governmental instrumentality
or court having jurisdiction over the Company or any of the Company's
Subsidiaries or any of their respective properties, in each case, except as
disclosed in the Prospectuses, and except for such conflicts, breaches or
defaults or liens or encumbrances that would not have a material adverse
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<PAGE> 34
effect on the Company and the Company's Subsidiaries, considered as one
enterprise. Such counsel need express no opinion, however, as to whether
the execution, delivery and performance by the Company of this Agreement or
the consummation by the Company of the Acquisition, the Subordinated Debt
Offering, the Tender Offers, the Debt Redemption, the 1994 Credit Agreement
and the transactions described in the ESOP Agreement will constitute a
violation of, or default under, any financial covenant or financial ratios
contained in any of the agreements referred to in the preceding sentence.
In addition, such opinion shall state that such counsel has
participated in the preparation of the Registration Statement and Prospectuses
and in conferences with officers and other representatives of the Company, and
your representatives and your counsel at which the contents of the Registration
Statement, the Prospectuses and related matters were discussed and, although
such counsel need not undertake to determine independently nor pass upon or
assume any responsibility, explicitly or implicitly, for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectuses, on the basis of and subject to the foregoing, no
facts have come to the attention of such counsel to lead such counsel to
believe (A) that the Registration Statement (including the Rule 430A
Information, if applicable) or any amendment thereto (except for the financial
statements, supporting schedules and other financial or statistical data
included therein or omitted therefrom including without limitation the pro
forma financial information, and except for the information set forth under the
caption "EPIC Management's Discussion and Analysis of Financial Condition and
Results of Operations," as to which such counsel need express no opinion), as
of the date the Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or (B) that the Prospectus or any amendment or supplement
thereto (except for the financial statements, supporting schedules and other
financial or statistical data included therein or omitted therefrom including
without limitation the pro forma financial information, and except for the
information set forth under the caption "EPIC Management's Discussion and
Analysis of Financial Condition and Results of Operations," as to which such
counsel need express no opinion), at the time the Prospectuses were issued, at
the time any such amended or supplemented prospectuses were issued or at the
Closing Time, contained or contains an untrue statement of a
33
<PAGE> 35
material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and the Company's Subsidiaries and
certificates of public officials.
(d) At the Closing Time, you shall have received a signed opinion
of Stanley F. Baldwin, Esq., general counsel for EPIC, dated as of the Closing
Time, together with reproduced copies of such opinion for each of the other
U.S. Underwriters, in form and substance reasonably satisfactory to Davis Polk
& Wardwell as counsel to the U.S. Underwriters, substantially to the effect set
forth in Section 7.02(g) of the Merger Agreement. The parties hereto
acknowledge and agree that no personal liability to Stanley F. Baldwin shall
attach to the rendering of such opinion.
Such counsel may state that, insofar as such opinion involves
factual matters, he has relied, to the extent he deems proper, upon
certificates of officers of EPIC and EPIC's Subsidiaries and certificates of
public officials.
(e) At the Closing Time, you shall have received a signed opinion
of Johnson & Gibbs, P.C. (or its successor), counsel for EPIC, dated as of the
Closing Time, together with reproduced copies of such opinion for each of the
other U.S. Underwriters, in form and substance reasonably satisfactory to Davis
Polk & Wardwell as counsel to the U.S. Underwriters, substantially in the form
and to the effect set forth in Section 7.02(f) of the Merger Agreement and to
the effect that:
such firm has represented EPIC in connection with the transactions
contemplated by the Merger Agreement and, although such firm has not
verified, is not passing upon and does not assume any responsibility for,
the accuracy, completeness or fairness of any statements contained in the
Registration Statement or the Prospectus, on the basis of the knowledge of
such firm in connection with such representation (relying as to materiality
to a large extent upon the opinions of officers and other representatives
of EPIC, without independent check or verification), no fact has come to
their attention that has led them to believe that the section of the
Prospectuses under the heading "EPIC
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<PAGE> 36
Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained an untrue statement of a material fact or omitted to
state a material fact required to be stated in such section or necessary to
make the statements in such section, in light of the circumstances under
which they were made, not misleading. In making the foregoing statements
in this paragraph, such firm expresses no opinion, belief or comment with
respect to any financial data or information included or incorporated by
reference in the aforementioned section of the Prospectuses. Such firm may
advise you that it has not participated in any respect in connection with
the preparation of such Prospectuses, the Registration Statements with
respect thereto or the Forms 10-K or 10-Q of EPIC from which the
information contained in the sections referred to above has been derived.
(f) At the Closing Time, you shall have received a signed opinion
of each of the counsels for each of the Selling Shareholders, dated as of the
Closing Time, together with reproduced copies of such opinion for each of the
other U.S. Underwriters, in form and substance reasonably satisfactory to Davis
Polk & Wardwell as counsel to the U.S. Underwriters, to the effect that:
(i) This Agreement and the International Purchase Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling
Shareholder.
(ii) The execution and delivery by the Selling Shareholder of, and the
performance by the Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement and Power of Attorney signed by the
Selling Shareholder and First Union National Bank of North Carolina as
Custodian, and the attorneys-in-fact named therein relating to the deposit
of the Shares to be sold by the Selling Shareholders and the appointment of
certain individuals as the Selling Shareholders' attorneys-in-fact to the
extent set forth therein (the "Custody Agreement"), will not contravene any
provision of applicable law, or the certificate of incorporation or by-laws
of such Selling Shareholder (if such Selling Shareholder is a corporation),
or any agreement or other instrument binding upon such Selling Shareholder
or any judgment, order or decree of any governmental body, agency or court
having jurisdiction over such Selling Shareholder, and no consent,
approval, authorization or order of or qualification with any governmental
body or agency is required for the performance by such Selling Shareholder
of its
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obligations under this Agreement or the Custody Agreement and Power of
Attorney of such Selling Shareholder, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the
offer and sale of the Shares.
(iii) Such Selling Shareholder has valid marketable title to the Shares to
be sold by such Selling Shareholder and the legal right and power, and all
authorization and approval required by law, to enter into this Agreement,
the Custody Agreement and the Power of Attorney and to sell, transfer and
deliver the Shares to be sold by such Selling Shareholder.
(iv) The Custody Agreement and the Power of Attorney has been duly
authorized, executed and delivered by such Selling Shareholder and are
valid and binding agreements of such Selling Shareholder.
(v) Delivery of the Shares to be sold by such Selling Shareholder pursuant
to this Agreement will pass marketable title to such Shares free and clear
of any security interests, claims, liens, equities and other encumbrances.
(vi) The Selling Shareholder is not an investment company under the
Investment Company Act of 1940.
(g) At the Closing Time, you shall have received signed opinions
of Dewey Ballantine and Johnson & Gibbs, P.C. (or its successor), dated as of
the Closing Time, together with reproduced copies of such opinions for each of
the other U.S. Underwriters, in form and substance reasonably satisfactory to
Davis Polk & Wardwell as counsel to the U.S. Underwriters, to the effect that
neither of (i) the discharge of that portion of the principal amount of EPIC's
loans to the EPIC ESOP Trust that exceeds the fair market value of the shares
of the EPIC Common Stock transferred by the EPIC Trustee to EPIC, or (ii) the
transfer by the EPIC Trustee to EPIC of shares of EPIC Common Stock unallocated
under the EPIC ESOP in satisfaction of EPIC's loans to the ESOP Trust, each as
contemplated by the Registration Statement, should constitute a violation of or
result in any liability under ERISA or the Code.
Each such counsel may (i) assume for purposes of such opinion,
based on the understanding of such counsel that the Trustee has retained and
received the advice of independent counsel and financial advisors, that the
Trustee has complied with the applicable fiduciary requirements of ERISA and
the Code and that the ESOP has received no less
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<PAGE> 38
than adequate consideration for such shares of EPIC Common Stock, and (ii)
state that, insofar as such opinion involves factual matters, it has relied, to
the extent they deem proper, upon certificates of officers of EPIC and its
Subsidiaries and certificates of public officials.
(h) At the Closing Time, you shall have received the favorable
opinion of Davis Polk & Wardwell as counsel for the U.S. Underwriters, dated as
of the Closing Time, together with reproduced copies of such opinion for each
of the other U.S. Underwriters, to the effect that the opinions delivered
pursuant to Sections 5(b), (c), (d) and (e) appear on their face to be
appropriately responsive to the requirements of this Agreement except,
specifying the same, to the extent waived by you, and with respect to the
incorporation and legal existence of the Company, the Offered Shares, this
Agreement, the Registration Statement, the transactions contemplated under the
captions "The Acquisition and Financing Plan" in the Registration Statement,
the Prospectuses and such other related matters as you may require. In giving
such opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York, the federal law of
the United States and the corporate law of the State of Delaware, upon the
opinions of counsel satisfactory to you. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company, the
Company's Subsidiaries, EPIC and EPIC's Subsidiaries and certificates of public
officials.
(i) At the Closing Time, (i) the Registration Statement and
the Prospectuses, as they may then be amended or supplemented, shall conform in
all material respects to the requirements of the 1933 Act and the 1933 Act
Regulations, the Company shall have complied in all material respects with Rule
430A (if it shall have elected to rely thereon), the Registration Statement, as
it may then be amended or supplemented, shall not contain 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 in the Registration Statement not
misleading, and the Prospectuses, as they may then be amended or supplemented,
shall not contain 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
in the Prospectuses, in light of the circumstances under which they were made,
not misleading, (ii) there shall not have been, since the respective dates as
of which information is given in the Registration Statement and the
Prospectuses, any
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material adverse change, or any development involving a prospective material
adverse change, in the condition (financial or otherwise), earnings or business
affairs of the Company and the Company's Subsidiaries, considered as one
enterprise, or of EPIC and EPIC's Subsidiaries, considered as one enterprise,
whether or not arising in the ordinary course of business, (iii) no action,
suit or proceeding at law or in equity shall be pending or, to the knowledge of
the Company, threatened against the Company, any of the Company's Subsidiaries,
EPIC or any of EPIC's Subsidiaries that would be required to be set forth in
the Prospectuses other than as set forth therein and no proceedings shall be
pending or, to the knowledge of the Company, threatened against the Company,
any of the Company's Subsidiaries, EPIC or any of EPIC's Subsidiaries before or
by any federal, state or other commission, board or administrative agency
wherein an unfavorable decision, ruling or finding could reasonably be expected
to materially adversely affect the condition (financial or otherwise), earnings
or business affairs of the Company and the Company's Subsidiaries, considered
as one enterprise, or of EPIC and EPIC's Subsidiaries, considered as one
enterprise, other than as set forth in the Prospectuses, (iv) the Company shall
have complied in all material respects with all agreements and satisfied in all
material respects all conditions on its part to be performed or satisfied at or
prior to the Closing Time, and (v) the other representations and warranties of
the Company set forth in Section 1(a) shall be accurate as though expressly
made at and as of the Closing Time. At the Closing Time, you shall have
received a certificate of the President or a Vice President and the Treasurer
or the Controller of the Company, dated as of the Closing Time, to such effect,
but in the case of clauses (ii) and (iii) above, only with respect to the
Company and the Company's Subsidiaries.
(j) At the Closing Time, you shall have received a certificate
of the chief executive officer or chief financial officer of EPIC, dated as of
the Closing Time, to the effect set forth in Section 7.02(a) of the Merger
Agreement.
(k) With respect to the purchase of Offered Shares from any
Selling Shareholder, such Selling Shareholder shall have complied in all
material respects with all agreements and satisfied in all material respects
all conditions on its part to be performed or satisfied at or prior to the
Closing Time.
(l) On the date of this Agreement and at the Closing Time, Ernst
& Young, independent public accountants
38
<PAGE> 40
with respect to the Company, shall have furnished to you letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, containing statements and information of the type customarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectuses.
(m) On the date of this Agreement and at the Closing Time, Ernst
& Young, independent public accountants with respect to EPIC, shall have
furnished to you letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, containing statements and information
of the type customarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements of EPIC and certain
financial information contained or incorporated by reference in the
Registration Statement and the Prospectuses.
(n) At the Closing Time, counsel for the U.S. Underwriters shall
have been furnished with all such documents, certificates and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Offered Shares as contemplated in this Agreement and
the matters referred to in Section 5(e) and in order to evidence the accuracy
and completeness of any of the representations, warranties or statements of the
Company, the performance of any of the covenants of the Company, or the
fulfillment of any of the conditions herein contained; and all proceedings
taken by the Company at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Offered Shares by the Company (whether
to you or the Selling Shareholders upon exercise of their warrants) as
contemplated in this Agreement shall be reasonably satisfactory in form and
substance to you and to Davis Polk & Wardwell as counsel for the U.S.
Underwriters.
(o) At the Closing Time, the Company shall have consummated the
Acquisition and, after giving effect to the Acquisition, is not in default
under the 1992 Credit Agreement or any amendment thereto. The Company shall
have provided to you and Davis Polk & Wardwell as counsel for the U.S.
Underwriters copies of all documents with respect to the consummation of the
Acquisition as you or Davis Polk & Wardwell may reasonably request.
(p) With respect to the purchase of Shares from a Selling
Shareholder who is not a U.S. Person, you shall have received on the Closing
Date, a certificate of such Selling Shareholder who is not a U.S. Person to the
effect that such Selling
39
<PAGE> 41
Shareholder is not a U.S. Person (as defined under applicable U.S. federal tax
legislation), which certificate may be in the form of a properly completed and
executed United States Treasury Department Form W-8 (or other applicable form
or statement specified by Treasury Department regulations in lieu thereof).
(q) The International Shares to be delivered on the Closing Date
pursuant to the International Purchase Agreement shall be sold simultaneously
with the U.S. Shares sold hereunder.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement may be terminated by you upon notice to the Company at any time
at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4
herein, provided, however, that failure of any Selling Shareholder to fulfill
any of the conditions specified in this Section 5 shall not itself relieve the
several Underwriters of their obligations to purchase and pay for the Offered
Shares to be sold by the Company hereunder. Notwithstanding any such
termination, the provisions of Sections 7 and 8 herein shall remain in effect.
Section 6. Conditions to Purchase of U.S. Option Shares. In the
event that the U.S. Underwriters exercise their option granted in Section 2 to
purchase all or any of the U.S. Option Shares and the Date of Delivery
determined by you pursuant to Section 2 is later than the Closing Time, the
obligations of the several U.S. Underwriters to purchase and pay for the U.S.
Option Shares that they shall have respectively agreed to purchase pursuant to
this Agreement are subject to the accuracy of the representations and
warranties of the Company herein contained, to the performance by the Company
of its obligations hereunder and to the following further conditions:
(a) The Registration Statement shall remain effective at the Date
of Delivery, and at the Date of Delivery no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or
shall be pending or, to your knowledge or to the knowledge of the Company,
shall have been threatened by the Commission, and any request on the part of
the Commission for additional information shall have been
40
<PAGE> 42
complied with to the reasonable satisfaction of Davis Polk & Wardwell as
counsel for the U.S. Underwriters.
(b) At the Date of Delivery, the provisions of Section 5(i) shall
have been complied with at and as of the Date of Delivery and, at the Date of
Delivery, you shall have received (i) a certificate of the President or a Vice
President and the Treasurer or the Controller of the Company in accordance with
the provisions of Section 5(i), dated as of the Date of Delivery, to such
effect and (ii) a Certificate of the chief executive officer or chief financial
officer of EPIC in accordance with the provisions of Section 5(j), dated as of
the Date of Delivery, to such effect.
(c) At the Date of Delivery, you shall have received the
favorable opinions of Dewey Ballantine, counsel for the Company, Philip D.
Wheeler, general counsel for the Company, Stanley F. Baldwin, Esq., general
counsel for EPIC, Johnson & Gibbs, P.C. (or its successor), counsel for EPIC,
or such other counsel reasonably satisfactory to Davis Polk & Wardwell as
counsel for the U.S. Underwriters together with reproduced copies of such
opinions for each of the other U.S. Underwriters in form and substance
satisfactory to Davis Polk & Wardwell as counsel for the U.S. Underwriters,
dated as of the Date of Delivery, relating to the U.S. Option Shares and
otherwise to the same effect as the opinions required by Sections 5(b), (c),
(d) and (e).
(d) At the Date of Delivery, you shall have received the
favorable opinion of Davis Polk & Wardwell, counsel for the U.S. Underwriters,
dated as of the Date of Delivery, relating to the U.S. Option Shares and
otherwise to the same effect as the opinion required by Section 5(h).
(e) At the Date of Delivery, you shall have received a letter
from Ernst & Young, in form and substance satisfactory to you and dated as of
the Date of Delivery, to the effect that they reaffirm the statements made in
the letter furnished pursuant to Section 5(m), except that the specified date
referred to shall be a date not more than five days prior to the Date of
Delivery.
(f) At the Date of Delivery, Davis Polk & Wardwell as counsel for
the U.S. Underwriters shall have been furnished with all such documents,
certificates and opinions as they may reasonably request for the purpose of
enabling them to pass upon the issuance and sale of the U.S. Option Shares as
contemplated in this Agreement and the matters referred to in Section 6(d) and
in order to evidence the accuracy and completeness of any of the
representations,
41
<PAGE> 43
warranties or statements of the Company, the performance of any of the
covenants of the Company, or the fulfillment of any of the conditions herein
contained; and all proceedings taken by the Company at or prior to the Date of
Delivery in connection with the authorization, issuance and sale of the U.S.
Option Shares as contemplated in this Agreement shall be reasonably
satisfactory in form and substance to you and to Davis Polk & Wardwell as
counsel for the U.S. Underwriters.
(g) At the Date of Delivery, the Company shall have consummated
the Acquisition and, after giving effect to the Acquisition, is not in default
under the 1992 Credit Agreement or any amendment thereto. The Company shall
have provided to you and Davis Polk & Wardwell as counsel for the U.S.
Underwriters copies of all documents with respect to the consummation of the
Acquisition as you or Davis Polk & Wardwell may reasonably request.
Section 7. Indemnification. (a) The Company agrees, and the
Selling Shareholders severally agree, to indemnify and hold harmless each U.S.
Underwriter and each person, if any, who controls any U.S. Underwriter within
the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of an untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information, if
applicable, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of an untrue statement or alleged
untrue statement of a material fact included in any preliminary prospectus
or the Prospectuses (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
42
<PAGE> 44
(iii) against any and all expense whatsoever, as incurred (including,
subject to the last sentence of Section 7(c), fees and disbursements of
counsel chosen by you to represent the U.S. Underwriters), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that with respect to the indemnity provided by any Selling
Shareholder, the indemnity shall only apply to information relating to such
Selling Shareholder furnished or confirmed in writing by such Selling
Shareholder for use in the Registration Statement (or any amendments thereto);
and provided, further, that this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information furnished or confirmed in writing to
the Company by or on behalf of any Underwriter through you or the International
Representatives expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto); and provided further that the foregoing indemnification with respect
to any untrue statement contained in or any omission from a preliminary
prospectus shall not inure to the benefit of any U.S. Underwriter (or any
person controlling such U.S. Underwriter) from whom the person asserting any
such losses, claims, damages, liabilities, or expenses purchased any of the
Offered Shares if a copy of the Prospectus (or the Prospectus as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such U.S. Underwriter to such
person, if such is required by law, at or prior to the written confirmation of
the sale of such Offered Shares to such person and the Prospectus (as so
amended or supplemented) would have cured the defect giving rise to such loss,
claim, damage, liability or expense and provided further that in no event shall
any Selling Shareholder be liable by reason of this Section 7 in an aggregate
amount in excess of the gross proceeds to such Selling Shareholder from the
sale of Offered Shares by such Selling Shareholder pursuant to this Agreement.
43
<PAGE> 45
(b) Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, the Selling Shareholders and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 7(a), as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto), including the Rule
430A Information, if applicable, or any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto) in reliance upon and in
conformity with information furnished or confirmed in writing to the Company by
or on behalf of such U.S. Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or such preliminary prospectus or the Prospectuses
(or any amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. An indemnifying party may participate
at its own expense in the defense of such action. In no event shall the
indemnifying party or parties be liable for the fees and expenses of more than
one counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances.
Section 8. Contribution. In order to provide for just and
equitable contribution in circumstances under which the indemnity provided for
in Section 7 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company, the
Selling Shareholders and the U.S. Underwriters shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity incurred by the Company, one or more of the
Selling Shareholders and one or more of the U.S. Underwriters, as incurred, in
such proportions that (a) the U.S. Underwriters are responsible for that
portion represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectuses bears to the initial public offering
price appearing thereon and (b) the Company and the Selling Shareholders are
responsible for the balance
44
<PAGE> 46
(with the Company and each of the Selling Shareholders responsible in
proportion to the net proceeds from the Offerings (as defined in the
Registration Statement) (before deducting expenses) received by each of the
Company and such Selling Shareholder); provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section, each
person, if any, who controls a U.S. Underwriter within the meaning of Section
15 of the 1933 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as the Company.
Section 9. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Company, the Selling Shareholders and the U.S. Underwriters
or their respective officers set forth in or made pursuant to this Agreement
will remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Company, any of the Selling
Shareholders or any U.S. Underwriter or controlling person and will survive
delivery of and payment for the Offered Shares.
Section 10. Termination of Agreement. (a) You may terminate
this Agreement, by notice to the Sellers, at any time at or prior to the
Closing Time (i) if there has been, since the respective dates as of which
information is given in the Registration Statement, any material adverse
change, or any development involving a prospective material adverse change, in
the condition (financial or otherwise), earnings or business affairs of the
Company and the Company's Subsidiaries, considered as one enterprise, or of
EPIC and EPIC's Subsidiaries, considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or any
outbreak of hostilities or escalation of existing hostilities or other calamity
or crisis the effect of which is such as to make it, in your reasonable
judgment, impracticable to market the U.S. Shares or enforce contracts for the
sale of the U.S. Shares, or (iii) if trading in any securities of the Company
has been suspended by the Commission, or if trading generally on the New York
Stock Exchange or in the over-the-counter market has been suspended, or minimum
or
45
<PAGE> 47
maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by such exchange or by order of the Commission
or any other governmental authority, or (iv) if a banking moratorium has been
declared by either federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party,
except to the extent provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 7 and 8 shall remain in effect.
(c) This Agreement may also terminate pursuant to the provisions
of Section 2(c), with the effect stated in such Section.
Section 11. Default by One or More of the U.S. Underwriters. If
one or more of the U.S. Underwriters shall fail at the Closing Time to purchase
the Initial U.S. Shares that it or they are obligated to purchase pursuant to
this Agreement (the "Defaulted U.S. Shares"), you shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-
defaulting U.S. Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted U.S. Shares in such amounts as may be
agreed upon and upon the terms set forth in this Agreement; if, however, you
have not completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted U.S. Shares does not exceed 10% of
the total number of Initial U.S. Shares, the non-defaulting U.S.
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective Initial U.S. Share underwriting
obligation proportions bear to the underwriting obligation proportions of
all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted U.S. Shares exceeds 10% of the
total number of Initial U.S. Shares, this Agreement shall terminate without
liability on the part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting U.S. Underwriter from liability in respect of its default.
In the event of any such default that does not result in a
termination of this Agreement, either you or the Company shall have the right
to postpone the Closing Time for a period not exceeding seven days in order to
effect any
46
<PAGE> 48
required changes in the Registration Statement or Prospectuses or in any other
documents or arrangements. As used herein, the term "U.S. Underwriter"
includes any person substituted for a U.S. Underwriter under this Section 11.
Section 12. Agreements of the Selling Shareholders. The Selling
Shareholders severally agree with you and the Company:
(a) To pay or to cause to be paid all transfer taxes with respect
to the Shares to be sold by the Selling Shareholders; and
(b) To take all reasonable actions in cooperation with the
Company and the Underwriters to cause the Registration Statement to become
effective at the earliest possible time, to do and perform all things to be
done and performed under this Agreement prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Shares pursuant to
this Agreement.
Section 13. Default by the Company. If the Company shall fail at
the Closing Time to sell and deliver the number of Offered Shares that it is
obligated to sell, then this Agreement shall terminate without any liability on
the part of any non-defaulting party except to the extent provided in Section
4 and except that the provisions of Sections 7 and 8 shall remain in effect.
No action taken pursuant to this Section shall relieve the Company
from liability, if any, in respect of such default.
Section 14. Notices. All notices and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
if delivered, mailed or transmitted by any standard form of telecommunication
(notices transmitted by telecopier to be promptly confirmed in writing).
Notices to you or the U.S. Underwriters shall be directed to you c/o Merrill
Lynch, Pierce, Fenner & Smith Incorporated at Merrill Lynch World Headquarters,
North Tower, World Financial Center, New York, New York 10281, attention of
Raymond L.M. Wong; and notices to the Company shall be directed to it at 4525
Harding Road, Nashville, Tennessee 37205 (telecopier no.: (615) 298-6377),
attention of Philip D. Wheeler, Esq.
Section 15. Parties. This Agreement is made solely for the
benefit of the several U.S. Underwriters and the Company and, to the extent
expressed, any person controlling the Company or any of the U.S. Underwriters,
and
47
<PAGE> 49
the directors of the Company, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns and, subject to the provisions of Section 11, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several U.S. Underwriters of the U.S. Shares. All of the
obligations of the U.S. Underwriters hereunder are several and not joint.
Section 16. Representation of U.S. Underwriters. You will act
for the several U.S. Underwriters in connection with this offering, and any
action under or in respect of this Agreement taken by you as U.S.
Representatives will be binding upon all the U.S. Underwriters.
Section 17. Governing Law and Time. This Agreement shall be
governed by the laws of the State of New York. Specified times of the day
refer to New York City time.
Section 18. Counterparts. This Agreement may be executed in one
or more counterparts and, when a counterpart has been executed by each party,
all such counterparts taken together shall constitute one and the same
agreement.
48
<PAGE> 50
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company and the several
U.S. Underwriters in accordance with its terms.
Very truly yours,
HEALTHTRUST, INC. - THE HOSPITAL
COMPANY
By______________________________
Name:
Title:
EACH OF THE SELLING SHAREHOLDERS
NAMED IN SCHEDULE B HERETO
By______________________________
Name:
Title: Attorney-in-Fact
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By_________________________
Name:
Title:
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A.
49
<PAGE> 51
Exhibit A
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(a Delaware corporation)
4,976,323 Shares
of Common Stock
U.S. PRICE DETERMINATION AGREEMENT
April 28, 1994
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
As Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1201
Dear Sirs:
Reference is made to the U.S. Purchase Agreement dated April 28,
1994 (the "U.S. Purchase Agreement") among Healthtrust, Inc. - The Hospital
Company, a Delaware corporation (the "Company"), the Selling Shareholders named
in Schedule B thereto and the several U.S. Underwriters named in Schedule A
thereto or hereto (the "U.S. Underwriters"), for whom Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation are acting as representatives (the "U.S.
Representatives"). The U.S. Purchase Agreement provides for the purchase by
the U.S. Underwriters from the Company and the Selling Shareholders, subject to
the terms and conditions set forth therein, of an aggregate of 4,976,323 shares
(the "Initial U.S. Shares") of the Company's common stock, par value $.001 per
share. This Agreement is the U.S. Price Determination Agreement referred to in
the U.S. Purchase Agreement.
Pursuant to Section 2 of the U.S. Purchase Agreement, the
undersigned agree with the U.S. Representatives as follows:
<PAGE> 52
1. The initial public offering price per share for the Initial
U.S. Shares shall be $28.25.
2. The purchase price per share for the Initial U.S. Shares to be
paid by the several U.S. Underwriters shall be $27.12, representing an
amount equal to the initial public offering price set forth above, less
$1.13 per share.
The Company represents and warrants to each of the U.S.
Underwriters that the representations and warranties of the Company set forth
in Section 1(a) of the U.S. Purchase Agreement are accurate as though expressly
made at and as of the date hereof.
The Selling Shareholders represent and warrant to each of the U.S.
Underwriters that the representation and warranties of the Selling Shareholders
set forth in Section 1(d) of the U.S. Purchase Agreement are accurate as though
expressly made at and as of the date hereof.
As contemplated by Section 2 of the U.S. Purchase Agreement,
attached as Schedule A is a completed list of the several U.S. Underwriters,
which shall be a part of this Agreement and the U.S. Purchase Agreement.
This Agreement shall be governed by the laws of the State of New
York.
2
<PAGE> 53
If the foregoing is in accordance with the understanding of the
U.S. Representatives of the agreement between the U.S. Underwriters and the
Company, please sign and return to the Company a counterpart hereof, whereupon
this instrument along with all counterparts and together with the U.S. Purchase
Agreement shall be a binding agreement among the U.S. Underwriters and the
Company in accordance with its terms and the terms of the U.S. Purchase
Agreement.
Very truly yours,
HEALTHTRUST, INC. - THE HOSPITAL
COMPANY
By______________________________
Name:
Title:
EACH OF THE SELLING SHAREHOLDERS
NAMED IN SCHEDULE B TO THE U.S.
PURCHASE AGREEMENT
By______________________________
Name:
Title: Attorney-in-Fact
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By_________________________
Name:
Title:
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A
attached to the U.S. Purchase Agreement.
3
<PAGE> 54
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial U.S. Shares
Underwriter to be Purchased
----------- -------------------
<S> <C>
Merrill Lynch, Pierce, Fenner
& Smith Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,688,162
Donaldson, Lufkin & Jenrette
Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,688,161
CS First Boston Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Bear, Stearns & Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Dillon, Read & Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
J.P. Morgan Securities Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
J.C. Bradford & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Equitable Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Johnson Rice & Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Kemper Securities, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
C.J. Lawrence/Deutsche Bank Securities
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
ScotiaMcLeod (USA) Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,976,323
=========
</TABLE>
<PAGE> 55
SCHEDULE B
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
TO BE SOLD TO BE SOLD TO THE
TO THE U.S. INTERNATIONAL
SELLING SHAREHOLDER UNDERWRITERS MANAGERS
------------------- ------------ -----------
<S> <C> <C>
Base Assets Trust . . . . . . . . . . . . . . . . . . . . . . 516,764 129,191
Commonwealth Life Insurance . . . . . . . . . . . . . . . . . 77,600 19,400
Guaranty Reassurance Corporation . . . . . . . . . . . . . . 37,720 9,430
American Financial Corporation . . . . . . . . . . . . . . . 22,632 5,658
Flexi-Van Leasing, Inc. . . . . . . . . . . . . . . . . . . . 22,632 5,658
Donaldson, Lufkin & Jenrette Securities Corporation . . . . . 16,700 4,175
Western Financial Savings Bank . . . . . . . . . . . . . . . 15,088 3,772
Berkeley Atlantic Income Limited . . . . . . . . . . . . . . 11,316 2,829
Comdisco, Inc. . . . . . . . . . . . . . . . . . . . . . . . 11,316 2,829
Lexington Precision Corporation . . . . . . . . . . . . . . . 11,316 2,829
Thomas Spiegel . . . . . . . . . . . . . . . . . . . . . . . 11,316 2,829
EQJ Partnership . . . . . . . . . . . . . . . . . . . . . . . 8,290 2,072
Equitable Life Assurance Society . . . . . . . . . . . . . . 6,400 1,600
Wolfson Equities. . . . . . . . . . . . . . . . . . . . . . 6,000 1,500
American Capital High Yield Investments Inc. . . . . . . . . 4,795 1,199
John Chulick & Kathi Chulick . . . . . . . . . . . . . . . . 4,602 1,150
Berkeley Technology Investments Limited . . . . . . . . . . . 4,526 1,132
General American Life Insurance Co. . . . . . . . . . . . . . 3,772 943
National Western Life Insurance Co. . . . . . . . . . . . . . 3,018 754
Universal Medical Buildings L.P. . . . . . . . . . . . . . . 3,000 750
South Ferry #2 L.P. . . . . . . . . . . . . . . . . . . . . 2,400 600
Christian Brothers Institute . . . . . . . . . . . . . . . . 2,263 566
Stephen Swid . . . . . . . . . . . . . . . . . . . . . . . . 2,263 566
The Westwood Group, Inc. . . . . . . . . . . . . . . . . . . 2,263 566
Worldwide Special Portfolio N.V. . . . . . . . . . . . . . . 2,263 566
American Capital Income Trust . . . . . . . . . . . . . . . . 2,129 532
Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . . 1,509 377
Warren F. Langford Trust . . . . . . . . . . . . . . . . . . 1,056 264
Citizens Trust Company . . . . . . . . . . . . . . . . . . . 754 189
American Capital Life Investment Trust . . . . . . . . . . . 620 155
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . 816,323 204,081
</TABLE>
2
<PAGE> 1
EXHIBIT 1.2
============================================================
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(A DELAWARE CORPORATION)
1,244,081 SHARES OF COMMON STOCK
INTERNATIONAL PURCHASE AGREEMENT
DATED: APRIL 28, 1994
============================================================
<PAGE> 2
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(A DELAWARE CORPORATION)
1,244,081 SHARES OF COMMON STOCK
INTERNATIONAL PURCHASE AGREEMENT
April 28, 1994
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
As Representatives of
the several Managers
c/o Merrill Lynch International Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
Healthtrust, Inc. - The Hospital Company, a Delaware
corporation (the "Company"), proposes to issue and sell to the managers named
in Schedule A hereto (collectively, the "Managers"), for whom you are acting as
Co-Lead Managers (the "Co-Lead Managers"), an aggregate of 1,040,000 authorized
but unissued shares of the Company's Common Stock, par value $.001 per share
(shares of which class of stock of the Company are hereinafter referred to as
"Common Stock") and certain shareholders of the Company (the "Selling
Shareholders") named in Schedule I hereto severally propose to sell to the
several Managers, an aggregate of 204,081 shares of Common Stock. Such shares
of Common Stock are to be sold to each Manager, acting severally and not
jointly, in such amounts as are set forth in Schedule A opposite the name of
such Manager. The Company also grants to the Managers, severally and not
jointly, the option described in Section 2 to purchase all or any part of
156,000 additional shares of Common Stock to cover over-allotments. The
aforesaid 1,244,081 shares of Common Stock (the "Initial International
Shares"), together with all or any part of the 156,000 additional shares of
Common Stock subject to the option described in Section 2 (the "International
Option Shares"), are collectively herein called the "International Shares".
The International Shares are more fully described in the International
Prospectus referred to below. The Company and the Selling Shareholders are
hereinafter sometimes collectively referred to as the Sellers.
2
<PAGE> 3
It is understood that the Company and the Selling Shareholders
are concurrently entering into an agreement, dated the date hereof (the "U.S.
Purchase Agreement"), providing for issuance and sale by the Company of
4,160,000 shares of Common Stock and the sale by the Selling Shareholders of
816,323 shares of Common Stock (together, the "Initial U.S. Shares") through
arrangements with certain underwriters in the United States and Canada (the
"U.S. Underwriters"), for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation are acting
as representatives (the "U.S. Representatives"), and the grant by the Company
to the U.S. Representatives of an option to purchase all or any part of 624,000
additional shares of Common Stock (the "U.S. Option Shares") to cover
over-allotments. The Initial U.S. Shares and the U.S. Option Shares are
hereinafter collectively referred to as the "U.S. Shares". The U.S. Shares and
the International Shares are hereinafter collectively referred to as the
"Offered Shares".
The Sellers understand that the Managers will simultaneously
enter into an agreement with the U.S. Underwriters dated the date hereof (the
"Intersyndicate Agreement") providing for the coordination of certain
transactions among the Managers and the U.S. Underwriters, under the direction
of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
You have advised us that you and the other Managers, acting
severally and not jointly, desire to purchase the International Shares and, if
the Managers so elect, the International Option Shares, and that you have been
authorized by the other Managers to execute this Agreement and the
International Price Determination Agreement referred to below on their behalf.
The initial public offering price per share for the
International Shares and the purchase price per share for the International
Shares to be paid by the several Managers shall be agreed upon by the Company,
the Selling Shareholders and the Co-Lead Managers, acting on behalf of the
several Managers, and such agreement shall be set forth in a separate written
instrument substantially in the form of Exhibit A hereto (the "International
Price Determination Agreement"). The International Price Determination
Agreement may take the form of an exchange of any standard form of written
telecommunication among the Company, the Selling Shareholders and the Co-Lead
Managers and shall specify such applicable information as is indicated in
Exhibit A hereto. The offering of the International Shares will be governed by
this Agreement, as supplemented by the International Price Determination
Agreement. From and after the date of the execution and delivery of the
International Price
3
<PAGE> 4
Determination Agreement, this Agreement shall be deemed to incorporate, and all
references herein to "this Agreement" or "herein" shall be deemed to include,
the International Price Determination Agreement.
The initial public offering price per share and the purchase
price per share for the U.S. Shares to be paid by the U.S. Underwriters
pursuant to the U.S. Purchase Agreement shall be set forth in a separate
agreement (the "U.S. Price Determination Agreement"), the form of which is
attached to the U.S. Purchase Agreement. The purchase price per share for the
U.S. Shares to be paid by the several U.S. Underwriters shall be identical to
the purchase price per share for the International Shares to be paid by the
several Managers hereunder.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 33-52401) covering the registration of the Offered Shares under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
preliminary prospectuses, and either (A) has prepared and proposes to file,
prior to the effective date of such registration statement, an amendment to
such registration statement, including final prospectuses, or (B) if the
Company has elected to rely upon Rule 430A ("Rule 430A") of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations"),
will prepare and file prospectuses, in accordance with the provisions of Rule
430A and Rule 424(b) ("Rule 424(b)") of the 1933 Act Regulations, promptly
after execution and delivery of the International Price Determination
Agreement. (1) The information, if any, included in such prospectuses that was
omitted from any prospectus included in such registration statement at the time
it becomes effective but that is deemed, pursuant to Rule 430A(b), to be part
of such registration statement at the time it becomes effective is referred to
herein as the "Rule 430A Information". Each Form of International Prospectus
and Form
____________________
(1)Two forms of prospectus are to be used in connection with
the offering and sale of the Offered Shares: one relating to the
International Shares (the "Form of International Prospectus") and
one relating to the U.S. Shares (the "Form of U.S. Prospectus").
The Form of International Prospectus is identical to the Form of
U.S. Prospectus, except for the front cover page, inside front
cover page, the section captioned "Underwriting" and the back
cover page.
4
<PAGE> 5
of U.S. Prospectus used before the time such registration statement
becomes effective, and any Form of International Prospectus and Form of U.S.
Prospectus that omits the Rule 430A Information that is used after such
effectiveness and prior to the execution and delivery of the International
Price Determination Agreement or the U.S. Price Determination Agreement,
respectively, is herein called a "preliminary prospectus". Such registration
statement, including the exhibits thereto, as amended at the time it becomes
effective and including, if applicable, the Rule 430A Information, is herein
called the "Registration Statement", and the Form of International Prospectus
and Form of U.S. Prospectus included in the Registration Statement at the time
it becomes effective is herein called the "International Prospectus" and the
"U.S. Prospectus", respectively, and, collectively, the "Prospectuses" and,
individually, a "Prospectus", except that, if the final International
Prospectus or U.S. Prospectus, as the case may be, first furnished to the
Managers or the U.S. Underwriters after the execution of the International
Price Determination Agreement or the U.S. Price Determination Agreement for use
in connection with the offering of the Offered Shares differs from the
prospectuses included in the Registration Statement at the time it becomes
effective (whether or not such prospectuses are required to be filed pursuant
to Rule 424(b)), the terms "International Prospectus", "U.S. Prospectus",
"Prospectuses" and "Prospectus" shall refer to the final International
Prospectus or U.S. Prospectus, as the case may be, first furnished to the
Managers or the U.S. Underwriters, as the case may be, for such use.
The Company and the Selling Shareholders understand that the
Managers propose to make a public offering of the International Shares as soon
as you deem advisable after the Registration Statement becomes effective and
the International Price Determination Agreement has been executed and
delivered.
The parties hereto acknowledge that the shares of Common Stock
that will be sold by the Selling Shareholders are being sold upon the exercise
of warrants owned by the Selling Shareholders.
The parties hereto further acknowledge that for purposes of
this Agreement, the "Company" and the "Company's Subsidiaries" shall refer to
the Company and the Company's subsidiaries on the date of this Agreement.
Section 1. Representations and Warranties. (a) The Company
represents and warrants to and agrees with each of the Managers that:
5
<PAGE> 6
(i) When the Registration Statement shall become
effective, if the Company has elected to rely upon Rule 430A, on the
date of the International Price Determination Agreement, on the
effective or issue date of each amendment or supplement to the
Registration Statement or the Prospectuses, at the Closing Time
referred to below, and, if, any U.S. Option Shares are purchased, on
the Date of Delivery referred to below, (A) the Registration Statement
and any amendments and supplements thereto will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations; (B) neither the Registration Statement nor any amendment
or supplement thereto will contain 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 not misleading; and (C)
neither of the Prospectuses nor any amendment or supplement to either
of them will include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, this representation
and warranty does not apply to statements or omissions from the
Registration Statement or the Prospectuses made in reliance upon and
in conformity with information furnished or confirmed in writing to
the Company by or on behalf of any Underwriter through you or the
International Representatives expressly for use in the Registration
Statement or the Prospectuses.
(ii) This Agreement has been duly authorized,
executed and delivered by the Company.
(iii) The consolidated financial statements of the
Company included in the Registration Statement present fairly the
consolidated financial position of the Company and the Company's
Subsidiaries (as hereinafter defined) as of the dates indicated and
the consolidated statements of operations, stockholders' equity and
cash flows of the Company and the Company's Subsidiaries for the
periods specified. Except as otherwise stated in the Registration
Statement, such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis throughout the periods involved. The financial statement
schedules, if any, included in the Registration Statement present
fairly the information required to be stated therein. The pro forma
financial statements and other pro forma financial information
included in the Prospectuses present fairly the information shown
6
<PAGE> 7
therein, have been prepared in all material respects in accordance
with the Commission's rules and guidelines with respect to pro forma
financial statements, have been properly compiled on the pro forma
bases described therein, and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(iv) To the Company's knowledge, the consolidated
financial statements of EPIC Holdings, Inc. ("EPIC") and EPIC's
subsidiaries (including the financial statements of EPIC Healthcare
Group, Inc. ("EPIC Group"), EPIC's wholly-owned subsidiary) included
in the Registration Statement present fairly the consolidated
financial position of EPIC and EPIC's Subsidiaries (as hereinafter
defined) as of the dates indicated and the consolidated statements of
operations, stockholders' equity (deficit) and cash flows of EPIC and
EPIC's Subsidiaries for the periods specified. To the Company's
knowledge, except as otherwise stated in the Registration Statement,
such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(v) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware with corporate power under such laws to own, lease and
operate its properties and conduct its business as described in the
Prospectuses; and the Company is duly qualified to transact business
as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification
necessary, except to the extent that the failure to so qualify or be
in good standing would not have a material adverse effect on the
Company and the Company's Subsidiaries, considered as one enterprise.
(vi) To the Company's knowledge, EPIC is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware with corporate power under
such laws to own, lease and operate its properties and conduct its
business as described in the Prospectuses and EPIC is duly qualified
to transact business as a foreign corporation and is in good standing
in each other jurisdiction in which it owns or leases property of a
nature, or transacts business of
7
<PAGE> 8
a type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on EPIC and EPIC's Subsidiaries,
considered as one enterprise.
(vii) Each of the Company's subsidiaries
(collectively, the "Company's Subsidiaries") is a corporation duly
incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation with corporate power under such
laws to own, lease and operate its properties and conduct its business
as described in the Prospectuses; and each of the Company's
Subsidiaries is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in
which it owns or leases property of a nature, or transacts business of
a type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and the Company's
Subsidiaries, considered as one enterprise. Except as set forth in
the Registration Statement, all of the outstanding shares of capital
stock of each of the Company's Subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are
owned by the Company, directly or through one or more Subsidiaries,
free and clear of any pledge, lien, perfected security interest, claim
or encumbrance of any kind or, to the knowledge of the Company, any
unperfected security interest.
(viii) To the Company's knowledge, each of EPIC's
subsidiaries (collectively, "EPIC's Subsidiaries") is a corporation
duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation with corporate power
under such laws to own, lease and operate its properties and conduct
its business as described in the Prospectuses and each of EPIC's
Subsidiaries is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in
which it owns or leases property of a nature, or transacts business of
a type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on EPIC and EPIC's Subsidiaries,
considered as one enterprise. To the Company's knowledge, except as
set forth in the Registration Statement, all of the outstanding shares
of capital stock of each of EPIC's Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable,
and except as set forth in the Disclosure
8
<PAGE> 9
Schedule (as hereinafter defined), are owned by EPIC, directly
or through one or more Subsidiaries, free and clear of any pledge,
lien, perfected security interest, claim or encumbrance of any kind
or, to the knowledge of the Company, any unperfected security
interest.
(ix) The shares to be sold by the Company (whether
to you or the Selling Shareholders upon exercise of their warrants)
pursuant to this Agreement and the International Purchase Agreement
have been duly authorized and, when issued and delivered by the
Company upon receipt of the payment therefor in accordance with this
Agreement and the International Purchase Agreement, will be validly
issued, fully paid and non-assessable; such shares are not subject to
the preemptive or other similar rights of any stockholder of the
Company arising by operation of law, under the charter and bylaws of
the Company or under any agreement to which the Company or any of the
Company's Subsidiaries is a party.
(x) All of the outstanding shares of capital stock
of the Company other than the Offered Shares have been duly authorized
and validly issued and are fully paid and non-assessable; and none of
the outstanding shares of Common Stock of the Company was issued in
violation of the preemptive or other similar rights of any stockholder
of the Company arising by operation of law, under the charter and
bylaws of the Company or under any agreement to which the Company or
any of the Company's Subsidiaries is a party.
(xi) To the Company's knowledge, all of the
outstanding shares of capital stock of EPIC have been duly authorized
and validly issued and are fully paid and non-assessable and none of
the outstanding shares of Common Stock of EPIC was issued in violation
of the preemptive or other similar rights of any stockholder of EPIC
arising by operation of law, under the charter and bylaws of EPIC or
under any agreement to which EPIC or any of EPIC's Subsidiaries is a
party.
(xii) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectuses, except as otherwise stated therein or contemplated
thereby, there has not been any material adverse change in the
condition (financial or otherwise), earnings or business affairs of
the Company and the Company's Subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business.
9
<PAGE> 10
(xiii) To the Company's knowledge, since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein or
contemplated thereby, there has not been (A) any change in the
condition (financial or otherwise), earnings or business affairs of
EPIC or EPIC's Subsidiaries that would be material and adverse to the
Company, its Subsidiaries, EPIC and EPIC's Subsidiaries, considered as
one enterprise (the "Combined Company"), whether or not arising in the
ordinary course of business, or (B) any dividend or distribution of
any kind declared, paid or made by EPIC on its capital stock.
(xiv) Neither the Company nor any of the Company's
Subsidiaries is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which it is a party or by which it is bound
or to which any of its properties is subject, except as disclosed in
the Prospectuses and except for such defaults that would not have a
material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Company and the Company's
Subsidiaries, considered as one enterprise. The execution and
delivery of this Agreement by the Company, the issuance and delivery
by the Company of the Offered Shares (whether to you or the Selling
Shareholders upon exercise of their warrants), the consummation by the
Company of the transactions contemplated in this Agreement and the
consummation of the Acquisition, the Subordinated Debt Offering, the
Tender Offers, the Debt Redemption, the 1994 Credit Agreement and the
transactions described in the ESOP Agreement (all as defined in the
Registration Statement) and compliance by the Company with the terms
of this Agreement have been duly authorized by all necessary corporate
action on the part of the Company and do not and will not result in
any violation of the charter or by-laws of the Company or any of the
Company's Subsidiaries, and do not and will not conflict with, or
result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien
or encumbrance upon any property or assets of the Company or any of
the Company's Subsidiaries under (A) any indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the
Company or any of the Company's Subsidiaries is a party or by which it
is bound or to which any of its properties is subject (assuming that
the amendment to the Credit Agreement dated as of September 29, 1992
among the Company and the
10
<PAGE> 11
financial institutions named therein is effective at the time of the
Acquisition), or (B) any existing applicable law (including any
environmental law), rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court having jurisdiction
over the Company or any of the Company's Subsidiaries or any of their
respective properties, in each case, except as disclosed in the
Prospectuses and except for such conflicts, breaches or defaults or
liens or encumbrances that would not have a material adverse effect on
the condition (financial or otherwise), earnings or business affairs
of the Company and the Company's Subsidiaries, considered as one
enterprise.
(xv) To the Company's knowledge, neither EPIC nor
any of EPIC's Subsidiaries is in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties is subject, except
as disclosed in the Prospectuses and except for such defaults that
would not have a material adverse effect on the condition (financial
or otherwise), earnings or business affairs of EPIC and EPIC's
Subsidiaries, considered as one enterprise. To the Company's
knowledge, the consummation by EPIC of the transactions contemplated
in this Agreement and in the ESOP Agreement and the consummation of
the Acquisition and the Tender Offers have been duly authorized by all
necessary corporate action on the part of EPIC and the consummation of
the foregoing and the Debt Redemption do not and will not result in
any violation of the charter or by-laws of EPIC or any of EPIC's
Subsidiaries, and do not and will not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien or
encumbrance upon any property or assets of EPIC or any of EPIC's
Subsidiaries under (A) any indenture, mortgage, loan agreement, note,
lease or other agreement or instrument to which EPIC or any of EPIC's
Subsidiaries is a party or by which it is bound or to which any of its
properties is subject, or (B) any existing applicable law (including
any environmental law), rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court having
jurisdiction over EPIC or any of EPIC's Subsidiaries or any of their
respective properties, in each case, except as disclosed in the
Prospectuses and except for such conflicts, breaches or defaults or
liens or encumbrances that would not have a material adverse effect on
the
11
<PAGE> 12
condition (financial or otherwise), earnings or business affairs of
the Combined Company.
(xvi) Except as disclosed in the Registration
Statement, no authorization, approval, consent or license of any
government, governmental instrumentality or court (other than under
the 1933 Act and the 1933 Act Regulations, the Trust Indenture Act of
1939, as amended and the applicable rules and regulations promulgated
thereunder (the "Trust Indenture Act") and the securities or blue sky
laws of the various states and the securities laws of any jurisdiction
outside the United States in which International Shares are offered or
sold by the International Underwriters pursuant to the International
Purchase Agreement) is required for the valid issuance, sale and
delivery of the Offered Shares by the Company (whether to you or the
Selling Shareholders upon exercise of their warrants) or for the
consummation by the Company of the transactions described in the
Prospectuses under the caption "The Acquisition and the Financing
Plan".
(xvii) Except as disclosed in the Prospectuses,
there is no action, suit or proceeding before or by any government,
governmental instrumentality or court, now pending or, to the
knowledge of the Company, threatened against or affecting the Company
or any of the Company's Subsidiaries that is required to be disclosed
in the Prospectuses or that could reasonably be expected to result in
any material adverse change in the condition (financial or otherwise),
earnings or business affairs of the Company and the Company's
Subsidiaries, considered as one enterprise, or that could reasonably
be expected to materially and adversely affect the consummation of the
transactions contemplated in this Agreement and described in the
Registration Statement under the caption "The Acquisition and the
Financing Plan".
(xviii) To the Company's knowledge, except as
disclosed in the Prospectuses, there is no action, suit or proceeding
before or by any government, governmental instrumentality or court,
now pending or, to the knowledge of the Company, threatened against or
affecting EPIC or any of EPIC's Subsidiaries that is required to be
disclosed in the Prospectuses or that could reasonably be expected to
result in any material adverse change in the condition (financial or
otherwise), earnings or business affairs of the Combined Company, or
that could reasonably be expected to materially and adversely affect
the consummation of the transactions contemplated in this Agreement
and described in the Registration Statement
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<PAGE> 13
under the caption "The Acquisition and the Financing Plan".
(xix) In the Company's judgment, there are no
contracts or documents of a character required to be described in the
Registration Statement or the Prospectuses or to be filed as exhibits
to the Registration Statement that are not described and filed as
required.
(xx) Each of the Company and the Company's
Subsidiaries own or possess all governmental licenses, permits,
certificates (including, without limitation, certificate of need
approvals and certification under the Medicare program), consents,
orders, approvals and other authorizations (collectively,
"Governmental Licenses") necessary to own or lease, as the case may
be, and to operate its properties and to carry on its business as
presently conducted, except where the failure to possess such
Governmental Licenses could reasonably be expected to not have a
material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Company and the Company's
Subsidiaries, considered as one enterprise, and neither the Company
nor any of the Company's Subsidiaries has received any notice of
proceedings relating to revocation or modification of any such
Governmental Licenses that, in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could reasonably be expected
to have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of the Company and the
Company's Subsidiaries, considered as one enterprise. All of the
hospitals operated by the Company and the Company's Subsidiaries are
"providers of services" as defined in the Social Security Act and the
regulations promulgated thereunder, and are eligible to participate in
the Medicare program, except as would not have a material adverse
effect on the condition (financial or other), earnings or business
affairs of the Company and the Company's Subsidiaries, taken as one
enterprise.
(xxi) To the Company's knowledge, each of EPIC and
EPIC's Subsidiaries own or possess all governmental licenses, permits,
certificates (including, without limitation, certificate of need
approvals and certification under the Medicare program), consents,
orders, approvals and other authorizations (collectively,
"Governmental Licenses") necessary to own or lease, as the case may
be, and to operate its properties and to carry on its business as
presently conducted, except where the failure to possess such
Governmental Licenses
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<PAGE> 14
could reasonably be expected to not have a material adverse effect on
the condition (financial or otherwise), earnings or business affairs
of the Combined Company, and neither EPIC nor any of EPIC's
Subsidiaries has received any notice of proceedings relating to
revocation or modification of any such Governmental Licenses that, in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), earnings or business
affairs of the Combined Company. To the Company's knowledge, all of
the hospitals operated by EPIC and EPIC's Subsidiaries are "providers
of services" as defined in the Social Security Act and the regulations
promulgated thereunder, and are eligible to participate in the
Medicare program, except as would not have a material adverse effect
on the condition (financial or other), earnings or business affairs of
the Combined Company.
(xxii) The Company has not taken and will not take,
directly or indirectly, any action designed to cause or result in
stabilization or manipulation of the price of the Common Stock; and
the Company has not distributed and will not distribute any prospectus
(as such term is defined in the 1933 Act and the 1933 Act Regulations)
in connection with the offering and sale of the Offered Shares other
than any preliminary prospectus filed with the Commission or the
Prospectuses or other material permitted by the 1933 Act or the 1933
Act Regulations.
(xxiii) Except as disclosed in the Prospectuses, all
United States federal income tax returns of the Company and the
Company's Subsidiaries required by law to be filed have been filed and
all taxes shown by such returns or otherwise assessed, which are due
and payable, have been paid, except tax assessments, if any, as are
being contested in good faith and as to which adequate reserves have
been provided, in each case except as would not have a material
adverse effect on the condition (financial or otherwise), earnings or
business affairs of the Company and the Company's Subsidiaries,
considered as one enterprise. Except as disclosed in the
Prospectuses, all other franchise and income tax returns of the
Company and the Company's Subsidiaries required to be filed pursuant
to applicable foreign, state or local law have been filed, except
insofar as the failure to file such returns would not have a material
adverse effect on the condition (financial or otherwise), earnings or
business affairs of the Company and the Company's Subsidiaries,
considered as one enterprise, and
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<PAGE> 15
all taxes shown on such returns or otherwise assessed which are due
and payable have been paid, except for such taxes, if any, as are
being contested in good faith and as to which adequate reserves have
been provided. To the best of the Company's knowledge, the charges,
accruals and reserves on the books of the Company and the Company's
Subsidiaries in respect of any income and corporate franchise tax
liability for any years not finally determined are adequate to meet
any assessments or reassessments for additional income or corporate
franchise tax for any years not finally determined, except as
disclosed in the Prospectuses and except to the extent of any
inadequacy that would not have a material adverse effect on the
condition (financial or otherwise), earnings or business affairs of
the Company and the Company's Subsidiaries, considered as one
enterprise.
(xxiv) To the Company's knowledge, except as
disclosed in the Prospectuses, all United States federal income tax
returns of EPIC and EPIC's Subsidiaries required by law to be filed
have been filed and all taxes shown by such returns or otherwise
assessed, which are due and payable, have been paid, except tax
assessments, if any, as are being contested in good faith and as to
which adequate reserves have been provided, in each case except as
would not have a material adverse effect on the condition (financial
or otherwise), earnings or business affairs of the Combined Company.
To the Company's knowledge, except as disclosed in the Prospectuses,
all other franchise and income tax returns of EPIC and EPIC's
Subsidiaries required to be filed pursuant to applicable foreign,
state or local law have been filed, except insofar as the failure to
file such returns would not have a material adverse effect on the
condition (financial or otherwise), earnings or business affairs of
the Combined Company, and all taxes shown on such returns or otherwise
assessed which are due and payable have been paid, except for such
taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided, in each case except as would not
have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of the Combined Company. To
the Company's knowledge, the charges, accruals and reserves on the
books of EPIC and EPIC's Subsidiaries in respect of any income and
corporate franchise tax liability for any years not finally determined
are adequate to meet any assessments or reassessments for additional
income or corporate franchise tax for any years not finally
determined, except as disclosed in the Prospectuses and except to the
extent of any inadequacy that would not have a material adverse
15
<PAGE> 16
effect on the condition (financial or otherwise), earnings or
business affairs of the Combined Company.
(xxv) The Company has obtained the written agreement
of R. Clayton McWhorter, Michael A. Koban, Jr. and W. Hudson Connery,
Jr. substantially in the form previously furnished to you that, for a
period of 90 days from the date hereof, such persons will not, without
the prior written consent of the U.S. Representatives (which consent
shall not be unreasonably withheld), directly or indirectly, sell,
offer to sell, contract to sell, grant any option for the sale of, or
otherwise dispose of any shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock
("convertible securities"); provided, however, that during such 90 day
period, such persons may without such prior written consent (i)
transfer such shares of Common Stock or convertible securities by will
or the laws of descent and distribution, (ii) make gifts of shares of
Common Stock or convertible securities or transfer such shares of
Common Stock or convertible securities to (A) family members (by trust
or otherwise), so long as the donee agrees to be bound by the
foregoing restriction in the same manner as it applies to such
persons, or (B) charitable organizations and (iii) sell, transfer or
otherwise dispose of shares of Common Stock or convertible securities
to the Company in connection with any of the transactions contemplated
by the Registration Statement.
(xxvi) To the Company's knowledge, EPIC's Employee
Stock Ownership Plan (the "EPIC ESOP") and the trust created pursuant
to the Trust Agreement for the EPIC ESOP between EPIC Group and U.S.
Trust Company of California, N.A., as trustee under the EPIC ESOP (the
"EPIC Trustee"), dated as of September 30, 1988 (the "EPIC ESOP
Trust"), meet all applicable requirements of qualification and
exemption from taxation under Sections 401(a) and 501(a),
respectively, of the Internal Revenue Code of 1986, as amended (the
"Code"), except as would not have a material adverse effect on the
condition (financial or other), earnings or business affairs of the
Combined Company.
(xxvii) To the Company's knowledge, the EPIC ESOP
constitutes an "employee stock ownership plan," as defined in Section
4975(e)(7) of the Code and the Treasury Regulations promulgated
thereunder, and as defined in Section 407(d)(6) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
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<PAGE> 17
(xxviii) To the Company's knowledge, each of the
loans to the EPIC ESOP Trust pursuant to the EPIC ESOP Loan Agreement
and the Substitute EPIC ESOP Loan Agreement, each between EPIC Group
and the EPIC ESOP Trustee and dated as of September 30, 1988 and July
30, 1991, respectively (collectively, the "ESOP Loan Agreements"), and
each of the pledges of shares of EPIC Group Common Stock, par value
$.01 per share (the "EPIC Group Common Stock"), by the EPIC ESOP Trust
pursuant to the Pledge Agreement and the Amendment to the Pledge
Agreement, each between EPIC Group and the EPIC ESOP Trustee and dated
as of September 30, 1988 and July 30, 1991, respectively
(collectively, the "EPIC ESOP Pledge Agreements"), satisfies the
requirements of Section 4975(d)(3) of the Code and Section 408(b)(3)
of ERISA, and will not subject EPIC to a tax imposed under Section
4975 of the Code or a civil penalty assessed under Section 502(i) of
ERISA, in each case except as would not have a material adverse effect
on the condition (financial or other), earnings or business affairs of
the Combined Company.
(xxix) To the Company's knowledge, the EPIC Common
Stock is a "qualifying employer security," within the meaning of
Section 4975(e)(8) of the Code and Section 407(d)(5) of ERISA, except
as would not have a material adverse effect on the condition
(financial or other), earnings or business affairs of the Combined
Company.
(xxx) To the Company's knowledge, the sales of
shares of EPIC Group Common Stock to the EPIC ESOP Trust pursuant to
the Subscription Agreement between EPIC Group and the EPIC ESOP
Trustee (the "EPIC ESOP Subscription Agreement"), satisfies the
requirements of Section 4975(d)(13) of the Code and Section 408(e) of
ERISA, and will not subject EPIC to a tax imposed under Section 4975
of the Code or a civil penalty assessed under Section 502(i) of ERISA,
in each case except as would not have a material adverse effect on the
condition (financial or other), earnings or business affairs of the
Combined Company.
(xxxi) To the Company's knowledge, and except as
disclosed in the Prospectuses, no opinion, correspondence or other
communication, whether written or otherwise, has been received by EPIC
or any of its agents, affiliates, associates, officers or directors,
or any fiduciary of the EPIC ESOP, from the United States Department
of Labor, the Internal Revenue Service or any other Federal or state
governmental or regulatory agency, body or authority, to the effect
that either of the loans
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<PAGE> 18
to the EPIC ESOP Trust pursuant to the EPIC ESOP Loan Agreements,
either of the pledges of shares of EPIC Group Common Stock by the EPIC
ESOP Trust pursuant to the EPIC ESOP Pledge Agreements or the sales of
shares of EPIC Group Common Stock to the EPIC ESOP Trust pursuant to
the EPIC ESOP Subscription Agreement may or will constitute a
violation of or result in any liability under ERISA or the Code, in
each case except as would not have a material adverse effect on the
condition (financial or other), earnings or business affairs of the
Combined Company.
(xxxii) None of the transactions contemplated by the
ESOP Agreement should constitute a material violation of or result in
any material liability under ERISA or the Code (including, without
limitation, any tax under Section 4978B of the Code), except as would
not have a material adverse effect on the condition (financial or
other), earnings or business affairs of the Combined Company.
(b) Any certificate signed by any officer of the Company and
delivered to you or to Davis Polk & Wardwell as counsel for the Managers
pursuant to this Agreement or at the Closing contemplated hereby shall be
deemed a representation and warranty by the Company to each U.S. Underwriter as
to the matters covered thereby.
(c) Representations and warranties in this Agreement which are
given "to the Company's knowledge" are based solely upon (i) the Company's
actual knowledge and (ii) the representations and warranties of EPIC set forth
in the Merger Agreement, dated as of January 9, 1994, among the Company,
Odyssey Acquisition Corp. and EPIC (the "Merger Agreement"). For purposes of
this Agreement, "Disclosure Schedule" means the disclosure schedule of EPIC
relating to the Merger Agreement.
(d) Each of the Selling Shareholders represents and warrants to
each of the Underwriters that:
(i) This Agreement and the U.S. Purchase Agreement have
been duly authorized, executed and delivered by or on behalf of such
Selling Shareholder.
(ii) The execution and delivery by such Selling
Shareholder of, and the performance by such Selling Shareholder of its
obligations under, this Agreement, the Custody Agreement signed by such
Selling Shareholder and First Union National Bank of North Carolina, as
Custodian, relating to the deposit of Shares
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<PAGE> 19
to be sold by such Selling Shareholder (the "Custody Agreement") and the
Power of Attorney appointing certain individuals as such Selling
Shareholder's attorneys-in-fact to the extent set forth therein, relating
to the transactions contemplated hereby and by the Registration Statement
(the "Power of Attorney") will not contravene any provision of applicable
law, or the certificate of incorporation (or charter) or by-laws of such
Selling Shareholder (if such Selling Shareholder is a corporation), or, in
any material respects, any agreement or other instrument binding upon such
Selling Shareholder or, in any material respects, any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
such Selling Shareholder, and no consent, approval, authorization or order
of or qualification with any governmental body or agency is required for
the performance by such Selling Shareholder of its obligations under this
Agreement or the Custody Agreement or Power of Attorney of such Selling
Shareholder, except such as have already been obtained or as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(iii) On the Closing Date, such Selling Shareholder, upon
due authorization and issuance of the Shares by the Company to the Selling
Shareholder, will have, valid marketable title to the Shares to be sold by
such Selling Shareholder and the legal right and power, and all
authorization and approval required by law, to enter into this Agreement,
the Custody Agreement and the Power of Attorney and to sell, transfer and
deliver the Shares to be sold by such Selling Shareholder.
(iv) The Custody Agreement and the Power of Attorney have
been duly authorized, executed and delivered by such Selling Shareholder
and are valid and binding agreements of such Selling Shareholder.
(v) Assuming that the Company duly authorizes, issues and
delivers the Shares to be sold by the Selling Shareholder on the Closing
Date to the Selling Shareholder free and clear of any security interests,
claims, liens, equities and other encumbrances, delivery of the Shares to
be sold by such Selling Shareholder pursuant to this Agreement will pass
marketable title to such Shares free and clear of any security interests,
claims, liens, equities and other encumbrances.
(vi) The Selling Shareholder is not an investment
company under the Investment Company Act of
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<PAGE> 20
1940 or is registered under the Investment Company Act of 1940.
(vii) All information furnished to the Company in writing
by or on behalf of such Selling Shareholder for use in the Registration
Statement and Prospectus is, and on the Closing Date will be, true,
correct, and complete, and does not, and on the Closing Date will not,
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading.
(viii) The Selling Shareholder has not taken, and will
not take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Shares pursuant to the distribution contemplated by this
Agreement, and other than as permitted by the Act, such Selling Shareholder
has not distributed and will not distribute any prospectus or other
offering material in connection with the offering and sale of the Shares.
(ix) The part of the preliminary prospectus under the
caption "Selling Shareholders" which specifically relates to such Selling
Shareholder or such Selling Shareholder's affiliates does not, and will not
on the Closing Date (and Option Closing Date, if applicable), contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of circumstances under which they were made, not misleading.
(x) At any time during such period as in the opinion of
counsel for the Underwriters a prospectus is required by law to be
delivered in connection with sales by an Underwriter or a dealer, if there
is any change in the information referred to in Section 1(d)(viii) above,
the Selling Shareholder will immediately notify you of such change.
Section 2. Sale and Delivery to the Managers; Closing. (a) On
the basis of the representations and warranties herein contained, and subject
to the terms and conditions herein set forth, the Company and each Selling
Shareholder severally agree to sell to each Manager, and each Manager agrees,
severally and not jointly, to purchase from the Company and each Selling
Shareholder, at the purchase
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<PAGE> 21
price per share for the Initial International Shares to be agreed upon by the
Co-Lead Managers and the Company in accordance with Section 2(b) or 2(c) and
set forth in the International Price Determination Agreement, the number of
Initial International Shares set forth opposite the name of such Manager in
Schedule A, plus such additional number of Initial International Shares such
Manager may become obligated to purchase pursuant to Section 11 hereof. If the
Company elects to rely on Rule 430A, Schedule A may be attached to the
International Price Determination Agreement.
(b) If the Company has elected not to rely upon Rule 430A, the
initial public offering price per share for the Initial International Shares
and the purchase price per share for the Initial International Shares to be
paid by the several Managers shall be agreed upon and set forth in the
International Price Determination Agreement, dated the date hereof, and an
amendment to the Registration Statement containing such per share price
information will be filed before the Registration Statement becomes effective.
(c) If the Company has elected to rely upon Rule 430A, the
initial public offering price per share for the Initial International Shares
and the purchase price per share for the Initial International Shares to be
paid by the several Managers shall be agreed upon and set forth in the
International Price Determination Agreement. In the event that the
International Price Determination Agreement has not been executed by the close
of business on the fourth business day following the date on which the
Registration Statement becomes effective, this Agreement shall terminate
forthwith, without liability of any party to any other party except that
Sections 7 and 8 shall remain in effect.
(d) In addition, on the basis of the representations and
warranties herein contained, and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Managers, severally and not
jointly, to purchase up to an additional 156,000 International Option Shares at
the same purchase price per share as shall be applicable to the Initial
International Shares. The option hereby granted will expire 30 days after the
date upon which the Registration Statement becomes effective or, if the Company
has elected to rely upon Rule 430A, the date of the International Price
Determination Agreement, and may be exercised in whole or from time to time in
part only for the purpose of covering over-allotments that may be made in
connection with the offering and distribution of the Initial International
Shares upon notice by you to the Company setting forth the number of
International Option Shares as to which the several Managers are exercising the
option, and the time
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and date of payment and delivery thereof. Such time and date of delivery (the
"Date of Delivery") shall be determined by you but shall not be later than five
full business days after the exercise of such option, nor in any event prior to
the Closing Time. If the option is exercised as to all or any portion of the
International Option Shares, the International Option Shares as to which the
option is exercised shall be purchased by the Managers, severally and not
jointly, in the respective proportions that bear the same relationship to the
number of International Option Shares to be purchased at the Date of Delivery
as the number of Initial International Shares set forth opposite the name of
each Manager in Schedule A hereto bears to the total number of Initial
International Shares (such proportions are hereinafter referred to as each
Manager's "underwriting obligation proportions").
(e) Payment of the purchase price for, and delivery of
certificates for, the Initial International Shares shall be made at the offices
of Dewey Ballantine, 1301 Avenue of the Americas, New York, New York 10019, or
at such other place as shall be agreed upon by the Company and you, at 10:00
A.M. either (i) on the fifth full business day after the effective date of the
Registration Statement, or (ii) if the Company has elected to rely upon Rule
430A, the fifth full business day after execution of the International Price
Determination Agreement (unless, in either case, postponed pursuant to Section
11 or 12), or at such other time not more than ten full business days
thereafter as you and the Company shall determine (such date and time of
payment and delivery being herein called the "Closing Time"). In addition, in
the event that any or all of the International Option Shares are purchased by
the Managers, payment of the purchase price for, and delivery of certificates
for, such International Option Shares shall be made at the offices of Davis
Polk & Wardwell set forth above, or at such other place as the Company and you
shall determine, on the Date of Delivery as specified in the notice from you to
the Company. Payment shall be made to the Company and the Selling Shareholders
by certified or official bank check or checks in New York Clearing House funds
payable to the order of the Company or the Selling Shareholders against
delivery to you for the respective accounts of the several Managers of
certificates for the International Shares to be purchased by them.
(f) Certificates for the Initial International Shares and the
International Option Shares to be purchased by the Managers shall be in such
denominations and registered in such names as you may request in writing at
least two full business days before the Closing Time or the Date of Delivery,
as the case may be. The certificates for the Initial International Shares and
International Option Shares will be
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<PAGE> 23
made available in New York City for examination and packaging by you not later
than 10:00 A.M. on the business day prior to the Closing Time or the Date of
Delivery, as the case may be.
(g) It is understood that each Manager has authorized you, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the International Shares that it has agreed to purchase.
You, individually and not as a Co-Lead Manager, may (but shall not be
obligated to) make payment of the purchase price for the Initial International
Shares or International Option Shares, to be purchased by any Manager whose
check or checks shall not have been received by the Closing Time or the Date of
Delivery, as the case may be.
(h) It is understood that the obligations of the Company to sell
the Offered Shares being sold by it hereunder are subject to the consummation
of the Acquisition (as defined in the Registration Statement). If the
Acquisition is not consummated, this Agreement may be terminated by the Company
upon notice to the U.S. representatives at or prior to the Closing Time, and
such Termination shall be without liability of any party to any other party
except as provided in Section 4 herein. Notwithstanding any such termination,
the provisions of Sections 7 and 8 herein shall remain in effect.
Section 3. Certain Covenants of the Company. The Company
covenants with each Manager as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and, if the Company elects to rely
upon Rule 430A and subject to Section 3(b), will comply in all material
respects with the requirements of Rule 430A and will notify you promptly, (i)
when the Registration Statement, or any post-effective amendment to the
Registration Statement, shall have become effective, or any supplement to the
Prospectuses or any amended Prospectuses shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission to amend the Registration Statement or amend or supplement any
Prospectus or for additional information and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Offered Shares for
offering or sale in any jurisdiction, or of the institution or threatening of
any proceedings for any of such purposes. The Company will make every
reasonable effort to prevent the issuance of any such stop order or of any
order preventing or suspending such use
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<PAGE> 24
and, if any such order is issued, to obtain the lifting thereof at the earliest
possible moment.
(b) The Company will not at any time file or make any amendment
to the Registration Statement, or any amendment or supplement (i) if the
Company has not elected to rely upon Rule 430A, to the Prospectuses or (ii) if
the Company has elected to rely upon Rule 430A, to either the prospectus
included in the Registration Statement at the time it becomes effective or to
the Prospectuses, of which you shall not have previously been advised and
furnished a copy or to which you or Davis Polk & Wardwell as counsel for the
Managers shall have promptly and reasonably objected in writing.
(c) The Company has furnished or will furnish to you and Davis
Polk & Wardwell as counsel for the Managers, without charge, as many signed
copies (as reasonably requested) of the Registration Statement as originally
filed and of all amendments thereto, whether filed before or after the
Registration Statement becomes effective, copies of all exhibits and documents
filed therewith and signed copies of all consents and certificates of experts,
as you may reasonably request and has furnished or will furnish to you, for
each other U.S. Underwriter, one conformed copy of the Registration Statement
as originally filed and each amendment thereto (without exhibits).
(d) The Company will deliver to each U.S. Underwriter, without
charge, from time to time until the effective date of the Registration
Statement (or, if the Company has elected to rely upon Rule 430A, until the
time the International Price Determination Agreement is executed and
delivered), as many copies of each preliminary prospectus as such U.S.
Underwriter may reasonably request, and the Company hereby consents to the use
of such copies for purposes permitted by the 1933 Act. The Company will
deliver to each Underwriter, without charge, as soon as the Registration
Statement shall have become effective (or, if the Company has elected to rely
upon Rule 430A, as soon as practicable after the International Price
Determination Agreement has been executed and delivered) and thereafter from
time to time as requested during the period when the Prospectus is required to
be delivered under the 1933 Act, such number of copies of the Prospectuses (as
supplemented or amended) as such U.S. Underwriter may reasonably request.
(e) The Company will comply in all material respects with the
1933 Act and the 1933 Act Regulations, and the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder so as to
permit the completion of the distribution of the Offered Shares as
24
<PAGE> 25
contemplated in this Agreement and in the Prospectuses. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Offered Shares any event shall occur or condition exist as a result of
which it is necessary, in the opinion of counsel for the Managers or counsel
for the Company, to amend the Registration Statement or amend or supplement any
Prospectus in order that the Prospectuses will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of either such counsel, at any such time to amend the
Registration Statement or amend or supplement any Prospectus in order to comply
with the requirements of the 1933 Act or the 1933 Act Regulations, the Company
will promptly prepare and file with the Commission, subject to Section 3(b),
such amendment or supplement as may be necessary to correct such untrue
statement or omission or to make the Registration Statement or the Prospectuses
comply with such requirements.
(f) The Company will endeavor, in cooperation with the Managers,
to qualify the Offered Shares for offering and sale under the applicable
securities laws of such states and other jurisdictions as the Company and you
may mutually agree upon and to maintain such qualifications in effect for a
period of not less than one year from the effective date of the Registration
Statement; provided, however, that neither the Company nor any of the Company's
Subsidiaries shall be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. The Company will file such statements and reports as may
be required by the laws of each such jurisdiction to maintain the qualification
of the Offered Shares as above provided.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 60 days after the close of
the period covered thereby, an earnings statement of the Company (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations),
covering a period of 12 months beginning after the effective date of the
Registration Statement but not later than the first day of the Company's fiscal
quarter next following such effective date.
(h) For a period of 90 days from the date hereof, the Company
will not, without the prior written consent of the U.S. Representatives, which
consent shall not be unreasonably
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withheld, directly or indirectly, sell, offer to sell, contract to sell, grant
any option for the sale of, or otherwise dispose of, any Common Stock or
convertible securities, other than (i) to eligible participants in the
Company's employee benefit plans pursuant to the terms thereof and to the
Managers pursuant to this Agreement, (ii) contributions to the Company's
employee benefit plans in accordance with the terms thereof, (iii) upon
exercise of options or warrants to purchase Common Stock, (iv) to the U.S.
Underwriters pursuant to the U.S. Purchase Agreement and (v) in connection with
the transactions described in the Prospectuses (including the transactions
described under the caption "The Acquisition and Financing Plan" in the
Prospectuses).
(i) If the Company has elected to rely upon Rule 430A, it will
take such steps as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for filing by
the Commission and, in the event that it was not, it will promptly file such
prospectus.
(j) The Company, with respect to the offering of the Offered
Shares, has complied and will comply with all of the provisions of Florida H.B.
1771, codified as Section 517.075 of the Florida Statutes, and all regulations
promulgated thereunder relating to issuers doing business with Cuba.
Section 4. Payment of Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (a) the printing and filing of the Registration Statement (including
financial statements and exhibits), as originally filed and as amended, the
preliminary prospectuses and the Prospectuses and any amendments or supplements
thereto, and the cost of furnishing copies thereof to the Managers, (b) the
printing and distribution of this Agreement (including the International Price
Determination Agreement), the Agreement among Managers, the Intersyndicate
Agreement, the Agreement among U.S. Underwriters, the certificates for the
International Shares and the Blue Sky Survey, (c) the delivery of the
certificates for the International Shares to the Managers (d) the fees and
disbursements of the Company's counsel and accountants, (e) the costs and
expenses in connection with the sale of the International Shares by the Selling
Shareholders as are agreed upon by the Company and the Selling Shareholders
(but in no event shall the Managers pay any costs and expenses of the Selling
Shareholders), (f) the qualification of the Offered Shares under the applicable
securities laws in accordance with Section 3(f) and any filing for review of
the offering with
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the National Association of Securities Dealers, Inc., including filing fees and
reasonable fees and disbursements of Davis Polk & Wardwell as counsel for the
Managers, in connection with such qualification of the Offered Shares and the
Blue Sky Survey and (g) the listing fees and expenses incurred in connection
with listing the Offered Shares on the New York Stock Exchange.
If this Agreement is terminated by you in accordance with the
provisions of Section 5, 10(a)(i) or 12, or by the Company in accordance with
the provisions of Section 2(h), the Company shall reimburse the Managers for
all their reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of Davis Polk & Wardwell as counsel for the Managers.
Section 5. Conditions of Managers' Obligations. In addition to
the execution and delivery of the International Price Determination Agreement,
the obligations of the several Managers to purchase and pay for the
International Shares that they have respectively agreed to purchase hereunder
are subject to the accuracy of the representations and warranties of the
Company contained herein (including those contained in the International Price
Determination Agreement) or in certificates of the Company's officers delivered
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date of this Agreement or, with your consent, at a
later time and date not later, however, than 5:30 P.M. on the first business
day following the date hereof, or at such later time or on such later date as
you may agree to in writing with the approval of a majority in interest of the
several Managers; and at the Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or
shall be pending or, to your knowledge or the knowledge of the Company, shall
have been threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Davis Polk & Wardwell as counsel for the Managers.
If the Company has elected to rely upon Rule 430A, Prospectuses containing the
Rule 430A Information shall have been filed with the Commission in accordance
with Rule 424(b) (or a post-effective amendment providing such information
shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
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(b) At the Closing Time, you shall have received a signed opinion
of Dewey Ballantine, counsel for the Company, dated as of the Closing Time, in
form and substance reasonably satisfactory to Davis Polk & Wardwell as counsel
for the Managers, to the effect that:
(i) This Agreement has been duly authorized, executed
and delivered by the Company.
(ii) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware with corporate power under such laws to own, lease and operate its
properties and conduct its business as described in the Prospectuses.
(iii) The Offered Shares sold by the Company pursuant to
this Agreement and the International Purchase Agreement have been duly
authorized and, when issued and delivered by the Company upon receipt of
the payment therefor in accordance with this Agreement and the
International Purchase Agreement, will be validly issued, fully paid and
non-assessable. Such Offered Shares are not subject to the preemptive or
other similar rights of any stockholder of the Company arising by operation
of law, under the charter or bylaws of the Company or under any agreement
known to such counsel to which the Company is a party.
(iv) The Offered Shares conform in all material respects
to the description thereof contained in the Prospectuses.
(v) To the knowledge of such counsel, no authorization,
approval, consent or license of any government, governmental
instrumentality or court (other than under the 1933 Act and the 1933 Act
Regulations, the Trust Indenture Act and the securities or blue sky laws of
the various states and the securities laws of any jurisdiction in which the
International Shares are offered or sold by the International Underwriters
pursuant to the International Purchase Agreement), is required for the
valid issuance, sale and delivery of the Offered Shares by the Company
(whether to you or the Selling Shareholders upon exercise of their
warrants).
(vi) Such counsel has been informed by the Commission
that the Registration Statement is effective under the 1933 Act; any
required filing of the Prospectuses or any supplement thereto pursuant to
Rule 424(b) has been made in the manner and within the time
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<PAGE> 29
period required by Rule 424(b); and, to the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or have been threatened by the Commission under the 1933 Act.
(vii) The Registration Statement (including the Rule 430A
Information, if applicable), the Prospectuses and each amendment or
supplement to the Registration Statement and Prospectuses, as of their
respective effective or issue dates (in each case, except for the financial
statements, supporting schedules and other financial or statistical data
included therein or omitted therefrom, as to which such counsel need
express no opinion), comply as to form in all material respects to the
requirements of the 1933 Act and the 1933 Act Regulations.
(viii) The Company is not an investment company under the
Investment Company Act of 1940.
(ix) The transactions contemplated in the Prospectuses
under the heading "The Acquisition and the Financing Plan", to the extent
described therein, have been duly authorized by the Company; to the
knowledge of such counsel, all of the necessary consents to consummate such
transactions have been obtained (other than the consent of EPIC and its
Subsidiaries with respect to the Debt Redemption and other than as
disclosed in the Registration Statement), except where the failure to
obtain such consents would not have a material adverse effect on the
consummation of the Acquisition and the Financing Plan; to the knowledge of
such counsel, there has not been any violation on the part of the Company
of any of the terms of such consents which violation would materially and
adversely affect the consummation of the Acquisition and the Financing
Plan; and to the knowledge of such counsel, except as disclosed in the
Registration Statement there is no pending or, threatened legal or
governmental proceedings with respect to any of the consents or the
transactions described in the Prospectuses under the caption "The
Acquisition and the Financing Plan" that, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
consummation of the Acquisition and the Financing Plan.
In addition, such opinion shall state that such counsel has
participated in the preparation of the Registration Statement and Prospectuses
and in conferences
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<PAGE> 30
with officers and other representatives of the Company, and your
representatives and your counsel at which the contents of the Registration
Statement, the Prospectuses and related matters were discussed and, although
such counsel need not undertake to determine independently nor pass upon or
assume any responsibility, explicitly or implicitly, for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectuses on the basis of and subject to the foregoing, no
facts have come to the attention of such counsel to lead such counsel to
believe (A) that the Registration Statement (including the Rule 430A
Information, if applicable) or any amendment thereto (except for the financial
statements, supporting schedules and other financial or statistical data
included therein or omitted therefrom including without limitation the pro
forma financial information, and except for the information set forth under the
caption "EPIC Management's Discussion and Analysis of Financial Condition and
Results of Operations," as to which such counsel need express no opinion), as
of the date the Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or (B) that the Prospectuses or any amendment or supplement
thereto (except for the financial statements, supporting schedules and other
financial or statistical data included therein or omitted therefrom including
without limitation the pro forma financial information, and except for the
information set forth under the caption "EPIC Management's Discussion and
Analysis of Financial Condition and Results of Operations," as to which such
counsel need express no opinion), at the time the Prospectuses were issued, at
the time any such amended or supplemented prospectuses were issued or at the
Closing Time, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and the Company's Subsidiaries and
certificates of public officials.
(c) At the Closing Time, you shall have received a signed opinion
of Philip D. Wheeler, General Counsel for the Company, dated as of the Closing
Time, together with reproduced copies of such opinion for each of the other
Managers, in form and substance reasonably satisfactory to Davis Polk &
Wardwell as counsel to the Managers, to the effect that:
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(i) The Company is duly qualified to transact business as
a foreign corporation and is in good standing in each jurisdiction in which
it owns or leases property of a nature, or transacts business of a type,
that would make such qualification necessary, except to the extent that the
failure to so qualify or be in good standing would not have a material
adverse effect on the Company and the Company's Subsidiaries, considered as
one enterprise.
(ii) Each of the Company's Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation with corporate power under such laws
to own, lease and operate its properties and conduct its business as
described in the Prospectuses, or except to the extent that the failure to
be in good standing would not have a material adverse effect on the Company
and the Company's Subsidiaries, considered as one enterprise.
(iii) Each of the Company's Subsidiaries is duly
qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases property of
a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on
the Company and the Company's Subsidiaries, considered as one enterprise.
(iv) The Offered Shares sold by the Company pursuant to
this Agreement and the International Purchase Agreement have been duly
authorized and, when issued and delivered by the Company upon receipt of
the payment therefor in accordance with this Agreement and the
International Purchase Agreement, will be validly issued, fully paid and
non-assessable. Such Offered Shares are not subject to the preemptive or
other similar rights of any stockholder of the Company arising by operation
of law, under the charter or bylaws of the Company or under any agreement
known to such counsel to which the Company or any of the Company's
Subsidiaries is a party. The Offered Shares to be sold by each Selling
Shareholder have been duly authorized and are validly issued, fully paid
and non-assessable.
(v) All of the outstanding shares of capital stock of the
Company other than the Offered Shares have been duly authorized and validly
issued and are fully paid and non-assessable; and none of the outstanding
shares of capital stock of the Company was issued in
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<PAGE> 32
violation of the preemptive or other similar rights of any stockholder of
the Company arising by operation oflaw, under the charter or bylaws of the
Company or under any agreements known to such counsel to which the Company
or any of the Company's Subsidiaries is a party.
(vi) Based solely on an examination of relevant minute
books and stock records, except as disclosed in the Prospectuses, all of
the outstanding shares of capital stock of each of the Company's
Subsidiaries have been duly authorized and validly issued and are fully
paid and non-assessable.
(vii) Such counsel does not know of any statutes or
regulations, or any pending or threatened legal or governmental
proceedings, required to be described in the Prospectuses that are not
described as required, nor of any contracts or documents of a character
required to be described in the Registration Statement or the Prospectuses
or to be filed as exhibits to the Registration Statement that are not
described or filed as required.
(viii) The statements made in the Prospectuses under
"Reimbursement and Regulation", to the extent that they constitute matters
of law or legal conclusions, have been reviewed by such counsel and fairly
present the information disclosed therein in all material respects.
(ix) The execution and delivery of this Agreement by the
Company, the issuance and delivery of the Offered Shares by the Company
(whether to you or the Selling Shareholders upon exercise of their
warrants), the consummation by the Company of the Acquisition, the
Subordinated Debt Offering, the Tender Offers, the Debt Redemption, the
1994 Credit Agreement and the transactions described in the ESOP Agreement
and compliance by the Company with the terms of this Agreement have been
duly authorized by all necessary corporate action on the part of the
Company and do not and will not result in any violation of the charter or
by-laws of the Company or any of the Company's Subsidiaries, and, to the
knowledge of such counsel, do not and will not conflict with, or constitute
a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien or encumbrance
upon any property or assets of the Company or any of the Company's
Subsidiaries under (A) any indenture, mortgage or loan agreement or any
other agreement or instrument to which the Company or any of the Company's
Subsidiaries is a party or by which it
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may be bound or to which any of their respective properties may be subject,
(B) any existing applicable law, rule or regulation (other than the
securities or blue sky laws of the various states and the securities laws
of any jurisdiction in which the International Shares are offered or sold
by the International Underwriters pursuant to the International Purchase
Agreement, as to which such counsel need express no opinion), or (C) any
judgment, order or decree of any government, governmental instrumentality
or court having jurisdiction over the Company or any of the Company's
Subsidiaries or any of their respective properties, in each case, except as
disclosed in the Prospectuses, and except for such conflicts, breaches or
defaults or liens or encumbrances that would not have a material adverse
effect on the Company and the Company's Subsidiaries, considered as one
enterprise. Such counsel need express no opinion, however, as to whether
the execution, delivery and performance by the Company of this Agreement or
the consummation by the Company of the Acquisition, the Subordinated Debt
Offering, the Tender Offers, the Debt Redemption, the 1994 Credit Agreement
and the transactions described in the ESOP Agreement will constitute a
violation of, or default under, any financial covenant or financial ratios
contained in any of the agreements referred to in the preceding sentence.
In addition, such opinion shall state that such counsel has
participated in the preparation of the Registration Statement and Prospectuses
and in conferences with officers and other representatives of the Company, and
your representatives and your counsel at which the contents of the Registration
Statement, the Prospectuses and related matters were discussed and, although
such counsel need not undertake to determine independently nor pass upon or
assume any responsibility, explicitly or implicitly, for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectuses, on the basis of and subject to the foregoing, no
facts have come to the attention of such counsel to lead such counsel to
believe (A) that the Registration Statement (including the Rule 430A
Information, if applicable) or any amendment thereto (except for the financial
statements, supporting schedules and other financial or statistical data
included therein or omitted therefrom including without limitation the pro
forma financial information, and except for the information set forth under the
caption "EPIC Management's Discussion and Analysis of Financial Condition and
Results of Operations," as to which such counsel need express no opinion), as
of the date the Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to
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<PAGE> 34
state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (B) that the Prospectus or any
amendment or supplement thereto (except for the financial statements,
supporting schedules and other financial or statistical data included therein
or omitted therefrom including without limitation the pro forma financial
information, and except for the information set forth under the caption "EPIC
Management's Discussion and Analysis of Financial Condition and Results of
Operations," as to which such counsel need express no opinion), at the time the
Prospectuses were issued, at the time any such amended or supplemented
prospectuses were issued or at the Closing Time, contained or contains an
untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and the Subsidiaries and certificates
of public officials.
(d) At the Closing Time, you shall have received a signed opinion
of Stanley F. Baldwin, Esq., general counsel for EPIC, dated as of the Closing
Time, together with reproduced copies of such opinion for each of the other
Managers, in form and substance reasonably satisfactory to Davis Polk &
Wardwell as counsel to the Managers, substantially to the effect set forth in
Section 7.02(g) of the Merger Agreement. The parties hereto acknowledge and
agree that no personal liability to Stanley F. Baldwin shall attach to the
rendering of such opinion.
Such counsel may state that, insofar as such opinion involves
factual matters, he has relied, to the extent he deems proper, upon
certificates of officers of EPIC and EPIC's Subsidiaries and certificates of
public officials.
(e) At the Closing Time, you shall have received a signed opinion
of Johnson & Gibbs, P.C. (or its successor), counsel for EPIC, dated as of the
Closing Time, together with reproduced copies of such opinion for each of the
other Managers, in form and substance reasonably satisfactory to Davis Polk &
Wardwell as counsel to the Managers, substantially in the form and to the
effect set forth in Section 7.02(f) of the Merger Agreement and to the effect
that:
such firm has represented EPIC in connection with the transactions
contemplated by the Merger Agreement and,
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although such firm has not verified, is not passing upon and does not
assume any responsibility for, the accuracy, completeness or fairness of
any statements contained in the Registration Statement or the Prospectus,
on the basis of the knowledge of such firm in connection with such
representation (relying as to materiality to a large extent upon the
opinions of officers and other representatives of EPIC, without independent
check or verification), no fact has come to their attention that has led
them to believe that the section of the Prospectuses under the heading
"EPIC Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained an untrue statement of a material fact or
omitted to state a material fact required to be stated in such section or
necessary to make the statements in such section, in light of the
circumstances under which they were made, not misleading. In making the
foregoing statements in this paragraph, such firm expresses no opinion,
belief or comment with respect to any financial data or information
included or incorporated by reference in the aforementioned section of the
Prospectuses. Such firm may advise you that it has not participated in any
respect in connection with the preparation of such Prospectuses, the
Registration Statements with respect thereto or the Forms 10-K or 10-Q of
EPIC from which the information contained in the sections referred to above
has been derived.
(f) At the Closing Time, you shall have received a signed opinion
of each of the counsels for each of the Selling Shareholders, dated as of the
Closing Time, together with reproduced copies of such opinion for each of the
other Managers, in form and substance reasonably satisfactory to Davis Polk &
Wardwell as counsel to the Managers, to the effect that:
(i) This Agreement and the International Purchase Agreement have
been duly authorized, executed and delivered by or on behalf of such
Selling Shareholder.
(ii) The execution and delivery by the Selling Shareholder of,
and the performance by the Selling Shareholder of its obligations under,
this Agreement, the Custody Agreement and Power of Attorney signed by the
Selling Shareholder and First Union National Bank of North Carolina as
Custodian, and the attorneys-in-fact named therein relating to the deposit
of the Shares to be sold by the Selling Shareholders and the appointment of
certain individuals as the Selling Shareholders' attorneys-in-fact to the
extent set forth therein (the "Custody Agreement"), will not contravene any
provision
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of applicable law, or the certificate of incorporation or by-laws of such
Selling Shareholder (if such Selling Shareholder is a corporation), or any
agreement or other instrument binding upon such Selling Shareholder or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over such Selling Shareholder, and no consent, approval,
authorization or order of or qualification with any governmental body or
agency is required for the performance by such Selling Shareholder of its
obligations under this Agreement or the Custody Agreement and Power of
Attorney of such Selling Shareholder, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the
offer and sale of the Shares.
(iii) Such Selling Shareholder has valid marketable title to the
Shares to be sold by such Selling Shareholder and the legal right and
power, and all authorization and approval required by law, to enter into
this Agreement, the Custody Agreement and the Power of Attorney and to
sell, transfer and deliver the Shares to be sold by such Selling
Shareholder.
(iv) The Custody Agreement and the Power of Attorney has been
duly authorized, executed and delivered by such Selling Shareholder and are
valid and binding agreements of such Selling Shareholder.
(v) Delivery of the Shares to be sold by such Selling Shareholder
pursuant to this Agreement will pass marketable title to such Shares free
and clear of any security interests, claims, liens, equities and other
encumbrances.
(vi) The Selling Shareholder is not an investment company under
the Investment Company Act of 1940.
(g) At the Closing Time, you shall have received signed opinions
of Dewey Ballantine and Johnson & Gibbs, P.C. (or its successor), dated as of
the Closing Time, together with reproduced copies of such opinions for each of
the other Managers, in form and substance reasonably satisfactory to Davis Polk
& Wardwell as counsel to the Managers, to the effect that neither of (i) the
discharge of that portion of the principal amount of EPIC's loans to the EPIC
ESOP Trust that exceeds the fair market value of the shares of the EPIC Common
Stock transferred by the EPIC Trustee to EPIC, or (ii) the transfer by the EPIC
Trustee to EPIC of shares of EPIC Common Stock unallocated under the EPIC ESOP
in satisfaction of EPIC's loans to the ESOP Trust, each as contemplated by the
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Registration Statement, should constitute a violation of or result in any
liability under ERISA or the Code.
Each such counsel may (i) assume for purposes of such opinion,
based on the understanding of such counsel that the Trustee has retained and
received the advice of independent counsel and financial advisors, that the
Trustee has complied with the applicable fiduciary requirements of ERISA and
the Code and that the ESOP has received no less than adequate consideration for
such shares of EPIC Common Stock, and (ii) state that, insofar as such opinion
involves factual matters, it has relied, to the extent they deem proper, upon
certificates of officers of EPIC and its Subsidiaries and certificates of
public officials.
(h) At the Closing Time, you shall have received the favorable
opinion of Davis Polk & Wardwell as counsel for the Managers, dated as of the
Closing Time, together with reproduced copies of such opinion for each of the
other Managers, to the effect that the opinions delivered pursuant to Sections
5(b), (c), (d) and (e) appear on their face to be appropriately responsive to
the requirements of this Agreement except, specifying the same, to the extent
waived by you, and with respect to the incorporation and legal existence of the
Company, the Offered Shares, this Agreement, the Registration Statement, the
transactions contemplated under the captions "The Acquisition and Financing
Plan" in the Registration Statement, the Prospectuses and such other related
matters as you may require. In giving such opinion such counsel may rely, as
to all matters governed by the laws of jurisdictions other than the law of the
State of New York, the federal law of the United States and the corporate law
of the State of Delaware, upon the opinions of counsel satisfactory to you.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company, the Company's Subsidiaries, EPIC and EPIC's
Subsidiaries and certificates of public officials.
(i) At the Closing Time, (i) the Registration Statement and
the Prospectuses, as they may then be amended or supplemented, shall conform in
all material respects to the requirements of the 1933 Act and the 1933 Act
Regulations, the Company shall have complied in all material respects with Rule
430A (if it shall have elected to rely thereon), the Registration Statement, as
it may then be amended or supplemented, shall not contain
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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 in the
Registration Statement not misleading, and the Prospectuses, as they may then
be amended or supplemented, shall not contain 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 in the Prospectuses, in light of the
circumstances under which they were made, not misleading, (ii) there shall not
have been, since the respective dates as of which information is given in the
Registration Statement and the Prospectuses, any material adverse change, or
any development involving a prospective material adverse change, in the
condition (financial or otherwise), earnings or business affairs of the Company
and the Company's Subsidiaries, considered as one enterprise, or of EPIC and
EPIC's Subsidiaries, considered as one enterprise, whether or not arising in
the ordinary course of business, (iii) no action, suit or proceeding at law or
in equity shall be pending or, to the knowledge of the Company, threatened
against the Company, any of the Company's Subsidiaries, EPIC or any of EPIC's
Subsidiaries that would be required to be set forth in the Prospectuses other
than as set forth therein and no proceedings shall be pending or, to the
knowledge of the Company, threatened against the Company, any of the Company's
Subsidiaries, EPIC or any of EPIC's Subsidiaries before or by any federal,
state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding could reasonably be expected to
materially adversely affect the condition (financial or otherwise), earnings or
business affairs of the Company and the Company's Subsidiaries, considered as
one enterprise, or of EPIC and EPIC's Subsidiaries, considered as one
enterprise, other than as set forth in the Prospectuses, (iv) the Company shall
have complied in all material respects with all agreements and satisfied in all
material respects all conditions on its part to be performed or satisfied at or
prior to the Closing Time, and (v) the other representations and warranties of
the Company set forth in Section 1(a) shall be accurate as though expressly
made at and as of the Closing Time. At the Closing Time, you shall have
received a certificate of the President or a Vice President and the Treasurer
or the Controller of the Company, dated as of the Closing Time, to such effect,
but in the case of clauses (ii) and (iii) above, only with respect to the
Company and the Company's Subsidiaries.
(j) At the Closing Time, you shall have received a certificate
of the chief executive officer or chief financial officer of EPIC, dated as of
the Closing Time, to the effect set forth in Section 7.02(a) of the Merger
Agreement.
(k) With respect to the purchase of Offered Shares from any
Selling Shareholder, such Selling Shareholder shall have complied in all
material respects with all agreements and satisfied in all material respects
all conditions on its part to be performed or satisfied at or prior to the
Closing Time.
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(l) On the date of this Agreement and at the Closing Time, Ernst
& Young, independent public accountants with respect to the Company, shall have
furnished to you letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, containing statements and information
of the type customarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectuses.
(m) On the date of this Agreement and at the Closing Time, Ernst
& Young, independent public accountants with respect to EPIC, shall have
furnished to you letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, containing statements and information
of the type customarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements of EPIC and certain
financial information contained or incorporated by reference in the
Registration Statement and the Prospectuses.
(n) At the Closing Time, counsel for the Managers shall have been
furnished with all such documents, certificates and opinions as they may
reasonably request for the purpose of enabling them to pass upon the issuance
and sale of the Offered Shares as contemplated in this Agreement and the
matters referred to in Section 5(e) and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company, the performance of any of the covenants of the Company, or the
fulfillment of any of the conditions herein contained; and all proceedings
taken by the Company at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Offered Shares by the Company (whether
to you or the Selling Shareholders upon exercise of their warrants) as
contemplated in this Agreement shall be reasonably satisfactory in form and
substance to you and to Davis Polk & Wardwell as counsel for the Managers.
(o) At the Closing Time, the Company shall have consummated the
Acquisition and, after giving effect to the Acquisition, is not in default
under the 1992 Credit Agreement or any amendment thereto. The Company shall
have provided to you and Davis Polk & Wardwell as counsel for the Managers
copies of all documents with respect to the consummation of the Acquisition as
you or Davis Polk & Wardwell may reasonably request.
(p) With respect to the purchase of Shares from a Selling
Shareholder who is not a U.S. Person, you shall have received on the Closing
Date, a certificate of such Selling
39
<PAGE> 40
Shareholder who is not a U.S. Person to the effect that such Selling
Shareholder is not a U.S. Person (as defined under applicable U.S. federal tax
legislation), which certificate may be in the form of a properly completed and
executed United States Treasury Department Form W-8 (or other applicable form
or statement specified by Treasury Department regulations in lieu thereof).
(q) The International Shares to be delivered on the Closing Date
pursuant to the International Purchase Agreement shall be sold simultaneously
with the U.S. Shares sold hereunder.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement may be terminated by you upon notice to the Company at any time
at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4
herein, provided, however, that failure of any Selling Shareholder to fulfill
any of the conditions specified in this Section 5 shall not itself relieve the
several Underwriters of their obligations to purchase and pay for the Offered
Shares to be sold by the Company hereunder. Notwithstanding any such
termination, the provisions of Sections 7 and 8 herein shall remain in effect.
Section 6. Conditions to Purchase of U.S. Option Shares. In the
event that the Managers exercise their option granted in Section 2 to purchase
all or any of the International Option Shares and the Date of Delivery
determined by you pursuant to Section 2 is later than the Closing Time, the
obligations of the several Managers to purchase and pay for the International
Option Shares that they shall have respectively agreed to purchase pursuant to
this Agreement are subject to the accuracy of the representations and
warranties of the Company herein contained, to the performance by the Company
of its obligations hereunder and to the following further conditions:
(a) The Registration Statement shall remain effective at the Date
of Delivery, and at the Date of Delivery no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or
shall be pending or, to your knowledge or to the knowledge of the Company,
shall have been threatened by the Commission, and any request on the part of
the Commission for additional information shall have been complied with to the
reasonable satisfaction of Davis Polk & Wardwell as counsel for the Managers.
40
<PAGE> 41
(b) At the Date of Delivery, the provisions of Section 5(i) shall
have been complied with at and as of the Date of Delivery and, at the Date of
Delivery, you shall have received (i) a certificate of the President or a Vice
President and the Treasurer or the Controller of the Company in accordance with
the provisions of Section 5(i), dated as of the Date of Delivery, to such
effect and (ii) a Certificate of the chief executive officer or chief financial
officer of EPIC in accordance with the provisions of Section 5(j), dated as of
the Date of Delivery, to such effect.
(c) At the Date of Delivery, you shall have received the
favorable opinions of Dewey Ballantine, counsel for the Company, Philip D.
Wheeler, general counsel for the Company, Stanley F. Baldwin, Esq., general
counsel for EPIC, Johnson & Gibbs, P.C. (or its successor), counsel for EPIC,
or such other counsel reasonably satisfactory to Davis Polk & Wardwell as
counsel for the Managers together with reproduced copies of such opinions for
each of the other Managers in form and substance satisfactory to Davis Polk &
Wardwell as counsel for the Managers, dated as of the Date of Delivery,
relating to the International Option Shares and otherwise to the same effect as
the opinions required by Sections 5(b), (c), (d) and (e).
(d) At the Date of Delivery, you shall have received the
favorable opinion of Davis Polk & Wardwell, counsel for the Managers, dated as
of the Date of Delivery, relating to the U.S. Option Shares and otherwise to
the same effect as the opinion required by Section 5(h).
(e) At the Date of Delivery, you shall have received a letter
from Ernst & Young, in form and substance satisfactory to you and dated as of
the Date of Delivery, to the effect that they reaffirm the statements made in
the letter furnished pursuant to Section 5(m), except that the specified date
referred to shall be a date not more than five days prior to the Date of
Delivery.
(f) At the Date of Delivery, Davis Polk & Wardwell as counsel for
the Managers shall have been furnished with all such documents, certificates
and opinions as they may reasonably request for the purpose of enabling them to
pass upon the issuance and sale of the U.S. Option Shares as contemplated in
this Agreement and the matters referred to in Section 6(d) and in order to
evidence the accuracy and completeness of any of the representations,
warranties or statements of the Company, the performance of any of the
covenants of the Company, or the fulfillment of any of the conditions herein
contained; and all proceedings taken by the Company at or prior to the Date of
Delivery in connection with
41
<PAGE> 42
the authorization, issuance and sale of the U.S. Option Shares as contemplated
in this Agreement shall be reasonably satisfactory in form and substance to you
and to Davis Polk & Wardwell as counsel for the Managers.
(g) At the Date of Delivery, the Company shall have consummated
the Acquisition and, after giving effect to the Acquisition, is not in default
under the 1992 Credit Agreement or any amendment thereto. The Company shall
have provided to you and Davis Polk & Wardwell as counsel for the Managers
copies of all documents with respect to the consummation of the Acquisition as
you or Davis Polk & Wardwell may reasonably request.
Section 7. Indemnification. (h) The Company agrees, and the
Selling Shareholders severally agree, to indemnify and hold harmless each U.S.
Underwriter and each person, if any, who controls any U.S. Underwriter within
the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information,
if applicable, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of an untrue statement or alleged
untrue statement of a material fact included in any preliminary prospectus
or the Prospectuses (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to the last sentence of Section 7(c), fees and
disbursements of counsel chosen by you to represent the Managers),
reasonably incurred in
42
<PAGE> 43
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that with respect to the indemnity provided by any Selling
Shareholder, the indemnity shall only apply to information relating to such
Selling Shareholder furnished or confirmed in writing by such Selling
Shareholder for use in the Registration Statement (or any amendments thereto);
and provided, further, that this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information furnished or confirmed in writing to
the Company by or on behalf of any Underwriter through you or the International
Representatives expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto); and provided further that the foregoing indemnification with respect
to any untrue statement contained in or any omission from a preliminary
prospectus shall not inure to the benefit of any U.S. Underwriter (or any
person controlling such U.S. Underwriter) from whom the person asserting any
such losses, claims, damages, liabilities, or expenses purchased any of the
Offered Shares if a copy of the Prospectus (or the Prospectus as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such U.S. Underwriter to such
person, if such is required by law, at or prior to the written confirmation of
the sale of such Offered Shares to such person and the Prospectus (as so
amended or supplemented) would have cured the defect giving rise to such loss,
claim, damage, liability or expense and provided further that in no event shall
any Selling Shareholder be liable by reason of this Section 7 in an aggregate
amount in excess of the gross proceeds to such Selling Shareholder from the
sale of Offered Shares by such Selling Shareholder pursuant to this Agreement.
(b) Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, the Selling Shareholders and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 7(a), as
43
<PAGE> 44
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto) in reliance upon and in conformity with information furnished or
confirmed in writing to the Company by or on behalf of such U.S. Underwriter
through you expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information, if applicable, or such
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. An indemnifying party may participate
at its own expense in the defense of such action. In no event shall the
indemnifying party or parties be liable for the fees and expenses of more than
one counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances.
Section 8. Contribution. In order to provide for just and
equitable contribution in circumstances under which the indemnity provided for
in Section 7 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company, the
Selling Shareholders and the Managers shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity incurred by the Company, one or more of the Selling Shareholders and
one or more of the Managers, as incurred, in such proportions that (a) the
Managers are responsible for that portion represented by the percentage that
the underwriting discount appearing on the cover page of the Prospectuses bears
to the initial public offering price appearing thereon and (b) the Company and
the Selling Shareholders are responsible for the balance (with the Company and
each of the Selling Shareholders responsible in proportion to the net proceeds
from the Offerings (as defined in the Registration Statement) (before deducting
expenses) received by each of the Company and such Selling Shareholder);
provided, however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person,
44
<PAGE> 45
if any, who controls a Manager within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as such Manager, and each director
of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as the
Company.
Section 9. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Company, the Selling Shareholders and the Managers or their
respective officers set forth in or made pursuant to this Agreement will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Company, any of the Selling Shareholders or any Manager or
controlling person and will survive delivery of and payment for the Offered
Shares.
Section 10. Termination of Agreement. (a) You may terminate
this Agreement, by notice to the Sellers, at any time at or prior to the
Closing Time (i) if there has been, since the respective dates as of which
information is given in the Registration Statement, any material adverse
change, or any development involving a prospective material adverse change, in
the condition (financial or otherwise), earnings or business affairs of the
Company and the Company's Subsidiaries, considered as one enterprise, or of
EPIC and EPIC's Subsidiaries, considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or any
outbreak of hostilities or escalation of existing hostilities or other calamity
or crisis the effect of which is such as to make it, in your reasonable
judgment, impracticable to market the International Shares or enforce contracts
for the sale of the International Shares, or (iii) if trading in any securities
of the Company has been suspended by the Commission, or if trading generally on
the New York Stock Exchange or in the over-the-counter market has been
suspended, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices for securities have been required, by such exchange or by
order of the Commission or any other governmental authority, or (iv) if a
banking moratorium has been declared by either federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party,
except to the extent provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 7 and 8 shall remain in effect.
45
<PAGE> 46
(c) This Agreement may also terminate pursuant to the
provisions of Section 2(c), with the effect stated in such Section.
(d) If the U.S. Purchase Agreement shall terminate for any
reason, this Agreement shall terminate.
Section 11. Default by One or More of the Managers. If one or
more of the Managers shall fail at the Closing Time to purchase the Initial
International Shares that it or they are obligated to purchase pursuant to this
Agreement (the "Defaulted International Shares"), you shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the non-
defaulting Managers, or any other underwriters, to purchase all, but not less
than all, of the Defaulted International Shares in such amounts as may be
agreed upon and upon the terms set forth in this Agreement; if, however, you
have not completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted International Shares does not
exceed 10% of the total number of Initial International Shares, the
non-defaulting Managers shall be obligated to purchase the full amount
thereof in the proportions that their respective Initial International
Share underwriting obligation proportions bear to the underwriting
obligation proportions of all non-defaulting Managers, or
(b) if the number of Defaulted International Shares exceeds
10% of the total number of Initial International Shares, this Agreement
shall terminate without liability on the part of any non-defaulting
Manager.
No action taken pursuant to this Section shall relieve any
defaulting Manager from liability in respect of its default.
In the event of any such default that does not result in a
termination of this Agreement, either you or the Company shall have the right
to postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectuses or in
any other documents or arrangements. As used herein, the term "Manager"
includes any person substituted for a Manager under this Section 11.
Section 12. Agreements of the Selling Shareholders. The
Selling Shareholders severally agree with you and the Company:
46
<PAGE> 47
(a) To pay or to cause to be paid all transfer taxes with
respect to the Shares to be sold by the Selling Shareholders; and
(b) To take all reasonable actions in cooperation with the
Company and Managers to cause the Registration Statement to become
effective at the earliest possible time, to do and perform all things to be
done and performed under this Agreement prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Shares pursuant to
this Agreement.
Section 13. Default by the Company. If the Company shall
fail at the Closing Time to sell and deliver the number of Offered Shares that
it is obligated to sell, then this Agreement shall terminate without any
liability on the part of any non-defaulting party except to the extent
provided in Section 4 and except that the provisions of Sections 7 and 8 shall
remain in effect.
No action taken pursuant to this Section shall relieve the Company
from liability, if any, in respect of such default.
Section 14. Notices. All notices and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
if delivered, mailed or transmitted by any standard form of telecommunication
(notices transmitted by telecopier to be promptly confirmed in writing).
Notices to you or the Managers shall be directed to you c/o Merrill Lynch
International Limited, Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY,
England, attention of Ms. Georgia May; and notices to the Company shall be
directed to it at 4525 Harding Road, Nashville, Tennessee 37205 (telecopier
no.: (615) 298-6377), attention of Philip D. Wheeler, Esq.
Section 15. Parties. This Agreement is made solely for the
benefit of the several Managers and the Company and, to the extent expressed,
any person controlling the Company or any of the Managers, and the directors of
the Company, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors and assigns and, subject to
the provisions of Section 11, no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include any purchaser, as such purchaser, from any of the several Managers
of the International Shares. All of the obligations of the Managers hereunder
are several and not joint.
47
<PAGE> 48
Section 16. Representation of Co-Lead Managers. You will act for
the several Managers in connection with this offering, and any action under or
in respect of this Agreement taken by you as Co-Lead Managers will be binding
upon all the Managers.
Section 17. Governing Law and Time. This Agreement shall be
governed by the laws of the State of New York. Specified times of the day
refer to New York City time.
Section 18. Counterparts. This Agreement may be executed in one
or more counterparts and, when a counterpart has been executed by each party,
all such counterparts taken together shall constitute one and the same
agreement.
48
<PAGE> 49
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company and the several
Managers in accordance with its terms.
Very truly yours,
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By:
______________________________
Name:
Title:
EACH OF THE SELLING SHAREHOLDERS
NAMED IN SCHEDULE B HERETO
By
______________________________
Name:
Title: Attorney-in-Fact
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: MERRILL LYNCH INTERNATIONAL
LIMITED
By:
_______________________
Attorney-in-Fact
For themselves and as Co-Lead Managers of the other Managers named in Schedule
A.
49
<PAGE> 50
EXHIBIT A
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(A DELAWARE CORPORATION)
1,244,081 SHARES
OF COMMON STOCK
INTERNATIONAL PRICE DETERMINATION AGREEMENT
April 28, 1994
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
As Representatives of the
several Managers
c/o Merrill Lynch International Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
Reference is made to the International Purchase Agreement dated
April 28, 1994 (the "International Purchase Agreement") among Healthtrust, Inc.
- - - The Hospital Company, a Delaware corporation (the "Company"), the Selling
Shareholders named in Schedule I to the International Purchase Agreement (the
"Selling Shareholders") and the several Managers named in Schedule A thereto or
hereto (the "Managers"), for whom Merrill Lynch International Limited and
Donaldson, Lufkin & Jenrette Securities Corporation are acting as Co-Lead
Managers (the "Co-Lead Managers"). The International Purchase Agreement
provides for the purchase by the Managers from the Company and the Selling
Shareholders, subject to the terms and conditions set forth therein, of an
aggregate of 1,244,081 shares (the "Initial International Shares") of the
Company's common stock, par value $.001 per share. This Agreement is the
International Price Determination Agreement referred to in the International
Purchase Agreement.
<PAGE> 51
Pursuant to Section 2 of the International Purchase Agreement,
the undersigned agree with the Co-Lead Managers as follows:
1. The initial public offering price per share for the
Initial International Shares shall be $28.25.
2. The purchase price per share for the Initial International
Shares to be paid by the several Managers shall be $27.12, representing an
amount equal to the initial public offering price set forth above, less
$1.13 per share.
The Company represents and warrants to each of the Managers that
the representations and warranties of the Company set forth in Section 1(a) of
the International Purchase Agreement are accurate as though expressly made at
and as of the date hereof.
The Selling Shareholders represent and warrant to each of the
Managers that the representations and warranties set forth in Section 1(d) of
the International Purchase Agreement are accurate as though expressly made at
and as of the date hereof.
As contemplated by Section 2 of the International Purchase
Agreement, attached as Schedule A is a completed list of the several Managers,
which shall be a part of this Agreement and the International Purchase
Agreement.
2
<PAGE> 52
This Agreement shall be governed by the laws of the State of New
York.
If the foregoing is in accordance with the understanding of the
Co-Lead Managers of the agreement between the Managers and the Company, please
sign and return to the Company a counterpart hereof, whereupon this instrument
along with all counterparts and together with the International Purchase
Agreement shall be a binding agreement among the Managers and the Company in
accordance with its terms and the terms of the International Purchase
Agreement.
Very truly yours,
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By:______________________________
Name:
Title:
EACH OF THE SELLING SHAREHOLDERS
NAMED IN SCHEDULE B TO THE
INTERNATIONAL PURCHASE AGREEMENT
By:______________________________
Name:
Title: Attorney-in-Fact
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: MERRILL LYNCH INTERNATIONAL
LIMITED
By:________________________
Attorney-in-Fact
For themselves and as Co-Lead Managers of the other Managers named in Schedule
A attached to the International Purchase Agreement
3
<PAGE> 53
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF INITIAL
INTERNATIONAL SHARES
MANAGER TO BE PURCHASED
------- --------------------
<S> <C>
Merrill Lynch International Limited . . . . . . . . . . . . . 472,041
Donaldson, Lufkin & Jenrette
Securities Corporation . . . . . . . . . . . . . . . . . . 472,040
ABN AMRO Bank N.V. . . . . . . . . . . . . . . . . . . . . . 60,000
Deutsche Bank Aktiengesellschaft . . . . . . . . . . . . . . 60,000
Dresdner Bank Aktiengesellschaft . . . . . . . . . . . . . . 60,000
RBC Dominion Securities Inc. . . . . . . . . . . . . . . . . 60,000
Swiss Bank Corporation . . . . . . . . . . . . . . . . . . . 60,000
--------
Total . . . . . . . . . . . . . . . . . . . . 1,244,081
=========
</TABLE>
<PAGE> 54
SCHEDULE B
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
TO BE SOLD TO BE SOLD TO THE
TO THE U.S. INTERNATIONAL
SELLING SHAREHOLDER UNDERWRITERS MANAGERS
------------------- ------------ -----------
<S> <C> <C>
Base Assets Trust . . . . . . . . . . . . . . . . . . . . . . 516,764 129,191
Commonwealth Life Insurance . . . . . . . . . . . . . . . . . 77,600 19,400
Guaranty Reassurance Corporation . . . . . . . . . . . . . . 37,720 9,430
American Financial Corporation . . . . . . . . . . . . . . . 22,632 5,658
Flexi-Van Leasing, Inc. . . . . . . . . . . . . . . . . . . . 22,632 5,658
Donaldson, Lufkin & Jenrette Securities Corporation . . . . . 16,700 4,175
Western Financial Savings Bank . . . . . . . . . . . . . . . 15,088 3,772
Berkeley Atlantic Income Limited . . . . . . . . . . . . . . 11,316 2,829
Comdisco, Inc. . . . . . . . . . . . . . . . . . . . . . . . 11,316 2,829
Lexington Precision Corporation . . . . . . . . . . . . . . . 11,316 2,829
Thomas Spiegel . . . . . . . . . . . . . . . . . . . . . . . 11,316 2,829
EQJ Partnership . . . . . . . . . . . . . . . . . . . . . . . 8,290 2,072
Equitable Life Assurance Society . . . . . . . . . . . . . . 6,400 1,600
Wolfson Equities. . . . . . . . . . . . . . . . . . . . . . 6,000 1,500
American Capital High Yield Investments Inc. . . . . . . . . 4,795 1,199
John Chulick & Kathi Chulick . . . . . . . . . . . . . . . . 4,602 1,150
Berkeley Technology Investments Limited . . . . . . . . . . . 4,526 1,132
General American Life Insurance Co. . . . . . . . . . . . . . 3,772 943
National Western Life Insurance Co. . . . . . . . . . . . . . 3,018 754
Universal Medical Buildings L.P. . . . . . . . . . . . . . . 3,000 750
South Ferry #2 L.P. . . . . . . . . . . . . . . . . . . . . 2,400 600
Christian Brothers Institute . . . . . . . . . . . . . . . . 2,263 566
Stephen Swid . . . . . . . . . . . . . . . . . . . . . . . . 2,263 566
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
TO BE SOLD TO BE SOLD TO THE
TO THE U.S. INTERNATIONAL
SELLING SHAREHOLDER UNDERWRITERS MANAGERS
------------------- ------------ -----------
<S> <C> <C>
The Westwood Group, Inc. . . . . . . . . . . . . . . . . . . 2,263 566
Worldwide Special Portfolio N.V. . . . . . . . . . . . . . . 2,263 566
American Capital Income Trust . . . . . . . . . . . . . . . . 2,129 532
Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . . 1,509 377
Warren F. Langford Trust . . . . . . . . . . . . . . . . . . 1,056 264
Citizens Trust Company . . . . . . . . . . . . . . . . . . . 754 189
American Capital Life Investment Trust . . . . . . . . . . . 620 155
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . 816,323 204,081
</TABLE>
<PAGE> 1
EXHIBIT 1.3
============================================================
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(A DELAWARE CORPORATION)
$200,000,000
10 1/4% SUBORDINATED NOTES DUE 2004
PURCHASE AGREEMENT
Dated: APRIL 28, 1994
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HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(a Delaware corporation)
$200,000,000
10 1/4% Subordinated Notes due 2004
PURCHASE AGREEMENT
April 28, 1994
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies and Gentlemen:
Healthtrust, Inc. - The Hospital Company, a Delaware
corporation (the "Company"), proposes to issue and sell to the underwriters
named in Schedule A (collectively, the "Underwriters") $200,000,000 aggregate
principal amount of its 10 1/4% Subordinated Notes due 2004 (the "Securities").
Such Securities are to be sold to each Underwriter, acting severally and not
jointly, in such amounts as are set forth in Schedule A opposite the name of
such Underwriter. The Securities are to be issued pursuant to an indenture
dated as of March 30, 1993 (the "Indenture") between the Company and The First
National Bank of Boston, as trustee (the "Trustee"). The Securities and the
Indenture are more fully described in the Prospectus referred to below.
The principal amount and certain terms of the Securities, and
the purchase price of the Securities to be paid by the Underwriters, shall be
agreed upon by the Company and the Underwriters, and such agreement shall be
set forth in a separate written instrument substantially in the form of Exhibit
A hereto (the "Price Determination Agreement"). The Price Determination
Agreement may take the form of an exchange of any standard form of written
telecommunication between the Company and the Underwriters and shall specify
such applicable information as is indicated in Exhibit A hereto. The offering
of the Securities will be governed by this Agreement, as supplemented by the
Price Determination Agreement. From and
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after the date of the execution and delivery of the Price Determination
Agreement, this Agreement shall be deemed to incorporate, and all references
herein to "this Agreement" or "herein" shall be deemed to include, the Price
Determination Agreement.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 33-52403) covering the registration of the Securities under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
preliminary prospectus or prospectuses, and either (A) has prepared and
proposes to file, prior to the effective date of such registration statement,
an amendment to such registration statement, including a final prospectus, or
(B) if the Company has elected to rely upon Rule 430A ("Rule 430A") of the
rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations"), will prepare and file a prospectus, in accordance with the
provisions of Rule 430A and Rule 424(b) ("Rule 424(b)") of the 1933 Act
Regulations, promptly after execution and delivery of the Price Determination
Agreement. The information, if any, included in such prospectus that was
omitted from the prospectus included in such registration statement at the time
it becomes effective but that is deemed, pursuant to Rule 430A(b), to be part
of such registration statement at the time it becomes effective is referred to
herein as the "Rule 430A Information". Each prospectus used before the time
such registration statement becomes effective and any prospectus that omits the
Rule 430A Information that is used after such effectiveness and prior to the
execution and delivery of the Price Determination Agreement, is herein called a
"preliminary prospectus". Such registration statement, including the exhibits
thereto, as amended at the time it becomes effective and including, if
applicable, the Rule 430A Information, is herein called the "Registration
Statement", and the prospectus included in the Registration Statement at the
time it becomes effective is herein called the "Prospectus", except that, if
the final prospectus first furnished to the Underwriters after the execution of
the Price Determination Agreement for use in connection with the offering of
the Securities differs from the prospectus included in the Registration
Statement at the time it becomes effective (whether or not such prospectus is
required to be filed pursuant to Rule 424(b)), the term "Prospectus" shall
refer to the final prospectus first furnished to the Underwriters for such use.
The Company understands that the Underwriters propose to make
a public offering of the Securities as soon
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as you deem advisable after the Registration Statement becomes effective, the
Price Determination Agreement has been executed and delivered and the Indenture
has been qualified under the Trust Indenture Act of 1939, as amended (the "1939
Act").
The parties hereto further acknowledge that for purposes of
this Agreement, the "Company" and the "Company's Subsidiaries" shall refer to
the Company and the Company's subsidiaries on the date of this Agreement.
Section 1. Representations and Warranties. (a) The
Company represents and warrants to and agrees with each of the Underwriters
that:
(i) When the Registration Statement shall become
effective, if the Company has elected to rely upon Rule 430A, on the
date of the Price Determination Agreement, on the effective or issue
date of each amendment or supplement to the Registration Statement or
the Prospectus, and at the Closing Time referred to below, (A) the
Registration Statement and any amendments and supplements thereto will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations; (B) neither the Registration Statement
nor any amendment or supplement thereto will contain 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 not
misleading; and (C) neither the Prospectus nor any amendment or
supplement thereto will include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, this
representation and warranty does not apply to statements or omissions
from the Registration Statement or the Prospectus made in reliance
upon and in conformity with information furnished or confirmed in
writing to the Company by or on behalf of any Underwriter expressly
for use in the Registration Statement or the Prospectus or to the
Statement of Eligibility of the Trustee on form T-1 filed with the
Commission as part of the Registration Statement.
(ii) This Agreement has been duly authorized, executed and
delivered by the Company.
(iii) The consolidated financial statements of the Company
included in the Registration Statement present fairly the consolidated
financial position of
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the Company and the Company's Subsidiaries (as hereinafter defined) as
of the dates indicated and the consolidated statements of operations,
stockholders' equity and cash flows of the Company and the Company's
Subsidiaries for the periods specified. Except as otherwise stated in
the Registration Statement, such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved. The
financial statement schedules, if any, included in the Registration
Statement present fairly the information required to be stated
therein. The pro forma financial statements and other pro forma
financial information included in the Prospectus present fairly the
information shown therein, have been prepared in all material respects
in accordance with the Commission's rules and guidelines with respect
to pro forma financial statements, have been properly compiled on the
pro forma bases described therein, and, in the opinion of the Company,
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(iv) To the Company's knowledge, the consolidated financial
statements of EPIC Holdings, Inc. ("EPIC") and EPIC's subsidiaries
(including the financial statements of EPIC Healthcare Group, Inc.
("EPIC Group"), EPIC's wholly-owned subsidiary) included in the
Registration Statement present fairly the consolidated financial
position of EPIC and EPIC's Subsidiaries (as hereinafter defined) as
of the dates indicated and the consolidated statements of operations,
stockholders' equity (deficit) and cash flows of EPIC and EPIC's
Subsidiaries for the periods specified. To the Company's knowledge,
except as otherwise stated in the Registration Statement, such
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved.
(v) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware
with corporate power under such laws to own, lease and operate its
properties and conduct its business as described in the Prospectus;
and the Company is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in
which it owns or leases property of a nature, or transacts
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business of a type, that would make such qualification necessary,
except to the extent that the failure to so qualify or be in good
standing would not have a material adverse effect on the Company and
the Company's Subsidiaries, considered as one enterprise.
(vi) To the Company's knowledge, EPIC is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware with corporate power under such laws to own,
lease and operate its properties and conduct its business as described
in the Prospectus; and EPIC is duly qualified to transact business as
a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification
necessary, except to the extent that the failure to so qualify or be
in good standing would not have a material adverse effect on EPIC and
EPIC's Subsidiaries, considered as one enterprise.
(vii) Each of the Company's subsidiaries (collectively, the
"Company's Subsidiaries") is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation with corporate power under such laws to own, lease
and operate its properties and conduct its business as described in
the Prospectus; and each of the Company's Subsidiaries is duly
qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make
such qualification necessary, except to the extent that the failure to
so qualify or be in good standing would not have a material adverse
effect on the Company and the Company's Subsidiaries, considered as
one enterprise. Except as set forth in the Registration Statement,
all of the outstanding shares of capital stock of each of the
Company's Subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable, and are owned by the Company,
directly or through one or more Subsidiaries, free and clear of any
pledge, lien, perfected security interest, claim or encumbrance of any
kind or, to the knowledge of the Company, any unperfected security
interest.
(viii) To the Company's knowledge, each of EPIC's subsidiaries
(collectively, "EPIC's Subsidiaries") is a corporation duly
incorporated, validly existing and in good standing under the laws of
the jurisdiction of its
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incorporation with corporate power under such laws to own, lease and
operate its properties and conduct its business as described in the
Prospectus; and each of EPIC's Subsidiaries is duly qualified to
transact business as a foreign corporation and is in good standing in
each other jurisdiction in which it owns or leases property of a
nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse
effect on EPIC and EPIC's Subsidiaries, considered as one enterprise.
To the Company's knowledge, except as set forth in the Registration
Statement, all of the outstanding shares of capital stock of each of
EPIC's Subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable, and except as set forth in the
Disclosure Schedule (as hereinafter defined), are owned by EPIC,
directly or through one or more Subsidiaries, free and clear of any
pledge, lien, perfected security interest, claim or encumbrance of any
kind or, to the knowledge of the Company, any unperfected security
interest.
(ix) The Indenture has been duly authorized by the Company,
will be substantially in the form heretofore delivered to you and,
when duly executed and delivered by the Company and, assuming due
authentication by the Trustee, will constitute a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization or other similar
laws affecting enforcement of creditors' rights generally and except
as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law); and the Indenture conforms in all material respects
to the description thereof contained in the Prospectus.
(x) The Securities have been duly authorized by the Company.
When executed, authenticated, issued and delivered in the manner
provided for in the Indenture and sold and paid for as provided in
this Agreement, the Securities will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture
and enforceable against the Company in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting enforcement
of creditors' rights generally and except
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as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or law); and the Securities conform in all material respect to
the description thereof contained in the Prospectus.
(xi) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable.
(xii) To the Company's knowledge, all of the outstanding
shares of capital stock of EPIC have been duly authorized and validly
issued and are fully paid and non-assessable and none of the
outstanding shares of Common Stock of EPIC was issued in violation of
the preemptive or other similar rights of any stockholder of EPIC
arising by operation of law, under the charter and bylaws of EPIC or
under any agreement to which EPIC or any of EPIC's Subsidiaries is a
party.
(xiii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein or contemplated thereby, there has not been
any material adverse change in the condition (financial or otherwise),
earnings or business affairs of the Company and the Company's
Subsidiaries, considered as one enterprise, whether or not arising in
the ordinary course of business.
(xiv) To the Company's knowledge, since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein or contemplated
thereby, there has not been (A) any change in the condition (financial
or otherwise), earnings or business affairs of EPIC or EPIC's
Subsidiaries that would be material and adverse to the Company, its
Subsidiaries, EPIC and EPIC's Subsidiaries, considered as one
enterprise (the "Combined Company"), whether or not arising in the
ordinary course of business, or (B) any dividend or distribution of
any kind declared, paid or made by EPIC on its capital stock.
(xv) Neither the Company nor any of the Company's
Subsidiaries is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which it is a party or by which it is bound
or to which any of its properties is
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subject, except as disclosed in the Prospectus and except for such
defaults that would not have a material adverse effect on the
condition (financial or otherwise), earnings or business affairs of
the Company and the Company's Subsidiaries, considered as one
enterprise. The execution and delivery of this Agreement and the
Indenture by the Company, the issuance and delivery of the Securities,
the consummation by the Company of the transactions contemplated in
this Agreement and the consummation of the Acquisition, the sale of
the Offered Shares, the Tender Offers, the Debt Redemption, 1994
Credit Agreement and the transactions described in the ESOP Agreement
(all as defined in the Registration Statement) and compliance by the
Company with the terms of this Agreement and the Indenture have been
duly authorized by all necessary corporate action on the part of the
Company and do not and will not result in any violation of the charter
or by-laws of the Company or any of the Company's Subsidiaries, and do
not and will not conflict with, or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien or encumbrance upon any
property or assets of the Company or any of the Company's Subsidiaries
under (A) any indenture, mortgage, loan agreement, note, lease or
other agreement or instrument to which the Company or any of the
Company's Subsidiaries is a party or by which it is bound or to which
any of its properties is subject (assuming that the amendment to the
Credit Agreement dated as of September 29, 1992 among the Company and
the financial institutions named therein is effective at the time of
the Acquisition), or (B) any existing applicable law (including any
environmental law), rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court having jurisdiction
over the Company or any of the Company's Subsidiaries or any of their
respective properties, in each case, except as disclosed in the
Prospectus and except for such conflicts, breaches or defaults or
liens or encumbrances that would not have a material adverse effect on
the condition (financial or otherwise), earnings or business affairs
of the Company and the Company's Subsidiaries, considered as one
enterprise.
(xvi) To the Company's knowledge, neither EPIC nor any of
EPIC's Subsidiaries is in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or
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other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties is subject, except as
disclosed in the Prospectus and except for such defaults that would
not have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of EPIC and EPIC's
Subsidiaries, considered as one enterprise. To the Company's
knowledge, the consummation by EPIC of the transactions contemplated
in this Agreement and in the ESOP Agreement and the consummation of
the Acquisition and the Tender Offers have been duly authorized by
all necessary corporate action on the part of EPIC and the
consummation of the foregoing and the Debt Redemption do not and will
not result in any violation of the charter or by-laws of EPIC or any
of EPIC's Subsidiaries, and do not and will not conflict with, or
result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien
or encumbrance upon any property or assets of EPIC or any of EPIC's
Subsidiaries under (A) any indenture, mortgage, loan agreement, note,
lease or other agreement or instrument to which EPIC or any of EPIC's
Subsidiaries is a party or by which it is bound or to which any of its
properties is subject, or (B) any existing applicable law (including
any environmental law), rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court having
jurisdiction over EPIC or any of EPIC's Subsidiaries or any of their
respective properties, in each case, except as disclosed in the
Prospectus and except for such conflicts, breaches or defaults or
liens or encumbrances that would not have a material adverse effect on
the condition (financial or otherwise), earnings or business affairs
of the Combined Company.
(xvii) Except as disclosed in the Registration Statement, no
authorization, approval, consent or license of any government,
governmental instrumentality or court (other than under the 1933 Act
and the 1933 Act Regulations, the 1939 Act and the rules and
regulations of the Commission under the 1939 Act (the "1939 Act
Regulations") and the securities or blue sky laws of the various
states) is required for the valid issuance, sale and delivery of the
Securities, for the execution, delivery or performance of the
Indenture by the Company or for the consummation by the Company of the
transactions described in the Prospectus under the caption "The
Acquisition and the Financing Plan".
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(xviii) Except as disclosed in the Prospectus, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, now pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of the
Company's Subsidiaries that is required to be disclosed in the
Prospectus or that could reasonably be expected to result in any
material adverse change in the condition (financial or otherwise),
earnings or business affairs of the Company and the Company's
Subsidiaries, considered as one enterprise, or that could reasonably
be expected to materially and adversely affect the consummation of the
transactions contemplated in this Agreement and described in the
Registration Statement under the caption "The Acquisition and the
Financing Plan".
(xix) To the Company's knowledge, except as disclosed in the
Prospectus, there is no action, suit or proceeding before or by any
government, governmental instrumentality or court, now pending or, to
the knowledge of the Company, threatened against or affecting EPIC or
any of EPIC's Subsidiaries that is required to be disclosed in the
Prospectus or that could reasonably be expected to result in any
material adverse change in the condition (financial or otherwise),
earnings or business affairs of the Combined Company, or that could
reasonably be expected to materially and adversely affect the
consummation of the transactions contemplated in this Agreement and
described in the Registration Statement under the caption "The
Acquisition and the Financing Plan".
(xx) In the Company's judgment, there are no contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described and filed as required.
(xxi) Each of the Company and the Company's Subsidiaries own
or possess all governmental licenses, permits, certificates
(including, without limitation, certificate of need approvals and
certification under the Medicare program), consents, orders, approvals
and other authorizations (collectively, "Governmental Licenses")
necessary to own or lease, as the case may be, and to operate its
properties and to carry on its business as presently conducted, except
where the failure to possess such Governmental Licenses could
reasonably be expected to not have a material adverse
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effect on the condition (financial or otherwise), earnings or business
affairs of the Company and the Company's Subsidiaries, considered as
one enterprise, and neither the Company nor any of the Company's
Subsidiaries has received any notice of proceedings relating to
revocation or modification of any such Governmental Licenses that, in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), earnings or business
affairs of the Company and the Company's Subsidiaries, considered as
one enterprise. All of the hospitals operated by the Company and the
Company's Subsidiaries are "providers of services" as defined in the
Social Security Act and the regulations promulgated thereunder, and
are eligible to participate in the Medicare program, except as would
not have a material adverse effect on the condition (financial or
other), earnings or business affairs of the Company and the Company's
Subsidiaries, taken as one enterprise.
(xxii) To the Company's knowledge, each of EPIC and EPIC's
Subsidiaries own or possess all governmental licenses, permits,
certificates (including, without limitation, certificate of need
approvals and certification under the Medicare program), consents,
orders, approvals and other authorizations (collectively,
"Governmental Licenses") necessary to own or lease, as the case may
be, and to operate its properties and to carry on its business as
presently conducted, except where the failure to possess such
Governmental Licenses could reasonably be expected to not have a
material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Combined Company, and neither EPIC
nor any of EPIC's Subsidiaries has received any notice of proceedings
relating to revocation or modification of any such Governmental
Licenses that, in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Combined Company. To the
Company's knowledge, all of the hospitals operated by EPIC and EPIC's
Subsidiaries are "providers of services" as defined in the Social
Security Act and the regulations promulgated thereunder, and are
eligible to participate in the Medicare program, except as would not
have a material adverse effect on the condition (financial or other),
earnings or business affairs of the Combined Company.
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(xxiii) The Company has not taken and will not take, directly
or indirectly, any action designed to cause or result in stabilization
or manipulation of the price of the Securities; and the Company has
not distributed and will not distribute any prospectus (as such term
is defined in the 1933 Act and the 1933 Act Regulations) in connection
with the offering and sale of the Securities other than any
preliminary prospectus filed with the Commission or the Prospectus or
other material permitted by the 1933 Act or the 1933 Act Regulations.
(xxiv) Except as disclosed in the Prospectus, all United
States federal income tax returns of the Company and the Company's
Subsidiaries required by law to be filed have been filed and all taxes
shown by such returns or otherwise assessed, which are due and
payable, have been paid, except tax assessments, if any, as are being
contested in good faith and as to which adequate reserves have been
provided, in each case except as would not have a material adverse
effect on the condition (financial or otherwise), earnings or business
affairs of the Company and the Company's Subsidiaries, considered as
one enterprise. Except as disclosed in the Prospectus, all other
franchise and income tax returns of the Company and the Company's
Subsidiaries required to be filed pursuant to applicable foreign,
state or local law have been filed, except insofar as the failure to
file such returns would not have a material adverse effect on the
condition (financial or otherwise), earnings or business affairs of
the Company and the Company's Subsidiaries, considered as one
enterprise, and all taxes shown on such returns or otherwise assessed
which are due and payable have been paid, except for such taxes, if
any, as are being contested in good faith and as to which adequate
reserves have been provided. To the best of the Company's knowledge,
the charges, accruals and reserves on the books of the Company and the
Company's Subsidiaries in respect of any income and corporate
franchise tax liability for any years not finally determined are
adequate to meet any assessments or reassessments for additional
income or corporate franchise tax for any years not finally
determined, except as disclosed in the Prospectus and except to the
extent of any inadequacy that would not have a material adverse effect
on the condition (financial or otherwise), earnings or business
affairs of the Company and the Company's Subsidiaries, considered as
one enterprise.
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(xxv) To the Company's knowledge, except as disclosed in the
Prospectus, all United States federal income tax returns of EPIC and
EPIC's Subsidiaries required by law to be filed have been filed and
all taxes shown by such returns or otherwise assessed, which are due
and payable, have been paid, except tax assessments, if any, as are
being contested in good faith and as to which adequate reserves have
been provided, in each case except as would not have a material
adverse effect on the condition (financial or otherwise), earnings or
business affairs of the Combined Company. To the Company's knowledge,
except as disclosed in the Prospectus, all other franchise and income
tax returns of EPIC and EPIC's Subsidiaries required to be filed
pursuant to applicable foreign, state or local law have been filed,
except insofar as the failure to file such returns would not have a
material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Combined Company, and all taxes
shown on such returns or otherwise assessed which are due and payable
have been paid, except for such taxes, if any, as are being contested
in good faith and as to which adequate reserves have been provided, in
each case except as would not have a material adverse effect on the
condition (financial or otherwise), earnings or business affairs of
the Combined Company. To the Company's knowledge, the charges,
accruals and reserves on the books of EPIC and EPIC's Subsidiaries in
respect of any income and corporate franchise tax liability for any
years not finally determined are adequate to meet any assessments or
reassessments for additional income or corporate franchise tax for
any years not finally determined, except as disclosed in the
Prospectus and except to the extent of any inadequacy that would not
have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of the Combined Company.
(xxvi) To the Company's knowledge, EPIC's Employee Stock
Ownership Plan (the "EPIC ESOP") and the trust created pursuant to the
Trust Agreement for the EPIC ESOP between EPIC Group and U.S. Trust
Company of California, N.A., as trustee under the EPIC ESOP (the "EPIC
Trustee"), dated as of September 30, 1988 (the "EPIC ESOP Trust"),
meet all applicable requirements of qualification and exemption from
taxation under Sections 401(a) and 501(a), respectively, of the
Internal Revenue Code of 1986, as amended (the "Code"), except as
would not have a material adverse effect on
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the condition (financial or other), earnings or business affairs of
the Combined Company.
(xxvii) To the Company's knowledge, the EPIC ESOP constitutes
an "employee stock ownership plan," as defined in Section 4975(e)(7)
of the Code and the Treasury Regulations promulgated thereunder, and
as defined in Section 407(d)(6) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
(xxviii) To the Company's knowledge, each of the loans to the
EPIC ESOP Trust pursuant to the EPIC ESOP Loan Agreement and the
Substitute EPIC ESOP Loan Agreement, each between EPIC Group and the
EPIC ESOP Trustee and dated as of September 30, 1988 and July 30,
1991, respectively (collectively, the "ESOP Loan Agreements"), and
each of the pledges of shares of EPIC Group Common Stock, par value
$.01 per share (the "EPIC Group Common Stock"), by the EPIC ESOP Trust
pursuant to the Pledge Agreement and the Amendment to the Pledge
Agreement, each between EPIC Group and the EPIC ESOP Trustee and dated
as of September 30, 1988 and July 30, 1991, respectively
(collectively, the "EPIC ESOP Pledge Agreements"), satisfies the
requirements of Section 4975(d)(3) of the Code and Section 408(b)(3)
of ERISA, and will not subject EPIC to a tax imposed under Section
4975 of the Code or a civil penalty assessed under Section 502(i) of
ERISA, in each case except as would not have a material adverse effect
on the condition (financial or other), earnings or business affairs of
the Combined Company.
(xxix) To the Company's knowledge, the EPIC Common Stock is a
"qualifying employer security," within the meaning of Section
4975(e)(8) of the Code and Section 407(d)(5) of ERISA, except as would
not have a material adverse effect on the condition (financial or
other), earnings or business affairs of the Combined Company.
(xxx) To the Company's knowledge, the sales of shares of EPIC
Group Common Stock to the EPIC ESOP Trust pursuant to the Subscription
Agreement between EPIC Group and the EPIC ESOP Trustee (the "EPIC ESOP
Subscription Agreement"), satisfies the requirements of Section
4975(d)(13) of the Code and Section 408(e) of ERISA, and will not
subject EPIC to a tax imposed under Section 4975 of the Code or a
civil penalty assessed under Section 502(i) of ERISA, in each case
except as would not have a material adverse effect on the condition
(financial or other), earnings or business affairs of the Combined
Company.
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(xxxi) To the Company's knowledge, and except as disclosed in
the Prospectus, no opinion, correspondence or other communication,
whether written or otherwise, has been received by EPIC or any of its
agents, affiliates, associates, officers or directors, or any
fiduciary of the EPIC ESOP, from the United States Department of
Labor, the Internal Revenue Service or any other Federal or state
governmental or regulatory agency, body or authority, to the effect
that either of the loans to the EPIC ESOP Trust pursuant to the EPIC
ESOP Loan Agreements, either of the pledges of shares of EPIC Group
Common Stock by the EPIC ESOP Trust pursuant to the EPIC ESOP Pledge
Agreements or the sales of shares of EPIC Group Common Stock to the
EPIC ESOP Trust pursuant to the EPIC ESOP Subscription Agreement may
or will constitute a violation of or result in any liability under
ERISA or the Code, in each case except as would not have a material
adverse effect on the condition (financial or other), earnings or
business affairs of the Combined Company.
(xxxii) None of the transactions contemplated by the ESOP
Agreement should constitute a material violation of or result in any
material liability under ERISA or the Code (including, without
limitation, any tax under Section 4978B of the Code), except as would
not have a material adverse effect on the condition (financial or
other), earnings or business affairs of the Combined Company.
(b) Any certificate signed by any officer of the Company and
delivered to you or to Davis Polk & Wardwell as counsel for the Underwriters
pursuant to this Agreement or at the Closing contemplated hereby shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
(c) Representations and warranties in this Agreement which are
given "to the Company's knowledge" are based solely upon (i) the Company's
actual knowledge and (ii) the representations and warranties of EPIC set forth
in the Merger Agreement, dated as of January 9, 1994, among the Company,
Odyssey Acquisition Corp. and EPIC (the "Merger Agreement"). For purposes of
this Agreement, "Disclosure Schedule" means the disclosure schedule of EPIC
relating to the Merger Agreement.
Section 2. Sale and Delivery to the Underwriters; Closing.
(a) On the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth,
the Company agrees to sell to
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<PAGE> 17
each Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at the purchase price to be agreed upon by the
Underwriters and the Company in accordance with Section 2(b) or 2(c) and set
forth in the Price Determination Agreement, the principal amount of Securities
set forth opposite the name of such Underwriter in Schedule A. If the Company
elects to rely on Rule 430A, Schedule A may be attached to the Price
Determination Agreement.
(b) If the Company has elected not to rely upon Rule
430A, the initial public offering price of the Securities, the purchase price
of the Securities to be paid by the several Underwriters and certain other
principal terms of the Securities shall be agreed upon and set forth in the
Price Determination Agreement, dated the date hereof, and an amendment to the
Registration Statement containing such per share price information will be
filed before the Registration Statement becomes effective.
(c) If the Company has elected to rely upon Rule 430A,
the initial public offering price of the Securities, the purchase price of the
Securities to be paid by the several Underwriters and certain other principal
terms of the Securities shall be agreed upon and set forth in the Price
Determination Agreement. In the event that the Price Determination Agreement
has not been executed by the close of business on the fourth business day
following the date on which the Registration Statement becomes effective, this
Agreement shall terminate forthwith, without liability of any party to any
other party except that Sections 6 and 7 shall remain in effect.
(d) Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the offices of Dewey
Ballantine, 1301 Avenue of the Americas, New York, New York 10019, or at such
other place as shall be agreed upon by the Company and you, at 10:00 A.M.
either (i) on the fifth full business day after the effective date of the
Registration Statement, or (ii) if the Company has elected to rely upon Rule
430A, the fifth full business day after execution of the Price Determination
Agreement (unless, in either case, postponed pursuant to Section 10), or at
such other time not more than ten full business days thereafter as you and the
Company shall determine (such date and time of payment and delivery being
herein called the "Closing Time"). Payment shall be made to the Company by
certified or official bank check or checks in New York Clearing House funds
payable to the order of the Company against delivery to the respective accounts
of the several Underwriters of certificates for the Securities.
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<PAGE> 18
(e) Certificates for the Securities shall be in such
denominations ($1,000 or an integral multiple thereof) and registered in such
names as you may request in writing at least two full business days before the
Closing Time. The certificates for the Securities, which may be in temporary
form, will be made available in New York City for examination and packaging by
you not later than 10:00 A.M. on the business day prior to the Closing Time.
(f) It is understood that the obligations of the Company
to sell the Securities being sold by it hereunder are subject to the
consummation of the Acquisition (as defined in the Registration Statement). If
the Acquisition is not consummated, this Agreement may be terminated by the
Company upon notice to the Underwriters at or prior to the Closing Time, and
such Termination shall be without liability of any party to any other party
except as provided in Section 4 herein. Notwithstanding any such termination,
the provisions of Sections 6 and 7 herein shall remain in effect.
Section 3. Certain Covenants of the Company. The Company
covenants with each Underwriter as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and, if the Company elects
to rely upon Rule 430A and subject to Section 3(b), will comply in all
material respects with the requirements of Rule 430A and will notify
you promptly, (i) when the Registration Statement, or any
post-effective amendment to the Registration Statement, shall have
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission to amend
the Registration Statement or amend or supplement the Prospectus or
for additional information and (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the
institution or threatening of any proceedings for any of such
purposes. The Company will make every reasonable effort to prevent
the issuance of any such stop order or of any order preventing or
suspending such use and, if any such order is issued, to obtain the
lifting thereof at the earliest possible moment.
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(b) The Company will not at any time file or make any
amendment to the Registration Statement, or any amendment or
supplement (i) if the Company has not elected to rely upon Rule 430A,
to the Prospectus or (ii) if the Company has elected to rely upon Rule
430A, to either the prospectus included in the Registration Statement
at the time it becomes effective or to the Prospectus, of which you
shall not have previously been advised and furnished a copy or to
which you or Davis Polk & Wardwell as counsel for the Underwriters
shall have promptly and reasonably objected in writing.
(c) The Company has furnished or will furnish to you and
Davis Polk & Wardwell as counsel for the Underwriters, without charge,
as many signed copies (as reasonably requested) of the Registration
Statement as originally filed and of all amendments thereto, whether
filed before or after the Registration Statement becomes effective,
copies of all exhibits and documents filed therewith and signed copies
of all consents and certificates of experts, as you may reasonably
request and has furnished or will furnish to you, for each other
Underwriter, one conformed copy of the Registration Statement as
originally filed and each amendment thereto (without exhibits).
(d) The Company will deliver to each Underwriter, without
charge, from time to time until the effective date of the Registration
Statement (or, if the Company has elected to rely upon Rule 430A,
until the time the Price Determination Agreement is executed and
delivered), as many copies of each preliminary prospectus as such
Underwriter may reasonably request, and the Company hereby consents to
the use of such copies for purposes permitted by the 1933 Act. The
Company will deliver to each Underwriter, without charge, as soon as
the Registration Statement shall have become effective (or, if the
Company has elected to rely upon Rule 430A, as soon as practicable
after the Price Determination Agreement has been executed and
delivered) and thereafter from time to time as requested during the
period when the Prospectus is required to be delivered under the 1933
Act, such number of copies of the Prospectus (as supplemented or
amended) as such Underwriter may reasonably request.
(e) The Company will comply in all material respects with
the 1933 Act and the 1933 Act Regulations, the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission
thereunder and the 1939 Act and the 1939 Act
18
<PAGE> 20
Regulations so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement and in the Prospectus.
If at any time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities any event shall
occur or condition exist as a result of which it is necessary, in the
opinion of counsel for the Underwriters or counsel for the Company, to
amend the Registration Statement or amend or supplement the Prospectus
in order that the Prospectus will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or
if it shall be necessary, in the opinion of either such counsel, at
any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly
prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such untrue
statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements.
(f) The Company will endeavor, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under
the applicable securities laws of such states and other jurisdictions
as the Company and you may mutually agree upon and to maintain such
qualifications in effect for a period of not less than one year from
the effective date of the Registration Statement; provided, however,
that neither the Company nor any of the Company's Subsidiaries shall
be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. The Company will file such statements
and reports as may be required by the laws of each such jurisdiction
to maintain the qualification of the Securities as above provided.
(g) The Company will make generally available to its
security holders as soon as practicable, but not later than 60 days
after the close of the period covered thereby, an earnings statement
of the Company (in form complying with the provisions of Rule 158 of
the 1933 Act Regulations), covering a period of 12 months beginning
after the effective date of the
19
<PAGE> 21
Registration Statement but not later than the first day of the
Company's fiscal quarter next following such effective date.
(h) If the Company has elected to rely upon Rule 430A, it
will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule
424(b) was received for filing by the Commission and, in the event
that it was not, it will promptly file such prospectus.
(i) The Company, with respect to the offering of the
Securities, has complied and will comply with all of the provisions of
Florida H.B. 1771, codified as Section 517.075 of the Florida
Statutes, and all regulations promulgated thereunder relating to
issuers doing business with Cuba.
Section 4. Payment of Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (a) the printing and filing of the Registration Statement (including
financial statements and exhibits), as originally filed and as amended, the
preliminary prospectus or prospectuses and the Prospectus and any amendments or
supplements thereto, and the cost of furnishing copies thereof to the
Underwriters, (b) the printing and distribution of this Agreement (including
the Price Determination Agreement), the Indenture, the certificates for the
Securities and the Blue Sky Survey, (c) the delivery of the certificates for
the Securities to the Underwriters, (d) the fees and disbursements of the
Company's counsel and accountants, (e) the qualification of the Securities
under the applicable securities laws in accordance with Section 3(f) and any
filing for review of the offering with the National Association of Securities
Dealers, Inc., including filing fees and reasonable fees and disbursements of
Davis Polk & Wardwell as counsel for the Underwriters, in connection with such
qualification of the Securities and the Blue Sky Survey, (f) any fees charged
by the rating agencies for rating the Securities, and (g) the fees and expenses
of the Trustee, including the fees and disbursements of counsel for the
Trustee, in connection with the Indenture and the Securities.
If this Agreement is terminated by you in accordance with the
provisions of Section 5, 9(a)(i) or 11, or by the Company in accordance with
the provisions of Section 2(f), the Company shall reimburse the Underwriters
for all their reasonable out-of-pocket expenses, including
20
<PAGE> 22
the reasonable fees and disbursements of Davis Polk & Wardwell as counsel for
the Underwriters.
Section 5. Conditions of Underwriters' Obligations. In
addition to the execution and delivery of the Price Determination Agreement,
the obligations of the several Underwriters to purchase and pay for the
Securities that they have respectively agreed to purchase hereunder are subject
to the accuracy of the representations and warranties of the Company contained
herein (including those contained in the Price Determination Agreement) or in
certificates of the Company's officers delivered pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder, and to
the following further conditions:
(a) The Registration Statement shall have become
effective not later than 5:30 P.M. on the date of this Agreement or,
with your consent, at a later time and date not later, however, than
5:30 P.M. on the first business day following the date hereof, or at
such later time or on such later date as you may agree to in writing;
and at the Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act
and no proceedings for that purpose shall have been instituted or
shall be pending or, to your knowledge or the knowledge of the
Company, shall have been threatened by the Commission, and any request
on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Davis Polk &
Wardwell as counsel for the Underwriters. If the Company has elected
to rely upon Rule 430A, a prospectus containing the Rule 430A
Information shall have been filed with the Commission in accordance
with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance
with the requirements of Rule 430A).
(b) At the Closing Time, you shall have received a signed
opinion of Dewey Ballantine, counsel for the Company, dated as of the
Closing Time, in form and substance reasonably satisfactory to Davis
Polk & Wardwell as counsel for the Underwriters, to the effect that:
(i) This Agreement has been duly authorized,
executed and delivered by the Company.
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(ii) The Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware with corporate power under such
laws to own, lease and operate its properties and conduct its
business as described in the Prospectus.
(iii) The Indenture has been duly authorized,
executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Trustee,
constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting
enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a
proceeding in equity or at law).
(iv) The Securities have been duly authorized by
the Company and, assuming that the Securities have been duly
authenticated by the Trustee in the manner described in its
certificate delivered to you today (which fact such counsel
need not determine by an inspection of the Securities), the
Securities have been duly executed, issued and delivered by
the Company and constitute valid and binding obligations of
the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles
of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
(v) The Indenture has been duly qualified under
the 1939 Act.
(vi) The Securities and the Indenture conform in
all material respects to the descriptions thereof contained in
the Prospectus.
(vii) To the knowledge of such counsel, no
authorization, approval, consent or license of any government,
governmental instrumentality or court (other than under the
1933 Act and the 1933 Act
22
<PAGE> 24
Regulations, the 1939 Act and 1939 Act Regulations, the Trust
Indenture Act and the securities or blue sky laws of the
various states), is required for the valid issuance, sale and
delivery of the Securities for the execution, delivery or
performance of the Indenture by the Company.
(viii) Such counsel has been informed by the
Commission that the Registration Statement is effective under
the 1933 Act; any required filing of the Prospectus or any
supplement thereto pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b);
and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or are pending or have been threatened by the
Commission under the 1933 Act.
(ix) The Registration Statement (including the
Rule 430A Information, if applicable), the Prospectus and each
amendment or supplement to the Registration Statement and the
Prospectus, as of their respective effective or issue dates
(in each case, except for the financial statements, supporting
schedules and other financial or statistical data included
therein or omitted therefrom and the Statement of Eligibility
of the Trustee on Form T-1 as to which such counsel need
express no opinion), comply as to form in all material
respects to the requirements of the 1933 Act and the 1933 Act
Regulations.
(x) The Company is not an investment company under the
Investment Company Act of 1940.
(xi) The transactions contemplated in the Prospectuses
under the heading "The Acquisition and the Financing Plan", to
the extent described therein, have been duly authorized by the
Company; to the knowledge of such counsel, all of the
necessary consents to consummate such transactions have been
obtained (other than the consent of EPIC and its Subsidiaries
with respect to the Debt Redemption and other than as
disclosed in the Registration Statement), except where the
failure to obtain such consents would not have a material
adverse effect on the consummation of the Acquisition and the
Financing Plan; to the
23
<PAGE> 25
knowledge of such counsel, there has not been any violation on
the part of the Company of any of the terms of such consents
which violation would materially and adversely affect the
consummation of the Acquisition and the Financing Plan; and to
the knowledge of such counsel, except as disclosed in the
Registration Statement there is no pending or, threatened
legal or governmental proceedings with respect to any of the
consents or the transactions described in the Prospectus under
the caption "The Acquisition and the Financing Plan" that, if
the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the consummation of
the Acquisition and the Financing Plan.
In addition, such opinion shall state that such
counsel has participated in the preparation of the Registration
Statement and Prospectus and in conferences with officers and other
representatives of the Company, and your representatives and your
counsel at which the contents of the Registration Statement, the
Prospectus and related matters were discussed and, although such
counsel need not undertake to determine independently nor pass upon or
assume any responsibility, explicitly or implicitly, for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus on the basis of and subject
to the foregoing, no facts have come to the attention of such counsel
to lead such counsel to believe (A) that the Registration Statement
(including the Rule 430A Information, if applicable) or any amendment
thereto (except for the financial statements, supporting schedules and
other financial or statistical data included therein or omitted
therefrom including without limitation the pro forma financial
information, and except for the information set forth under the
caption "EPIC Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the Statement of Eligibility
of the Trustee on Form T-1, as to which such counsel need express no
opinion), as of the date the Registration Statement or any such
amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or (B) that the Prospectus or any amendment or supplement
thereto (except for the financial statements, supporting schedules and
other financial or statistical data included therein or omitted
therefrom including without limitation the pro
24
<PAGE> 26
forma financial information, and except for the information set forth
under the caption "EPIC Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the Statement of
Eligibility of the Trustee on Form T-1, as to which such counsel need
express no opinion), at the time the Prospectus was issued, at the
time any such amended or supplemented Prospectus was issued or at the
Closing Time, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and the Company's Subsidiaries and
certificates of public officials.
(c) At the Closing Time, you shall have received a signed
opinion of Philip D. Wheeler, General Counsel for the Company, dated as of the
Closing Time, together with reproduced copies of such opinion for each of the
other U.S. Underwriters, in form and substance reasonably satisfactory to Davis
Polk & Wardwell as counsel to the Underwriters, to the effect that:
(i) The Company is duly qualified to transact
business as a foreign corporation and is in good standing in
each jurisdiction in which it owns or leases property of a
nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure
to so qualify or be in good standing would not have a material
adverse effect on the Company and the Company's Subsidiaries,
considered as one enterprise.
(ii) Each of the Company's Subsidiaries is a
corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation with corporate power under such laws to own,
lease and operate its properties and conduct its business as
described in the Prospectus, or except to the extent that the
failure to be in good standing would not have a material
adverse effect on the Company and the Company's Subsidiaries,
considered as one enterprise.
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<PAGE> 27
(iii) Each of the Company's Subsidiaries is duly
qualified to transact business as a foreign corporation and is
in good standing in each other jurisdiction in which it owns
or leases property of a nature, or transacts business of a
type, that would make such qualification necessary, except to
the extent that the failure to so qualify or be in good
standing would not have a material adverse effect on the
Company and the Company's Subsidiaries, considered as one
enterprise.
(iv) The Securities have been duly authorized by
the Company and assuming that the Securities have been
authenticated by the Trustee in the manner described in its
certificate delivered to you today (which fact such counsel
need not determine by an inspection of the Securities), the
Securities have been duly executed, issued and delivered by
the Company and constitute valid and binding obligations of
the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles
of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
(v) All of the outstanding shares of capital
stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable.
(vi) Based solely on an examination of relevant
minute books and stock records, except as disclosed in the
Prospectus, all of the outstanding shares of capital stock of
each of the Company's Subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable.
(vii) Such counsel does not know of any statutes or
regulations, or any pending or threatened legal or
governmental proceedings, required to be described in the
Prospectus that are not described as required, nor of any
contracts or documents of a character required to be described
in the Registration Statement or the Prospectus or to be filed
as exhibits to the
26
<PAGE> 28
Registration Statement that are not described or filed as
required.
(viii) The statements made in the Prospectus under
"Reimbursement and Regulation", to the extent that they
constitute matters of law or legal conclusions, have been
reviewed by such counsel and fairly present the information
disclosed therein in all material respects.
(ix) The execution and delivery of this Agreement
and the Indenture by the Company, the issuance and delivery of
the Securities by the Company, the consummation by the Company
of the Acquisition, the Common Stock Offering, the Tender
Offers, the Debt Redemption, the 1994 Credit Agreement and the
transactions described in the ESOP Agreement and compliance by
the Company with the terms of this Agreement and the Indenture
have been duly authorized by all necessary corporate action on
the part of the Company and do not and will not result in any
violation of the charter or by-laws of the Company or any of
the Company's Subsidiaries, and, to the knowledge of such
counsel, do not and will not conflict with, or constitute a
breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any
lien or encumbrance upon any property or assets of the Company
or any of the Company's Subsidiaries under (A) any indenture,
mortgage or loan agreement or any other agreement or
instrument to which the Company or any of the Company's
Subsidiaries is a party or by which it may be bound or to
which any of their respective properties may be subject, (B)
any existing applicable law, rule or regulation (other than
the securities or blue sky laws of the various states, as to
which such counsel need express no opinion), or (C) any
judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over the Company
or any of the Company's Subsidiaries or any of their
respective properties, in each case, except as disclosed in
the Prospectus, and except for such conflicts, breaches or
defaults or liens or encumbrances that would not have a
material adverse effect on the Company and the Company's
Subsidiaries, considered as one enterprise. Such counsel need
express no opinion, however, as to whether the execution,
delivery and performance by the Company of this Agreement or
27
<PAGE> 29
the consummation by the Company of the Acquisition, the Common
Stock Offering, the Tender Offers, the Debt Redemption, the
1994 Credit Agreement and the transactions described in the
ESOP Agreement will constitute a violation of, or default
under, any financial covenant or financial ratios contained in
any of the agreements referred to in the preceding sentence.
In addition, such opinion shall state that such
counsel has participated in the preparation of the Registration
Statement and Prospectus and in conferences with officers and other
representatives of the Company, and your representatives and your
counsel at which the contents of the Registration Statement, the
Prospectus and related matters were discussed and, although such
counsel need not undertake to determine independently nor pass upon or
assume any responsibility, explicitly or implicitly, for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, on the basis of and subject
to the foregoing, no facts have come to the attention of such counsel
to lead such counsel to believe (A) that the Registration Statement
(including the Rule 430A Information, if applicable) or any amendment
thereto (except for the financial statements, supporting schedules and
other financial or statistical data included therein or omitted
therefrom including without limitation the pro forma financial
information, and except for the information set forth under the
caption "EPIC Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the Statement of Eligibility
of the Trustee on Form T-1, as to which such counsel need express no
opinion), as of the date the Registration Statement or any such
amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or (B) that the Prospectus or any amendment or supplement
thereto (except for the financial statements, supporting schedules and
other financial or statistical data included therein or omitted
therefrom including without limitation the pro forma financial
information, and except for the information set forth under the
caption "EPIC Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the Statement of Eligibility
of the Trustee on Form T-1, as to which such counsel need express no
opinion), at the time the Prospectus was issued, at the time any such
amended or
28
<PAGE> 30
supplemented prospectus was issued or at the Closing Time, contained
or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and the
Company's Subsidiaries and certificates of public officials.
(d) At the Closing Time, you shall have received a signed
opinion of Stanley F. Baldwin, Esq., general counsel for EPIC, dated
as of the Closing Time, together with reproduced copies of such
opinion for each of the other U.S. Underwriters, in form and
substance reasonably satisfactory to Davis Polk & Wardwell as counsel
to the U.S. Underwriters, substantially to the effect set forth in
Section 7.02(g) of the Merger Agreement. The parties hereto
acknowledge and agree that no personal liability to Stanley F. Baldwin
shall attach to the rendering of such opinion.
Such counsel may state that, insofar as such opinion
involves factual matters, he has relied, to the extent he deems
proper, upon certificates of officers of EPIC and EPIC's Subsidiaries
and certificates of public officials.
(e) At the Closing Time, you shall have received a signed
opinion of Johnson & Gibbs, P.C. (or its successor), counsel for EPIC,
dated as of the Closing Time, together with reproduced copies of such
opinion for each of the other U.S. Underwriters, in form and
substance reasonably satisfactory to Davis Polk & Wardwell as counsel
to the U.S. Underwriters, substantially in the form and to the effect
set forth in Section 7.02(f) of the Merger Agreement and to the effect
that:
such firm has represented EPIC in connection with the
transactions contemplated by the Merger Agreement and,
although such firm has not verified, is not passing upon and
does not assume any responsibility for, the accuracy,
completeness or fairness of any statements contained in the
Registration Statement or the Prospectus, on the
29
<PAGE> 31
basis of the knowledge of such firm in connection with such
representation (relying as to materiality to a large extent
upon the opinions of officers and other representatives of
EPIC, without independent check or verification), no fact has
come to their attention that has led them to believe that the
section of the Prospectuses under the heading "EPIC
Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated in such section or necessary to make the statements
in such section, in light of the circumstances under which
they were made, not misleading. In making the foregoing
statements in this paragraph, such firm expresses no opinion,
belief or comment with respect to any financial data or
information included or incorporated by reference in the
aforementioned section of the Prospectuses. Such firm may
advise you that it has not participated in any respect in
connection with the preparation of such Prospectuses, the
Registration Statements with respect thereto or the Forms 10-K
or 10-Q of EPIC from which the information contained in the
sections referred to above has been derived.
(f) At the Closing Time, you shall have received signed
opinions of Dewey Ballantine and Johnson & Gibbs, P.C. (or its
successor), dated as of the Closing Time, together with reproduced
copies of such opinion for each of the other Underwriters, in form and
substance reasonably satisfactory to Davis Polk & Wardwell as counsel
to the U.S. Underwriters, to the effect that neither of (i) the
discharge of that portion of the principal amount of EPIC's loans to
the EPIC ESOP Trust that exceeds the fair market value of the shares
of the EPIC Common Stock transferred by the EPIC Trustee to EPIC, or
(ii) the transfer by the EPIC Trustee to EPIC of shares of EPIC Common
Stock unallocated under the EPIC ESOP in satisfaction of EPIC's loans
to the ESOP Trust, each as contemplated by the Registration Statement,
should constitute a violation of or result in any liability under
ERISA or the Code.
Each such counsel may (i) assume for purposes of such
opinion, based on the understanding of such counsel that the Trustee
has retained and received the advice of independent counsel and
financial advisors, that the Trustee has complied with the applicable
30
<PAGE> 32
fiduciary requirements of ERISA and the Code and that the ESOP has
received no less than adequate consideration for such shares of EPIC
Common Stock, and (ii) state that, insofar as such opinion involves
factual matters, it has relied, to the extent they deem proper, upon
certificates of officers of EPIC and its Subsidiaries and certificates
of public officials.
(g) At the Closing Time, you shall have received the
favorable opinion of Davis Polk & Wardwell as counsel for the
Underwriters, dated as of the Closing Time, together with reproduced
copies of such opinion for each of the other Underwriters, to the
effect that the opinions delivered pursuant to Sections 5(b), (c), (d)
and (e) appear on their face to be appropriately responsive to the
requirements of this Agreement except, specifying the same, to the
extent waived by you, and with respect to the incorporation and legal
existence of the Company, the Securities, this Agreement, the
Indenture, the Registration Statement, the transactions contemplated
under the captions "The Acquisition and Financing Plan" in the
Registration Statement, the Prospectus and such other related matters
as you may require. In giving such opinion such counsel may rely, as
to all matters governed by the laws of jurisdictions other than the
law of the State of New York, the federal law of the United States and
the corporate law of the State of Delaware, upon the opinions of
counsel satisfactory to you. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to
the extent they deem proper, upon certificates of officers of the
Company, the Company's Subsidiaries, EPIC and EPIC's Subsidiaries and
certificates of public officials.
(h) At the Closing Time, (i) the Registration Statement
and the Prospectus, as they may then be amended or supplemented, shall
conform in all material respects to the requirements of the 1933 Act
and the 1933 Act Regulations and the 1939 Act and the 1939 Act
Regulations, the Company shall have complied in all material respects
with Rule 430A (if it shall have elected to rely thereon), the
Registration Statement, as it may then be amended or supplemented,
shall not contain 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 in the Registration Statement not misleading, and
the Prospectus, as it may then be amended or supplemented, shall not
contain an untrue statement of a material fact or omit to state a
31
<PAGE> 33
material fact required to be stated therein or necessary to make the
statements in the Prospectus, in light of the circumstances under
which they were made, not misleading, (ii) there shall not have been,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse
change, or any development involving a prospective material adverse
change, in the condition (financial or otherwise), earnings or
business affairs of the Company and the Company's Subsidiaries,
considered as one enterprise, or of EPIC and EPIC's Subsidiaries,
considered as one enterprise, whether or not arising in the ordinary
course of business, (iii) no action, suit or proceeding at law or in
equity shall be pending or, to the knowledge of the Company,
threatened against the Company, any of the Company's Subsidiaries,
EPIC or any of EPIC's Subsidiaries that would be required to be set
forth in the Prospectus other than as set forth therein and no
proceedings shall be pending or, to the knowledge of the Company,
threatened against the Company, any of the Company's Subsidiaries,
EPIC or any of EPIC's Subsidiaries before or by any federal, state or
other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding could reasonably be expected
to materially adversely affect the condition (financial or otherwise),
earnings or business affairs of the Company and the Company's
Subsidiaries, considered as one enterprise, or of EPIC and EPIC's
Subsidiaries, considered as one enterprise, other than as set forth in
the Prospectus, (iv) the Company shall have complied in all material
respects with all agreements and satisfied in all material respects
all conditions on its part to be performed or satisfied at or prior to
the Closing Time and (v) the other representations and warranties of
the Company set forth in Section 1(a) shall be accurate as though
expressly made at and as of the Closing Time. At the Closing Time,
you shall have received a certificate of the President or a Vice
President and the Treasurer or the Controller of the Company, dated as
of the Closing Time, to such effect, but in the case of clauses (ii)
and (iii) above, only with respect to the Company and the Company's
Subsidiaries.
(i) At the Closing Time, you shall have received a
certificate of the chief executive officer or chief financial officer
of EPIC, dated as of the Closing Time, to the effect set forth in
Section 7.02(a) of the Merger Agreement.
32
<PAGE> 34
(j) On the date of this Agreement and at the Closing
Time, Ernst & Young, independent public accountants with respect to
the Company, shall have furnished to you letters, dated the respective
dates of delivery thereof, in form and substance satisfactory to you,
containing statements and information of the type customarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in
the Registration Statement and the Prospectus;
(k) On the date of this Agreement and at the Closing
Time, Ernst & Young, independent public accountants with respect to
EPIC, shall have furnished to you letters, dated the respective dates
of delivery thereof, in form and substance satisfactory to you,
containing statements and information of the type customarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements of EPIC and certain financial information
contained or incorporated by reference in the Registration Statement
and the Prospectus; and
(l) At the Closing Time, counsel for the Underwriters
shall have been furnished with all such documents, certificates and
opinions as they may reasonably request for the purpose of enabling
them to pass upon the issuance and sale of the Securities as
contemplated in this Agreement and the matters referred to in Section
5(d) and in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company, the
performance of any of the covenants of the Company, or the fulfillment
of any of the conditions herein contained; and all proceedings taken
by the Company at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Securities as contemplated in
this Agreement shall be reasonably satisfactory in form and substance
to you and to Davis Polk & Wardwell as counsel for the Underwriters.
(m) At the Closing Time, the Company shall have
consummated the Acquisition and, after giving effect to the
Acquisition, is not in default under the 1992 Credit Agreement or any
amendment thereto. The Company shall have provided to you and Davis
Polk & Wardwell as counsel for the U.S. Underwriters copies of all
documents with respect to the consummation of the Acquisition as you
or Davis Polk & Wardwell may reasonably request.
33
<PAGE> 35
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement may be terminated by you upon notice to the Company at any time
at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4
herein. Notwithstanding any such termination, the provisions of Sections 6 and
7 herein shall remain in effect.
Section 6. Indemnification. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act as
follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of an untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of an untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to the last sentence of Section 6(c), fees and
disbursements of counsel chosen by you to represent the Underwriters),
reasonably incurred in investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged
34
<PAGE> 36
untrue statement or omission, to the extent that any such expense is
not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished or confirmed in writing to the Company by
any Underwriter expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided further that the foregoing indemnification with respect
to any untrue statement contained in or any omission from a preliminary
prospectus shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) from whom the person asserting any such losses,
claims, damages, liabilities, or expenses purchased any of the Securities if a
copy of the Prospectus (or the Prospectus as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Underwriter to such person, if such is
required by law, at or prior to the written confirmation of the sale of such
Securities to such person and the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense.
(b) Each Underwriter severally agrees to indemnify and
hold harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
Section 6(a), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with information
furnished or confirmed in writing to the Company by such Underwriter expressly
for use in the Registration Statement (or any amendment thereto), including the
Rule 430A Information, if applicable, or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to
each indemnifying party of any action commenced
35
<PAGE> 37
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. In no event shall the indemnifying party or parties be liable for the
fees and expenses of more than one counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances.
Section 7. Contribution. In order to provide for just and
equitable contribution in circumstances under which the indemnity provided for
in Section 6 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and the
Underwriters shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity incurred by
the Company and one or more of the Underwriters, as incurred, in such
proportions that (a) the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial public offering price
appearing thereon and (b) the Company is responsible for the balance; provided
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section, each person, if any, who controls an Underwriter
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each
officer of the Company who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as the Company.
Section 8. Representations, Warranties and Agreements to
Survive Delivery. The representations, warranties, indemnities, agreements and
other statements of the Company, the Underwriters or their respective officers
set forth in or made pursuant to this Agreement will remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Company or any Underwriter or controlling person and will survive delivery
of and payment for the Securities.
36
<PAGE> 38
Section 9. Termination of Agreement. (a) You may terminate
this Agreement, by notice to the Company, at any time at or prior to the
Closing Time (i) if there has been, since the respective dates as of which
information is given in the Registration Statement, any material adverse
change, or any development involving a prospective material adverse change, in
the condition (financial or otherwise), earnings or business affairs of the
Company and the Company's Subsidiaries, considered as one enterprise, or of
EPIC and EPIC's Subsidiaries, considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or any
outbreak of hostilities or escalation of existing hostilities or other calamity
or crisis the effect of which is such as to make it, in your reasonable
judgment, impracticable to market the Securities or enforce contracts for the
sale of the Securities, or (iii) if trading in any securities of the Company
has been suspended by the Commission, or if trading generally on the New York
Stock Exchange or in the over-the-counter market has been suspended, or minimum
or maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by such exchange or by order of the Commission
or any other governmental authority, or (iv) if a banking moratorium has been
declared by either federal or New York authorities.
(b) If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party, except to the extent provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 6 and 7 shall remain in effect.
(c) This Agreement may also terminate pursuant to the
provisions of Section 2(c), with the effect stated in such Section.
Section 10. Default by One or More of the Underwriters. If
one or more of the Underwriters shall fail at the Closing Time to purchase the
Securities that it or they are obligated to purchase pursuant to this Agreement
(the "Defaulted Securities"), you shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and upon
the terms set forth in this Agreement; if, however, you have not completed such
arrangements within such 24-hour period, then:
37
<PAGE> 39
(a) if the number of Defaulted Securities does
not exceed 10% of the aggregate principal amount of Securities to be
purchased pursuant to this Agreement, the non-defaulting Underwriters
shall be obligated to purchase the full amount thereof in the
proportions that their respective Securities underwriting obligation
proportions bear to the underwriting obligation proportions of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds
10% of the aggregate principal amount of Securities to be purchased
pursuant to this Agreement, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default that does not result in a
termination of this Agreement, either you or the Company shall have the right
to postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
Section 11. Default by the Company. If the Company shall
fail at the Closing Time to sell and deliver the aggregate principal amount of
Securities that it is obligated to sell, then this Agreement shall terminate
without any liability on the part of any non-defaulting party except to the
extent provided in Section 4 and except that the provisions of Section 6 and 7
shall remain in effect.
No action taken pursuant to this Section shall relieve the
Company from liability, if any, in respect of such default.
Section 12. Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered, mailed or transmitted by any standard form of
telecommunication (notices transmitted by telecopier to be promptly confirmed
in writing). Notices to the Underwriters shall be directed to you c/o
Donaldson, Lufkin & Jenrette Securities Corporation, 140 Broadway, New York,
New York 10005, attention of Thomas G. McGonagle; and notices to the Company
38
<PAGE> 40
shall be directed to it at 4525 Harding Road, Nashville, Tennessee 37205
(telecopier no.: (615) 298-6377), attention of Philip D. Wheeler, Esq.
Section 13. Parties. This Agreement is made solely for the
benefit of the several Underwriters and the Company and, to the extent
expressed, any person controlling the Company or any of the Underwriters, and
the directors of the Company, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns and, subject to the provisions of Section 10, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Securities. All of the obligations
of the Underwriters hereunder are several and not joint.
Section 14. Governing Law and Time. This Agreement shall be
governed by the laws of the State of New York. Specified times of the day
refer to New York City time.
Section 15. Counterparts. This Agreement may be executed in
one or more counterparts and, when a counterpart has been executed by each
party, all such counterparts taken together shall constitute one and the same
agreement.
39
<PAGE> 41
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a counterpart hereof, whereupon
this instrument will become a binding agreement among the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
HEALTHTRUST, INC. - THE HOSPITAL
COMPANY
By______________________________
Name:
Title:
Confirmed and accepted as of
the date first above written:
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
By___________________________________
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By___________________________________
Name:
Title:
40
<PAGE> 42
Exhibit A
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(A Delaware corporation)
$200,000,000
10 1/4% Subordinated Notes due 2004
PRICE DETERMINATION AGREEMENT
April 28, 1994
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies and Gentlemen:
Reference is made to the Purchase Agreement dated April 28,
1994 (the "Purchase Agreement") among Healthtrust, Inc. - The Hospital
Company, a Delaware corporation (the "Company"), and Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch & Co. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated as the several Underwriters named in Schedule A
thereto or hereto (the "Underwriters"). The Purchase Agreement provides for
the purchase by the Underwriters from the Company, subject to the terms and
conditions set forth therein, of $200,000,000 aggregate principal amount of the
Company's 10 1/4% Subordinated Notes due 2004 (the "Securities"). This
Agreement is the Price Determination Agreement referred to in the Purchase
Agreement.
Pursuant to Section 2 of the Purchase Agreement, the
undersigned agree with the Underwriters as follows:
1. The initial public offering price of the Securities
shall be 100% of the principal amount thereof.
41
<PAGE> 43
2. The purchase price of the Securities to be paid by
the several Underwriters shall be 97 1/2% of the principal amount
thereof.
3. The interest rate to be borne by the Securities shall
be 10 1/4% per annum.
The Company represents and warrants to each of the
Underwriters that the representations and warranties of the Company set forth
in Section 1(a) of the Purchase Agreement are accurate as though expressly made
at and as of the date hereof.
As contemplated by Section 2 of the Purchase Agreement,
attached as Schedule A is a completed list of the several Underwriters, which
shall be a part of this Agreement and the Purchase Agreement.
This Agreement shall be governed by the laws of the State of
New York.
42
<PAGE> 44
If the foregoing is in accordance with the understanding of
the Underwriters of the agreement between the Underwriters and the Company,
please sign and return to the Company a counterpart hereof, whereupon this
instrument along with all counterparts and together with the Purchase Agreement
shall be a binding agreement among the Underwriters and the Company in
accordance with its terms and the terms of the Purchase Agreement.
ery truly yours,
HEALTHTRUST, INC. -
THE HOSPITAL COMPANY
By______________________________
Name:
Title:
Confirmed and accepted as of
the date first above written:
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
By_____________________________
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________
Name:
Title:
43
<PAGE> 45
SCHEDULE A
Principal Amount
of Securities
Underwriter to be Purchased
----------- ----------------
Donaldson, Lufkin & Jenrette Securities
Corporation . . . . . . . . . . . . . . . . $100,000,000
-----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . 100,000,000
-----------
Total. . . . . . . . . . . . . $200,000,000
==========
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Current Report (Form 8-K)
of Healthtrust, Inc. - The Hospital Company ("Healthtrust") of our reports
dated December 3, 1993 with respect to the consolidated financial statements of
EPIC Holdings, Inc. and subsidiaries and EPIC Healthcare Group, Inc. and
subsidiaries included in the U.S. Prospectus filed pursuant to Rule 424(b),
dated April 28, 1994, related to the Registration Statement (No. 33-52401) on
Form S-3 filed by Healthtrust for the registration of 6,220,404 shares of its
common stock.
Ernst & Young
Dallas, Texas
May 12, 1994
<PAGE> 1
EXHIBIT 99.1
Merilyn Herbert
Healthtrust, Inc. - The Hospital Company
615/298-6261
or
Paula Lovell
Lovell Communications
615/297-7766
HEALTHTRUST COMPLETES ACQUISITION OF EPIC HOLDINGS
NASHVILLE, TN, May 5, 1994 - Healthtrust, Inc. - The Hospital Company
(NYSE:HTI) announced today the completion of its previously announced
acquisition of EPIC Holdings, Inc. in a transaction valued at approximately $1
billion.
EPIC owns and operates 34 hospitals in 10 states, and also provides
certain specialty services, including home health care, rehabilitation services
and health care management services. EPIC will be operated as a wholly owned
subsidiary of Healthtrust.
Healthtrust also announced today that it has completed the sale to the
public of 5,980,000 shares of its common stock at a price of $28.25 per share
and $200,000,000 principal amount of 10-1/4% subordinated notes due 2004.
Healthtrust is using the proceeds of the offerings, together with borrowings
under a bank credit facility and available cash, to finance the EPIC
acquisition and certain related transactions, including tender offers for
certain outstanding EPIC indebtedness.
<PAGE> 2
R. Clayton McWhorter, Chairman and Chief Executive Officer of
Healthtrust, said, "The EPIC acquisition is in keeping with Healthtrust's
strategy and will improve Healthtrust's position as a provider of cost
effective, high quality care in the changing health care environment. This
transaction broadens our coverage of the markets we currently serve, provides
access to new geographical markets and expands our operations in related health
care areas."
The public offerings were co-managed by Merrill Lynch & Co. and
Donaldson, Lufkin & Jenrette Securities Corporation. Copies of the
prospectuses relating to the offerings may be obtained from either Merrill
Lynch & Co., 250 Vesey Street, 30th Floor, New York, New York 10281 or
Donaldson, Lufkin & Jenrette Securities Corporation, 140 Broadway, New York,
New York 10005.
Healthtrust is one of the largest health care providers in the United
States. Operating in 22 southern and western states, the Company delivers a
variety of impatient and outpatient health care services through its 115
affiliated hospitals.
2
<PAGE> 1
EXHIBIT 99.2
PROSPECTUS
6,220,404 SHARES
(LOGO) HEALTHTRUST INC.
The Hospital Company
COMMON STOCK
------------------------
Of the 6,220,404 shares of Common Stock (par value $.001 per share) offered
hereby, 4,976,323 shares are being offered hereby in the United States and
Canada by the U.S. Underwriters and 1,244,081 shares are being offered in a
concurrent offering outside the United States and Canada by the International
Underwriters. The offering price and the aggregate underwriting discount per
share are identical for both offerings. See "Underwriting."
Of the 6,220,404 shares of Common Stock offered, 5,200,000 shares are being
sold by Healthtrust, Inc. - The Hospital Company and 1,020,404 shares are being
sold by certain non-management selling stockholders upon the exercise of
warrants which were issued in connection with the formation of the Company. See
"Selling Stockholders." The Company will not receive any of the proceeds from
the sale of shares by the selling stockholders. The Underwriters have agreed to
purchase the shares to be sold by the Company regardless of whether the
Underwriters purchase any or all of the selling stockholders' shares. See
"Underwriting."
Concurrently with the Offerings, the Company is publicly offering $200
million aggregate principal amount of 10 1/4% Subordinated Notes due 2004. The
Offerings and the offering of the Subordinated Notes are being made as part of
the financing of the Company's acquisition of EPIC Holdings, Inc. and certain
related transactions. The Offerings and the offering of the Subordinated Notes
are contingent upon the consummation of the acquisition. See "The Acquisition
and the Financing Plan."
The Common Stock of the Company is traded on the New York Stock Exchange
under the symbol "HTI." On April 28, 1994, the last sale price of the Company's
Common Stock, as reported on the New York Stock Exchange, was $29 per share.
FOR INFORMATION CONCERNING CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "INVESTMENT CONSIDERATIONS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS(3)
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $28.25 $1.13 $27.12 $27.12
- - --------------------------------------------------------------------------------------------------
Total(4).......................... $175,726,413 $7,029,057 $141,024,000 $27,673,356
- - --------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities under the Securities Act
of 1933. See "Underwriting."
(2) Before deducting expenses of the offerings payable by the Company estimated
at $1,100,000.
(3) Before deducting the exercise price of $3.18 per share with respect to the
1,015,312 shares being sold by the selling stockholders upon exercise of
warrants.
(4) The Company has granted the U.S. Underwriters and the International
Underwriters options exercisable within 30 days after the date hereof to
purchase up to 624,000 and 156,000 additional shares, respectively, solely
to cover over-allotments, if any. If such options are exercised in full,
the total Price to Public, Underwriting Discount and Proceeds to Company
will be $197,761,413, $7,910,457, and $162,177,600, respectively. See
"Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to various prior conditions, including the right to reject orders in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made in New York, New York on or about May 5, 1994.
------------------------
MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
------------------------------
The date of this Prospectus is April 28, 1994.
<PAGE> 2
(Map, see Appendix)
------------------------
IN CONNECTION WITH THESE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
COMPANY'S COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
2
<PAGE> 3
THE COMPANY
Healthtrust, Inc. - The Hospital Company (together with its subsidiaries,
"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
April 1, 1994, the Company owned or leased through its subsidiaries or joint
ventures 82 acute care hospitals (the "affiliated hospitals") and is 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 21 southern and western states. Approximately 40% of
Healthtrust's affiliated hospitals are the sole providers of general acute care
hospital services in their communities, and an additional 20% are one of two
general acute care hospitals in their communities. 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 Company has experienced consistent growth since it began operations
through the acquisition of a group of hospitals and related assets (the
"Formation") from Hospital Corporation of America ("HCA") in September 1987. The
82 affiliated hospitals presently operated by the Company generated
approximately $2.4 billion of net operating revenue, $135.2 million of net
income before extraordinary charges and preferred stock dividends and $121.6
million of net income for the fiscal year ended August 31, 1993, compared with
approximately $1.8 billion of net operating revenue, a $101.3 million net loss
before extraordinary charges and preferred stock dividends and a $159.9 million
net loss for the fiscal year ended August 31, 1989 generated by the 94 hospitals
then operated by the Company. In addition, for the same periods, the Company's
operating cash flow (net operating revenue less hospital service costs)
increased from $339.2 million to $506.0 million. Operating cash flow should not
be considered as a substitute for cash provided by operating activities or any
consolidated income statement data prepared in accordance with generally
accepted accounting principles ("GAAP"). See "Selected Historical Financial
Information."
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
objectives. The Company recently acquired Nashville Memorial Hospital in
Madison, Tennessee and executed a definitive agreement to purchase Holy Cross
Hospital of Salt Lake City, Utah, Holy Cross-Jordan Valley Hospital in Jordan
Valley, Utah and St. Benedict's Hospital in Ogden, Utah. On March 22, 1994, the
Federal Trade Commission ("FTC") informed the Company that it will challenge the
acquisition of the three Utah hospitals. The Company is seeking to resolve the
issues raised by the FTC.
Consistent with the Company's strategy, Healthtrust entered into an
agreement on January 9, 1994 to acquire EPIC Holdings, Inc. ("EPIC Holdings"
and, together with its subsidiaries, "EPIC") (the "Acquisition"). EPIC is a
health care services provider that owns and operates 34 general acute care
hospitals providing inpatient, outpatient and other specialty services in 10
southern, southwestern and western states. Approximately 29% of EPIC's hospitals
are the sole providers of general acute care hospital services in their
communities, and an additional 27% of EPIC's hospitals are one of two general
acute care hospitals in their communities. Following the Acquisition,
Healthtrust will be the second largest hospital management company
3
<PAGE> 4
in the United States, operating 115 hospitals in 22 states. Of these 115
hospitals, approximately 37% are the sole providers of general acute care
hospital services in their communities and an additional 22% are one of two such
providers in their communities. Total pro forma combined net operating revenue,
operating cash flow and net income before extraordinary charges for Healthtrust
and EPIC for their 1993 fiscal years were approximately $3.4 billion, $651.4
million and $125.9 million, respectively, after giving effect to the Acquisition
and the Financing Plan, assuming the Current Tender Amount of each issue of
Specified EPIC Debt Securities is purchased in the Tender Offers (all as
hereinafter defined). See "Selected Pro Forma Financial Information."
The Company believes that the Acquisition will enhance the Company's
presence in the geographic areas it presently serves and provide access to new
markets. In addition, the Acquisition 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 certain government payors. Healthtrust
also expects to realize operating cost savings of approximately $50 million
during the fiscal year ending August 31, 1995 resulting from increased economies
of scale and improved operating efficiencies following the Acquisition. After
giving effect to these savings, the Acquisition is expected to add $0.10 to
$0.12 per share to the Company's earnings during fiscal year 1995. See
"Investment Considerations -- Acquisition-Related Considerations," "The
Acquisition and the Financing Plan" and the Unaudited Pro Forma Condensed
Combined Financial Statements of the Company included elsewhere in this
Prospectus.
THE FINANCING PLAN
In connection with the Acquisition, on March 15, 1994, EPIC and certain of
its subsidiaries commenced offers to purchase up to 100% of five series of
outstanding debt securities of EPIC (the "Specified EPIC Debt Securities") in an
aggregate principal amount of approximately $608.5 million (representing an
aggregate accreted value of approximately $529.9 million as of December 31,
1993). In connection therewith, the consent of the holders of the Specified EPIC
Debt Securities is being solicited to eliminate or modify substantially all of
the restrictive covenants and certain event of default provisions related
thereto. The offers to purchase the Specified EPIC Debt Securities and the
related solicitation of consents are hereinafter referred to as the "Tender
Offers." In addition, following the consummation of the Acquisition, it is
anticipated that approximately $220.8 million aggregate principal amount of
certain other outstanding EPIC indebtedness (representing an aggregate accreted
value of approximately $142.6 million as of December 31, 1993) will be redeemed
or prepaid in accordance with the provisions thereof (the "Debt Redemption").
The Acquisition, the Tender Offers and the Debt Redemption will be financed
through the following: (i) the offering by the Company of the Common Stock
offered hereby, (ii) the public offering by the Company of $200.0 million
aggregate principal amount of a new series of subordinated notes (the
"Subordinated Debt Offering"), (iii) the refinancing of the Company's existing
bank credit facility with a new bank credit facility (the "1994 Credit
Agreement") providing for aggregate commitments of up to $1.2 billion and (iv)
cash on hand. The offering of the Common Stock offered hereby is expected to
occur substantially contemporaneously with the Acquisition, the Subordinated
Debt Offering, the Debt Redemption and the 1994 Credit Agreement, and is
conditioned upon the consummation of the Acquisition. It is anticipated that the
Tender Offers will remain open until approximately five business days after the
consummation of the Acquisition. See "The Acquisition and the Financing Plan"
and the Unaudited Pro Forma Condensed Combined Financial Statements of the
Company included elsewhere in this Prospectus.
4
<PAGE> 5
THE OFFERINGS
Of the 6,220,404 shares of Common Stock offered hereby, 4,976,323 shares
are being offered in the United States and Canada by the U.S. Underwriters and
1,244,081 shares are being offered in a concurrent offering outside the United
States and Canada by the International Underwriters (the "Offerings"). Of the
shares of Common Stock offered hereby, 1,020,404 shares (the "Secondary Shares")
are being offered by certain non-management selling stockholders (the "Selling
Stockholders").
<TABLE>
<S> <C>
Common Stock Offered by:
The Company................................. 5,200,000 shares
The Selling Stockholders.................... 1,020,404 shares(1)
Common Stock Outstanding after the
Offerings................................... 88,996,898 shares(2)
Use of Proceeds............................... The proceeds of the sale of the shares of
Common Stock offered by the Company in the
Offerings, together with the proceeds of the
Subordinated Debt Offering, borrowings under
the 1994 Credit Agreement and cash on hand,
will be used to finance the Acquisition, the
Tender Offers and the Debt Redemption. See
"Use of Proceeds." The Company will not
receive any of the proceeds of the sale of
the shares of Common Stock offered by the
Selling Stockholders.
New York Stock Exchange Symbol................ HTI
</TABLE>
- - ---------------
(1) 1,015,312 of the Secondary Shares are being offered by the holders thereof
upon exercise of Warrants to purchase Common Stock issued in 1987 in
connection with the Formation of the Company ("Warrants") at an exercise
price of $3.18 per share. 3,772 and 1,320 of the Secondary Shares were
purchased by the holders thereof upon exercise of Warrants at exercise
prices of $7.95 and $5.30 per share, respectively. See "Selling
Stockholders."
(2) As of April 20, 1994. Does not include (i) 4,304,107 shares of Common Stock
issuable upon exercise of options granted under the Company's stock option
plans (of which options for 916,100 shares are presently exercisable) as of
January 31, 1994 (ii) 844,198 shares of Common Stock issuable upon exercise
of Warrants and (iii) approximately 900,000 shares of Common Stock to be
issued and contributed to the Company's 401(k) Retirement Program (the
"Plan") on or about May 15, 1994.
5
<PAGE> 6
INVESTMENT CONSIDERATIONS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors before
purchasing the Common Stock offered hereby.
SUBSTANTIAL INDEBTEDNESS
Following the consummation of the Acquisition and the Financing Plan, the
Company will continue to have substantial indebtedness and, as a result,
significant debt service obligations. As of February 28, 1994, the Company's
ratio of long-term debt to stockholders' equity was 1.3 to 1 and approximately
$150.3 million of the Company's $967.0 million of long-term debt was subject to
variable interest rates (in each case including current maturities). After
giving effect to the Acquisition and the transactions contemplated by the
Financing Plan (as hereinafter defined), at February 28, 1994, the ratio of the
Company's long-term debt to stockholders' equity would have been 2.0 to 1, and
the portion of the Company's $1,758.6 million of long-term debt subject to
variable interest rates would have been approximately $711.8 million (in each
case including current maturities), in each case assuming the Current Tender
Amount of each issue of the outstanding Specified EPIC Debt Securities is
purchased in the Tender Offers. See "Capitalization" and the Unaudited Pro Forma
Condensed Combined Financial Statements of the Company included elsewhere in
this Prospectus.
The degree to which the Company is leveraged could have important
consequences to holders of the Common Stock, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other
purposes may be impaired; (ii) a substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for its
operations; (iii) certain of the Company's borrowings are and will continue to
be at variable rates of interest, which causes the Company to be vulnerable to
increases in interest rates; and (iv) such indebtedness contains numerous
financial and other restrictive covenants, including those restricting the
incurrence of indebtedness, the creation or existence of liens, the declaration
or payment of dividends, certain investments, the acquisition of securities of
the Company, and certain extraordinary corporate transactions. Failure by the
Company to comply with such covenants may result in an event of default which,
if not cured or waived, could have a material adverse effect on the Company.
The Company's ability to make scheduled payments or to refinance its
obligations with respect to its indebtedness depends on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to financial, business and other factors beyond its control.
Although the Company's cash flow from its operations has been sufficient to meet
its debt service obligations in the past, there can be no assurance that the
Company's operating results will continue to be sufficient for payment of the
Company's indebtedness.
HEALTH CARE REFORM
On November 20, 1993, President Clinton submitted proposed comprehensive
health care reform legislation ("Administration's Proposal") to Congress. A
central component of the Administration's Proposal is the restructuring of
health insurance markets through the use of "managed competition." 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, and the provision of such
benefits would be mandated 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 or are expected
6
<PAGE> 7
to be introduced in Congress. These other proposals contain or are expected to
contain coverage guarantees, benefit standards, financing and cost control
mechanisms which are different than the Administration's Proposal. The Company
is unable to predict what, if any, reforms will be adopted, 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.
REIMBURSEMENT AND REGULATION
The Company derives a substantial portion of its revenue from Medicare and
Medicaid programs. Such programs are highly regulated and subject to frequent
and in certain cases substantial changes. Significant changes in Medicare and
Medicaid reimbursement programs have resulted in reduced levels of reimbursement
for a substantial portion of hospital procedures and costs. Changes in other
existing reimbursement programs are scheduled or anticipated in the future which
changes are likely to result in further reductions in reimbursement levels. In
addition, the Company's revenue could be affected by any implementation of
federal government sequestration under the Balanced Budget and Emergency Deficit
Control Act of 1985, as amended.
The health care industry is subject to extensive federal, state and local
regulation relating to licensure, conduct of operations, addition of facilities
and services and cost containment. Over the past several years, federal and
state initiatives have been undertaken to evaluate the impact that financial
arrangements between health care providers and physicians may have on Medicare
and state health care programs. As a result of such initiatives, the U.S.
Department of Health and Human Services ("HHS") issued final regulations
outlining certain "safe harbor" practices which, although potentially capable of
inducing prohibited referrals of business, would not be subject to enforcement
action under the Social Security Act of 1935, as amended (the "Social Security
Act"). In addition, certain provisions of Section 1877 of the Social Security
Act, commonly known as the "Stark Bill," have recently been amended to
significantly broaden the scope of prohibited physician self-referrals
thereunder. Certain of the Company's current financial arrangements with
physicians do not qualify for the safe harbor exemptions and, as a result, risk
scrutiny by HHS and may be subject to enforcement action. Additionally, the
Company believes that certain of EPIC's financial arrangements with physicians
do not qualify for the safe harbor exemptions. The Company's participation in
and development of joint ventures and other financial arrangements with
physicians could be adversely affected by the recent HHS regulations and Stark
Bill amendments. The Company is unable to predict the future course of federal,
state and local regulation or legislation, including Medicare and Medicaid
statutes and regulations. Further changes in the regulatory framework could have
an adverse impact on the Company.
DEPENDENCE ON PHYSICIANS AND OTHER KEY PERSONNEL
Since physicians generally control the majority of hospital admissions, the
success of the Company, in part, is dependent upon the number and quality of
physicians on its hospitals' medical staffs. The Company's operations also are
dependent on the efforts, ability and experience of its key corporate and
hospital management teams. The loss of some or all of these key personnel or an
inability to attract and retain sufficient numbers of qualified physicians could
adversely affect the Company's hospitals.
COMPETITION
The health care business is highly competitive and subject to excess
capacity. Competition among hospitals and other health care providers for
patients has intensified in recent years. During this period, hospital occupancy
rates in the United States have declined as a result of cost containment
pressures, changing technology, changes in regulations and reimbursement,
changes in practice patterns from inpatient to outpatient treatment, an
increasing supply of physicians and other factors. In many geographic areas in
which the Company operates, there are other hospitals or facilities that provide
inpatient or outpatient services comparable to those offered by the Company's
hospitals. Certain of these hospitals have greater financial resources than the
Company's hospitals and offer a wider range of services than the Company's
hospitals. Even in communities in which the Company's hospitals are the sole
providers of general acute care hospital services, the Company may face
competition from local providers of outpatient services and hospitals and
7
<PAGE> 8
other health care providers in nearby communities. The competitive position of
the Company's hospitals also has been, and in all likelihood will continue to
be, affected by the increased initiatives undertaken during the past several
years by federal and state governments and other major purchasers of health
care, including insurance companies and employers, to revise payment
methodologies and monitor health care expenditures in order to contain health
care costs. Due in part to these initiatives, managed care organizations such as
health maintenance organizations ("HMOs") and preferred provider organizations
("PPOs"), which offer prepaid and discounted medical services packages,
represent an increasing segment of health care payors, tending to reduce the
historical rate of growth of hospital revenue. In addition, hospitals owned by
governmental agencies or other tax-exempt entities benefit from endowments,
charitable contributions and tax-exempt financing, which advantages are not
enjoyed by the Company's hospitals.
LEGAL PROCEEDINGS
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. The Company has been informed by the Antitrust Division of U.S.
Department of Justice that the Government does not intend to pursue criminal
charges against the Company in connection with the actions of its Utah
facilities. In addition, the Justice Department recently filed a civil antitrust
complaint and three consent decrees in U.S. District Court in Salt Lake City,
Utah. The consent decrees, if approved by the court, would settle the suit
against all named hospitals. Such approval of the consent decrees is expected on
or about May 13, 1994. If the consent decrees are approved, four of the
Company's affiliated hospitals will be prohibited from entering into agreements
with other Utah hospitals to fix the compensation paid to nurses and will be
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 have
admitted any wrongdoing and no fines or penalties have been assessed.
On March 9, 1994, Memorial Hospital at Gulfport ("Memorial") filed suit
against EPIC and the Company in Mississippi State court, alleging that EPIC
agreed to sell Garden Park Community Hospital ("Garden Park") in Garden Park,
Mississippi to Memorial for approximately $23.3 million. The suit seeks specific
performance of the alleged agreement and actual and punitive damages. In
addition, Memorial is seeking a preliminary injunction to prohibit consummation
of the Acquisition until the final disposition of its suit or, in the
alternative, a preliminary injunction prohibiting EPIC and the Company from
encumbering or disposing of the assets comprising Garden Park. Following a bench
trial, the court concluded that no contract for the sale of Garden Park was
reached, and denied Memorial's motion for specific performance and injunctive
relief, though certain other claims are still pending.
In April 1994, Lawrence Lacroix filed suit against EPIC in Texas state
court alleging that the payment to certain EPIC executives of severance and
other benefits in connection with the Acquisition, the payment of the
Acquisition consideration with respect to outstanding EPIC stock appreciation
rights and the cash contribution to the EPIC Employee Stock Ownership Plan (the
"EPIC ESOP") contemplated by the ESOP Agreement (as defined herein) are
fraudulent transfers. The lawsuit alleges that such payments would deplete the
assets of EPIC available to satisfy Mr. Lacroix's claims as a potential judgment
creditor in connection with a pending medical malpractice suit. Mr. Lacroix
seeks to enjoin such payments.
PROFESSIONAL LIABILITY
As is typical in the health care industry, the Company is subject to claims
and legal actions by patients and others in the ordinary course of business. The
Company generally self-insures against substantially all of its professional and
general liabilities and maintains an unfunded reserve for liability risks. While
the Company's cash flow has been adequate to provide for 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.
8
<PAGE> 9
PRINCIPAL STOCKHOLDER
As of December 31, 1993, the trustee (the "Plan Trustee") of the Plan held
approximately 31% of the outstanding Common Stock. After giving effect to the
Offerings, as of December 31, 1993, the Plan Trustee would have held
approximately 28% of the outstanding Common Stock. Shares of Common Stock held
by the Plan Trustee are held in the accounts of participants in the Plan. Such
participants are able to direct the Plan Trustee to vote the shares allocated to
their accounts, except when the Plan Trustee believes its fiduciary duties
obligate it to override such directions. As a principal stockholder, the Plan
Trustee may have the ability to influence the policies and affairs of the
Company to a greater extent than other stockholders.
FORMATION-RELATED CONSIDERATIONS
In connection with the Formation of Healthtrust in 1987, HCA agreed to
indemnify the Company against tax claims, professional liability claims and
claims covered by standard public liability insurance relating to the acquired
assets, in each case relating to periods prior to the Formation. In the past HCA
has satisfied its obligation to indemnify the Company for all such claims, and
the Company has no reason to believe that HCA would not continue to do so.
However, if HCA should fail to meet its indemnification obligations, the Company
would be responsible for the satisfaction of any such claims in the future,
which claims, if substantial, could have a material adverse effect on the
Company.
With respect to certain taxable periods ending on or prior to the Formation
in September 1987, the Company and certain of its subsidiaries filed federal
income tax returns on a consolidated basis with HCA and, as a result, under
federal income tax law, the Company and such subsidiaries are severally liable
with HCA for the federal income taxes of HCA's consolidated group for such
periods. However, in connection with the Formation, HCA agreed that it would be
responsible for the payment of all taxes, assessments, interest and penalties
imposed by any taxing authority for any periods prior to and including the date
of the Formation. HCA has disclosed that following a recent examination of HCA's
federal income tax returns for tax years 1981 through 1990, the Internal Revenue
Service has proposed certain adjustments to such returns, and HCA has received
notices of deficiencies for certain years, which it is contesting through
litigation. Should HCA be unable to sustain its position on disputed matters,
additional taxes would approximate $383 million, plus accrued interest of
approximately $640 million as of December 31, 1993, for taxable periods in which
the Company and certain of its subsidiaries were members of HCA's consolidated
group. If the additional taxes that have been asserted by the Internal Revenue
Service were finally determined to be due and HCA were unable to, or for any
other reason did not, pay such taxes or related interest, the Company could be
responsible for such payment, which payment could have a material adverse effect
on the Company.
ERISA MATTERS
In connection with the Formation in 1987, the Company's Employee Stock
Ownership Plan (the "ESOP") purchased approximately 50.9 million shares of
Common Stock for $810 million. The purchase price was based on the determination
of the committee administering the ESOP (the "ESOP Committee") as to the fair
market value of such shares at that time. Based on such determination, and
subject to limitations contained in the Internal Revenue Code of 1986, as
amended (the "Code"), the Company has claimed income tax deductions for
contributions to the ESOP for the years to which such contributions relate.
Contributions to the ESOP were used by the ESOP to pay interest and principal on
the loans owed to the Company. These payments were in turn used by the Company
to pay interest and principal on the ESOP term loans under the Company's
previous bank credit agreement and certain other indebtedness related to the
ESOP. As a result, the Company was effectively able to obtain a deduction for
principal, as well as interest payments, on ESOP-related borrowings. If the ESOP
Committee's determination of fair market value was incorrect, the Company's
contribution to the ESOP might not be fully deductible, which could have a
material adverse effect on the Company.
It was intended that qualified holders of the ESOP term loans and the other
indebtedness incurred in connection with the ESOP be entitled to exclude from
taxable income 50% of the interest received on such indebtedness. In addition,
the loans to the ESOP and the purchase of Common Stock by the ESOP were
9
<PAGE> 10
intended to qualify for exemption from the "prohibited transaction" rules under
the Code and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which rules generally prohibit sale and loan transactions between an
employer and a qualified retirement plan. The 50% interest exclusion and the
prohibited transaction exemption were available only if the plan was designed to
invest primarily in "employer securities." It is likely that if Healthtrust and
HCA were deemed to have been members of the same "controlled group of
corporations" for purposes of the relevant section in the Code or ERISA, the
stock of HCA, and not Healthtrust's Common Stock, would have been "employer
securities" for these purposes. Healthtrust and HCA concluded that they were not
in the same "controlled group of corporations" (as defined in Section 409(1) of
the Code). If, notwithstanding such conclusion, HCA's common stock were deemed
to have been "employer securities" for such purposes, there could be severe
adverse consequences to Healthtrust, including violation of the prohibited
transaction rules discussed above (which could subject Healthtrust or other
disqualified persons with respect to the ESOP to an excise tax and could require
that certain corrective action be taken) and retroactive increases in the rate
of interest payable on certain of the Company's previously outstanding
ESOP-related indebtedness as a result of the loss of the 50% interest exclusion.
In addition, the 50% interest exclusion and the prohibited transaction exemption
were available only if the price paid by the ESOP reflected the fair market
value of the employer securities as determined in good faith by the plan
fiduciaries. Accordingly, if the ESOP Committee's determination of fair market
value was incorrect, the 50% interest exclusion might not have been fully
available and the Company or other disqualified persons may have committed
prohibited transactions, either of which events could have a material adverse
effect on the Company. See Note 5 to "Capitalization."
ACQUISITION-RELATED CONSIDERATIONS
The purchase of EPIC common stock by the EPIC ESOP in connection with
EPIC's acquisition (the "EPIC Formation") of its facilities from American
Medical International, Inc. ("AMI") in 1988 was structured in a manner similar
to the purchase of Common Stock by the ESOP in connection with the Formation of
Healthtrust and was intended to (i) qualify for exemption from the "prohibited
transaction" rules of the Code and ERISA, (ii) permit EPIC to deduct for federal
income tax purposes its contributions to the EPIC ESOP used to pay principal and
interest on loans made by EPIC to the EPIC ESOP and (iii) permit qualified
holders of indebtedness incurred in connection with the EPIC ESOP to benefit
from the 50% interest exclusion provision referred to in "-- ERISA Matters"
above. Exemption from the prohibited transaction rules and the availability of
the ESOP-related benefits described above depends on (i) the amount the EPIC
ESOP paid for EPIC common stock not having exceeded the fair market value of
that EPIC common stock, (ii) the EPIC common stock being "employer securities"
and (iii) compliance with the other relevant provisions of the Code and ERISA.
If (i) the EPIC ESOP paid an amount in excess of fair market value for the EPIC
common stock, (ii) the EPIC common stock were to fail to qualify as "employer
securities" or (iii) the EPIC ESOP were to fail to comply with the other
relevant provisions of the Code or ERISA, such events could result in material
adverse consequences to EPIC similar to those described with respect to the
Company under "-- ERISA Matters" above, which could have a material adverse
effect on the Company following consummation of the Acquisition. See "The
Acquisition and the Financing Plan" and Note 6 to "Capitalization." In addition,
although the Company believes that the actions which the parties intend to take
with respect to the EPIC ESOP pursuant to the ESOP Agreement (as hereinafter
defined) should not give rise to any adverse tax or other consequences to EPIC
or the Company, if the Internal Revenue Service or the Department of Labor were
to successfully challenge certain aspects of such actions, the Company or EPIC
could be subject to certain taxes or penalties, which could have a material
adverse effect on the Company following consummation of the Acquisition.
Additionally, the termination of contributions to the EPIC ESOP in connection
with the Acquisition will result in a default on the EPIC ESOP Notes (as
hereinafter defined). If the EPIC ESOP Notes are not redeemed pursuant to the
Debt Redemption, such default could adversely affect the Company. See "The
Acquisition and the Financing Plan."
In connection with the EPIC Formation, AMI agreed to indemnify EPIC against
certain losses, including the loss of certain expected tax benefits. If AMI is
unable to or otherwise does not satisfy such
10
<PAGE> 11
indemnification obligations, EPIC could be responsible for such losses, which
could adversely affect the Company following the Acquisition.
The Company will use the proceeds of the Offerings to fund the Acquisition.
While the Company believes that it can improve the profitability of the
operations acquired from EPIC, there can be no assurance that this will be the
case. In addition, there can be no assurance that the Company will be able to
realize expected operating and economic efficiencies following the Acquisition
or that the Acquisition will not adversely affect the Company's results of
operations or financial condition. See the Unaudited Pro Forma Condensed
Combined Financial Statements of the Company included elsewhere in this
Prospectus.
11
<PAGE> 12
THE ACQUISITION AND THE FINANCING PLAN
On January 9, 1994, Healthtrust, Odyssey Acquisition Corp., a wholly-owned
subsidiary of Healthtrust ("Odyssey") and EPIC entered into a merger agreement
pursuant to which Odyssey will merge into EPIC and EPIC will become a
wholly-owned subsidiary of Healthtrust. Upon consummation of the Acquisition,
the holders of EPIC common stock (and securities exercisable therefor) will
become entitled to receive $7.00 per share in cash from Healthtrust. It is
anticipated that the Company will purchase approximately 35.7 million shares of
EPIC common stock (and securities exercisable therefor) at the closing of the
Acquisition, for an aggregate purchase price of approximately $250.2 million,
comprised of the following securities: (i) approximately 13.6 million shares of
EPIC common stock allocated or allocable to EPIC ESOP participants, (ii)
approximately 15.9 million other shares of outstanding EPIC common stock and
(iii) outstanding stock appreciation rights, warrants and options exercisable
for approximately 6.2 million shares of EPIC common stock. The consummation of
the Acquisition is subject to certain conditions, including, among others, the
approval of the stockholders of EPIC, certain regulatory approvals and the
consent solicitation in connection with the Specified EPIC Debt Securities
described below. The approval of the Acquisition requires the affirmative vote
of the holders of a majority of the outstanding shares of EPIC common stock
entitled to vote thereon. Subject to certain conditions, each of AMI and the
EPIC ESOP Trustee has agreed to vote the shares of EPIC common stock over which
it exercises voting power (in the aggregate approximately 52% of the EPIC common
stock outstanding on January 8, 1994) in favor of the Acquisition.
In connection with the Acquisition, the Company entered into an Amended and
Restated ESOP Agreement (the "ESOP Agreement") with EPIC Holdings, EPIC
Healthcare Group, Inc. ("EPIC Group"), U.S. Trust Company of California, N.A.,
the trustee of the trust established under the EPIC ESOP (the "EPIC ESOP
Trustee") and the EPIC Committee administering the EPIC ESOP. Pursuant to the
ESOP Agreement, all shares of EPIC common stock held by the EPIC ESOP Trustee
and not allocated or allocable to EPIC ESOP participants as of the closing of
the Acquisition (approximately 10.6 million shares) will be returned to EPIC in
full satisfaction of certain loans granted by EPIC to the EPIC ESOP Trustee, and
contributions to the EPIC ESOP will be terminated. Subject to certain Code
limitations, EPIC has agreed to contribute approximately $27.6 million in cash
to the EPIC ESOP upon consummation of the Acquisition or within one business day
thereafter, which contribution will not be applied to repay EPIC ESOP loans but
will be allocated directly to participants' accounts. In addition, following the
Acquisition, the EPIC ESOP participants who continue to be employed by the
Company will be entitled to participate in the Plan or in a similar plan to be
established by the Company (the Plan or such other plan, the "Healthtrust
Plan"). Subject to Code limitations, EPIC will contribute to the EPIC ESOP an
aggregate dollar amount equivalent to the 4% profit sharing contribution
(described below) to which EPIC ESOP participants would have been entitled had
they participated in the Plan from March 1, 1994 through the Acquisition closing
date. In addition, the Company has agreed to provide certain minimum retirement
benefits in accordance with the terms of the Plan and subject to Code
limitations, including (i) a profit sharing contribution by the Company on
behalf of EPIC ESOP participants who participate in the Healthtrust Plan of 4%
of aggregate compensation from the Acquisition closing date through December 31,
1994 and (ii) a matching contribution by the Company of 100% of participants'
salary deferrals for each EPIC ESOP participant who participates in the
Healthtrust Plan, up to a maximum of 3% of compensation, for the period from the
Acquisition closing date through December 31, 1998. In the event that fewer
shares are so allocated or allocable to EPIC ESOP participants as of the closing
or the full amount of contributions to the Healthtrust Plan are not permitted to
be made due to Code limitations, additional contributions will be made in the
future in lieu of any shares not so allocated or allocable and any contributions
not so permitted to be made. The obligations of the parties under the ESOP
Agreement are conditioned upon, among other things, the consummation of the
Acquisition. The foregoing does not purport to be a complete description of the
ESOP Agreement and reference is hereby made to the ESOP Agreement, which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.
In connection with the Acquisition and the related merger agreement, on
March 15, 1994, EPIC and certain of its subsidiaries commenced offers to
purchase up to 100% of the following outstanding debt securities of EPIC at the
following purchase prices: (i) $250.0 million aggregate principal amount
(represent-
12
<PAGE> 13
ing an aggregate accreted value of approximately $172.2 million as of December
31, 1993) of 12% Senior Deferred Coupon Notes due 2002 of EPIC Holdings (the
"EPIC 12% Notes") for 112% of accreted value (expected to be approximately
$178.8 million at the time of purchase), or an aggregate purchase price of
$200.3 million, (ii) $160 million aggregate principal amount of 10 7/8% Senior
Subordinated Notes due 2003 of EPIC Group (the "EPIC 10 7/8% Notes") for 116% of
principal amount, or an aggregate purchase price of $185.6 million, (iii) $100
million aggregate principal amount (representing an aggregate accreted value of
approximately $99.6 million as of December 31, 1993) of 11 3/8% Class B-1 First
Priority Mortgage Notes due 2001 of EPIC Properties (the "EPIC Class 1 Mortgage
Notes"), for 118 3/4% of principal amount, or an aggregate purchase price of
$118.8 million, (iv) approximately $83.5 million aggregate principal amount
(representing an aggregate accreted value of approximately $83.1 million as of
December 31, 1993) of 11 1/2% Class B-2 First Priority Mortgage Notes due 2001
of EPIC Properties (the "EPIC Class 2 Mortgage Notes") for 121 1/8% of principal
amount, or an aggregate purchase price of $101.1 million and (v) $15 million
aggregate principal amount of Floating Rate Class B-3 First Priority Mortgage
Notes due 1998 (with an interest rate of 6 3/8% at February 1, 1994) of EPIC
Properties (the "EPIC Class 3 Mortgage Notes" and, together with the EPIC Class
1 Mortgage Notes and EPIC Class 2 Mortgage Notes, the "EPIC Mortgage Notes") for
103 1/8% of principal amount, or an aggregate purchase price of $15.5 million.
In connection therewith, the consent of the holders of the Specified EPIC Debt
Securities is being solicited to eliminate or modify substantially all of the
restrictive covenants and certain event of default provisions relating to any
Specified EPIC Debt Securities which remain outstanding after the offers to
purchase are completed. Consent payments of $20 per $1,000 of principal amount
will be made with respect to the Specified EPIC Debt Securities for which
consents have been validly delivered (and not revoked) on or prior to April 13,
1994, the date on which such consents were accepted. The obligation to make the
consent payments is subject to certain conditions, including the acceptance for
purchase and payment of the applicable issue of Specified EPIC Debt Securities
in the Tender Offers. The obligation to purchase and pay for the Specified EPIC
Debt Securities in the Tender Offers is conditioned upon, among other things,
(i) the consummation of the Acquisition, the Offerings and the Subordinated Debt
Offering, (ii) the Company having entered into the 1994 Credit Agreement and
having received sufficient proceeds of borrowings thereunder to consummate the
Tender Offers, (iii) receipt of validly delivered and unrevoked consents from
holders of a majority in aggregate principal amount of each of the EPIC 12%
Notes, EPIC 10 7/8% Notes and EPIC Mortgage Notes and (iv) there having been
validly tendered and not withdrawn at least a majority in aggregate principal
amount of each of the EPIC 12% Notes, EPIC 10 7/8% Notes and EPIC Mortgage
Notes. On April 14, 1994, after receiving tenders and related consents from the
holders of 100%, 100% and 95.1% of the outstanding EPIC 12% Notes, EPIC 10 7/8%
Notes and EPIC Mortgage Notes, respectively (the "Current Tender Amounts"),
supplemental indentures giving effect to the proposed modifications to the
Specified EPIC Debt Securities were executed. Holders of tendered Specified EPIC
Debt Securities will no longer be entitled to withdraw such securities or their
related consents (except as otherwise provided pursuant to the terms of the
Tender Offers).
Following the consummation of the Acquisition, it is anticipated that 100%
of the following outstanding indebtedness of EPIC Group (collectively, the "EPIC
Redeemable Debt") will be redeemed or prepaid in accordance with the provisions
thereof: (i) approximately $74.8 million aggregate principal amount
(representing an aggregate accreted value of approximately $72.3 million as of
December 31, 1993) of 11 7/8% Senior ESOP Notes due 1998 (the "EPIC ESOP
Notes"), (ii) approximately $96.4 million aggregate principal amount
(representing an aggregate accreted value of approximately $31.9 million as of
December 31, 1993) of Zero Coupon Notes due 2001 (the "EPIC Zero Coupon Notes")
(with an effective interest rate of 14.8% at December 31, 1993), (iii)
approximately $30.9 million aggregate principal amount (representing an
aggregate accreted value of approximately $20.0 million as of December 31, 1993)
of 11% Junior Subordinated Pay-In-Kind Notes due 2003 and (iv) approximately
$18.7 million principal amount outstanding under EPIC's existing bank credit
facility. During the first quarter of EPIC's 1993 fiscal year, a subsidiary of
EPIC Group purchased $5.4 million of EPIC ESOP Notes in the open market.
The Acquisition, the Tender Offers and the Debt Redemption will be financed
through the following:
(i) the Offerings by the Company;
13
<PAGE> 14
(ii) the public offering by the Company of $200 million aggregate
principal amount of a new series of Subordinated Notes due 2004;
(iii) the refinancing of the Company's existing bank credit facility
with a new bank credit facility described below, which will provide for
aggregate commitments of up to $1.2 billion; and
(iv) cash on hand.
The Company, The Bank of Nova Scotia, as administrative agent (the
"Administrative Agent") and a syndicate of banks have executed the 1994 Credit
Agreement, dated as of April 28, 1994. Pursuant to the 1994 Credit Agreement,
the Company will be able to borrow up to an aggregate of $1.2 billion,
consisting of (i) a revolving facility in an aggregate amount of $400.0 million
(the "Revolving Facility"), with the proceeds thereof being available to pay in
part the consideration for the Acquisition, the Financing Plan (as hereinafter
defined) and the acquisition of certain other health care related facilities and
assets (the "Other Transactions"), and financing the Company's ongoing working
capital and general corporate needs, (ii) a term loan facility in an aggregate
amount of $415.0 million (the "Term Facility"), with the proceeds thereof being
available solely to repay amounts outstanding under the Company's existing
credit facility and to pay in part the cash consideration of the Tender Offers
and (iii) a declining delayed term loan facility in an initial aggregate amount
of $385.0 million (the "Delayed Term Facility"), with the proceeds thereof being
available solely to pay in part the cash consideration for the Debt Redemption
and the Other Transactions. Under the 1994 Credit Agreement, and after giving
effect to the Acquisition and the Financing Plan, the Company expects to have
available an aggregate of approximately $488.2 million of unutilized
commitments, assuming the Current Tender Amount of each issue of Specified EPIC
Debt Securities is purchased in the Tender Offers.
The loans to be provided under the 1994 Credit Agreement (the "1994 Loans")
will bear interest at fluctuating rates equal, at the Company's option, to
either (a) an alternate base rate (equal to the higher of the Administrative
Agent's base rate for dollar loans or the federal funds rate plus 50 basis
points) plus 50 basis points or (b) the Administrative Agent's reserve-adjusted
LIBOR rate plus 150 basis points, and in each case subject to mutually agreed
upon increases and reductions. The 1994 Loans will be secured by pledges of the
shares of capital stock of, and will be guaranteed by, virtually all of the
Company's direct and indirect subsidiaries. Pursuant to the 1994 Credit
Agreement, the Company is required to deliver pledges of capital stock and
guarantees of certain EPIC entities within a specified period of time after the
initial borrowings. If the Debt Redemption is not consummated, such pledges and
guarantees would result in a default under certain outstanding EPIC
indebtedness. The 1994 Loans provided pursuant to the Term Facility will be
subject to semiannual repayment requirements commencing on the six month
anniversary of the initial borrowings and the 1994 Loans provided pursuant to
the Delayed Term Facility will be subject to semiannual repayment requirements
commencing on the two year anniversary of the initial borrowings. The 1994 Loans
must be repaid in full not later than the seven year anniversary of the initial
borrowings. In addition to the scheduled repayments, the Company also will be
required, subject to certain exceptions, to repay the 1994 Loans with all or a
portion of the cash proceeds from sales of assets, subsidiary stock, or accounts
receivable or the cash proceeds from any refinancing of the 1994 Credit
Agreement. The 1994 Credit Agreement contains a number of customary covenants,
including those restricting the incurrence of indebtedness, the creation or
existence of liens, the declaration or payment of dividends, certain other
investments, the acquisition of debt and equity securities of the Company,
certain corporate transactions such as sales of substantial assets, mergers or
consolidations or other transactions outside of the ordinary course of business.
The Company is also required to comply with certain financial maintenance
covenants.
The obligations of the lenders under the 1994 Credit Agreement are
conditioned upon, among other things, (i) the Company's receipt of gross cash
proceeds from the Subordinated Debt Offering of not less than $200.0 million;
(ii) the Company's receipt of gross cash proceeds from the Offerings of not less
than $140.0 million; (iii) the sum of (w) the gross cash proceeds received from
the Subordinated Debt Offering, (x) the gross cash proceeds received from the
Offerings, (y) cash on hand and (z) the amounts available under the 1994 Credit
Agreement being sufficient to consummate the Acquisition, the Tender Offers, the
Debt Redemption, the refinancing of the Company's existing credit facility and
the Other Transactions; (iv) the consummation of the Acquisition and the Tender
Offers and (v) the absence of any event of default having occurred as a result
of the Acquisition, the Tender Offer, the Debt Redemption or the Other
14
<PAGE> 15
Transactions under any of the indentures governing the Specified EPIC Debt
Securities. It is anticipated that all such conditions will not be met at the
time the Acquisition is consummated, since the Tender Offers are expected to
remain open until approximately five business days after such consummation.
Therefore, the Company presently intends to amend its existing credit facility,
or prepay all amounts outstanding thereunder, in order to permit the Company to
proceed with the Acquisition.
The Tender Offers, the Debt Redemption, the Offerings, the Subordinated
Debt Offering and the 1994 Credit Facility are hereinafter referred to as the
"Financing Plan." The Offerings are expected to occur substantially
contemporaneously with the Acquisition, the Subordinated Debt Offering, the Debt
Redemption and the 1994 Credit Agreement and are conditioned upon the
consummation of the Acquisition. It is anticipated that the Tender Offers will
remain open until approximately five business days after the consummation of the
Acquisition.
The following table sets forth the sources of funds to be used to effect
the Acquisition, the Tender Offers and the Debt Redemption, assuming (i)
5,200,000 shares of Common Stock are sold by the Company in the Offerings at a
public offering price of $28.25 per share, (ii) $200 million aggregate principal
amount of Subordinated Notes are sold by the Company in the Subordinated Debt
Offering at a public offering price of 100% of principal amount, (iii)
approximately 35,746,000 shares of EPIC common stock (and securities exercisable
therefor) are acquired pursuant to the Acquisition; and (iv) the Current Tender
Amount of each issue of the outstanding Specified EPIC Debt Securities is
purchased in the Tender Offers.
ACQUISITION AND FINANCING PLAN
(DOLLARS IN MILLIONS)
<TABLE>
<S> <C>
SOURCES OF FUNDS
Cash on hand(1).......................................... $ 186.4
1994 Credit Agreement.................................... 711.8
The Offerings............................................ 146.9
The Subordinated Debt Offering........................... 200.0
--------
Total............................................... $1,245.1
--------
--------
USE OF FUNDS
Purchase of EPIC equity in Acquisition................... $ 250.2
Tender Offers(2)......................................... 621.2
Debt Redemption.......................................... 157.5
Refinancing of existing bank credit facility............. 150.3
Payment in connection with EPIC ESOP termination......... 27.6
Estimated Fees and Expenses(3)........................... 38.3
--------
Total............................................... $1,245.1
--------
--------
</TABLE>
- - ---------------
(1) Cash on hand of $186.4 million consists of as reported Healthtrust cash of
$159.8 million, plus as reported EPIC cash of $55.1 million, less cash used
in connection with EPIC's redemption of its 15% Senior Subordinated Notes of
$8.5 million, less a cash balance to be maintained of $20.0 million.
(2) Represents (a) the principal amount of the EPIC 10 7/8% Notes and the EPIC
Class 3 Mortgage Notes, (b) the accreted value as of December 31, 1993 of
the EPIC 12% Notes, EPIC Class 1 Mortgage Notes and EPIC Class 2 Mortgage
Notes and (c) $101.0 million of aggregate premiums and consent payments.
(3) Includes underwriting discounts and commissions with respect to the Company,
bank fees and legal and accounting expenses.
15
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock in the
Offerings are estimated to be approximately $143,154,000 million (approximately
$164,307,600 million if the Underwriters' over-allotment options are exercised
in full), after giving effect to the receipt of an aggregate of approximately
$3,230,000 from the exercise of warrants by the Selling Stockholders. The
Company intends to use the net proceeds from its sale of Common Stock in the
Offerings, together with the net proceeds of the Subordinated Debt Offering,
borrowings under the 1994 Credit Agreement and cash on hand, to effect the
Acquisition, the Tender Offers and the Debt Redemption. The EPIC 10 7/8% Notes,
which are subject to repurchase pursuant to the Tender Offers, were issued by
EPIC Group in June 1993 to refinance certain outstanding long-term indebtedness.
See "The Acquisition and the Financing Plan."
16
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 28, 1994, of EPIC as of December 31, 1993 and combined as adjusted to
reflect the Acquisition, the Offerings, the Subordinated Debt Offering and the
other transactions contemplated by the Financing Plan. This table should be read
in conjunction with "The Acquisition and the Financing Plan," the Unaudited Pro
Forma Condensed Combined Financial Statements of the Company and the historical
financial statements of the Company and EPIC and the notes thereto included or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
AS OF
FEBRUARY 28, 1994
HEALTHTRUST EPIC COMBINED
ACTUAL ACTUAL AS ADJUSTED
----------- ------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
LONG-TERM DEBT:
Bank Indebtedness.................................................. $ 150.3 $ -- $ 711.8
10 3/4% Subordinated Notes due 2002................................ 500.0 -- 500.0
8 3/4% Subordinated Debentures due 2005............................ 300.0 -- 300.0
Subordinated Debt Offering......................................... -- -- 200.0
Specified EPIC Debt Securities..................................... -- 529.9 --(1)
EPIC Redeemable Debt............................................... -- 142.6 --
EPIC Group 15% Senior Subordinated Notes(2)........................ -- 40.3 --
Other Debt......................................................... 16.7 20.4 46.8
----------- ------- --------
Less Current Portion............................................. (35.6) (48.0) (53.6)
----------- ------- --------
Total Long-Term Debt......................................... 931.4 685.2 1,705.0
STOCKHOLDERS' EQUITY:
Common Stock, $.001 par value: 400,000,000 shares authorized,
81,221,108 shares issued and outstanding (86,421,108 shares
issued and outstanding, as adjusted)(3).......................... 0.1 -- 0.1
EPIC common stock, $.01 par value: 100,000,000 shares authorized,
40,167,753 shares issued and outstanding(4)...................... -- 0.4 --
Additional paid-in capital(5)...................................... 828.3 245.8 828.3
Common Stock Offerings(6)........................................ -- -- 141.0
Deferred compensation.............................................. (0.6) (137.4) (0.6)
Retained deficit................................................... (83.4) (191.7) (83.4)
----------- ------- --------
Total Stockholders' Equity................................... 744.4 (82.9) 885.4
----------- ------- --------
Total Capitalization......................................... $ 1,675.8 $ 602.3 $ 2,590.4
----------- ------- --------
----------- ------- --------
</TABLE>
- - ---------------
(1) Assumes 100% of each issue of Specified EPIC Debt Securities is purchased in
the Tender Offers.
(2) EPIC redeemed such indebtedness in February 1994.
(3) Excludes (i) 7,812,849 shares of Common Stock reserved for issuance under
the Company's stock plans and upon exercise of options granted under the
Company's stock option plans; and (ii) 3,409,219 shares of Common Stock
reserved for issuance upon the exercise of Warrants, of which 1,549,709 have
been exercised since February 28, 1994. Also excludes approximately 900,000
shares of Common Stock to be issued and contributed by the Company to the
Plan on or about May 15, 1994.
(4) As of January 8, 1994. Excludes 6,227,165 shares reserved for issuance upon
exercise of certain options, stock appreciation rights and warrants.
(5) Additional paid-in capital with respect to the Company equals the total
amount of (i) the net proceeds of the Company's initial public offering of
Common Stock, (ii) the net proceeds of the sales of Common Stock to the
ESOP, (iii) the estimated value of shares of Common Stock awarded under the
Company's stock plans, (iv) the estimated aggregate fair market value of
Warrants that were issued to HCA and certain other investors in connection
with the Formation and the financing thereof and (v) the estimated aggregate
fair market value of the Company's preferred stock surrendered by HCA upon
exercise of Warrants to receive Common Stock, minus (vi) dividends paid and
accrued and accretion of discount on preferred stock. In connection with the
Formation, the Company issued Warrants exercisable for an aggregate of
36,874,551 shares of Common Stock (33,460,240 shares for HCA and 3,414,311
shares of certain other investors). The Company initially recorded its
Warrants at an aggregate fair value of $117.0 million, or $3.18 per Warrant,
as determined by an independent investment banking firm subsequent to the
Formation. HCA recorded the fair value of its investment in the Warrants at
$37.0 million or $1.11 per Warrant, based upon a valuation range determined
by another investment banking firm. These respective values were based upon
a number of assumptions and projections as to financial results, including
estimates by the investment banking firms of the discounted present value of
a share of Common Stock at September 17, 1987 ($3.38 in the case of the
Warrant value recorded by the Company and a range of $.66 to $1.59 in the
case of the Warrant value recorded by HCA). Each such estimate was based
upon, among other things, certain different assumptions in the valuation of
the Warrants as to the investment objectives of a purchaser of such Warrants
(and, accordingly, an annual yield assumption for discounting to the date of
the Formation the estimated value of a share of Common Stock at a future
date) and the number of shares of Common Stock subject to the Warrants.
After further review, the Company decreased the amount recorded for Warrants
to $52.0 million, or $1.41 per Warrant. In addition, EPIC has received
determinations of the fair value of the EPIC common stock from independent
financial advisors that valued such stock at prices lower than the amount
paid therefor by the EPIC ESOP in connection with the EPIC Formation.
(6) Excludes 1,015,312 shares of Common Stock to be sold in the Offerings by the
Selling Stockholders upon the exercise of Warrants. Holders of Warrants that
are outstanding following consummation of the Offerings remain entitled to
certain demand and incidental registration rights in connection with their
securities.
17
<PAGE> 18
SELECTED HISTORICAL FINANCIAL INFORMATION
The following tables set forth selected historical financial information
for (i) the Company for each of the years in the five-year period ended August
31, 1993 and for the six months ended February 28, 1994 and 1993; and (ii) EPIC
for each of the years in the five-year period ended September 30, 1993 and for
the three months ended December 31, 1993 and 1992. The selected financial
information for the Company and EPIC for each of the years in the five-year
periods ended August 31, 1993 and September 30, 1993, respectively, are derived
from the consolidated financial statements of the Company and EPIC, each of
which have been audited by Ernst & Young, independent auditors. The selected
financial information for the Company for the six months ended February 28, 1994
and 1993 and for EPIC for the three months ended December 31, 1993 and 1992, are
derived from unaudited condensed consolidated financial statements of the
Company and EPIC and reflect all adjustments (consisting of normal recurring
adjustments) that, in the opinion of management, are necessary for a fair
presentation of such information. Operating results for the six months ended
February 28, 1994 and the three months ended December 31, 1993 are not
necessarily indicative of the results that may be expected for the Company's
fiscal year ending August 31, 1994.
All information contained 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 of the Company and EPIC included or incorporated by reference
herein.
18
<PAGE> 19
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
--------------------- ------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenue.................. $1,274.6 $1,189.7 $2,394.6 $2,265.3 $2,025.7 $1,856.9 $1,769.1
Hospital service costs................. 1,000.9 926.0 1,888.6 1,796.0 1,615.8 1,488.2 1,429.9
Depreciation and amortization.......... 69.7 64.9 132.7 127.5 120.8 119.2 121.5
Interest expense....................... 42.3 50.9 99.8 119.6 152.6 161.1 189.8
ESOP/pension expense................... 20.5 23.1 39.0 38.7 97.0 100.7 138.6
Deferred compensation expense.......... 0.6 3.0 4.3 8.1 18.7 31.1 27.2
Other (income) expense, net............ (8.7) (6.3) (7.6) (4.6) (14.5) 23.1 14.8
-------- -------- -------- -------- -------- -------- --------
Income (loss) before minority
interests, taxes and extraordinary
charges............................ 149.3 128.1 237.8 180.0 35.3 (66.5) (152.7)
Minority interests..................... 4.1 7.4 11.9 15.3 13.3 8.6 1.7
Income tax expense (benefit)........... 59.0 49.4 90.7 71.4 15.4 (21.9) (53.1)
Extraordinary charges (net of
taxes)(1)............................ -- -- 13.6 136.4 -- 5.8 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss).................... 86.2 71.3 121.6 (43.1) 6.6 (59.0) (101.3)
Redeemable preferred stock dividends... -- -- -- 24.6 76.3 65.7 58.6
-------- -------- -------- -------- -------- -------- --------
Net income (loss) to common
stockholders....................... $ 86.2 $ 71.3 $ 121.6 $ (67.7) $ (69.7) $ (124.7) $ (159.9)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
EARNINGS (LOSS) PER SHARE:
Before extraordinary charges........... $ 1.02 $ 0.85 $ 1.62 $ 0.90 $ (1.15) $ (2.03) $ (2.78)
Extraordinary charges.................. -- -- 0.16 1.78 -- 0.10 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) per common share..... $ 1.02 $ 0.85 $ 1.46 $ (0.88) $ (1.15) $ (2.13) $ (2.78)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings to fixed
charges(2)(3)........................ 3.6x 3.0x 2.8x 2.2x 1.1x -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AUGUST 31,
FEBRUARY 28, ------------------------------------------------------------
1994 1993 1992 1991 1990 1989
------------ -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments.................. $ 159.8 $ 151.3 $ 172.6 $ 302.6 $ 230.7 $ 12.2
Working capital.................................. 291.6 219.1 245.3 390.2 309.8 72.9
Total assets..................................... 2,515.8 2,536.7 2,379.7 2,445.4 2,293.8 2,210.6
Long-term debt................................... 931.4 948.6 1,033.9 1,150.0 1,155.6 1,151.3
Redeemable preferred stock....................... -- -- -- 575.9 499.6 433.9
Stockholders' equity............................. 744.4 655.7 530.8 88.0 42.1 34.9
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
-------------------- ------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- ------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Additions to property, plant and
equipment............................. $ 83.7 $ 85.9 $ 219.5 $ 178.1 $ 170.3 $ 120.8 $ 98.4
Acquisitions............................ -- 1.6 101.9 -- -- -- --
Ratio of operating cash flow to interest
expense(4)............................ 6.5x 5.2x 4.8x 3.9x 2.7x 2.3x 1.8x
</TABLE>
- - ---------------
(1) Extraordinary after-tax charges relate to the early extinguishment of debt.
(2) The ratio of earnings to fixed charges was computed by dividing (i) income
from continuing operations before fixed charges and income taxes by (ii)
fixed charges, which consist of interest charges (interest expense plus
interest charged to construction) and the portion of rent expense which is
deemed to be equivalent to interest expense.
(3) The Company's earnings were inadequate to cover fixed charges for the years
ended August 31, 1990 and 1989 by $75.5 million and $154.5 million,
respectively.
(4) Operating cash flow represents net operating revenue less hospital service
costs. For purposes of calculating the ratio of operating cash flow to
interest expense, hospital service costs have been adjusted to include $25.5
million of cash ESOP/pension expense for the year ended August 31, 1993 (the
only period presented which included cash ESOP/pension expense). Operating
cash flow and the ratio of operating cash flow to interest expense do not
take into account certain expenses that are reflected in the calculation of
net income in accordance with GAAP, are not intended to represent any
measure of performance in accordance with GAAP, and should not be considered
in isolation or as a substitute for cash provided by operating activities,
net income or any other consolidated income statement data prepared in
accordance with GAAP. The ratio of operating cash flow to interest expense
is included herein because the Company believes that it may be a useful tool
for investors in measuring a company's ability to service its debt.
19
<PAGE> 20
EPIC HOLDINGS, INC.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31, YEAR ENDED SEPTEMBER 30,
-------------------- ------------------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
-------- ------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenue................... $ 272.5 $ 244.4 $1,019.1 $ 941.3 $ 802.7 $ 742.4 $ 613.2
Hospital service costs.................. 236.2 215.1 873.7 809.9 683.3 631.7 520.1
Depreciation and amortization........... 13.1 13.8 57.9 53.0 49.3 47.5 44.4
Interest expense........................ 23.8 22.0 89.9 79.8 68.3 69.2 76.2
ESOP expense............................ 5.7 5.2 20.7 20.7 23.1 15.4 16.9
Deferred compensation expense........... 0.7 (0.5) 3.8 11.8 8.1 5.8 15.6
Other income, net....................... (0.8) (0.6) (7.2) (2.8) (4.9) (5.1) (8.2)
-------- ------- -------- -------- -------- -------- --------
Loss before minority interests, taxes
and extraordinary charges........... (6.2) (10.6) (19.7) (31.1) (24.5) (22.1) (51.8)
Minority interests...................... 1.7 0.6 3.5 2.0 2.1 1.8 0.1
Income tax expense (benefit)............ 0.4 0.2 2.0 (9.3) (7.6) (6.6) (17.0)
Extraordinary charges (net of
taxes)(1)............................. -- 0.6 21.9 1.3 2.6 -- --
-------- ------- -------- -------- -------- -------- --------
Net loss.............................. (8.3) (12.0) (47.1) (25.1) (21.6) (17.3) (34.9)
Redeemable preferred stock dividends.... -- -- -- 11.1 22.8 19.0 18.1
-------- ------- -------- -------- -------- -------- --------
Net loss to common stockholders....... $ (8.3) $ (12.0) $ (47.1) $ (36.2) $ (44.4) $ (36.3) $ (53.0)
-------- ------- -------- -------- -------- -------- --------
-------- ------- -------- -------- -------- -------- --------
LOSS PER SHARE:
Before extraordinary charges............ $ (0.21) $ (0.28) $ (0.63) $ (1.07) $ (1.71) $ (1.48) $ (2.16)
Extraordinary charges................... -- 0.01 0.55 0.04 0.11 -- --
-------- ------- -------- -------- -------- -------- --------
Net loss per common share............... $ (0.21) $ (0.29) $ (1.18) $ (1.11) $ (1.82) $ (1.48) $ (2.16)
-------- ------- -------- -------- -------- -------- --------
-------- ------- -------- -------- -------- -------- --------
Ratio of earnings to fixed
charges(2)(3)......................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF SEPTEMBER 30,
DECEMBER 31, ------------------------------------------------------------
1993 1993 1992 1991 1990 1989
----------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments........... $ 89.3 $ 112.5 $ 53.8 $ 84.6 $ 69.1 $ 71.3
Working capital........................... 37.6 35.1 41.3 53.7 8.3 2.8
Total assets.............................. 898.5 875.0 780.8 763.4 758.0 743.2
Long-term debt............................ 685.2 679.6 619.4 478.3 462.5 481.4
Redeemable preferred stock................ -- -- -- 186.0 163.2 144.2
Stockholders' equity (deficit)............ (82.9) (85.3) (58.4) (101.7) (79.9) (58.9)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31, YEAR ENDED SEPTEMBER 30,
-------------------- ------------------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
-------- ------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Additions to property, plant and
equipment............................. $ 23.4 $ 7.4 $ 60.8 $ 47.8 $ 25.6 $ 40.2 $ 19.4
Acquisitions............................ 1.0 4.1 54.5 12.3 -- -- --
Ratio of operating cash flow to interest
expense(4)............................ 1.5x 1.3x 1.6x 1.6x 1.7x 1.6x 1.2x
</TABLE>
- - ---------------
(1) Extraordinary after-tax charges relate to the early extinguishment of debt.
(2) The ratio of earnings to fixed charges was computed by dividing (i) income
from continuing operations before fixed charges and income taxes by (ii)
fixed charges, which consist of interest charges (interest expense plus
interest charged to construction) and the portion of rent expense which is
deemed to be equivalent to interest expense.
(3) EPIC's earnings were inadequate to cover fixed charges for the three months
ended December 31, 1993 and 1992 by $7.9 million and $11.5 million,
respectively, and the years ended September 30, 1993, 1992, 1991, 1990 and
1989 by $24.2 million, $34.1 million, $27.7 million, $24.9 million and $51.9
million, respectively.
(4) Operating cash flow represents net operating revenue less hospital service
costs. Operating cash flow and the ratio of operating cash flow to interest
expense do not take into account certain expenses that are reflected in the
calculation of net income in accordance with GAAP, are not intended to
represent any measure of performance in accordance with GAAP, and should not
be considered in isolation or as a substitute for cash provided by operating
activities, net income or any other consolidated income statement data
prepared in accordance with GAAP. The ratio of operating cash flow to
interest expense is included herein because the Company believes that it may
be a useful tool for investors in measuring a company's ability to service
its debt.
20
<PAGE> 21
SELECTED PRO FORMA FINANCIAL INFORMATION
The following selected pro forma financial information is derived from the
Unaudited Pro Forma Condensed Combined Financial Statements included elsewhere
in this Prospectus and is based upon the consolidated financial statements of
each of the Company and EPIC, adjusted to give effect to the Acquisition and the
Financing Plan. The selected pro forma statement of operations data for the year
ended August 31, 1993 and the six months ended February 28, 1994 gives effect to
the Acquisition and the Financing Plan as if they had occurred on September 1,
1992. The pro forma balance sheet data as of February 28, 1994 gives effect to
the Acquisition and the Financing Plan as if they had occurred on February 28,
1994.
All information contained in the following tables should be read in
conjunction with "The Acquisition and the Financing Plan," "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Unaudited Pro Forma Condensed Combined Financial Statements of
the Company and the consolidated financial statements and related notes of the
Company and EPIC included or incorporated by reference herein.
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1994 1993
-------------------- ----------------
(UNAUDITED)
(DOLLARS IN MILLIONS
EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenue............................................... $1,811.8 $3,413.7
Hospital service costs.............................................. 1,463.4 2,762.3
Depreciation and amortization....................................... 104.3 201.2
Interest expense.................................................... 72.6 161.1
ESOP/pension expense................................................ 31.3 59.7
Deferred compensation expense....................................... 0.6 4.3
Other income, net................................................... (4.0) (6.9)
-------- --------
Income before minority interests, taxes and extraordinary charges... 143.6 232.0
Minority interests.................................................. 6.9 15.4
Income tax expense.................................................. 57.0 90.7
-------- --------
Net income before extraordinary charges............................. $ 79.7 $ 125.9
-------- --------
-------- --------
Earnings per share before extraordinary charges..................... $ 0.89 $ 1.42
-------- --------
-------- --------
Ratio of earnings to fixed charges(1)............................... 2.5x 2.1x
-------- --------
</TABLE>
<TABLE>
<CAPTION>
AS OF
FEBRUARY 28,
1994
---------------------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C>
BALANCE SHEET DATA:
Cash and short-term investments................................... $ 20.0
Working capital................................................... 123.2
Total assets...................................................... 3,663.3
Long-term debt.................................................... 1,705.0
Stockholders' equity.............................................. 885.4
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1994 1993
-------------------- ----------------
<S> <C> <C>
OTHER DATA:
Ratio of operating cash flow to interest expense(2)................. 4.8x 3.9x
</TABLE>
- - ---------------
(1) The ratio of earnings to fixed charges was computed by dividing (i) income
from continuing operations before fixed charges and income taxes by (ii)
fixed charges, which consist of interest charges (interest expense plus
interest charged to construction) and the portion of rent expense which is
deemed to be equivalent to interest expense.
(2) Operating cash flow represents net operating revenue less hospital service
costs. For purposes of calculating the ratio of operating cash flow to
interest expense, the Company's hospital service costs have been adjusted to
include $25.5 million of cash ESOP/pension expense for the year ended August
31, 1993 (the only period presented which included cash ESOP/pension
expense). Operating cash flow and the ratio of operating cash flow to
interest expense do not take into account certain expenses that are reflected
in the calculation of net income in accordance with GAAP, are not intended to
represent any measure of performance in accordance with GAAP, and should not
be considered in isolation or as a substitute for cash provided by operating
activities, net income or any other consolidated income statement data
prepared in accordance with GAAP. The ratio of operating cash flow to
interest expense is included herein because the Company believes that it may
be a useful tool for investors in measuring a company's ability to service
its debt.
21
<PAGE> 22
SELECTED OPERATING STATISTICS
The following tables set forth certain operating statistics for the
hospitals operated by the Company and EPIC for each of the periods indicated.
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------
1993 1992 1991
---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
HISTORICAL OPERATING DATA:
Number of hospitals........................................ 81 81 85
Bed capacity(1)............................................ 11,233 11,374 11,607
Gross revenue:(2)
Inpatient................................................ $ 2,594.2 $ 2,439.3 $ 2,148.6
Outpatient............................................... $ 1,181.6 $ 1,021.9 $ 814.2
Net operating revenue(3)................................... $ 2,394.6 $ 2,265.3 $ 2,025.7
Patient days............................................... 1,541,536 1,616,340 1,658,061
Adjusted patient days(4)................................... 2,243,677 2,293,453 2,286,357
Average length of stay (days).............................. 5.4 5.5 5.7
Admissions................................................. 284,606 291,599 293,344
Adjusted admissions(5)..................................... 414,239 413,755 404,502
Occupancy rate(6).......................................... 40.5% 40.2% 40.4%
Operating margin(7)........................................ 21.1% 20.7% 20.2%
</TABLE>
EPIC HOLDINGS, INC.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1993 1992 1991
---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
HISTORICAL OPERATING DATA:
Number of hospitals........................................ 34 35 34
Bed capacity(1)............................................ 4,444 4,332 4,296
Net operating revenue:(3)
Acute inpatient net revenue.............................. $ 469.2 $ 489.1 $ 454.4
Outpatient net revenue................................... 317.2 282.1 234.7
Other net revenue(8)..................................... 232.7 170.1 113.6
---------- ---------- ----------
Net operating revenue(3)................................... $ 1,019.1 $ 941.3 $ 802.7
Patient days............................................... 589,283 641,373 643,210
Adjusted patient days(4)................................... 943,355 940,046 906,640
Average length of stay (days).............................. 5.8 6.0 6.0
Admissions................................................. 101,487 106,990 106,534
Adjusted admissions(5)..................................... 162,466 156,813 150,134
Occupancy rate(6).......................................... 39% 40% 41%
Operating margin(7)........................................ 14.3% 14.0% 14.9%
</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/or policy discounts.
(3) Net operating revenue represents gross revenue less any contractual
adjustments and/or policy discounts.
(4) Represents actual patient days adjusted to include outpatient and emergency
room services by multiplying actual patient days by the sum of inpatient
revenue and outpatient revenue and dividing the result by inpatient revenue.
(5) Represents actual admissions adjusted to include outpatient and emergency
room services by multiplying actual admissions by the sum of inpatient
revenue and outpatient revenue and dividing the result by inpatient revenue.
(6) Based on the number of licensed beds in service.
(7) 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.
(8) Other net revenue includes revenue from skilled nursing, rehabilitation and
geropsychiatric units, home health visits and management contract fees.
22
<PAGE> 23
DESCRIPTION OF EPIC
EPIC is a health care services provider that owns and operates acute care
hospitals and related health care businesses. EPIC owns and operates 34 general
acute care hospitals with a total of 4,444 licensed beds and has approximately
11,200 full time equivalent employees. EPIC's hospitals offer inpatient,
outpatient and other specialty services and are situated primarily in suburban
locations and cities in 10 southern, southwestern and western states. In
addition, EPIC offers, as an extension of its basic health care services,
certain specialty programs and services, including home health care,
rehabilitation services, skilled nursing care, health care management services
and selected mental health services. Twenty-seven of EPIC's hospitals are
located in Texas, California, Oklahoma or Louisiana. EPIC also owns or manages
(i) associated medical office buildings, as well as related health care
businesses, (ii) two long-term care facilities, (iii) certain vacant developed
and undeveloped properties and (iv) a 238,000 square foot office facility in
Dallas, Texas which serves as its administrative support center. EPIC is also
constructing a 125-bed acute care facility in Mandeville, Louisiana which is
expected to be completed in June 1994. As of December 6, 1993, the EPIC ESOP,
which was established to increase incentives to EPIC employees and to finance
the EPIC Formation, owned approximately 60.8% (53% on a fully-diluted basis) of
the EPIC common stock outstanding. Pursuant to the ESOP Agreement and in
connection with the Acquisition, contributions to the EPIC ESOP will be
terminated. See "Properties," "Price Range of Common Stock," "Dividend Policy"
and "EPIC Managements' Discussion and Analysis of Financial Condition and
Results of Operations."
PROPERTIES
The following table sets forth certain information relating to each of the
hospitals operated by the Company at November 1, 1993 and by EPIC at September
30, 1993, grouped by state. Hospitals operated by EPIC appear in italicized
type. Unless otherwise noted below, all hospitals are wholly-owned by
subsidiaries of the Company or EPIC.
<TABLE>
<CAPTION>
NUMBER OF
STATE NAME LOCATION LICENSED BEDS
- - --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Alabama Andalusia Hospital Andalusia 77
Crestwood Hospital Huntsville 120
Selma 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
Palm Drive Hospital Sebastopol 56
*Healdsburg General Hospital Healdsburg 49
*Mission Bay Memorial Hospital San Diego 150
*Visalia Community Hospital Visalia 52
Westside Hospital(1) Los Angeles 87
Florida North Okaloosa Medical Center Crestview 110
Palm Beach Regional Hospital Lake Worth 200
East Pointe Hospital Lehigh Acres 88
Palms West Hospital Loxahatchee 117
Santa Rosa Medical Center(2) Milton 129
Plantation General Hospital(3) Plantation 264
Edward White Hospital St. Petersburg 167
South Bay Hospital Sun City Center 112
*Clearwater Community Hospital(4) Clearwater 133
*Lake City Medical Center Lake City 75
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
NUMBER OF
STATE NAME LOCATION LICENSED BEDS
- - --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Georgia Doctors Hospital(5) Columbus 248
Lanier Park Regional Hospital Gainesville 124
*Barrow Medical Center Winder 60
Idaho West Valley Medical Center Caldwell 150
Eastern Idaho Regional Medical Center Idaho Falls 286
Indiana Terre Haute Regional Hospital Terre Haute 284
Kentucky Scott General Hospital Georgetown 75
Spring View Hospital Lebanon 113
PineLake Medical Center Mayfield 116
Meadowview Regional Hospital Maysville 111
Bourbon General Hospital Paris 60
Logan Memorial Hospital Russellville 100
Louisiana Medical Center of Baton Rouge Baton Rouge 225
Medical Center of SW Louisiana Lafayette 166
Women's and Children's Hospital(6) Lafayette 93
Lakeside Hospital Metairie 186
Dauterive Hospital New Iberia 113
Doctor's Hospital of Opelousas(7)(8) Opelousas 133
*Highland Park Hospital Covington 104
*Riverview Medical Center Gonzales 104
Mississippi Vicksburg Medical Center Vicksburg 144
*Garden Park Community Hospital(9) Gulfport 120
Missouri Springfield Community Hospital Springfield 200
North Carolina Davis Community Hospital Statesville 149
The Brunswick Hospital(10) Supply 60
Heritage Hospital Tarboro 127
Oklahoma Edmond Regional Medical Center Edmond 139
Wagoner Community Hospital(11) Wagoner 100
*Claremore Hospital Claremore 89
*Doctor's Medical Center Tulsa 211
*Southwestern Medical Center Lawton 108
Oregon McMinnville Community Hospital McMinnville 80
Douglas Community Hospital Roseburg 118
South Carolina Marlboro Park Hospital Bennettsville 111
Chesterfield General Hospital Cheraw 72
Colleton Regional Hospital Walterboro 131
Doctor's Memorial Hospital(8)(12) Spartanburg 108
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
NUMBER OF
STATE NAME LOCATION LICENSED BEDS
- - --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Tennessee Smith County Memorial Hospital Carthage 66
Sycamore Shoals Hospital Elizabethton 100
Trinity Hospital Erin 40
Hendersonville Hospital(13) Hendersonville 120
Johnson City Specialty Hospital(14) Johnson City 39
North Side Hospital(15) Johnson City 154
Crockett Hospital Lawrenceburg 106
Livingston Regional Hospital Livingston 106
River Park Hospital(16) McMinnville 89
South Pittsburg Municipal Hospital(17) South Pittsburg 107
Southern Tennessee Medical Center(18) Winchester 212
Stones River Hospital Woodbury 85
Texas Northeast Community Hospital Bedford 200
Valley Regional Medical Center Brownsville 158
Brownwood Regional Hospital(19) Brownwood 218
Doctors Hospital(20) Conroe 135
Medical Center Hospital Conroe 182
El Campo Memorial Hospital El Campo 41
Gilmer Medical Center Gilmer 46
Sun Belt Regional Medical Center(21) Houston 273
Midway Park Medical Center Lancaster 90
Longview Regional Hospital Longview 80
Woodland Heights Medical Center Lufkin 117
Coronado Hospital Pampa 115
Bayshore Medical Center Pasadena 469
Detar Hospital Victoria 303
Gulf Coast Medical Center Wharton 161
*Alice Physicians & Surgeons Hospital Alice 131
*Alvin Community Hospital Alvin 86
*Coastal Bend Hospital Aransas Pass 75
*Denton Regional Medical Center Denton 297
Doctor's Hospital of Laredo(22) Laredo 91
*Fort Bend Community Hospital Missouri City 80
*Katy Medical Center Katy 103
Mainland Regional Healthcare System(23) Texas City 430
Medical Arts Hospital(8) Dallas 72
Medical Arts Hospital(8) Texarkana 110
*Medical Plaza Hospital Sherman 164
North Texas Medical Center McKinney 270
*Parkway Hospital Houston 262
*Riverside Hospital Corpus Christi 89
*Round Rock Community Hospital Round Rock 75
Terrell Community Hospital(23) Terrell 101
*Westbury Hospital Houston 134
Utah Lakeview Hospital Bountiful 128
Brigham City Community Hospital Brigham City 50
Mountain View Hospital Payson 118
Castleview Hospital Price 88
Ashley Valley Medical Center Vernal 39
Pioneer Valley Hospital West Valley City 139
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
NUMBER OF
STATE NAME LOCATION LICENSED BEDS
- - --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Virginia Northern Virginia Doctors Hospital Arlington 267
Montgomery Regional Hospital Blacksburg 146
Pulaski Community Hospital Pulaski 153
Washington Capital Medical Center Olympia 110
Wyoming Riverton Memorial Hospital Riverton 70
</TABLE>
- - ---------------
* The land, building, and improvements are owned by EPIC Properties, are
subject to the Mortgages (as hereinafter defined), and are leased to EPIC
Master Leasing, Inc. ("Master Leasing") pursuant to a lease.
(1) Owned by a limited partnership of which 28.7% of the interest is held by
non-EPIC limited partners. The limited partnership has leased the hospital
to a joint venture of which approximately 23.7% is held by non-EPIC
minority owners.
(2) Lease expires in 2005, unless landlord exercises option to purchase
facility for book value in 1995.
(3) Operated by a partnership of which the Company is the general partner
owning 53% and certain physicians are limited partners owning 47%.
(4) Operated by a limited partnership of which approximately 18% of the
interest is held by non-EPIC limited partners.
(5) Owned by the Company as a tenancy in common with physicians having a
minority interest of 40.5%.
(6) Ground lease expires in 2011; there are two ten-year optional renewal
terms.
(7) Operated by a limited partnership of which approximately 23% of the
interest is held by non-EPIC limited partners.
(8) The facility is leased from a third party other than EPIC Properties.
(9) Operated by a limited partnership in which investors other than EPIC
receive the first $2 million earned by the partnership after payment of the
lease payments due to EPIC ($3 million per year, increasing by 15% per
year), and EPIC is entitled to 60% of all additional earnings.
(10) Lease expires in 2024.
(11) Lease expires in 2007.
(12) Operated by a limited partnership of which approximately 15% of the
interest is held by non-EPIC limited partners. With the consent of the
Company, EPIC has not renewed the lease for this facility. Such lease will
expire in July 1994.
(13) Owned by a partnership of which the Company is the general partner owning
83% and certain physicians are limited partners owning 17%.
(14) Owned by a partnership of which the Company is the general partner owning
87% and certain physicians are limited partners owning 13%.
(15) Owned by the Company as a tenancy in common with physicians having a
minority interest of 30.25%.
(16) Owned by a partnership of which the Company is the general partner owning
78% and certain physicians are limited partners owning 22%.
(17) 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.
(18) Includes a leased (lease expires in 2020) hospital campus located in
Sewanee, Tennessee with 50 licensed beds.
(19) Lease expires in 2000; there are two optional renewal terms of ten years
each.
(20) 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.
(21) Includes a hospital campus located at Channelview, Texas with 96 licensed
beds.
(22) Operated by a limited partnership of which approximately 22.125% of the
interest is held by non-EPIC limited partners.
(23) The hospital consists of two facilities, one of which is leased from a
third party.
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 in the table above, as of November 1,
1993, no definitive arrangements with respect to any sales or joint ventures had
been agreed upon by the Company.
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) 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 AMI, 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 addition, the Company,
through its subsidiaries or joint venture arrangements, owns, leases or manages
approximately 120 medical office buildings with physicians' office
26
<PAGE> 27
space and various parcels of undeveloped land, substantially all of which are
adjacent to its hospitals. The Company also occupies approximately 65,000 square
feet of corporate office space in Nashville, Tennessee.
Twenty-four of the 34 EPIC hospitals are owned by EPIC Properties, a
wholly-owned subsidiary of EPIC, and are subject to mortgages (the "Mortgages")
granted in connection with the issuance of the EPIC Mortgage Notes. EPIC
Properties leases these 24 hospitals to Master Leasing, a wholly-owned
subsidiary of EPIC. With respect to these 24 hospitals, EPIC has agreed to
indemnify EPIC Properties, the trustee under the indenture governing the EPIC
Mortgage Notes (the "Mortgage Notes Trustee"), all holders of the EPIC Mortgage
Notes and each of their respective subsidiaries, directors, officers, agents,
successors and assigns from liabilities relating to the presence of hazardous
wastes, any medical or infectious wastes, or substances in the soil or ground
water of any real property on which such hospitals are located in concentrations
that the applicable federal or state environmental agency would require remedial
action to correct (the "Environmental Indemnity"). Pursuant to the Environmental
Indemnity, EPIC is obligated to remediate or to cause to be remediated any
spill, leak, disposal, discharge or release of certain materials on or beneath
any property occurring during the period that the EPIC Mortgage Notes remain
outstanding. EPIC Properties has collaterally assigned the Environmental
Indemnity to the Mortgage Notes Trustee.
27
<PAGE> 28
PRICE RANGE OF COMMON STOCK
HEALTHTRUST
The Common Stock is listed on the NYSE under the symbol "HTI." On April 28,
1994, the last sale price of the Common Stock, as reported on the NYSE, was $29
per share. The following table sets forth the high and low sale prices of the
Common Stock for the periods indicated as reported by the NYSE Composite Tape
since the initial public offering of the Common Stock on December 13, 1991:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, 1992 HIGH LOW
------------------------------------------------------------------- ---- ----
<S> <C> <C>
Second Quarter (beginning December 13, 1991).................. $23 3/4 $13 5/8
Third Quarter................................................. 20 5/8 14 1/8
Fourth Quarter................................................ 17 1/4 13 1/8
FISCAL YEAR ENDED AUGUST 31, 1993
-------------------------------------------------------------------
First Quarter................................................. 17 7/8 11 7/8
Second Quarter................................................ 19 7/8 12
Third Quarter................................................. 19 1/8 13 3/8
Fourth Quarter................................................ 21 7/8 17 3/8
FISCAL YEAR ENDING AUGUST 31, 1994
-------------------------------------------------------------------
First Quarter................................................. 24 3/4 19 3/4
Second Quarter................................................ 29 5/8 22 1/2
Third Quarter (through April 28, 1994)........................ 33 1/4 27 3/4
</TABLE>
EPIC
There is no established trading market for the common stock of EPIC
Holdings. The EPIC Holdings common stock is not listed on any securities
exchange or quoted on the National Association of Securities Dealers Automated
Quotation System. As of December 14, 1993, there were 43 holders of record of
the EPIC Holdings common stock. In addition, there is no established trading
market for the common stock of EPIC Group, and as of December 14, 1993, EPIC
Holdings was the only holder of record thereof.
DIVIDEND POLICY
The Company has never paid dividends on its Common Stock. The Company
currently intends to retain earnings for working capital, capital expenditures,
general corporate purposes and reduction of outstanding indebtedness.
Accordingly, the Company does not expect to pay dividends in the foreseeable
future. In addition, the declaration and payment of dividends on the Common
Stock are prohibited by the terms of the Company's existing bank credit facility
and restricted by the indentures governing certain of the Company's other long
term indebtedness (including the indenture pursuant to which the indebtedness to
be issued in the Subordinated Debt Offering will be issued), and the Company
anticipates that similar prohibitions will be included in the 1994 Credit
Agreement.
Each share of EPIC Holdings common stock and EPIC Group common stock has an
equal and ratable right to receive dividends to be paid from EPIC's assets
legally available therefor when, as and if declared by the Board of Directors of
EPIC Holdings or EPIC Group, as the case may be. No dividends have been paid on
the EPIC Holdings common stock. Cash dividends of $1,022,000 were paid on the
EPIC Group common stock in September 1993. The declaration and payment of
dividends on the EPIC Holdings common stock and EPIC Group common stock are
restricted by the terms of the instruments governing certain of EPIC's
outstanding long-term indebtedness. It is anticipated that if the Acquisition
and the Financing Plan (including the Tender Offers or the related consent
solicitation) are consummated, such restrictions will be eliminated.
28
<PAGE> 29
EPIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion has been taken from the Annual Report on Form 10-K
for the fiscal year ended September 30, 1993 and the Quarterly Report on Form
10-Q for the quarter ended December 31, 1993 of EPIC Holdings and EPIC Group.
Such discussion should be read in conjunction with the historical financial
statements of EPIC Holdings and EPIC Group appearing elsewhere in this
Prospectus.
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
The following table summarizes certain operating results and statistics of
EPIC Group for the years ended September 30, 1993, 1992 and 1991 (dollars in
thousands).
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1993 1992 1991
------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Operating result(s)
Net operating revenue................ $1,019,149 100% $941,266 100% $802,689 100%
Costs and expenses:
Salaries and wages................. 354,326 35 319,868 34 271,007 34
Employee benefits.................. 84,615 8 81,365 9 68,434 9
ESOP expense....................... 20,715 2 20,714 2 23,076 3
Supplies........................... 121,986 12 116,145 12 99,882 12
Uncompensated care................. 80,643 8 69,308 7 59,425 7
Professional liability insurance... 13,570 1 13,268 2 14,878 2
Other.............................. 222,200 22 221,611 24 177,755 22
Depreciation and amortization...... 57,917 6 53,013 6 49,354 6
Interest expense................... 70,934 7 71,000 7 68,266 9
Interest income...................... (3,627) -- (3,822) (1) (5,405) (1)
(Gain) loss on sale of assets........ (3,521) -- 1,123 -- 543 --
---------- --- -------- --- -------- ---
Loss before income tax benefit,
minority interests and
extraordinary item................. $ (609) -- $(22,327) (2)% $(24,526) (3)%
---------- --- -------- --- -------- ---
---------- --- -------- --- -------- ---
Other Data:
EBDAIT(1)(2)......................... $ 145,058 14% $129,383 14% $117,902 15%
Operating Statistics
Equivalent admissions(3)............. 162,466 156,813 150,134
Admissions(4)
Medicare and Medicaid.............. 65,867 65% 65,659 61% 60,701 57%
Private and other.................. 35,620 35 41,331 39 45,833 43
---------- --- -------- --- -------- ---
Total........................... 101,487 100% 106,990 100% 106,534 100%
Outpatient:
Visits............................. 1,002,547 918,187 789,244
Surgeries.......................... 69,153 66,965 62,892
Home health visits................... 1,094,842 502,998 202,946
Equivalent patient days(5)........... 943,355 940,046 906,640
Patient days......................... 589,293 641,373 643,210
Licensed beds occupancy rate......... 39% 40% 41%
Licensed beds at end of period....... 4,444 4,332 4,296
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Net revenues by payor:
Medicare....................................... 48% 44% 39%
Medicaid....................................... 7 7 7
Private and other.............................. 45 49 54
--- --- ---
Total....................................... 100% 100% 100%
--- --- ---
--- --- ---
</TABLE>
- - ---------------
(1) Percentages are expressed as percentages of net operating revenue.
(2) This item represents earnings before depreciation, amortization, interest
expense, interest income, income tax benefit, ESOP expense, non-cash SAR
expense, minority interests, gain on sale of assets and extraordinary item.
It is not intended to represent cash flow or any other measure of
performance in accordance with generally accepted accounting principles.
EBDAIT is included herein because EPIC management believes that certain
investors find it to be a useful tool for measuring the ability to service
debt.
(3) Represents actual admissions as adjusted to include outpatient services by
adding to actual admissions an amount derived by dividing outpatient revenue
by inpatient revenue per admission. EPIC Group believes that this statistic
is frequently used as a benchmark to analyze the volume of total services
provided to patients and has become more meaningful than occupancy rates and
patient days as a result of industry trends toward increased use of
outpatient services.
(4) Percentages are expressed as percentage of total admissions.
(5) Represents actual patient days as adjusted to include outpatient services by
adding to actual patient days an amount derived by dividing outpatient
revenue by inpatient revenue per patient day.
RESULTS OF OPERATIONS -- EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NET OPERATING REVENUE
EPIC Group recorded net operating revenue of $1,019.1 million for the year
ended September 30, 1993. Net operating revenue increased $77.9 million (8%) in
1993 and $138.6 million (17%) in 1992.
Acute inpatient net revenue, which totalled $469.2 million for the year
ended September 30, 1993, decreased $19.9 million (4%) in 1993, and increased
$34.7 million (8%) in 1992. Approximately 50% of the decrease in 1993 was due to
the sale of two hospitals during the second quarter of fiscal 1993. This
decrease was offset by additional Medicare and Medicaid payments during 1993.
The increase during 1992 was due to additional Medicare and Medicaid payments
and price increases of up to 10% in selected markets and services. Acute
inpatient admissions, which totalled 89,247 in 1993, decreased 7% in 1993 and 1%
in 1992, and acute patient days, which totalled 408,216 in 1993, decreased 8% in
1993 and 3% in 1992, as the direction of healthcare services shifted toward
outpatient services, inpatient specialty units, and home health services.
Outpatient net revenue, which totalled $317.2 million for the year ended
September 30, 1993, increased $35.1 million (12%) in 1993 and $47.4 million
(20%) in 1992. The number of outpatient surgeries, which totalled 69,153 in
1993, increased 3% in 1993 and 6% in 1992, respectively, and selected price
increases were implemented in 1992. Other outpatient visits, which totalled
1,002,547 in 1993, increased 9% in 1993 and 16% in 1992.
Inpatient specialty unit net revenue, which totalled $111.3 million for the
year ended September 30, 1993, and for which EPIC Group generally receives
payment on a cost reimbursement basis, increased $.7 million (1%) in 1993 and
$12.6 million (13%) in 1992. Specialty unit admissions increased 13% in 1993 and
15% in 1992. The number of specialty care units, which include skilled nursing,
rehabilitation, and geriatric psychiatric units, were 56, 57 and 52 at September
30, 1993, 1992 and 1991, respectively.
Net revenue from home health visits, which totalled $85.7 million for the
year ended September 30, 1993, increased $47.9 million (127%) in 1993 and $24.8
million (191%) in 1992. Home health visits increased 118% in 1993 and 148% in
1992. Approximately 34% and 19% of the increases in home health visits in 1993
and 1992, respectively, resulted from the purchase of existing home health
businesses in EPIC Group's current markets.
30
<PAGE> 31
Other revenue which totaled $36.0 million for the year ended September 30,
1993, increased $14.3 million (66%) in 1993 and $9.5 million (78%) in 1992. Of
this revenue, total geriatric psychiatric, rehabilitation and home healthcare
management contract fees increased $9.7 million and $4.4 million during 1993 and
1992, respectively.
Net patient revenue attributable to patients covered under the Medicare,
Medicaid and other government programs as a percentage of total net patient
revenue was 55%, 51% and 46% for 1993, 1992 and 1991, respectively. Net revenue
attributable to patients covered under various contracted discount programs
totaled 18%, 18% and 20% of total net revenue for 1993, 1992 and 1991,
respectively. The increase in net revenue was due, in part, to increased
admissions of Medicare and Medicaid patients, including the continued increase
in utilization of specialty care units and home health services for which EPIC
is paid on a cost reimbursement basis, and the increase in rates paid by
governmental entities under Medicare and Medicaid programs.
COSTS AND EXPENSES
Costs and expenses, as a percentage of net operating revenue decreased 2%
in 1993 and 1% in 1992.
Salaries and wages increased 1% as a percentage of net operating revenue in
1993 compared to 1992 due to the increase in home health net revenue, which is
more labor intensive than inpatient care. Salaries and wages remained constant
as a percentage of net operating revenue in 1992 compared to 1991. EPIC ESOP
expense remained constant as a percentage of net operating revenue in 1993
compared to 1992 and decreased 1% as a percentage of net operating revenue in
1992 compared to 1991 due to increased contributions in 1991 to the EPIC ESOP.
Other expenses decreased 2% as a percentage of net operating revenue in
1993 compared to 1992 and increased 2% as a percentage of net operating revenue
in 1992 compared to 1991 due primarily to $2.9 million in expenditures to
upgrade various computer software applications during 1992 not incurred in 1993,
and a $6.6 million increase during 1992 in costs relating to programs to recruit
new physicians. There were no significant fluctuations in employee benefits,
supplies, uncompensated care and professional liability insurance as a
percentage of net operating revenue from 1991 to 1993.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $4.9 million in 1993 compared to
1992 and $3.6 million in 1992 compared to 1991. The increases resulted from
property and equipment additions, net of asset sales and retirements. Fiscal
1993 and 1992 also include depreciation on $9.8 million of property and
equipment relating to Colonial Hospital, which was purchased October 1, 1991.
INTEREST EXPENSE AND INTEREST INCOME AND GAIN ON SALE OF ASSETS
Interest expense decreased $.1 million in 1993 compared to 1992 and
increased $2.7 million in 1992 compared to 1991. The 1993 change was due to an
increase in the amount of debt outstanding beginning in the third quarter offset
by a decrease in interest rates. The 1992 increase was due to accretion of
non-cash interest on certain notes and termination of an interest rate cap
agreement in 1992. Interest income did not fluctuate significantly over the
three-year period. During the second quarter of fiscal 1993, EPIC Group sold
Valley Medical Center ("Valley") in El Cajon, California, which resulted in a
gain on sale of $4.6 million. Other dispositions during fiscal 1993, including
Westpark Community Hospital in Hammond, Louisiana ("Westpark"), resulted in
losses on sale of $1.1 million.
LOSS BEFORE INCOME TAX BENEFIT, MINORITY INTERESTS AND EXTRAORDINARY ITEM
EPIC Group incurred a loss before income tax benefit, minority interests,
and extraordinary item of $.6 million, $22.3 million and $24.5 million for the
years ended September 30, 1993, 1992, and 1991,
31
<PAGE> 32
respectively. The following non-cash charges are included in the loss before
income tax benefit, minority interests and extraordinary item:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Depreciation and amortization.......................... $ 57,917 $ 53,013 $ 49,354
Non-cash portion of SAR Plan compensation expense...... 3,249 10,805 7,137
Non-cash portion of interest expense................... 18,286 18,417 13,975
Non-cash portion of professional liability risks....... 2,641 4,131 11,291
ESOP expense........................................... 20,715 20,714 23,076
-------- -------- --------
Total........................................ $102,808 $107,080 $104,833
-------- -------- --------
-------- -------- --------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1993, EPIC Group had working capital of $30.0 million
(current assets of $210.1 million less current liabilities of $180.1 million),
which included approximately $107.9 million of cash, cash equivalents and
marketable securities. EPIC's existing bank credit facility requires $42.7
million in cash and marketable securities be restricted for the redemption of
the remaining outstanding Senior Subordinated Notes. EPIC Group has available
$30 million in loan commitments under the bank credit facility. EPIC Properties
has a revolving line of credit of the lesser of $22.0 million or the annual
interest accrual on the EPIC Mortgage Notes for the purpose of paying the EPIC
Mortgage Notes interest and principal.
Because AMI assumes all liability for professional liability incidents
occurring prior to October 1, 1988 at EPIC Group's facilities acquired from AMI,
EPIC Group continues to experience lower cash payments for its professional
liability losses than has historically been the case for these hospitals. That
fact, coupled with the relatively long lag time for settlement of professional
liability claims, has led EPIC Group to expect that professional liability
payments for which EPIC Group is self-insured, will be comparable to or less
than the related expense in the next several years.
On June 18, 1993, EPIC Group implemented a refinancing plan designated to
improve its operating and financial flexibility by reducing its future interest
expense (the "Refinancing"). The Refinancing included the following components:
(i) the issuance and sale in a public offering of approximately $160 million
aggregate principal amount of 10 7/8% Notes; (ii) redemption of $74.7 million of
EPIC Group's 15% Senior Subordinated Notes; and (iii) the redemption of $53.7
million principal amount of EPIC Group's 11% Junior Subordinated Pay-in-Kind
Notes with $20 million of the proceeds from the offering and $10 million of
working capital. EPIC Group was required to call $40.3 million of the 15% Senior
Subordinated Notes on February 1, 1994, with the remaining proceeds as required
by EPIC Group's existing bank credit facility. As a result of the refinancing,
EPIC Group incurred an extraordinary loss before tax of $21.4 million from the
write-off of loan issue costs and unamortized discount on the 15% Senior
Subordinated Notes and the redeemed 11% Pay-in-Kind Notes, payments to the
holders of the 15% Senior Subordinated Notes and the 11 7/8% Senior ESOP Notes
for waivers of certain provisions of the respective indentures and the accrual
of the call premium to be paid on redemption of $40.3 million of the 15% Senior
Subordinated Notes.
Cash provided by operating activities totalled $119.2 million and $57.9
million for the years ended September 30, 1993 and 1992, respectively. The
increase in operating cash in fiscal 1993 was due to a decrease in the loss
before income tax benefit (expense), minority interests and extraordinary item
of $21.7 million in fiscal 1993. Also, accounts receivable increased $35.2
million in fiscal 1992, which was attributable primarily to an increase of $41.8
million in net operating revenue in the fourth quarter of fiscal 1992.
Cash used in investing activities totalled $123.5 million and $61.0 million
for the years ended September 30, 1993 and 1992, respectively. EPIC Group added
other property and equipment totalling $60.8 million and $47.9 million during
fiscal 1993 and 1992, respectively. EPIC Group's investments in marketable
securities increased $36.7 million during fiscal 1993 and decreased $5.2 million
during fiscal 1992.
32
<PAGE> 33
The County of Galveston, Texas, entered into an agreement with EPIC
providing for the lease for 20 years of Mainland Center Hospital ("Mainland"),
the County's 310-bed facility, and the purchase of certain of the hospital's net
current assets and equipment. The lease payments, which were paid in full upon
execution of the lease, and purchase price of the net assets and equipment
acquired totaled $46 million, a portion of which was offset by the cash included
in Mainland's current assets (approximately $5 million). The lease also provides
EPIC with two additional ten year options to extend the lease and the right to
purchase the facility on the first anniversary of the lease for approximately
$.5 million.
During fiscal 1993, EPIC purchased two imaging centers for $7.8 million and
two home health agencies for $4.0 million. On October 1, 1991, EPIC Group
purchased Colonial Hospital, a 49-bed hospital in Terrell, Texas, for $10.4
million.
EPIC sold Westpark in January 1993 for $6.2 million in cash and recorded a
net loss on the sale of $.6 million in 1993 and $.8 million in fiscal 1992 in
anticipation of the sale. EPIC sold Valley in March 1993 for $17 million in cash
and recorded a gain on sale of $4.6 million. EPIC retained ownership of
Westpark's and Valley's accounts receivable and other current assets.
Cash provided by financing activities totalled $28.4 million for the year
ended September 30, 1993 and cash used in financing activities totalled $33.1
million for the year ended September 30, 1992. The Refinancing provided $44.8
million of net proceeds in 1993. A subsidiary of EPIC Group purchased $5.4
million and $19.9 million of the 11 7/8% Senior ESOP Notes on the open market
for $5.6 million and $20.3 million plus accrued interest in fiscal 1993 and
1992, respectively. During fiscal 1993, EPIC paid $5.5 million in debt issue
costs relating to the Refinancing. On August 31, 1993, EPIC purchased
Healthtrust's 40% interest in the North Texas Medical Center Joint Venture in
McKinney, Texas, which owns and operates North Texas Medical Center, for $15.7
million.
EPIC management believes EPIC Group's hospitals are well maintained and
equipped and permitted expenditures will be sufficient to meet EPIC Group's
ongoing capital requirements at its operating facilities. Capital expenditures
totalling approximately $75 million are planned for fiscal 1994, including
completion of construction of a new hospital near Covington, Louisiana, which
commenced in June 1992, and continuation of construction of a new hospital in
Denton, Texas, which commenced in June, 1993.
The Internal Revenue Service (the "IRS") has audited EPIC's federal income
tax return for the year ended September 30, 1989. As a result of the audit, the
IRS had proposed the permanent capitalization of approximately $24 million of
debt issuance costs. EPIC has fully protested its position with the IRS. EPIC
was required to capitalize and amortize certain loan costs which were previously
expensed. This adjustment resulted in the reduction of EPIC Holdings' current
net operating loss by approximately $7 million.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes," which supersedes SFAS No. 96. Implementation of SFAS No. 109 for EPIC
Group is required as of October 1, 1993. SFAS No. 109 requires that differences
between the tax and financial statement bases of assets and liabilities
("temporary differences") be reflected in the same balance sheet category as the
items that caused the temporary differences. Deferred tax assets, which would
include tax net operating loss carryforwards, would require the determination of
a related valuation allowance, based on the assets' expected realization. EPIC
has completed the analysis necessary to determine the impact of adoption of SFAS
No. 109 and it is not expected to have a material impact on its financial
position or results of operations and will not impact cash flows.
EPIC has reviewed its benefit programs and has determined it offers no post
employment benefits that require accrual in accordance with SFAS No. 112,
"Employers' Accounting for Postemployment Benefits."
Total scheduled debt maturities are $47.9, $9.5 and $43.5 million in fiscal
1994, 1995 and 1996, respectively, and expected annual cash interest payments
are approximately $58 million through fiscal 1996. See Note 5 of the Notes to
EPIC Group's Consolidated Financial Statements for information regarding EPIC's
indebtedness. In addition to the indebtedness of EPIC, EPIC Holdings, the parent
corporation of EPIC, has outstanding $250 million principal amount ($167.2
million value at September 30, 1993) of the EPIC 12% Notes, which require cash
interest payments commencing in March 1997. Such interest payments,
33
<PAGE> 34
as well as the principal payment upon maturity in 2002, are expected to be
funded out of dividends from EPIC Group to EPIC Holdings. Although EPIC Group's
indebtedness is substantial, EPIC management believes that cash, cash
equivalents and marketable securities on hand, cash flow from operations, and
the availability of funds under revolving bank credit facilities will provide
sufficient liquidity to meet all cash requirements for the next several years.
RESULTS OF OPERATIONS -- EPIC HOLDINGS, INC. AND SUBSIDIARIES
GENERAL
Net operating revenue, operating expenses, depreciation and amortization,
and interest income of EPIC Holdings were substantially the same as those of
EPIC Group for fiscal years 1993, 1992 and 1991 and reference is made to the
discussion of EPIC Group's " -- Results of Operations," and " -- Liquidity and
Capital Resources" above.
Following is additional information relating to EPIC Holdings.
INTEREST EXPENSE
Interest expense increased $10.1 million and $11.5 million in 1993 and
1992, respectively, due to the issuance of the EPIC 12% Notes during fiscal
1992.
LOSS BEFORE INCOME TAX BENEFIT AND MINORITY INTEREST
EPIC Holdings incurred losses before income tax benefit, minority interest,
and extraordinary item of $19.7 million, $31.1 million and $24.5 million for the
years ended September 30, 1993, 1992, and 1991, respectively. The following
non-cash charges are included in the loss before income tax benefit and minority
interests for the years ended September 30, 1993, 1992 and 1991 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Depreciation and amortization.............. $ 57,917 $ 53,013 $ 49,354
Non-cash portion of SAR Plan compensation
expense.................................. 3,249 10,805 7,137
Non-cash portion of interest expense....... 36,855 27,190 13,975
Non-cash portion of professional liability
risks.................................... 2,641 4,131 11,291
ESOP expense............................... 20,715 20,714 23,076
-------- -------- --------
Total............................ $121,377 $115,853 $104,833
-------- -------- --------
-------- -------- --------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1993 EPIC Holdings had working capital of $35.1 million
(current assets of $215.2 million less current liabilities of $180.1 million),
which included approximately $112.5 million of cash, cash equivalents and
marketable securities. EPIC's existing bank credit facility requires $42.7
million in cash and marketable securities be restricted for the redemption of
the remaining outstanding 15% Senior Subordinated Notes. EPIC Group has
available $30 million in loan commitments under EPIC's existing bank credit
facility. EPIC Properties has a revolving line of credit of the lesser of $22.0
million or the annual interest accrual on the EPIC Mortgage Notes for the
purpose of paying the EPIC Mortgage Notes interest and principal.
EPIC expects to continue to incur federal income tax loss in the near term
primarily as a result of the deductibility of contributions to the EPIC ESOP,
higher depreciation for tax purposes than for financial reporting purposes, and
high interest expense.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes," which supersedes SFAS No. 96. Implementation of SFAS No. 109 for EPIC is
required on October 1, 1993. SFAS No. 109 requires that differences
34
<PAGE> 35
between the tax and financial statement bases of asset and liabilities
("temporary differences") be reflected in the same balance sheet category as the
items that caused the temporary differences. Deferred tax assets, which would
include tax net operating loss carryforwards, would require the determination of
a related valuation allowance, based on the assets' expected realization. EPIC
has completed the analysis necessary to determine the impact of adoption of SFAS
No. 109 and it is not expected to have a material impact on EPIC Holdings'
financial position or results of operations and will not impact cash flows.
EPIC has reviewed its benefit programs and has determined that it offers no
post employment benefits that require accrual in accordance with SFAS No. 112,
"Employers' Accounting for Postemployment Benefits."
See " -- Liquidity and Capital Resources" of EPIC Group for further
discussion of matters relating to liquidity and capital resources of EPIC
Holdings.
Although EPIC Holdings' indebtedness, including EPIC Group's indebtedness,
is substantial, EPIC management believes cash, cash equivalents and marketable
securities on hand, cash flow from operations, and the availability of funds
under revolving bank credit facilities will provide sufficient liquidity to meet
all cash requirements for the next several years.
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS -- THREE MONTHS ENDED DECEMBER 31, 1993 COMPARED TO THREE
MONTHS ENDED DECEMBER 31, 1992
NET OPERATING REVENUE
EPIC Group recorded net operating revenue of $272.5 million for the
three-month period ended December 31, 1993, an increase of $28.1 million (12%)
compared to the three-month period ended December 31, 1992.
Acute inpatient net revenue, which totalled $118.3 million for the
three-month period ended December 31, 1993, increased $2.9 million (2%) compared
to the three-month period ended December 31, 1992, due primarily to increased
reimbursement recognized from Medicare and Medicaid programs. Acute inpatient
admissions remained constant and acute inpatient patient days decreased 4% in
the three-month period, respectively, as the direction of healthcare services
continues to shift toward outpatient services, inpatient specialty units and
home health services.
Outpatient net revenue, which totalled $87.3 million for the three-month
period ended December 31, 1993, increased $9.4 million (12%) compared to the
three-month period ended December 31, 1992 as a result of a 9% increase in
clinic and other outpatient visits.
Inpatient specialty unit net revenue, which totalled $27.8 million for the
three-month period ended December 31, 1993, increased $0.8 million (3%) compared
to the three-month period ended December 31, 1992.
Net revenue from home health visits, which totalled $25.9 million for the
three-month period ended December 31, 1993, increased $8.8 million (52%)
compared to the three-month period ended December 31, 1992. Home health visits
increased 46% in the three-month period. Approximately 31% of the increase in
home health visits resulted from the purchase of existing home health
businesses.
Other revenue, which totalled $13.2 million for the three-month period
ended December 31, 1993, increased $6.2 million compared to the three-month
period ended December 31, 1992. Geriatric psychiatric, rehabilitation and home
healthcare management contract fees increased $3.3 million in the three-month
period.
Net patient revenue attributable to Medicare and Medicaid patients as a
percentage of total net revenue was 58% and 53% for the three-month periods
ended December 31, 1993 and 1992, respectively. Net patient revenue attributable
to patients covered under various managed care programs as a for the three-month
periods ended December 31, 1993 and 1992, respectively.
35
<PAGE> 36
COSTS AND EXPENSES
Costs and expenses decreased 2% as a percentage of net operating revenue
for the three-month period ended December 31, 1993 compared to the three-month
period ended December 31, 1992.
Salaries and wages increased 2% as a percentage of net operating revenue
for the three-month period ended December 31, 1993 compared to the three-month
period ended December 31, 1992 due to the increase in home health services,
which is more labor intensive than inpatient care. Employee benefits decreased
2% as a percentage of net operating revenue for the three-month period ended
December 31, 1993 compared to the three-month period ended December 31, 1992
primarily due to a decrease in the costs of providing medical benefits. EPIC
Group made changes to its medical benefit plan effective January 1, 1993 to
reduce these costs. These changes included increased utilization review,
implementation of a managed care referral program, and increased deductibles and
out-of-pocket maximums. EPIC ESOP expense remained constant as a percentage of
net operating revenue for the three-month period ended December 31, 1993
compared to the three-month period ended December 31, 1992.
Depreciation and amortization decreased 1% as a percentage of net operating
revenue for the three-month period ended December 31, 1993 compared to the
three-month period ended December 31, 1992 due to the increase in net revenue.
Supplies, uncompensated care, other operating expenses, and interest expense
remained constant as a percentage of net operating revenue for the three-month
period ended December 31, 1993 compared to the three-month period ended December
31, 1992.
LOSS BEFORE INCOME TAX BENEFIT (EXPENSE), MINORITY INTERESTS AND EXTRAORDINARY
ITEM
EPIC Group incurred a loss before income tax benefit (expense), minority
interests and extraordinary item of $1.1 million, for the three-month period
ended December 31, 1993, compared to a loss of $6.0 million for the three-month
period ended December 31, 1992.
Earnings before depreciation and amortization, interest expense, interest
income, income tax benefit (expense), ESOP expense, non-cash SAR expense,
minority interests and extraordinary items (EBDAIT) as a percentage of net
operating revenue increased from 11.57% for the three-month period ended
December 31, 1992 to 12.96% for the three-month period ended December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1993, EPIC Group had working capital of $32.6 million
(current assets of $222.8 million less current liabilities of $190.2 million),
which included $84.6 million in cash, cash equivalents and marketable
securities. The revolving credit agreement requires $42.7 million in cash and
marketable securities be restricted for the redemption of the remaining 15%
Senior Subordinated Notes by February 28, 1994. EPIC Group has available an
additional $30 million in loan commitments from a group of banks under a
revolving line of credit agreement. EPIC Properties has available a revolving
line of credit of the lesser of $22 million or the annual interest accrual on
the EPIC Mortgage Notes for the purpose of paying the EPIC Mortgage Notes
interest and principal.
Cash used in operating activities totalled $1.1 million and cash provided
by operating activities totalled $15.0 million for the three-month periods ended
December 31, 1993, and 1992, respectively. Accounts receivable increased $22.4
million during the first quarter of fiscal 1994 primarily due to an increase in
net operating revenue.
Cash used in investing activities totalled $11.8 million and $5.9 million
for the three-month periods ended December 31, 1993, and 1992, respectively.
EPIC Group made capital additions of approximately $23.4 million and $7.4
million during the three months ended December 31, 1993, and 1992, respectively.
EPIC management believes that EPIC Group's hospitals are well maintained and
equipped and that planned and permitted expenditures will be sufficient to meet
EPIC Group's ongoing capital requirements at its operating facilities. Capital
expenditures totalling approximately $52 million are planned for the remainder
of fiscal 1994 including completion of construction of
36
<PAGE> 37
a new hospital near Covington, Louisiana and continuation of construction of a
new hospital in Denton, Texas. On December 31, 1992, EPIC Group purchased an
imaging center for $4.1 million.
Cash used in financing activities totalled $2.9 million and $7.3 million
for the three-month periods ended December 31, 1993 and 1992, respectively.
During the first quarter of fiscal 1993, a subsidiary of EPIC Group purchased
$5.4 million of the 11 7/8% Senior ESOP Notes on the open market for $5.6
million plus accrued interest.
Total scheduled debt maturities are $47.9, $9.5 and $43.5 million in fiscal
1994, 1995 and 1996, respectively. EPIC is expected to make cash interest
payments of approximately $58 million per year through fiscal 1996. See Note 5
of the Notes to EPIC Group's Consolidated Financial Statements for the year
ended September 30, 1993, for information regarding EPIC Group's indebtedness.
In addition to the indebtedness of EPIC Group, EPIC Holdings, the parent
corporation of EPIC Group, has outstanding $250 million principal amount ($172.2
million accreted value at December 31, 1993) of the EPIC Holdings Notes, which
require cash interest payments commencing in March 1997. Such interest payments,
as well as the principal payment upon maturity in 2002, is expected to be funded
out of dividends to EPIC Holdings. Although EPIC's indebtedness is substantial,
EPIC management believes that cash, cash equivalents and marketable securities
on hand, cash flow from operations, and the availability of funds under
revolving bank credit facilities will provide sufficient liquidity to meet all
cash requirements for the next several years.
EPIC HOLDINGS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS -- THREE MONTHS ENDED DECEMBER 31, 1993 COMPARED TO THREE
MONTHS ENDED DECEMBER 31, 1992
Operations of EPIC Holdings were substantially the same as those of EPIC
Group for the three-month periods ended December 31, 1993 and 1992 with the
exception of interest expense. EPIC Holdings' interest expense remained constant
as a percentage of net operating revenue for the three-month period ended
December 31, 1993, compared to the three-month period ended December 31, 1992.
EPIC Holdings incurred a loss before income tax, minority interests and
extraordinary item of $6.2 million for the three-month period ended December 31,
1993, compared to a loss of $10.6 million for the three-month period ended
December 31, 1992.
Earnings before depreciation and amortization, interest expense, interest
income, income tax benefit (expense), EPIC ESOP expense, noncash SAR expense,
minority interests and extraordinary items (EBDAIT) as a percentage of net
operating revenue increased from 11.56% for the three-month period ended
December 31, 1992 to 12.94% for the three-month period ended December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1993, EPIC Holdings had working capital of $37.6 million
(current assets of $227.9 million less current liabilities of $190.3 million),
which included $89.3 million of cash, cash equivalents and marketable
securities. The revolving credit agreement requires $42.7 million in cash and
marketable securities be restricted for the redemption of the remaining
outstanding 15% Senior Subordinated Notes by February 28, 1994. EPIC Group has
available $30 million in loan commitments from a group of banks under a
revolving credit agreement. EPIC Properties has available a revolving line of
credit of the lesser of $22 million or the annual interest accrual on the EPIC
Mortgage Notes for the purpose of paying the EPIC Mortgage Notes interest and
principal.
Although EPIC Holdings' indebtedness, including EPIC Group's indebtedness,
is substantial, EPIC management believes cash, cash equivalents and marketable
securities on hand, cash flow from operations, and the availability of funds
under revolving bank credit facilities will provide sufficient liquidity to meet
all cash requirements for the next several years.
37
<PAGE> 38
SELLING STOCKHOLDERS
The Selling Stockholders listed in the table below have agreed to sell the
number of shares of Common Stock set forth opposite their respective names.
Except as noted below, all such shares of Common Stock are being sold in the
Offerings upon exercise of Warrants held by the Selling Stockholders at an
exercise price of $3.18 per share. The table sets forth information with respect
to the beneficial ownership of the Common Stock immediately prior to the
consummation of the Offerings and as adjusted to reflect the sale of the Common
Stock pursuant to the Offerings. Except as otherwise noted, none of the Selling
Stockholders has had any position, office or other material relationship with
the Company or its affiliates within the past three years. Following
consummation of the Offerings, none of the Selling Stockholders will
beneficially own any shares of Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
PRIOR TO THE
OFFERINGS
------------------- NUMBER
NUMBER OF OF SHARES
SELLING STOCKHOLDERS SHARES PERCENT BEING OFFERED
- - --------------------------------------------------------- --------- ------- -------------
<S> <C> <C> <C>
Base Assets Trust........................................ 645,955 * 645,955
Commonwealth Life Insurance.............................. 97,000 * 97,000
Guaranty Reassurance Corporation......................... 47,150 * 47,150
American Financial Corporation........................... 28,290 * 28,290
Flexi-Van Leasing, Inc................................... 28,290 * 28,290
Donaldson, Lufkin & Jenrette Securities Corporation(1)... 20,875 * 20,875
Western Financial Savings Bank........................... 18,860 * 18,860
Berkeley Atlantic Income Limited(2)...................... 14,145 * 14,145
Comdisco, Inc............................................ 14,145 * 14,145
Lexington Precision Corporation.......................... 14,145 * 14,145
Thomas Spiegel........................................... 14,145 * 14,145
EQJ Partnership(3)....................................... 10,362 * 10,362
Equitable Life Assurance Society(3)...................... 8,000 * 8,000
Wolfson Equities(4)...................................... 7,500 * 7,500
American Capital High Yield Investments Inc.(5).......... 5,994 * 5,994
John Chulick & Kathi Chulick............................. 5,752 * 5,752
Berkeley Technology Investments Limited(2)............... 5,658 * 5,658
General American Life Insurance Co....................... 4,715 * 4,715
National Western Life Insurance Co.(6)................... 3,772 * 3,772
Universal Medical Buildings L.P.......................... 3,750 * 3,750
South Ferry #2 L.P.(4)................................... 3,000 * 3,000
Christian Brothers Institute............................. 2,829 * 2,829
Stephen Swid............................................. 2,829 * 2,829
The Westwood Group, Inc.................................. 2,829 * 2,829
Worldwide Special Portfolio N.V.......................... 2,829 * 2,829
American Capital Income Trust(5)......................... 2,661 * 2,661
Merrill Lynch, Pierce, Fenner & Smith Incorporated(7).... 1,886 * 1,886
Warren F. Langford Trust(8).............................. 1,320 * 1,320
Citizens Trust Company, Agent for the Trustees of the
Lawrence K. Fish Trust f/b/o Edward T. Fish, Emily T.
Fish and Leah T. Fish.................................. 943 * 943
American Capital Life Investment Trust(5)................ 775 * 775
</TABLE>
38
<PAGE> 39
- - ---------------
* Less than one percent.
(1) Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") is acting as a
co-representative of the Underwriters in the Offerings and is acting in
certain additional capacities in connection with the Acquisition and the
Financing Plan. In addition, DLJ has from time to time performed investment
banking and other financial services for the Company. See "Underwriting."
(2) Berkeley Atlantic Income Limited and Berkeley Technology Investments Limited
are affiliated entities.
(3) EQJ Partnership and Equitable Assurance Society are affiliated with DLJ. See
note 1 above.
(4) Wolfson Equities is a limited partner in South Ferry #2 L.P.
(5) American Capital High Yield Investments, Inc., American Capital Income Trust
and American Capital Life Investment Trust are affiliated entities.
(6) The shares of Common Stock being sold by such Selling Stockholder were
purchased upon exercise of Warrants at an exercise price of $7.95 per
share.
(7) Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and one
of its affiliates are acting as co-representatives of the Underwriters in
the Offerings and Merrill Lynch is acting in certain additional capacities
in connection with the Acquisition and the Financing Plan. In addition,
Merrill Lynch has from time to time performed investment banking and other
financial services for the Company. See "Underwriting."
(8) The shares of Common Stock being sold by such Selling Stockholder were
purchased upon exercise of Warrants at an exercise price of $5.30 per
share.
39
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 400,000,000
shares of Common Stock and (ii) 78,000,000 shares of preferred stock, par value
$.001 per share (the "Preferred Stock"), of which 1,000,000 shares have been
designated as Series A Junior Preferred Stock. As of February 28, 1994, there
were 81,221,108 shares of Common Stock outstanding and no shares of Preferred
Stock outstanding. The following summary description of the Company's capital
stock is qualified by reference to the Company's amended and restated
Certificate of Incorporation (the "Certificate") and By-Laws and the Rights
Agreement, dated as of July 8, 1993, between the Company and First Union
National Bank of North Carolina, as Rights Agent (the "Rights Agreement").
Capital Stock
Each share of Common Stock entitles the holder thereof to one vote on all
matters submitted to a vote of stockholders. Subject to preferential rights that
may be applicable to any outstanding Preferred Stock, holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. See "Dividend Policy." In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and subject to the liquidation preference of any outstanding
Preferred Stock. Holders of Common Stock have no cumulative voting rights and no
preemptive, subscription, redemption or conversion rights. The transfer agent
and registrar for the Common Stock is First Union National Bank of North
Carolina.
Pursuant to the Rights Agreement, attached to each share of Common Stock
(including the Common Stock offered hereby) is one preferred stock purchase
right (a "Right") that, when exercisable, entitles the holder thereof to
purchase one one-hundredth of a share of Series A Junior Preferred Stock at a
price (the "Exercise Price") of $75, subject to adjustment. The Rights generally
become exercisable ten days after the earlier of (i) a public announcement that
a person or group beneficially owns 15% or more of any class of the Company's
voting stock (a "15% Interest") or (ii) the commencement, or announcement of the
intent to commence, a tender offer which would result in any person or group
acquiring a 15% Interest (in either case unless approved by the Company's
Continuing Directors, as defined in the Rights Agreement). Following the
acquisition by a person or group of a 15% Interest, the Rights held by such
person or group (and certain affiliates, associates and transferees thereof)
become null and void. Following certain events (including a person or group
acquiring a 15% Interest, a merger or a sale of a majority of the Company's
assets), exercise of the Rights entitles the holders thereof to receive Common
Stock or common stock of the acquiring corporation, or cash, property or other
securities, with a market value equal to twice the Exercise Price. The Rights
expire on July 8, 2003 and may be redeemed by the Company (with the approval of
the Continuing Directors) for $.01 per Right until the tenth day after a person
or group acquires a 15% Interest. At any time after a person or group acquires a
15% Interest and until such person or group acquires 50% or more of any class of
the Company's voting stock, the Company (with the approval of the Continuing
Directors) may exchange each Right for one share of Common Stock.
Certificate and By-laws
The Certificate and the By-laws provide that (i) the Board of Directors
consists of a minimum of five and a maximum of fifteen directors, divided into
three classes serving staggered three-year terms, and such provisions may not be
amended without the affirmative vote of the holders of at least 80% of the
Company's outstanding voting stock; (ii) directors may be removed only for
cause; and (iii) special meetings may be called only by the Board of Directors.
In addition, the Board of Directors is authorized, without further stockholder
approval, to establish and issue one or more series of Preferred Stock and
determine the rights, preferences and limitations thereof. The foregoing
provisions of the Certificate and By-laws, together with the ability of the
Board of Directors to issue Preferred Stock and the effects of the Rights
described above, could discourage or delay a change of control of the Company
and the removal of the Company's management.
Recent Developments
On February 15, 1994, Mellon Bank corporation ("Mellon") filed with the
Commission a report on Schedule 13G stating that Mellon and its subsidiaries, in
various fiduciary capacities, beneficially own 5,230,000 shares of Common Stock,
representing approximately 6.4% of the Common Stock outstanding on such date.
40
<PAGE> 41
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general summary of certain United States federal income
and estate tax consequences expected to result under current law from the
purchase, ownership, sale or other taxable disposition of Common Stock by any
person that is (as to the United States) a foreign corporation, a foreign
partnership, a nonresident alien individual, or a nonresident alien fiduciary of
an estate or trust the income of which is not subject to United States taxation
regardless of its source (a "Non-U.S. Holder"). This summary does not address
all aspects of United States federal income and estate taxes that may be
relevant to Non-U.S. Holders in light of their personal circumstances or to
certain types of Non-U.S. Holders that may be subject to special treatment under
United States federal income tax laws (for example, insurance companies, tax
exempt organizations, financial institutions or broker-dealers). Furthermore,
this summary does not discuss any aspects of foreign, state or local taxation.
This summary is based on current provisions of the Internal Revenue Code of
1986, as amended (the "Code"), existing and proposed regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change. This summary does not constitute, and should not be
viewed as, legal or tax advice to prospective purchasers. Each prospective
purchaser of Common Stock is advised to consult its own tax advisor with respect
to the tax consequences of acquiring, holding and disposing of Common Stock.
DIVIDENDS
The Company does not expect to pay dividends on its Common Stock in the
foreseeable future. See "Dividend Policy." Except as described below and subject
to the discussion below regarding the Foreign Investment in Real Property Tax
Act ("FIRPTA"), dividends paid to a Non-U.S. Holder of Common Stock generally
will be subject to withholding of United States federal income tax at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty. In
determining the applicability of a tax treaty that provides for a lower rate of
withholding, dividends paid to an address in a foreign country are presumed
under current Treasury regulations to be paid to a resident of that country.
Under proposed Treasury regulations, however, a Non-U.S. Holder would be
required to file certain forms in order to claim the benefit of an applicable
treaty rate. Any dividends that are effectively connected with the conduct of a
trade or business of the Non-U.S. Holder within the United States generally will
not be subject to the 30% withholding tax (provided that the required forms are
filed), but will be taxed at ordinary federal income tax rates. If the Non-U.S.
Holder is a foreign corporation, such effectively connected income may also be
subject to an additional United States "branch profits tax."
The Company must report annually to the Internal Revenue Service (the
"IRS") and to each Non-U.S. Holder the amount of dividends paid to, and tax
withheld from dividends received by, such Non-U.S. Holder. These information
reporting requirements apply even if withholding is reduced or eliminated by an
applicable tax treaty. This information also may be made available to the tax
authorities of the country in which the Non-U.S. Holder resides.
SALE OR DISPOSITION OF COMMON STOCK
Except as described below in this paragraph and subject to the discussion
below regarding FIRPTA, a Non-U.S. Holder generally will not be subject to
United States federal income tax (and no amount generally will be withheld) in
respect of any gain recognized on a sale or other taxable disposition of Common
Stock. However, capital gain that is effectively connected with the conduct of a
trade or business of the Non-U.S. Holder in the United States will be taxed at
ordinary federal income tax rates (subject to a 28% maximum tax rate for
long-term capital gains of individuals). Capital gains of a Non-U.S. Holder also
may be subject to tax if such Holder is subject to the provisions of the United
States tax law applicable to certain United States expatriates. Moreover, a
Non-U.S. Holder who is a nonresident alien individual and who holds the Common
Stock as a capital asset generally will be taxed at a rate of 30% on capital
gain if (i) he is present in the United States for 183 or more days in the
taxable year of sale or other disposition and (ii) either the gain is
attributable to a fixed place of business maintained by him in the United States
or he has a "tax home" (as defined in the Code) in the United States. An
applicable treaty may provide for different rules.
41
<PAGE> 42
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be included in such Non-U.S. Holder's gross estate for
United States federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise, and may be subject to United States federal estate
tax.
FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT
If a Non-U.S. Holder's gain or loss upon the sale, exchange or redemption
of Common Stock (including dividend distributions treated as redemptions or
partial liquidations under United States federal income tax rules) is subject to
FIRPTA, such gain or loss will be treated as effectively connected with a trade
or business engaged in by such Non-U.S. Holder within the United States and thus
will be subject to United States income tax at the ordinary rates. The FIRPTA
provisions would apply to the Common Stock only if the Company has been or
becomes a "United States real property holding corporation" within the meaning
of the Code ("USRPHC"). It is possible that the Company is or, in the future,
will be a USRPHC. However, even if the Company is a USRPHC, if the Common Stock
is regularly traded on an established securities market, FIRPTA will apply only
to a Non-U.S. Holder that beneficially owns, directly or indirectly, more than
5% of the fair market value of the Common Stock at any time during the 5-year
period ending on the date of disposition (or such shorter period that such
Common Stock was held).
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding (which generally is a withholding tax imposed at the
rate of 31% on certain payments to persons that fail to furnish the information
required under the United States information reporting requirements) and
information reporting with respect to backup withholding generally will not
apply to dividends paid to Non-U.S. Holders at an address outside of the United
States.
The payment of the proceeds from the disposition of Common Stock to or
through the United States office of a broker will be subject to information
reporting and backup withholding unless the payee under penalties of perjury
certifies, among other things, its status as a Non-U.S. Holder, or otherwise
establishes an exemption. The payment of the proceeds from the disposition of
Common Stock to or through a non-U.S. office of a non-U.S. broker will
generally, except as noted below, not be subject to backup withholding and
information reporting. In the case of the payment of proceeds from the
disposition of Common Stock through a non-U.S. office of a broker that is a
United States person or a "U.S. related person," existing regulations require
information reporting on the payment unless the broker has documentary evidence
in its files that the owner is a Non-U.S. Holder and the broker has no actual
knowledge to the contrary. For this purpose, a "U.S. related person" is (i) a
"controlled foreign corporation" for United States federal income tax purposes
(generally, a foreign corporation controlled by United States shareholders) or
(ii) a foreign person 50% or more of whose gross income from all sources for a
certain period is derived from activities that are effectively connected with
the conduct of a United States trade or business. Proposed regulations contain a
similar rule with respect to information reporting by a non-U.S. office of a
broker that is a United States person or a U.S. related person. However, under
the proposed regulations, such a person may only rely on documentary evidence to
avoid information reporting if the foreign office "effects" the sale at such
foreign office. The existing backup withholding regulations state that payments
of sale proceeds made through a foreign office of a broker that is a United
States person or a U.S. related person will not be subject to backup withholding
until provided otherwise, and the proposed regulations state that backup
withholding will not apply to such payments (absent actual knowledge that the
payee is a United States person) where the foreign office "effects" the sale at
such foreign office.
Amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund of or a credit against such Non-U.S.
Holder's United States federal income tax, provided that the required
information is furnished to the IRS.
42
<PAGE> 43
UNDERWRITING
Subject to the terms and conditions set forth in a U.S. purchase agreement
(the "U.S. Purchase Agreement") among the Company, the Selling Stockholders and
each of the underwriters named below (the "U.S. Underwriters"), and concurrently
with the sale of 1,244,081 shares of Common Stock to the International
Underwriters (as defined below), the Company and the Selling Stockholders
severally have agreed to sell to the U.S. Underwriters, and each of the U.S.
Underwriters severally has agreed to purchase from the Company and the Selling
Stockholders, the aggregate number of shares of Common Stock set forth opposite
its name below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
------------------------------------------------------------------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................... 1,688,162
Donaldson, Lufkin & Jenrette Securities Corporation..................... 1,688,161
CS First Boston Corporation............................................. 200,000
Salomon Brothers Inc.................................................... 200,000
Bear, Stearns & Co. Inc................................................. 200,000
Dillon, Read & Co. Inc.................................................. 200,000
J.P. Morgan Securities Inc.............................................. 200,000
J.C. Bradford & Co...................................................... 100,000
Equitable Securities Corporation........................................ 100,000
Johnson Rice & Company.................................................. 100,000
Kemper Securities, Inc.................................................. 100,000
C.J. Lawrence/Deutsche Bank Securities Corporation...................... 100,000
ScotiaMcLeod (USA) Inc.................................................. 100,000
---------
Total......................................................... 4,976,323
---------
---------
</TABLE>
Merrill Lynch and DLJ are acting as representatives (the "U.S.
Representatives") of the U.S. Underwriters.
The Company and the Selling Stockholders also have entered into a purchase
agreement (the "International Purchase Agreement") with certain underwriters
outside the United States (the "International Underwriters" and, together with
the U.S. Underwriters, the "Underwriters"), for whom Merrill Lynch International
Limited and DLJ are acting as representatives (the "International
Representatives"). Subject to the terms and conditions set forth in the
International Purchase Agreement, and concurrently with the sale of 4,976,323
shares of Common Stock to the U.S. Underwriters pursuant to the U.S. Purchase
Agreement, the Company and the Selling Stockholders have agreed to sell to the
International Underwriters, and the International Underwriters severally have
agreed to purchase from the Company and the Selling Stockholders, an aggregate
of 1,244,081 shares of Common Stock. The initial public offering price per share
and the total underwriting discount per share are identical under the U.S.
Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such Agreement if any of the shares of Common Stock being sold pursuant to
each such agreement are purchased. The Underwriters have agreed, subject to the
terms and conditions set forth in the U.S. Purchase Agreement and the
International Purchase Agreement, to purchase the shares to be sold by the
Company regardless of whether the Underwriters purchase any or all of the
Selling Stockholders' shares. Under certain circumstances, the commitments of
non-defaulting U.S. Underwriters or International Underwriters (as the case may
be) may be increased. Sales of Common Stock to be purchased by the U.S.
Underwriters and the International Underwriters are conditioned upon one
another.
The U.S. Underwriters and the International Underwriters have entered into
an intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. The Underwriters are permitted to sell
shares of Common Stock to each other for purposes of resale at the initial
public offering
43
<PAGE> 44
price, less an amount not greater than the selling concession. Under the terms
of the Intersyndicate agreement, the U.S. Underwriters and any dealer to whom
they sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to persons who are non-United States persons or non-Canadian persons or to
persons they believe intend to resell to persons who are non-United States
persons or non-Canadian persons, and the International Underwriters and any
dealer to whom they sell shares of Common stock will not offer to sell or sell
shares of Common Stock to United States persons or Canadian persons or to
persons they believe intend to resell to United States persons or Canadian
persons, except in each case for transactions pursuant to such agreement.
The U.S. Representatives have advised the Company that the U.S.
Underwriters propose initially to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $.65 per share. The U.S. Underwriters may allow, and such dealers may
reallow, a discount not in excess of $.10 per share on sales to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Company has granted an option to the U.S. Underwriters, exercisable
during the 30-day period after the date of this Prospectus, to purchase up to an
aggregate of 624,000 additional shares of Common Stock at the initial public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The U.S. Underwriters may exercise this option only to
cover over-allotments, if any, made on the sale of Common Stock offered hereby.
To the extent that the U.S. Underwriters exercise this option, each U.S.
Underwriter will be obligated, subject to certain conditions, to purchase the
number of additional shares of Common Stock proportionate to such U.S.
Underwriter's initial amount reflected in the foregoing table. The Company also
has granted an option to the International Underwriters, exercisable during the
30-day period after the date of this Prospectus, to purchase up to an aggregate
of 156,000 additional shares of Common Stock to cover overallotments, if any, on
terms similar to those granted to the U.S. Underwriters.
The Company and certain of its executive officers have agreed, subject to
certain exceptions, not to sell, offer to sell, contract to sell, grant any
option for the sale of or otherwise dispose of, any Common Stock or securities
convertible into Common Stock for a period of 90 days from the date of this
Prospectus without the prior written consent of the U.S. Representatives.
The Common Stock is listed on the NYSE under the symbol "HTI."
The Company, the Selling Stockholders and the several Underwriters have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act.
Each of the U.S. Underwriters, from time to time, performs investment
banking and other financial services for the Company. Merrill Lynch and DLJ are
acting as financial advisors to the Company in connection with the Acquisition.
In addition, the Company has retained DLJ and Merrill Lynch as Dealer Managers
for the Tender Offers and as underwriters for the Subordinated Debt Offering.
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain other legal
matters relating to the Offerings will be passed upon for the Company by Dewey
Ballantine, New York, New York. Certain legal matters will be passed upon for
the Underwriters by Davis Polk & Wardwell, New York, New York. Morton A. Pierce
and Robert M. Smith, both members of Dewey Ballantine, are Assistant Secretaries
of the Company. In addition, certain members of Dewey Ballantine and certain
associates of the firm beneficially own shares of Common Stock.
EXPERTS
The consolidated financial statements of Healthtrust, Inc. - The Hospital
Company, EPIC Holdings, Inc., and EPIC Healthcare Group, Inc. appearing or
incorporated by reference in this Prospectus and Registration Statement have
been audited by Ernst & Young, independent auditors, to the extent indicated in
their reports thereon also appearing elsewhere herein and in the Registration
Statement or incorporated by reference. Such consolidated financial statements
have been included herein or incorporated herein by reference in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.
44
<PAGE> 45
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), for the
registration of the securities offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in exhibits and schedules to the Registration Statement as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits thereto, and the financial
statements and notes filed as a part thereof. Statements made in this Prospectus
concerning the contents of any contract, agreement or other document referred to
herein are not necessarily complete. With respect to each such contract,
agreement or other document filed with the Commission as an exhibit, reference
is made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; at the Commission's New York Regional Office, 7 World Trade Center,
New York, New York 10048; and at its Chicago Regional Office, Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Common Stock is listed on the
New York Stock Exchange, Inc. (the "NYSE") and such reports, proxy statements
and other information concerning the Company also can be inspected at the office
of the NYSE, 20 Broad Street, New York, New York 10005.
------------------------
INFORMATION INCORPORATED BY REFERENCE
The following documents of the Company, which have been filed by the
Company with the Commission pursuant to the Exchange Act, are incorporated
herein by reference: (i) Annual Report on Form 10-K for the fiscal year ended
August 31, 1993; (ii) Current Report on Form 8-K dated January 10, 1994; (iii)
Quarterly Report on Form 10-Q for the quarter ended November 30, 1993; (iv)
Quarterly Report on Form 10-Q for the quarter ended February 28, 1994; (v) the
description of the Common Stock contained in the Registration Statement on Form
8-A dated November 5, 1991, as amended by Amendment No. 1 on Form 8 dated
December 4, 1991; and (vi) the description of the Company's preferred stock
purchase rights contained in the Registration Statement on Form 8-A dated July
12, 1993.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
of the Common Stock, shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the respective date of filing of each
such document. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference herein, other than exhibits to such
documents. Requests should be directed to Philip D. Wheeler, Esq., Senior Vice
President, General Counsel and Secretary, Healthtrust, Inc. - The Hospital
Company, 4525 Harding Road, Nashville, Tennessee 37205, telephone number (615)
383-4444.
45
<PAGE> 46
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Condensed Combined Financial Statements......... P-1
Unaudited Pro Forma Condensed Combined Balance Sheet................................ P-2
Notes to Unaudited Pro Forma Condensed Combined Balance Sheet....................... P-3
Unaudited Pro Forma Condensed Combined Statements of Operations..................... P-4
Notes to Unaudited Pro Forma Condensed Combined Statements of Operations............ P-6
EPIC HOLDINGS, INC. AND SUBSIDIARIES
THREE MONTHS ENDED DECEMBER 31, 1993:
Condensed Consolidated Balance Sheets............................................... F-1
Condensed Consolidated Statements of Operations..................................... F-2
Condensed Consolidated Statements of Cash Flows..................................... F-3
Notes to Condensed Consolidated Financial Statements................................ F-4
EPIC HOLDINGS, INC. AND SUBSIDIARIES
THREE YEARS ENDED SEPTEMBER 30, 1993:
Report of Independent Auditors...................................................... F-7
Consolidated Balance Sheets......................................................... F-8
Consolidated Statements of Operations............................................... F-9
Consolidated Statements of Stockholders' Equity (Deficit)........................... F-10
Consolidated Statements of Cash Flows............................................... F-11
Notes to Consolidated Financial Statements.......................................... F-12
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
THREE MONTHS ENDED DECEMBER 31, 1993:
Condensed Consolidated Balance Sheets............................................... F-25
Condensed Consolidated Statements of Operations..................................... F-26
Condensed Consolidated Statements of Cash Flows..................................... F-27
Notes to Condensed Consolidated Financial Statements................................ F-28
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
THREE YEARS ENDED SEPTEMBER 30, 1993:
Report of Independent Auditors...................................................... F-37
Consolidated Balance Sheets......................................................... F-38
Consolidated Statements of Operations............................................... F-39
Consolidated Statements of Stockholders' Equity (Deficit)........................... F-40
Consolidated Statements of Cash Flows............................................... F-41
Notes to Consolidated Financial Statements.......................................... F-42
</TABLE>
46
<PAGE> 47
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
are based on the consolidated financial statements of the Company and EPIC
included or incorporated by reference in this Prospectus, combined and adjusted
to give effect to the Company's Acquisition of EPIC, using the purchase method
of accounting, and the related Financing Plan.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of February 28,
1994 gives effect to the Acquisition and Financing Plan as if they had occurred
as of February 28, 1994. The Unaudited Pro Forma Condensed Combined Statements
of Operations for the six months ended February 28, 1994 and year ended August
31, 1993, give effect to the Acquisition and Financing Plan as if they had
occurred on September 1, 1992. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable. The Unaudited Pro Forma Condensed Combined Financial Statements do
not purport to represent what the combined financial position or results of
operations would actually have been if the transactions had occurred on February
28, 1994 or September 1, 1992 or to project the combined financial position or
combined results of operations for any future period.
The Company will continue to report its financial information on the basis
of an August 31 fiscal year. EPIC reports its financial information using a
September 30 fiscal year. The Unaudited Pro Forma Condensed Combined Balance
Sheet combines the Company's February 28, 1994 balance sheet and EPIC's December
31, 1993 balance sheet. The Unaudited Pro Forma Condensed Combined Statements of
Operations combine the Company's statements of operations for the six months
ended February 28, 1994 and fiscal year ended August 31, 1993 with EPIC's
statements of operations for the six months ended December 31, 1993 and fiscal
year ended September 30, 1993, respectively.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with "The Acquisition and the Financing Plan,"
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes of the Company and EPIC included or incorporated by reference in this
Prospectus.
P-1
<PAGE> 48
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FEBRUARY 28, 1994
------------------------------------------------------------
AS REPORTED AS REPORTED PRO FORMA COMBINED
HEALTHTRUST EPIC ADJUSTMENTS PRO FORMA
----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents..................... $ 159.8 $ 55.1 $ 141.0(1) $ 20.0
195.0(2)
(157.5)(3)
(621.2)(4)
(250.2)(5)
(27.6)(6)
(8.5)(7)
(27.4)(8)
561.5(9)
Marketable securities......................... 34.1 (34.1)(7) 0.0
Accounts receivable........................... 392.1 99.4 491.5
Supplies...................................... 54.5 21.0 75.5
Other current assets.......................... 30.1 18.3 48.4
----------- ----------- ------------ ---------
TOTAL CURRENT ASSETS................... 636.5 227.9 (229.0) 635.4
PROPERTY, PLANT AND EQUIPMENT................... 2,243.7 810.0 (231.2)(10) 2,822.5
Less accumulated depreciation................. 660.2 231.2 (231.2)(10) 660.2
----------- ----------- ------------ ---------
1,583.5 578.8 0.0 2,162.3
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED...................................... 177.5 52.5 17.3(3) 631.5
117.9(4)
292.9(5)
27.6(6)
25.8(8)
(80.0)(11)
OTHER ASSETS.................................... 118.3 39.3 5.0(2) 234.1
(2.4)(3)
(16.9)(4)
10.8(8)
80.0(11)
----------- ----------- ------------ ---------
TOTAL ASSETS........................... $ 2,515.8 $ 898.5 $ 249.0 $3,663.3
----------- ----------- ------------ ---------
----------- ----------- ------------ ---------
CURRENT LIABILITIES
Accounts payable.............................. $ 77.7 $ 45.6 $ 9.2(8) $ 132.5
Other current liabilities..................... 267.2 144.8 (42.6)(7) 379.7
10.3(9)
----------- ----------- ------------ ---------
TOTAL CURRENT LIABILITIES.............. 344.9 190.4 (23.1) 512.2
LONG-TERM DEBT.................................. 931.4 685.2 200.0(2) 1,705.0
(142.6)(3)
(520.2)(4)
551.2(9)
DEFERRED INCOME TAXES........................... 133.6 11.4 145.0
DEFERRED PROFESSIONAL LIABILITIES............... 148.9 46.5 195.4
OTHER LIABILITIES............................... 212.6 47.9 (40.2)(5) 220.3
STOCKHOLDERS' EQUITY
Common stock(12).............................. 0.1 0.4 (0.4)(5) 0.1
Paid-in capital............................... 828.3 245.8 141.0(1) 969.3
(245.8)(5)
Deferred compensation......................... (0.6) (137.4) 137.4(5) (0.6 )
Retained deficit.............................. (83.4) (191.7) 191.7(5) (83.4 )
----------- ----------- ------------ ---------
STOCKHOLDERS' EQUITY................... 744.4 (82.9) 223.9 885.4
----------- ----------- ------------ ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...... $ 2,515.8 $ 898.5 $ 249.0 $3,663.3
----------- ----------- ------------ ---------
----------- ----------- ------------ ---------
</TABLE>
See notes to unaudited pro forma condensed combined balance sheet.
P-2
<PAGE> 49
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED BALANCE SHEET
1. To record the net proceeds from the completion of the offering of 5.2
million shares of Healthtrust Common Stock at $28.25 per share. Gross
proceeds of $146.9 million, less estimated issuance costs of $5.9 million,
provides net proceeds of $141.0 million.
2. To record the net proceeds from the completion of the $200 million
Subordinated Debt Offering. Gross proceeds of $200.0 million, less estimated
issuance costs of $5.0 million, provides net proceeds of $195.0 million.
Maturities of pro forma long-term debt for the 12-month periods ending
subsequent to February 28, 1994 are as follows: 1994 -- $53.6 million;
1995 -- $67.4 million; 1996 -- $100.4 million; 1997 -- $118.2 million;
1998 -- $124.2 million; and thereafter -- $1,294.8 million.
3. To record the Debt Redemption. The $157.5 million payment retires $142.6
million recorded value of EPIC indebtedness, the related deferred loan costs
of $2.4 million are written off and the net payment excess of $17.3 million
is recorded in excess of purchase price over net assets acquired.
4. To record the completion of the Tender Offers for the Current Tender Amount
of each issue of the Specified EPIC Debt Securities. Assuming either 100% or
0% of each issue of the Specified EPIC Debt Securities is purchased in the
Tender Offers, there would be no material effect on long-term indebtedness.
The $621.2 million payment retires $520.2 million recorded value of
Specified EPIC Debt Securities, the related deferred loan costs of $16.9
million are written off and the net payment excess of $117.9 million is
recorded in excess of purchase price over net assets acquired.
5. To record the payment of $7 per share for 35,746,000 shares of EPIC common
stock ($250.2 million).
EPIC recorded a noncurrent liability of approximately $40.2 million related
to the 5.9 million shares of EPIC Common Stock issued pursuant to the EPIC
Stock Appreciation Rights Plan, which shares are included in the total
number of shares of EPIC common stock to be purchased by the Company
pursuant to the Acquisition.
6. To record the payment of $27.6 million in connection with the termination of
contributions to the EPIC ESOP pursuant to the ESOP Agreement.
7. To record EPIC's required call of the outstanding 15% Senior Subordinated
Notes of EPIC Group and pay the related call premium and accrued interest
payable.
8. To record certain severance agreement liabilities and transaction costs
(including estimated legal, accounting and valuation costs).
9. To record borrowings under the 1994 Credit Agreement of $711.8 million to
complete the Acquisition and Financing Plan transactions ($150.3 million to
refinance the existing bank credit facility and $561.5 million of additional
borrowings) and maintain a $20.0 million cash balance.
10. To record EPIC's property, plant and equipment at historical net book value.
No estimate of any purchase accounting adjustments to record such property,
plant and equipment at fair value has been made at this time. The Company
expects to obtain and record a valuation of EPIC's land and buildings within
six months following the Acquisition. It is not expected that the
reclassification between excess of purchase price over net assets acquired
and property, plant and equipment will be significant to the combined
balance sheet.
11. To record the deferred tax asset for the temporary differences related to
the above transactions (assumes a 39% statutory combined federal and state
tax rate).
12. No assumption has been made as to the exercise of all or a portion of the
Warrants to purchase 3,409,219 shares of Common Stock. If all Warrants were
exercised at a price of $3.18 per share, net proceeds to the Company would
be approximately $10.8 million.
P-3
<PAGE> 50
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1994
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED AS REPORTED PRO FORMA COMBINED PRO
HEALTHTRUST EPIC ADJUSTMENTS FORMA(1)
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net operating revenue................... $ 1,274.6 $ 537.2 $ 1,811.8
Costs and expenses:
Hospital service costs:
Salaries and benefits.............. 468.4 227.4 695.8
Supplies........................... 179.0 64.4 243.4
Fees............................... 133.1 40.9 174.0
Other expenses..................... 131.7 87.0 218.7
Bad debt expense................... 88.7 42.8 131.5
----------- ----------- ------------ ------------
1,000.9 462.5 1,463.4
Depreciation and amortization........... 69.7 29.4 $ 5.2(2) 104.3
Interest................................ 42.3 46.7 (16.4)(3) 72.6
ESOP/pension expense.................... 20.5 10.8 31.3
Deferred compensation expense........... 0.6 2.3 (2.3)(4) 0.6
Other income (net)...................... (8.7) (1.5) 6.2(5) (4.0)
----------- ----------- ------------ ------------
1,125.3 550.2 (7.3) 1,668.2
----------- ----------- ------------ ------------
Income (Loss) before minority interests,
income taxes and extraordinary
charges............................... 149.3 (13.0) 7.3 143.6
Minority interests...................... 4.1 2.8 6.9
----------- ----------- ------------ ------------
Income (Loss) before income taxes and
extraordinary charges................. 145.2 (15.8) 7.3 136.7
Income tax expense (benefit)............ 59.0 0.8 (2.8)(6) 57.0
----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY
CHARGES............................... $ 86.2 $ (16.6) $ 10.1 $ 79.7
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
(40,030,743)(7)
Weighted average common shares.......... 84,639,121 40,030,743 5,200,000(7) 89,839,121
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Income (loss) per share before
extraordinary charges................. $ 1.02 $ (0.41) $ 0.89
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
See notes to unaudited pro forma condensed combined statements of operations.
P-4
<PAGE> 51
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1993
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED
AS REPORTED AS REPORTED PRO FORMA PRO
HEALTHTRUST EPIC ADJUSTMENTS FORMA(1)
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net operating revenue.................... $ 2,394.6 $ 1,019.1 $ 3,413.7
Costs and expenses:
Hospital service costs:
Salaries and benefits............... 886.7 432.5 1,319.2
Supplies............................ 347.0 122.0 469.0
Fees................................ 270.1 75.7 345.8
Other expenses...................... 239.3 162.9 402.2
Bad debt expense.................... 145.5 80.6 226.1
----------- ----------- ------------ -----------
1,888.6 873.7 2,762.3
Depreciation and amortization............ 132.7 57.9 $ 10.6(2) 201.2
Interest................................. 99.8 89.9 (28.6)(3) 161.1
ESOP/pension expense..................... 39.0 20.7 59.7
Deferred compensation expense............ 4.3 3.8 (3.8)(4) 4.3
Other income (net)....................... (7.6) (7.2) 7.9(5) (6.9)
----------- ----------- ------------ -----------
2,156.8 1,038.8 (13.9) 3,181.7
----------- ----------- ------------ -----------
Income (Loss) before minority interests,
income taxes and extraordinary
charges................................ 237.8 (19.7) 13.9 232.0
Minority interests....................... 11.9 3.5 15.4
----------- ----------- ------------ -----------
Income (Loss) before income taxes and
extraordinary charges.................. 225.9 (23.2) 13.9 216.6
Income tax expense (benefit)............. 90.7 2.0 (2.0)(6) 90.7
----------- ----------- ------------ -----------
INCOME (LOSS) BEFORE EXTRAORDINARY
CHARGES................................ $ 135.2 $ (25.2) $ 15.9 $ 125.9
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
(40,146,915)(7)
Weighted average common shares........... 83,540,815 40,146,915 5,200,000(7) 88,740,815
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Income (Loss) per share before
extraordinary charges.................. $ 1.62 $ (0.63) $ 1.42
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to unaudited pro forma condensed combined statements of operations.
P-5
<PAGE> 52
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
1. The pro forma condensed combined statements of operations do not give effect
to any overhead reductions or cost savings, if any, which may be realized
after the consummation of the Acquisition. Pension expense for EPIC employees
has been assumed to be equivalent to historical EPIC ESOP expense
(approximately 5.5% of salaries).
2. To adjust amortization as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 1994 AUGUST 31, 1993
----------------- ---------------
<S> <C> <C>
To record amortization related to the $454.0 million
increase in the excess of purchase price over net assets
acquired................................................. $ 6.5 $12.9
To eliminate the EPIC historical amortization of the
excess of purchase price over net assets acquired........ (1.3) (2.3)
----- ------
$ 5.2 $10.6
----- ------
----- ------
</TABLE>
The excess of purchase price over net assets acquired related to the EPIC
acquisition will be amortized over 40 years using the straight-line method
(for the purpose of the pro forma computations of amortization, $60.0 million
of the excess of purchase price over net assets acquired has been amortized
over 20 years using the straight-line method to provide an estimated effect
for recording the acquired property, plant and equipment at fair value).
3. To adjust interest expense as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 1994 AUGUST 31, 1993
----------------- ---------------
<S> <C> <C>
To record interest expense on borrowings of $711.8
million related to the 1994 Credit Agreement (assumes
average interest rate of 5.34% and 5.43%, respectively)
and includes the amortization of deferred loan costs of
$1.1 million and $2.2 million, respectively.............. $ 20.2 $ 40.9
To record interest expense related to the $200 million
Subordinated Notes (at a 10.25% interest rate) and
includes the amortization of deferred financing costs of
$.3 million and $.7 million, respectively................ 10.6 21.2
To eliminate historical interest expense (including the
amortization of the related deferred loan costs) on the
Current Tender Amount of the Specified EPIC Debt
Securities, the called EPIC Redeemable Debt and the
refinanced Company bank debt............................. (47.2) (90.7)
------- -------
$ (16.4) $ (28.6)
------- -------
------- -------
</TABLE>
An increase or decrease of one-eighth of one percent (0.125%) in the interest
rate assumption used to calculate interest expense on the proceeds of the
Subordinated Debt Offering would increase or decrease interest expense and
income before income taxes by approximately $0.1 million and $0.3 million,
respectively.
Assuming 100% or 0% of each issue of the Specified EPIC Debt Securities is
purchased in the Tender Offers, pro forma interest expense would not increase
by any material amount as the nonpurchased securities would be recorded at a
current market interest rate using the purchase accounting method.
4. To eliminate the compensation expense related to EPIC'S SAR Plan.
5. To eliminate interest income on excess cash.
6. To record the pro forma provision for income taxes by applying the estimated
statutory rates (39.0% and 38.6% for the six months ended February 28, 1994
and year ended August 31, 1993, respectively) to pro forma income before
income taxes, adjusted for any nondeductible expenses.
7. To reflect the Company's purchase of EPIC's outstanding equity and completion
of the offering of 5.2 million shares of Common Stock by the Company.
P-6
<PAGE> 53
EPIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1993
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents....................................... $ 45,563 $ 61,362
Cash restricted for interest payment............................ 9,573 3,820
Marketable securities........................................... 34,132 47,347
Accounts receivable, net of reserves for uncompensated care of
$31,187 and $29,286.......................................... 99,392 76,957
Supply inventories.............................................. 20,973 20,687
Prepaid expenses and other...................................... 12,898 5,074
Deferred income taxes........................................... 5,384 --
------------ -------------
TOTAL CURRENT ASSETS.............................................. 227,915 215,247
PROPERTY AND EQUIPMENT............................................ 810,055 786,798
ACCUMULATED DEPRECIATION AND AMORTIZATION......................... (231,239) (218,746)
------------ -------------
578,816 568,052
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, net of
accumulated amortization........................................ 52,461 52,965
OTHER ASSETS, net of accumulated amortization..................... 39,330 38,696
------------ -------------
TOTAL ASSETS...................................................... $ 898,522 $ 874,960
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt............................ $ 48,049 $ 47,914
Accounts payable................................................ 45,557 44,610
Accrued liabilities............................................. 96,746 87,604
------------ -------------
TOTAL CURRENT LIABILITIES......................................... 190,352 180,128
LONG-TERM DEBT.................................................... 685,187 679,605
DEFERRED INCOME TAXES............................................. 11,378 5,994
RESERVE FOR PROFESSIONAL LIABILITY RISKS.......................... 46,557 46,612
OTHER DEFERRED LIABILITIES........................................ 42,013 42,450
COMMITMENTS AND CONTINGENT LIABILITIES............................
MINORITY INTERESTS................................................ 5,909 5,472
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value.................................... 399 401
Paid-in capital................................................. 245,759 245,757
Notes receivable from EPIC ESOP................................. (137,381) (148,214)
Retained earnings (deficit)..................................... (191,651) (183,245)
------------ -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT).............................. (82,874) (85,301)
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT).............. $ 898,522 $ 874,960
------------ -------------
------------ -------------
</TABLE>
See notes to condensed consolidated financial statements.
F-1
<PAGE> 54
EPIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER 31,
---------------------------
1993 1992
----------- -----------
<S> <C> <C>
NET OPERATING REVENUE............................................. $ 272,451 $ 244,352
COSTS AND EXPENSES:
Salaries and wages.............................................. 99,526 84,634
Employee benefits............................................... 21,094 22,997
ESOP expense.................................................... 5,635 5,182
Supplies........................................................ 32,025 30,041
Uncompensated care.............................................. 19,618 19,048
Other........................................................... 64,653 57,909
Depreciation and amortization................................... 13,130 13,791
Interest expense................................................ 23,834 21,954
----------- -----------
TOTAL COSTS AND EXPENSES.......................................... 279,515 255,556
INTEREST INCOME................................................... 819 612
----------- -----------
LOSS BEFORE INCOME TAX EXPENSE, MINORITY INTERESTS AND
EXTRAORDINARY ITEM.............................................. (6,245) (10,592)
INCOME TAX EXPENSE, net........................................... (375) (176)
MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES, net of
income tax expense.............................................. (1,667) (631)
----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM.................................... (8,287) (11,399)
EXTRAORDINARY ITEM, net of income tax expense..................... -- (570)
----------- -----------
NET LOSS.......................................................... $ (8,287) $ (11,969)
----------- -----------
----------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING....................................... 39,943,524 40,156,780
LOSS PER COMMON SHARE:
Before extraordinary item....................................... $ (.21) $ (.28)
Extraordinary item.............................................. -- (.01)
----------- -----------
Net loss........................................................ $ (.21) $ (.29)
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
F-2
<PAGE> 55
EPIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................................. $ (8,287) $(11,969)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization..................................... 13,130 13,791
Non-cash provision for professional liability risks............... (1,111) 437
ESOP expense...................................................... 5,635 5,182
Deferred SAR Plan compensation.................................... (274) (1,496)
Minority interests in income of consolidated subsidiaries......... 1,667 631
Non-cash interest................................................. 8,995 9,227
Extraordinary item................................................ -- 570
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable............................................... (22,435) 342
Supply inventories and other assets............................... (8,399) (10,549)
Accounts payable and other liabilities............................ 9,991 8,785
-------- --------
Net cash provided by (used in) operating activities.......... (1,088) 14,951
INVESTING ACTIVITIES
Investments in marketable securities, net............................ 13,215 6,395
Cash paid for acquisitions........................................... (960) (4,100)
Additions to property and equipment.................................. (23,431) (7,410)
Other................................................................ (661) (811)
-------- --------
Net cash used in investing activities........................ (11,837) (5,926)
FINANCING ACTIVITIES
Payments on debt obligations......................................... (1,415) (76)
Line of credit borrowings, net....................................... -- 800
Purchase of Senior ESOP Notes........................................ -- (5,616)
Purchase of treasury stock........................................... (119) (11)
Distributions and dividends to minority interests.................... (1,132) (2,340)
Payments of debt issue costs and other, net.......................... (208) (59)
-------- --------
Net cash used in financing activities........................ (2,874) (7,302)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... (15,799) 1,723
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................... 61,362 37,419
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 45,563 $ 39,142
-------- --------
-------- --------
SUPPLEMENTARY INFORMATION
Cash paid for interest............................................... $ 8,513 $ 1,598
Cash paid for income taxes........................................... $ 199 $ 176
</TABLE>
See notes to condensed consolidated financial statements.
F-3
<PAGE> 56
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
EPIC Holdings, Inc. and Subsidiaries ("Holdings") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included and are of a normal recurring nature.
Operating results for the three month period ended December 31, 1993 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 1994. These financial statements should be read in
conjunction with the audited consolidated financial statements and footnotes
thereto included in Holdings' annual report on Form 10-K for the year ended
September 30, 1993.
Certain prior period amounts have been reclassified to conform with the
fiscal 1994 presentation.
2. SUBSEQUENT EVENT
On January 9, 1994, Holdings entered into an Agreement and Plan of Merger
(the "Merger Agreement") with HealthTrust, Inc. -- The Hospital Company, a
Delaware corporation ("HTI"), and Odyssey Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of HTI ("HTI Sub"), providing for the
merger (the "Merger") of HTI Sub with and into Holdings following which Holdings
would become a wholly-owned subsidiary of HTI. The Merger is expected to result
in a termination of the EPIC ESOP. Under the terms of the Merger Agreement,
which was unanimously approved by the Boards of Directors of both HTI and
Holdings, shareholders of Holdings will receive $7.00 per share of Holdings'
common stock.
HTI intends to offer to purchase the 12% Senior Deferred Coupon Notes due
2002, the 11.375% Class B-1 First Priority Mortgage Notes due 2001, the 11.5%
Class B-2 First Priority Mortgage Notes due 2001, the Class B-3 First Priority
Mortgage Notes, and the 10.875% Senior Subordinated Notes due 2003 and to redeem
other outstanding EPIC indebtedness in accordance with their terms. HTI also
plans to seek the consent of the holders of Holdings' indebtedness to amend
certain restrictive provisions.
Consummation of the Merger is subject to a number of conditions, including
the approval of Holdings' shareholders and the consummation of certain debt
consent solicitations. American Medical International, Inc. and the trustee of
the EPIC ESOP (who controls the unallocated shares of the EPIC ESOP) have
agreed, subject to the fulfillment of certain conditions, to vote their shares
of Holdings common stock (approximately 52% combined) in favor of the Merger.
The transaction is expected to close by May of 1994.
3. INCOME TAXES
Effective October 1, 1993, Holdings changed its method of accounting for
income taxes to the liability method as required by Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
superseded SFAS No. 96. As permitted under the rules of SFAS No. 109, prior
years' financial statements have not been restated.
Adopting SFAS No. 109 had no effect on current period operations. Due to
the uncertainty of the realization of the net deferred federal tax liability,
Holdings established a valuation allowance against the deferred federal tax
assets so that deferred federal tax assets equalled deferred federal tax
liabilities. The net deferred tax liability reported relates primarily to state
taxes.
F-4
<PAGE> 57
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Holdings' deferred tax assets and liabilities as of October 1, 1993 are as
follows (in thousands):
<TABLE>
<S> <C>
Deferred tax liabilities
-------------------------------------------------------------------
Property and equipment basis difference.......................... $42,908
ESOP plan fees................................................... 1,547
ESOP contribution................................................ 3,455
State taxes and other............................................ 5,994
-------
Total deferred tax liabilities................................... 53,904
-------
Deferred tax assets
-------------------------------------------------------------------
Bad debt reserve differences..................................... 6,593
Professional liability reserves.................................. 15,670
SAR compensation................................................. 14,034
Health plan and workers' compensation reserves................... 3,652
Paid time off reserve............................................ 1,788
Net operating losses............................................. 24,312
Other............................................................ 700
-------
Total deferred tax assets........................................ 66,749
Valuation allowance.............................................. (18,839)
-------
Net deferred tax assets.......................................... 47,910
-------
Net deferred tax liability....................................... $ 5,994
-------
-------
</TABLE>
No tax benefit was recorded for the current net operating loss and no
federal taxes are anticipated for fiscal 1994. Current income tax expense of
$375,000 relates to state income taxes.
4. LOSS PER COMMON SHARE
Loss per common share has been computed by dividing the net loss applicable
to common shares by the weighted average number of common shares outstanding
during the period. The exercise of the outstanding common stock warrants and
other common stock equivalents has not been assumed as the effect would be
antidilutive.
5. CHANGES IN STOCKHOLDER'S EQUITY
During the three-month period ended December 31, 1993, Holdings purchased
treasury stock for $119,000 and received a principal payment on the Notes
receivable from the EPIC ESOP of $10,833,000 which was recorded as a reduction
of the Notes receivable from EPIC ESOP.
6. GUARANTOR SUBSIDIARIES
Certain subsidiaries of EPIC (the "Guarantor Subsidiaries") guarantee the
loans under the Amended Credit Agreement, the Zero Coupon Notes, the Additional
Zero Coupon Notes, the Senior ESOP Notes, the 10.875% Senior Subordinated Notes,
the 15% Senior Subordinated Notes and the 11% Junior Subordinated
F-5
<PAGE> 58
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
Pay-In-Kind Notes. Certain other subsidiaries, including EPIC Properties, Inc.
("EPIC Properties") are not Guarantor Subsidiaries (the "Nonguarantor
Subsidiaries"). All equity interests in the Nonguarantor Subsidiaries, other
than those held by minority interests, are held by EPIC.
Condensed consolidating financial information of EPIC Healthcare Group,
Inc. ("EPIC"), the Guarantor Subsidiaries, EPIC Properties and the other
Nonguarantor Subsidiaries are included in the footnotes to the unaudited
condensed consolidated financial statements of EPIC included elsewhere herein.
F-6
<PAGE> 59
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
The Board of Directors
EPIC Holdings, Inc.
We have audited the accompanying consolidated balance sheets of EPIC
Holdings, Inc. and subsidiaries as of September 30, 1993 and 1992, and the
related consolidated statements of operations, stockholder's equity (deficit),
and cash flows for each of the three years in the period ended September 30,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
EPIC Holdings, Inc. and subsidiaries at September 30, 1993, and 1992, and the
results of its consolidated operations and its consolidated cash flows for each
of the three years in the period ended September 30, 1993, in conformity with
generally accepted accounting principles.
ERNST & YOUNG
Dallas, Texas
December 3, 1993
F-7
<PAGE> 60
EPIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1993 1992
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................................. $ 61,362 $ 37,419
Cash restricted for interest payments...................................................... 3,820 5,768
Marketable securities...................................................................... 47,347 10,607
Accounts receivable, net of reserves for uncompensated care of $29,286 and $25,837,
respectively............................................................................. 76,957 73,398
Supply inventories......................................................................... 20,687 20,000
Prepaid expenses and other................................................................. 5,074 5,222
-------- --------
TOTAL CURRENT ASSETS......................................................................... 215,247 152,414
PROPERTY AND EQUIPMENT
Land....................................................................................... 53,030 57,492
Buildings and improvements................................................................. 476,570 451,292
Equipment.................................................................................. 234,656 192,367
Construction in progress................................................................... 22,542 9,333
-------- --------
786,798 710,484
Accumulated depreciation and amortization.................................................. (218,746) (173,789)
-------- --------
568,052 536,695
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,
net of accumulated amortization............................................................ 52,965 48,140
OTHER ASSETS, net of accumulated amortization................................................ 38,696 43,502
-------- --------
TOTAL ASSETS................................................................................. $874,960 $780,751
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt....................................................... $ 47,914 $ 2,330
Accounts payable........................................................................... 44,610 34,809
Accrued liabilities:
Salaries and wages....................................................................... 36,475 33,031
Taxes other than on income............................................................... 7,946 7,589
Interest................................................................................. 11,027 7,658
Group health insurance................................................................... 4,902 5,656
Current reserve for professional liability risks......................................... 11,000 11,000
Other.................................................................................... 16,254 9,011
-------- --------
TOTAL CURRENT LIABILITIES.................................................................... 180,128 111,084
LONG-TERM DEBT............................................................................... 679,605 619,363
DEFERRED INCOME TAXES........................................................................ 5,994 5,994
RESERVE FOR PROFESSIONAL LIABILITY RISKS..................................................... 46,612 39,640
OTHER DEFERRED LIABILITIES................................................................... 42,450 39,607
COMMITMENTS AND CONTINGENT LIABILITIES.......................................................
MINORITY INTERESTS........................................................................... 5,472 23,494
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value -- Authorized: 100,000,000 shares; Issued: 40,319,245 shares;
Outstanding: 40,099,441 and 40,154,545 shares, respectively.............................. 401 401
Paid-in capital............................................................................ 245,757 245,757
Notes receivable from EPIC ESOP............................................................ (148,214) (168,929)
Retained earnings (deficit)................................................................ (183,245) (135,660)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)......................................................... (85,301) (58,431)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)......................................... $874,960 $780,751
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 61
EPIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------------
1993 1992 1991
----------- ----------- ----------
<S> <C> <C> <C>
NET OPERATING REVENUE................................ $ 1,019,149 $ 941,266 $ 802,689
COSTS AND EXPENSES:
Salaries and wages................................. 354,326 319,868 271,007
Employee benefits.................................. 84,615 81,365 68,434
ESOP expense....................................... 20,715 20,714 23,076
Supplies........................................... 121,986 116,145 99,882
Uncompensated care................................. 80,643 69,308 59,425
Other.............................................. 235,924 235,009 192,633
Depreciation and amortization...................... 57,917 53,013 49,354
Interest expense................................... 89,872 79,790 68,266
----------- ----------- ----------
TOTAL COSTS AND EXPENSES............................. 1,045,998 975,212 832,077
INTEREST INCOME...................................... 3,648 3,936 5,405
GAIN (LOSS) ON SALE OF ASSETS........................ 3,521 (1,123) (543)
----------- ----------- ----------
LOSS BEFORE INCOME TAX BENEFIT
(EXPENSE), MINORITY INTERESTS AND
EXTRAORDINARY ITEM................................. (19,680) (31,133) (24,526)
INCOME TAX BENEFIT (EXPENSE), net.................... (1,984) 9,252 7,603
MINORITY INTERESTS IN INCOME OF CONSOLIDATED
SUBSIDIARIES (net of income
tax benefit of $1,008, and $1,063 in 1992 and
1991, respectively)................................ (3,499) (1,958) (2,064)
----------- ----------- ----------
LOSS BEFORE EXTRAORDINARY ITEM....................... (25,163) (23,839) (18,987)
EXTRAORDINARY ITEM (net of income tax benefit of $652
and $1,330 in 1992 and 1991, respectively)......... (21,960) (1,265) (2,581)
----------- ----------- ----------
NET LOSS............................................. (47,123) (25,104) (21,568)
REDEEMABLE PREFERRED STOCK DIVIDEND OF PREDECESSOR
COMPANY............................................ -- (11,048) (22,873)
----------- ----------- ----------
NET LOSS APPLICABLE TO COMMON SHARES................. $ (47,123) $ (36,152) $ (44,441)
----------- ----------- ----------
----------- ----------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING........................................ 40,146,915 32,576,161 24,482,803
LOSS PER COMMON SHARE:
Before extraordinary item.......................... $ (.63) $ (1.07) $ (1.71)
Extraordinary item................................. (.55) (.04) (.11)
----------- ----------- ----------
Net loss........................................... $ (1.18) $ (1.11) $ (1.82)
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 62
EPIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES RETAINED TOTAL
COMMON PAID-IN RECEIVABLE EARNINGS STOCKHOLDERS'
STOCK CAPITAL FROM EPIC ESOP (DEFICIT) EQUITY (DEFICIT)
------ -------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1990.......... $245 $219,808 $ (212,738) $ (87,241) $(79,926)
Dividends accrued and accretion of
discount on redeemable preferred
stock............................. -- (22,873) -- -- (22,873)
Principal payments received on notes
receivable from EPIC ESOP......... -- -- 23,095 -- 23,095
Treasury stock purchased............ (1) -- -- (468) (469)
Net loss............................ -- -- -- (21,568) (21,568)
------ -------- -------------- --------- ----------------
Balance at September 30, 1991....... 244 196,935 (189,643) (109,277) (101,741)
Dividends accrued and accretion of
discount on redeemable preferred
stock............................. -- (11,048) -- -- (11,048)
Principal payments received on notes
receivable from EPIC ESOP......... -- -- 20,714 -- 20,714
Treasury stock purchased............ (2) -- -- (1,279) (1,281)
Warrant conversion.................. 65 (44) -- -- 21
Preferred stock transaction costs... -- (7,063) -- -- (7,063)
Conversion of Class C Preferred
Stock............................. 94 63,842 -- -- 63,936
Net book value of Class A and Class
B Preferred Stock over cash
paid.............................. -- 3,135 -- -- 3,135
Net loss............................ -- -- -- (25,104) (25,104)
------ -------- -------------- --------- ----------------
Balance at September 30, 1992....... 401 245,757 (168,929) (135,660) (58,431)
Principal payments received on notes
receivable from EPIC ESOP......... -- -- 20,715 -- 20,715
Treasury stock purchased............ -- -- -- (462) (462)
Net loss............................ -- -- -- (47,123) (47,123)
------ -------- -------------- --------- ----------------
Balance at September 30, 1993....... $401 $245,757 $ (148,214) $(183,245) $(85,301)
------ -------- -------------- --------- ----------------
------ -------- -------------- --------- ----------------
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 63
EPIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(47,123) $(25,104) $(21,568)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 57,917 53,013 49,354
Non-cash provision for professional liability risks.... 2,641 4,131 11,291
ESOP expense........................................... 20,715 20,714 23,076
Deferred SAR Plan compensation......................... 3,249 10,805 7,137
Minority interests in income of consolidated
subsidiaries......................................... 3,499 2,966 3,127
(Gain) loss on sale of assets.......................... (3,521) 1,123 543
Non-cash interest...................................... 36,855 27,190 13,975
Extraordinary item..................................... 21,960 1,917 3,911
Deferred income tax benefit............................ -- (11,800) (9,996)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable.................................. 6,054 (35,196) (3,043)
Supply inventories and other assets.................. 4,083 (3,162) (5,291)
Accounts payable and other liabilities............... 12,172 11,395 6,444
-------- -------- --------
Net cash provided by operating activities......... 118,501 57,992 78,960
INVESTING ACTIVITIES
Investments in marketable securities, net................. (36,740) 5,167 (12,091)
Cash paid for acquisitions................................ (54,536) (12,269) --
Additions to property and equipment....................... (60,784) (47,850) (25,646)
Purchase of investment securities......................... -- (4,180) --
Proceeds from sales of assets............................. 25,148 190 361
Collection on note receivable............................. 9,349 -- --
Other..................................................... (5,925) (2,046) (48)
-------- -------- --------
Net cash used in investing activities............. (123,488) (60,988) (37,424)
FINANCING ACTIVITIES
Payments on debt obligations.............................. (117,765) (1,603) (250,647)
Proceeds from long-term borrowings........................ 180,853 140,052 227,868
Purchase of Senior ESOP Notes............................. (5,616) (20,293) --
Purchase of treasury stock................................ (462) (1,281) (469)
Purchase of Class A and B Preferred Stock................. -- (130,000) --
Preferred stock transaction costs......................... -- (7,063) --
Proceeds on warrant conversion............................ -- 21 --
Contributions from minority interests..................... 520 1,884 556
Distributions and dividends to minority interests......... (21,110) (4,065) (4,122)
Payments of debt issue costs and other, net............... (7,490) (6,056) (11,294)
-------- -------- --------
Net cash provided by (used in) financing
activities...................................... 28,930 (28,404) (38,108)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 23,943 (31,400) 3,428
Cash and cash equivalents at beginning of year............ 37,419 68,819 65,391
-------- -------- --------
Cash and cash equivalents at end of year.................. $ 61,362 $ 37,419 $ 68,819
-------- -------- --------
-------- -------- --------
SUPPLEMENTARY INFORMATION
Cash paid during the year for interest.................... $ 52,370 $ 53,343 $ 52,987
Cash paid for income taxes................................ $ 657 $ 888 $ 666
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 64
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
EPIC Healthcare Group, Inc. ("EPIC" or, either alone or together with its
subsidiaries, the "Company") was acquired by EPIC Holdings, Inc. ("Holdings") on
March 25, 1992, in a merger transaction (the "Merger") in which each outstanding
share of common stock of EPIC was converted into one share of Holdings common
stock. The merger was between companies under common control (i.e., a pooling of
interests for accounting purposes) and accordingly, the recorded assets and
liabilities of EPIC on an historical basis are combined with the assets and
liabilities of Holdings. Holdings had no operations prior to the merger. Results
of operations for the period prior to March 25, 1992, consist of the operations
of EPIC.
Principles of Consolidation
The consolidated financial statements include the accounts of Holdings and
its subsidiaries. Intercompany accounts and transactions have been eliminated.
Minority interests represent the minority stockholders' proportionate shares of
the equity in the income (loss) of certain consolidated subsidiaries.
Cash Equivalents, Cash Restricted for Interest Payments, and Marketable
Securities
Holdings considers all highly liquid investments with initial maturities of
three months or less from date of purchase to be cash equivalents. Cash
restricted for interest payments is cash deposited into a trust to pay principal
and interest required by the Class B-1, Class B-2 and Class B-3 First Priority
Mortgage Notes (the "Mortgage Notes"). Investments in marketable
interest-bearing securities are stated at cost which approximates market.
Holdings has $42,694,000 in cash and marketable securities restricted for the
purpose of redeeming the remaining 15% Senior Subordinated Notes (See Note 5).
Cash equivalents, cash restricted for interest payments, and marketable
securities are subject to potential concentrations of credit risk. Holdings
attempts to lessen that risk by investing only in United States Government
securities, commercial paper having at least a rating of A-1 or the equivalent,
time deposits and certificates of deposit of banks having a debt rating of at
least A, or money market funds comprised of such securities. Holdings invests in
securities with maturities no longer than 180 days and limits the amount of
credit exposure to any one commercial issuer.
Accounts Receivable
Concentration of credit risk relating to accounts receivable is limited to
some extent by the diversity and number of patients and payors and the
geographic dispersion of Holdings' hospitals. Accounts receivable (gross)
consists of amounts due from government programs (e.g., Medicare and Medicaid)
(53%) commercial insurance companies (16%), private pay patients (18%) and other
(including health maintenance organizations and other group insurance programs)
(13%). Holdings' hospitals are located throughout the southern United States,
with the largest concentration in Texas, Oklahoma, Louisiana and California.
Holdings maintains an allowance for losses (i.e., uncompensated care or bad debt
expense) based on the expected collectibility of accounts receivable.
Supply Inventories
Supply inventories are stated at the lower of cost (first-in, first-out
method) or market.
F-12
<PAGE> 65
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are recorded at cost (or fair value at the date of
acquisition as a result of the original purchase from American Medical
International, Inc. and its subsidiaries ("AMI")). Depreciation and amortization
is computed using the straight-line method over estimated useful lives or term
of the lease generally ranging from 25 to 30 years for buildings and
improvements, and 3 to 10 years for equipment. Maintenance costs and repairs are
expensed as incurred.
Joint Ventures
EPIC, in the ordinary course of business, enters into joint ventures with
physicians and other companies. EPIC is the majority owner and general partner
of substantially all of the joint ventures and follows the principles of
consolidation for all majority-owned joint ventures. Minority shareholders'
investments and earnings in the joint ventures are recorded as minority
interests and minority interests in income of consolidated subsidiaries,
respectively. Any interest held by the Company in non-majority owned
partnerships with at least 20% ownership is accounted for using the equity
method. Any interest held by the Company in partnerships with less than 20%
ownership is accounted for using the cost method.
On February 1, 1990, EPIC entered into a joint venture with Healthtrust,
Inc. -- The Hospital Company ("Healthtrust") for the purpose of operating
certain hospital assets in McKinney, Texas. EPIC contributed, at net book value,
a 168 bed facility to the venture and is the managing co-general partner with a
60% equity interest in the venture. Healthtrust contributed a 99 bed facility to
the venture and was the co-general partner with a 40% interest in the venture.
The assets contributed by Healthtrust to the joint venture, including property
and equipment of $15,328,000, were recorded at fair market value which
approximated net book value. Goodwill of $2,470,000 is being amortized over 40
years. On August 31, 1993, EPIC purchased Healthtrust's interest in the joint
venture for $15,656,000 which approximated Healthtrust's interest in the net
assets of the joint venture and was recorded as a reduction to minority
interests.
Intangible Assets
The excess of the purchase price over the fair value of net asset acquired
is being amortized on a straight-line basis over periods ranging from nine to 40
years. Accumulated amortization was $9,244,000 and $6,920,000 at September 30,
1993 and 1992, respectively.
Costs incurred in obtaining long term financing are deferred and are
included in other assets. Deferred financing costs are amortized using the
effective interest method over the term of the related debt, and such
amortization is included in interest expense. Accumulated amortization of
deferred financing costs was $16,993,000 and $14,401,000 at September 30, 1993
and 1992, respectively.
EPIC has purchased licenses to use various software applications. These
costs are included in other assets and have been amortized over two or five year
periods. Accumulated amortization of the software costs was $5,750,000 and
$4,750,000 at September 30, 1993 and 1992, respectively.
Income Taxes
Holdings files a consolidated federal income tax return which includes all
of its eligible subsidiaries.
Holdings accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 96, "Accounting for Income Taxes."
Under the liability method specified by SFAS No. 96, deferred tax assets and/or
liabilities are determined by multiplying the difference between the financial
reporting and tax reporting bases of assets and liabilities (collectively, the
"temporary differences," see Note 6) by tax rates (determined in accordance with
enacted tax laws) that are expected to be effective when such temporary
differences reverse. Holdings' deferred tax liabilities originated from the
accounting for the
F-13
<PAGE> 66
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition from AMI (the "Acquisitions"), and reflect the estimated tax effect
of differences between book and tax bases of assets acquired and liabilities
assumed.
In February 1992, the Financial Accounting Standards Board issued SFAS No.
109, "Accounting for Income Taxes," which supersedes SFAS No. 96. Implementation
of SFAS No. 109 for Holdings was required October 1, 1993. SFAS No. 109 requires
that temporary differences be reflected in the same balance sheet category as
the assets and liabilities that caused the temporary differences. Deferred tax
assets, which would include tax net operating loss carryforwards, would require
the determination of a related valuation allowance, based on the assets'
expected realization. The Company has completed the analysis necessary to
determine the impact of adoption of SFAS No. 109 and it is not expected to have
a material impact on Holdings' financial position or results of operations and
will not impact cash flows.
Net Operating Revenue
Net operating revenue is recorded based on established billing rates net of
allowances and discounts for patients covered by Medicare, Medicaid and other
contractual programs. Payments received under these programs, which are based on
either the costs of services or predetermined rates, are generally less than the
established billing rates of EPIC's hospitals, and the differences are recorded
as contractual allowances and/or contracted discounts. Reserves provided have
been deducted from accounts receivable pending final audit and appeal
settlement. Contractual adjustments, contracted discounts and other discounts
amounted to $627,757,000, $576,572,000, and $482,158,000 for fiscal 1993, 1992
and 1991, respectively.
It is generally EPIC's policy to attempt to collect compensation for all
services performed.
Reclassifications
Certain prior period amounts have been reclassified to conform with the
fiscal 1993 presentation.
2. ACQUISITION AND DIVESTITURES
On August 24, 1993 the Company entered into a 20-year lease agreement with
two ten-year renewal options with the County of Galveston, Texas for Mainland
Center Hospital, a 310-bed hospital in Texas City, Texas. The lease payments of
$27,535,000 were paid in full upon the execution of the lease, which has been
accounted for as a capital lease. The Company also purchased certain net current
assets and equipment of the hospital, which included $5,639,000 in cash, for
$17,965,000 which has been accounted for by the purchase method of accounting.
The Company also has a commitment for $20,000,000 in capital improvements over
the term of the lease. The Company has a purchase option beginning after the
first year of the lease. The option price ranges from $500,000 to $851,000 over
the term of the lease.
On January 6, 1993, the Company sold Westpark Community Hospital in
Hammond, Louisiana for $6,200,000. A loss of $624,000 was recorded as gain
(loss) on sale of assets in fiscal 1993. A charge of $800,000 to reflect the
anticipated loss on the sale was recorded as gain (loss) on sale of assets in
fiscal 1992. The net book value of the assets sold before the fiscal 1992
charge, less liabilities assumed by the buyer, was $7,624,000.
On March 15, 1993, the Company sold Valley Medical Center in El Cajon,
California for $16,950,000. A gain of $4,632,000 was recorded as gain (loss) on
sale of assets in fiscal 1993. The net book value of the assets sold, less
liabilities assumed by the buyer, was $12,318,000.
On October 1, 1991, the Company purchased Colonial Hospital, a 49-bed
hospital in Terrell, Texas for $10,403,000 in cash. The acquisition has been
accounted for by the purchase method of accounting. The excess of purchase price
over net assets acquired will be amortized over 40 years.
F-14
<PAGE> 67
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
Employee-owners of EPIC have beneficial ownership of approximately 60% of
the Holdings Common Stock through their participation in the EPIC ESOP.
At EPIC's inception, the EPIC ESOP purchased 24,500,000 shares of EPIC
Common Stock with the proceeds obtained from the issuance of loans aggregating
$245 million payable to EPIC. The terms of the original ESOP loan agreement
segregated the EPIC ESOP's obligation to EPIC into two components, the terms of
the first of which mirrored the terms of the Senior ESOP Bank Debt (the "First
ESOP Loan") and the second of which mirrored the terms of the Senior ESOP Notes
(see Note 5). Concurrent with the issuance of the Mortgage Notes (see Note 5),
the First ESOP Loan was replaced by a loan agreement which provides for
mandatory principal payments in amounts that are substantially in conformance
with the remaining mandatory principal payments of the Senior ESOP Bank Debt as
if the issuance of the Mortgage Notes had not occurred (the "New ESOP Loan").
The interest rate on the New ESOP Loan is determined quarterly based on .85
times the sum of the London InterBank Offered Rates plus 2.5% (5.1% at September
30, 1993). The EPIC ESOP has pledged all of its shares of the Holdings Common
Stock as collateral for the ESOP-related borrowings. These shares are released
from the pledge as the loans are paid. The EPIC ESOP receives contributions from
EPIC to service and extinguish the loans.
The EPIC ESOP is an individual account, defined contribution plan. Nonunion
employee-owners who work a specified number of hours are eligible to participate
in the EPIC ESOP if they have attained age 21 and completed one year of service.
No employee-owner contributions are required or permitted to be made to the EPIC
ESOP. No rollover contributions are permitted to be made to the EPIC ESOP.
Allocations are made to participants' accounts in an amount which reflects each
participant's proportionate share of the contributions made by EPIC to the EPIC
ESOP, as determined on the basis of each participant's compensation.
Contributions made to the EPIC ESOP and the value of shares of common stock
allocated to the account of a participant as a result of such contributions are
intended to be treated as tax-deferred contributions. Such contributions, and
earnings thereon, generally are includable in a participant's compensation for
federal income tax purposes when distributed.
As of the plan year ended December 31, 1992, cumulative allocations of
10,650,517 shares of Holdings Common Stock at a market value of $8.00 per share
based on an independent valuation, or $85,204,136 in total have been made to
10,183 participants. Shares of Holdings Common Stock relating to the plan year
ending December 31, 1993 will be allocated during fiscal 1994.
Subject to limitations contained in the Internal Revenue Code of 1986, as
amended (the "Code"), Holdings is entitled to claim an income tax deduction for
contributions to the EPIC ESOP. Holdings has received a favorable determination
from the Internal Revenue Service that the EPIC ESOP is qualified as an
"employee stock ownership plan" within the meaning of Section 4975(e)(7) of the
Code. Contributions to the EPIC ESOP are used by the EPIC ESOP to pay interest
and principal on the loans owed to EPIC. These payments are used by EPIC to pay
interest and principal on the Class B-1 First Priority Mortgage Notes and the
Senior ESOP Notes.
EPIC recorded net ESOP expense, using the cash method, and corresponding
reductions in the EPIC ESOP notes receivable, of $20,715,000, $20,714,000, and
$23,076,000 for fiscal 1993, 1992 and 1991, respectively. Interest income
recognized on the EPIC ESOP notes receivable totaled $14,984,000, $16,885,000,
and $20,483,000 for fiscal 1993, 1992 and 1991, respectively, which in turn was
contributed to the EPIC ESOP to pay interest expense incurred on the
ESOP-related debt. Interest expense incurred on ESOP-related debt totaled
$20,856,000, $21,734,000, and $21,731,000, which included discount amortization
of $559,000, $551,000, and $511,000 for fiscal 1993, 1992 and 1991,
respectively.
F-15
<PAGE> 68
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. OPERATING LEASES
Holdings leases office space, office equipment and medical equipment.
Generally, real estate leases are for primary terms of from one to 12 years with
options to renew for additional periods, and equipment leases are for terms of
from one to seven years. Future minimum lease payments for all operating leases
having initial or remaining noncancellable lease terms in excess of one year as
of September 30, 1993 are as follows (dollars in thousands):
<TABLE>
<S> <C>
1994............................................................... $ 4,560
1995............................................................... 4,225
1996............................................................... 3,337
1997............................................................... 2,693
1998............................................................... 1,835
1999 and thereafter................................................ 3,485
-------
20,135
Sublease income.................................................... (1,116)
-------
$19,019
-------
-------
</TABLE>
Rent expense under operating leases was as follows (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
-------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Minimum rent.................................. $18,496 $16,107 $13,609
Sublease income............................... (795) (609) (317)
------- ------- -------
$17,701 $15,498 $13,292
------- ------- -------
------- ------- -------
</TABLE>
F-16
<PAGE> 69
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Holdings' long-term debt, net of discounts, is summarized below (dollars in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1993 1992
-------- --------
<S> <C> <C>
12% Senior Deferred Coupon Notes, principal of $250,000 due
2002........................................................... $167,197 $148,628
11.375% Class B-1 First Priority Mortgage Notes payable in
semi-annual payments of $9,000 commencing in July 1996 with a
final payment of $10,000 in July 2001.......................... 99,579 99,500
11.5% Class B-2 First Priority Mortgage Notes payable in
semi-annual payments of $500 through July 1994, increasing to
$750 in January 1995, to $1,500 in January 1997, to $8,000 in
January 1998, to $9,000 in January 1999, with a final payment
of $15,500 in July 2001........................................ 83,112 84,046
Class B-3 First Priority Mortgage Notes payable in semi-annual
payments of $750 commencing in January 1995, increasing to
$3,000 in January 1997 through July 1998, with a fluctuating
interest rate (6.5% at September 30, 1993)..................... 15,000 15,000
Other mortgage debt and capital lease obligations with varying
maturities and interest rates ranging from 4.75% to 12.9%...... 20,651 20,351
Acquisition loan payable in quarterly installments of $1,250
commencing in October 1993 with a fluctuating interest rate
(8.0% at September, 1993)...................................... 19,542 --
Zero Coupon Notes, principal of $89,313 due 2001 with an
effective interest rate of 14.8%............................... 28,564 24,770
Additional Zero Coupon Notes, principal of $7,079 due 2001 with
an effective interest rate of 14.8%............................ 2,265 1,964
11.875% Senior ESOP Notes payable in three equal annual payments
commencing in September 1996 with an effective interest
rate of 13.03%................................................. 72,141 76,840
10.875% Senior Subordinated Notes due 2003....................... 160,000 --
15% Senior Subordinated Notes payable in three equal annual
payments commencing in 1999.................................... 40,320 104,852
11% Junior Subordinated Pay-In-Kind Notes payable in three equal
annual payments commencing in September 2001................... 19,148 45,742
-------- --------
727,519 621,693
Current maturities............................................... (47,914) (2,330)
-------- --------
$679,605 $619,363
-------- --------
-------- --------
</TABLE>
The 12% Senior Deferred Coupon Notes are reflected at their fair value of
$140,053,000 at March 25, 1992, plus accretion of discount through September 30,
1993. Interest is payable semi-annually beginning March 16, 1997.
The Mortgage Notes are the indebtedness of EPIC Properties, Inc. ("EPIC
Properties"), an indirect wholly-owned subsidiary of EPIC. The Mortgage Notes
are secured by mortgages on 24 acute care hospital complexes ("the Mortgaged
Hospitals") and the land on which such buildings are located, and by a first
priority security interest in certain furnishings and equipment located at each
of the Mortgaged Hospitals. The Mortgage Notes are fully and unconditionally
guaranteed by EPIC (see Note 18).
The interest rate on the Class B-1 First Priority Mortgage Notes (the
"Class B-1 Notes") will increase to 11.5% after September 30, 1995. If the
Internal Revenue Service determines that interest on the Class B-1 Notes does
not qualify for a 50% exclusion from federal taxable income, the interest rate
on the Class B-1 Notes will increase to 11.5% for all periods through September
30, 1995 during which such interest exclusion is not available.
EPIC incurred losses on refinancing concurrent with the issuance of the
Mortgage Notes, due primarily to the write-off of loan issue costs. These
losses, totalling $3,911,000, are recorded as an extraordinary item (net of
income tax benefit of $1,330,000) in the consolidated statement of operations
for the fiscal year ended September 30, 1991.
F-17
<PAGE> 70
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Zero Coupon Notes are reflected at their fair value of $14,008,000, as
estimated by EPIC at September 30, 1988, plus accretion of discount through
September 30, 1993. No interest or principal is payable until maturity.
Additional Zero Coupon Notes were issued under an interest rate cap
agreement with AMI (see Note 13) and are reflected at their original fair value
plus accretion of discount through September 30, 1993. No interest or principal
is payable until maturity.
A subsidiary of EPIC purchased $5,400,000 and $19,850,000 face value of the
11.875% Senior ESOP Notes on the open market for $5,616,000 and $20,293,000 plus
accrued interest in fiscal 1993 and 1992, respectively (the "Senior ESOP Note
Purchases"). Losses of $570,000 and $1,917,000 due to the write-off of debt
issue costs and unamortized discounts and the payment of a premium on the Senior
ESOP Note Purchase are recorded as extraordinary items (net of income tax
benefit of $652,000 in 1992) in the consolidated statements of operations for
the fiscal years ended September 30, 1993 and 1992.
The 11.875% Senior ESOP Notes, which carry detached stock purchase warrants
(see Note 9), have a stated principal amount of $100,000,000 and are reflected
at their fair value of $93,988,000, as estimated by EPIC at September 30, 1988,
less the Senior ESOP Note Purchases, plus accretion of discount through
September 30, 1993.
On June 18, 1993, EPIC refinanced $74,680,000 in principal of the 15%
Senior Subordinated Notes and $53,697,000 in principal of the 11% Junior
Subordinated Pay-In-Kind Notes (the "Refinancing") through the issuance of the
10.875% Senior Subordinated Notes. The 10.875% Senior Subordinated Notes are
guaranteed by certain subsidiaries of EPIC (see Note 18).
Under the terms of the Second Amended and Restated Credit Agreement dated
as of September 30, 1988, and amended and restated as of July 30, 1991, and
September 1, 1993 (the "Amended Credit Agreement"), EPIC is required to call the
remaining $40,320,000 in principal of the 15% Senior Subordinated Notes by
February 28, 1994, with the remaining proceeds of the Refinancing. The remaining
principal of the 15% Senior Subordinated Notes at September 30, 1993, has been
recorded as current maturities of long term debt in the consolidated balance
sheets.
EPIC incurred a loss before taxes of $21,390,000 on the Refinancing, which
resulted from the write-off of loan issue costs and unamortized discount on the
15% Senior Subordinated Notes and the redeemed portion of the 11% Junior
Subordinated Pay-In-Kind Notes, payments to the holders of the 15% Senior
Subordinated Notes and the 11.875% Senior ESOP Notes for waivers of certain
provisions of the respective indentures and the accrual of the call premium to
be paid on redeeming the remaining principal on the 15% Senior Subordinated
Notes. These losses are recorded as an extraordinary item in the consolidated
statements of operations.
The 15% Senior Subordinated Notes are guaranteed by certain wholly-owned
subsidiaries of EPIC (see Note 18) and are secured by a fourth pledge of the
common stock of such subsidiaries.
Interest on the 11% Junior Subordinated Pay-in-Kind Notes is payable
semiannually by the issuance of additional 11% Junior Subordinated Pay-in-Kind
Notes through September 30, 1995, and thereafter, if Holdings is prohibited from
making cash interest payments by the terms of any senior debt existing on
September 30, 1988 less the amount retired in the Refinancing. The notes, which
have a stated principal amount of $50,000,000, have been recorded at their fair
value estimated by EPIC at September 30, 1988, of $22,900,000 plus accretion of
discount through September 30, 1993, less the amount retired as a result of the
Refinancing. The effective interest rate for these notes is 18.07%.
The Amended Credit Agreement provides EPIC with revolving loan commitments
and an acquisition loan to be used for working capital and acquisition funds for
EPIC. As of September 30, 1993, revolving loan commitments aggregated $30
million. Any revolving loan commitments outstanding are due July 31, 1997.
F-18
<PAGE> 71
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest is generally payable monthly at the following rates per annum, at
EPIC's option: (i) 1.5% in excess of the higher of the prime rate in effect from
time to time or the annual yield on ninety-day commercial paper or (ii) 2.5% in
excess of the LIBOR rate. There were no revolving loans outstanding as of
September 30, 1993, and 1992, respectively. The acquisition term loan principal
amount outstanding is payable in quarterly installments commencing on October
31, 1993 through July 31, 1997. Interest is generally payable quarterly at the
following rates per annum, at EPIC's option: (i) 2.0% in excess of the higher of
the prime rate in effect from time to time or the annual yield on ninety-day
commercial paper or (ii) 3.0% in excess of the LIBOR rate.
In connection with the issuance of the Mortgage Notes, EPIC Properties
obtained a revolving line of credit. The line of credit can only be used for the
purpose of paying interest or principal on the Mortgage Notes. The maximum loan
amount available is the lesser of $22 million or the annual interest accrual of
the Mortgage Notes. The line of credit would bear an interest rate of the Prime
Lending Rate of AmSouth Bank plus 2%. There were no loans outstanding under the
line of credit as of September 30, 1993 and 1992, respectively.
The Amended Credit Agreement and other long-term debt agreements contain a
number of restrictive covenants, including restrictions on incurrence of debt,
sales of assets, payment of cash dividends, requirements to maintain certain
financial ratios and a specified level of net worth, as defined, and other
limitations, including limitations on the use of funds from the sale of certain
assets.
As of September 30, 1993, the maturities of long-term debt were as follows
(dollars in thousands):
<TABLE>
<S> <C>
1994.............................................................. $ 47,914
1995.............................................................. 9,498
1996.............................................................. 43,545
1997.............................................................. 58,546
1998.............................................................. 67,207
1999 and thereafter............................................... 671,160
---------
897,870
Unamortized discounts and unaccreted interest..................... (170,351)
---------
$ 727,519
---------
---------
</TABLE>
6. INCOME TAXES
The income tax benefit for fiscal 1992 and 1991 was comprised of deferred
federal benefits of $11,800,000 and $9,996,000 respectively, arising from
reported financial losses and state income tax expense of $1,984,000 and
$888,000 in fiscal 1993 and 1992, respectively. For financial reporting
purposes, Holdings has utilized all of its deferred federal tax liability and
has not recognized a benefit for the current net operating loss pursuant to the
provisions of SFAS No. 96. Taxes paid during 1993 and 1992 primarily relate to
state income taxes and estimated federal tax payments.
F-19
<PAGE> 72
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Holdings' consolidated effective federal tax rate differed from the federal
statutory rate as set forth in the following table:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
--------------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Tax benefit computed at federal statutory rate
(34%)............................................... $ 16,022 $12,547 $10,732
Amortization of excess purchase price over net assets
acquired............................................ (790) (614) (601)
Losses not subject to benefit......................... (15,089) -- --
Other, net............................................ (143) (133) (135)
-------- ------- -------
Income tax benefit.................................... $ -- $11,800 $ 9,996
-------- ------- -------
-------- ------- -------
</TABLE>
The deferred income tax benefit results from the following temporary
differences in reporting for financial and income tax purposes:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
-------------------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Book/tax difference on sale of assets................. $ 3,835 $ -- $ --
Book/tax depreciation differences..................... 475 221 (3,392)
Net operating loss recognized currently for financial
reporting........................................... 2,976 1,412 6,134
SAR compensation not currently deductible............. 968 3,673 2,426
Professional liability reserves not currently
deductible.......................................... 383 1,013 4,345
Other reserves for estimated losses and contingencies
not currently deductible............................ 1,348 2,217 508
Paid time off accrued for financial reporting, not
currently deductible................................ 339 719 89
Difference arising from ESOP loan fees initially
expensed for tax purposes but capitalized and
amortized for financial reporting purposes.......... 197 427 (480)
Difference in methods used to reserve for bad debts... 802 1,014 55
Difference in ESOP contribution deduction............. (162) 207 (1,317)
Difference in methods for reporting interest.......... 1,553 562 694
Losses not subject to benefit......................... (15,089) -- --
Other................................................. 2,375 335 934
------- ------- -------
Deferred income tax benefit........................... $ -- $11,800 $ 9,996
------- ------- -------
------- ------- -------
</TABLE>
Net operating loss carryforwards of approximately $72,106,000 (expiring in
the years 2004, 2005, 2006, 2007 and 2008) are available to offset future income
for federal and state tax purposes. The utilization of these net operating loss
carryforwards is dependent upon future taxable income. Net operating loss
carryforwards of $47,123,000 are available for financial reporting purposes.
7. DEFERRED COMPENSATION
Holdings has adopted a deferred compensation plan (the "SAR Plan") as part
of its overall executive compensation program to attract, motivate and retain
key employee-owners. As of September 30, 1993, 5,873,582 SAR Plan units, each
exchangeable for one share of Holdings Common Stock or redeemable for cash or
other property under certain circumstances, were held by certain key
employee-owners and former employee-owners. During fiscal 1993, 1992 and 1991,
309,500, 1,481,065 and 1,002,000 SAR Plan units were granted and 427,800,
218,000, and 243,000 SAR Plan units were cancelled, respectively. The
outstanding SAR Plan units vest in varying amounts at varying periods not
exceeding five years beginning on each respective grant date. A maximum of
6,587,565 SAR Plan units, reduced by all units redeemed may be
F-20
<PAGE> 73
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
outstanding at any time. During fiscal 1993, 1992, and 1991, Holdings accrued
SAR Plan compensation expense of $3,848,000, $11,805,000, and $8,135,000,
respectively.
During fiscal 1993, 123,417 SAR Plan units were redeemed for $974,994 in
cash ($7.90 per unit) and 3,125 units were redeemed for $25,000 in cash ($8.00
per unit); in October 1993, 121,874 SAR Plan units were redeemed for $974,996 in
cash ($8.00 per unit).
During fiscal 1992, 129,998 SAR Plan units were redeemed for $974,985 in
cash ($7.50 per unit) and 3,164 SAR Plan units were redeemed for $24,996 in cash
($7.90 per unit).
8. REDEEMABLE PREFERRED STOCK
Pursuant to the Merger, the EPIC Class A and Class B Preferred Stock was
converted to Holdings Preferred Stock and the EPIC Class C Preferred Stock was
converted to Holdings Common Stock. The EPIC Class A and Class B Preferred
Stock, which had a book value of $66,360,000 and $66,776,000, respectively, was
repurchased from AMI for $130,000,000. The EPIC Class C Preferred Stock, which
had a book value of $63,935,000 was converted into 9,423,075 shares of Holdings
Common Stock.
At September 30, 1988, redeemable preferred stock of EPIC was recorded at
fair value estimated by EPIC, based on an independent valuation. The recorded
amounts were less than the mandatory redemption amounts for the EPIC Class A and
Class B Preferred Stock and were increased by the recording of dividends at the
stated rate and by accretion of the discount, and reduced by the discount
recorded on declared and accrued dividends, so that the carrying amounts would
equal the mandatory redemption amounts at the mandatory redemption dates.
Dividends on the EPIC Class A and Class B Preferred Stock were cumulative
and payable quarterly at annual rates of $10.00 and $10.50 per share,
respectively, out of funds legally available. EPIC declared and paid such
dividends in like stock three quarters in arrears, however, such dividends were
accrued quarterly. For the dividend periods after September 30, 1988, to
conversion, dividends were paid in additional shares of the same class of stock
at the rate of 0.025 and 0.02625, respectively, of a share of stock. During
fiscal 1992, EPIC declared dividends of 26,144 shares of EPIC Class A Preferred
Stock and 28,182 shares of EPIC Class B Preferred Stock.
Holders of shares of EPIC Class C Preferred Stock were entitled to receive
cumulative dividends out of funds legally available at the annual rate of $8.00
per share. No dividends were declared on the EPIC Class C Preferred Stock;
however, EPIC had recorded accruals of $1,935,000 during fiscal year 1992 and
$4,000,000 during fiscal year 1991 for undeclared dividends.
9. COMMON STOCK WARRANTS AND OPTIONS
The Senior ESOP Notes and 15% Senior Subordinated Notes carried detachable
stock purchase warrants to purchase 1,884,615 and 3,795,000 shares of EPIC
Common Stock for $.01 and $.001 per share, subject to anti-dilution adjustments.
The aggregate fair values of these warrants estimated by EPIC, based on an
independent valuation, at date of issuance were $6,012,000 and $12,103,000,
respectively. In addition, EPIC agreed to issue to AMI certain warrants to
purchase 925,129 shares of EPIC Common Stock at an exercise price of $.001 per
share. Immediately prior to the Merger, 6,306,395 of the warrants outstanding
were exercised for 63,064 shares of EPIC Common Stock. In conjunction with the
Merger, all of the remaining warrants outstanding became warrants to acquire the
same number of shares of Holdings Common Stock. During fiscal 1992, after the
Merger, 152,692 of the warrants outstanding were exercised for Holdings Common
Stock. During fiscal 1993, 3,300 of the warrants outstanding were exercised.
Warrants to purchase 142,357 shares of Holdings Common Stock were outstanding at
September 30, 1993.
F-21
<PAGE> 74
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 14, 1988, EPIC adopted the EPIC Healthcare Group, Inc. Stock
Option Plan (the "Stock Option Plan"). Under the Stock Option Plan, the Board of
Directors is authorized to grant options to EPIC directors, officers and
salaried employee-owners to purchase up to 500,000 shares of Holdings Common
Stock. Options granted vest in five equal annual installments. No options were
granted during fiscal 1993, 1992 or 1991. At September 30, 1993, options for
32,000 shares were exercisable.
10. COMMON STOCK
Prior to the Merger, warrants were exercised for 63,064 shares of EPIC
Common Stock and 1,452 shares were repurchased by EPIC from participants of the
EPIC ESOP. Pursuant to the Merger, 30,739,378 shares of EPIC Common Stock were
converted to Holdings Common Stock and the EPIC Class C Preferred Stock was
converted to 9,423,075 shares of Holdings Common Stock. Since the Merger,
warrants have been exercised for 155,992 shares of Holdings Common Stock.
Additionally, 219,004 shares have been distributed to participants of the EPIC
ESOP, which were repurchased by Holdings.
Holdings has reserved 142,357 shares of Holdings Common Stock for issuance
upon the exercise of outstanding warrants to purchase Holdings Common Stock and
5,902,116 shares have been reserved for future issuance under the SAR Plan.
11. LOSS PER COMMON SHARE
Loss per common share has been computed by dividing the net loss to common
stockholders by the average number of common shares outstanding during the
period. The exercise of the outstanding common stock warrants and other common
stock equivalents has not been assumed as the effect would be antidilutive.
Assuming conversion of the EPIC redeemable preferred stock as of October 1,
1991, the net loss per common share of Holdings would have been $32,645,000 as a
result of the elimination of the redeemable preferred stock dividend of
$11,048,000 and additional interest expense of $8,806,000 on the Holdings Notes
(from the period from October 1, 1991, to March 24, 1992). The weighted average
number of common shares outstanding would have been 40,183,036 shares. As a
result, the net loss per common share in fiscal 1992 would have been $0.84.
12. PROFESSIONAL AND GENERAL LIABILITY RISKS
Holdings is self-insured for its professional and general liability risks.
As of September 30, 1993, the unfunded reserve for this self insurance was
$45,130,000 of which $11,000,000 was included in current liabilities. EPIC has
funded $12,482,000 of the reserves through a wholly-owned captive insurance
company at September 30, 1993. The reserves for losses and related expenses are
discounted to their present value based on expected loss reporting patterns
determined by independent actuaries using a rate of 9%. AMI has retained the
liability for all professional liability claims with a date of occurrence prior
to October 1, 1988.
13. RELATED PARTY TRANSACTIONS
EPIC and AMI entered into an interest rate cap agreement (the "Senior
Interest Cap Agreement") whereby AMI agreed to pay to EPIC the amounts by which
EPIC's interest costs under certain tranches of indebtedness exceeded, during
each of the three fiscal years after September 30, 1988, certain specified
rates, net of the effect of any reimbursement to EPIC by Medicare, Medicaid, or
Blue Cross for any interest expense incurred by EPIC in excess of such rates in
connection with such loans.
On August 28, 1991, EPIC and AMI agreed that it was mutually in their best
interest to terminate the Senior Interest Cap Agreement prior to its scheduled
expiration of October 1, 1991. EPIC and AMI further agreed that each party had
fully performed all of its obligations under the Senior Interest Cap Agreement
and each party released the other from future obligations thereunder.
F-22
<PAGE> 75
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to the terms of the Senior Interest Cap Agreement, EPIC issued
Additional Zero Coupon Notes to AMI in the principal amounts of $1,612,000 and
$2,844,000 during fiscal 1990 and 1989, respectively, in exchange for cash of a
like amount paid to EPIC by AMI during such years. In fiscal 1991, EPIC paid to
AMI $2,864,000 and issued Additional Zero Coupon Notes to AMI with a present
value of $626,000 in exchange for the cancellation of the zero coupon notes
issued in 1989. AMI has sold their interest in the Additional Zero Coupon Notes.
Net interest expense of $839,000 was recognized during fiscal 1991 relating to
this agreement.
EPIC and AMI have entered into certain other agreements, including a
registration rights agreement pursuant to which EPIC has agreed to register the
securities issued to AMI under the Securities Act of 1933. AMI has also agreed
to indemnify EPIC against certain liabilities associated with the breach of
representations and warrants made by AMI, certain tax liabilities that may
arise, certain reimbursements still pending related to the Acquisitions and
certain fees, costs, and expenses.
During fiscal 1993, AMI reimbursed $1,621,000 relating to AMI's
indemnifications of EPIC for certain intermediary adjustments to reimburse costs
relating to cost report years that preceded the formation of EPIC.
EPIC entered into a three year group purchasing agreement, effective
September 1, 1993, with a subsidiary of AMI, which allows the Company to
purchase supplies at lower group rates. The Company expects to purchase more
than $30,000,000 per year of supplies under terms of the agreement. The Company
will pay $180,000 per year to participate in this program.
David R. Belle-Isle, a former officer of EPIC, borrowed $181,000 from EPIC
in December 1988 in connection with his relocation to Texas. The loan was
interest free until it was restructured in October 1990. Effective as of the
30th day of September 1991, this debt, totalling $160,000, was forgiven. The
Company reimbursed Mr. Belle-Isle for the tax liability associated with the
forgiveness of the loan.
EPIC has a consulting agreement with The Elder Group, of which Thomas H.
Elder, who formerly served as EPIC's Management Services Officer, is the
Managing Principal. EPIC paid The Elder Group approximately $1,300,000 and
$1,000,000 in fiscal 1992 and 1991, respectively.
EPIC has an investment in the preferred stock of the Compucare Company
("Compucare"), who is developing and installing one of EPIC's new information
systems. The chief executive officer of EPIC is on the board of directors of
Compucare. Payments to Compucare for fiscal 1993 totalled $5,651,000.
14. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in any cases, could not be realized in immediate
settlement of the instrument. SFAS No. 107 excluded certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of Holdings. The following methods and assumptions were used by
Holdings in estimating its fair value disclosures for financial instruments.
Cash Equivalents, Cash Restricted for Interest Payments, and Marketable
Securities
The carrying amounts reported in the consolidated balance sheets for cash
equivalents, cash restricted for interest payments, and marketable interest
bearing securities approximates their fair values.
F-23
<PAGE> 76
EPIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Term Debt (Including Current Maturities)
The fair values of Holdings' long-term debt, except the Class B-1 and Class
B-2 First Priority Mortgage Notes, are estimated using quoted market prices or
the call price. The fair value of the Class B-1 and Class B-2 First Priority
Mortgage Notes are estimated using discounted cash flow analysis based on
Holdings' incremental borrowing rate for similar types of borrowing
arrangements.
The carrying amounts and estimated fair values of Holdings' financial
instruments at September 30, 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Cash equivalents, cash restricted for interest payments, and
marketable securities.......................................... $112,529 $112,529
Long-term debt................................................... $727,519 $772,006
</TABLE>
15. EXTRAORDINARY ITEMS
Extraordinary items of $21,960,000 in 1993, $1,265,000 ($1,917,000, net of
income tax benefit of $652,000) in 1992 and $2,581,000 ($3,911,000, net of
income tax benefit of $1,330,000) in 1991 were primarily due to the write-offs
of loan issue costs and unamortized discounts on retirements of long-term debt
(see Note 5).
16. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance and repair expense was $17,101,000, $17,564,000, and
$16,159,000 for fiscal 1993, 1992, and 1991, respectively.
17. CONTINGENCIES
Final determination of amounts earned under prospective payment and
cost-reimbursement programs 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.
Holdings is currently, and from time to time is 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 matters will not have a material
effect on Holding's results of operations, financial position, or liquidity.
Pursuant to the terms of the Acquisitions, claims relating to litigation,
medical benefits, and workers' compensation occurring prior to October 1, 1988,
remain the obligation of AMI.
18. GUARANTOR SUBSIDIARIES
Certain subsidiaries of EPIC (the "Guarantor Subsidiaries") guarantee the
loans under the Bank Credit Agreement, AMI Zero Coupon Notes, Additional AMI
Zero Coupon Notes, 11.875% Senior ESOP Notes, 10.875% Senior Subordinated Notes,
15% Senior Subordinated Notes and 11% Junior Subordinated Pay-In-Kind Notes.
Certain other subsidiaries, including EPIC Properties, are not Guarantor
Subsidiaries (the Nonguarantor Subsidiaries) (see Note 5). All equity interests
in the Nonguarantor Subsidiaries, other than those held by minority interests,
are held by EPIC.
Condensed consolidating financial information of EPIC, the Guarantor
Subsidiaries, EPIC Properties and the other Nonguarantor Subsidiaries are
included in the footnotes to the consolidated financial statements of EPIC
included elsewhere herein.
F-24
<PAGE> 77
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1993
------------ -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents......................................... $ 40,940 $ 56,756
Cash restricted for interest payment.............................. 9,573 3,820
Marketable securities............................................. 34,132 47,347
Accounts receivable, net of reserves for uncompensated care of
$31,187 and $29,286............................................ 99,392 76,957
Supply inventories................................................ 20,973 20,687
Prepaid expenses and other........................................ 12,398 4,574
Deferred income taxes............................................. 5,384 --
TOTAL CURRENT ASSETS................................................ 222,792 210,141
PROPERTY AND EQUIPMENT.............................................. 810,055 786,798
ACCUMULATED DEPRECIATION AND AMORTIZATION........................... (231,239) (218,746)
------------ -------------
578,816 568,052
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, net of
accumulated amortization.......................................... 52,461 52,965
OTHER ASSETS, net of accumulated amortization....................... 34,551 33,818
------------ -------------
TOTAL ASSETS........................................................ $ 888,620 $ 864,976
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt.............................. $ 48,049 $ 47,914
Accounts payable.................................................. 45,551 44,610
Accrued liabilities............................................... 96,636 87,531
------------ -------------
TOTAL CURRENT LIABILITIES........................................... 190,236 180,055
LONG-TERM DEBT...................................................... 512,999 512,408
DEFERRED INCOME TAXES............................................... 11,378 5,994
RESERVE FOR PROFESSIONAL LIABILITY RISKS............................ 46,557 46,612
OTHER DEFERRED LIABILITIES.......................................... 42,013 42,450
COMMITMENTS AND CONTINGENT LIABILITIES..............................
MINORITY INTERESTS.................................................. 5,909 5,472
STOCKHOLDER'S EQUITY
Common stock, $.01 par value...................................... -- --
Paid-in capital................................................... 373,719 373,838
Notes receivable from EPIC ESOP................................... (137,381) (148,214)
Retained earnings (deficit)....................................... (156,810) (153,639)
------------ -------------
TOTAL STOCKHOLDER'S EQUITY.......................................... 79,528 71,985
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.......................... $ 888,620 $ 864,976
------------ -------------
------------ -------------
</TABLE>
See notes to condensed consolidated financial statements.
F-25
<PAGE> 78
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
-----------------------
1993 1992
-------- --------
<S> <C> <C>
NET OPERATING REVENUE................................................ $272,451 $244,352
COSTS AND EXPENSES:
Salaries and wages................................................. 99,526 84,634
Employee benefits.................................................. 21,094 22,997
ESOP expense....................................................... 5,635 5,182
Supplies........................................................... 32,025 30,041
Uncompensated care................................................. 19,618 19,048
Other.............................................................. 64,613 57,871
Depreciation and amortization...................................... 13,130 13,791
Interest expense................................................... 18,745 17,426
-------- --------
TOTAL COSTS AND EXPENSES............................................. 274,386 250,990
INTEREST INCOME...................................................... 806 636
-------- --------
LOSS BEFORE INCOME TAX BENEFIT (EXPENSE), MINORITY INTERESTS AND
EXTRAORDINARY ITEM................................................. (1,129) (6,002)
INCOME TAX BENEFIT (EXPENSE)......................................... (375) 431
MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES, net of
income tax benefit (expense)....................................... (1,667) (556)
-------- --------
LOSS BEFORE EXTRAORDINARY ITEM....................................... (3,171) (6,127)
EXTRAORDINARY ITEM, net of income tax benefit........................ -- (503)
-------- --------
NET LOSS............................................................. $ (3,171) $ (6,630)
-------- --------
-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
F-26
<PAGE> 79
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
DECEMBER 31,
-----------------------
1993 1992
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss........................................................... $ (3,171) $ (6,630)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization................................... 13,130 13,791
Non-cash provision for professional liability risks............. (1,111) 437
ESOP expense.................................................... 5,635 5,182
Deferred SAR Plan compensation.................................. (274) (1,496)
Minority interests in income of consolidated subsidiaries....... 1,667 631
Non-cash interest............................................... 3,906 4,698
Deferred income tax benefit..................................... -- (749)
Extraordinary item.............................................. -- 570
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable............................................. (22,435) 342
Supply inventories and other assets............................. (8,390) (10,549)
Accounts payable and other liabilities.......................... 9,938 8,747
-------- --------
Net cash provided by (used in) operating activities........ (1,105) 14,974
INVESTING ACTIVITIES
Investments in marketable securities, net.......................... 13,215 6,395
Cash paid for acquisitions......................................... (960) (4,100)
Additions to property and equipment................................ (23,431) (7,410)
Other.............................................................. (661) (811)
-------- --------
Net cash used in investing activities...................... (11,837) (5,926)
FINANCING ACTIVITIES
Payments on debt obligations....................................... (1,415) (76)
Line of credit borrowings, net..................................... -- 800
Purchase of Senior ESOP Notes...................................... -- (5,616)
Dividends paid to EPIC Holdings.................................... (119) (11)
Distributions and dividends to minority interests.................. (1,132) (2,340)
Payments of debt issue costs and other, net........................ (208) (59)
-------- --------
Net cash used in financing activities...................... (2,874) (7,302)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................... (15,816) 1,746
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..................... 56,756 32,641
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................... $ 40,940 $ 34,387
-------- --------
-------- --------
SUPPLEMENTARY INFORMATION
Cash paid for interest............................................. $ 8,513 $ 1,598
Cash paid for income taxes......................................... $ 199 $ 176
</TABLE>
See notes to condensed consolidated financial statements.
F-27
<PAGE> 80
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
EPIC Healthcare Group, Inc. and Subsidiaries (the "Company" or "EPIC"), a
wholly-owned subsidiary of EPIC Holdings, Inc. ("Holdings"), have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included and are of a normal
recurring nature. Operating results for the three month period ended December
31, 1993 are not necessarily indicative of the results that may be expected for
the fiscal year ending September 30, 1994. These financial statements should be
read in conjunction with the audited consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended September 30, 1993.
Certain prior period amounts have been reclassified to conform with the
fiscal 1994 presentation.
2) SUBSEQUENT EVENT
On January 9, 1994, Holdings entered into an Agreement and Plan of Merger
(the "Merger Agreement") with HealthTrust, Inc. -- The Hospital Company, a
Delaware corporation ("HTI"), and Odyssey Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of HTI ("HTI Sub"), providing for the
merger (the "Merger") of HTI Sub with and into Holdings following which Holdings
would become a wholly-owned subsidiary of HTI. The Merger is expected to result
in a termination of the EPIC ESOP. Under the terms of the Merger Agreement,
which was unanimously approved by the Boards of Directors of both HTI and
Holdings, shareholders of Holdings will receive $7.00 per share of Holdings'
common stock.
HTI intends to offer to purchase Holdings' 12% Senior Deferred Coupon Notes
due 2002, and EPIC's 11.375% Class B-1 First Priority Mortgage Notes due 2001,
11.5% Class B-2 First Priority Mortgage Notes due 2001, Class B-3 First Priority
Mortgage Notes, and 10.875% Senior Subordinated Notes due 2003 and to redeem
other outstanding EPIC indebtedness in accordance with their terms. HTI also
plans to seek the consent of the holders of Holdings' and EPIC's indebtedness to
amend certain restrictive provisions.
Consummation of the Merger is subject to a number of conditions, including
the approval of Holdings' shareholders and the consummation of certain debt
consent solicitations. American Medical International, Inc. and the trustee of
the EPIC ESOP (who controls the unallocated shares of the EPIC ESOP) have
agreed, subject to the fulfillment of certain conditions, to vote their shares
of Holdings common stock (approximately 52% combined) in favor of the Merger.
The transaction is expected to close by May of 1994.
3) INCOME TAXES
Effective October 1, 1993, the Company changed its method of accounting for
income taxes to the liability method as required by Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
superseded SFAS No. 96. As permitted under the rules of SFAS No. 109, prior
years' financial statements have not been restated.
Adoption of SFAS No. 109 had no effect on current period operations. Due to
the uncertainty of the realization of the net deferred federal tax liability,
the Company established a valuation allowance against the deferred federal tax
assets so that deferred federal tax assets equalled deferred federal tax
liabilities. The net deferred tax liability reported relates primarily to state
taxes.
F-28
<PAGE> 81
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of October 1, 1993 are as
follows (in thousands):
<TABLE>
<S> <C>
DEFERRED TAX LIABILITIES
------------------------
Property and equipment basis difference....................... $ 42,908
Loan fees.................................................... 1,547
ESOP contribution............................................ 3,455
State taxes and other........................................ 5,994
--------
Total deferred tax liabilities............................... 53,904
--------
DEFERRED TAX ASSETS
-------------------
Bad debt reserve differences.................................. 6,593
Professional liability reserves.............................. 15,670
SAR compensation............................................. 14,034
Health plan and workers' compensation reserve................ 3,652
Paid time off reserve........................................ 1,788
Net operating losses......................................... 24,312
Other........................................................ 700
--------
Total deferred tax assets.................................... 66,749
Valuation allowance.......................................... (18,839)
--------
--------
Net deferred tax assets...................................... 47,910
--------
Net deferred tax liability................................... $ 5,994
--------
</TABLE>
No tax benefit was recorded for the current net operating loss and no
federal taxes are anticipated for fiscal 1994. Current income tax expense of
$375,000 relates to state income taxes.
4) CHANGES IN STOCKHOLDER'S EQUITY
During the three-month period ended December 31, 1993, the Company paid
dividends of $119,000 to Holdings, which were recorded as a reduction in paid-in
capital, and received a principal payment on the Notes receivable from the EPIC
ESOP of $10,833,000, which was recorded as a reduction of the Notes receivable
from EPIC ESOP.
5) GUARANTOR SUBSIDIARIES
Certain subsidiaries of EPIC (the "Guarantor Subsidiaries") guarantee the
loans under the Amended Credit Agreement, the Zero Coupon Notes, the Additional
Zero Coupon Notes, the 11.875% Senior ESOP Notes, the 10.875% Senior
Subordinated Notes, the 15% Senior Subordinated Notes and the 11% Junior
Subordinated Pay-In-Kind Notes. Certain other subsidiaries, including EPIC
Properties, Inc. ("EPIC Properties") are not Guarantor Subsidiaries (the
"Nonguarantor Subsidiaries"). All equity interests in the Nonguarantor
Subsidiaries, other than those held by minority interests, are held by EPIC.
F-29
<PAGE> 82
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
Following is condensed consolidating financial information of EPIC, the
Guarantor Subsidiaries, EPIC Properties and the other Nonguarantor Subsidiaries:
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
EPIC
HEALTHCARE
EPIC OTHER GROUP, INC.
HEALTHCARE GUARANTOR EPIC NONGUARANTOR AND
GROUP, INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.............. $ 4,948 $ 29,826 $ 1,918 $ 4,248 $ -- $ 40,940
Cash restricted for interest payment... -- -- 9,573 -- -- 9,573
Marketable securities.................. -- 22,672 -- 11,460 -- 34,132
Accounts receivable, net............... 558 72,307 470 31,320 (5,263) 99,392
Supply inventories..................... -- 16,820 -- 4,153 -- 20,973
Prepaid expenses and other............. 5,931 5,044 237 1,186 -- 12,398
Deferred income taxes.................. 5,384 -- -- -- -- 5,384
Receivables from affiliates............ 160,997 34,140 -- 5,930 (201,067) --
----------- ------------ ----------- ------------ ------------ -------------
TOTAL CURRENT ASSETS............. 177,818 180,809 12,198 58,297 (206,330) 222,792
PROPERTY AND EQUIPMENT................... -- 283,970 444,673 81,412 -- 810,055
ACCUMULATED DEPRECIATION AND
AMORTIZATION........................... -- (55,974) (146,387) (28,878) -- (231,239)
----------- ------------ ----------- ------------ ------------ -------------
-- 227,996 298,286 52,534 -- 578,816
INVESTMENTS IN SUBSIDIARIES.............. 64,684 89,641 -- -- (154,325) --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net.......................... -- 38,107 -- 14,354 -- 52,461
OTHER ASSETS, net........................ 11,844 89,786 895 3,427 (71,401) 34,551
RECEIVABLES FROM AFFILIATES.............. 297,673 4,117 -- -- (301,790) --
----------- ------------ ----------- ------------ ------------ -------------
TOTAL ASSETS..................... $ 552,019 $630,456 $ 311,379 $128,612 $ (733,846) $ 888,620
----------- ------------ ----------- ------------ ------------ -------------
----------- ------------ ----------- ------------ ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt... $ 45,332 $ 686 $ 1,020 $ 1,011 $ -- $ 48,049
Accounts payable....................... 235 41,308 (71) 6,301 (2,222) 45,551
Accrued liabilities.................... 9,602 69,137 12,417 8,521 (3,041) 96,636
Payables to affiliates................. -- 166,927 -- 34,140 (201,067) --
----------- ------------ ----------- ------------ ------------ -------------
TOTAL CURRENT LIABILITIES........ 55,169 278,058 13,366 49,973 (206,330) 190,236
LONG-TERM DEBT........................... 322,906 8,879 241,964 10,651 (71,401) 512,999
DEFERRED INCOME TAXES.................... 11,378 -- -- -- -- 11,378
RESERVE FOR PROFESSIONAL LIABILITY
RISKS.................................. -- 32,011 -- 13,054 1,492 46,557
OTHER DEFERRED LIABILITIES............... -- 40,786 -- 1,227 -- 42,013
MINORITY INTERESTS....................... -- 5,226 -- 683 -- 5,909
PAYABLES TO AFFILIATES................... 1,363 297,673 564 1,330 (300,930) --
STOCKHOLDERS' EQUITY
Common stock......................... -- -- 1 -- (1) --
Paid-in capital...................... 373,719 61,855 92,865 5,434 (160,154) 373,719
Notes receivable from EPIC ESOP...... (100,000) -- (37,381) -- -- (137,381)
Retained earnings (deficit).......... (112,516) (94,032) -- 46,260 3,478 (156,810)
----------- ------------ ----------- ------------ ------------ -------------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT)...................... 161,203 (32,177) 55,485 51,694 (156,677) 79,528
----------- ------------ ----------- ------------ ------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)...................... $ 552,019 $630,456 $ 311,379 $128,612 $ (733,846) $ 888,620
----------- ------------ ----------- ------------ ------------ -------------
----------- ------------ ----------- ------------ ------------ -------------
</TABLE>
F-30
<PAGE> 83
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1993
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............. $ 8,944 $ 40,846 $ 2,062 $ 4,904 $ -- $ 56,756
Cash restricted for interest
payment............................. -- -- 3,820 -- -- 3,820
Marketable securities................. -- 35,972 -- 11,375 -- 47,347
Accounts receivable, net.............. 474 56,000 1,071 21,321 (1,909) 76,957
Supply inventories.................... -- 16,589 -- 4,098 -- 20,687
Prepaid expenses and other............ 777 2,714 -- 1,083 -- 4,574
Receivables from affiliates........... 156,437 29,013 -- 13,663 (199,113) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT ASSETS.................... 166,632 181,134 6,953 56,444 (201,023) 210,141
PROPERTY AND EQUIPMENT.................. -- 264,044 444,673 78,081 -- 786,798
ACCUMULATED DEPRECIATION AND
AMORTIZATION.......................... -- (50,548) (140,665) (27,533) -- (218,746)
---------- ------------ ---------- ------------ ------------ ------------
-- 213,496 304,008 50,548 -- 568,052
INVESTMENTS IN SUBSIDIARIES............. 64,684 109,474 -- -- (174,158) --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net......................... -- 38,577 -- 14,388 -- 52,965
OTHER ASSETS, net....................... 12,440 89,314 936 2,529 (71,401) 33,818
RECEIVABLES FROM AFFILIATES............. 297,673 -- -- -- (297,673) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL ASSETS............................ $ 541,429 $631,995 $ 311,897 $123,909 $ (744,254) $864,976
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt................................ $ 45,333 $ 643 $ 1,020 $ 918 $ -- $ 47,914
Accounts payable...................... 236 39,225 (65) 5,450 (236) 44,610
Accrued liabilities................... 9,294 64,070 5,624 10,216 (1,673) 87,531
Payables to affiliates................ -- 164,963 -- 34,150 (199,113) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT LIABILITIES............... 54,863 268,901 6,579 50,734 (201,022) 180,055
LONG-TERM DEBT.......................... 321,895 8,948 241,927 11,039 (71,401) 512,408
DEFERRED INCOME TAXES................... 5,994 -- -- -- -- 5,994
RESERVE FOR PROFESSIONAL LIABILITY
RISKS................................. -- 34,053 -- 11,206 1,353 46,612
OTHER DEFERRED LIABILITIES.............. -- 41,258 -- 1,192 -- 42,450
MINORITY INTERESTS...................... -- 4,947 -- 525 -- 5,472
PAYABLES TO AFFILIATES.................. -- 297,673 -- -- (297,673) --
STOCKHOLDERS' EQUITY
Common stock.......................... -- -- 1 -- (1) --
Paid-in capital....................... 373,838 61,855 111,604 5,434 (178,893) 373,838
Notes receivable from EPIC ESOP....... (100,000) -- (48,214) -- -- (148,214)
Retained earnings (deficit)........... (115,161) (85,640) -- 43,779 3,383 (153,639)
---------- ------------ ---------- ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT).... 158,677 (23,785) 63,391 49,213 (175,511) 71,985
---------- ------------ ---------- ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)...................... $ 541,429 $631,995 $ 311,897 $123,909 $ (744,254) $864,976
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-31
<PAGE> 84
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EPIC
HEALTHCARE
EPIC GROUP,
HEALTHCARE OTHER INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
NET OPERATING REVENUE............... $ -- $212,740 $ 13,649 $ 62,212 $(16,150) $272,451
COSTS AND EXPENSES:
Operating expenses................ 11 203,002 11 55,420 (15,933) 242,511
Depreciation and amortization..... -- 5,935 5,669 1,603 (77) 13,130
Interest expense.................. 12,617 17,454 6,962 840 (19,128) 18,745
---------- ------------ ---------- ------------ ------------ ----------
TOTAL COSTS AND EXPENSES............ 12,628 226,391 12,642 57,863 (35,138) 274,386
INTEREST INCOME..................... 16,636 2,536 652 110 (19,128) 806
---------- ------------ ---------- ------------ ------------ ----------
INCOME (LOSS) BEFORE INCOME TAX
BENEFIT (EXPENSE), MINORITY
INTERESTS AND EXTRAORDINARY
ITEM.............................. 4,008 (11,115) 1,659 4,459 (140) (1,129)
INCOME TAX BENEFIT (EXPENSE)........ (1,363) 3,503 (564) (1,657) (294) (375)
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES, net of
income tax benefit (expense)...... -- (780) -- (321) (566) (1,667)
---------- ------------ ---------- ------------ ------------ ----------
NET INCOME (LOSS)................... $ 2,645 $ (8,392) $ 1,095 $ 2,481 $ (1,000) $ (3,171)
---------- ------------ ---------- ------------ ------------ ----------
---------- ------------ ---------- ------------ ------------ ----------
</TABLE>
F-32
<PAGE> 85
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1992
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARATOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
NET OPERATING REVENUE.......... $ -- $178,988 $ 13,649 $ 69,156 $(17,441) $ 244,352
COST AND EXPENSES:
Operating expenses........... 50 172,362 40 64,553 (17,232) 219,773
Depreciation and
amortization............... 407 4,463 7,281 1,747 (107) 13,791
Interest expense............. 11,911 12,520 6,961 1,504 (15,470) 17,426
---------- ------------ ---------- ------------ ------------ -----------
TOTAL COSTS AND EXPENSES....... 12,368 189,345 14,282 67,804 (32,809) 250,990
INTEREST INCOME................ 12,500 2,480 1,025 101 (15,470) 636
---------- ------------ ---------- ------------ ------------ -----------
INCOME (LOSS) BEFORE INCOME TAX
BENEFIT (EXPENSE), MINORITY
INTERESTS AND EXTRAORDINARY
ITEM......................... 132 (7,877) 392 1,453 (102) (6,002)
INCOME TAX BENEFIT (EXPENSE)... 607 (122) -- (54) -- 431
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES,
net of income tax benefit
(expense).................... 75 (552) -- (79) -- (556)
---------- ------------ ---------- ------------ ------------ -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM........... 814 (8,551) 392 1,320 (102) (6,127)
EXTRAORDINARY ITEM,
net of income tax benefit
(expense).................. (503) -- -- -- -- (503)
---------- ------------ ---------- ------------ ------------ -----------
NET INCOME (LOSS).............. $ 311 $ (8,551) $ 392 $ 1,320 $ (102) $ (6,630)
---------- ------------ ---------- ------------ ------------ -----------
---------- ------------ ---------- ------------ ------------ -----------
</TABLE>
F-33
<PAGE> 86
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EPIC
HEALTHCARE
EPIC OTHER GROUP, INC.
HEALTHCARE GUARANTOR EPIC NONGUARANTOR AND
GROUP, INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities............. $(2,627) $(11,483) $ 8,856 $ 4,149 $ -- $ (1,105)
INVESTING ACTIVITIES:
Investments in marketable
securities, net................ -- 13,300 -- (85) -- 13,215
Cash paid for acquisitions....... -- -- -- (960) -- (960)
Additions to property and
equipment...................... -- (20,100) -- (3,331) -- (23,431)
Principal collected on note
receivable from EPIC ESOP...... -- -- 10,833 -- (10,833) --
Other............................ -- (601) -- (60) -- (661)
----------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities............. -- (7,401) 10,833 (4,436) (10,833) (11,837)
FINANCING ACTIVITIES
Payments on debt obligations..... (1,250) (26) -- (139) -- (1,415)
Contributions to EPIC ESOP....... -- (10,833) -- -- 10,833 --
Dividends paid to EPIC
Holdings....................... (119) -- -- -- -- (119)
Dividends and capital
distributions received from
EPIC Properties................ -- 19,833 -- -- (19,833) --
Dividends and capital
distributions paid by EPIC
Properties..................... -- -- (19,833) -- 19,833 --
Distributions and dividends to
minority interests............. -- (902) -- (230) -- (1,132)
Payments of debt issue costs and
other, net..................... -- (208) -- -- -- (208)
----------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities............. (1,369) 7,864 (19,833) (369) 10,833 (2,874)
DECREASE IN CASH AND CASH
EQUIVALENTS...................... (3,996) (11,020) (144) (656) -- (15,816)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 8,944 40,846 2,062 4,904 -- 56,756
----------- ------------ ---------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD........................... $ 4,948 $ 29,826 $ 1,918 $ 4,248 $ -- $ 40,940
----------- ------------ ---------- ------------ ------------ ------------
----------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-34
<PAGE> 87
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1992
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EPIC
HEALTHCARE
EPIC OTHER GROUP, INC.
HEALTHCARE GUARANTOR EPIC NONGUARANTOR AND
GROUP, INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities............. $(771) $ 11,646 $ 7,269 $ (3,170) $ -- $ 14,974
INVESTING ACTIVITIES:
Investments in marketable
securities, net................ -- 256 -- 6,139 -- 6,395
Cash paid for acquisitions....... -- (4,100) -- -- -- (4,100)
Additions to property and
equipment...................... -- (7,410) -- -- -- (7,410)
Principal collected on note
receivable from EPIC ESOP...... -- -- 10,357 -- (10,357) --
Other............................ (103) (708) -- -- -- (811)
----------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities............. (103) (11,962) 10,357 6,139 (10,357) (5,926)
FINANCING ACTIVITIES
Payments on debt obligations..... -- (20) -- (56) -- (76)
Line of credit borrowings, net... 800 -- -- -- -- 800
Purchase of Senior ESOP notes.... -- (5,616) -- -- -- (5,616)
Contributions to EPIC ESOP....... -- (10,357) -- -- 10,357 --
Dividends paid to EPIC
Holdings....................... (11) -- -- -- -- (11)
Dividends and capital
distributions received from
EPIC Properties................ -- 17,012 -- 888 (17,900) --
Dividends and capital
distributions paid by EPIC
Properties..................... -- -- (17,900) -- 17,900 --
Distributions and dividends to
minority interests............. -- (680) -- (1,660) -- (2,340)
Payment of debt issue costs and
other, net..................... -- (59) -- -- -- (59)
----------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities............. 789 280 (17,900) (828) 10,357 (7,302)
----------- ------------ ---------- ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................. (85) (36) (274) 2,141 -- 1,746
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 86 22,381 4,506 5,668 -- 32,641
----------- ------------ ---------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD........................... $ 1 $ 22,345 $ 4,232 $ 7,809 $ -- $ 34,387
----------- ------------ ---------- ------------ ------------ ------------
----------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-35
<PAGE> 88
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The subsidiaries comprising the Guarantor Subsidiaries change from year to
year due to new and/or revised agreements relating to the various subsidiaries
of the Company. As a result, the investment in subsidiaries is presented on the
cost basis.
Receivables from (payables to) affiliates include cash transfers between
entities on collection of accounts receivable and payment of accounts payable
and are included in cash flows provided by (used in) operating activities. Cash
flows from operating, financing and investing activities for each subsidiary are
presented in the consolidating statements of cash flows based on that
subsidiary's designation as a guarantor or nonguarantor subsidiary at the end of
the period.
Deferred income taxes and deferred income tax benefit (expense) were
recorded in the accounts of EPIC Healthcare Group, Inc. and were not allocated
to the subsidiaries in fiscal 1993. SFAS No. 109, "Accounting for Income Taxes"
requires that the consolidated amount of current and deferred tax expense for a
group that files a consolidated tax return shall be allocated among the members
of the group when those members issue separate financial statements on a basis
consistent with SFAS No. 109. The Company adopted SFAS No. 109, including
allocation of taxes within the consolidating financial statements, effective
October 1, 1993. For fiscal 1994, deferred income tax benefit (expense) is
allocated to the subsidiaries using the effective tax rate applicable and
deferred income taxes for the subsidiaries are included in receivables from
(payables to) affiliates.
F-36
<PAGE> 89
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
The Board of Directors
EPIC Holdings, Inc.
We have audited the accompanying consolidated balance sheets of EPIC
Healthcare Group, Inc. and subsidiaries (a wholly-owned subsidiary of EPIC
Holdings, Inc.) as of September 30, 1993 and 1992, and the related consolidated
statements of operations, stockholder's equity (deficit), and cash flows for
each of the three years in the period ended September 30, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
EPIC Healthcare Group, Inc. and subsidiaries at September 30, 1993, and 1992,
and the results of its consolidated operations and its consolidated cash flows
for each of the three years in the period ended September 30, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG
Dallas, Texas
December 3, 1993
F-37
<PAGE> 90
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1993 1992
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................ $ 56,756 $ 32,641
Cash restricted for interest payment................................. 3,820 5,768
Marketable securities................................................ 47,347 10,607
Accounts receivable, net of reserves for uncompensated care of
$29,286 and $25,837............................................... 76,957 73,398
Supply inventories................................................... 20,687 20,000
Prepaid expenses and other........................................... 4,574 5,222
--------- ---------
TOTAL CURRENT ASSETS......................................... 210,141 147,636
PROPERTY AND EQUIPMENT
Land................................................................. 53,030 57,492
Buildings and improvements........................................... 476,570 451,292
Equipment............................................................ 234,656 192,367
Construction in progress............................................. 22,542 9,333
--------- ---------
786,798 710,484
Accumulated depreciation and amortization............................ (218,746) (173,789)
--------- ---------
568,052 536,695
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, net of accumulated
amortization......................................................... 52,965 48,140
OTHER ASSETS, net of accumulated amortization.......................... 33,818 38,315
--------- ---------
TOTAL ASSETS................................................. $ 864,976 $ 770,786
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt................................. $ 47,914 $ 2,330
Accounts payable..................................................... 44,610 34,809
Accrued liabilities:
Salaries and wages................................................ 36,475 33,031
Taxes other than on income........................................ 7,874 7,476
Interest.......................................................... 11,027 7,658
Group health insurance............................................ 4,902 5,656
Current reserve for professional liability risks.................. 11,000 11,000
Other............................................................. 16,253 9,011
--------- ---------
TOTAL CURRENT LIABILITIES.............................................. 180,055 110,971
LONG-TERM DEBT......................................................... 512,408 470,735
DEFERRED INCOME TAXES.................................................. 5,994 8,988
RESERVE FOR PROFESSIONAL LIABILITY RISKS............................... 46,612 39,640
OTHER DEFERRED LIABILITIES............................................. 42,450 39,607
COMMITMENTS AND CONTINGENT LIABILITIES.................................
MINORITY INTERESTS..................................................... 5,472 23,494
STOCKHOLDER'S EQUITY
Common stock, $.01 par value -- Authorized: 100,000,000 shares;
Issued and outstanding: 1,000 shares.............................. -- --
Paid-in capital...................................................... 373,838 374,860
Notes receivable from EPIC ESOP...................................... (148,214) (168,929)
Retained earnings (deficit).......................................... (153,639) (128,580)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY............................................. 71,985 77,351
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............................. $ 864,976 $ 770,786
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
F-38
<PAGE> 91
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
NET OPERATING REVENUE................................... $ 1,019,149 $ 941,266 $ 802,689
COSTS AND EXPENSES:
Salaries and wages.................................... 354,326 319,868 271,007
Employee benefits..................................... 84,615 81,365 68,434
ESOP expense.......................................... 20,715 20,714 23,076
Supplies.............................................. 121,986 116,145 99,882
Uncompensated care.................................... 80,643 69,308 59,425
Other................................................. 235,770 234,879 192,633
Depreciation and amortization......................... 57,917 53,013 49,354
Interest expense...................................... 70,934 71,000 68,266
----------- ----------- -----------
TOTAL COSTS AND EXPENSES...................... 1,026,906 966,292 832,077
INTEREST INCOME......................................... 3,627 3,822 5,405
GAIN (LOSS) ON SALE OF ASSETS........................... 3,521 (1,123) (543)
----------- ----------- -----------
LOSS BEFORE INCOME TAX BENEFIT, MINORITY INTERESTS AND
EXTRAORDINARY ITEM.................................... (609) (22,327) (24,526)
INCOME TAX BENEFIT, net................................. 243 6,258 7,603
MINORITY INTERESTS IN INCOME OF CONSOLIDATED
SUBSIDIARIES (net of income tax benefit of $106,
$1,008 and $1,063, respectively)...................... (3,394) (1,958) (2,064)
----------- ----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM.......................... (3,760) (18,027) (18,987)
EXTRAORDINARY ITEM (net of income tax benefit of $661,
$652 and $1,330, respectively......................... (21,299) (1,265) (2,581)
----------- ----------- -----------
NET LOSS...................................... $ (25,059) $ (19,292) $ (21,568)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-39
<PAGE> 92
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES RETAINED TOTAL
COMMON PAID-IN RECEIVABLE EARNINGS STOCKHOLDERS'
STOCK CAPITAL FROM EPIC ESOP (DEFICIT) EQUITY (DEFICIT)
------ -------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1990......... $ 245 $219,808 $ (212,738) $ (87,241) $ (79,926)
Dividends accrued and accretion of
discount on redeemable preferred
stock............................ -- (22,873) -- -- (22,873)
Principal payments received on
notes receivable from EPIC
ESOP............................. -- -- 23,095 -- 23,095
Treasury stock purchased........... (1 ) -- -- (468) (469)
Net loss........................... -- -- -- (21,568) (21,568)
------ -------- -------------- --------- ----------------
Balance at September 30, 1991...... 244 196,935 (189,643) (109,277) (101,741)
Dividends accrued and accretion of
discount on redeemable preferred
stock............................ -- (11,048) -- -- (11,048)
Principal payments received on
notes receivable from EPIC
ESOP............................. -- -- 20,714 -- 20,714
Treasury stock purchased........... -- -- -- (11) (11)
Warrant conversion................. 63 (42) -- -- 21
Contribution of redeemable
preferred stock, net of
expenses......................... -- 190,008 -- -- 190,008
Exchange of common stock in
connection with merger........... (307 ) 307 -- -- --
Dividends paid to EPIC Holdings.... -- (1,300) -- -- (1,300)
Net loss........................... -- -- -- (19,292) (19,292)
------ -------- -------------- --------- ----------------
Balance at September 30, 1992...... -- 374,860 (168,929) (128,580) 77,351
Principal payments received on
notes receivable from EPIC
ESOP............................. -- -- 20,715 -- 20,715
Dividends paid to EPIC Holdings.... -- (1,022) -- -- (1,022)
Net loss........................... -- -- -- (25,059) (25,059)
------ -------- -------------- --------- ----------------
Balance at September 30, 1993...... $ -- $373,838 $ (148,214) $(153,639) $ 71,985
------ -------- -------------- --------- ----------------
------ -------- -------------- --------- ----------------
</TABLE>
See notes to consolidated financial statements.
F-40
<PAGE> 93
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
---------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $ (25,059) $ (19,292) $ (21,568)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 57,917 53,013 49,354
Non-cash provision for professional liability risks.... 2,641 4,131 11,291
ESOP expense........................................... 20,715 20,714 23,076
Deferred SAR Plan compensation......................... 3,249 10,805 7,137
Minority interests in income of consolidated
subsidiaries......................................... 3,499 2,966 3,127
(Gain) loss on sale of assets.......................... (3,521) 1,123 543
Non-cash interest...................................... 18,286 18,417 13,975
Extraordinary item..................................... 21,960 1,917 3,911
Deferred federal income tax benefit.................... (2,994) (8,806) (9,996)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable.................................. 6,054 (35,196) (3,043)
Supply inventories and other assets.................. 4,284 (3,162) (5,291)
Accounts payable and other liabilities............... 12,202 11,282 6,444
--------- --------- ---------
Net cash provided by operating activities......... 119,233 57,912 78,960
INVESTING ACTIVITIES
Investments in marketable securities, net................. (36,740) 5,167 (12,091)
Cash paid for acquisitions................................ (54,536) (12,269) --
Additions to property and equipment....................... (60,784) (47,850) (25,646)
Purchase of investment securities......................... -- (4,180) --
Proceeds from sales of assets............................. 25,148 190 361
Collection on note receivable............................. 9,349 -- --
Other..................................................... (5,925) (2,046) (48)
--------- --------- ---------
Net cash used in investing activities............. (123,488) (60,988) (37,424)
FINANCING ACTIVITIES
Payments on debt obligations.............................. (117,765) (1,603) (250,647)
Proceeds from long-term borrowings........................ 180,853 -- 227,868
Purchase of Senior ESOP Notes............................. (5,616) (20,293) --
Purchase of treasury stock................................ -- (11) (469)
Dividends paid to EPIC Holdings........................... (1,022) (1,300) --
Preferred stock transaction costs......................... -- (7,063) --
Proceeds of warrant conversion............................ -- 21 --
Contributions from minority interests..................... 520 1,884 556
Distributions and dividends to minority interests......... (21,110) (4,065) (4,122)
Payments of debt issue costs and other, net............... (7,490) (672) (11,294)
--------- --------- ---------
Net cash provided by (used in) financing
activities...................................... 28,370 (33,102) (38,108)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 24,115 (36,178) 3,428
Cash and cash equivalents at beginning of year............ 32,641 68,819 65,391
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 56,756 $ 32,641 $ 68,819
SUPPLEMENTARY INFORMATION
Cash paid during the year for interest.................... $ 52,370 $ 53,343 $ 52,987
Cash paid for income taxes................................ $ 657 $ 888 $ 666
</TABLE>
See notes to consolidated financial statements
F-41
<PAGE> 94
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
EPIC Healthcare Group, Inc. ("EPIC" or, either alone or together with its
subsidiaries, the "Company") was acquired by EPIC Holdings, Inc. ("Holdings") on
March 25, 1992, in a merger transaction (the "Merger") in which each outstanding
share of common stock of EPIC was converted into one share of Holdings common
stock. Because the Merger was between companies under common ownership, and as
EPIC is a wholly-owned subsidiary of Holdings, the recorded assets and
liabilities of EPIC have retained their historical cost basis.
Principles of Consolidation
The consolidated financial statements include the accounts of EPIC and its
subsidiaries. Intercompany accounts and transactions have been eliminated.
Minority interests represent the minority stockholders' proportionate shares of
the equity in the income (loss) of certain consolidated subsidiaries.
Cash Equivalents, Cash Restricted for Interest Payments, and Marketable
Securities
The Company considers all highly liquid investments with initial maturities
of three months or less from date of purchase to be cash equivalents. Cash
restricted for interest payments is cash deposited into a trust to pay principal
and interest required by the Class B-1, Class B-2 and Class B-3 First Priority
Mortgage Notes (the "Mortgage Notes"). Investments in marketable
interest-bearing securities are stated at cost which approximates market. The
Company has $42,694,000 in cash and marketable securities restricted for the
purpose of redeeming the remaining 15% Senior Subordinated Notes (See Note 5).
Cash equivalents, cash restricted for interest payments, and marketable
securities are subject to potential concentrations of credit risk. The Company
attempts to lessen that risk by investing only in United States Government
securities, commercial paper having at least a rating of A-1 or the equivalent,
time deposits and certificates of deposit of banks having a debt rating of at
least A, or money market funds comprised of such securities. The Company invests
in securities with maturities no longer than 180 days and limits the amount of
credit exposure to any one commercial issuer.
Accounts Receivable
Concentration of credit risk relating to accounts receivable is limited to
some extent by the diversity and number of patients and payors and the
geographic dispersion of the Company's hospitals. Accounts receivable (gross)
consists of amounts due from government programs (e.g., Medicare and Medicaid)
(53%), commercial insurance companies (16%), private pay patients (18%) and
other (including health maintenance organizations and other group insurance
programs) (13%). The Company's hospitals are located throughout the southern
United States, with the largest concentration in Texas, Oklahoma, Louisiana and
California. The Company maintains an allowance for losses (i.e., uncompensated
care or bad debt expense) based on the expected collectibility of accounts
receivable.
Supply Inventories
Supply inventories are stated at the lower of cost (first-in, first-out
method) or market.
Property and Equipment
Property and equipment are recorded at cost (or fair value at the date of
acquisition as a result of the original purchase from American Medical
International, Inc. and its subsidiaries ("AMI")). Depreciation
F-42
<PAGE> 95
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and amortization is computed using the straight-line method over estimated
useful lives or the term of the lease generally ranging from 25 to 30 years for
buildings and improvements, and 3 to 10 years for equipment. Maintenance costs
and repairs are expensed as incurred.
Joint Ventures
The Company, in the ordinary course of business, enters into joint ventures
with physicians and other companies. The Company is the majority owner and
general partner of substantially all of the joint ventures and follows the
principles of consolidation for all majority-owned joint ventures. Minority
shareholders' investments and earnings in the joint ventures are recorded as
minority interests and minority interests in income of consolidated
subsidiaries, respectively. Any interest held by the Company in non-majority
owned partnerships with at least 20% ownership is accounted for using the equity
method. Any interest held by the Company in partnerships with less than 20%
ownership is accounted for using the cost method.
On February 1, 1990, the Company entered into a joint venture with
Healthtrust, Inc. - The Hospital Company ("Healthtrust") for the purpose of
operating certain hospital assets in McKinney, Texas. The Company contributed,
at net book value, a 168 bed facility to the venture and was the managing
co-general partner with a 60% equity interest in the venture. Healthtrust
contributed a 99 bed facility to the venture and was the co-general partner with
a 40% interest in the venture. The assets contributed by Healthtrust to the
joint venture, including property and equipment of $15,328,000, were recorded at
fair market value which approximated net book value. Goodwill of $2,470,000, is
being amortized over 40 years. On August 31, 1993, the Company purchased
Healthtrust's interest in the joint venture for $15,656,000, which approximated
Healthtrust's interest in the net assets of the joint venture and was recorded
as a reduction to minority interests.
Intangible Assets
The excess of the purchase price over the fair value of net assets acquired
is being amortized on a straight-line basis over periods ranging from nine to 40
years. Accumulated amortization was $9,244,000 and $6,920,000 at September 30,
1993 and 1992, respectively.
Costs incurred in obtaining long term financing are deferred and are
included in other assets. Deferred financing costs are amortized using the
effective interest method over the term of the related debt, and such
amortization is included in interest expense. Accumulated amortization of
deferred financing costs was $16,427,000 and $14,203,000 at September 30, 1993
and 1992, respectively.
The Company has purchased licenses to use various software applications.
These costs are recorded as other assets and have been amortized over two or
five year periods. Accumulated amortization of the software costs was $5,750,000
and $4,750,000 at September 30, 1993 and 1992, respectively.
Income Taxes
The Company is included in the consolidated federal income tax return of
Holdings. The Company's tax provision is determined as if the Company, along
with its subsidiaries, prepared its tax return on a separate return basis.
EPIC accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 96, "Accounting for Income Taxes."
Under the liability method specified by SFAS No. 96, deferred tax assets and/or
liabilities are determined by multiplying the difference between the financial
reporting and tax reporting bases of assets and liabilities (collectively, the
"temporary differences," see Note 6) by tax rates (determined in accordance with
enacted tax laws) that are expected to be effective when such temporary
differences reverse. EPIC's deferred tax liabilities originated from the
accounting for the
F-43
<PAGE> 96
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition from AMI (the "Acquisitions"), and reflect the estimated tax effect
of differences between book and tax bases of assets acquired and liabilities
assumed.
In February 1992, the Financial Accounting Standards Board issued SFAS No.
109, "Accounting for Income Taxes," which supersedes SFAS No. 96. Implementation
of SFAS No. 109 for the Company was required October 1, 1993. SFAS No. 109
requires that temporary differences be reflected in the same balance sheet
category as the assets and liabilities that caused the temporary differences.
Deferred tax assets, which would include tax net operating loss carryforwards,
would require the determination of a related valuation allowance, based on the
assets' expected realization. The Company has completed the analysis necessary
to determine the impact of adoption of SFAS No. 109 and it is not expected to
have a material impact on the Company's financial position or results of
operations and will not impact cash flows.
Net operating revenue
Net operating revenue is recorded based on established billing rates net of
allowances and discounts for patients covered by Medicare, Medicaid and other
contractual programs. Payments received under these programs, which are based on
either the costs of services or predetermined rates, are generally less than the
established billing rates of the Company's hospitals, and the differences are
recorded as contractual allowances and/or contracted discounts. Reserves
provided have been deducted from accounts receivable pending final audit and
appeal settlement. Contractual adjustments, contracted discounts and other
discounts amounted to $627,757,000, $576,572,000, and $482,158,000 for fiscal
1993, 1992 and 1991, respectively.
It is generally the Company's policy to attempt to collect compensation for
all services performed.
Reclassifications
Certain prior period amounts have been reclassified to conform with the
fiscal 1993 presentation.
2. ACQUISITIONS AND DIVESTITURES
On August 24, 1993, the Company entered into a 20-year lease agreement with
two ten year renewal options, with the County of Galveston, Texas for Mainland
Center Hospital, a 310-bed hospital in Texas City, Texas. The lease payment of
$27,535,000 was paid in full upon the execution of the lease, which has been
accounted for as a capital lease. The Company also purchased certain net current
assets and equipment of the hospital, which included $5,639,000 in cash, for
$17,965,000 which has been accounted for by the purchase method of accounting.
The Company also has a commitment to carry out $20,000,000 of capital
improvements over the term of the lease. The lease agreement contains a purchase
option which becomes effective on August 24, 1994. The option price ranges from
$500,000 to $851,000 over the term of the lease.
On January 6, 1993, the Company sold Westpark Community Hospital in
Hammond, Louisiana for $6,200,000. A charge of $624,000 to reflect the loss on
the sale was recorded in fiscal 1993. A charge of $800,000 to reflect the
anticipated loss on the sale was recorded in fiscal 1992. The net book value of
the assets sold before the fiscal 1992 charge, less liabilities assumed by the
buyer, was $7,624,000.
On March 15, 1993, the Company sold Valley Medical Center in El Cajon,
California for $16,950,000. A gain on the sale of $4,632,000 was recorded in
fiscal 1993. The net book value of the assets sold, less liabilities assumed by
the buyer, was $12,318,000.
On October 1, 1991, the Company purchased Colonial Hospital, a 49-bed
hospital in Terrell, Texas for $10,403,000 in cash. The acquisition has been
accounted for by the purchase method of accounting. The excess of purchase price
over net assets acquired is being amortized over 40 years.
3. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
Employee-owners of EPIC have beneficial ownership of approximately 60% of
the Holdings Common Stock through their participation in the EPIC ESOP.
F-44
<PAGE> 97
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At the Company's inception, the EPIC ESOP purchased 24,500,000 shares of
the EPIC Common Stock with the proceeds obtained from the issuance of loans
aggregating $245 million payable to the Company. The terms of the original ESOP
loan agreement segregated the EPIC ESOP's obligation to the Company into two
components, the terms of the first of which mirrored the terms of the Senior
ESOP Bank Debt (the "First ESOP Loan") and the second of which mirrored the
terms of the Senior ESOP Notes (see Note 5). Concurrent with the issuance of the
Mortgage Notes (see Note 5), the First ESOP Loan was replaced by a loan
agreement which provides for mandatory principal payments in amounts that are
substantially in conformance with the remaining mandatory principal payments of
the Senior ESOP Bank Debt as if the issuance of the Mortgage Notes had not
occurred (the "New ESOP Loan"). The interest rate on the New ESOP Loan is
determined quarterly based on .85 times the sum of the London InterBank Offered
Rates plus 2.5% (5.1% at September 30, 1993). The EPIC ESOP has pledged all of
its shares of the Holdings Common Stock as collateral for the ESOP-related
borrowings. These shares are released from the pledge as the loans are paid. The
EPIC ESOP receives contributions from the Company to service and extinguish the
loans.
The EPIC ESOP is an individual account, defined contribution plan. Nonunion
employee-owners who work a specified number of hours are eligible to participate
in the EPIC ESOP if they have attained age 21 and completed one year of service.
No employee-owner contributions are required or permitted to be made to the EPIC
ESOP. No rollover contributions are permitted to be made to the EPIC ESOP.
Allocations are made to participants' accounts in an amount which reflects each
participant's proportionate share of the contributions made by the Company to
the EPIC ESOP, as determined on the basis of each participant's compensation.
Contributions made to the EPIC ESOP and the value of shares of common stock
allocated to the account of a participant as a result of such contributions are
intended to be treated as tax-deferred contributions. Such contributions, and
earnings thereon, generally are includable in a participant's compensation for
federal income tax purposes when distributed.
As of the plan year ended December 31, 1992, cumulative allocations of
10,650,517 shares of Holdings Common Stock at a market value of $8.00 per share
based on an independent valuation, or $85,204,136 in total have been made to
10,183 participants. Shares of Holdings Common Stock relating to the plan year
ending December 31, 1993 will be allocated during fiscal 1994.
Subject to limitations contained in the Internal Revenue Code of 1986, as
amended (the "Code"), Holdings is entitled to claim an income tax deduction for
contributions to the EPIC ESOP. The Company has received a favorable
determination from the Internal Revenue Service that the EPIC ESOP is qualified
as an "employee stock ownership plan" within the meaning of Section 4975(e)(7)
of the Code. Contributions to the EPIC ESOP are used by the EPIC ESOP to pay
interest and principal on the loans owed to the Company. The Company uses
payments from the EPIC ESOP to pay interest and principal on the Class B-1 First
Priority Mortgage Notes and the Senior ESOP Notes.
The Company recorded net ESOP expense, using the cash method, and
corresponding reductions in the EPIC ESOP notes receivable, of $20,715,000,
$20,714,000, and $23,076,000 for fiscal 1993, 1992 and 1991, respectively.
Interest income recognized on the EPIC ESOP notes receivable totaled
$14,984,000, $16,885,000, and $20,483,000 for fiscal 1993, 1992 and 1991,
respectively, which in turn was contributed to the EPIC ESOP to pay interest
expense incurred on the ESOP-related debt. Interest expense incurred on ESOP-
related debt totaled $20,856,000, $21,734,000, and $21,731,000 which included
discount amortization of $559,000, $551,000, and $511,000 for fiscal 1993, 1992
and 1991, respectively.
F-45
<PAGE> 98
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. OPERATING LEASES
The Company leases office space, office equipment and medical equipment.
Generally, real estate leases are for primary terms of from one to 12 years with
options to renew for additional periods, and equipment leases are for terms of
from one to seven years. Future minimum lease payments for all operating leases
having initial or remaining noncancellable lease terms in excess of one year as
of September 30, 1993 are as follows (dollars in thousands):
<TABLE>
<S> <C>
1994....................................................................... $ 4,560
1995....................................................................... 4,225
1996....................................................................... 3,337
1997....................................................................... 2,693
1998....................................................................... 1,835
1999 and thereafter........................................................ 3,485
-------
20,135
Sublease income............................................................ (1,116)
-------
$19,019
-------
-------
</TABLE>
Rent expense under operating leases was as follows (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
---------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Minimum rent.............................................. $18,496 $16,107 $13,609
Sublease income........................................... (795) (609) (317)
------- ------- -------
$17,701 $15,498 $13,292
------- ------- -------
------- ------- -------
</TABLE>
F-46
<PAGE> 99
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
The Company's long-term debt, net of discounts, is summarized below
(dollars in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1993 1992
--------- ---------
<S> <C> <C>
11.375% Class B-1 First Priority Mortgage Notes payable in
semi-annual payments of $9,000 commencing in July 1996 with
a final payment of $10,000 in July 2001.................... $ 99,579 $ 99,500
11.5% Class B-2 First Priority Mortgage Notes payable in
semi-annual payments of $500 through July 1994, increasing
to $750 in January 1995, to $1,500 in January 1997, to
$8,000 in January 1998, to $9,000 in January 1999, with a
final payment of $15,500 in July 2001...................... 83,112 84,046
Class B-3 First Priority Mortgage Notes payable in
semi-annual payments of $750 commencing in January 1995,
increasing to $3,000 in January 1997 through July 1998,
with a fluctuating interest rate (6.5% at September 30,
1993)...................................................... 15,000 15,000
Other mortgage debt and capital lease obligations with
varying maturities and interest rates ranging from 4.75% to
12.9%...................................................... 20,651 20,351
Acquisition Loan, payable in quarterly installments of $1,250
commencing in October, 1993 with a fluctuating interest
rate (8.0% at September 30, 1993).......................... 19,542 --
Zero Coupon Notes, principal of $89,313 due 2001 with an
effective interest rate of 14.8%........................... 28,564 24,770
Additional Zero Coupon Notes, principal of $7,079 due 2001
with an effective interest rate of 14.8%................... 2,265 1,964
11.875% Senior ESOP Notes payable in three equal annual
payments commencing in September 1996 with an effective
interest rate of 13.03%.................................... 72,141 76,840
10.875% Senior Subordinated Notes due 2003................... 160,000 --
15% Senior Subordinated Notes payable in three equal annual
payments commencing in 1999................................ 40,320 104,852
11% Junior Subordinated Pay-In-Kind Notes payable in three
equal annual payments commencing in September 2001......... 19,148 45,742
--------- ---------
560,322 473,065
Current maturities........................................... (47,914) (2,330)
--------- ---------
$ 512,408 $ 470,735
--------- ---------
--------- ---------
</TABLE>
The Mortgage Notes are the indebtedness of EPIC Properties, Inc. ("EPIC
Properties"), an indirect wholly-owned subsidiary of EPIC. The Mortgage Notes
are secured by mortgages on 24 acute care hospital complexes (the "Mortgaged
Hospitals") and the land on which such buildings are located, and by a first
priority security interest in certain furnishings and equipment located at each
of the Mortgaged Hospitals. The Mortgage Notes are fully and unconditionally
guaranteed by EPIC (see Note 17).
The interest rate on the Class B-1 First Priority Mortgage Notes (the
"Class B-1 Notes") will increase to 11.5% after September 30, 1995. If the
Internal Revenue Service determines that interest on the Class B-1 Notes does
not qualify for a 50% exclusion from federal taxable income, the interest rate
on the Class B-1 Notes will increase to 11.5% for all periods through September
30, 1995 during which such interest exclusion is not available.
F-47
<PAGE> 100
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company incurred losses on refinancing concurrent with the issuance of
the Mortgage Notes due primarily to the write-off of loan issue costs. These
losses, totalling $3,911,000, are recorded as an extraordinary item (net of
income tax benefit of $1,330,000) in the consolidated statement of operations
for the fiscal year ended September 30, 1991.
The Zero Coupon Notes are reflected at their fair value of $14,008,000, as
estimated by the Company at September 30, 1988, plus accretion of discount
through September 30, 1993. No interest or principal is payable until maturity.
Additional Zero Coupon Notes were issued under an interest rate cap
agreement with AMI (see Note 12) and are reflected at their original fair value
plus accretion of discount through September 30, 1993. No interest or principal
is payable until maturity.
A subsidiary of EPIC purchased $5,400,000 and $19,850,000 face value of the
11.875% Senior ESOP Notes on the open market for $5,616,000 and $20,293,000 plus
accrued interest in fiscal 1993 and 1992, respectively (the "Senior ESOP Note
Purchases"). Losses of $570,000 and $1,917,000 due to the write-off of debt
issue costs and unamortized discounts and the payment of a premium on the Senior
ESOP Note Purchases are recorded as extraordinary items (net of income tax
benefit of $17,000 and $652,000, respectively) in the consolidated statements of
operations for the fiscal years ended September 30, 1993 and 1992, respectively.
The 11.875% Senior ESOP Notes, which carry detachable stock purchase
warrants (see Note 9), have a stated principal amount of $100,000,000 and are
reflected at their fair value of $93,988,000, as estimated by the Company at
September 30, 1988, less the Senior ESOP Note Purchases, plus accretion of
discount through September 30, 1993.
On June 18, 1993, the Company refinanced $74,680,000 in principal of the
15% Senior Subordinated Notes and $53,697,000 in principal of the 11% Junior
Subordinated Pay-In-Kind Notes (the "Refinancing") through the issuance of the
10.875% Senior Subordinated Notes. The 10.875% Senior Subordinated Notes are
guaranteed by certain subsidiaries of the Company (see Note 17).
Under the terms of the Second Amended and Restated Credit Agreement dated
as of September 30, 1988, and amended and restated as of July 30, 1991, and
September 1, 1993 (the "Amended Credit Agreement"), the Company is required to
call the remaining $40,320,000 in principal of the 15% Senior Subordinated Notes
by February 28, 1994, with the remaining proceeds of the Refinancing. The
remaining principal of the 15% Senior Subordinated Notes at September 30, 1993,
has been recorded as current maturities of long term debt in the consolidated
balance sheets.
The Company incurred a loss before taxes of $21,390,000 on the Refinancing,
which resulted from the write-off of loan issue costs and unamortized discount
on the 15% Senior Subordinated Notes and the redeemed portion of the 11% Junior
Subordinated Pay-In-Kind Notes, payments to the holders of the 15% Senior
Subordinated Notes and the 11.875% Senior ESOP Notes for waivers of certain
provisions of the respective indentures and the accrual of the call premium to
be paid on redeeming the remaining principal on the 15% Senior Subordinated
Notes. These losses are recorded as an extraordinary item (net of income tax
benefit of $644,000) in the consolidated statements of operations.
The 15% Senior Subordinated Notes are guaranteed by certain wholly-owned
subsidiaries of the Company (see Note 17) and are secured by a fourth pledge of
the common stock of such subsidiaries.
Interest on the 11% Junior Subordinated Pay-in-Kind Notes is payable
semi-annually by the issuance of additional 11% Junior Subordinated Pay-in-Kind
Notes through September 30, 1995, and thereafter, if the Company is prohibited
from making cash interest payments by the terms of any senior debt existing on
September 30, 1988, less the amount retired in the Refinancing. The notes, which
have a stated principal amount of $50,000,000, have been recorded at their fair
value estimated by the Company at September 30,
F-48
<PAGE> 101
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1988, of $22,900,000 plus accretion of discount through September 30, 1993, less
the amount retired as a result of the Refinancing. The effective interest rate
for these notes is 18.07%.
The Amended Credit Agreement provides the Company with revolving loan
commitments and an acquisition loan to be used for working capital and
acquisition funds for the Company. As of September 30, 1993, revolving loan
commitments aggregated $30 million. Any revolving loan commitments outstanding
are due July 31, 1997. Interest is generally payable monthly at the following
rates per annum, at the Company's option: (i) 1.5% in excess of the higher of
the prime rate in effect from time to time or the annual yield on ninety-day
commercial paper or (ii) 2.5% in excess of the LIBOR rate. There were no
revolving loans outstanding as of September 30, 1993, and 1992, respectively.
The acquisition term loan principal amount outstanding is payable in quarterly
installments commencing on October 31, 1993 through July 31, 1997. Interest is
generally payable quarterly at the following rates per annum, at the Company's
option: (i) 2.0% in excess of the higher of the prime rate in effect from time
to time or the annual yield on ninety-day commercial paper or (ii) 3.0% in
excess of the LIBOR rate.
In connection with the issuance of the Mortgage Notes, EPIC Properties
obtained a revolving line of credit. The line of credit can only be used for the
purpose of paying interest or principal on the Mortgage Notes. The maximum loan
amount available is the lesser of $22 million or the annual interest accrual of
the Mortgage Notes. The line of credit bears an interest rate of the Prime
Lending Rate of AmSouth Bank plus 2%. There were no loans outstanding under the
line of credit as of September 30, 1993, and 1992, respectively.
The Amended Credit Agreement and other long-term debt agreements contain a
number of restrictive covenants, including restrictions on incurrence of debt,
sales of assets, payment of cash dividends, requirements to maintain certain
financial ratios and a specified level of net worth, as defined, and other
limitations, including limitations on the use of funds from the sale of certain
assets.
As of September 30, 1993, the maturities of long-term debt were as follows
(dollars in thousands):
<TABLE>
<S> <C>
1994..................................................................... $ 47,914
1995..................................................................... 9,498
1996..................................................................... 43,545
1997..................................................................... 58,546
1998..................................................................... 67,207
1999 and thereafter...................................................... 421,160
---------
647,870
Unamortized discounts and unaccreted interest............................ (87,548)
---------
$ 560,322
---------
---------
</TABLE>
6. INCOME TAXES
Subsequent to the Merger, the Company files a consolidated federal income
tax return with Holdings. The Company's income tax benefit for fiscal 1993, 1992
and 1991 was comprised of deferred federal benefits of $2,994,000, $8,806,000
and $9,996,000, respectively, arising from reported financial losses and state
income tax expense of $1,984,000 and $888,000 in fiscal 1993 and 1992,
respectively. For financial reporting purposes, Holdings has utilized
substantially all of its deferred federal tax liability and has limited the
benefit recognized for the current net operating loss pursuant to the provisions
of SFAS No. 96. Taxes paid during 1993 and 1992 primarily relate to state income
taxes and estimated federal tax payments.
F-49
<PAGE> 102
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's consolidated effective federal tax rate differed from the
federal statutory rate as set forth in the following table:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30
---------------------------
1993 1992 1991
-------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tax benefit computed at federal statutory rate (34%)...... $ 9,538 $9,553 $10,732
Amortization of excess purchase price over net assets
acquired................................................ (790) (614) (601)
Losses not subject to benefit............................. (5,611) -- --
Other, net................................................ (143) (133) (135)
-------- ------ -------
Deferred income tax benefit............................... $ 2,994 $8,806 $ 9,996
-------- ------ -------
-------- ------ -------
</TABLE>
The deferred income tax benefit results from the following temporary
differences in reporting for financial and income tax purposes:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
------------------------------
1993 1992 1991
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Book/tax difference on sale of assets.................. $ 3,835 $ -- $ --
Book/tax depreciation differences...................... 475 221 (3,392)
Net operating (benefit) loss recognized currently for
financial reporting.................................. (3,508) (1,582) 6,134
SAR compensation not currently deductible.............. 968 3,673 2,426
Professional liability reserves not currently
deductible........................................... 383 1,013 4,345
Other reserves for estimated losses and contingencies
not currently deductible............................. 1,348 2,217 508
Paid time off accrued for financial reporting, not
currently deductible................................. 339 719 89
Difference arising from ESOP loan fees initially
expensed for tax purposes but capitalized and
amortized for financial reporting purposes........... 197 427 (480)
Difference in methods used to reserve for bad debts.... 802 1,014 55
Difference in ESOP contribution deduction.............. (162) 207 (1,317)
Difference in methods for reporting interest........... 1,553 562 694
Losses not subject to benefit.......................... (5,611) -- --
Other.................................................. 2,375 335 934
-------- ------- -------
Deferred income tax benefit............................ $ 2,994 $ 8,806 $ 9,996
-------- ------- -------
-------- ------- -------
</TABLE>
7. DEFERRED COMPENSATION
The Company has adopted a deferred compensation plan (the "SAR Plan") as
part of its overall executive compensation program to attract, motivate and
retain key employee-owners. As of September 30, 1993, 5,873,582 SAR Plan units,
each exchangeable for one share of Holdings Common Stock or redeemable for cash
or other property under certain circumstances, were held by certain key
employee-owners and former employee-owners. During fiscal 1993, 1992 and 1991,
309,500, 1,481,065, and 1,002,000 SAR Plan units were granted and 427,800,
218,000, and 243,000 SAR Plan units were cancelled, respectively. The
outstanding SAR Plan units vest in varying amounts at varying periods not
exceeding five years beginning on each respective grant date. A maximum of
6,587,565 SAR Plan units, reduced by all units redeemed, may be
F-50
<PAGE> 103
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
outstanding at any time. During fiscal 1993, 1992 and 1991, the Company accrued
SAR Plan compensation expense of $4,249,000, $11,805,000, and $8,135,000,
respectively.
During fiscal 1993, 123,417 SAR Plan units were redeemed for $974,994 in
cash ($7.90 per unit) and 3,125 units were redeemed for $25,000 in cash ($8.00
per unit); in October 1993, 121,874 SAR Plan units were redeemed for $974,996 in
cash ($8.00 per unit).
During fiscal 1992, 129,998 SAR Plan units were redeemed for $974,985 in
cash ($7.50 per unit) and 3,164 SAR Plan units were redeemed for $24,996 in cash
($7.90 per unit).
8. COMMON STOCK OPTIONS
On December 14, 1988, the Company adopted the EPIC Healthcare Group, Inc.
Stock Option Plan (the "Stock Option Plan"). Under the Stock Option Plan, the
Board of Directors is authorized to grant options to EPIC directors, officers
and salaried employee-owners to purchase up to 500,000 shares of Holdings Common
Stock. Options granted vest in five equal annual installments. No options were
granted during fiscal 1993, 1992 or 1991. At September 30, 1993, options for
32,000 shares were exercisable.
9. COMMON STOCK AND COMMON STOCK WARRANTS
The Company sold 24,500,000 shares of EPIC Common Stock to the EPIC ESOP on
September 30, 1988. Since that time through the Merger, 69,445 shares were
distributed to participants in the EPIC ESOP, of which 66,684 shares were
repurchased by the Company. In addition, immediately prior to the Merger,
6,306,395 of warrants outstanding were exercised for 63,064 shares of EPIC
Common Stock. Pursuant to the Merger, each share of EPIC Common Stock was
converted to Holdings Common Stock and the Company issued 1,000 shares of EPIC
Common Stock to Holdings.
10. LOSS PER COMMON SHARE
Because EPIC is a wholly-owned subsidiary of Holdings, loss per common
share is not meaningful and, therefore, is not presented.
11. PROFESSIONAL AND GENERAL LIABILITY RISKS
The Company is self-insured for its professional and general liability
risks. As of September 30, 1993, the unfunded reserve for this self insurance
was $45,130,000 of which $11,000,000 was included in current liabilities. The
Company has funded $12,482,000 of the reserves through a wholly-owned captive
insurance company at September 30, 1993. The reserves for losses and related
expenses are discounted to their present value based on expected loss reporting
patterns determined by independent actuaries using a rate of 9%. AMI has
retained the liability for all professional liability claims with a date of
occurrence prior to October 1, 1988.
12. RELATED PARTY TRANSACTIONS
EPIC and AMI entered into an interest rate cap agreement (the "Senior
Interest Cap Agreement") whereby AMI agreed to pay to EPIC the amounts by which
EPIC's interest costs under certain tranches of indebtedness exceeded, during
each of the three fiscal years after September 30, 1988, certain specified
rates, net of the effect of any reimbursement to EPIC by Medicare, Medicaid, or
Blue Cross for any interest expense incurred by EPIC in excess of such rates in
connection with such loans.
On August 28, 1991, EPIC and AMI agreed that it was mutually in their best
interest to terminate the Senior Interest Cap Agreement prior to its scheduled
expiration of October 1, 1991. EPIC and AMI further agreed that each party had
fully performed all of its obligations under the Senior Interest Cap Agreement
and each party released the other from future obligations thereunder.
F-51
<PAGE> 104
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to the terms of the Senior Interest Cap Agreement, EPIC issued
Additional Zero Coupon Notes to AMI in the principal amounts of $1,612,000 and
$2,844,000 during fiscal 1990 and 1989, respectively, in exchange for cash of a
like amount paid to EPIC by AMI during such years. In fiscal 1991, EPIC paid to
AMI $2,864,000 and issued Additional Zero Coupon Notes to AMI with a present
value of $626,000 in exchange for the cancellation of the Zero Coupon Notes
issued in 1989. AMI has sold their interest in the Additional Zero Coupon Notes.
Net interest expense of $839,000 was recognized during fiscal 1991 relating to
this agreement.
The Company and AMI have entered into certain other agreements, including a
registration rights agreement pursuant to which EPIC has agreed to register the
securities issued to AMI under the Securities Act of 1933. AMI has also agreed
to indemnify the Company against certain liabilities associated with the breach
of representations and warrants made by AMI, certain tax liabilities that may
arise, certain reimbursements still pending related to the Acquisitions, and
certain fees, costs, and expenses.
During fiscal 1993, AMI reimbursed $1,621,000 relating to AMI's
indemnifications of EPIC for certain intermediary adjustments to reimburse costs
relating to cost report years that preceded the formation of EPIC.
The Company entered into a three year group purchasing agreement, effective
September 1, 1993, with a subsidiary of AMI, which allows the Company to
purchase supplies at lower group rates. The Company expects to purchase more
than $30,000,000 per year of supplies under the terms of the agreement. The
Company will pay $180,000 per year to participate in this program.
David R. Belle-Isle, a former officer of EPIC, borrowed $181,000 from EPIC
in December 1988 in connection with his relocation to Texas. The loan was
interest free until it was restructured in October 1990. Effective as of the
30th day of September 1991, this debt, totalling $160,000, was forgiven. The
Company reimbursed Mr. Belle-Isle for the tax liability associated with the
forgiveness of the loan.
The Company has a consulting agreement with The Elder Group, of which
Thomas H. Elder, who formerly served as the Company's Management Services
Officer, is the Managing Principal. The Company paid The Elder Group
approximately $1,300,000 and $1,000,000 in fiscal 1992 and 1991, respectively.
The Company has an investment in the preferred stock of the Compucare
Company ("Compucare"), who is developing and installing one of the Company's new
information systems. The chief executive officer of the Company is on the board
of directors of Compucare. Payments to Compucare for fiscal 1993 totalled
$5,651,000.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. SFAS No. 107 excluded certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company. The following methods and assumptions were used
by the Company in estimating its fair value disclosures for financial
instruments.
F-52
<PAGE> 105
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash Equivalents, Cash Restricted for Interest Payments, and Marketable
Securities
The carrying amounts reported in the consolidated balance sheets for cash
equivalents, cash restricted for interest payments, and marketable interest
bearing securities approximates their fair values.
Long-Term Debt (Including Current Maturities)
The fair values of the Company's long-term debt, except the Class B-1 and
B-2 First Priority Mortgage Notes, are estimated using quoted market prices or
the call price. The fair values of the Class B-1 and B-2 First Priority Mortgage
Notes are estimated using discounted cash flow analysis, based on the Company's
incremental borrowing rate for similar types of borrowing arrangements.
The carrying amounts and estimated fair values of the Company's financial
instruments at September 30, 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Cash equivalents, cash restricted for interest payments, and
marketable securities.......................................... $107,923 $107,923
Long-term debt................................................... 560,322 605,131
</TABLE>
14. EXTRAORDINARY ITEMS
Extraordinary items of $21,299,000 ($21,960,000, net of income tax benefit
of $661,000) in 1993, $1,265,000 ($1,917,000, net of income tax benefit of
$652,000) in 1992 and $2,581,000 ($3,911,000, net of income tax benefit of
$1,330,000) in 1991 were primarily due to the write-offs of loan issue costs and
unamortized discounts on retirements of long-term debt (see Note 5).
15. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance and repair expense was $17,101,000, $17,564,000, and
$16,159,000 for fiscal 1993, 1992 and 1991, respectively.
16. CONTINGENCIES
Final determination of amounts earned under prospective payment and
cost-reimbursement programs 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 is currently, and from time to time expects to be, subject to
claims and suits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of such matters will not have a material
effect on the Company's results of operations, financial position, or liquidity.
Pursuant to the terms of the Acquisitions, claims relating to litigation,
medical benefits, and workers' compensation occurring prior to October 1, 1988,
remain the obligation of AMI.
17. GUARANTOR SUBSIDIARIES
Certain subsidiaries of EPIC (the "Guarantor Subsidiaries") guarantee the
loans under the Amended Credit Agreement, Zero Coupon Notes, Additional Zero
Coupon Notes, 11.875% Senior ESOP Notes, 10.875% Senior Subordinated Notes, 15%
Senior Subordinated Notes and 11% Junior Subordinated Pay-In-Kind Notes. Certain
other subsidiaries, including EPIC Properties, are not Guarantor Subsidiaries
(the "Nonguarantor Subsidiaries") (see Note 5). All equity interests in the
Nonguarantor Subsidiaries, other than those held by minority interests, are held
by EPIC.
F-53
<PAGE> 106
Following is condensed consolidating financial information of EPIC, the
Guarantor Subsidiaries, EPIC Properties and the other Nonguarantor Subsidiaries:
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1993
(DOLLARS IN THOUSANDS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ASSETS
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............... $ 8,944 $ 40,846 $ 2,062 $ 4,904 $ -- $ 56,756
Cash restricted for interest payment.... -- -- 3,820 -- -- 3,820
Marketable securities................... -- 35,972 -- 11,375 -- 47,347
Accounts receivable, net................ 474 56,000 1,071 21,321 (1,909) 76,957
Supply inventories...................... -- 16,589 -- 4,098 -- 20,687
Prepaid expenses and other.............. 777 2,714 -- 1,083 -- 4,574
Receivables from affiliates............. 156,437 29,013 -- 13,663 (199,113) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT ASSETS.............. 166,632 181,134 6,953 56,444 (201,022) 210,141
---------- ------------ ---------- ------------ ------------ ------------
PROPERTY AND EQUIPMENT.................... -- 264,044 444,673 78,081 -- 786,798
ACCUMULATED DEPRECIATION AND
AMORTIZATION............................ -- (50,548) (140,665) (27,533) -- (218,746)
---------- ------------ ---------- ------------ ------------ ------------
-- 213,496 304,008 50,548 -- 568,052
---------- ------------ ---------- ------------ ------------ ------------
INVESTMENTS IN SUBSIDIARIES............... 64,684 109,474 -- -- (174,158) --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net........................... -- 38,577 -- 14,388 -- 52,965
OTHER ASSETS, net......................... 12,440 89,314 936 2,529 (71,401) 33,818
RECEIVABLES FROM AFFILIATES............... 297,673 -- -- -- (297,673) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL ASSETS...................... $ 541,429 $631,995 $ 311,897 $123,909 $ (744,254) $ 864,976
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt.... $ 45,333 $ 643 $ 1,020 $ 918 $ -- $ 47,914
Accounts payable........................ 236 39,225 (65) 5,450 (236) 44,610
Accrued liabilities..................... 9,294 64,070 5,624 10,216 (1,673) 87,531
Payables to affiliates.................. -- 164,963 -- 34,150 (199,113) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT LIABILITIES......... 54,863 268,901 6,579 50,734 (201,022) 180,055
---------- ------------ ---------- ------------ ------------ ------------
LONG-TERM DEBT............................ 321,895 8,948 241,927 11,039 (71,401) 512,408
DEFERRED INCOME TAXES..................... 5,994 -- -- -- -- 5,994
RESERVE FOR PROFESSIONAL LIABILITY
RISKS................................... -- 34,053 -- 11,206 1,353 46,612
OTHER DEFERRED LIABILITIES................ -- 41,258 -- 1,192 -- 42,450
MINORITY INTERESTS........................ -- 4,947 -- 525 -- 5,472
PAYABLES TO AFFILIATES.................... -- 297,673 -- -- (297,673) --
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock............................ -- -- 1 -- (1) --
Paid-in capital......................... 373,838 61,855 111,604 5,434 (178,893) 373,838
Notes receivable from EPIC ESOP......... (100,000) -- (48,214) -- -- (148,214)
Retained earnings (deficit)............. (115,161) (85,640) -- 43,779 3,383 (153,639)
---------- ------------ ---------- ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT)....................... 158,677 (23,785) 63,391 49,213 (175,511) 71,985
---------- ------------ ---------- ------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)....................... $ 541,429 $631,995 $ 311,897 $123,909 $ (744,254) $ 864,976
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-54
<PAGE> 107
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1992
(DOLLARS IN THOUSANDS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ASSETS
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.............. $ 86 $ 22,381 $ 4,506 $ 5,668 $ -- $ 32,641
Cash restricted for interest payment... -- -- 5,768 -- -- 5,768
Marketable securities.................. -- 4,468 -- 6,139 -- 10,607
Accounts receivable, net............... 352 35,530 1,455 38,601 (2,540) 73,398
Supply inventories..................... -- 15,345 -- 4,655 -- 20,000
Prepaid expenses and other............. 240 8,447 259 826 (4,550) 5,222
Receivables from affiliates............ 132,015 26,543 -- 12,023 (170,581) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT ASSETS............. 132,693 112,714 11,988 67,912 (177,671) 147,636
---------- ------------ ---------- ------------ ------------ ------------
PROPERTY AND EQUIPMENT................... -- 185,431 450,259 74,794 -- 710,484
ACCUMULATED DEPRECIATION AND
AMORTIZATION........................... -- (34,377) (116,355 ) (23,057) -- (173,789)
---------- ------------ ---------- ------------ ------------ ------------
-- 151,054 333,904 51,737 -- 536,695
---------- ------------ ---------- ------------ ------------ ------------
INVESTMENTS IN SUBSIDIARIES.............. 66,219 146,521 -- 11,502 (224,242) --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net.......................... -- 35,576 -- 12,564 -- 48,140
OTHER ASSETS, net........................ 21,387 77,466 1,102 4,362 (66,002) 38,315
RECEIVABLES FROM AFFILIATES.............. 229,544 12,113 -- -- (241,657) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL ASSETS..................... $ 449,843 $535,444 $ 346,994 $148,077 $ (709,572) $ 770,786
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt... $ -- $ 597 $ 1,018 $ 715 $ -- $ 2,330
Accounts payable....................... -- 29,440 260 5,350 (241) 34,809
Accrued liabilities.................... 4,323 53,190 10,016 13,152 (6,849) 73,832
Payables to affiliates................. -- 140,007 -- 30,574 (170,581) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT LIABILITIES........ 4,323 223,234 11,294 49,791 (177,671) 110,971
---------- ------------ ---------- ------------ ------------ ------------
LONG-TERM DEBT........................... 274,018 9,363 242,803 10,553 (66,002) 470,735
DEFERRED INCOME TAXES.................... 8,988 -- -- -- -- 8,988
RESERVE FOR PROFESSIONAL LIABILITY
RISKS.................................. -- 32,095 -- 6,749 796 39,640
OTHER DEFERRED LIABILITIES............... -- 37,492 -- 2,115 -- 39,607
MINORITY INTERESTS....................... -- 3,847 -- 19,647 23,494 --
PAYABLES TO AFFILIATES................... -- 199,942 -- 41,715 (241,657) --
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock........................... -- -- 1 -- (1) --
Paid-in capital........................ 374,860 51,853 159,351 13,037 (224,241) 374,860
Notes receivable from EPIC ESOP........ (100,000) -- (68,929 ) -- -- (168,929)
Retained earnings (deficit)............ (112,346) (22,382) 2,474 4,470 (796) (128,580)
---------- ------------ ---------- ------------ ------------ ------------
TOTAL STOCKHOLDER'S EQUITY
(DEFICIT)...................... 162,514 29,471 92,897 17,507 (225,038) 77,351
---------- ------------ ---------- ------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY
(DEFICIT)...................... $ 449,843 $535,444 $ 346,994 $148,077 $ (709,572) $ 770,786
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-55
<PAGE> 108
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1993
(DOLLARS IN THOUSANDS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET OPERATING REVENUE.................... $ -- $792,442 $ 54,596 $237,072 $ (64,961) $1,019,149
COSTS AND EXPENSES:
Operating expenses..................... 269 747,344 482 214,040 (64,080) 898,055
Depreciation and amortization.......... 1,618 21,289 27,602 7,733 (325) 57,917
Interest expense....................... 48,089 68,744 27,778 3,230 (76,907) 70,934
---------- ------------ ---------- ------------ ------------ ------------
TOTAL COSTS AND EXPENSES......... 49,976 837,377 55,862 225,003 (141,312) 1,026,906
INTEREST INCOME.......................... 66,148 10,165 3,528 693 (76,907) 3,627
GAIN (LOSS) ON SALE OF ASSETS............ -- 3,524 1 (4) -- 3,521
---------- ------------ ---------- ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT
(EXPENSE), MINORITY INTERESTS AND
EXTRAORDINARY ITEM..................... 16,172 (31,246) 2,263 12,758 (556) (609)
INCOME TAX BENEFIT (EXPENSE), net........ 2,207 (1,910) -- (54) -- 243
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES (net of
income tax benefit).................... 105 (2,659) -- (840) -- (3,394)
---------- ------------ ---------- ------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM................................... 18,484 (35,815) 2,263 11,864 (556) (3,760)
EXTRAORDINARY ITEM (net of income tax
benefit)............................... (21,299) -- -- -- -- (21,299)
---------- ------------ ---------- ------------ ------------ ------------
NET INCOME (LOSS)........................ $ (2,815) $(35,815) $ 2,263 $ 11,864 $ (556) $ (25,059)
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-56
<PAGE> 109
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1992
(DOLLARS IN THOUSANDS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET OPERATING REVENUE.................... $ -- $700,752 $ 54,596 $254,183 $ (68,265) $941,266
COSTS AND EXPENSES:
Operating expenses..................... 557 675,277 425 233,876 (67,856) 842,279
Depreciation and amortization.......... 1,627 15,021 30,132 6,233 -- 53,013
Interest expense....................... 47,501 62,796 27,864 10,124 (77,285) 71,000
---------- ------------ ---------- ------------ ------------ ------------
TOTAL COSTS AND EXPENSES......... 49,685 753,094 58,421 250,233 (145,141) 966,292
INTEREST INCOME.......................... 65,453 9,815 5,609 617 (77,672) 3,822
GAIN (LOSS) ON SALE OF ASSETS............ -- (972) (151) -- -- (1,123)
---------- ------------ ---------- ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT
(EXPENSE), MINORITY INTERESTS AND
EXTRAORDINARY ITEM..................... 15,768 (43,499) 1,633 4,567 (796) (22,327)
INCOME TAX BENEFIT (EXPENSE), net........ 7,146 (888) -- -- -- 6,258
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES (net of
income tax benefit).................... 1,008 (473) -- (2,493) -- (1,958)
---------- ------------ ---------- ------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM................................... 23,922 (44,860) 1,633 2,074 (796) (18,027)
EXTRAORDINARY ITEM (net of income tax
benefit)............................... (1,265) -- -- -- -- (1,265)
---------- ------------ ---------- ------------ ------------ ------------
NET INCOME (LOSS)........................ $ 22,657 $(44,860) $ 1,633 $ 2,074 $ (796) $(19,292)
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-57
<PAGE> 110
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1991
(DOLLARS IN THOUSANDS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET OPERATING REVENUE.................... $ -- $633,401 $ 9,394 $173,480 $(13,586) $802,689
COSTS AND EXPENSES:
Operating expenses..................... 146 570,706 -- 157,191 (13,586) 714,457
Depreciation and amortization.......... 1,627 36,272 4,953 6,502 -- 49,354
Interest expense....................... 59,387 63,096 4,860 5,942 (65,019) 68,266
---------- ------------ ---------- ------------ ------------ ------------
TOTAL COSTS AND EXPENSES......... 61,160 670,074 9,813 169,635 (78,605) 832,077
INTEREST INCOME.......................... 64,014 4,931 1,260 219 (65,019) 5,405
GAIN (LOSS) ON SALE OF ASSETS............ -- 105 1 (649) -- (543)
---------- ------------ ---------- ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT,
MINORITY INTERESTS AND EXTRAORDINARY
ITEM................................... 2,854 (31,637) 842 3,415 -- (24,526)
INCOME TAX BENEFIT....................... 7,603 -- -- -- -- 7,603
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES (net of
income tax benefit).................... 1,069 (1,366) -- (1,767) -- (2,064)
---------- ------------ ---------- ------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM................................... 11,526 (33,003) 842 1,648 -- (18,987)
EXTRAORDINARY ITEM (net of income tax
benefit)............................... (2,581) -- -- -- -- (2,581)
---------- ------------ ---------- ------------ ------------ ------------
NET INCOME (LOSS)........................ $ 8,945 $(33,003) $ 842 $ 1,648 $ -- $(21,568)
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-58
<PAGE> 111
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1993
(DOLLARS IN THOUSANDS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................. $ (46,950 ) $125,482 $ 28,428 $ 12,273 $ -- $119,233
INVESTING ACTIVITIES
Investments in marketable securities,
net.................................. -- (31,504) -- (5,236) -- (36,740)
Cash paid for acquisitions............. -- (50,835) -- (3,701) -- (54,536)
Additions to property and equipment.... -- (57,957) (6,432) (2,827) 6,432 (60,784)
Proceeds from sale of assets........... -- 31,580 -- -- (6,432) 25,148
Collection on note receivable.......... -- 9,349 -- -- -- 9,349
Principal collected on note receivable
from EPIC ESOP....................... -- -- 20,715 -- (20,715) --
Other.................................. -- (5,925) -- -- -- (5,925)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities................. -- (105,292) 14,283 (11,764) (20,715) (123,488)
FINANCING ACTIVITIES
Payments on debt obligations........... (115,180 ) (498) (1,018) (1,069) -- (117,765)
Proceeds from long-term borrowings..... 179,500 1,353 -- -- -- 180,853
Purchase of Senior ESOP Notes.......... -- (5,616) -- -- -- (5,616)
Dividends paid to EPIC Holdings........ (1,022 ) -- -- -- -- (1,022)
Contribution to EPIC ESOP.............. -- (20,715) -- -- 20,715 --
Dividends and capital distributions
received from EPIC Properties........ -- 44,137 -- -- (44,137) --
Dividends and capital distributions
paid by EPIC Properties.............. -- -- (44,137) -- 44,137 --
Contributions from minority
interests............................ -- 520 -- -- -- 520
Distributions and dividends to minority
interests............................ -- (20,906) -- (204) -- (21,110)
Payment of debt issue costs and other,
net.................................. (7,490 ) -- -- -- -- (7,490)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities................. 55,808 (1,725) (45,155) (1,273) 20,715 28,370
---------- ------------ ---------- ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 8,858 18,465 (2,444) (764) -- 24,115
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR................................... 86 22,381 4,506 5,668 -- 32,641
---------- ------------ ---------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................... $ 8,944 $ 40,846 $ 2,062 $ 4,904 $ -- $ 56,756
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-59
<PAGE> 112
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1992
(DOLLARS IN THOUSANDS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................. $ 9,427 $ (3,682) $ 34,846 $ 17,321 $ -- $ 57,912
INVESTING ACTIVITIES
Investments in marketable securities,
net.................................. -- 11,306 -- (6,139) -- 5,167
Cash paid for acquisitions............. -- (9,903) -- (2,366) -- (12,269)
Additions to property and equipment.... -- (31,503) (9,764) (6,583) -- (47,850)
Purchase of investment securities...... (4,180) -- -- -- -- (4,180)
Principal collected on note receivable
from EPIC ESOP....................... -- -- 20,714 -- (20,714) --
Other.................................. 612 (2,704) 236 -- -- (1,856)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities................. (3,568) (32,804) 11,186 (15,088) (20,714) (60,988)
FINANCING ACTIVITIES
Payments on debt obligations........... -- (76) (516) (1,011) -- (1,603)
Purchase of Senior ESOP Notes.......... -- (20,293) -- -- -- (20,293)
Contribution to EPIC ESOP.............. -- (20,714) -- -- 20,714 --
Dividends paid to EPIC Holdings........ (1,300) -- -- -- -- (1,300)
Dividends and capital distributions
received from EPIC Properties........ -- 54,519 -- 2,844 (57,363) --
Dividends and capital distributions
paid by EPIC Properties.............. -- -- (57,363) -- 57,363 --
Preferred stock transaction costs...... (7,063) -- -- -- -- (7,063)
Contributions from minority
interests............................ -- -- -- 1,884 -- 1,884
Distributions and dividends to minority
interests............................ -- (335) -- (3,730) -- (4,065)
Contribution to subsidiary............. (1,500) -- -- -- 1,500 --
Issuance of capital stock by
subsidiary........................... -- -- -- 1,500 (1,500) --
Payment of debt issue costs and other,
net.................................. (294) (236) (132) -- -- (662)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities................. (10,157) 12,865 (58,011) 1,487 20,714 (33,102)
---------- ------------ ---------- ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ (4,298) (23,621) (11,979) 3,720 -- (36,178)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR................................... 4,384 46,002 16,485 1,948 -- 68,819
---------- ------------ ---------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................... $ 86 $ 22,381 $ 4,506 $ 5,668 $ -- $ 32,641
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-60
<PAGE> 113
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1991
(DOLLARS IN THOUSANDS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................. $ (3,274) $ 68,299 $ 6,128 $ 7,807 $ -- $ 78,960
INVESTING ACTIVITIES
Investments in marketable securities,
net.................................. -- (12,091) -- -- -- (12,091)
Additions to property and equipment.... -- (23,002) (198,868 ) (2,644) 198,868 (25,646)
Proceeds from sales of assets.......... -- 199,190 -- 39 (198,868) 361
Principal collected on note receivable
from EPIC ESOP....................... 12,717 -- 10,357 -- (23,074) --
Principal collected on intercompany
note receivable...................... 41,041 -- -- -- (41,041) --
Other.................................. (48) -- -- -- -- (48)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities................. 53,710 164,097 (188,511 ) (2,605) (64,115) (37,424)
FINANCING ACTIVITIES
Payments on debt obligations........... (244,761) (4,550) -- (1,336) -- (250,647)
Principal payments on intercompany
notes payable........................ -- (41,041) -- -- 41,041 --
Proceeds from long-term borrowings..... 29,000 -- 198,868 -- -- 227,868
Contribution to EPIC ESOP.............. -- (23,074) -- -- 23,074 --
Intercompany dividends................. 153,308 (153,308) -- -- -- --
Contributions from minority
interests............................ -- -- -- 556 -- 556
Distributions and dividends to minority
interests............................ -- -- -- (4,122) -- (4,122)
Payment of debt issue costs and other,
net.................................. (10,473) -- -- (1,290) -- (11,763)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities................. (72,926) (221,973) 198,868 (6,192) 64,115 (38,108)
---------- ------------ ---------- ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ (22,490) 10,423 16,485 (990) -- 3,428
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR................................... 26,874 35,579 -- 2,938 -- 65,391
---------- ------------ ---------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................... $ 4,384 $ 46,002 $ 16,485 $ 1,948 $ -- $ 68,819
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>
F-61
<PAGE> 114
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The subsidiaries comprising the Guarantor Subsidiaries change from year to
year due to new and/or revised agreements relating to the various subsidiaries
of the Company. As a result, the investment in subsidiaries is presented on the
cost basis.
Intercompany receivables/payables relate to cash transfers between entities
on collection of accounts receivable and payment of accounts payable and are
included in cash flows provided by (used in) operating activities. Cash flows
from operating, financing, and investing activities for each subsidiary are
presented in the consolidating statement of cash flows based on that
subsidiary's designation as a guarantor or nonguarantor subsidiary at the end of
the period.
Deferred income taxes and deferred income tax benefit are recorded in the
accounts of EPIC Healthcare Group, Inc. and are not allocated to the
subsidiaries. SFAS No. 109, "Accounting for Income Taxes," requires that the
consolidated amount of current and deferred tax expense for a group that files a
consolidated tax return shall be allocated among the members of the group when
those members issue separate financial statements on a basis consistent with
SFAS No. 109. The Company will adopt SFAS No. 109, including allocation of taxes
within the consolidating financial statements, effective October 1, 1993.
Certain prior period amounts have been reclassified or restated for
intercompany transactions to conform with the fiscal 1993 presentation. In
addition, certain amounts have been reclassified for a change made in the fourth
quarter of 1992 in the method of allocating interest income from the EPIC ESOP
for intercompany purposes.
F-62
<PAGE> 115
- - ---------------------------------------------------------
- - ---------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY HEALTHTRUST, INC. - THE HOSPITAL COMPANY OR ANY UNDERWRITER,
DEALER OR AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF HEALTHTRUST, INC. - THE HOSPITAL COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company.............................. 3
The Offerings............................ 5
Investment Considerations................ 6
The Acquisition and the Financing Plan... 12
Use of Proceeds.......................... 16
Capitalization........................... 17
Selected Historical Financial
Information............................ 18
Selected Pro Forma Financial
Information............................ 21
Selected Operating Statistics............ 22
Description of EPIC...................... 23
Properties............................... 23
Price Range of Common Stock.............. 28
Dividend Policy.......................... 28
EPIC Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................. 29
Selling Stockholders..................... 38
Description of Capital Stock............. 40
Certain United States Tax Consequences to
Non-United States Holders.............. 41
Underwriting............................. 43
Legal Matters............................ 44
Experts.................................. 44
Available Information.................... 45
Information Incorporated by Reference.... 45
Index to Financial Statements............ 46
</TABLE>
- - ---------------------------------------------------------
- - ---------------------------------------------------------
- - ---------------------------------------------------------
- - ---------------------------------------------------------
6,220,404 SHARES
(LOGO) HEALTHTRUST INC.
The Hospital Company
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
APRIL 28, 1994
- - ---------------------------------------------------------
- - ---------------------------------------------------------
<PAGE> 116
APPENDIX A
Graphic and Image Material
--------------------------
The inside front cover of the Prospectus contains a map of the United States
marked to indicate the locations of the hospitals operated by each of
Healthtrust, Inc. - The Hospital Company and EPIC Holdings, Inc. See
"Properties" for a list of the names and locations of such hospitals.
<PAGE> 1
EXHIBIT 99.3
AMENDMENT TO CREDIT AGREEMENT
This Amendment to Credit Agreement, dated as of March 31, 1994 (this
Amendment"), is made with reference to the Credit Agreement, dated as of
September 29, 1992 (the "Credit Agreement") by and among HEALTHTRUST, INC. --
THE HOSPITAL COMPANY, a Delaware corporation (the "Borrower"), the various
financial institutions parties thereto (collectively, the "Lenders"), THE BANK
OF NOVA SCOTIA ("Scotiabank") and 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, LTCB TRUST COMPANY, SWISS BANK
CORPORATION, and THE TORONTO-DOMINION BANK, as co-agents (the "Co-Agents") for
the Lenders, and Scotiabank, as administrative agent (in such capacity, the
"Administrative Agent") for the Co-Agents and the Lenders.
In consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Credit Agreement.
SECTION 2. Representations and Warranties. In order to induce the
Lenders, the Co-Agents and the Administrative Agent to enter into this
Amendment, the Borrower hereby covenants, represents and warrants that after
giving effect to this Amendment:
(a) No Default or Event of Default will exist under the
Credit Agreement or any other Loan Document;
(b) All representations and warranties of the Borrower
contained in the Credit Agreement and the other Loan Documents will be
true and correct in all material respects except to the extent such
representations and warranties specifically relate to an earlier date,
in which case they will be true and correct in all material respects
as of such earlier date; and
(c) The Borrower will be in compliance with, and will
thereafter continue to be in compliance with, all agreements,
affirmative covenants and negative covenants
<PAGE> 2
contained in the Credit Agreement and the other Loan Documents.
SECTION 3. Amendment. At the request of the Borrower, the undersigned
Co-Agents, Administrative Agent and the undersigned Lenders, constituting
Required Lenders, hereby amend clause (a) of the definition of "Cash Flow
Coverage Ratio" by adding the following proviso to the end thereof:
"provided, however, that there shall be excluded from the computation
of Cash Flow (for purposes of this definition only) Capital
Expenditures in an amount not to exceed $53,000,000 made in respect of
the acquisition of the Nashville Memorial Hospital located in or near
Madison, Tennessee;"
SECTION 4. Reference to and Effect on the Credit Agreement and the
Other Loan Documents.
(a) Except as specifically provided in this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(b) Without limiting the generality of the provisions of
Section 10.1 of the Credit Agreement, this Amendment does not
constitute, nor should it be construed as, a waiver of compliance by
the Borrower with respect to any other term, provision or condition of
the Credit Agreement or any other instrument or agreement referred to
therein.
(c) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy
of the Administrative Agent, any Co-Agent or any Lender under, the
Credit Agreement or any of the other Loan Documents.
SECTION 5. Counterparts. Multiple originals of this Amendment may be
executed in counterparts, all of which taken together shall constitute but a
single document. Signature pages may be detached from the counterpart
documents and reassembled to form duplicate executed originals.
SECTION 6. Effectiveness. This Amendment shall be effective upon
execution and delivery of this Amendment by the Borrower and the Required
Lenders and receipt by the Administrative Agent of written or telephonic
notification of such execution and authorization of delivery thereof.
-2-
<PAGE> 3
SECTION 7. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO AND ALL OTHER ASPECTS HEREOF SHALL BE DEEMED
TO BE MADE UNDER, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their authorized agents or representatives as of
the date first above written.
HEALTHTRUST, INC. -- THE HOSPITAL
COMPANY
By:
-------------------------------------
Title:
THE BANK OF NOVA SCOTIA, as
Administrative Agent, Co-Agent and
Lender
By:
-------------------------------------
Title:
ABN-AMRO BANK N.V.,
as Co-Agent and Lender
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Co-Agent
By:
-------------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Lender
By:
-------------------------------------
Title:
-4-
<PAGE> 5
THE CHASE MANHATTAN BANK, N.A.,
as Co-Agent and Lender
By:
-------------------------------------
Title:
CITIBANK, N.A., as Co-Agent and Lender
By:
-------------------------------------
Title:
CONTINENTAL BANK N.A., as Co-Agent
and Lender
By:
-------------------------------------
Title:
DEUTSCHE BANK AG, New York and/or
Cayman Islands Branch, as Co-Agent
and Lender
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
LTCB TRUST COMPANY, as Co-Agent
and Lender
By:
-------------------------------------
Title:
SWISS BANK CORPORATION, as Co-Agent
and Lender
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
-5-
<PAGE> 6
THE TORONTO-DOMINION BANK, as Co-
Agent and Lender
By:
-------------------------------------
Title:
BANK OF CALIFORNIA, N.A.
By:
-------------------------------------
Title:
CHEMICAL BANK
By:
-------------------------------------
Title:
SHAWMUT BANK CONNECTICUT, N.A.
By:
-------------------------------------
Title:
CREDITANSTALT BANKVEREIN
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
THE DAIWA BANK, LIMITED
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
-6-
<PAGE> 7
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCH
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
FIRST AMERICAN NATIONAL BANK
By:
-------------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------------
Title:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:
-------------------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:
-------------------------------------
Title:
MIDLAND BANK plc, NEW YORK BRANCH
By:
-------------------------------------
Title:
MITSUI LEASING (U.S.A.) INC.
By:
-------------------------------------
Title:
NATIONSBANK
By:
-------------------------------------
Title:
-7-
<PAGE> 8
PNC BANK
By:
-------------------------------------
Title:
THE SAKURA BANK, LIMITED
By:
-------------------------------------
Title:
SUMITOMO BANK, LTD.
By:
-------------------------------------
Title:
THIRD NATIONAL BANK IN NASHVILLE
By:
-------------------------------------
Title:
UNITED STATES NATIONAL BANK OF OREGON
By:
-------------------------------------
Title:
-8-
<PAGE> 9
[EXECUTION COPY]
AMENDMENT NO. 2 TO CREDIT AGREEMENT
This AMENDATORY AGREEMENT, dated as of May 4, 1994, to the Credit
Agreement, dated as of September 29, 1992 (as amended by the Amendment, dated
March 31, 1994 thereto, the "Existing Credit Agreement") by and among
HEALTHTRUST, INC. - THE HOSPITAL COMPANY, a Delaware corporation (the
"Borrower"), the various financial institutions parties thereto (collectively,
the "Lenders"), THE BANK OF NOVA SCOTIA ("Scotiabank") and 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, LTCB TRUST
COMPANY, SWISS BANK CORPORATION, and THE TORONTO-DOMINION BANK, as co-agents
(the "Co-Agents") for the Lenders, and Scotiabank, as administrative agent (in
such capacity, the "Administrative Agent") for the Co-Agents and the Lenders.
WITNESSETH:
WHEREAS, the Borrower wishes to (a) acquire EPIC Holdings, Inc., a
Delaware corporation, and its subsidiaries (collectively, "EPIC"), and
contemporaneously therewith merge a wholly-owned special purpose subsidiary of
the Borrower with and into EPIC, provide funds to EPIC and its subsidiaries to
refinance EPIC's existing credit agreement (the "EPIC Credit Agreement") and to
redeem EPIC's 11 7/8% Senior ESOP Notes due September 30, 1998 (the "Senior
ESOP Notes") and permit the remaining EPIC indebtedness to remain outstanding
(collectively, the "EPIC Transaction") and (b) acquire Holy Cross Hospital of
Salt Lake City, Holy Cross-Jordan Valley Hospital and St. Benedict's Hospital
from Holy Cross Health Services of Utah (collectively, the "Other
Transactions"); and
WHEREAS, in connection with the EPIC Transaction and the Other
Transactions, the Borrower will sell shares of its common stock in a registered
public stock offering and will receive proceeds from the exercise of certain
outstanding warrants for its common stock (the "Public Offering") and issue a
new series of subordinated notes in a registered public offering (the "Note
Offering"); and
WHEREAS, in connection with the EPIC Transaction, the Other
Transactions, the Public Offering and the Note Offering, the Borrower desires
to (a) restructure the indebtedness under the Existing Credit Agreement as a
$310,000,000 revolving credit facility in accordance with the terms set forth
below (the "Credit Agreement Restructuring"; the EPIC Transaction, the Other
Transactions, the Public Offering, the Note Offering and the
<PAGE> 10
Credit Agreement Restructuring are collectively referred to as the
"Transaction"; and the Existing Credit Agreement as so restructured being the
"Credit Agreement") and (b) in connection therewith obtain from Scotiabank a
Revolving Loan Commitment pursuant to which Revolving Loans and Letters of
Credit in a maximum aggregate amount not to exceed $310,000,000 will be made or
issued, as the case may be, from time to time (provided, that of such amount,
no more than $100,000,000 shall be available for the issuance of Letters of
Credit); and
WHEREAS, Scotiabank is willing on the terms and conditions hereinafter
set forth to extend such Revolving Loan Commitment:
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Amendatory Agreement,
including its preamble and recitals, have the following meanings (such meanings
to be equally applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Amendment No. 2" means this Amendatory Agreement.
"Amendment No. 2 Effective Date" is defined in Section 3.1.
"Borrower" is defined in the preamble.
"Co-Agents" is defined in the preamble.
"Credit Agreement" is defined in the third recital.
"Credit Agreement Restructuring" is defined in the third recital.
"EPIC" is defined in the first recital.
"EPIC Credit Agreement" is defined in the first recital.
"EPIC Transaction" is defined in the first recital.
"Existing Credit Agreement" is defined in the preamble.
"Lenders" is defined in the preamble.
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"Master Assignment Agreement" means that certain Assignment Agreement,
dated as of April 26, 1994, between the Lenders party to this Agreement,
collectively as assignor, and Scotiabank, as assignee.
"Note Offering" is defined in the second recital.
"Other Transactions" is defined in the first recital.
"Public Offering" is defined in the second recital.
"Scotiabank" is defined in the preamble.
"Senior ESOP Notes" is defined in the first recital.
"Transactions" is defined in the third recital.
SECTION 1.2. Other Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Amendatory Agreement,
including its preamble and recitals, have the meanings provided in the Existing
Credit Agreement.
ARTICLE II
AMENDMENTS TO EXISTING CREDIT AGREEMENT AS OF
THE AMENDMENT NO. 2 EFFECTIVE DATE
Effective on (and subject to the occurrence of) the Amendment No. 2
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Article II. Except as so amended, the Existing Credit Agreement
shall continue in full force and effect.
SECTION 2.1. Amendments to the Credit Agreement.
SECTION 2.1.1. Amendments to Section 1.1. Article I of the Existing
Credit Agreement is hereby amended as follows:
(a) Section 1.1 of the Existing Credit Agreement is hereby
amended by inserting the following new terms in their alphabetically
appropriate places:
"Amendment Fee Letter" means the fee letter, dated
as of May 4, 1994.
"Amendment No. 2" means the Amendatory Agreement,
dated as of May 4, 1994, among the parties thereto, amending
this Agreement as then in effect.
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"Amendment No. 2 Effective Date" is defined in
Section 3.1 of Amendment No. 2.
"Borrower Effective Date Cash on Hand" means cash of
the Borrower on the Amendment No. 2 Effective Date in an
amount at least equal to $180,000,000 which will be used to
pay in part the cash consideration of the Transaction.
"CMOs" means each of the 11 3/8% Class B-1 First
Priority Mortgage Notes due 2001, the 11 1/2% Class B-2 First
Priority Mortgage Notes due 1998 and the Floating Rate Class
B-3 First Priority Mortgage Notes due 1998 of EPIC Properties,
Inc. together with the indenture and guaranty relating
thereto.
"Consent and Tender Document" means the Offer to
Purchase and Consent Solicitation of EPIC, EPIC Healthcare
Group, Inc. and EPIC Properties, Inc. dated March 15, 1994.
"Continuing EPIC Debt" means the 11% Junior
Subordinated Pay-in-Kind Notes due 2003 and the Zero Coupon
Notes due 2001 of EPIC Healthcare Group, Inc., the 10-7/8%
Senior Subordinated Notes due 2003 and the 12% Senior Deferred
Coupon Notes due 2002 of EPIC and the CMOs.
"EPIC" means EPIC Holdings, Inc., a Delaware
corporation.
"EPIC Credit Agreement" means that certain Second
Amended and Restated Credit Agreement, dated as of September
30, 1988 and Amended and Restated as of July 31, 1991 and
September 1, 1993 among EPIC Healthcare Group, Inc., various
lenders and General Electric Capital Corporation, as
administrative agent.
"EPIC Transaction" means, collectively, (i) the
acquisition of EPIC and its Subsidiaries and the
contemporaneous merger of a wholly-owned special purpose
subsidiary of the Borrower with and into EPIC, (ii) the
provision of funds to EPIC and its Subsidiaries to refinance
the EPIC Credit Agreement and to redeem the Senior ESOP Notes
and (iii) the actions necessary to permit the Continuing EPIC
Debt to remain outstanding.
"Existing Healthtrust Subordinated Debenture
Indenture" means the Indenture, dated as of March 30, 1993
between the Borrower and The First National Bank
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<PAGE> 13
of Boston, as trustee, pursuant to which the Existing
Healthtrust Subordinated Debentures were issued as amended,
supplemented or otherwise modified from time to time in
accordance with Section 7.2.11.
"Existing Healthtrust Subordinated Debentures" means
the $300,000,000 aggregate principal amount of 8-3/4%
Subordinated Debentures due 2005 issued by the Borrower
pursuant to the Existing Healthtrust Subordinated Debenture
Indenture.
"Existing Healthtrust Subordinated Note Indenture"
means the Indenture, dated as of May 1, 1992, between the
Borrower and The First National Bank of Boston, as trustee,
pursuant to which the Existing Healthtrust Subordinated Notes
were issued as amended, supplemented or otherwise modified
from time to time in accordance with Section 7.2.11.
"Existing Healthtrust Subordinated Notes" means the
$500,000,000 aggregate principal amount of 10-3/4%
Subordinated Notes due 2002 issued by the Borrower pursuant to
the Existing Healthtrust Subordinated Note Indenture.
"Good Faith Contest" means the contest of any dispute
or inquiry if (a) the dispute or inquiry is diligently
contested in good faith by appropriate proceedings timely
instituted; (b) adequate reserves are established with respect
to the contested dispute or inquiry; (c) during the period of
such contest, the enforcement of the contested item is
effectively stayed and (d) the failure to pay or comply with
the contested item during the period of such contest is not
reasonably likely to result in a Material Adverse Effect.
"Minority Subsidiaries" means, at any time, those
Subsidiaries of the Borrower (other than EPIC and its
Subsidiaries) which do not individually or in the aggregate
account for more than 5% of the consolidated net revenues or
more than 5% of the consolidated net assets of the Borrower
and its Subsidiaries (in each case as calculated on the
Amendment No. 2 Effective Date and thereafter for the
Borrower's most recent Fiscal Year end).
"1994 Credit Agreement" means that certain Credit
Agreement, dated as of April 28, 1994, among the Borrower,
certain financial institutions, the co-agents for such
financial institutions and Scotiabank as the
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administrative agent for such financial institutions and co-
agents.
"Note Offering" means the issuance by the Borrower
of the Subordinated Notes.
"Public Offering" means the issuance of Common Stock
in a registered public stock offering and the receipt by the
Borrower of proceeds from the exercise of certain outstanding
warrants for Common Stock.
"Registration Statements" means the Borrower's
Registration Statements, each on a Form S-3 as filed with the
Securities and Exchange Commission in connection with the Note
Offering and the Public Offering.
"Senior ESOP Notes" means the 11-7/8% Senior ESOP
Notes due September 30, 1998 of EPIC Healthcare Group, Inc.
"Total Debt to EBITDA Coverage Ratio" means, as at
any date of determination thereof, the ratio of (a) the total
principal amount of consolidated Indebtedness of the Borrower
and its Subsidiaries outstanding on such date of determination
to (b) EBITDA for the four consecutive Fiscal Quarter period
ending on or prior to such date of determination (or for such
lesser number of whole Fiscal Quarters which have ended since
the Amendment No. 2 Effective Date on an annualized basis).
(b) The term "Capital Expenditures is hereby amended in its
entirety to read as follows:
"Capital Expenditures" means, for any period, the
aggregate amount (without duplication) of all expenditures,
whether paid in cash or other consideration other than Common
Stock, (including the incurrence of Capitalized Lease
Liabilities) of the Borrower and its Subsidiaries during such
period to acquire fixed or capital assets made during such
period which, in accordance with GAAP, would be classified as
capital expenditures; provided, however, that there shall be
excluded from Capital Expenditures (x) Investments permitted
under clauses (d) and (g) of Section 7.2.5 and (y) Capital
Expenditures financed with Net Equity Proceeds specifically
designated for such purpose.
(c) The terms "Cash Flow" and "Cash Flow Coverage Ratio" are
hereby amended to read in their entirety as follows:
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<PAGE> 15
"Cash Flow" means, for any Fiscal Quarter, the sum
for such Fiscal Quarter of
(a) EBITDA for such Fiscal Quarter;
minus
(b) all federal, state and foreign income taxes actually paid
by the Borrower and its Subsidiaries during such Fiscal Quarter;
minus
(c) the amount of Capital Expenditures for such Fiscal
Quarter.
"Cash Flow Coverage Ratio" means, for any Fiscal Quarter, the ratio
computed for the period of four consecutive Fiscal Quarters, ending on the
close of such Fiscal Quarter (or, if less, for the period of such lesser number
of whole Fiscal Quarters to have elapsed since the Closing Date of:
(a) Cash Flow for all such Fiscal Quarters; provided,
however, that the amount of Capital Expenditures used in the
computation of Cash Flow for the final Fiscal Quarter of 1994 shall be
calculated by dividing (i) the sum of all amounts of Capital
Expenditures for 1994 by (ii) 4;
to
(b) the sum for all such Fiscal Quarters of
(i) Net Interest Expense;
plus
(ii) the amount expended (other than in connection
with the Transaction) by the Borrower or its Subsidiaries
during such Fiscal Quarters in respect of the redemption,
retirement or other acquisition of Subordinated Debt other
than from the proceeds of Refunding Indebtedness or Net
Equity Proceeds."
(d) The term "Commitment" is hereby amended to read in its
entirety as follows:
"Commitment" means the Revolving Loan Commitment.
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<PAGE> 16
(e) The term "Commitment Amount" is hereby amended to read in
its entirety as follows:
"Commitment Amount" means the Revolving Loan
Commitment Amount.
(f) The term "Commitment Letter" is hereby deleted in its
entirety.
(g) The term "Commitment Termination Date" is hereby amended
to read in its entirety as follows:
"Commitment Termination Date" means the Revolving
Loan Commitment Termination Date.
(h) The term "Existing Subordinated Debt" is hereby amended
in its entirety to read as follows:
"Existing Subordinated Debt" means, collectively, the
Existing Healthtrust Subordinated Notes and the Existing
Healthtrust Subordinated Debentures.
(i) The term "Indentures" is hereby amended in its entirety
to read as follows:
"Indentures" means, collectively, the Existing
Healthtrust Subordinated Note Indenture and the Existing
Healthtrust Subordinated Debenture Indenture.
(j) The term "Interest Coverage Ratio" is hereby amended in
its entirety to read as follows:
"Interest Coverage Ratio" means as of the last day of
any Fiscal Quarter, the ratio computed for the period of four
consecutive Fiscal Quarters, ending on the close of such
Fiscal Quarter (or, if less, for the period of such lesser
number of whole Fiscal Quarters to have elapsed since the
Amendment No. 2 Effective Date) of:
(a) EBITDA for such period
to
(b) Net Interest Expense for such period.
(k) The term "Investment" is hereby amended in its entirety
to read as follows:
"Investment" means (i) any investment in any Person,
whether by means of share purchase, capital,
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<PAGE> 17
equity or similar contribution, loan, advance, time deposit or
otherwise (excluding commission, travel and similar advances
to officers and employees made in the ordinary course of
business), (ii) without duplication of clause (i), becoming a
party to any joint venture or partnership or (iii) without
duplication of clause (i) or (ii), an acquisition (whether by
purchase, lease or otherwise) of a Facility or any Person
owning, leasing or managing a Facility whether through share
purchase or otherwise; provided, however, that the term
"Investment" shall not include the contribution of an asset
which is not a Facility by the Borrower to a not-for-profit
corporation or other not-for-profit entity. The amount of any
Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and
without adjustment by reason of the financial condition of
such other Person) and shall, if made by the transfer or
exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the
book value of such property.
(l) The term "Loan Document" is hereby amended by adding the
words "and Amendment Fee Letter" after the words "Fee Letter" appearing
in the eighth line of such definition.
(m) The term "Material Adverse Effect" is hereby amended in
its entirety to read as follows:
"Material Adverse Effect" means a material adverse
effect on (i) the business, operations, properties, assets or
condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole, (ii) the ability of the
Borrower to perform its Obligations or (iii) the ability of
one or more Subsidiaries of the Borrower, which Subsidiaries,
individually or in the aggregate, account for more than 5.0%
of the consolidated net revenues or more than 5.0% of the
consolidated net assets of the Borrower (as calculated as of
the Amendment No. 2 Effective Date until August 31, 1994 and
thereafter for the Borrower's most recent Fiscal Year end) to
perform their respective Obligations.
(n) The term "Net Income" is hereby amended in its entirety
to read as follows:
"Net Income" means, for any period, all amounts
which, in accordance with GAAP, would be included as net
income on the consolidated statements of income of
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<PAGE> 18
the Borrower and its Subsidiaries for such period; provided,
however, that such amount shall exclude (i) extraordinary
gains and extraordinary non-cash losses and (ii) non-cash
gains and non-cash losses relating to asset sales,
dispositions and write-downs.
(o) The term "Net Worth" is hereby amended in its entirety to
read as follows:
"Net Worth" means, at any time, all amounts which, in
accordance with GAAP, would be included under shareholders'
equity on a consolidated balance sheet of the Borrower and its
Subsidiaries at such time; provided, however, that if the
Borrower has repurchased any of its Common Stock pursuant to
clause (a)(iii) of Section 7.2.6, Net Worth shall include an
amount equal to the lesser of (i) the amount of Common Stock
the Borrower intends to contribute within the next twelve
months pursuant to clause (a)(iii) of Section 7.2.6 to the
extent that such contribution would receive recognition in
accordance with GAAP if it were in fact contributed on the
date of determination and (ii) 75% of the market value of the
Borrower's Common Stock held in its treasury and available for
any future planned contributions.
(p) The term "Reference Lenders" is hereby amended in its
entirety to read as follows:
"Reference Lenders" means, Scotiabank or such other
Lender or Lenders as may be agreed to by the Borrower and the
Required Lenders.
(q) The term "Revolving Loan Commitment Amount" is hereby
amended in its entirety to read as follows:
"Revolving Loan Commitment Amount" means, on any
date, $310,000,000; provided, however, that such amount shall
be reduced from time to time pursuant to Section 2.4.
(r) The term "Revolving Loan Commitment Termination Date" is
hereby amended in its entirety to read as follows:
"Revolving Loan Commitment Termination Date" means
the earliest of
(a) 5:00 p.m., New York City time, on May 12,
1994, unless extended pursuant to Section 2.10;
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<PAGE> 19
(b) the date on which the Revolving Loan
Commitment Amount is terminated in full or reduced to
zero pursuant to Section 2.4; and
(c) the date on which any Commitment
Termination Event occurs.
Upon the occurrence of any event described in clause (b) or
(c), the Revolving Loan Commitment shall terminate
automatically and without any further action.
(s) The term "Solvent" is hereby amended in its entirety to
read as follows:
"Solvent", as applied to any Person, means, as at the
date of determination, that (i) the then fair saleable value
of the property of such Person is (A) greater than the total
amount of liabilities (including Contingent Liabilities) of
such Person and (B) greater than the amount that will be
required to pay the probable liabilities of such Person's then
existing debts as they become absolute and matured, (ii) such
Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction and
(iii) such Person does not intend to incur, or does not
believe or should not reasonably believe that it will incur,
debts beyond its ability to pay such debts as they become due.
(t) The term "Stated Maturity Date" is hereby amended in its
entirety to read as follows:
"Stated Maturity Date" means for each Loan, May 12,
1994, except as otherwise extended upon written request
pursuant to Section 2.10.
(u) The term "Subordinated Debt" is hereby amended by
deleting the first clause thereof and inserting in its place the
following new clause (i):
"(i) The Existing Healthtrust Subordinated Notes, the
Existing Healthtrust Subordinated Debentures and the
Subordinated Notes".
(v) The term "Subordinated Note Indenture" is hereby deleted
in its entirety.
(w) The term "Subordinated Notes" is hereby amended in its
entirety to read as follows:
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<PAGE> 20
"Subordinated Notes" means the $200,000,000 aggregate
principal amount of 10 1/4% Subordinated Notes issued by the Borrower
pursuant to the Existing Healthtrust Subordinated Note Indenture.
(x) The terms "Applicable Discount", "Current Ratio",
"Delayed Term Loan", "Delayed Term Loan Commitment", "Delayed Term
Loan Commitment Amount", "Delayed Term Loan Commitment Termination
Date", "Guaranteed Subordinated Debentures", "Guaranteed Subordinated
Debenture Indenture", "Maximum Leverage Ratio", "Senior Subordinated
Debenture Indentures", "Senior Subordinated Debenture Indenture
Amendment", "Senior Subordinated Debentures", "Senior Subordinated
Indenture", "Term Loan", "Term Loan Commitment", "Term Loan Commitment
Amount", "Term Loan Commitment Termination Date", "Zero Guaranteed
Subordinated Debenture Indenture" and "Zero Guaranteed Subordinated
Debentures" are hereby deleted.
SECTION 2.1.2. Amendment to Article II. Article II of the Existing
Credit Agreement is hereby amended as follows:
(a) Section 2.1.1 of the Existing Credit Agreement is hereby
deleted in its entirety and replaced by the following:
"SECTION 2.1.1. Restructuring of Loans. Effective on
the Amendment No. 2 Effective Date, all loans outstanding
under the Existing Credit Agreement shall be restructured as
Revolving Loans and the Borrower shall repay all such loans to
the extent that the principal amount of such loans exceeds the
Revolving Loan Commitment less the then Letter of Credit
Outstandings."
(b) Section 2.1.2 of the Existing Credit Agreement is hereby
deleted in its entirety and replaced by the following:
SECTION 2.1.2. [Intentionally Omitted].
(c) Section 2.1.4 of the Existing Credit Agreement is hereby
amended by adding the parenthetical "(unless otherwise agreed to by
the relevant Issuer)" after the phrase "Revolving Loan Commitment
Termination Date" appearing therein.
(d) Sections 2.2.1 and 2.2.2 of the Existing Credit Agreement
are hereby deleted in their entirety and replaced by the following:
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SECTION 2.2.1. [Intentionally Omitted].
SECTION 2.2.2. [Intentionally Omitted].
(e) Clause (b) of Section 2.4 of the Existing Credit
Agreement is hereby deleted in its entirety and replaced by the
following:
(b) [Intentionally Omitted].
(f) Clause (c) of Section 2.4 of the Existing Credit
Agreement is hereby amended and restated in its entirety to read as
set forth below:
(c) The Revolving Loan Commitment Amount shall be
automatically terminated in full upon the date of the initial
credit extension under the 1994 Credit Agreement.
(g) Section 2.6 of the Existing Credit Agreement is hereby
amended by changing the dollar amount "$10,000,000" appearing therein
to "$5,000,000".
(h) A new Section 2.10 is hereby added to the Existing Credit
Agreement as follows:
"SECTION 2.10. Extension of Revolving Loan
Commitment Termination Date. Upon at least one Business Day's
prior written notice to the Administrative Agent, the Borrower
may, so long as no Default has occurred and is continuing,
extend the Revolving Loan Commitment Termination Date and the
Stated Maturity Date to May 4, 1995."
SECTION 2.1.3. Amendment to Article III. Article III of the Existing
Credit Agreement is hereby amended as follows:
(a) Section 3.1.2 of the Existing Credit Agreement is hereby
deleted in its entirety and replaced by the following:
SECTION 3.1.2. [Intentionally Omitted].
(b) Section 3.1.3 of the Existing Credit Agreement is hereby
deleted in its entirety and replaced by the following:
SECTION 3.1.3. [Intentionally Omitted].
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(c) Section 3.1.4 of the Existing Credit Agreement is hereby
amended by changing the reference to "clause (b)" in the third line of
such Section to "clause (c)".
(d) Section 3.1.5 of the Existing Credit Agreement is hereby
amended as follows:
(i) Clauses (a), (b) and (c) are hereby deleted and
replaced by the following:
"(a) to be applied (or held by the Administrative
Agent for application, as the case may be) to Obligations
outstanding under the Revolving Loan Commitments with a
commensurate and contemporaneous reduction of the
Revolving Loan Commitments;"; and
(ii) A new last sentence shall be added thereto to
read as follows:
"The Borrower shall, immediately upon the initial
credit extension made under the 1994 Credit Agreement,
make a mandatory prepayment of all outstanding Revolving
Loans.".
(e) Section 3.2.1 of the Existing Credit Agreement is hereby
amended as follows:
(i) Clauses (a) and (b) are hereby deleted and replaced
by the following:
"(a) Alternate Base Rate. On that portion of such
Borrowing maintained from time to time as a Base Rate
Loan, equal to the sum of the Alternate Base Rate from
time to time in effect plus 1/2 of 1%.
(b) LIBO Rate. On that portion maintained as a
LIBO Rate Loan, during each Interest Period applicable
thereto, equal to the sum of the LIBO Rate (Reserve
Adjusted) for such Interest Period plus 1 1/2%.", and
(ii) A new sentence is hereby added to the end
thereof to read as set forth below:
"All Borrowings of Revolving Loans made on or prior
to the seventh Business Day after the Amendment No. 2
Effective Date shall be made as Base Rate Loans.".
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(f) Clause (b) of Section 3.3.1. of the Existing Credit
Agreement is hereby amended by changing the reference to "1/2 of 1%"
to "3/8 of 1%".
(g) Clause (a) of Section 3.3.2 of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
"(a) The Borrower agrees to pay to the Administrative
Agent for the pro rata account of each Lender having a
Revolving Loan Commitment (including the Issuer), a
participation fee equal to 1-1/4% per annum of the Stated
Amount of each Letter of Credit. Such participation fee shall
accrue from the date of issuance of any Letter of Credit until
the date such Letter of Credit is drawn in full or terminated,
and shall be payable in arrears on each Quarterly Payment
Date."
(h) Section 3.3.3 of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
"SECTION 3.3.3. Fee Letter Fees. The Borrower agrees
to pay the fees in the amounts and at the times set forth in
the Fee Letter and the Amendment Fee Letter."
SECTION 2.1.4. Amendment to Section 5.2.1. Section 5.2.1 of the
Credit Agreement is hereby amended and restated in its entirety to read as set
forth below:
"SECTION 5.2.1. Compliance with Warranties, No Default, etc.
Both before and after giving effect to such Credit Extension (but, if
any Default of the nature referred to in Section 8.1.5 shall have
occurred with respect to any other Indebtedness, without giving effect
to the application, directly or indirectly, of the proceeds of any
Borrowing) the following statements shall be true and correct as of
the date of such Credit Extension:
(a) the representations and warranties set forth
in Article VI shall be true and correct in all material
respects with the same effect as if then made (unless stated
to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in
all material respects as of such earlier date); provided,
however, that the condition precedent set forth in this clause
(a) shall not be applicable to EPIC and its Subsidiaries and
shall be satisfied with respect to any representation or
warranty (i) made by the Borrower with respect to the
Subsidiary Guaranty, (ii) made by the Borrower with respect to
the
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<PAGE> 24
Subsidiary Pledge Agreement, or any other Collateral
Document to which a Subsidiary of the Borrower is a party, or
the Pledged Subsidiary Debt, and (iii) otherwise made by the
Borrower with respect to a Subsidiary, unless (A) a Subsidiary
or Subsidiaries of the Borrower accounting for more than 5.0%
of the consolidated net revenues or more than 5.0% of the
consolidated assets of the Borrower, or the Subsidiary
Guaranty or Subsidiary Pledge Agreement, or such other
Collateral Documents, or the Pledged Subsidiary Debt, of such a
Subsidiary or Subsidiaries, are the subject of one or more
materially false representations or warranties of the types
described in this proviso (except that in making such
determination EPIC and its Subsidiaries shall be excluded from
such calculation), or (B) there otherwise exists a Material
Adverse Effect in connection with one or more materially false
representations or warranties of the types described in this
proviso; and
(b) no Default shall have then occurred and be
continuing.".
SECTION 2.1.5. Amendments to Article VI of the Existing Credit
Agreement. Article VI of the Existing Credit Agreement is hereby amended as
follows:
(a) Section 6.6 of the Existing Credit Agreement is hereby
amended and restated in its entirety to read as set forth below:
"SECTION 6.6. No Material Adverse Change. Except as
has been disclosed in writing to the Administrative Agent and
the Lenders prior to the Amendment No. 2 Effective Date, (i)
since August 31, 1993, with respect to the Borrower or any of
its Existing Subsidiaries, taken as a whole, (ii) since
September 30, 1993, with respect to EPIC or any of its
Subsidiaries, taken as a whole or (iii) since the Amendment
No. 2 Effective Date with respect to the Borrower or any of
its Subsidiaries, taken as a whole, no event has occurred
which has or would cause a Material Adverse Effect.".
(b) Section 6.15 of the Existing Credit Agreement is hereby
amended and restated in its entirety to read as set forth below:
"SECTION 6.15. Status of Obligations.
(a) The incurrence by the Borrower of all Obligations
hereunder and any related Hedging
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<PAGE> 25
Obligations, and the execution, delivery, maintenance and
performance of the Subsidiary Guaranty and the Subsidiary
Pledge Agreement, do not and will not violate, or constitute
(with due notice or lapse of time or both) an Event of Default
(as defined in any indenture relating to Subordinated Debt).
(b) The entry by the Borrower into subordination
arrangements with respect to intercompany indebtedness does
not and will not violate, or constitute (with due notice or
lapse of time or both) a default under, any indenture pursuant
to which the Subordinated Debt was issued.
(c) The incurrence and maintenance of the first
priority security interests in stock and the Pledged Notes
pledged to the Collateral Agent pursuant to the Pledge
Agreements do not and will not violate, or constitute (with
due notice or lapse of time or both) an Event of Default (as
defined in the indenture related to Subordinated Debt).
(d) All Loans, when made, and all Reimbursement
Obligations, when incurred, will constitute "Senior
Indebtedness" and "Specified Senior Indebtedness" or similar
defined terms under all indentures pursuant to which the
Subordinated Debt was or will be issued. The subordination
provisions of such indentures pursuant to which such
Subordinated Debt was or will be issued, are or will be, as
the case may be, enforceable against the holders thereof.".
(c) A new Section 6.16 is hereby added to the Existing Credit
Agreement to read in its entirety to read as set forth below:
"SECTION 6.16. Environmental Warranties. Except as
set forth in Item 6.12 ("Environmental Matters") of the
Disclosure Schedule to the 1994 Credit Agreement:
(a) all facilities and property (including
underlying groundwater) owned or leased by the Borrower or any
of its Subsidiaries have been, and continue to be, owned or
leased by the Borrower and its Subsidiaries in material
compliance with all Environmental Laws except for
noncompliance which, singly or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or
which noncompliance is the subject of a Good Faith Contest;
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<PAGE> 26
(b) there have been no past, and there are no
pending or threatened
(i) claims, complaints, notices or requests
for information received by the Borrower or any of
its Subsidiaries with respect to any alleged
violation of any Environmental Law which could
reasonably be expected to have a Material Adverse
Effect, or
(ii) complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding
potential liability under any Environmental Law which
could reasonably be expected to have a Material
Adverse Effect;
(c) there have been no Releases of Hazardous
Materials at, on or under any property now or previously owned
or leased by the Borrower or any of its Subsidiaries that,
singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect;
(d) the Borrower and its Subsidiaries have been
issued and are in material compliance with all material
permits, certificates, approvals, licenses and other
authorizations relating to environmental matters which are
necessary or desirable for their businesses;
(e) no property now or previously owned or leased by
the Borrower or any of its Subsidiaries is listed or proposed
for listing (with respect to owned property only) on the
National Priorities List pursuant to CERCLA, on the CERCLIS or
on any similar state list of sites requiring investigation or
clean-up;
(f) there are no underground storage tanks, active
or abandoned, including petroleum storage tanks, on or under
any property now or previously owned or leased by the Borrower
or any of its Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a Material
Adverse Effect;
(g) neither the Borrower nor any Subsidiary of the
Borrower has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which
is listed or proposed for listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any similar
state list or which is the subject of federal, state or local
enforcement actions or other investigations which may
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<PAGE> 27
lead to material claims against the Borrower or such
Subsidiary thereof for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or
friable asbestos present at any property now or previously
owned or leased by the Borrower or any Subsidiary of the
Borrower that, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any property
now or previously owned or leased by the Borrower which, with
the passage of time, or the giving of notice or both, would
give rise to liability under any Environmental Law which could
reasonably be expected to have a Material Adverse Effect."
SECTION 2.1.6. Amendments to Article VII of the Existing Credit
Agreement. Article VII of the Existing Credit Agreement is hereby amended as
set forth below:
(a) Section 7.1.6 of the Existing Credit Agreement is hereby
amended and restated in its entirety to read as set forth below:
"SECTION 7.1.6. Use of Proceeds. The Borrower shall
use the Revolving Loans to pay or loan or contribute the
proceeds of Revolving Loans to EPIC and its Subsidiaries to
pay in part the cash consideration of the Transaction and to
finance the Borrower's ongoing working capital and general
corporate purposes.".
(b) Section 7.1.9 of the Existing Credit Agreement is hereby
amended and restated in its entirety to read as set forth below:
"SECTION 7.1.9 Future Subsidiaries. Upon the lapse
or other termination of all restrictions contained in any
indenture or other agreement existing on the Amendment No. 2
Effective Date relating to Indebtedness of EPIC or its
Subsidiaries which restrictions prohibit the entering into by
EPIC or any such Subsidiary of the Subsidiary Guaranty or
Subsidiary Pledge Agreement, the Borrower shall promptly cause
(i) EPIC and each of its Subsidiaries (other than JV
Subsidiaries) to become parties to the Subsidiary Guaranty,
and (ii) EPIC and each of its relevant Subsidiaries to become
parties to the
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<PAGE> 28
Subsidiary Pledge Agreement and deliver certificates
representing all of the issued and outstanding shares of
capital stock (other than the capital stock of EPIC
Properties, Inc. until such time that all of the CMOs have
been redeemed or otherwise retired) of EPIC and its
Subsidiaries, together with duly executed stock powers in
blank to the Collateral Agent. Upon any other Person
becoming, after the Amendment No. 2 Effective Date, a
Subsidiary of the Borrower, the Borrower shall notify the
Administrative Agent of such event and such Subsidiary shall
become a party to the Subsidiary Guaranty (if such Subsidiary
is not a JV Subsidiary) and the Subsidiary Pledge Agreement in
a manner reasonably satisfactory to the Administrative Agent.
In addition, the Borrower shall provide the Administrative
Agent and the Lenders with such opinions of legal counsel, in
form and substance reasonably satisfactory to the
Administrative Agent, as the Administrative Agent may
reasonably require, relating to the obligations of such new
Subsidiary under the Subsidiary Guaranty and Subsidiary Pledge
Agreement.".
(c) A new Section 7.1.10 is hereby added to the Existing
Credit Agreement to read as set forth below:
"SECTION 7.1.10. Environmental Covenant. The Borrower
will, and will cause each of its Subsidiaries to,
(a) use and operate all of the its facilities and
properties in material compliance with all Environmental Laws,
keep all necessary permits, approvals, certificates, licenses
and other authorizations relating to environmental matters in
effect and remain in material compliance therewith, and handle
all Hazardous Materials in material compliance with all
applicable Environmental Laws except for noncompliance which,
singly or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect or which noncompliance is
the subject of a Good Faith Contest;
(b) immediately notify the Administrative Agent and
provide copies upon receipt of all written claims, complaints,
notices or inquiries relating to the condition of its
facilities and properties or compliance with Environmental
Laws, and shall promptly cure and have dismissed with
prejudice to the satisfaction of the Administrative Agent any
actions and proceedings relating to compliance with
Environmental Laws except for such claims, complaints,
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<PAGE> 29
notices and inquiries which, singly or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect
or which are the subject of a Good Faith Contest; and
(c) provide such information and certifications
which the Administrative Agent may reasonably request from
time to time to evidence compliance with this Section 7.1.10."
(d) Section 7.2.2 of the Existing Credit Agreement is hereby
amended by (i) the parenthetical appearing in clause (e)(iii) thereof
is amended in its entirety to read "(other than (i) a JV Subsidiary
and (ii) EPIC and its Subsidiaries with respect to any such promissory
note owing to EPIC or any of its Subsidiaries existing prior to the
Amendment No.2 Effective Date)", (ii) deleting the word "and"
appearing at the end of clause (j) thereof, (iii) replacing the period
at the end of clause (k) thereof with"; and" and (iv) inserting a new
clause (l) to read as set forth below:
"(l) Indebtedness of EPIC and its Subsidiaries
outstanding on the date of the consummation of the EPIC Merger
and not incurred in contemplation thereof (other than
Indebtedness under the EPIC Credit Agreement and, after the
65th day following the Amendment No. 2 Effective Date, the
Senior ESOP Notes).".
(e) Section 7.2.3 of the Existing Credit Agreement is hereby
amended by (i) deleting "and" appearing at the end of clause (m)
thereof, (ii) replacing the period at the end of clause (n) thereof
with the word "; and" and (iii) inserting a new clause (o) to read as
set forth below:
"(o) Liens on assets of EPIC or any of its
Subsidiaries existing on the Amendment No. 2 Effective Date,
other than Liens arising as a result of or created in
contemplation of the Transaction.".
(f) Section 7.2.4 of the Existing Credit Agreement is hereby
amended and restated in its entirety as follows:
"SECTION 7.2.4. Financial Condition. The Borrower covenants
and agrees as follows:
(a) Net Worth. The Borrower will not permit Net
Worth at any time during any period set forth below to be less
than the amount set forth opposite such period:
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<PAGE> 30
<TABLE>
<CAPTION>
Period Net Worth
------ ---------
<S> <C>
Amendment No. 2 Effective Date
through end of Fiscal Year 1994 $900,000,000
First Two Fiscal Quarters of
Fiscal Year 1995 $925,000,000
Last Two Fiscal Quarters of
Fiscal Year 1995 $950,000,000
</TABLE>
(b) Cash Flow Coverage Ratio. The Borrower will
not permit the Cash Flow Coverage Ratio, at any time
commencing on the Amendment No. 2 Effective Date, to be less
than 1.0:1.0.
(c) Interest Coverage Ratio. The Borrower will
not permit the Interest Coverage Ratio, at any time during any
period set forth below, to be less than the ratio set forth
opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Amendment No. 2 Effective Date
through end of Fiscal Year 1994 3.75:1.0
Fiscal Year 1995 3.75:1.0
</TABLE>
(d) Total Debt to EBITDA Coverage Ratio. The
Borrower will not permit the Total Debt to EBITDA Coverage
Ratio (i) from the Amendment No. 2 Effective Date to August
31, 1994 to exceed 4.25:1.0 and (ii) at any time thereafter
during any period set forth below, to be greater than the
ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
First 2 Fiscal Quarters
of Fiscal Year 1995 4.25:1.0
Last 2 Fiscal Quarters
of Fiscal Year 1995 4.00:1.0"
</TABLE>
(g) Section 7.2.5 of the Existing Credit Agreement is hereby
amended in its entirety to read as set forth below:
"SECTION 7.2.5 Investments. The Borrower will not,
and will not permit any of its Subsidiaries to, make, incur,
assume or suffer to exist any Investment in any other Person,
except:
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<PAGE> 31
(a) Investments existing on the Effective Date and
identified in Item 7.2.5(a) ("Ongoing Investments") of the
Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) Investments in the Borrower or any of its
wholly-owned Subsidiaries;
(d) Investments in joint ventures;
(e) Investments arising in connection with Permitted
Dispositions under Section 7.2.10; and
(f) other Investments in an aggregate amount not to
exceed at any time $40,000,000;
(g) Investments in the Other Transactions not to
exceed $125,000,000; and
(h) Investments by EPIC and its Subsidiaries
existing on the Amendment No. 2 Effective Date;
(i) Investments in EPIC and its Subsidiaries;
provided, however, that
(i) no Investment otherwise permitted by clause (d), (e), or
(f) shall be permitted to be made if, immediately before or
after giving effect thereto, any Default of the type described
in clauses (a) through (d) of Section 8.1.9 subject to the
proviso set forth therein or any Event of Default shall have
occurred and be continuing;
(ii) no Investments otherwise permitted by clause (d), (e) or
(f) which have not been committed to by the Borrower or any of
its Subsidiaries prior to any occurrence thereof shall be
permitted if, immediately before or after giving effect
thereto, any Material Adverse Effect shall have occurred;
(iii) no Investment permitted by this Section may be made in
any joint venture if, as of the date such Investment is made,
incurred or assumed, all joint venture Investments permitted
by this Section shall hold assets of the Borrower or any of
its Subsidiaries, or any assets contributed by the Borrower or
any of its Subsidiaries which are greater (in Dollar amount,
in the case of the following clause (x) and number, in the
case of the following clause (y)) than the lesser of
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<PAGE> 32
(x) 35% of the value of the consolidated assets of the
Borrower and its Subsidiaries at such time and (y) 30% (by
number) of all hospitals constituting Facilities at such time;
provided, further, that the Borrower will not, and will not
permit any of its Subsidiaries to, make, incur, assume or
suffer to exist any Investments in Minority Ventures if
Minority Ventures, in the aggregate, would hold at such time
more than six hospitals which were previously Facilities or if
the aggregate amount of assets contributed, which assets shall
be valued at book value at the time such contribution is made,
net of returns of principal or equity thereon received by the
Borrower or any of its Subsidiaries after such contribution is
made and loans made available by the Borrower or any of its
Subsidiaries to Minority Ventures at such time exceeds
$350,000,000;
(iv) any Investments permitted under this proviso shall be
reduced by any Investments made pursuant to clause (a) above;
and
(v) Investments in EPIC and its Subsidiaries shall be limited
to (A) cash only Investments in EPIC and its Subsidiaries on
the Amendment No. 2 Effective Date to pay for the merger
consideration in respect of common stock of EPIC in the EPIC
Transaction not to exceed in the aggregate $290,000,000 and
(B) additional cash only Investments constituting intercompany
Indebtedness made in EPIC and its Subsidiaries not to exceed
in the aggregate $250,000,000."
(h) Sections 7.2.7 and 7.2.8 are hereby amended in their
entirety to read as set forth below:
SECTION 7.2.7 [Intentionally Omitted.]
SECTION 7.2.8 [Intentionally Omitted.]
(i) Section 7.2.9 of the Existing Credit Agreement is hereby
amended by adding the following new last paragraph to the end thereof
to read as set forth below:
"Notwithstanding the foregoing, no Subsidiary of EPIC existing
on the Amendment No. 2 Effective Date ("Existing EPIC
Subsidiary") may liquidate or dissolve, consolidate with, or
merge into or with, or purchase or otherwise acquire all or
substantially all of the assets of any Subsidiary of the
Borrower which was a Subsidiary of the Borrower prior to the
Amendment No.2 Effective Date ("Prior Subsidiary"), except
that an
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<PAGE> 33
Existing EPIC Subsidiary (other than EPIC Healthcare Group,
Inc. and EPIC Properties, Inc. and, after the Amendment No. 2
Effective Date, EPIC) may merge into any Prior Subsidiary so
long as the Prior Subsidiary is the surviving corporation of
any such merger."
(j) Section 7.2.11 of the Existing Credit Agreement is hereby
amended in its entirety to read as set forth below:
"SECTION 7.2.11. Modification of Certain Agreements.
After the Amendment No. 2 Effective Date, the Borrower will
not consent and will not permit any Subsidiary to consent to
any amendment, supplement or other modification of any of the
terms or provisions contained in, or applicable to,
(a) the Subordinated Debt or Continuing EPIC Debt,
if the effect of such amendment or change is to increase the
interest rate on such Indebtedness, change (to earlier dates)
the date upon which payments of principal or interest are due
thereon, change the subordination provisions thereof (or of
any guaranty thereof) (if any) or if the effect of such
amendment or change, together with all amendments or changes
made, is to increase materially the obligations of the obligor
or confer additional rights on the holder of such Indebtedness
which would be adverse to the Borrower or the Lenders; or
(b) the Consent and Tender Document, unless,
simultaneously therewith, the Borrower shall have paid all
Obligations in full and terminated all Commitments
hereunder.".
(k) Section 7.2.13 of the Existing Credit Agreement is hereby
amended by adding the following phrase at the end of the parenthetical
appearing therein "or as contained in any indenture or other document
relating to Indebtedness of EPIC or its Subsidiaries existing on the
Amendment No. 2 Effective Date".
SECTION 2.1.7. Amendments to Article VIII of the Existing Credit
Agreement. Article VIII of the Existing Credit Agreement is hereby amended as
set forth below:
(a) The proviso appearing at the end of Section 8.1.9 of the
Existing Credit Agreement is hereby amended in its entirety to read as
set forth below:
"provided, however, that, with respect to any Subsidiary of
the Borrower and subject to Section 8.4,
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<PAGE> 34
an "Event of Default" shall not occur under this Section 8.1.9
until such time as such a Subsidiary or Subsidiaries of the
Borrower accounting for more than 5.0% of the consolidated net
revenues or more than 5.0% of the consolidated assets of the
Borrower (as calculated as of the Amendment No. 2 Effective
Date until August 31, 1994 and thereafter for the Borrower's
most recent Fiscal Year end) is or are the subject of one or
more of the events described in this Section 8.1.9."
(b) Section 8.1.11 of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
"SECTION 8.1.11. Subsidiary Guaranty. (i) Without
duplication of the terms of Section 8.1.12, the guaranty given
by any Subsidiary of the Borrower under the Subsidiary
Guaranty shall for any reason other than the satisfaction in
full of all Obligations and termination of this Agreement or
the release of such Subsidiary from its Obligations under the
Subsidiary Guaranty in accordance with the terms thereof,
cease to be in full force and effect at any time or is
declared to be null and void or (ii) any such Subsidiary
denies that it has any further liability under the Subsidiary
Guaranty, or gives notice to such effect, and such denial or
notice is not revoked within one Business Day after the
earlier of (A) receipt by the Borrower of notice from the
Administrative Agent or any Lender of such denial or notice
being made or given, as the case may be or (B) the Borrower
becomes aware of such denial or notice being made or given, as
the case may be; provided, however, that, subject to Section
8.4, an "Event of Default" shall not occur under this Section
8.1.11 until such time as a Subsidiary or Subsidiaries of the
Borrower accounting for more than 5.0% of the consolidated net
revenues or more than 5.0% of the consolidated assets of the
Borrower (as calculated as of the Amendment No. 2 Effective
Date until August 31, 1994 and thereafter for the Borrower's
most recent Fiscal Year end) is or are the subject of one or
more of the events described in this Section 8.1.11; provided
further, however, that in making such determination EPIC and
its Subsidiaries shall be excluded from such calculation."
(c) Section 8.1.12 of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
SECTION 8.1.12. Impairment of Security, etc. Any Loan
Document shall (except in accordance with its
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<PAGE> 35
terms), in whole or in part, terminate, cease to be effective
or cease to be the legally valid, binding and enforceable
obligation of any Obligor party thereto or any Lien granted
under any Loan Document on any substantial portion of the
collateral shall, in whole or in part, terminate, cease to be
effective or cease to be the legally valid, binding and
enforceable Obligation of any Obligor party thereto; the
Borrower or any other Obligor shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding
nature or enforceability; or any Lien securing any Obligation
shall, in whole or in part, cease to be a perfected prior to
all other Liens (other than as a result of actions of the
Collateral Agent or any Lender); provided, however, that,
subject to Section 8.4, an "Event of Default" shall not occur
under this Section 8.1.12 with respect to any of the foregoing
relating to any Collateral Document to which a Subsidiary of
the Borrower is a party or any Pledged Subsidiary Debt until
such time as the Collateral Documents or Pledged Subsidiary
Debt of a Subsidiary or Subsidiaries of the Borrower
accounting for more than 5.0% of the consolidated net revenues
or more than 5.0% of the consolidated assets of the Borrower
(as calculated as of the Amendment No. 2 Effective Date until
August 31, 1994 and thereafter for the Borrower's most recent
Fiscal Year end) is or are the subject of one or more of the
events described in this Section 8.1.12; provided further,
however, that in making such determination EPIC and its
Subsidiaries shall be excluded from such calculation."
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. Amendment No. 2 Effective Date. This Amendatory
Agreement shall become effective as of the date upon which (the "Amendment No.
2 Effective Date ") all the conditions set forth in this Section 3.1 shall have
been satisfied (on or prior to such date) and, thereafter, this Amendatory
Agreement shall be known, and may be referred to, as "Amendment No. 2".
SECTION 3.1.1. Execution of Counterparts. The Administrative Agent
shall have received counterparts of this Amendatory Agreement duly executed by
the Borrower and Scotiabank. The delivery of an executed counterpart hereof by
the Borrower shall constitute a representation and warranty by the Borrower
that, on the date of such delivery and on Amendment No. 2 Effective Date, after
giving effect to Amendment No. 2, all
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<PAGE> 36
statements set forth in Section 5.2.1 of the Credit Agreement, as amended by
Amendment No. 2, are true and correct as of each such date.
SECTION 3.1.2. Delivery of Note. The Administrative Agent shall have
received a promissory note payable to Scotiabank evidencing the Revolving Loans
made by Scotiabank from time to time to the Borrower pursuant to Amendment No.
2, dated the Amendment No. 2 Effective Date, duly executed and delivered by the
Borrower, in the form of Annex I hereto.
SECTION 3.1.3. 1994 Credit Agreement. The Administrative Agent shall
have received counterparts of the 1994 Credit Agreement, duly executed by the
Borrower, the Lenders, the Co-Agents and the Administrative Agent (as each such
term is defined in the 1994 Credit Agreement), together with counterparts of
the Pledge Agreements and the Subsidiary Guaranty (as defined in and delivered
pursuant to the 1994 Credit Agreement), duly executed by each Obligor (as
defined in the 1994 Credit Agreement) party thereto (other than EPIC and its
Subsidiaries). The Administrative Agent shall have received (i) shares of
stock pledged to the Collateral Agent pursuant to the Pledge Agreements (except
with respect to the shares of stock of EPIC and its Subsidiaries), (ii) the
Subsidiary Notes and other Indebtedness of the Borrower's Subsidiaries
evidenced by promissory notes and pledged to the Collateral Agent pursuant to
the Note Pledge Agreement (including the promissory notes of EPIC's
subsidiaries payable to the Borrower, but excluding the promissory notes of
EPIC's Subsidiaries not so payable) and (iii) evidence reasonably satisfactory
to the Collateral Agent that all filings, recordings and other actions which
the Collateral Agent shall reasonably deem necessary or advisable to establish,
preserve and perfect the Liens granted to the Lenders pursuant to the
Collateral Documents have been made or taken.
SECTION 3.1.4. Termination of EPIC Credit Agreement. On or prior to
the Amendment No. 2 Effective Date, the Borrower shall have taken and shall
have caused EPIC to have taken all necessary actions such that on or prior to
the Amendment No. 2 Effective Date (i) the commitments under the EPIC Credit
Agreement shall have been terminated, (ii) all outstanding obligations
thereunder, including, without limitation, any principal, interest, fees,
commissions and other amounts accrued and unpaid thereunder shall be discharged
and (iii) no lender thereunder or other party thereto shall have any effective
Lien over the collateral or any other property of the Borrower or any of its
Subsidiaries.
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<PAGE> 37
SECTION 3.1.5. Transaction Consummated.
(a) EPIC Merger Agreement and Related Documents. The
Administrative Agent shall have received (with copies for each Lender)
a fully executed copy of the EPIC Merger Agreement, and all other
certificates, filings, documents, consents, approvals, board of
directors resolutions and opinions furnished pursuant to or in
connection with the consummation of the EPIC Transaction each of which
shall be in form and substance satisfactory to the Administrative
Agent and the majority Co-Agents. No amendment, waiver or other
modification of, or other forbearance to exercise any rights with
respect to, any of the terms or provisions relating to the conditions
to the consummation of the EPIC Merger in the EPIC Merger Agreement
that could reasonably be expected to have a material adverse effect on
the financial condition, operations, assets, business or properties of
the Borrower or the Borrower and its Subsidiaries, taken as a whole,
shall have been made or consented to by the Borrower (unless otherwise
agreed to by the Lenders).
(b) Consummation of EPIC Merger; Delivery of Certificate of
EPIC Merger. The EPIC Merger shall have been consummated in
accordance with the EPIC Merger Agreement. The Certificate of Merger,
in recordable form, shall have been executed by the parties thereto,
and the Administrative Agent shall have received evidence satisfactory
to it that counterparts thereof have been presented for filing with
the Secretary of State of the State of Delaware. The Administrative
Agent shall have received a copy of the Certificate of Merger, duly
executed and delivered by each party thereto.
(c) Senior ESOP Notes. The Administrative Agent shall have
received a true and correct copy of each irrevocable notice of
redemption delivered to the trustee of the Senior ESOP Notes which
redemption shall have been arranged on terms and conditions
satisfactory to the Lenders.
(d) No Default under Continuing EPIC Debt. No Event of
Default (as defined in any indenture relating to the Continuing EPIC
Debt) shall have occurred or be created as a result of the
Transaction.
SECTION 3.1.6. Funds Available for the Transaction. On or prior to
the Amendment No. 2 Effective Date, the cash proceeds of the Public Offering
shall have been applied to the EPIC Merger and the Borrower Effective Date Cash
on Hand shall have been applied to the payment of the cash consideration of the
Transaction. The amount of such funds not so applied on the Amendment No. 2
Effective Date, together with the amount of
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<PAGE> 38
Commitments shall be sufficient to pay in full all remaining cash consideration
for the Transaction.
SECTION 3.1.7. Public Offering. The Administrative Agent shall have
received copies of all documents, agreements and instruments related to the
Public Offering and the other transactions contemplated in connection therewith
(including the Borrower's Registration Statement on Form S-3 filed with the
Securities and Exchange Commission), all of which shall be in form and
substance reasonably satisfactory to the Administrative Agent. Upon completion
of the Public Offering, the Borrower shall have received gross cash proceeds
from the Public Offering in an amount at least equal to $140,000,000.
SECTION 3.1.8. Issuance of the Subordinated Notes. The Borrower
shall have duly authorized, executed and delivered the Subordinated Note
Indenture, the Subordinated Notes and all other certificates, documents and
agreements entered into in connection therewith, and the Administrative Agent
shall have received, with counterpart copies for each Lender, true and correct
copies of the Subordinated Notes and all other certificates, documents,
agreements, consents and opinions furnished pursuant to or in connection
therewith, the terms and conditions of which shall be reasonably satisfactory
to the Administrative Agent. The Borrower shall have received gross cash
proceeds from the issuance of the Subordinated Notes in an amount at least
equal to $200,000,000.
SECTION 3.1.9. Master Assignment Agreement. The Administrative Agent
shall have received counterparts of the Master Assignment Agreement duly
executed by the Borrower and each Lender (other than Scotiabank).
SECTION 3.1.10. No Material Adverse Change. Except as disclosed in
writing to the Lenders prior to the Amendment No. 2 Effective Date, (i) since
August 31, 1993, with respect to the Borrower or any of its existing
Subsidiaries, taken as a whole or (ii) since September 30, 1993, with respect
to EPIC or any of its Subsidiaries, taken as a whole, no event has occurred
which or would cause a Material Adverse Effect.
SECTION 3.1.11. Amendment Fee Letter. The Administrative Agent shall
have received counterparts of the Amendment Fee Letter, duly executed by the
Borrower.
SECTION 3.1.12. Opinions of Counsel. The Administrative Agent shall
have received opinions, dated the Amendment No. 2 Effective Date, in form and
substance satisfactory to the Administrative Agent, from
(a) Dewey Ballantine, counsel to the Borrower; and
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<PAGE> 39
(b) Philip D. Wheeler, Esq., General Counsel to the Borrower.
SECTION 3.1.13. Legal Details, etc. All documents executed or
submitted pursuant hereto shall be satisfactory in form and substance to the
Administrative Agent and its counsel and shall include certified copies of
board resolutions of the Borrower and its Subsidiaries authorizing the
transactions contemplated hereby and certificates of incumbency for those
officers of such Persons authorized to execute and deliver all agreements and
instruments contemplated hereby or relating hereto. The Administrative Agent
shall have received all information, and such counterpart originals or such
certified or other copies of such other materials, as the Administrative Agent
or its counsel may reasonably request, and all legal matters incident to the
transactions contemplated by this Amendment shall be satisfactory to the
Administrative Agent and its counsel. In addition, the Administrative Agent
shall have received such other agreements and documents as it may from time to
time request.
SECTION 3.1.14. Payment of Fees and Expenses. The Borrower shall
have paid in full all reasonable fees and expenses of the Scotiabank, or its
counsel or consultants incurred in respect of the negotiation, preparation and
review of the documentation relating to the transactions contemplated by this
Amendment No. 2 invoiced on or prior thereto.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Cross-References. References in this Amendatory
Agreement to any Article or Section are, unless otherwise specified or
otherwise required by the context, to such Article or Section of this
Amendatory Agreement.
SECTION 4.2. Loan Document Pursuant to Credit Agreement; Limited
Waiver. This Amendatory Agreement is a Loan Document executed pursuant to the
Credit Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered, and applied in accordance with all of the terms and
provisions of the Credit Agreement. Except as expressly amended or waived
hereby, all of the representations, warranties, terms, covenants and conditions
of the Credit Agreement shall remain unamended and unwaived. The amendments,
waivers and other terms set forth herein shall be limited precisely as provided
for herein and shall not be deemed to be a waiver of, amendment of, consent to,
or modification of, any other term or provision of the Credit Agreement or of
any term or provision of any other Collateral Document or Loan Document or of
any transaction or
-31-
<PAGE> 40
further or future action on the part of the Borrower which would require the
consent of any of Scotiabank under the Credit Agreement.
SECTION 4.3. Successors and Assigns. This Amendatory Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
SECTION 4.4. Counterparts. This Amendatory Agreement may be executed
by the parties hereto in several counterparts and be deemed to be an original
and all of which shall constitute together but one and the same agreement.
-32-
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be executed and delivered by their authorized agents of
representatives as of the date first above written.
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By:
-----------------------------
Title:
THE BANK OF NOVA SCOTIA, as
Administrative Agent, Co-Agent and
Lender
By:
-----------------------------
Title:
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<PAGE> 42
ANNEX I
NOTE
$310,000,000 May 5, 1994
FOR VALUE RECEIVED, the undersigned, HEALTHTRUST INC. - THE HOSPITAL COMPANY,
a Delaware corporation (the "Borrower"), promises to pay to the order of THE
BANK OF NOVA SCOTIA ("Scotiabank") on or before the Stated Maturity Date (as
defined in the Credit Agreement) the principal sum of THREE HUNDRED TEN MILLION
DOLLARS ($310,000,000) or, if less, the aggregate unpaid principal amount of all
Loans shown on the schedule attached hereto (and any continuation thereof) made
by the Lender pursuant to that certain Credit Agreement, dated as of September
29, 1992 (as heretofore or hereafter amended, supplemented, amended and restated
or otherwise modified from time to time, the "Credit Agreement"), among the
Borrower the various financial institutions parties thereto (collectively, the
"Lenders"), Scotiabank and 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, LTCB Trust Company, Swiss Bank
Corporation and The Toronto-Dominion Bank, as co-agents (the "Co-Agents") for
the Lenders and Scotiabank, as administrative agent (the "Administrative Agent")
for the Co-Agents and the Lenders.
The Borrower also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money
of the United States of America in same day or immediately available funds to
the account designated by the Lender pursuant to the Credit Agreement.
This Note is the Note referred to in, and evidences Indebtedness
incurred under, the Credit Agreement, to which reference is made for a
description of the security for this Note and for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Note and on
which such Indebtedness may be declared to be immediately due and payable.
Unless otherwise defined, terms used herein have the meanings provided in the
Credit Agreement.
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<PAGE> 43
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
By:
-----------------------------------
Title:
<PAGE> 44
LOANS AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION> Amount of Principal Unpaid Principal
Amount of Loan Made Repaid Balance
Interest
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Base LIBO Period (if Base LIBO Base LIBO Notation
Date Rate Rate applicable) Rate Rate Rate Rate Total Made By
</TABLE>
-3-
<PAGE> 1
EXHIBIT 99.4
U.S. $1,200,000,000
CREDIT AGREEMENT,
dated as of April 28, 1994
among
HEALTHTRUST, INC. - THE HOSPITAL COMPANY,
as the Borrower,
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders,
THE BANK OF NOVA SCOTIA
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 for the Lenders,
and
THE BANK OF NOVA SCOTIA,
as the Administrative Agent
for the Lenders.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
1.4. Accounting and Financial Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES,
LETTERS OF CREDIT AND REGISTER
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.1.1. Term Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.1.2. Delayed Term Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.1.3. Revolving Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.1.4. Letter of Credit Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.2. Lenders Not Permitted or Required to Make Loans . . . . . . . . . . . . . . . . . . . . . . . . 39
2.2.1. Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.2.2. Delayed Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.2.3. Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.2.4. All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.3. Issuer Not Permitted or Required to Issue Letters of Credit . . . . . . . . . . . . . . . . . . 40
2.4. Reduction of the Commitment Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.5. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.6. Continuation and Conversion Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.7. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.8. Letter of Credit Issuance Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.8.1. Other Lenders' Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.8.2. Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.8.3. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.8.4. Deemed Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.8.5. Nature of Reimbursement Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.8.6. Increased Letter of Credit Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.8.7. Determination of the Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.9. Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.1.1. Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.1.2. Scheduled Amortization of Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.1.3. Scheduled Amortization of Delayed Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.1.4. Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.1.5. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.1.6. Acceleration of Stated Maturity Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.2. Interest Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
3.2.1. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.2.2. Post-Maturity Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.2.3. Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.3.1. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.3.2. Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.3.3. Fee Letter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.2. Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.3. Increased LIBO Rate Loan Costs, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.7. Payments, Computations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4.8. Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.9. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.10. Lender's Duty to Mitigate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.11. Replacement of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.12. Replacement Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE V
CONDITIONS TO CREDIT EXTENSION
5.1. Initial Credit Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
5.1.1. Resolutions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.1.2. Termination or Amendment of Credit Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.1.3. Transaction Consummated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.1.4. Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.1.5. Pledge Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.1.6. Funds Available for the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.1.7. Public Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.1.8. Issuance of the Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.1.9. Internal Revenue Service Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.1.10. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.1.11. Closing Date Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.1.12. Financial Information, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.1.13. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.1.14. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.1.15. Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.2. All Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.2.1. Compliance with Warranties, No Default, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.2.2. Credit Extension Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
6.2. Due Authorization, Non-Contravention, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.3. Government Approval, Regulation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.4. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.5. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.6. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.7. Litigation, Labor Controversies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.9. Ownership of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.12. Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.13. Regulations G, U and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.14. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.15. Status of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.1.1. Financial Information, Reports, Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.1.2. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.1.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.5. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.6. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.1.7. Accreditation and Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.1.8. Subsidiary Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.1.9. Future Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.1.10. Environmental Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.2.1. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.2.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.2.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.2.4. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.2.5. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.2.6. Restricted Payments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.2.7. Negative Pledges, Restrictive Agreements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 95
7.2.8. Consolidation, Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
7.2.9. Asset Dispositions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
7.2.10. Modification of Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.2.11. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.2.12. Rate Protection Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.1.3. Non-Performance of Certain Covenants and Obligations . . . . . . . . . . . . . . . . . . . . . . 98
8.1.4. Non-Performance of Other Covenants and Obligations . . . . . . . . . . . . . . . . . . . . . . . 99
8.1.5. Default on Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
8.1.6. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.1.7. Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.1.8. Control of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.1.9. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.1.10. Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.1.11. Impairment of Security, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
8.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
8.4. Subsidiary Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
ARTICLE IX
THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT
AND THE CO-AGENTS
9.1. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.4. Successor; Removal of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.5. Loans by Administrative Agent, Collateral Agent and Co-Agents . . . . . . . . . . . . . . . . . 106
9.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.7. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.8. No Obligations on Co-Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
10.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
10.3. Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
10.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
10.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
10.8. Execution in Counterparts, Effectiveness, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 112
10.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
10.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
10.11. Securities Representation; Sale and Transfer of Loans
and Notes; Participations in Loans and Notes . . . . . . . . . . . . . . . . . . . . . . . . 112
10.11.1. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
10.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
10.12. Copies to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
10.13. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
10.14. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
10.15. The Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.16. Forum Selection and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.17. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Existing Letters of Credit
SCHEDULE III - List of Local Counsel
SCHEDULE IV - Lenders' Percentage
</TABLE>
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<PAGE> 6
EXHIBIT A Form of Borrowing Request
EXHIBIT B Form of Issuance Request
EXHIBIT C Form of Continuation/Conversion Notice
EXHIBIT D Form of Lender Assignment Agreement
EXHIBIT E Form of Closing Date Certificate
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Confidentiality Agreement
EXHIBIT H Form of Subsidiary Guaranty
EXHIBIT I Form of Subsidiary Stock Pledge Agreement
EXHIBIT J Form of Borrower Stock Pledge Agreement
EXHIBIT K Form of Opinion of Counsel to the Administrative Agent
EXHIBIT L-1 Form of Opinion of Special Tennessee Counsel to the Borrower
EXHIBIT L-2 Form of Opinion of Special Counsel to the Borrower
EXHIBIT L-3 Form of Opinion of General Counsel of the Borrower
EXHIBIT L-4 Form of Opinion of Local Counsel to the Borrower
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<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 28, 1994, among HEALTHTRUST, INC.
- - - THE HOSPITAL COMPANY, a Delaware corporation, (the "Borrower"), the various
financial institutions as are or may become parties hereto (collectively, the
"Lenders"), THE BANK OF NOVA SCOTIA ("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
(the "Co-Agents) for the Lenders, and Scotiabank, as administrative agent (in
such capacity, the "Administrative Agent") for the Co-Agents and the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower 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,
LTCB Trust Company, Swiss Bank Corporation, and The Toronto-Dominion Bank, as
co-agents and Scotiabank as administrative agent for the lenders;
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of January
9, 1994 (the "EPIC Merger Agreement"), among the Borrower, EPIC Holdings, Inc.,
a Delaware corporation ("EPIC") and Odyssey Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Borrower ("Acquisition Sub"),
Acquisition Sub will merge with and into EPIC pursuant to which all of the
issued and outstanding shares of capital stock of EPIC (other than shares
subject to appraisal rights) (the "EPIC Merger") will be converted into the
right to receive $7.00 per share in cash;
WHEREAS, (i) EPIC and certain Subsidiaries of EPIC have tendered for at
least a majority in principal amount (the "Tender") of each issue of the EPIC
Tendered Debt pursuant to the Consent and Tender Document, (ii) EPIC and
certain Subsidiaries of EPIC have solicited the consent (the "Consent") of at
least a
<PAGE> 8
majority in principal amount of each issue of the EPIC Tendered Debt pursuant
to the Consent and Tender Document to amend the respective indentures relating
thereto in certain respects as set forth in supplemental indentures thereto
previously delivered to the Lenders (the "Supplemental Indentures"), (iii) the
Borrower will cause EPIC or its relevant Subsidiary to irrevocably call for the
redemption in full of each issue of the EPIC Redeemable Debt and (iv) the
Borrower will cause EPIC to pay in full all obligations outstanding under the
EPIC Credit Agreement and terminate all commitments thereunder (each of such
transactions, together with the EPIC Merger are hereinafter referred to as the
"EPIC Transaction");
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of March 18,
1994 (the "Tennessee Purchase Agreement"), among HTI Memorial Hospital
Corporation, the Borrower, Nashville Memorial Health Systems, Inc., Nashville
Memorial Hospital, Inc., Nashville Memorial Outreach Services Corporation,
Community Health Services, Medical Credit Clearing, Inc., and Memorial
Companies, Inc. ("Memorial"), the Borrower has purchased substantially all of
the assets of Memorial (the "Tennessee Acquisition");
WHEREAS, the Borrower desires to have the borrowing capacity to acquire
certain other health care related facilities and assets (collectively, the
"Other Acquisitions"; the Tennessee Acquisition and the Other Acquisitions are
referred to herein collectively as the "Other Transactions");
WHEREAS, the aggregate amount of funds necessary to consummate the Other
Transactions is up to a maximum of $265,000,000;
WHEREAS, in connection with the EPIC Transaction and the Other
Transactions, the Borrower will refinance all amounts outstanding or otherwise
due under the 1992 Credit Agreement;
WHEREAS, (i) in connection with the EPIC Merger the Borrower will sell
shares of its common stock in a registered public stock offering and will
receive proceeds from the exercise of certain outstanding warrants for Common
Stock (the "Public Offering") and (ii) in connection with the consummation of
the EPIC Transaction and the Other Transactions the Borrower will issue the
Subordinated Notes (the "Note Offering"), in each case as further set forth in
the Borrower's Registration Statements each on a Form S-3 as filed with the SEC
(collectively, the "Registration Statements"), with gross cash proceeds
received by the Borrower on or prior to the Effective Date to be no less than
$140,000,000 from the Public Offering and $200,000,000 from the Note Offering;
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<PAGE> 9
WHEREAS, in connection with the Transaction, the Borrower desires to obtain
from the Lenders
(a) a Term Loan Commitment pursuant to which Term Loans
in a maximum aggregate principal amount not to exceed $415,000,000 will be
made in a single Borrowing by Lenders having Term Loan Commitments;
(b) a Delayed Term Loan Commitment pursuant to which
Delayed Term Loans in a maximum aggregate principal amount not to exceed
$385,000,000 will be made by Lenders having Delayed Term Loan Commitments;
and
(c) a Revolving Loan Commitment pursuant to which
Revolving Loans and Letters of Credit in a maximum aggregate amount not to
exceed $400,000,000, will be made or issued, as the case may be, from time
to time, from Lenders having Revolving Loan Commitments (provided, that of
such amount, no more than $150,000,000 shall be available for the issuance
of Letters of Credit);
with all the proceeds of the Loans to be used for the purposes specified in
Section 7.1.6; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend the
Commitments, make Loans to the Borrower and issue and participate in Letters of
Credit for the account of the Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Accounts" means any "account" (as that term is defined in Section 9-106
of the U.C.C. as in effect, from time to time, in the State of New York) of the
Borrower arising from the sale or lease of goods or rendering of services.
"Acquisition Sub" has the meaning set forth in the second recital of this
Agreement.
-3-
<PAGE> 10
"Administrative Agent" is defined in the preamble and includes any Person
referred to and serving from time to time as "Credit Agent" under any
Collateral Document and each other Person as shall have subsequently been
appointed as the successor Administrative Agent pursuant to Section 9.4.
"Affected Issuers" is defined in clause (b) of Section 4.12.
"Affected Lender" is defined in Section 4.11.
"Affected Replacement Event Lender" means any Lender that is the subject
of a Replacement Event.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently announced or
established by Scotiabank as its base rate for Dollar loans; and
(b) the Federal Funds Rate plus 1/2%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by Scotiabank in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Borrower
and the Lenders of changes in the Alternate Base Rate.
"AmSouth Facility" means the credit facility provided by AmSouth Bank,
N.A. pursuant to a credit agreement, dated as of July 30, 1991 between AmSouth
Bank, N.A. and EPIC Properties, Inc. in support of the CMOs.
-4-
<PAGE> 11
"Applicable LIBOR Margin" means 1 1/2% plus or minus the Applicable Rate
Modifier.
"Applicable Rate Modifier" means, with respect to interest on any Loan of
any type or any Letter of Credit participation fee referred to in clause (a) of
Section 3.3.2 and at any time of determination commencing with the Fiscal
Quarter ended November 30, 1994, a single addition to or discount from the
interest rate allowable under Section 3.2.1, which addition or discount shall
be determined by reference to the Interest Coverage Ratio and the Total Debt to
EBITDA Coverage Ratio (as reported in the Borrower's last Compliance
Certificate) as set forth below:
<TABLE>
<CAPTION>
Financial Tests Applicable
--------------- Rate Modifier
-------------
<S> <C>
In the event the Interest Coverage Ratio is < 4.5:1.0 and the
Total Debt to EBITDA Coverage Ratio is > 4.0:1.0 ("Maximum
Rate Modifier"), the Applicable Rate Modifier shall be: + .25%
In the event the Interest Coverage Ratio is > 4.5:1.0 but <
5.0:1.0 and the Total Debt to EBITDA Coverage Ratio is <
4.0:1.0 but > 2.5: 1.0, the Applicable Rate Modifier shall
be: 0 %
In the event the Interest Coverage Ratio is > 5.0:1.0 but <
5.5:1.0 and the Total Debt to EBITDA Coverage Ratio is <
2.5:1.0 but > 2.0:1.0, the Applicable Rate Modifier shall be: - .25%
In the event the Interest Coverage Ratio is > 5.5:1.0 and the
Total Debt to EBITDA Coverage Ratio is < 2.0:1.0, the
Applicable Rate Modifier shall be: - .50%;
</TABLE>
provided, however, that (i) any such discount shall be permitted only if no
Default has occurred and is continuing and (ii) if the Borrower meets one, but
not both, tests for a reduction or an increase in the Applicable Rate Modifier,
then the Applicable Rate Modifier shall be the next highest level where the
Borrower satisfies both such tests. Changes in the Applicable Rate Modifier
shall take effect (with respect to Loans of any type and
-5-
<PAGE> 12
Letters of Credit then or thereafter outstanding) five Business Days after the
date of delivery of a Compliance Certificate pursuant to clause (c) of Section
7.1.1.
"Assignee Lender" is defined in Section 10.11.1.
"Authorized Officer" means, relative to any Obligor, those of its officers
whose signatures and incumbency shall have been certified to the Administrative
Agent and the Lenders pursuant to Section 5.1.1 or as such Obligor may from
time to time thereafter certify in writing to the Administrative Agent. For
purposes of the delivery of a Compliance Certificate, Authorized Officer shall
mean the chief executive officer, chief operating officer, president, principal
financial officer, treasurer, controller or any senior vice president of the
Borrower.
"Average Life" means, as at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from such date to the date of each successive scheduled
principal payment of such debt security multiplied by the amount of such
principal payment by (ii) the sum of all such principal payments; provided,
however, that for purposes of this definition the term "scheduled principal
payment" shall be deemed to include any scheduled payments in respect of any
sinking fund obligation, mandatory redemption, acquisition or defeasance of any
such debt security.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Benchmark Securities" means, with respect to any Lender at any time of
determination, (i) certificates of deposit issued by such Lender and
outstanding or (ii) if at such time of determination such Lender does not have
any such certificates of deposit issued and outstanding, any other outstanding
general obligations of such Lender which are both unsecured and unsupported by
a letter of credit or other form of credit enhancement device.
"Borrower" is defined in the preamble.
"Borrower Effective Date Cash on Hand" means cash of the Borrower on the
Effective Date in an amount at least equal to $180,000,000 which will be used
to pay in part the cash consideration of the Transaction.
"Borrower Stock Pledge Agreement" means the Borrower Stock Pledge
Agreement executed and delivered pursuant to Section 5.1.5, substantially in
the form of Exhibit J hereto.
-6-
<PAGE> 13
"Borrowing" means the Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by all Lenders on the same Business
Day and pursuant to the same Borrowing Request in accordance with Section 2.1.
"Borrowing Request" means a loan request and certificate duly executed by
an Authorized Officer of the Borrower, substantially in the form of Exhibit A
hereto.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in
New York City; and
(b) relative to the making, continuing, prepaying or
repaying of any LIBO Rate Loans, any day on which dealings in Dollars are
carried on in the London interbank market.
"Capital Expenditures" means, for any period, the aggregate amount
(without duplication) of all expenditures, whether paid in cash or other
consideration other than Common Stock, (including the incurrence of Capitalized
Lease Liabilities) of the Borrower and its Subsidiaries during such period to
acquire fixed or capital assets made during such period which, in accordance
with GAAP, would be classified as capital expenditures; provided, however, that
there shall be excluded from Capital Expenditures (w) Hospital Exchanges, (x)
expenditures of funds made pursuant to clause (c) of the definition of "Net
Disposition Proceeds", (y) Investments permitted under clauses (d) and (e) of
Section 7.2.5 and (z) Capital Expenditures financed with Net Equity Proceeds
specifically designated for such purpose.
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as capitalized leases, and,
for purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Cash Equivalent Investment" means, at any time (a) marketable direct
obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the
date of acquisition thereof, (b) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any
-7-
<PAGE> 14
such state or any public instrumentality thereof maturing within one year from
the date of acquisition thereof and, at the time of acquisition, having the
highest rating obtainable from either Standard & Poor's Corporation or Moody's
Investors Service, Inc., (c) commercial paper or privately placed unsecured
general obligations of a corporation, whether redeemable at the holder's demand
for next day settlement ("master notes") or otherwise, maturing no more than
one year from the date of acquisition thereof; provided, however, that if the
issuing corporation is not a Lender (or its holding company), such
corporation's commercial paper has, at the time of acquisition of such
commercial paper or other obligation, a rating in one of the two highest rating
categories of Standard & Poor's Corporation or Moody's Investors Service, Inc.,
(d) certificates of deposit, bankers' acceptances or time deposits maturing
within one year from the date of acquisition thereof issued by a Lender and (e)
certificates of deposit, bankers' acceptances or time deposits maturing within
one year from the date of acquisition thereof issued by other commercial banks
organized under the laws of the United States of America or any state thereof
or the District of Columbia, each having combined capital and surplus of not
less than $125,000,000 or other commercial banks organized under the laws of a
foreign country, each having combined capital and surplus of not less than
$500,000,000.
"Cash Flow" means, for any Fiscal Quarter, the sum for such Fiscal Quarter
of
(a) EBITDA for such Fiscal Quarter;
minus
(b) all federal, state and foreign income taxes actually
paid by the Borrower and its Subsidiaries during such Fiscal Quarter;
minus
(c) the amount of Capital Expenditures for such Fiscal
Quarter.
"Cash Flow Coverage Ratio" means, for any Fiscal Quarter, the ratio
computed for the period of four consecutive Fiscal Quarters, ending on the
close of such Fiscal Quarter (or, if less, for the period of such lesser number
of whole Fiscal Quarters to have elapsed since the Closing Date of:
(a) Cash Flow for all such Fiscal Quarters; provided,
however, that the amount of Capital Expenditures used in the computation
of Cash Flow for the final Fiscal Quarter of
-8-
<PAGE> 15
1994 shall be calculated by dividing (i) the sum of all amounts of Capital
Expenditures for 1994 by (ii) 4;
to
(b) the sum for all such Fiscal Quarters of
(i) Net Interest Expense;
plus
(ii) scheduled debt reductions pursuant to Sections
3.1.2 and 3.1.3, as such amounts may be reduced from time
to time pursuant to Section 3.1;
plus
(iii) the amount expended (other than in connection
with the Transaction) by the Borrower or its Subsidiaries
during such Fiscal Quarters in respect of the redemption,
retirement or other acquisition of Subordinated Debt
other than from the proceeds of Refunding Indebtedness
or Net Equity Proceeds.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended.
"Change in Control" means any Person (other than (i) any trustee under any
Plan or (ii) any underwriter, in its capacity as an underwriter in connection
with a public offering of the Borrower's Common Stock) or any two or more
Persons acting in concert shall acquire beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act), directly or indirectly, of Securities of the Borrower
(or other Securities convertible into such Securities) representing 30% or more
of the combined voting power of all Securities of the Borrower entitled to vote
in the election of directors, other than Securities having such power only by
reason of the occurrence of a triggering event which would permit the exercise
of voting power.
"Closing Date" means the date of the making of the initial Credit
Extension hereunder.
"Closing Date Certificate" means a certificate duly completed and executed
and delivered pursuant to Section 5.1.11, substantially in the form of Exhibit
E hereto.
"CMOs" means each of the 11 3/8% Class B-1 First Priority Mortgage Notes
due 2001, the 11 1/2% Class B-2 First Priority Mortgage Notes due 1998 and the
Floating Rate Class B-3 First
-9-
<PAGE> 16
Priority Mortgage Notes due 1998 of EPIC Properties, Inc., issued pursuant to
the CMO Indenture together with the CMO Indenture and the CMO Guaranty as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with Section 7.2.10.
"CMO Guaranty" means the Guaranty, dated as of July 30, 1991, of EPIC
Healthcare Group, Inc. in favor of the trustee under the CMO Indenture, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with Section 7.2.10.
"CMO Indenture" means the indenture, dated as of July 30, 1991, between
EPIC Properties, Inc. as issuer and State Street Bank and Trust Company, as
trustee, and collateral agent as the same may be amended, supplemented or
otherwise modified from time to time in accordance with Section 7.2.10.
"Co-Agent" is defined in the preamble.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral Agent" means Scotiabank in its capacity as collateral agent,
collateral administrator or having a similar title or function under any of the
Collateral Documents and includes each other Person as shall have been
appointed as successor Collateral Agent in accordance with Section 9.4.
"Collateral Documents" means the Pledge Agreements and the Intercreditor
Agreement.
"Commitment" means, as the context may require, any of the Term Loan
Commitment, Delayed Term Loan Commitment or Revolving Loan Commitment.
"Commitment Amount" means, as the context may require, any of the
Revolving Loan Commitment Amount, the Delayed Term Loan Commitment Amount or
the Term Loan Commitment Amount.
"Commitment Letter" means the confidential commitment letter, dated March
15, 1994, from Scotiabank, addressed to, and acknowledged and agreed to by, the
Borrower.
"Commitment Termination Date" means, as the context may require, any of
the Revolving Loan Commitment Termination Date, the Delayed Term Loan
Commitment Termination Date or the Term Loan Commitment Termination Date.
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"Commitment Termination Event" means
(a) the occurrence of any Event of Default described in
clauses (a) through (d) of Section 8.1.9 (subject to the proviso at the
end of such Section); or
(b) the occurrence and continuance of any other Event of
Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 8.3, or
(ii) in the absence of such declaration, the giving
of notice by the Administrative Agent, acting at the
direction of the Required Lenders, to the Borrower that
the Commitments have been terminated.
"Common Stock" means the common stock of the Borrower, with a par value of
$.001 per share.
"Compliance Certificate" means a certificate duly completed and executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
F hereto, as amended, supplemented or restated or otherwise modified from time
to time.
"Confidentiality Agreement" means a confidentiality agreement, executed
and delivered pursuant to clause (a)(iv) of Section 10.11.1 and Section 10.14,
substantially in the form of Exhibit G hereto.
"Consent" is defined in the third recital.
"Consent and Tender Document" means the Offer to Purchase and Consent
Solicitation of EPIC, EPIC Healthcare Group, Inc. and EPIC Properties, Inc.
dated March 15, 1994 and any amendments thereto.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person, if the primary purpose or intent thereof by the Person incurring the
Contingent Liability is to provide assurance to the obligee of such obligation
of another Person that such obligation of such other Person will be paid or
discharged, or that any agreements relating thereto will be
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complied with, or that the holders of such obligation will be protected (in
whole or in part) against loss in respect thereof. The amount of any Person's
obligation under any Contingent Liability shall (subject to any limitation set
forth therein) be deemed to be the outstanding principal amount (or maximum
principal amount, if larger) of the debt, obligation or other liability
guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender excluding any
conversion or continuation of such Loan pursuant to Section 2.6 hereof
which does not increase the principal amount of such Loan; or
(b) the issuance of any Letter of Credit by an Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Delayed Term Loan" is defined in Section 2.1.2.
"Delayed Term Loan Commitment" means, relative to any Lender having a
Delayed Term Loan Commitment, such Lender's obligation to make Delayed Term
Loans pursuant to Section 2.1.2.
"Delayed Term Loan Commitment Amount" means, on any date, $385,000,000, as
such amount may be reduced from time to time pursuant to Section 2.4.
"Delayed Term Loan Commitment Termination Date" means the earliest of
(a) 5:00 p.m., New York City time, on December 31, 1995;
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<PAGE> 19
(b) the date on which the Delayed Term Loan Commitment
Amount is terminated in full or reduced to zero pursuant to Section 2.4 or
Section 3.1.5; and
(c) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clause (b) or (c), the Delayed
Term Loan Commitments shall terminate automatically and without any further
action.
"Disbursement Date" is defined in Section 2.8.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Administrative Agent
and the Required Lenders.
"Dollar" and the symbol "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
"EBITDA" means, for any period, an amount equal to for such period,
without duplication, of
(a) Net Income;
plus
(b) Net Interest Expense;
plus
(c) tax provisions for all federal, state and foreign
income taxes of the Borrower and its Subsidiaries;
plus
(d) amortization expense (including the amortization of
deferred loan costs) of the Borrower and its Subsidiaries;
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plus
(e) the depreciation expense of the Borrower and its
Subsidiaries.
"Effective Date" means the date this Agreement becomes effective pursuant
to Section 10.8.
"Eligible Assignee" means (i) a commercial bank organized under the laws
of the United States or any State thereof; (ii) a savings and loan association
or savings bank organized under the laws of the United States or any State
thereof; (iii) a commercial bank organized under the laws of any other country,
or a political subdivision thereof; provided, however, that (A) such bank is
acting through a branch or agency located in the United States or (B) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country, (iv) any affiliate of a Lender and (v) any other entity which is an
"accredited investor" (as defined in Regulation D under the Securities Act)
which extends credit or buys loans as one of its businesses including, but not
limited to, insurance companies, mutual funds and lease financing companies.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which is, or has been, sponsored or maintained by the
Borrower or any of its Subsidiaries.
"Environmental Laws" means all federal, state or local laws, rules,
regulations, plans, decrees, demand letters or orders relating to environmental
matters, pollution, waste disposal, industrial hygiene, land use or the
protection of human or animal health or welfare, including, without limitation,
those relating to any release or disposal or threatened release or disposal of
Hazardous Materials and to the generation, use, storage, transportation, or
disposal of Hazardous Materials, in any manner applicable to the Borrower or
any of its Subsidiaries or any of their respective properties.
"EPIC" has the meaning set forth in the second recital of this Agreement.
"EPIC Credit Agreement" means that certain Second Amended and Restated
Credit Agreement, dated as of September 30, 1988 and Amended and Restated as of
July 31, 1991 and September 1, 1993 among EPIC Healthcare Group, Inc., various
lenders and General Electric Capital Corporation, as administrative agent.
"EPIC Merger" has the meaning set forth in the second recital of this
Agreement.
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"EPIC Merger Agreement" has the meaning set forth in the second recital of
this Agreement.
"EPIC Redeemable Debt" means, collectively, the 11-7/8% Senior ESOP Notes
due September 30, 1998, the 11% Junior Subordinated Pay-in-Kind Notes due 2003
and the Zero Coupon Notes due 2001 of EPIC Healthcare Group, Inc.
"EPIC 10-7/8% Senior Subordinated Indenture" means the Indenture, dated as
of July 17, 1993 and amended in connection with the Consent between EPIC
Healthcare Group, Inc. and Bankers Trust Company, as trustee, pursuant to which
the EPIC 10-7/8% Senior Subordinated Notes were issued, as the same may be
amended, supplemented or otherwise modified from time to time in accordance
with Section 7.2.10.
"EPIC 10-7/8% Senior Subordinated Notes" means the 10-7/8% Senior
Subordinated Notes due 2003 issued pursuant to the EPIC 10- 7/8% Senior
Subordinated Indenture.
"EPIC Tendered Debt" means, collectively, the CMOs, the EPIC 10-7/8%
Senior Subordinated Notes and the EPIC 12% Senior Deferred Coupon Notes.
"EPIC Transaction" has the meaning set forth in the third recital of this
Agreement.
"EPIC 12% Senior Deferred Coupon Note Indenture" means the Indenture,
dated as of March 25, 1992, and amended in connection with the Consent between
EPIC and First Trust National Association, as trustee, pursuant to which the
12% Senior Deferred Coupon Notes were issued, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with Section
7.2 10.
"EPIC 12% Senior Deferred Coupon Notes" means the 12% Senior Deferred
Coupon Notes due 2002 issued pursuant to the 12% Senior Deferred Coupon Note
Indenture.
"Equivalent Subsidiary" means, with respect to any Subsidiary of the
Borrower (the "First Subsidiary"), any other Subsidiary of the Borrower (the
"Proposed Equivalent Subsidiary") of which the Borrower, directly or indirectly
through one or more of its Subsidiaries, owns an equivalent or greater
percentage of the Control/Beneficial Interests (as hereinafter defined) as it
does, directly or indirectly, of the First Subsidiary. For purposes of this
definition, (i) "Control/Beneficial Interests" means, with respect to any
Subsidiary of the Borrower, collectively (a) the total voting power of shares
of stock or other ownership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the
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Person or Persons (whether directors, managers, trustees or other Persons
performing similar functions) having the power to direct or cause the direction
of the management and policies of such Subsidiary and (b) all rights to receive
dividends or other distributions (upon liquidation or termination of the
existence of such Subsidiary or otherwise) in respect of ownership interests in
such Subsidiary and (ii) to the extent the Borrower's ownership of the
Control/Beneficial Interests in the First Subsidiary or any Proposed Equivalent
Subsidiary is indirect through one or more of the other Subsidiaries of the
Borrower (each such Subsidiary being an "Intermediate Subsidiary"), the
Borrower's percentage ownership of the Control/Beneficial Interests in the
First Subsidiary or such Proposed Equivalent Subsidiary shall take into account
the percentage ownership by the Borrower and, where applicable, each
Intermediate Subsidiary of the Control/Beneficial Interests in each
Intermediate Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means for any period, an amount equal to, for such
period of
(a) EBITDA;
minus
(b) Capital Expenditures;
minus
(c) all federal, state and foreign income taxes actually
paid by the Borrower and its Subsidiaries;
minus
(d) Net Interest Expense;
minus
(e) debt payments (including mandatory prepayments made
pursuant to Section 3.1.5 in an amount equal to such prepayment), as such
amounts may be reduced from time to time pursuant to Section 3.1, plus an
amount equal to the amount, if any, by which such scheduled principal
payments
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were reduced by the chronological order of payment application of
voluntary prepayments.
"Excluded Taxes" is defined in Section 4.6.
"Existing Administrative Agent" is defined in Section 4.11.
"Existing Healthtrust Subordinated Debenture Indenture" means the
Indenture, dated as of March 30, 1993 between the Borrower and The First
National Bank of Boston, as trustee, pursuant to which the Existing Healthtrust
Subordinated Debentures were issued as amended, supplemented or otherwise
modified from time to time in accordance with Section 7.2.10.
"Existing Healthtrust Subordinated Debentures" means the $300,000,000
aggregate principal amount of 8-3/4% Subordinated Debentures due 2005 issued by
the Borrower pursuant to the Existing Healthtrust Subordinated Debenture
Indenture.
"Existing Healthtrust Subordinated Note Indenture" means the Indenture,
dated as of May 1, 1992, between the Borrower and The First National Bank of
Boston, as trustee, pursuant to which the Existing Healthtrust Subordinated
Notes were issued as amended, supplemented or otherwise modified from time to
time in accordance with Section 7.2.10.
"Existing Healthtrust Subordinated Notes" means the $500,000,000 aggregate
principal amount of 10-3/4% Subordinated Notes due 2002 issued by the Borrower
pursuant to the Existing Healthtrust Subordinated Note Indenture.
"Existing Subsidiaries" is defined in Section 6.8.
"Facility" means a general acute care hospital owned or leased by the
Borrower or any of its Subsidiaries.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to
(a) the weighted average of the rates on overnight
federal funds transaction with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.
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"Fee Letter" means the confidential fee letter, dated March 15, 1994, from
Scotiabank, addressed to, and acknowledged and agreed to by, the Borrower.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending August 31; references to a Fiscal Year with a number corresponding to
any calendar year (e.g., the "1994 Fiscal Year") refer to the Fiscal Year
ending on the August 31 occurring during such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" is defined in Section 1.4.
"Good Faith Contest" means the contest of any dispute or inquiry if (a)
the dispute or inquiry is diligently contested in good faith by appropriate
proceedings timely instituted; (b) adequate reserves are established with
respect to the contested dispute or inquiry; (c) during the period of such
contest, the enforcement of the contested item is effectively stayed and (d)
the failure to pay or comply with the contested item during the period of such
contest is not reasonably likely to result in a Material Adverse Effect.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum or crude oil or any fraction thereof;
(d) any asbestos in any form or condition;
(e) any polychlorinated biphenyls in any form or
condition;
(f) any radioactive material, including any source,
special nuclear or by-product material as defined at 42 U.S.C. 2011 et
seq.;
(g) any sediment which would be considered toxic,
hazardous or contaminated under any Environmental Law; or
(h) any pollutant or contaminant or hazardous, dangerous
or toxic chemical, material or substance within
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the meaning of any other applicable federal, state or local law,
regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, all as amended or hereafter amended.
"Health Care JV's" means a joint venture which is a provider of medical,
surgical or other health care services or any business related to the business
of the Borrower or its Subsidiaries but is not the owner or lessee of a
Facility.
"Hedging Obligations" means, with respect to any Person, all liabilities
of such Person under any Rate Protection Agreement.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Holy Cross" has the meaning set forth in the fourth recital.
"Hospital Exchanges" means any sale, transfer, lease, contribution,
conveyance or other exchange (collectively, an "Exchange") to or with a Person
of a Facility in an Exchange of a like nature for a general acute care hospital
of such Person or its Affiliate to the Borrower or any of its Subsidiaries,
whether in a single transaction or a series of related transactions; provided,
however, that
(a) no Default shall have occurred or be continuing
either immediately prior to such Exchange or after giving effect thereto;
(b) the general acute care hospital and other
consideration which the Borrower or its Subsidiaries receives as a result
of such Exchange is, unless otherwise consented to by the Required
Lenders, of an equal or greater value (as determined by the Borrower in
its reasonable judgment which determination with respect to a Hospital
Exchange in a single transaction or series of related transactions has a
value in excess of $50,000,000 shall be evidenced by a resolution of the
Borrower's board of directors) than the general acute care hospital
transferred and other consideration given by the Borrower or its
Subsidiary in such Exchange;
(c) the reciprocal Exchange of a general acute care
hospital is made to or from (as the case may be) the
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Borrower or its Subsidiary within three months of the initial Exchange; and
(d) after giving effect to such Exchange, the Borrower
shall be in compliance with Section 7.2.4, calculated on a pro forma basis
as if such Exchange had occurred at the beginning of the applicable
calculation period.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement not in accordance with
generally accepted auditing standards; or
(c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause such Obligor to be in default of any of its obligations
under Section 7.2.4.
"Including" means including without limiting the generality of any
description preceding such term.
"Indebtedness" of any Person means, without duplication:
(a) all indebtedness of such Person for borrowed money
and all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments;
(b) all obligations, contingent or otherwise, relative
to the face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under
leases which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) if included as liabilities in accordance with GAAP,
all obligations of such Person to pay the deferred purchase price of
property or services which purchase price is due more than six months from
the date of incurrence of the obligation in respect thereof, and
indebtedness (excluding prepaid interest thereon) secured by a Lien on
property owned by such Person (including indebtedness
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arising under conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by such Person or
is limited in recourse; provided, however, that in the case of any
indebtedness described in this clause (d) which is neither assumed by such
Person nor recourse to the credit of such Person, the amount of such
indebtedness shall be deemed to be an amount equal to the lesser of the
principal amount of such indebtedness and the aggregate book value of the
property and assets of such Person securing such indebtedness; and
(e) all Contingent Liabilities of such Person in respect
of any type of indebtedness described in clauses (a) through (d).
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any majority-owned partnership or majority-owned
joint venture in which such Person is a general partner, but shall not include
the Indebtedness of any minority-owned partnership or minority-owned joint
venture in which such Person is a general partner.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Indentures" means, collectively, the CMO Indenture, the EPIC 10-7/8%
Senior Subordinated Indenture, the EPIC 12% Senior Deferred Coupon Note
Indenture, the Existing Healthtrust Subordinated Note Indenture and the
Existing Healthtrust Subordinated Debenture Indenture.
"Interest Coverage Ratio" means, as of the last day of any Fiscal Quarter,
the ratio computed for the period of four consecutive Fiscal Quarters, ending
on the close of such Fiscal Quarter (or, if less, for the period of such lesser
number of whole Fiscal Quarters to have elapsed since the Closing Date) of:
(a) EBITDA for such period
to
(b) Net Interest Expense for such period.
"Interest Expense" means, for any period, the aggregate consolidated
interest expense of the Borrower and its Subsidiaries for such period,
including, without duplication, all fees owed with respect to and all net
payments in respect of Hedging Obligations, commitment fees owed with respect
to the Commitments, fees owed with respect to Letters of Credit but excluding
the amortization or write-off of deferred loan costs.
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"Interest Income" means, for any period, the aggregate consolidated
interest income of the Borrower and its Subsidiaries for such period.
"Interest Period" means, relative to any LIBO Rate Loans, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.5 or
2.6 and shall end on (but exclude) the day which numerically corresponds to
such date one, two, three, six and, if available (in the judgment of the
Administrative Agent), nine or twelve months thereafter (or, if such month has
no numerically corresponding day, on the last Business Day of such month), in
each case as the Borrower may select in its relevant notice pursuant to Section
2.5 or 2.6; provided, however, that
(a) the Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have expiration
dates occurring on more than ten different dates; provided, however, that
if any Loans have Interest Periods of the same duration and ending on the
same date, there shall be deemed to be one Interest Period for all such
Loans;
(b) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest Period
shall end on the Business Day next preceding such numerically
corresponding day); and
(c) no Interest Period may end later than the Stated
Maturity Date.
"Inverse Order Amount" is defined in Section 3.1.5.
"Investment" means (i) any investment in any Person, whether by means of
share purchase, capital, equity or similar contribution, loan, advance, time
deposit or otherwise (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), (ii) without
duplication of clause (i), becoming a party to any joint venture or partnership
or (iii) without duplication of clause (i) or (ii), an acquisition (whether by
purchase, lease or otherwise) of a Facility or any Person owning, leasing or
managing a Facility whether through share purchase or otherwise; provided,
however, that the term "Investment" shall not include the contribution of an
asset which is not a Facility by the Borrower to a not-for-profit corporation
or other not-for-profit entity. The amount of any Investment shall be the
original principal or capital amount
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thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made
by the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the book value of such
property.
"Issuance Request" means an issuance request duly completed and executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
B hereto.
"Issuer" means, with respect to each Letter of Credit, the Lender which
agrees, or is otherwise obligated, to issue such Letter of Credit as provided
in Section 2.8.7.
"JV Subsidiary" means any Subsidiary of the Borrower which is a joint
venture.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit D hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" means an irrevocable standby letter of credit issued by
an Issuer in form and substance satisfactory to such Issuer.
"Letter of Credit Outstandings" means, on any date, an amount equal to the
sum (without duplication) of
(a) the then aggregate amount which is undrawn and
available under all Letters of Credit issued and outstanding for the
account of the Borrower
plus
(b) the then aggregate amount of all unpaid and
outstanding Reimbursement Obligations of the Borrower.
"LIBO Rate" means, relative to any Interest Period for a LIBO Rate Loan,
the rate of interest equal to the average (rounded upwards, if necessary, to
the nearest 1/100 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to each Reference Lender's LIBOR Office
in the London interbank market as at or about 11:00 a.m., London time, two
Business Days prior to the beginning of such Interest Period for delivery on
the first day of such Interest Period, and in an amount approximately equal to
the amount of such Reference Lender's LIBO Rate Loan and for a period
approximately equal to such Interest Period.
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"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined pursuant to the following formula:
LIBO Rate
LIBO Rate = -------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for a LIBO Rate
Loan will be determined by the Administrative Agent on the basis of the LIBOR
Reserve Percentage in effect on the date which is, and the applicable rates
furnished to and received by the Administrative Agent from the Reference
Lenders, two Business Days before the first day of such Interest Period.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of a Lender as designated from time
to time by notice from such Lender to the Borrower and the Administrative
Agent, whether or not outside the United States, which shall be making or
maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for a
LIBO Rate Loan, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S.
Board, having a term approximately equal or comparable to such Interest Period.
"Lien" means any security interest, mortgage, financing lease (other than
where the Borrower or a Subsidiary of the Borrower is the lessor), pledge,
hypothecation, assignment, deposit arrangement, encumbrance of any kind
(including any conditional sale or title retention agreement (other than where
the Borrower or any of its Subsidiaries is the seller)), lien (statutory or
otherwise) or any agreement to give any security interest.
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"Loan" means, as the context may require, either a Revolving Loan, a
Delayed Term Loan or a Term Loan of any type.
"Loan Document" means this Agreement, the Borrower Stock Pledge Agreement,
the Subsidiary Guaranty, the Subsidiary Stock Pledge Agreement, the Rate
Protection Agreements, if any, the Fee Letter and the Commitment Letter.
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations, properties, assets or condition (financial or otherwise)
of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the
Borrower to perform its Obligations or (iii) the ability of one or more
Subsidiaries of the Borrower, which Subsidiaries, individually or in the
aggregate, account for more than 10.0% of the consolidated net revenues or more
than 10.0% of the consolidated net assets of the Borrower (as calculated as of
the Closing Date until August 31, 1994 and thereafter for the Borrower's most
recent Fiscal Year end) to perform their respective Obligations.
"Maximum Rate Modifier" has the meaning assigned to that term in the
definition of "Applicable Rate Modifier."
"Memorandum" means the confidential memorandum dated March 1994 relating
to the Transaction distributed to the Lenders.
"Memorial" has the meaning set forth in the fifth recital.
"Minority Subsidiaries" means, at any time, those Subsidiaries of the
Borrower which do not individually or in the aggregate account for more than
10% of the consolidated net revenues or more than 10% of the consolidated net
assets of the Borrower and its Subsidiaries (in each case as calculated on the
Closing Date and thereafter for the Borrower's most recent Fiscal Year end);
provided, however, that in making such determination (i) EPIC and its
Subsidiaries shall be excluded from such calculation for the period commencing
on the Closing Date and ending on the 90th day after the Closing Date and (ii)
EPIC Properties, Inc. shall be excluded from such calculation until such time
that all of the CMOs have been redeemed or otherwise retired.
"Minority Venture" means any entity which owns a general acute care
hospital or Other Health Care Facility or is a Health Care JV, which entity is
not a Subsidiary of the Borrower.
"Net Accounts Proceeds" means, with respect to the Borrower or any of its
Subsidiaries in connection with the sale or disposition (collectively, a
"Disposition") of the type described in clause (d) of the definition of
"Permitted Disposition", the excess of
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(a) the gross cash and Cash Equivalent proceeds received
from such Disposition of Accounts
less
(b) all reasonable fees, commissions, discounts, costs
and other expenses incurred in connection with such Disposition,
including, without limitation, legal, investment banking, accounting and
other professional fees, disbursements and expenses and all taxes actually
paid or estimated (in good faith) in connection with such Disposition of
Accounts which have not been paid to Affiliates of the Borrower or any of
its Subsidiaries (other than customary fees on terms no less favorable to
the Borrower or such Subsidiary than would be obtained in a comparable
arm's length transaction in connection with such Disposition); provided,
however, that if the amount of estimated taxes referred to above for any
such Disposition, if any, exceeds the amount of taxes actually paid in
cash in respect of such sale for the Fiscal Year in which such Disposition
occurred, the aggregate amount of such excess shall be immediately applied
in accordance with Section 3.1.5 as Net Accounts Proceeds.
"Net Debt Proceeds" means, with respect to the Borrower or any of its
Subsidiaries in connection with the incurrence of any Refunding Indebtedness
permitted under clause (a) of Section 7.2.2, the excess of
(a) the gross cash proceeds received from such
Indebtedness
less
(b) all reasonable fees, commissions, discounts, costs
and other expenses incurred in connection with such Indebtedness,
including without limitation, fees and expenses with respect to
underwriting or placement commissions, legal, investment banking,
accounting and other professional fees, disbursements and expenses and any
governmental fees which have not been paid to Affiliates of the Borrower
or any of its Subsidiaries (other than customary fees on terms no less
favorable to the Borrower or such Subsidiary than would be obtained in a
comparable arm's length transaction in connection with such Indebtedness).
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"Net Disposition Proceeds" means, with respect to (x) any disposition of
the type described in clause (b), (c) or (e) of, or the proviso contained in,
the definition of "Permitted Disposition", or (y) any cash or Cash Equivalent
consideration received by the Borrower or any of its Subsidiaries in connection
with a Hospital Exchange, the excess of
(a) the gross cash and Cash Equivalent proceeds received
as a result of such Permitted Disposition
less
(b) all reasonable fees and expenses with respect to
legal, investment banking, brokerage and accounting and other professional
fees, sales commissions and disbursements actually incurred in connection
with such Permitted Disposition and all taxes actually paid or estimated
(in good faith) in connection with such Permitted Disposition which have
not been paid to Affiliates of the Borrower or any of its Subsidiaries
(other than customary fees on terms no less favorable to the Borrower or
such Subsidiary than would be obtained in a comparable arm's length
transaction in connection with such Permitted Disposition); provided,
however, that if the amount of estimated taxes referred to above for any
Permitted Disposition, if any, exceeds the amount of taxes actually paid
in cash in respect of such Permitted Disposition for the Fiscal Year in
which such Permitted Disposition occurred, the aggregate amount of such
excess shall be immediately applied in accordance with Section 3.1.5 as
Net Disposition Proceeds
less
(c) the amount of such cash proceeds that are to be used
as all or part of the cash consideration to acquire general acute care
hospitals or other healthcare businesses within one year of the date of
the consummation of such Disposition (the "Acquisition Period"); provided,
however, that if all or any part of such proceeds are not so used to
acquire general acute care hospitals or other healthcare businesses during
the relevant Acquisition Period then such unused proceeds shall be deemed
to be Net Disposition Proceeds received by the Borrower or its Subsidiary,
as the case may be, on the last day of such Acquisition Period and shall
be immediately applied in accordance with Section 3.1.5.
"Net Equity Proceeds" means, with respect to the Borrower or any of its
Subsidiaries in connection with the sale or issuance of any equity security,
the excess of
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(a) the gross cash and Cash Equivalent proceeds received
from such sale or issuance
less
(b) all reasonable fees, commissions, discounts, costs
and other expenses incurred in connection with such sale or issuance,
including without limitation, fees and expenses with respect to
underwriting or placement commissions, legal, investment banking,
accounting and other professional fees, disbursements and expenses and any
governmental fees which have not been paid to Affiliates of the Borrower
or any of its Subsidiaries (other than customary fees on terms no less
favorable to the Borrower or such Subsidiary than would be obtained in a
comparable arm's length transaction in connection with such sale or
issuance).
"Net Income" means, for any period, all amounts which, in accordance with
GAAP, would be included as net income on the consolidated statements of income
of the Borrower and its Subsidiaries for such period; provided, however, that
such amount shall exclude (i) extraordinary gains and extraordinary non-cash
losses, (ii) non-cash gains and non-cash losses relating to asset sales,
dispositions and write-downs and (iii) premiums, consent payments and similar
expenses related to the Tenders and Consents.
"Net Interest Expense" means, for any period, an amount equal to Interest
Expense for such period less Interest Income for such period.
"Net Worth" means, at any time, all amounts which, in accordance with
GAAP, would be included under shareholders' equity on a consolidated balance
sheet of the Borrower and its Subsidiaries at such time; provided, however,
that if the Borrower has repurchased any of its Common Stock pursuant to clause
(a)(iii) of Section 7.2.6, Net Worth shall include an amount equal to the
lesser of (i) the amount of Common Stock the Borrower intends to contribute
within the next twelve months pursuant to clause (a)(iii) of Section 7.2.6 to
the extent that such contribution would receive recognition in accordance with
GAAP if it were in fact contributed on the date of determination and (ii) 75%
of the market value of the Borrower's Common Stock held in its treasury and
available for any future planned contributions.
"1992 Credit Agreement" is defined in the first recital.
"Non-CMO Debt" means the EPIC 12% Senior Deferred Coupon Notes and the
EPIC 10-7/8% Senior Subordinated Notes.
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"Note Offering" has the meaning set forth in the eighth recital.
"Notification Date" is defined in Section 2.8.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, any Letter of Credit and each other Loan Document.
"Obligor" means the Borrower or any of its Subsidiaries party to and
obligated under any Loan Document.
"Organic Document" means, relative to any corporate Obligor, its
certificate of incorporation, its by-laws and all shareholder agreements,
voting trusts and similar arrangements, in each case to which such Obligor is a
party, applicable to any of its authorized shares of capital stock.
"Other Acquisitions" has the meaning set forth in the fifth recital.
"Other Health Care Facility" means a health care facility having inpatient
capacity which is not a Facility.
"Other Tax Forms" is defined in Section 4.6.
"Other Transactions" has the meaning set forth in the fifth recital.
"Participant" is defined in Section 10.11.2.
"Payee" is defined in Section 4.6.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage for the
applicable Commitment set forth opposite the name of such Lender on Schedule IV
hereto or set forth in the Lender
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Assignment Agreement, as such percentage may be adjusted from time to time
pursuant to Lender Assignment Agreement(s) executed by such Lender and its
assignee Lender(s) and delivered pursuant to Section 10.11.
"Permitted Disposition" means any sale, transfer, lease, contribution,
conveyance or other disposition (collectively, a "Disposition") of, or the
grant of options or warrants the exercise of which would constitute a
Disposition of, any assets of the Borrower or any of its Subsidiaries, whether
in a single transaction or a series of related transactions, to any Person, but
only if
(a) such Disposition is either (i) made in the ordinary
course of business of the Borrower or a Subsidiary of the Borrower
(including, without limitation, the sale of Accounts to a collection
agency or other entity, which Accounts such obligee determines cannot be
collected by it or are more likely to be collected by the purchaser
thereof), (ii) a Disposition from the Borrower to any of its wholly-owned
Subsidiaries or a Subsidiary of the Borrower to the Borrower or to an
Equivalent Subsidiary, (iii) a lease (on a short-term or long-term basis)
to another Person of assets determined by the Borrower, in its reasonable
judgment to be no longer useful or necessary in the operations or
businesses of the Borrower and its Subsidiaries and the rental payments
are not less than the fair market rental value for the assets subject to
such lease, (iv) permitted by clause (a) of Section 7.2.8, (v) a
Disposition (or series of related Dispositions) of assets having an
aggregate fair market value equal to or less than $1,000,000, (vi) a
contribution of assets made by the Borrower or any of its Subsidiaries
permitted as an Investment pursuant to clauses (c) and (d) of Section
7.2.5 or (vii) a Hospital Exchange;
(b) such Disposition is made in connection with a sale
and leaseback transaction involving the sale of capital assets of the
Borrower or any of its Subsidiaries to a Person other than the Borrower or
any of its Subsidiaries and (i) such sale of such capital assets is for an
amount not less than the fair market value thereof, (ii) no Default shall
have occurred or be continuing either immediately prior to such
disposition or after giving effect thereto, (iii) the rental payments of
the lease relative to such transaction shall not be greater than the fair
market rental value (unless such lease constitutes a Capitalized Lease
Liability) for the assets subject to such lease and (iv) in the case of a
sale or in a related series of sales for an amount in excess of
$15,000,000, at least 75% of the consideration for such sale shall be in
cash;
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(c) such Disposition is made with respect to (i) any
Securities (other than Securities constituting Cash Equivalent
Investments) of any of the Borrower's Subsidiaries, (ii) all or
substantially all of the assets of any division or line of business of the
Borrower or any of its Subsidiaries, (iii) one or more Facilities or (iv)
any other asset which is not of the type described in clauses (a) or (b),
or a division or line of business or any interest in any of the foregoing
of the Borrower or any of its Subsidiaries; provided, however, that (i)
with respect to any assets having a fair market value in excess of
$1,000,000, any such sale or other disposition is made for at least the
fair market value of such assets and (ii) any such Disposition of more
than $25,000,000 in value of assets in any one transaction or a related
series of transactions shall be permitted only if the Borrower's Board of
Directors shall have adopted a resolution confirming that the
consideration to be received in connection with such sale or other
disposition is at least equal to the fair market value of such assets;
provided, however, that upon the receipt by the Borrower of any cash in
respect of any part of such non-cash consideration, such cash shall be
immediately applied in accordance with Section 3.1.5 as Net Disposition
Proceeds;
(d) such Disposition is made in respect of Accounts;
provided, however, (i) the sole consideration for such Disposition is cash
and Cash Equivalent Investments and (ii) if such Disposition is made with
recourse to the Borrower, (x) the aggregate recourse liability, if any, of
the Borrower in connection with any such Disposition (to the extent such
liability relates to the failure of any account debtor with respect to any
of such Accounts to make any payments in respect thereof) shall not exceed
10% of the face amount of the Accounts sold or otherwise disposed of, and
(y) the consideration received by the Borrower and its Subsidiaries in
connection with any such Disposition is not less than 90% of the face
value of such Accounts; provided, further, however, that this Section
shall not apply to any Disposition of Accounts if such Disposition is in
connection with the Disposition of a Facility that is otherwise permitted
by this Agreement;
(e) such Disposition is made in connection with an
exchange or sale and acquisition of capital assets of the Borrower or any
of its Subsidiaries to a Person other than the Borrower or any of its
Subsidiaries and (i) such exchange or sale and acquisition of such capital
assets is for an amount not less than the fair market value thereof and
(ii) no Default shall have occurred or be continuing
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either immediately prior to such disposition or after giving effect
thereto; or
(f) the terms of the option or warrant so granted are
for a Disposition which would constitute a Disposition of the type
referred to in clause (a), (b), (c), (d) or (e) above;
provided, however, that (i) any Disposition (or series of related Dispositions)
by any Minority Venture of assets having an aggregate fair market value equal
to or greater than $1,000,000 shall constitute a "Permitted Disposition"
hereunder and all cash dividends or cash returns of capital aggregating
$1,000,000 or more received by the Borrower or any of its Subsidiaries in
connection therewith shall be applied as Net Disposition Proceeds, (ii) the
receipt by the Borrower or any of its Subsidiaries of non-cash consideration
must comply with Section 7.2.5 and (iii) upon the receipt by the Borrower or
any of its Subsidiaries of any cash in respect of any non-cash dividends or
non-cash consideration, such cash shall, to the extent such cash constitutes
Net Disposition Proceeds, be immediately applied in accordance with Section
3.1.5.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreements" means the Borrower Stock Pledge Agreement and the
Subsidiary Stock Pledge Agreement, collectively.
"Pledged Shares" or "Pledged Stock" means any shares of stock pledged to
the Collateral Agent pursuant to the Pledge Agreements.
"Prepayment Amount" is defined in Section 3.1.5.
"Principal Reduction Dates" means each date on which a scheduled principal
payment of Term Loans or Delayed Term Loans, as the case may be, is due as set
forth in Section 3.1.2 or Section 3.1.3 or, if such a date is not a Business
Day, the immediately succeeding Business Day.
"Pro-Rata Amount" is defined in Section 3.1.5.
"Public Offering" has the meaning set forth in the eighth recital.
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"Quarterly Payment Date" means the last Business Day of each March, June,
September and December.
"Rate Protection Agreement" means any interest rate swap agreement,
interest rate cap agreement or interest rate collar agreement, and any other
agreement or arrangement designed to protect a Person against fluctuations in
interest rates or currency exchange rates and entered into by the Borrower with
any Lender hereunder.
"Reference Lenders" means Scotiabank and Citicorp USA, Inc. or such other
Lenders as may be agreed to by the Borrower and the Required Lenders.
"Refund" with respect to any Indebtedness means, as the context may
require, to purchase, repurchase, redeem, retire, defease or refinance any
portion of such Indebtedness and "Refunded" and "Refunding" shall have
correlative meanings.
"Register" is defined in Section 10.15.
"Registration Statement" has the meaning set forth in the eighth recital.
"Reimbursement Obligation" is defined in Section 2.8.3.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Event" means, with respect to any Lender, (i) if the
Benchmark Securities of such Lender are rated by both Standard & Poor's
Corporation ("S&P") and Moody's Investors Service, Inc. ("Moody's"; together
with S&P, the "Primary Raters") (or, in the event that either of the Primary
Raters does not then rate the Benchmark Securities of such Lender, if such
Benchmark Securities are rated by one Primary Rater and by any other rating
organization (an "Alternative Rater") whose ratings of securities of the same
type as such Benchmark Securities are widely accepted in the financial and
business community), the downgrading by both Primary Raters (or by the
applicable Primary Rater and the Alternative Rater) of the Benchmark Securities
of such Lender below a rating of BBB- or Baa3 (or the equivalent rating of such
Alternative Rater), respectively or (ii) if the Benchmark Securities of such
Lender are rated by only one Primary Rater or only by an Alternative Rater, the
downgrading by such Primary Rater or such Alternative Rater, as the case may
be, of the Benchmark Securities of such Lender below a rating of BBB- or Baa3
(or the equivalent rating of the Alternative Rater), respectively.
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"Replacement Event Lender" is defined in clause (b) of Section 4.12.
"Replacement Lender" is defined in Section 4.11.
"Replacement Notice" is defined in Section 4.11.
"Required Lenders" means Lenders holding in excess of 50% of the aggregate
principal amount of the Loans and the unborrowed Revolving Loan Commitments and
Delayed Term Loan Commitments, or, if no Loans are outstanding, Lenders having
in excess of 50% of the aggregate Commitments.
"Resource Conservation and Recovery Act" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to
time.
"Revolving Loan" is defined in Section 2.1.3.
"Revolving Loan Commitment" means, relative to any Lender having a
Revolving Loan Commitment, such Lender's obligation to make Revolving Loans
pursuant to Section 2.1.3.
"Revolving Loan Commitment Amount" means, on any date, $400,000,000;
provided, however, that such amount shall be reduced from time to time pursuant
to Section 2.4.
"Revolving Loan Commitment Availability" means at any time the Revolving
Loan Commitment Amount less, at such time, (i) the aggregate principal amount
of Revolving Loans and (ii) Letter of Credit Outstandings.
"Revolving Loan Commitment Termination Date" means the earlier to occur of
(a) 5:00 p.m., New York City time, on June 1, 2001; and
(b) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clause (b), the Revolving Loan
Commitments shall terminate automatically and without any further action.
"Scotiabank" is defined in the preamble.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement, bonds, debentures, notes, or other evidences of indebtedness,
secured or unsecured,
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convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities" or any certificates of interest, shares or participations
in temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Solvent", as applied to any Person, means, as at the date of
determination, that (i) the then fair saleable value of the property of such
Person is (A) greater than the total amount of liabilities (including
Contingent Liabilities) of such Person and (B) greater than the amount that
will be required to pay the probable liabilities of such Person's then existing
debts as they become absolute and matured, (ii) such Person's capital is not
unreasonably small in relation to its business or any contemplated or
undertaken transaction and (iii) such Person does not intend to incur, or does
not believe or should not reasonably believe that it will incur, debts beyond
its ability to pay such debts as they become due.
"Stated Amount" for any Letter of Credit on any day means the amount which
is undrawn and available under such Letter of Credit on such day (after giving
effect to any drawings thereon on such day).
"Stated Expiry Date" is defined in Section 2.8.
"Stated Maturity Date" means for each Loan, June 1, 2001, as such date for
any such Loan may be adjusted pursuant to Sections 2.4 and 3.1.
"Subordinated Debt" means (i) the Subordinated Notes, the Existing
Healthtrust Subordinated Notes, the Existing Healthtrust Subordinated
Debentures, the EPIC 10-7/8% Senior Subordinated Notes and the EPIC 12% Senior
Deferred Coupon Notes and (ii) all other unsecured Indebtedness of the Borrower
for money borrowed which is subordinated, upon terms satisfactory to the
Administrative Agent and the Required Lenders, in right of payment to the
payment in full in cash of all Obligations.
"Subordinated Notes" means the $200,000,000 aggregate principal amount of
Subordinated Notes issued by the Borrower pursuant to the Existing Healthtrust
Subordinated Note Indenture.
"Subsidiary" means, with respect to any Person, (i) any for profit
corporation of which more than 50% of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more
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other Subsidiaries of such Person, or (ii) any for profit partnership, joint
venture or other entity as to which such Person, such Person and one or more of
its Subsidiaries or one or more Subsidiaries of such Person has or have the
power to direct or cause the direction of management and policies, or the power
to elect the managing general partner (or the equivalent), of such partnership,
joint venture or other entity, as the case may be; provided, however, that no
Plan shall be deemed a Subsidiary of the Borrower.
"Subsidiary Guarantor" means, on the Closing Date, each Subsidiary of the
Borrower (other than EPIC and its Subsidiaries and the JV Subsidiaries) party
to the Subsidiary Guaranty, and, thereafter, each Subsidiary of the Borrower
that is required pursuant to Section 7.1.9 to execute and deliver a guaranty in
substantially the form of the Subsidiary Guaranty.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and delivered
pursuant to Section 5.1.4, substantially in the form of Exhibit H hereto.
"Subsidiary Stock Pledge Agreement" means the Subsidiary Stock Pledge
Agreement, executed and delivered pursuant to Section 5.1.5, substantially in
the form of Exhibit I hereto.
"Supplemental Indentures" is defined in the third recital.
"Taxes" is defined in Section 4.6.
"Tender" is defined in the third recital.
"Tennessee Acquisition" has the meaning set forth in the fourth recital.
"Tennessee Purchase Agreement" has the meaning set forth in the fourth
recital.
"Term Loan" is defined in Section 2.1.1.
"Term Loan Commitment" means, relative to any Lender having a Term Loan
Commitment, such Lender's obligation to make Term Loans pursuant to Section
2.1.1.
"Term Loan Commitment Amount" means, on any date, $415,000,000.
"Term Loan Commitment Termination Date" means the earliest of
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(a) June 30, 1994 (if the Term Loans have not been made
on or prior to such date);
(b) the date immediately following the Closing Date; and
(c) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clauses (b) or (c), the Term Loan
Commitments shall terminate automatically and without any further action.
"Total Debt to EBITDA Coverage Ratio" means, as at any date of
determination thereof, the ratio of (a) the total principal amount of
consolidated Indebtedness of the Borrower and its Subsidiaries outstanding on
such date of determination to (b) EBITDA for the four consecutive Fiscal
Quarter period ending on or prior to such date of determination (or for such
lesser number of whole Fiscal Quarters which have ended since the Closing Date
on an annualized basis).
"Transaction" means, collectively, the Public Offering, the Note Offering,
together with the refinancing of amounts outstanding under the Existing Credit
Agreement, the EPIC Transaction and the Other Transactions.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Welfare Plan" means a "welfare plan", as such term is defined in Section
3(1) of ERISA.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Note, Borrowing Request, Issuance Request, Continuation/Conversion Notice,
Closing Date Certificate, Compliance Certificate, Confidentiality Agreement,
Acknowledgment, Loan Document, notice and other communication delivered from
time to time in connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in
any Article,
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Section or definition to any clause are references to such clause of such
Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, (i) all accounting terms used herein or in any other Loan Document
shall be interpreted, all accounting determinations and computations hereunder
or thereunder (including under Section 7.2.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared
in accordance with, those generally accepted accounting principles ("GAAP")
applied in the preparation of the financial statements referred to in Section
6.5 and (ii) except as otherwise expressly provided, all accounting
determinations and computations hereunder or under any other Loan Documents
(including under Section 7.2.4) shall be made without duplication and on a
consolidated basis for the Borrower and its Subsidiaries.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES,
LETTERS OF CREDIT AND REGISTER
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Article V), (i) each Lender severally agrees to make
Loans pursuant to the Commitments described in this Section 2.1 and (ii) the
Issuer agrees that it will issue Letters of Credit pursuant to Section 2.1.4,
and each other Lender having a Revolving Loan Commitment severally agrees that
it will purchase participation interests in such Letters of Credit pursuant to
Section 2.8.1.
SECTION 2.1.1. Term Loan Commitment. On the Closing Date, but in no
event on or after the Term Loan Commitment Termination Date, each Lender having
a Term Loan Commitment will make Loans (relative to such Lender, its "Term
Loans") to the Borrower in a single Borrowing equal to such Lender's Percentage
of the aggregate amount of the Borrowing of Term Loans requested by the
Borrower to be made on such day. The Commitment of each Lender described in
this Section 2.1.1 is herein referred to as its "Term Loan Commitment". No
amounts paid or prepaid with respect to Term Loans may be reborrowed.
SECTION 2.1.2. Delayed Term Loan Commitment. From time to time on any
Business Day occurring on or after the Closing Date and prior to the Delayed
Term Loan Commitment Termination Date, each Lender having a Delayed Term Loan
Commitment will make Loans (relative to such Lender, its "Delayed Term Loans")
to the Borrower equal to such Lender's Percentage of the aggregate amount of
the Borrowing of Delayed Term Loans requested by the
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Borrower to be made on such day. The Commitment of each Lender described in
this Section 2.1.2 is herein referred to as its "Delayed Term Loan Commitment".
No amounts paid or prepaid with respect to Delayed Term Loans may be
reborrowed.
SECTION 2.1.3. Revolving Loan Commitment. From time to time on any
Business Day occurring on or after the Closing Date and prior to the Revolving
Loan Commitment Termination Date, each Lender having a Revolving Loan
Commitment will make Loans (relative to such Lender, its "Revolving Loans") to
the Borrower equal to such Lender's Percentage of the aggregate amount of the
Borrowing of the Revolving Loans requested by the Borrower to be made on such
day. The Commitment of each Lender described in this Section 2.1.3 is herein
referred to as its "Revolving Loan Commitment". On the terms and subject to
the conditions hereof, the Borrower may from time to time borrow, prepay and
reborrow the Revolving Loans.
SECTION 2.1.4. Letter of Credit Commitments. From time to time on any
Business Day occurring on or after the Closing Date occurring not less than 30
days prior to the Revolving Loan Commitment Termination Date, an Issuer will
(a) issue one or more Letters of Credit for the account
of the Borrower in Stated Amounts requested by the Borrower on such day;
or
(b) extend the Stated Expiry Date of an existing Letter
of Credit previously issued by such Issuer hereunder.
SECTION 2.2. Lenders Not Permitted or Required to Make Loans. No Lender
shall be permitted or required to make any Loan of the kind and under the
circumstances described below in this Section 2.2.
SECTION 2.2.1. Term Loans. No Borrowing of Term Loans shall be made if,
after giving effect to such Borrowing, the aggregate outstanding principal
amount of all Term Loans of all Lenders having Term Loan Commitments would
exceed the Term Loan Commitment Amount.
SECTION 2.2.2. Delayed Term Loans. No Borrowing of Delayed Term Loans
shall be made if, after giving effect to such Borrowing, the aggregate
outstanding principal amount of all Delayed Term Loans of all Lenders having
Delayed Term Loan Commitments would exceed the Delayed Term Loan Commitment
Amount.
SECTION 2.2.3. Revolving Loans. No Borrowing of Revolving Loans shall be
made if, after giving effect to such Borrowing, the sum of the aggregate
outstanding principal amount of all Revolving Loans of all Lenders having
Revolving Loan Commitments
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plus the aggregate amount of all Letter of Credit Outstandings would exceed the
Revolving Loan Commitment Amount.
SECTION 2.2.4. All Loans. No Loan shall be made by any Lender under any
Commitment if, after giving effect thereto, the aggregate outstanding principal
amount of (i) all such Loans by such Lender and (ii) with respect to the
Revolving Loan Commitments, Letter of Credit Outstandings of such Lender would
exceed such Lender's Percentage of the Commitment Amount relative to such
Commitment.
SECTION 2.3. Issuer Not Permitted or Required to Issue Letters of Credit.
No Issuer shall be permitted or required to issue, or extend the Stated Expiry
Date of, any Letter of Credit if, after giving effect thereto, either (i) the
aggregate amount of all Letter of Credit Outstandings would exceed the lesser
of (A) the then Revolving Loan Commitment Amount less the then aggregate amount
of outstanding Revolving Loans and (B) $150,000,000 or (ii) the term of such
Letter of Credit would extend beyond one Business Day prior to the Stated
Maturity Date.
SECTION 2.4. Reduction of the Commitment Amounts. (a) The Borrower may,
from time to time on any Business Day, voluntarily reduce the Revolving Loan
Commitment Amount and the Delayed Term Loan Commitment Amount; provided,
however, that (i) all such reductions shall require at least two Business Days'
prior written notice to the Administrative Agent and be permanent, and (ii) any
partial reduction of any such Commitment Amount shall be in a minimum amount of
$5,000,000 and in an integral multiple of $1,000,000.
(b) All Commitment Amounts shall be automatically reduced to $0 if the
initial Credit Extension hereunder is not made on or prior to June 30, 1994.
(c) On December 31, 1994 the unused Delayed Term Loan Commitment shall be
automatically reduced by an amount, if positive, equal to $120,000,000 minus
the aggregate principal amount of Delayed Term Loans used to Refund EPIC
Redeemable Debt.
(d) On each date of payment or prepayment of Revolving Loans required
pursuant to Section 3.1.5 (regardless of whether there is a sufficient
principal amount of Revolving Loans to be so prepaid) the Revolving Loan
Commitment Amount will automatically be reduced by an amount equal to the
amount of such prepayment.
(e) On or prior to the Delayed Term Loan Commitment Termination Date, the
Delayed Term Loan Commitment will be reduced by an amount equal to the Net Debt
Proceeds, Net Account Proceeds, Net Disposition Proceeds and Net Equity
Proceeds not
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used to prepay Loans pursuant to clauses (a) or (b) of Section 3.1.5.
SECTION 2.5. Borrowing Procedure. The Borrower may from time to time
irrevocably request, by delivering a Borrowing Request to the Administrative
Agent, (i) in the case of LIBO Rate Loans, not later than 12:00 Noon, New York
City time, not less than three Business Days before a proposed Borrowing or
(ii) in the case of Base Rate Loans, not later than 12:00 Noon, New York City
time, not less than one Business Day before a proposed Borrowing, that a
Borrowing be made in a minimum amount of $5,000,000 and an integral multiple of
$1,000,000, or, in the unused amount of the applicable Commitment. Upon the
receipt of each Borrowing Request, the Administrative Agent shall give prompt
notice thereof to each Lender on the same day such Borrowing Request is
received. On the terms and subject to the conditions of this Agreement, each
Borrowing shall be comprised of the type of Loans, and shall be made on the
Business Day, specified in such Borrowing Request. On or before 12:00 Noon,
New York City time, on such Business Day, each Lender having a Commitment for
the type of Loan being requested shall deposit with the Administrative Agent
same day funds in an amount equal to such Lender's Percentage of the requested
Borrowing. Such deposit will be made to an account maintained by the
Administrative Agent which the Administrative Agent shall specify from time to
time by notice to the Lenders. To the extent funds are received from the
Lenders, the Administrative Agent shall make such funds available to the
Borrower by wire transfer to the accounts the Borrower shall have specified in
its Borrowing Request. No Lender's obligation to make any Loan shall be
affected by any other Lender's failure to make any Loan.
SECTION 2.6. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
Noon, New York City time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than three Business Days' notice that all, or
any portion in an aggregate minimum amount of $5,000,000 and an integral
multiple of $1,000,000, of any Loans, be, in the case of Base Rate Loans,
converted into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted
into a Base Rate Loan or continued as a LIBO Rate Loan of such type; provided,
however, that (i) each such conversion or continuation shall be pro rated among
the applicable outstanding Loans of the applicable Lenders, and (ii) no portion
of the outstanding principal amount of any Loans may be continued as, or be
converted into, LIBO Rate Loans when any Default has occurred and is
continuing. Absent delivery of a Continuation/Conversion Notice with respect
to any LIBO Rate Loan at least three Business Days before the last day of the
then current Interest Period with respect thereto, such LIBO Rate Loan
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shall, on such last day, automatically convert to a Base Rate Loan.
SECTION 2.7. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing
one of its foreign branches or affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank eurodollar market.
SECTION 2.8. Letter of Credit Issuance Procedures. By delivering to the
Administrative Agent an Issuance Request on or before 10:00 a.m., New York City
time, the Borrower may from time to time request that an Issuer issue a Letter
of Credit. Each such request shall be made on not less than two Business Days'
notice (or such shorter period as may be agreed to by the Administrative
Agent), and not less than 30 days prior to the Revolving Loan Commitment
Termination Date. Upon receipt of an Issuance Request, the Administrative
Agent shall promptly on the same day notify the applicable Issuer and each
Lender having a Revolving Loan Commitment thereof. Each Letter of Credit shall
by its terms be stated to expire (whether originally or after giving effect to
any extension) on a date (its "Stated Expiry Date") no later than the earlier
of (i) the one year anniversary of the date of issuance or extension of such
Letter of Credit; provided, however, that, subject to clause (ii) below, this
clause (i) shall not prevent an Issuer from agreeing that a Letter of Credit
will automatically be renewed annually for a period not to exceed one year if
the Issuer does not cancel such renewal; provided, further, that such Issuer
shall deliver a written notice to the Administrative Agent setting forth the
last day on which such Issuer may give notice that it will not extend (a
"Notification Date" with respect to such Letter of Credit) at least ten
Business Days prior to such Notification Date; provided, further, that, unless
the Required Lenders otherwise consent, such Issuer shall give notice that it
will not extend if it has knowledge that an Event of Default has occurred and
is continuing on such Notification Date and (ii) three days prior to the
Revolving Loan Commitment Termination Date. The Borrower and each Issuer of a
Letter of Credit may amend or modify such Letter of Credit upon written notice
to the Administrative Agent only; provided, however, that (A) any amendment
constituting an
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extension of such Letter of Credit's Stated Expiry Date shall comply with the
provisions of the immediately preceding sentence and (B) any amendment
constituting an increase in the Stated Amount of such Letter of Credit shall be
deemed a request for the issuance of a new Letter of Credit and shall comply
with the foregoing provisions of this paragraph.
Each Issuer will issue each Letter of Credit to be issued by it and will
make available to the beneficiary thereof the original of such Letter of
Credit.
The Administrative Agent, each of the Lenders and the Borrower agree that
the letters of credit issued pursuant to the 1992 Credit Agreement that are
listed in Schedule II hereto and outstanding as of the Closing Date shall for
all purposes of this Agreement (other than with respect to fees or other
charges payable upon the issuance of Letters of Credit pursuant to Section
3.3.2) be deemed to have been issued as Letters of Credit under and pursuant to
the terms of this Agreement on the Closing Date and shall be given effect in
any calculation of Letter of Credit Outstandings.
SECTION 2.8.1. Other Lenders' Participation. Automatically, and without
further action, upon the issuance of each Letter of Credit (and, with respect
to the letters of credit listed on Schedule II hereto, as of the Closing Date),
each Lender having a Revolving Loan Commitment (other than the Issuer of such
Letter of Credit) shall be deemed to have irrevocably purchased from such
Issuer, to the extent of such Lender's Percentage of the Revolving Loan
Commitment Amount, a participation interest in such Letter of Credit (including
any Reimbursement Obligation and any other Contingent Liability with respect
thereto), and such Lender shall, to the extent of its Percentage of such
Revolving Loan Commitment Amount, be responsible for reimbursing promptly (and
in any event within one Business Day after receipt of demand for payment from
such Issuer, together with accrued interest from the day of such demand) such
Issuer for any Reimbursement Obligation which has not been reimbursed in
accordance with Section 2.8.3. In addition, such Lender shall, to the extent
of its Percentage of the Revolving Loan Commitment Amount, be entitled to
receive a ratable portion of the Letter of Credit participation fee payable
pursuant to Section 3.3.2 with respect to each Letter of Credit and a ratable
portion of any interest payable pursuant to Section 2.8.2 and Section 3.2.2
and, if entitled thereto, a ratable portion of any principal payment made by
the Borrower.
SECTION 2.8.2. Disbursements. Subject to the terms and provisions of
each Letter of Credit and this Agreement, upon presentment of any Letter of
Credit to the Issuer thereof for payment, such Issuer shall make such payment
to the beneficiary
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(or its designee) of such Letter of Credit on the date designated for such
payment (the "Disbursement Date"). Such Issuer will promptly notify the
Borrower and each of the Lenders having a Revolving Loan Commitment and, if
such Issuer is not Scotiabank, the Administrative Agent, of the presentment for
payment of any such Letter of Credit, together with notice of the Disbursement
Date thereof. Prior to 12:00 noon, New York City time, on the next Business
Day following the Disbursement Date, the Borrower will reimburse the
Administrative Agent, for the account of such Issuer, for all amounts disbursed
under such Letter of Credit, together with all interest accrued thereon since
the Disbursement Date. To the extent the Administrative Agent does not receive
payment in full, on behalf of the Issuer, in accordance with the third sentence
of this Section, the Borrower's Reimbursement Obligation shall accrue interest
at a fluctuating rate determined by reference to the Alternate Base Rate plus
1/2 of 1%, plus or minus the Applicable Rate Modifier, if any (for one day
following the Disbursement Date), and thereafter at the Alternate Base Rate
plus an additional margin of 2.75% per annum, payable on demand. In the event
the Borrower fails to notify the Administrative Agent and the Issuer prior to
12:00 noon, New York City time, on the Disbursement Date that the Borrower
intends to pay the Administrative Agent, for the account of the Issuer, for the
amount of such drawing with funds other than proceeds of Revolving Loans, or
the Administrative Agent does not receive such reimbursement payment from the
Borrower prior to 12:00 noon, New York City time, on the next Business Day
following the Disbursement Date (or if the Issuer must for any reason return or
disgorge such reimbursement), the Lenders (including the Issuer) shall, on the
terms and subject to the conditions of this Agreement, fund the Reimbursement
Obligation therefor by making, on the next Business Day, Revolving Loans which
are Base Rate Loans as provided in Section 2.1.3 (the Borrower being deemed to
have given a timely Borrowing Request therefor for such amount); provided,
however, that for the purpose of determining the availability of any unused
Revolving Loan Commitment Amount immediately prior to giving effect to the
application of the proceeds of such Revolving Loans, such Reimbursement
Obligation shall be deemed not to be outstanding at such time and, if entitled
thereto, a ratable portion of any payment made by the Borrower.
SECTION 2.8.3. Reimbursement. The obligation (the "Reimbursement
Obligation") of the Borrower under Section 2.8.2 to reimburse an Issuer with
respect to each disbursement under a Letter of Credit (including interest
thereon), and, upon the failure of the Borrower to reimburse such Issuer, the
obligation of each Lender having a Revolving Loan Commitment to reimburse such
Issuer, shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower or such Lender, as the case
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may be, may have or have had against an Issuer or any Lender, including any
defense based upon the failure of any disbursement under a Letter of Credit to
conform to the terms of the applicable Letter of Credit (if, in the applicable
Issuer's good faith opinion, such disbursement is determined to be appropriate)
or any non-application or misapplication by the beneficiary of the proceeds of
such Letter of Credit; provided, however, that nothing herein shall require the
Borrower or such Lender, as the case may be, to reimburse the applicable Issuer
for any wrongful disbursement made by such Issuer under a Letter of Credit as a
result of acts or omissions determined by a court of competent jurisdiction to
constitute gross negligence or wilful misconduct on the part of such Issuer.
SECTION 2.8.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Event of Default of the type described in Section 8.1.9 or,
with notice from the Administrative Agent, upon the occurrence and during the
continuation of any other Event of Default, an amount equal to the then
aggregate amount of each Letter of Credit which is undrawn and available under
all issued and outstanding Letters of Credit shall, without demand upon or
notice to the Borrower, be deemed to have been paid or disbursed by the Issuer
under such Letters of Credit (notwithstanding that such amount may not in fact
have been so paid or disbursed) and the Borrower shall be immediately obligated
to pay to the Issuer of each Letter of Credit an amount equal to such amount.
Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash with the Administrative Agent and held as cash collateral
security for payment of Obligations arising in connection with such Letter of
Credit. At such time when such Event of Default shall have been cured or
waived (and provided no other Default has occurred and is continuing and the
Obligations have not been accelerated pursuant to Section 8.2 or 8.3), the
Administrative Agent shall promptly return to the Borrower all amounts then on
deposit with the Administrative Agent pursuant to this clause (including
accrued interest), net of any amount (including accrued interest) applied to
the payment of any Obligations.
SECTION 2.8.5. Nature of Reimbursement Obligations. The Borrower and, to
the extent set forth in Section 2.8.1, each Lender shall assume all risks of
the acts, omissions or misuse of any Letter of Credit by the beneficiary
thereof. No Issuer (except to the extent of its own gross negligence or wilful
misconduct) shall be responsible for:
(a) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any Letter of Credit or any document
submitted by any party in connection with the application for and issuance
of a Letter of Credit, even if
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it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or
benefits thereunder or the proceeds thereof in whole or in part, which may
prove to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, telecopy or otherwise;
or
(e) any loss or delay in the transmission or otherwise
of any document or draft required in order to make a disbursement under a
Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Issuer or any Lender hereunder. In furtherance
and extension and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by any Issuer in good faith (and not
constituting gross negligence or willful misconduct) shall be binding upon the
Borrower and each Lender, and shall not put such Issuer under any resulting
liability to the Borrower, or any Lender, as the case may be.
SECTION 2.8.6. Increased Letter of Credit Costs. If by reason of any
change after the date hereof in applicable law, regulation, rule, decree or
regulatory requirement or any change after the date hereof in the
interpretation or application by any judicial or regulatory authority of any
law, regulation, rule, decree or regulatory requirement, or compliance by any
Issuer or any Lender with any direction, request or requirement (whether or not
having the force of law) of any governmental or monetary authority, including
Regulation D of the F.R.S. Board:
(a) any Issuer or any Lender shall be subject to any
tax, levy, charge or withholding (other than (i) Taxes and Excluded Taxes
and (ii) taxes on net income and franchise taxes) of any nature or to any
variation thereof or to any penalty with respect to the maintenance or
fulfillment of its obligations under this Section 2.8, whether directly or
by being indirectly suffered by such Issuer or any Lender;
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(b) any reserve, deposit or similar requirement is or
shall be applicable, imposed or modified in respect of any Letters of
Credit issued by any Issuer or participations therein purchased by any
Lender or any commitment with respect thereto; or
(c) there shall be imposed on any Issuer or any Lender
any other condition regarding this Section 2.8, any Letter of Credit or
any participation therein;
and the result of the foregoing is directly or indirectly to increase the cost
to such Issuer or such Lender of issuing, making or maintaining any Letter of
Credit or of purchasing or maintaining any participation therein, or to reduce
any amount receivable in respect thereof by such Issuer or such Lender, then
and in any such case such Issuer or such Lender may, at any time within a
reasonable period after the additional cost is incurred or the amount received
is reduced, notify the Borrower thereof, and the Borrower shall pay, within
five days of its receipt of such notice, such amounts as such Issuer or Lender
may specify to be necessary to compensate such Issuer or Lender for such
additional cost or reduced receipt, together with interest on such amount from
the date demanded until such payment is due at a rate equal at all times to the
Alternate Base Rate plus 1/2 of 1% per annum, plus or minus the Applicable Rate
Modifier, if any. The determination by such Issuer or Lender, as the case may
be, of any amount due pursuant to this Section, as set forth in a statement
setting forth the calculation thereof, in reasonable detail, shall, in the
absence of manifest error, be final and conclusive and binding on all of the
parties hereto.
SECTION 2.8.7. Determination of the Issuer. (a) Upon the receipt by the
Administrative Agent of an Issuance Request requesting the issuance of a Letter
of Credit, in the event the Administrative Agent elects to issue such Letter of
Credit, the Administrative Agent shall promptly so notify the Borrower, and the
Administrative Agent shall be the Issuer with respect thereto. In the event
that the Administrative Agent, in its sole discretion, elects not to issue such
Letter of Credit, the Administrative Agent shall promptly so notify the
Borrower and the Borrower may request any other Lender to issue such Letter of
Credit; provided, however, that anything contained in this Agreement to the
contrary notwithstanding, there shall not be more than three Issuers (not
including the Administrative Agent in its capacity as an Issuer) with Letters
of Credit outstanding at any one time. Any such Lender so requested to issue
such Letter of Credit shall promptly notify the Borrower and the Administrative
Agent whether, in its sole discretion, it has elected to issue such Letter of
Credit, and any such Lender which so elects to issue such Letter of Credit
shall be the Issuer with respect thereto. In the event that all other Lenders
shall have
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declined to issue such Letter of Credit (or, if there are already three Issuers
(other than the Administrative Agent) and all three such Issuers have declined
to issue such Letter of Credit), notwithstanding the prior election of the
Administrative Agent not to issue such Letter of Credit, the Administrative
Agent shall be obligated to issue the Letter of Credit requested by the
Borrower and shall be the Issuer with respect to that Letter of Credit.
(b) Each Issuer which elects to issue a Letter of Credit shall promptly
give written notice to the Administrative Agent and each other Lender of the
information required under Section 2.8.2 relating to such Letter of Credit.
(c) Upon satisfaction or waiver of the conditions set forth in Article V,
the Issuer shall issue the requested Letter of Credit in accordance with the
Issuer's standard operating procedures.
SECTION 2.9. Register. (a) The Administrative Agent will record in the
Register Term Loan Commitments, Delayed Term Loan Commitments, Revolving Loan
Commitments, Term Loans, Delayed Term Loans, Revolving Loans and Letters of
Credit from time to time of each Lender and each payment in respect thereof.
Any such recordation shall be conclusive and binding on the Borrower, absent
manifest error. Failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's Obligations in respect of such
Loans or the Letters of Credit.
(b) Each Lender will record in its internal records (including, without
limitation, any promissory note described in the last sentence of this clause
(b)) the amount of each Term Loan, Delayed Term Loan and Revolving Loan made,
and each Letter of Credit issued or participated in, by it and each payment in
respect thereof. Failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's Obligations in respect of such
Loans or the Letters of Credit. Any such recordation shall be conclusive and
binding on the Borrower, absent manifest error; provided, however, that in the
event of any inconsistency between the Register and any Lender's records, the
recordation in the Register shall govern. If so requested by any Lender by
written notice to the Borrower (with a copy to the Administrative Agent), the
Borrower shall execute and deliver to such Lender at any time a promissory note
or promissory notes to evidence such Lender's Loans; provided, however, that
any such promissory note shall be in a form approved by the Administrative
Agent.
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ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, repayments and prepayments of Loans shall be made as
set forth in this Section 3.1. Each repayment or prepayment of any Loans made
pursuant to this Section 3.1 shall be without premium or penalty, except as may
be required by Section 4.4.
SECTION 3.1.1. Voluntary Prepayments. The Borrower may, from time to
time on any Business Day, make a voluntary prepayment, in whole or in part, of
the outstanding principal amount of any Loans; provided, however, that
(a) any such prepayment shall be made pro rata among
Loans of the same type and, if applicable, having Interest Periods of the
same duration and ending on the same date;
(b) any such prepayment of any LIBO Rate Loan made on
any day other than the last day of the Interest Period for such Loan shall
obligate the Borrower to pay the Lenders as provided in Section 4.4;
(c) all such voluntary prepayments shall require prior
written notice to the Administrative Agent of at least one Business Day in
the case of the prepayment of Base Rate Loans and three Business Days in
the case of the prepayment of LIBO Rate Loans; and
(d) all such voluntary partial prepayments shall be in
an aggregate minimum amount of $5,000,000 and an integral multiple of
$1,000,000;
provided, further, however, that (i) the Borrower's voluntary prepayment of the
principal of Revolving Loans shall not cause a reduction in the Revolving Loan
Commitment Amount, (ii) the Borrower's voluntary prepayment of the principal of
any Loans other than Revolving Loans (x) prior to the Delayed Term Loan
Commitment Termination Date may be applied against Term Loans or Delayed Term
Loans as designated by the Borrower in writing to the Administrative Agent and
(y) after the Delayed Term Loan Commitment Termination Date shall be applied
pro rata across Term Loans and Delayed Term Loans and such payments under
clauses (x) and (y) shall be applied (A) within Term Loans, to the extent of
such prepayment, to the next two remaining scheduled maturities and,
thereafter, to the remaining maturities on a pro rata basis and (B) within
Delayed Term Loans shall be applied, to the extent of such prepayment, to the
next two remaining scheduled
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maturities and, thereafter, against the remaining maturities on a pro rata
basis.
SECTION 3.1.2. Scheduled Amortization of Term Loans. On each Principal
Reduction Date set forth below, the Borrower shall make a scheduled payment of
Term Loans in the aggregate principal amount as calculated by reference to the
percentage set forth opposite the applicable Principal Reduction Date (as such
repayment amount may be adjusted from time to time pursuant to Section 3.1.1
and Section 3.1.5):
<TABLE>
<CAPTION>
Percentage of Original Aggregate
Principal Amount of Term Loans
Principal Reduction Date As of the Closing Date
------------------------ ------------------------------
<S> <C>
December 1, 1994 4.820%
June 1, 1995 4.820%
December 1, 1995 5.420%
June 1, 1996 5.420%
December 1, 1996 6.025%
June 1, 1997 6.025%
December 1, 1997 7.230%
June 1, 1998 7.230%
December 1, 1998 7.830%
June 1, 1999 7.830%
December 1, 1999 9.035%
June 1, 2000 9.035%
December 1, 2000 9.640%
June 1, 2001 9.640%.
</TABLE>
SECTION 3.1.3. Scheduled Amortization of Delayed Term Loans. On each
Principal Reduction Date set forth below, the Borrower shall make a scheduled
payment of Delayed Term Loans in the aggregate principal amount as calculated
by reference to the percentage set forth opposite the applicable Principal
Reduction Date (as such repayment amount may be adjusted from time to time
pursuant to Section 3.1.1 and Section 3.1.5):
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<TABLE>
<CAPTION>
Percentage of Aggregate Principal
Amount of Delayed Term Loans
Principal Reduction Date on January 1, 1996
------------------------ ---------------------------------
<S> <C>
December 1, 1994 0.00%
June 1, 1995 0.00%
December 1, 1995 0.00%
June 1, 1996 6.50%
December 1, 1996 7.79%
June 1, 1997 7.79%
December 1, 1997 9.09%
June 1, 1998 9.09%
December 1, 1998 9.09%
June 1, 1999 9.09%
December 1, 1999 10.39%
June 1, 2000 10.39%
December 1, 2000 10.39%
June 1, 2001 10.39%;
</TABLE>
provided, however, that in the event any Delayed Term Loans are repaid or the
Delayed Term Loan Commitment Amount is reduced, in either case prior to the
Delayed Term Loan Commitment Termination Date by amounts constituting Inverse
Order Amounts, then the aggregate amount of such Inverse Order Amounts shall be
included as outstanding Delayed Term Loans for purposes of the calculation
above and shall then be applied against the scheduled maturities, as so
calculated, in inverse order.
SECTION 3.1.4. Revolving Loans. The Borrower shall on each date when
any reduction in the Revolving Loan Commitment Amount becomes effective,
including pursuant to clause (a) or (d) of Section 2.4, make a payment (to be
applied (or held by the Administrative Agent as cash collateral for
application, as the case may be, to the extent such payment would be greater
than the aggregate amount of outstanding Revolving Loans immediately prior to
the application of any such prepayment) to Obligations outstanding under the
Revolving Loan Commitments) in an amount equal to the excess, if any, of the
sum of (x) the aggregate outstanding principal amount of all Revolving Loans
plus (y) Letter of Credit Outstandings, over the Revolving Loan Commitment
Amount as so reduced.
SECTION 3.1.5. Mandatory Prepayments. The Borrower shall, within two
Business Days of the receipt of any (i) Net Disposition Proceeds in any Fiscal
Year, make a mandatory prepayment in an amount equal to 50% of any Net
Disposition Proceeds in excess of $50,000,000 of Net Disposition Proceeds
received by the Borrower in such Fiscal Year (such mandatory prepayment amount
is referred to as the "Pro-Rata Amount") and (ii) Net Accounts Proceeds or Net
Debt Proceeds, make a mandatory prepayment in an amount equal to 100% of Net
Accounts Proceeds
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and 100% of Net Debt Proceeds so received (such mandatory prepayment amounts
are referred to as the "Inverse Order Amount"; the Inverse Order Amount and the
Pro-Rata Amount are referred to collectively as the "Prepayment Amount") to be
applied to the extent of such prepayment as follows:
(a) first, prior to the Delayed Term Loan Commitment
Termination Date, to be applied to outstanding Term Loans to the full
extent thereof (x) with respect to the Pro-Rata Amount, pro rata
against the remaining scheduled maturities and (y) with respect to the
Inverse Order Amount, against the remaining scheduled maturities, in
the inverse order;
(b) second, prior to the Delayed Term Loan Commitment
Termination Date, to be applied to the payment of then outstanding
Delayed Term Loans;
(c) third, after the Delayed Term Loan Commitment Termination
Date, to be applied pro rata across outstanding Term Loans and Delayed
Term Loans, and within the respective kinds of such Loans, to be
applied against the remaining scheduled maturities of outstanding Term
Loans and Delayed Term Loans (x) with respect to the Pro-Rata
Amount, pro rata against the remaining scheduled maturities and (y)
with respect to the Inverse Order Amount, against the remaining
scheduled maturities, in the inverse order; and
(d) fourth, once all Term Loans and Delayed Term Loans have
been repaid and the Delayed Term Loan Commitments have been terminated
in full, to be applied (or held by the Administrative Agent for
application, as the case may be) to Obligations outstanding under the
Revolving Loan Commitments with a commensurate and contemporaneous
reduction of the Revolving Loan Commitments;
provided, however, that, (x) in the event any of the foregoing provisions of
this Section 3.1.5 would require the application of Prepayment Amounts
aggregating to an amount less than $5,000,000 and so long as (i) no Default of
the type described in clauses (a) through (d) of Section 8.1.9 subject to the
proviso set forth therein and (ii) no Event of Default has occurred and is
continuing, such Prepayment Amounts shall be payable, and any related reduction
in Commitments shall be effective, on the date that is 30 days after the last
day of the Fiscal Quarter of the Borrower in which the foregoing provisions of
this Section 3.1.5 would otherwise require such prepayment, and any related
reduction in Commitments, to be made and (y) if any Default of the type
described in clauses (a) through (d) of Section 8.1.9 subject to the proviso
set forth therein or any Event of Default has occurred and is continuing, such
Prepayment Amount shall be payable on the earlier of (i) the occurrence of any
such Default
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or Event of Default and (ii) within two Business Days of receipt by the
Borrower of the Net Disposition Proceeds consisting of such Prepayment Amount;
provided, further, that no prepayment shall be required to be made in respect
of Cash Equivalent Investments constituting Net Disposition Proceeds until the
second Business Day after the then maturity date of such Cash Equivalent
Investment.
SECTION 3.1.6. Acceleration of Stated Maturity Dates. Immediately
upon any acceleration of the Stated Maturity Date of any Loans pursuant to
Section 8.2 or Section 8.3, the Borrower shall repay all Loans to the full
extent of such acceleration.
SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.2.
SECTION 3.2.1. Rates. Subject to Section 3.2.2 and pursuant to an
appropriately delivered Borrowing Request or Continuation/Conversion Notice,
the Borrower may elect that Loans comprising a Borrowing accrue interest at the
following rates per annum:
(a) Alternate Base Rate. On that portion of such Borrowing
maintained from time to time as a Base Rate Loan, equal to the sum of
the Alternate Base Rate from time to time in effect plus 1/2 of 1%,
plus or minus the Applicable Rate Modifier, if any.
(b) LIBO Rate. On that portion maintained as a LIBO Rate
Loan, during each Interest Period applicable thereto, equal to the sum
of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the
Applicable LIBOR Margin.
All LIBO Rate Loans shall bear interest from and including the first
day of the applicable Interest Period to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such LIBO
Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal
amount of any Loan is due and payable (whether on the Stated Maturity Date,
upon acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on
such amounts at a rate per annum equal to the Alternate Base Rate plus a margin
of 2.75%.
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SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan;
(c) with respect to Base Rate Loans, on each Quarterly
Payment Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, on each three month anniversary of the date of the
commencement of such Interest Period); and
(e) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the pro rata account of each Lender with a Revolving
Loan Commitment in the case of clause (i) and each Lender with a Delayed Term
Loan Commitment in the case of clause (ii), for the period (including any
portion thereof when any of its Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
Closing Date to (but excluding) the Revolving Loan Commitment Termination Date
or the Delayed Term Loan Commitment Termination Date, as the case may be, an
ongoing commitment fee at the rate of (i) .375% per annum of the aggregate
average daily unused portion of the Revolving Loan Commitment Amount and (ii)
.375% per annum of the aggregate average daily unused portion of the Delayed
Term Loan Commitment Amount; provided, however, that, during any period that
the Maximum Rate Modifier is in effect, the rate per annum set forth in clauses
(i) and (ii) shall be .500% per annum. Such commitment fees shall be payable
by the Borrower in arrears on each Quarterly Payment Date and (x) in the case
of Revolving Loans, on the Revolving Loan Commitment Termination Date and
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(y) in the case of Delayed Term Loans, on the earlier of (A) the first date on
which all Delayed Term Loans are outstanding and (B) the Delayed Term Loan
Commitment Termination Date.
SECTION 3.3.2. Letter of Credit Fees. (a) The Borrower agrees to
pay to the Administrative Agent for the pro rata account of each Lender having
a Revolving Loan Commitment (including the Issuer), a participation fee per
annum for each Letter of Credit equal to (x) the Stated Amount of such Letter
of Credit multiplied by (y) the Applicable LIBOR Margin less 1/4 of 1%. Such
participation fee shall accrue from the date of issuance of any Letter of
Credit until the date such Letter of Credit is drawn in full or terminated, and
shall be payable in arrears on each Quarterly Payment Date and on the Revolving
Loan Commitment Termination Date.
(b) The Borrower agrees to pay to the Issuer of each Letter of Credit
an issuance fee of 1/4 of 1% per annum of the Stated Amount of such Letter of
Credit payable to the Issuer in arrears on each Quarterly Payment Date and on
the Revolving Loan Commitment Termination Date. The Borrower agrees to
reimburse the Issuer, on demand, for all usual and customary fees and
out-of-pocket costs and expenses incurred in connection with the issuance or
maintenance of any Letter of Credit issued by such Issuer.
SECTION 3.3.3. Fee Letter Fees. The Borrower agrees to pay the fees
in the amounts and at the times set forth in the Fee Letter.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to the Borrower and
the Lenders, be conclusive and binding on the Borrower) that after the date
hereof the introduction of or any change in or in the interpretation of any law
makes it unlawful, or any central bank or other governmental authority asserts
that it is unlawful, for such Lender to make, continue or maintain any Loan as,
or to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender
to make, continue, maintain or convert any such Loans shall, upon such
determination, forthwith be suspended until such Lender shall notify the
Administrative Agent that the circumstances causing such suspension no longer
exist, and all LIBO Rate Loans of such Lender shall automatically convert into
Base Rate Loans at the end of the then current Interest Periods with respect
thereto or sooner, if required by such law or assertion.
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<PAGE> 62
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to the Administrative Agent
in its relevant market; or
(b) by reason of circumstances affecting the Administrative
Agent's relevant market, adequate means do not exist for ascertaining
the interest rate applicable hereunder to LIBO Rate Loans of such
type,
then, upon notice from the Administrative Agent to the Borrower and the
Lenders, the obligations of all Lenders under Section 2.5 and Section 2.6 to
make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans
shall forthwith be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. In the event that,
as a result of any law, rule, regulation or order (or any interpretation
thereof and including the introduction of any new law or governmental rule,
regulation or order) that becomes effective after the date hereof, or the
compliance with any guidelines or request issued or made after the date hereof
by any central bank or other governmental authority or quasi-governmental
authority exercising control over banks or financial institutions generally
(whether or not having the force of law),
(a) any Lender (or its applicable lending office) shall be
subject to any additional tax, duty or other charge (other than (i)
Taxes and Excluded Taxes and (ii) taxes on net income and franchise
taxes) with respect to its LIBO Rate Loans or its obligation to make
LIBO Rate Loans, or shall change the basis of taxation of payments to
any Lender of the principal of or interest on its LIBO Rate Loans or
its obligation to make LIBO Rate Loans (except for changes (i) in
respect of Taxes and Excluded Taxes and (ii) in the rate of tax on the
overall gross or net income of such Lender or its applicable lending
office imposed by the jurisdiction under whose laws such Lender is
organized or the jurisdictions in which such Lender's principal
executive office or applicable lending office is located); or
(b) any reserve (including, without limitation, any reserve
imposed by the F.R.S. Board), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender's applicable lending office shall be imposed
or deemed applicable or any other condition affecting its LIBO Rate
Loans or its obligation to make LIBO Rate
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Loans or its obligation to make LIBO Rate loans shall be imposed on
any Lender or its applicable lending office;
and as a result thereof there shall be any direct or indirect increase in the
cost to such Lender of agreeing to make or making, funding or maintaining LIBO
Rate Loans (except to the extent already included in the determination of the
LIBO Rate), or there shall be a reduction in the amount received or receivable
by that Lender or its applicable lending office, then the Borrower agrees to
indemnify such Lender and to hold it harmless with respect to such increased
costs or to compensate such Lender by an amount equal to such reduced amount,
as the case may be. Such Lender shall promptly notify the Administrative Agent
and the Borrower in a written certificate of the occurrence of any such event,
such certificate to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five days of its receipt of such
certificate, and such certificate shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
reasonable loss or expense (including any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to make, continue or maintain any portion of the principal amount of any
Loan as, or to convert any portion of the principal amount of any Loan into, a
LIBO Rate Loan) as a result (other than due to the provisions of Section 4.1 or
4.2 or a default of such Lender or the Administrative Agent) of
(a) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than the
scheduled last day of the Interest Period applicable thereto, whether
pursuant to Section 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/ Conversion Notice
therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to
the Administrative Agent), the Borrower shall, within five days of its receipt
thereof, pay directly to such Lender such amount as will (in the reasonable
determination of such Lender) reimburse such Lender for such loss or expense.
Such written notice (which shall include calculations in
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reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If after the date hereof any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority affects or would affect
the amount of capital required or expected to be maintained by any Lender or
any Person controlling such Lender, and such Lender determines (in its
reasonable judgment) that the rate of return on its or such controlling
Person's capital as a consequence of its Commitments or its commitments to
issue, maintain or participate in any Letter of Credit, the Loans made by such
Lender or the issuance, maintenance of or participation in any Letter of Credit
by such Lender is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon the delivery of a written certificate
from time to time by such Lender to the Borrower, the Borrower shall, within
two Business Days of its receipt thereof, pay directly to such Lender
additional amounts sufficient to compensate such Lender or such controlling
Person for such reduction in rate of return. Each such certificate of such
Lender shall include calculations of any such additional amount or amounts in
reasonable detail and shall, in the absence of manifest error, be conclusive
and binding on the Borrower. In determining such amount, such Lender may use
any method of averaging and attribution that it (in its reasonable judgment)
shall deem applicable.
SECTION 4.6. Taxes. All payments to any Lender, Issuer, the Co-Agents
in their capacity as such, the Collateral Agent in its capacity as such or to
the Administrative Agent in its capacity as such (a "Payee") by the Borrower of
principal of, and interest on, the Loans and the Notes, all payments on
Reimbursement Obligations and Letters of Credit and all other amounts payable
hereunder shall be made free and clear of and without deduction for any present
or future income, excise, stamp or other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding (a) franchise taxes and taxes which are imposed on or measured by any
Payee's gross receipts or gross income by a jurisdiction under the laws of
which it is organized, is qualified to do business or in the case of a Lender,
has its LIBOR Office, and (b) taxes imposed on or measured by any Payee's net
income or receipts (except for any tax, fee or similar charge with respect to
or measured by net income or receipts imposed by a State of the United States
of America or a political subdivision thereof other than a jurisdiction in
which the Payee
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<PAGE> 65
is organized, or has a branch or office) (such non-excluded items being called
"Taxes" and such excluded items being called "Excluded Taxes"). In the event
that any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Borrower will
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official
receipt or other documentation reasonably satisfactory to the
Administrative Agent evidencing such payment to such authority; and
(iii) so long as such Payee is in compliance with the
provisions of the last paragraph of this Section 4.6, pay to the
Administrative Agent for the account of such Payees such additional
amount or amounts as is necessary to ensure that the net amount
actually received by such Payee will equal the full amount such Payee
would have received had no such withholding or deduction been
required.
Moreover, if any Taxes are directly asserted against the Administrative Agent
or any Payee with respect to any payment received by the Administrative Agent
or such Payee hereunder, the Administrative Agent or such Payee may pay such
Taxes and, so long as such Payee is in compliance with the provisions of the
last paragraph of this Section 4.6, the Borrower will promptly after receiving
written demand therefor, which demand shall be accompanied by a certificate
describing in reasonable detail the basis thereof, pay such additional amounts
(including any penalties, interest or reasonable out-of-pocket expenses) as is
necessary in order that the net amount received by such person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such person would have received had such Taxes not been
asserted.
So long as the Payee is in compliance with the provisions of the last
paragraph of this Section 4.6, if the Borrower fails to pay any Taxes when due
to the appropriate taxing authority or fails to remit to the Administrative
Agent, for the account of the respective Payees, the required receipts or other
required documentary evidence, the Borrower shall indemnify the Payees for any
incremental Taxes, interest or penalties that may become payable by any Payee
as a result of any such failure. For purposes of this Section 4.6, a
distribution hereunder by the Administrative Agent or any Payee to or for the
account of any Payee shall be deemed a payment by the Borrower.
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Each Payee agrees that if it receives a final tax credit, tax
deduction or tax refund with respect to this Section 4.6, such Payee shall
reimburse the Borrower to the extent of the benefit thereof to such Payee. The
determination of whether there is any such benefit and the amount thereof shall
be made at the sole discretion of the Payee.
Each Payee that is created or organized under the laws of the United
States of America or any State thereof shall on the date such Payee executes
this Agreement (or, if later, the date on which such Payee becomes a Payee) and
at such other times as may be necessary in the determination of the Borrower or
the Administrative Agent (each in the reasonable exercise of its discretion)
deliver to the Borrower and to the Administrative Agent an IRS Form W-9 (or any
successor or substitute form or forms as may be required to avoid withholding
of United States federal income tax). Each Payee that is created or organized
under the laws of a jurisdiction other than the United States of America or any
State thereof shall, on the date such Payee executes this Agreement or, if
later, the date on which such Payee becomes a Payee pursuant to this Agreement,
provide to each of the Borrower and the Administrative Agent either (i) two
true, accurate and complete original signed copies of IRS Form 1001 (or any
successor or substitute form or forms) or (ii) two true, accurate and complete
original signed copies of IRS Form 4224 (or any successor or substitute form or
forms), evidencing such Payee's entitlement to receive all payments of
interest, fees, commissions and any other amount payable hereunder or under the
Loan, the Notes, the Reimbursement Obligations, the Letters of Credit or the
other Loan Documents without deduction or withholding of any United States of
America federal income tax. In addition, within 30 days of request therefor by
the Borrower or the Administrative Agent, each Payee shall deliver to each of
the Borrower and the Administrative Agent two executed copies of such other
certifications, forms or documents (collectively, "Other Tax Forms") which,
under the laws of any jurisdiction or the regulations of any taxing authority,
will permit the Borrower and the Administrative Agent to make payments
hereunder or under the Notes or the other Loan Documents without deduction or
withholding for or on account of any Tax or with such deduction or withholding
at a reduced rate; provided; however, that such Payee is entitled under
applicable law to provide such requested Other Tax Form and can accurately
provide such requested Other Tax Form without prejudice to such Payee's
interests. Subject to the proviso contained in the last sentence of this
paragraph, each Payee further agrees to deliver to each of the Borrower and the
Administrative Agent from time to time (i) IRS Form 1001 or IRS Form 4224, as
the case may be, and (ii) any applicable Other Tax Form, before or promptly
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower and the Administrative Agent
pursuant to
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this paragraph. For purposes of the immediately preceding sentence, a funding
of a LIBO Rate Loan by any Payee created or organized under the laws of a
jurisdiction other than the United States of America or any State thereof by
one or more foreign branches or affiliates of, or international banking
facilities created by, such Payee pursuant to Section 2.7 of this Agreement
occurring after the date such Payee executes this Agreement (or, if later, the
date on which such Payee becomes a Payee) shall be deemed an event requiring a
change in the most recent form previously delivered by it to the Borrower and
the Administrative Agent pursuant to this paragraph. Further (i) each Payee
that delivers IRS Form 1001 hereby covenants and agrees to deliver to each of
the Borrower and the Administrative Agent within 5 days prior to January 1,
1996, and every third anniversary of such date thereafter (or more often if
required by law or reasonably requested by the Borrower or the Administrative
Agent) on which this Agreement is still in effect, two true, accurate and
complete original signed copies of IRS Form 1001 (or any successor or
substitute form or forms required under the Code or the applicable regulations
promulgated thereunder) and (ii) each Payee that delivers IRS Form 4224 hereby
covenants and agrees to deliver to each of the Borrower and the Administrative
Agent within 15 days prior to the beginning of each subsequent taxable year of
such Payee (or more often if required by law or reasonably requested by the
Borrower or the Administrative Agent) during which this Agreement is still in
effect, two true, accurate and complete original signed copies of IRS Form 4224
(or any successor or substitute form or forms required under the Code or the
applicable regulations promulgated thereunder) unless, in the case of either
clause (i) or clause (ii) above, as a result of the adoption of or a change in
applicable law (including any statute, treaty, ruling, or regulation by a
governmental, judicial or taxing authority), such Payee is not entitled to
provide, or may not accurately provide, such a form.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes or
any other Loan Document shall be made by the Borrower to the Administrative
Agent for the pro rata account of the Lenders entitled to receive such payment.
All such payments required to be made to the Administrative Agent shall be
made, without setoff, deduction or counterclaim, not later than 11:00 a.m., New
York City time, on the date due, in same day or immediately available funds, to
such account as the Administrative Agent shall specify from time to time by
notice to the Borrower. Funds received after that time shall be deemed to have
been received by the Administrative Agent on the next succeeding Business Day.
The Administrative Agent shall remit in same day funds to each Lender its
share, if any, of such payments received by the Administrative Agent for the
account of such Lender on the same day it receives such payment if such payment
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is received on or before 11:00 a.m. or on the Business Day following receipt
thereof if such payment is received after 11:00 a.m., and fees shall be
computed on the basis of the actual number of days (including the first day but
excluding the last day) occurring during the period for which such interest or
fee is payable over a year comprised of (i) 360 days in the case of LIBO Rate
Loans and (ii) 365 or 366 days, as the case may be, in the case of Base Rate
Loans and fees. Whenever any payment to be made shall otherwise be due on a
day which is not a Business Day, such payment shall (except as otherwise
required by clause (c) of the definition of the term "Interest Period" with
respect to LIBO Rate Loans) be made on the next succeeding Business Day and
such extension of time shall be included in computing interest and fees, if
any, in connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any of its Loans or other Obligations owing
to it (other than pursuant to the terms of Sections 2.8.6, 4.3, 4.4 and 4.5) in
excess of its pro rata share of payments then or therewith obtained by all
Lenders with respect to their same Loans or other same Obligations owing to
them, such Lender shall purchase from the other Lenders such participations in
such Loans or other Obligations as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Lender, the purchase
shall be rescinded and each Lender which has sold a participation to the
purchasing Lender shall repay to the purchasing Lender the purchase price to
the ratable extent of such recovery together with an amount equal to such
selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to
the purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of
such participation. If under any applicable
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bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff to which this Section applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders entitled under this Section
to share in the benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any
Event of Default described in clauses (a) through (d) of Section 8.1.9 or, with
the consent of the Required Lenders, any other Event of Default, have the right
to appropriate and apply to the payment of the Obligations owing to it (whether
or not then due), and (as security for such Obligations) the Borrower hereby
grants to each Lender a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter
maintained with such Lender or any Affiliate of such Lender; provided, however,
that any such appropriation and application shall be subject to the provisions
of Section 4.8. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff under applicable law or otherwise) which such Lender may have.
SECTION 4.10. Lender's Duty to Mitigate. Each Lender agrees that, as
promptly as practicable after it becomes aware of the occurrence of an event or
the existence of a condition that would cause it to be affected under Section
2.8.6, 4.1, 4.3 or 4.6, or that would entitle such Lender to receive payments
under Section 4.5 or that would result in the incurrence of Taxes by such
Lender, it will, to the extent not inconsistent with such Lender's internal
policies, use reasonable efforts to make, fund, or maintain its affected LIBO
Rate Loans or Letters of Credit or participations therein through another
lending office of such Lender if, as a result thereof, the additional moneys
which would otherwise be required to be paid to such Lender pursuant to Section
4.3 or 4.5, as the case may be, would be materially reduced, or the illegality
or other adverse circumstances which would otherwise require a conversion of
such Loans pursuant to Section 4.1 would cease to exist, and if, as determined
by such Lender in its sole discretion, the making, funding or maintaining of
such Loans, Letters of Credit or participations therein through such other
lending office would not otherwise adversely affect such Loans, Letters of
Credit, participations or such Lender; provided, however, that such Lender
shall not be obligated to utilize such other lending office unless the
Borrower agrees to pay all reasonable expenses incurred by any
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Lender in utilizing another lending office pursuant to this Section.
SECTION 4.11. Replacement of Lenders. Each Lender hereby severally
agrees that if such Lender makes demand upon the Borrower for compensation
resulting from any materially increased costs pursuant to Section 2.8.6, 4.3,
4.5 or 4.6 and such costs are materially greater (as determined by the Borrower
in the reasonable exercise of its discretion) than the aggregate amount of
payments made or required to be made to at least one other Lender which is
subject to similar regulatory requirements giving rise to such increased costs
and has Commitments or Loans in an amount similar to the Commitments and Loans
of the affected lender (the "Affected Lender"), so long as no Event of Default
shall have occurred and be continuing and the Borrower shall have obtained a
commitment from an Eligible Assignee (which may be another Lender) (a
"Replacement Lender") to become a Lender for all purposes under this Agreement
and assume all obligations of the Affected Lender, the Borrower may, within 120
days of receipt of such demand, give notice (a "Replacement Notice") in writing
to the Administrative Agent and the Affected Lender of its intention to replace
the Affected Lender with a financial institution designated in such Replacement
Notice; provided, however, that the Replacement Lender shall be acceptable to
each Issuer that has issued any Letter of Credit then outstanding and the
Administrative Agent, or if it is not an Issuer, the Administrative Agent;
provided, further, that concurrently with such termination (i) the Borrower
and/or the Replacement Lender, as applicable, shall pay the Affected Lender an
amount equal to all principal, interest, fees and other amounts owed or accrued
to the Affected Lender (including, without limitation, amounts, if any, owed
under Section 2.8.6, 4.3, 4.4, 4.5 or 4.6) to the date on which such
termination becomes effective and (ii) all documents and supporting materials
necessary, in the reasonable judgment of the Administrative Agent (or if the
Administrative Agent (the "Existing Administrative Agent") is also the Lender
to be terminated, any successor Administrative Agent appointed in accordance
with the provisions of Section 9.4 following the resignation of the Existing
Administrative Agent as described therein) to evidence the substitution of the
Replacement Lender for the Affected Lender shall have been received by the
Administrative Agent as of such date, together with a processing and
recordation fee of $3,000 which shall have been paid by the Borrower to the
Administrative Agent. Upon the effective date of such assignment, such
Replacement Lender and such Replacement Lender shall become a "Lender" for all
purposes under this Agreement and all other Loan Documents.
SECTION 4.12. Replacement Event. (a) If a Replacement Event occurs
with respect to any Lender, the Affected Replacement Event Lender shall deliver
written notice of the occurrence of
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such Replacement Event to the Administrative Agent within ten days after such
occurrence and, as soon as practicable after receipt of such notice, the
Administrative Agent shall notify the Borrower and each applicable Issuer
thereof.
(b) Whether or not such notice is delivered to the Administrative
Agent, if a Replacement Event occurs, so long as the Administrative Agent has
not received written notice from the Affected Replacement Event Lender to the
effect that the Benchmark Securities of the Affected Replacement Event Lender
have been subsequently rated at a level that would not cause the occurrence of
a Replacement Event, any Issuer that has issued a Letter of Credit that is then
outstanding or the Administrative Agent, if it is not such an Issuer (all such
Issuers and the Administrative Agent being the "Affected Issuers"), or the
Borrower may request (by written notice delivered to the Administrative Agent)
that the Affected Replacement Event Lender be terminated and replaced as a
party to this Agreement to the extent of the unfunded portion of its
Commitments. Subject to the provisions of the first sentence of clause (c)
below, in the event that a commitment shall have been obtained by (i) an
Affected Issuer from an Eligible Assignee acceptable to the Borrower (which
approval shall not be unreasonably delayed or withheld) or an Eligible Assignee
which is a Lender or (ii) the Borrower from an Eligible Assignee (which may
include a Lender) to become a Lender for all purposes under this Agreement and
to assume all obligations of the Affected Replacement Event Lender to the
extent of the unfunded portion of the Affected Replacement Event Lender's
Commitments, the Affected Replacement Event Lender will be terminated as a
Lender and replaced as a party to this Agreement with respect to the unfunded
portion of its Commitments; provided, however, that any such Eligible Assignee
described in clause (i) or (ii) shall be acceptable to all Affected Issuers
based on the criteria set forth in Section 10.11 (any such acceptable Eligible
Assignee being a "Replacement Event Lender"); provided, further, that
concurrently with such termination, (A) the Borrower and/or the Replacement
Event Lender, as applicable, shall pay the Affected Replacement Event Lender an
amount equal to all principal, interest, fees and other amounts owed or accrued
to such Affected Replacement Event Lender with respect to the Commitments,
Loans (other than its Term Loans or funded Delayed Term Loans) and Letters of
Credit to the date on which such termination becomes effective, (B) all of the
requirements of Section 10.11 (other than the minimum assignment amount of
$5,000,000 if to a Lender or $15,000,000 if to an Eligible Assignee, as set
forth in clause (b) of Section 10.11) shall be satisfied with respect to the
assumption by the Replacement Event Lender of the affected obligations of the
Affected Replacement Event Lender, and (C) all documents and supporting
materials necessary, in the reasonable judgment of the Administrative Agent, to
evidence the substitution of the
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Replacement Event Lender for such Affected Replacement Event Lender shall have
been received by the Administrative Agent as of such date, together with a
processing and recordation fee of $3,000 which shall be paid by the Affected
Replacement Event Lender to the Administrative Agent.
(c) If such termination and replacement described in clause (b) above
have not become effective within 30 days after receipt by the Administrative
Agent of notice from any Affected Issuer or the Borrower requesting such
termination, then, upon written notice to the Administrative Agent from an
Affected Issuer or the Borrower requesting the same, the Affected Replacement
Event Lender shall be required to purchase an assignment from such Affected
Issuer of rights and obligations relating to such Affected Issuer's Term Loans
and to the extent necessary, if at all, the funded portion of such Affected
Issuer's Delayed Term Loans in an aggregate amount up to an amount equal to the
aggregate unfunded portion of the Affected Replacement Event Lender's Revolving
Loan Commitment on the date of such assignment and, contemporaneously
therewith, to assign to such Affected Issuer an equivalent Dollar amount of the
Affected Replacement Event Lender's rights and obligations relating to its
Revolving Loan Commitment. If more than one Affected Issuer shall deliver such
written notice to the Administrative Agent requesting assignments to and from
such Affected Issuer, then the assignment described in the immediately
preceding sentence shall be made to and from all such Affected Issuers in such
amounts as may be agreed by such Affected Issuers. In the event of any
assignment by an Affected Replacement Event Lender pursuant to either of the
two immediately preceding sentences, the Affected Replacement Event Lender
shall pay a processing and recordation fee of $3,000 to the Administrative
Agent.
(d) If any assignment requested by an Affected Issuer described in
this Section 4.12 results in the prepayment of any LIBOR Rate Loans, the
Borrower shall not be required to pay any compensation otherwise required
pursuant to Section 4.4 in connection with the assignment of such LIBOR Rate
Loans.
ARTICLE V
CONDITIONS TO CREDIT EXTENSION
SECTION 5.1. Initial Credit Extension. The obligations of each Lender
(including, as applicable, the Issuers) to make the initial Credit Extension
shall be subject to the prior or concurrent satisfaction of each of the
conditions precedent set forth in this Section 5.1.
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SECTION 5.1.1. Resolutions, etc. The Administrative Agent shall have
received from each Obligor a certificate, dated the date of the initial Credit
Extension, of its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full force
and effect authorizing the execution, delivery and performance of each
Loan Document to be executed by it;
(b) the incumbency and signatures of those of its officers
authorized to act with respect to each Loan Document executed by it;
and
(c) each of its Organic Documents,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary of such Obligor canceling or
amending such prior certificate.
SECTION 5.1.2. Termination or Amendment of Credit Agreements. On or
prior to the Closing Date, the Borrower shall have taken and shall have caused
EPIC to have taken all necessary actions such that,
(a) on or prior to the Closing Date (i) the commitments under
the 1992 Credit Agreement and the EPIC Credit Agreement shall have
been terminated, (ii) all outstanding obligations thereunder,
including, without limitation, any principal, interest, fees,
commissions and other amounts accrued and unpaid thereunder (including
any fees, commissions or other amounts accrued and unpaid with respect
to the letters of credit issued under the 1992 Credit Agreement that
are deemed, pursuant to Section 2.8, to have been issued under this
Agreement), shall be discharged and (iii) no lender thereunder or
other party thereto shall have any Lien over the collateral or any
other property of the Borrower or any of its Subsidiaries; and
(b) the AmSouth Facility shall have been amended on terms and
conditions satisfactory to the Administrative Agent and the guaranty
of EPIC Healthcare Group, Inc. relating thereto shall have been
amended on terms and conditions satisfactory to the Administrative
Agent.
SECTION 5.1.3. Transaction Consummated.
(a) EPIC Merger Agreement and Related Documents. The
Administrative Agent shall have received (with copies for each Lender)
a fully executed copy of the EPIC Merger Agreement, and all other
certificates, filings, documents, consents, approvals, board of
directors resolutions and
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opinions furnished pursuant to or in connection with the consummation
of the EPIC Transaction each of which shall be in form and substance
satisfactory to the Administrative Agent and the majority Co-Agents.
No amendment, waiver or other modification of, or other forbearance to
exercise any rights with respect to, any of the terms or provisions
relating to the conditions to the consummation of the EPIC Merger in
the EPIC Merger Agreement that could reasonably be expected to have a
material adverse effect on the financial condition, operations,
assets, business or properties of the Borrower or the Borrower and its
Subsidiaries, taken as a whole, shall have been made or consented to
by the Borrower (unless otherwise agreed to by the Administrative
Agent and the majority Co-Agents).
(b) Consummation of EPIC Merger; Delivery of Certificate of
EPIC Merger. The EPIC Merger shall have been consummated in
accordance with the EPIC Merger Agreement. The Certificate of Merger,
in recordable form, shall have been executed by the parties thereto,
and the Administrative Agent shall have received evidence satisfactory
to it that counterparts thereof have been presented for filing with
the Secretary of State of the State of Delaware. The Administrative
Agent shall have received a copy of the Certificate of Merger, duly
executed and delivered by each party thereto.
(c) EPIC Redeemable Debt. The Administrative Agent shall
have received a true and correct copy of each irrevocable notice of
redemption delivered to the trustees of the EPIC Redeemable Debt which
redemption shall have been arranged on terms and conditions
satisfactory to the Lenders.
(d) Tender; Consent; Amendments to Existing EPIC Subordinated
Debt. The Tender and the Consent shall have been consummated on terms
and conditions satisfactory to the Administrative Agent. The EPIC
10-7/8% Senior Subordinated Note Indenture, the CMOs and the EPIC 12%
Senior Deferred Coupon Note Indenture each shall have been amended by
the Supplemental Indenture relating thereto, each of which
Supplemental Indentures shall have been executed and delivered by the
appropriate trustee and EPIC or its appropriate Subsidiary and become
effective.
(e) No Default under EPIC Tendered Debt. No Event of Default
(as defined in any indenture relating to the EPIC Tendered Debt) shall
have occurred or be created as a result of the Transaction.
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SECTION 5.1.4. Subsidiary Guaranty. The Administrative Agent shall
have received the Subsidiary Guaranty, dated as of the date hereof, duly
executed and delivered by each Subsidiary Guarantor.
SECTION 5.1.5. Pledge Agreements. The Administrative Agent shall
have received executed counterparts of each of the Pledge Agreements, dated as
of the Closing Date, duly executed and delivered by each of the parties
thereto, together with (i) the certificates, evidencing all of the issued and
outstanding shares of capital stock pledged to the Collateral Agent pursuant to
the Pledge Agreements on the Closing Date, which certificates shall in each
case be accompanied by undated stock powers duly executed in blank, and (ii)
evidence reasonably satisfactory to the Collateral Agent that all recordings
and other actions which the Collateral Agent shall reasonably deem necessary or
advisable to establish, preserve and perfect the Liens granted to the Lenders
pursuant to the Collateral Documents have been made or taken (except the
capital stock of the Minority Subsidiaries need not be pledged at any time).
SECTION 5.1.6. Funds Available for the Transaction. On or prior to
the Closing Date, the cash proceeds of the Public Offering shall have been
applied to the EPIC Merger and the cash proceeds of the Note Offering and the
Borrower Effective Date Cash on Hand shall have been applied to the payment of
the cash consideration of the Transaction. The amount of such funds not so
applied on the Closing Date, together with the amount of Commitments available
for such purpose shall be sufficient to pay in full all remaining cash
consideration for the Transaction.
SECTION 5.1.7. Public Offering. The Administrative Agent shall have
received copies of all documents, agreements and instruments related to the
Public Offering and the other transactions contemplated in connection therewith
(including the Borrower's Registration Statement on Form S-3 filed with the
Securities and Exchange Commission), all of which shall be in form and
substance reasonably satisfactory to the Administrative Agent. The Borrower
shall have received gross cash proceeds from the Public Offering in an amount
at least equal to $140,000,000.
SECTION 5.1.8. Issuance of the Subordinated Notes. The Borrower
shall have duly authorized, executed and delivered the Subordinated Notes and
all other certificates, documents and agreements entered into in connection
therewith, and the Administrative Agent shall have received, with counterpart
copies for each Lender, true and correct copies of the Subordinated Notes and
all other certificates, documents, agreements, consents and opinions furnished
pursuant to or in connection therewith, the terms and conditions of which shall
be reasonably satisfactory to the Administrative Agent. The Borrower shall have
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received gross cash proceeds from the issuance of the Subordinated Notes in an
amount at least equal to $200,000,000.
SECTION 5.1.9. Internal Revenue Service Forms. Each applicable
Lender shall deliver to the Administrative Agent pursuant to the last paragraph
of Section 4.6 two duly completed copies of the appropriate United States
Internal Revenue Service Form.
SECTION 5.1.10. Solvency. The Administrative Agent shall have
received a certificate executed by a duly Authorized Officer of the Borrower to
the effect that the Borrower will be Solvent after giving effect to the
transactions contemplated by this Agreement.
SECTION 5.1.11. Closing Date Certificate. The Administrative Agent
shall have received the Closing Date Certificate, dated the Closing Date and
duly executed by an Authorized Officer of the Borrower. All statements in and
agreements required to be appended to the Closing Date Certificate shall be in
form and substance satisfactory to the Administrative Agent.
SECTION 5.1.12. Financial Information, etc. The Administrative Agent
shall have received, in each case in form and scope reasonably satisfactory to
the Administrative Agent, the financial statements referred to in Section 6.5.
SECTION 5.1.13. Subordination. The Existing Healthtrust Subordinated
Notes, the Existing Healthtrust Subordinated Debentures, the Subordinated Notes
and the EPIC 10-7/8% Senior Subordinated Notes shall be subordinated in right
of payment and of security to all Obligations under this Agreement, and the
Administrative Agent shall have received a certificate, duly executed and
delivered by an Authorized Officer of the Borrower, to such effect.
SECTION 5.1.14. Opinions of Counsel. The Administrative Agent shall
have received opinions, dated the date of the initial Credit Extension and
addressed to the Administrative Agent and all Lenders, from
(a) Waller Lansden Dortch & Davis, special Tennessee counsel
to the Borrower, substantially in the form of Exhibit L-1 hereto;
(b) Dewey Ballantine, counsel to the Borrower, substantially
in the form of Exhibit L-2 hereto;
(c) Philip D. Wheeler, Esq., General Counsel to the Borrower,
substantially in the form of Exhibit L-3 hereto;
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(d) Local counsel to the Borrower, substantially in the form
of Exhibit L-4 hereto; and
(e) Mayer, Brown & Platt, counsel to the Administrative
Agent, substantially in the form of Exhibit K hereto.
SECTION 5.1.15. Closing Fees, Expenses, etc. The Administrative
Agent shall have received for its own account, or for the account of each
Lender, as the case may be, all fees, costs and expenses due and payable
pursuant to Sections 3.3 and 10.3, if then invoiced.
SECTION 5.2. All Credit Extensions. The obligation of each Lender
(including, as applicable, an Issuer) to make any Credit Extension (including
the initial Credit Extension) shall be subject to the satisfaction of each of
the conditions precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both
before and after giving effect to such Credit Extension (but, if any Default of
the nature referred to in Section 8.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds of any Borrowing) the following statements shall be
true and correct as of the date of such Credit Extension:
(a) the representations and warranties set forth in Article
VI shall be true and correct in all material respects with the same
effect as if then made (unless stated to relate solely to an earlier
date, in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date);
provided, however, that the condition precedent set forth in this
clause (a) shall be satisfied with respect to any representation or
warranty (i) made by the Borrower with respect to the Subsidiary
Guaranty, (ii) made by the Borrower with respect to the Subsidiary
Stock Pledge Agreement, or any other Collateral Document to which a
Subsidiary of the Borrower is a party, and (iii) otherwise made by the
Borrower with respect to a Subsidiary, unless (A) a Subsidiary or
Subsidiaries of the Borrower accounting for more than 10.0% of the
consolidated net revenues or more than 10.0% of the consolidated
assets of the Borrower, or the Subsidiary Guaranty or Subsidiary Stock
Pledge Agreement, or such other Collateral Documents, of such a
Subsidiary or Subsidiaries, are the subject of one or more materially
false representations or warranties of the types described in this
proviso (except that in making such determination (i) EPIC and its
Subsidiaries shall be excluded from such calculation for the period
commencing on
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the Closing Date and ending on the 90th day after the Closing Date and
(ii) EPIC Properties, Inc. shall be excluded from such calculation
until such time that all of the CMOs have been redeemed or otherwise
retired), or (B) there otherwise exists a Material Adverse Effect in
connection with one or more materially false representations or
warranties of the types described in this proviso; and
(b) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request. The Administrative Agent
shall have received a Borrowing Request if Loans are being requested or an
Issuance Request if a Letter of Credit is being requested. Each of the
delivery of a Borrowing Request or an Issuance Request and the acceptance by
the Borrower of the proceeds or other benefits of such Credit Extension shall
constitute a representation and warranty by the Borrower that on the date of
such Credit Extension (both immediately before and after giving effect to such
Credit Extension and the application of the proceeds thereof) the statements
made in Section 5.2.1 are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Administrative Agent to enter
into this Agreement and to make Credit Extensions hereunder, the Borrower
represents and warrants to the Administrative Agent and each Lender as set
forth in this Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of its
Subsidiaries is a corporation or partnership validly organized and existing and
in good standing under the laws of the State of its incorporation or
organization, is duly qualified to do business and is in good standing as a
foreign corporation or partnership in each jurisdiction where the nature of its
business requires such qualification, except where the failure to be so
qualified or be in good standing would not cause a Material Adverse Effect, and
has full corporate or partnership power and authority to enter into and perform
its Obligations under this Agreement and each other Loan Document to which it
is a party and, except to the extent such failure would not cause a Material
Adverse Effect, to own and hold under lease its property and to conduct its
business substantially as currently conducted by it.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by the Borrower of this
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Agreement and each other Loan Document executed or to be executed by it, and
the execution, delivery and performance by each other Obligor of each Loan
Document executed or to be executed by it are within the Borrower's and each
such Obligor's corporate powers, have been duly authorized by all necessary
corporate action, and do not
(a) contravene the Borrower's or any such Obligor's Organic
Documents;
(b) contravene any material contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Borrower or any such Obligor; or
(c) result in, or require the creation or imposition of, any
Lien on any of any Obligor's properties other than as provided in the
Collateral Documents or permitted under Section 7.2.3.
SECTION 6.3. Government Approval, Regulation, etc. No authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other Person is required for the
due execution, delivery or performance by the Borrower or any other Obligor of
this Agreement, the Notes or any other Loan Document to which it is or upon
consummation of the Tender with respect to EPIC and its Subsidiaries will
become a party, or for the Borrower's or any of its Subsidiaries' participation
in the consummation of the transactions contemplated hereby except for such
authorizations, approvals, notices, filings or other actions that, if not
obtained, delivered or performed, would not cause a Material Adverse Effect.
Neither the Borrower nor any of its Subsidiaries is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended. Each of the Borrower and its Subsidiaries has all permits,
licenses and other governmental approvals and all accreditations for the
operation of each of its Facilities as are required to be maintained by it
pursuant to Section 7.1.7 and is qualified to participate in and receive
payment under all private insurance programs having broad application and all
Federal, state and local governmental programs providing for payment or
reimbursement for services rendered to the extent required by Section 7.1.7.
SECTION 6.4. Validity, etc. This Agreement and all other
documentation relating to letters of credit issued under the 1992 Credit
Agreement constitute, and each other Loan Document executed by the Borrower
will, on the due execution and delivery
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thereof, constitute, the legal, valid and binding obligations of the Borrower
enforceable in accordance with their respective 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; and each Loan Document executed pursuant
hereto by each other Obligor will, on the due execution and delivery thereof by
such Obligor, be the legal, valid and binding obligation of such Obligor
enforceable 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.
SECTION 6.5. Financial Information. Each of (i) the audited balance
sheets of the Borrower and each of its Existing Subsidiaries as at August 31,
1993, and the related statements of earnings and cash flow of the Borrower and
each of its Existing Subsidiaries and (ii) the unaudited balance sheets of the
Borrower and its Existing Subsidiaries as at February 28, 1994 and the related
statements of earnings and cash flow of the Borrower and each of its Existing
Subsidiaries, copies of which have been furnished to the Administrative Agent
and each Lender, have been prepared in accordance with GAAP consistently
applied, and present fairly the consolidated financial condition of the
corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended; provided, however, that any financial
statements delivered pursuant to clause (ii) are subject to normal year-end
audit adjustments.
SECTION 6.6. No Material Adverse Change. Except as has been disclosed
in writing to the Administrative Agent and the Lenders prior to the Closing
Date, (i) since August 31, 1993, with respect to the Borrower or any of its
Existing Subsidiaries, taken as a whole, (ii) since September 30, 1993, with
respect to EPIC or any of its Subsidiaries, taken as a whole or (iii) since the
Closing Date with respect to the Borrower or any of its Subsidiaries, taken as
a whole, no event has occurred which has or would cause a Material Adverse
Effect.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no
pending or, to the knowledge of the Borrower, threatened litigation, action,
proceeding, or labor controversy affecting the Borrower or any of its
Subsidiaries, or any of their respective properties, businesses, assets or
revenues, which would cause a Material Adverse Effect or which purports to
affect the legality, validity or enforceability of this Agreement, the Notes or
any other Loan Document, except (i) as disclosed in writing to the Co-Agents
and consented to by the Required Lenders, (ii) malpractice litigation or (iii)
as disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule.
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SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries, except
those Subsidiaries
(a) which are identified in Item 6.8(a) ("Existing
Subsidiaries") of the Disclosure Schedule as of the date hereof or as
of the most recent revision of Item 6.8(a) ("Subsidiaries") of the
Disclosure Schedule delivered pursuant to clause (j)(i) of Section
7.1.1, as the case may be; or
(b) which are permitted to have been acquired in accordance
with Section 7.2.5 or 7.2.9.
Item 6.8(c) ("Ownership Interest") of the Disclosure Schedule correctly sets
forth the ownership interest of the Borrower in each of its Subsidiaries as of
the date hereof or as of the date of the most recent revision of Item 6.8(c)
("Ownership Interest") of the Disclosure Schedule delivered pursuant to clause
(k)(i) of Section 7.1.1, as the case may be.
SECTION 6.9. Ownership of Properties. The Borrower and each of its
Subsidiaries owns good and legal title to all of its material properties and
assets, real and personal, tangible and intangible, of any nature whatsoever
(including patents, trademarks, trade names, service marks and copyrights),
free and clear of all Liens except as permitted pursuant to Section 7.2.3.
SECTION 6.10. Taxes. The Borrower and each of its Subsidiaries has
filed all tax returns and reports required by law to have been filed by it the
non-filing of which could result in an aggregate liability of the Borrower and
its Subsidiaries in excess of $15,000,000 and has paid all taxes and
governmental charges thereby shown to be owing, except to the extent permitted
by clause (b) of Section 7.1.2.
SECTION 6.11. Pension and Welfare Plans. Except as disclosed in Item
6.11 ("Pension and Welfare Plans") of the Disclosure Schedule, during the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of any Borrowing hereunder, no steps
have been taken to terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Employee Benefit Plan which would reasonably be
expected to result in the incurrence by the Borrower or any member of the
Controlled Group of any material liability, fine or penalty (other than benefit
obligations payable in the ordinary course) and, to the best knowledge of the
Borrower and each of its Subsidiaries, no inquiry or investigation has been
initiated or undertaken by the U.S. Department of Labor pertaining to any
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suspected or alleged fiduciary breach relating to any Employee Benefit Plan.
Neither the Borrower nor any member of the Controlled Group has any contingent
liability with respect to any post-retirement benefit under a Welfare Plan,
other than liability for continuation coverage described in Part 6 of Title I
of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in Item
6.12 ("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its
Subsidiaries have been, and continue to be, owned or leased by the
Borrower and its Subsidiaries in material compliance with all
Environmental Laws except for noncompliance which, singly or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect or which noncompliance is the subject of a Good Faith Contest;
(b) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law which could reasonably be expected to have a
Material Adverse Effect, or
(ii) complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding potential
liability under any Environmental Law which could reasonably
be expected to have a Material Adverse Effect;
(c) there have been no Releases of Hazardous Materials at, on
or under any property now or previously owned or leased by the
Borrower or any of its Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a Material Adverse
Effect;
(d) the Borrower and its Subsidiaries have been issued and
are in material compliance with all material permits, certificates,
approvals, licenses and other authorizations relating to environmental
matters which are necessary or desirable for their businesses;
(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or proposed for listing
(with respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the
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CERCLIS or on any similar state list of sites requiring investigation
or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably
be expected to have, a Material Adverse Effect;
(g) neither the Borrower nor any Subsidiary of the Borrower
has directly transported or directly arranged for the transportation
of any Hazardous Material to any location which is listed or proposed
for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations
which may lead to material claims against the Borrower or such
Subsidiary thereof for any remedial work, damage to natural resources
or personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by
the Borrower or any Subsidiary of the Borrower that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material
Adverse Effect; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower which, with the passage of
time, or the giving of notice or both, would give rise to liability
under any Environmental Law which could reasonably be expected to have
a Material Adverse Effect.
SECTION 6.13. Regulations G, U and X. The Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Loans will be used for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation G, U or X.
Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or
any regulations substituted therefor, as from time to time in effect, are used
in this Section with such meanings.
SECTION 6.14. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to the Administrative Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all other such factual information hereafter furnished by or on behalf of the
Borrower to the Administrative Agent or any Lender will be, true and accurate
in every material respect on the date as of which
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such information is dated or certified and as of the date of execution and
delivery of this Agreement by the Administrative Agent and such Lender, and
such information is not, or shall not be, as the case may be, incomplete by
omitting to state any material fact necessary to make such information not
misleading.
SECTION 6.15. Status of Obligations.
(a) The incurrence by the Borrower of all Obligations
hereunder and any related Hedging Obligations, and the execution,
delivery, maintenance and performance of the Subsidiary Guaranty and
the Subsidiary Pledge Agreement, do not and will not violate, or
constitute (with due notice or lapse of time or both) an Event of
Default (as defined in the indenture related thereto) under the
Tendered Debt or the Subordinated Debt.
(b) The entry by the Borrower into subordination arrangements
with respect to intercompany indebtedness does not and will not
violate, or constitute (with due notice or lapse of time or both) a
default under, any indenture pursuant to which the Subordinated Debt
or the Tendered Debt was issued.
(c) The incurrence and maintenance of the first priority
security interests in stock pledged to the Collateral Agent pursuant
to the Pledge Agreements do not and will not violate, or constitute
(with due notice or lapse of time or both) an Event of Default (as
defined in the indenture related thereto) under, any indenture
pursuant to which the Subordinated Debt or the Tendered Debt was
issued.
(d) All Loans, when made, and all Reimbursement Obligations,
when incurred, will constitute "Senior Indebtedness" and "Specified
Senior Indebtedness" or similar defined terms under all indentures
(other than the EPIC 12% Senior Deferred Coupon Note Indenture)
pursuant to which the Subordinated Debt was or will be issued. The
subordination provisions of such indentures pursuant to which such
Subordinated Debt was or will be issued, are or will be, as the case
may be, enforceable against the holders thereof.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the
Administrative Agent, each Lender and each Issuer that, until all Commitments
have terminated and all Obligations have
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been paid and performed in full, the Borrower will perform the obligations set
forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender and the
Agent copies of the following financial statements, reports, notices and
information:
(a) as soon as available and in any event within 60 days
after the end of each Fiscal Quarter of each Fiscal Year of the
Borrower, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter and consolidated
statements of earnings and consolidated statements of cash flow of the
Borrower and its Subsidiaries for such Fiscal Quarter and for the
period commencing at the end of the previous Fiscal Year and ending
with the end of such Fiscal Quarter, setting forth in comparative form
and details the figures for the corresponding period of the previous
Fiscal Year and corresponding budget, certified by an Authorized
Officer of the Borrower;
(b) as soon as available and in any event within 95 days
after the end of each Fiscal Year of the Borrower, a copy of the
annual audit report for such Fiscal Year for the Borrower and its
Subsidiaries, including therein consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and
consolidated statements of earnings and consolidated statements of
cash flow of the Borrower and its Subsidiaries for such Fiscal Year,
in each case certified (without any Impermissible Qualification) in a
manner acceptable to the Agent and the Required Lenders by any "Big
Six" accounting firm selected by the Borrower or any other independent
certified public accountants of recognized national standing selected
by the Borrower and reasonably acceptable to the Required Lenders,
together with a report from such accountants to the effect that, in
making the examination necessary for the signing of such annual audit
report by such accountants, they have not become aware of any Default
that has occurred and is continuing, or, if they have become aware of
such Default, describing such Default and the steps, if any, being
taken to cure it;provided, however, that such accountants shall not be
liable by reason of any failure to obtain knowledge of any such
Default that would not be disclosed in the course of their audit
examination;
(c) as soon as available and in any event within 60 days
after the end of each Fiscal Quarter commencing with the Fiscal
Quarter ended August 31, 1994, a Compliance Certificate, executed by
an Authorized Officer of the
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Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to the
Agent) compliance with the financial covenants set forth in Section
7.2.4;
(d) promptly after the chairman of the board, president,
chief executive officer, chief operating officer, principal financial
officer, controller or treasurer of the Borrower obtains actual
knowledge thereof, notice of the occurrence of any Default, together
with a statement of one of the foregoing officers setting forth
details of such Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(e) promptly after the chairman of the board, president,
chief executive officer, chief operating officer, principal financial
officer, controller or treasurer of the Borrower obtains actual
knowledge thereof, notice of (y) the occurrence of any material
adverse development on the merits with respect to any litigation,
action, proceeding, or labor controversy described in Section 6.7 or
(z) the commencement of any litigation, action, proceeding or labor
controversy of the type described in Section 6.7 (other than
malpractice litigation);
(f) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to any of its securityholders,
and all periodic reports, reports on Form 8-K and registration
statements which the Borrower or any of its Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(g) promptly after becoming aware of the institution of any
steps by the Borrower or any other Person to terminate any Pension
Plan, or the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under
section 302(f) of ERISA, or the taking of any action with respect to a
Pension Plan which would reasonably be expected to result in the
requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Employee Benefit Plan which would reasonably be expected to
result in the incurrence by the Borrower of any material liability,
fine or penalty (other than benefit obligations payable in the
ordinary course), or any material increase in the contingent liability
of the Borrower with respect to any post-retirement Welfare Plan
benefit, or the initiation of any inquiry, investigation or proceeding
by the U.S. Department of Labor pertaining to any suspected or alleged
fiduciary
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breach relating to any Employee Benefit Plan, notice thereof and
copies of all documentation relating thereto;
(h) together with each delivery of financial statements made
pursuant to clause (b), a certificate from an Authorized Officer of
the Borrower setting forth the details of the establishment by St.
Paul Fire and Marine Insurance Co. Inc. (or any other
nationally-recognized professional liability or medical malpractice
insurer, or any nationally-recognized claims adjustor, in each case
selected by the Borrower and reasonably satisfactory to the
Administrative Agent) of reserves in an amount equal to or greater
than $2,500,000 (in the case of any single claim) or $5,000,000 (in
the case of multiple claims arising out of a single incident or a
related series of incidents) in respect of actual or potential claims
against the Borrower or any of its Subsidiaries related to
professional liability or medical malpractice or, in the case of any
such reserve previously established, of the increase in such reserve
to an amount equal to or greater than $2,500,000 (in the case of any
single claim) or $5,000,000 (in the case of multiple claims arising
out of a single incident or a related series of incidents), and
specifying what action (if any) the Borrower has taken, is taking and
proposes to take with respect thereto;
(i) promptly after their being made publicly available,
copies of all press releases and other statements made available
generally by the Borrower to the public concerning material
developments in the business of the Borrower and its Subsidiaries;
(j) together with each delivery of financial statements of
the Borrower and its Subsidiaries pursuant to clause (b) above,
(i) a revised Item 6.8 (a) ("Subsidiaries") of the
Disclosure Schedule, listing all Subsidiaries of the Borrower
as at the end of the applicable Fiscal Year and a revised Item
6.8(c) ("Ownership Interest");
(ii) a schedule, in form reasonably satisfactory to
the Administrative Agent, for each Facility, and, in the
aggregate, for all Facilities of the following information to
the extent that such information is not displayed in the
financial statements delivered pursuant to clause (a): (A)
licensed beds, (B) average daily census, (C) admission and
length of stay, (D) number of beds in service, (E) in-patient
revenues, (F) outpatient revenues and (G) payor mix; and
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(iii) information giving details of the operating
indicators and financial performance of each general acute
care hospital which is owned or leased by a Minority Venture,
setting forth in comparative form and details for the
corresponding periods of the previous Fiscal Year; provided,
however, that the Borrower shall be required to provide the
information specified in the preceding clause (ii) and this
clause (iii) only to the extent that such information is
either in the possession of the Borrower or any of its
Subsidiaries or, through reasonable efforts, may be obtained
by the Borrower or any such Subsidiaries;
(k) together with each delivery of a Compliance Certificate
pursuant to clause (c) above, a schedule listing all Indebtedness in
excess of $10,000,000 permitted pursuant to clause (l) of Section
7.2.2 outstanding as of the date of delivery of such schedule; and
(l) such other information regarding the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries (but excluding information that federal or state laws or
regulations forbid the Borrower or its Subsidiaries to disclose) as
any Lender through the Administrative Agent may from time to time
reasonably request.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws (including, without limitation, Environmental Laws), rules,
regulations and orders, such compliance to include (without limitation):
(a) except as permitted under Section 7.2.9, the maintenance
and preservation of its corporate existence and qualification as a
foreign corporation;
(b) the payment, before the same become delinquent, of all
taxes, assessments and governmental charges imposed upon it or upon
its property except to the extent being contested in good faith by
appropriate proceedings and for which adequate reserves, if any, as
required in conformity with GAAP, shall have been set aside on its
books; and
(c) laws, rules, regulations or orders which relate to
reimbursement under the Medicare program or state health care
programs,
in each case, non-compliance with which would cause a Material Adverse Effect.
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SECTION 7.1.3. Maintenance of Properties. The Borrower will, and
will cause each of its Subsidiaries to, maintain, preserve, protect and keep in
good repair, working order and condition, and make necessary and proper
repairs, renewals and replacements all properties of the Borrower and its
Subsidiaries material to the business or operations of the Borrower and its
Subsidiaries taken as a whole unless the Borrower determines in good faith that
the continued maintenance of any such property is no longer economically
desirable.
SECTION 7.1.4. Insurance. The Borrower will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Subsidiaries against loss or damage of the kinds customarily insured against by
business entities of established reputation engaged in the same or similar
businesses and similarly situated, of such types and in such amounts as are
customarily carried under similar circumstances by such other business
entities; provided, however, that the Borrower may self-insure against workers'
compensation claims (to the extent permitted by applicable law), general
liability claims and professional liability claims.
SECTION 7.1.5. Books and Records. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect
all of its business affairs and transactions and permit the Administrative
Agent and each Lender or any of their respective representatives, at the
expense of such Lender, upon reasonable notice to the Borrower and at
reasonable times and intervals, to visit all of its offices, to discuss its
financial matters with its officers and independent public accountant (and the
Borrower hereby authorizes such independent public accountant to discuss the
Borrower's financial matters with each Lender or its representatives whether or
not any representative of the Borrower is present; provided, however, that the
Borrower shall be given prior written notice of such discussion and the
Borrower may, if it so chooses, be present at or participate in any such
discussions) and to examine (and photocopy extracts from) any of its books or
other corporate records (but excluding patient records and any other materials
made private or confidential by federal or state law or regulation).
SECTION 7.1.6. Use of Proceeds. The Borrower shall apply
(a) the proceeds of the Term Loans solely to repay in full
all amounts outstanding under the 1992 Credit Agreement and thereafter
to loan or contribute the proceeds thereof to EPIC or its Subsidiaries
to pay in part the cash portion of the purchase price obligations in
connection with the
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acquisition of the Tendered Debt and the tender premiums thereon;
(b) the proceeds of the Delayed Term Loans to pay in part the
cash portion of its purchase price obligations in connection with the
acquisitions contemplated by the Other Transactions (provided, that
the aggregate amount of Delayed Term Loans the proceeds of which are
used to fund Other Transactions shall not exceed $265,000,000) and for
the Borrower to loan or contribute such proceeds to EPIC Healthcare
Group, Inc. to redeem the EPIC Redeemable Debt; and
(c) the proceeds of the Revolving Loans to (i) pay the
transaction costs and expenses of the Transaction (provided that the
aggregate amount of such costs and expenses shall not exceed
$200,000,000 and the cash portion of its obligation in connection with
the Transaction), (ii) for general corporate purposes of the Borrower
and its Subsidiaries and (iii) in the case of Letters of Credit, for
issuing standby Letters of Credit for general corporate purposes.
SECTION 7.1.7. Accreditation and Licensing.
(a) The Borrower will, and will cause each of its
Subsidiaries to, obtain and maintain all permits, licenses and other
governmental approvals and all accreditations as may be necessary for
the operation of each of its Facilities except those permits,
licenses, governmental approvals and accreditations which, if not
obtained and maintained, would not cause a Material Adverse Effect;
and
(b) the Borrower will, and will cause each of its
Subsidiaries to, maintain its qualification for participation in and
payment under private insurance programs having broad application and
federal, state and local governmental programs providing for payment
or reimbursement for services rendered, except to the extent any
failure to maintain such qualification would not cause a Material
Adverse Effect.
SECTION 7.1.8. Subsidiary Advances. The Borrower will cause its
Subsidiaries to make advances to the Borrower from time to time which in the
aggregate are sufficient, together with other funds of the Borrower, to enable
the Borrower to pay its Obligations when due.
SECTION 7.1.9. Future Subsidiaries. On or prior to the 91st day
after the Closing Date, the Borrower shall cause (i) EPIC and each of its
Subsidiaries (other than JV Subsidiaries) to
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become parties to the Subsidiary Guaranty, and (ii) EPIC and each of its
relevant Subsidiaries to become parties to the Subsidiary Pledge Agreement and
deliver certificates representing all of the issued and outstanding shares of
capital stock (other than the capital stock of EPIC Properties, Inc.) of EPIC
and its Subsidiaries, together with duly executed stock powers in blank to the
Collateral Agent. On or prior to the thirtieth day following the redemption in
full of the CMOs, the Borrower shall cause EPIC to deliver to the Collateral
Agent an executed counterpart of the Subsidiary Stock Pledge Agreement and
stock certificates representing all of the issued and outstanding capital stock
of EPIC Properties, Inc., together with duly executed stock powers in blank.
Upon any other Person becoming, after the Effective Date, a Subsidiary of the
Borrower (other than a JV Subsidiary), the Borrower shall notify the
Administrative Agent of such event and such Subsidiary shall become a party to
the Subsidiary Guaranty and the Subsidiary Stock Pledge Agreement in a manner
reasonably satisfactory to the Administrative Agent. In addition, the Borrower
shall provide the Administrative Agent and the Lenders with such opinions of
legal counsel, in form and substance reasonably satisfactory to the
Administrative Agent, as the Administrative Agent may reasonably require,
relating to the obligations of such new Subsidiary under the Subsidiary
Guaranty and Subsidiary Stock Pledge Agreement.
SECTION 7.1.10. Environmental Covenant. The Borrower will, and will
cause each of its Subsidiaries to,
(a) use and operate all of the its facilities and properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws except for
noncompliance which, singly or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect or which noncompliance
is the subject of a Good Faith Contest;
(b) immediately notify the Administrative Agent and provide
copies upon receipt of all written claims, complaints, notices or
inquiries relating to the condition of its facilities and properties
or compliance with Environmental Laws, and shall promptly cure and
have dismissed with prejudice to the satisfaction of the
Administrative Agent any actions and proceedings relating to
compliance with Environmental Laws except for such claims, complaints,
notices and inquiries which, singly or in the aggregate, could not
reasonably be expected to have a
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Material Adverse Effect or which are the subject of a Good Faith
Contest; and
(c) provide such information and certifications which the
Administrative Agent may reasonably request from time to time to
evidence compliance with this Section 7.1.10.
SECTION 7.2. Negative Covenants. The Borrower agrees with the
Administrative Agent and each Lender that, until all Commitments have
terminated and all Obligations have been paid and performed in full, the
Borrower will perform the obligations set forth in this Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
the business engaged in by the Borrower and its Subsidiaries on the date hereof
and any other business or activities as may be substantially similar,
incidental or related thereto.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Loans and other
Obligations and any Refunding thereof so long as (i) the principal
amount of such refinancing Indebtedness (or, to the extent such
refinancing Indebtedness does not require cash payments prior to
maturity, the original issuance price thereof) does not exceed the
principal amount of the Obligations so refinanced, (ii) such
refinancing Indebtedness, determined as of the date of incurrence,
does not require any payments or prepayments of the principal thereof
prior to the date that is one month after the final scheduled maturity
date of the Obligations being refinanced, (iii) the sole consideration
received by the Borrower for such refinancing Indebtedness is cash and
(iv) such refinancing Indebtedness is otherwise on terms and
conditions satisfactory to the Required Lenders;
(b) until the 90th day following the Closing Date, the EPIC
Redeemable Debt not to exceed $130,000,000 in aggregate principal
amount;
(c) Indebtedness of Healthtrust or its Subsidiaries existing
as of the Effective Date prior to the EPIC Merger which is identified
in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule
and any Indebtedness the proceeds of which are used for the Refunding
of any such Indebtedness identified in Item
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7.2.2(c) of the Disclosure Schedule so long as with respect to any
Subordinated Debt identified therein (i) the principal amount of such
Refunding Subordinated Debt (or, to the extent such Refunding
Subordinated Debt does not require cash payments prior to maturity,
the original issuance price thereof) does not exceed the principal
amount (or the original issuance price, as the case may be) of the
Subordinated Debt identified in Item 7.2.2(c) so Refunded, (ii) such
Refunding Subordinated Debt, determined as of the date of incurrence,
does not mature prior to the final scheduled maturity date of the
Subordinated Debt identified in Item 7.2.2(c) being Refunded and the
Average Life of such Refunding Subordinated Debt is equal to or
greater than the remaining Average Life of the Subordinated Debt
identified in Item 7.2.2(c) being Refunded and (iii) the terms and
conditions of such Refunding Subordinated Debt and the indentures or
other agreements pursuant to which such Refunding Subordinated Debt is
issued (including, without limitation, those relating to interest
rate, principal amortization, redemption, covenants, events of
default, remedies and subordination) shall be satisfactory to the
Required Lenders;
(d) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal
trade terms in connection with purchases of goods and services, but
excluding Indebtedness incurred through the borrowing of money or
Contingent Liabilities);
(e) Indebtedness of the Borrower's Subsidiaries owing to the
Borrower and unsecured Indebtedness of the Borrower owing to any of
its Subsidiaries provided that (i) the obligation of the Borrower to
repay Indebtedness to any of its Subsidiaries shall be subject to
agreements in form and substance satisfactory to the Required Lenders
that the obligations of the Borrower shall be subordinated in right of
payment to the payment in full of the Obligations and any related
Hedging Obligations, (ii) all Indebtedness of any of the Borrower's
Subsidiaries to the Borrower shall be subject to agreements in form
and substance satisfactory to the Administrative Agent which shall
provide that (x) the obligations of such Subsidiary thereunder shall
be subordinated in right of payment to the payment in full of the
Obligations of such Subsidiary under the Subsidiary Guaranty and (y)
any payment by such Subsidiary under the Subsidiary Guaranty shall
discharge an equivalent amount of such Indebtedness, and such
Subsidiary shall waive any and all right to offset amounts owed by the
Borrower to such Subsidiary against amounts owed by such Subsidiary to
the Borrower and (iii) all Indebtedness of any Subsidiary of the
Borrower (other than a JV Subsidiary) to any other
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Subsidiary of the Borrower shall be subject to agreements in form and
substance satisfactory to the Administrative Agent which shall provide
that the obligations of such Subsidiary thereunder shall be
subordinated in right of payment to the payment in full of the
Obligations of such Subsidiary under the Subsidiary Guaranty and all
obligations of such Subsidiary to the Borrower;
(f) Indebtedness with respect to the sale of Accounts made as
a "Permitted Disposition" to the extent permitted under the definition
thereof;
(g) Indebtedness with respect to taxes, assessments and other
governmental charges being contested in good faith as provided in
clause (b) of Section 7.1.2;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course
of business in an aggregate amount not to exceed $10,000,000 at any
time; provided, however, that such Indebtedness is extinguished within
one Business Day of its incurrence;
(i) Contingent Liabilities in the nature of endorsements of
negotiable instruments for collection in the ordinary course of
business;
(j) Indebtedness in respect of the CMOs;
(k) Indebtedness (including Indebtedness in respect of
Capitalized Lease Liabilities and the AmSouth Facility) of EPIC and
its Subsidiaries outstanding on the Closing Date in an aggregate
principal amount not to exceed $45,000,000 and refinancings thereof on
terms and conditions satisfactory to the Administrative Agent;
(l) Indebtedness in respect of Non-CMO Debt;
(m) Indebtedness in the nature of aggregate recourse
liability to the extent such liability relates to the failure of any
account debtor in respect of any Account to make any payments in
respect thereof; and
(n) other Indebtedness (including Indebtedness in respect of
Capitalized Lease Liabilities and Contingent Liabilities) in an
aggregate principal amount not to exceed at any time $300,000,000;
provided, however, that (I) an amount not to exceed $50,000,000 of
such Indebtedness may be considered Senior Indebtedness (as defined in
the Existing Subordinated Note Indenture) and/or Indebtedness of
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Subsidiaries and (II) the remaining amount of such Indebtedness shall
be Subordinated Debt described inclause (ii) of the definition
thereof.
SECTION 7.2.3. Liens. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to
exist any Lien upon any of its property, revenues or assets, whether
now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations granted
pursuant to any Loan Document;
(b) Liens granted (i) to secure payment of Indebtedness of
the type permitted and described in clauses (c), (j), (k) and (n) (to
the extent that such Liens secure Indebtedness described in such
clause (n) not in excess of $150,000,000 in principal amount at any
time outstanding) of Section 7.2.2 and covering only those assets
acquired with the proceeds of such Indebtedness and (ii) in favor of
the holders of the EPIC Healthcare Group's 11 7/8% Senior ESOP Notes
due September 30, 1998;
(c) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or the payment of which is not at the time required by
clause (b) of Section 7.1.2;
(d) Liens of carriers, warehousemen, mechanics, materialmen,
landlords and other Liens imposed by law incurred in the ordinary
course of business for sums not overdue or being diligently contested
in good faith by appropriate proceedings and for which adequate
reserves, if any as required in accordance with GAAP, shall have been
set aside on its books;
(e) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, bids, performance and
return-of-money bonds, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(f) judgment Liens in existence less than 45 days after the
entry thereof or with respect to which execution has been stayed or
the payment of which is covered in full (subject to a customary
deductible) by insurance maintained with responsible insurance
companies;
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(g) Leases or subleases (and related options to purchase the
property subject to any such lease or sublease) granted to others not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(h) Easements, rights-of-ways, restrictions and other similar
charges or encumbrances not interfering in any material respect with
the ordinary conduct of the business of the Borrower or any of its
Subsidiaries;
(i) Liens identified in Item 7.2.3 (i) ("Liens") of the
Disclosure Schedule;
(j) Liens on Accounts securing the payment of Indebtedness
permitted under clause (f) of Section 7.2.2;
(k) Liens securing Reimbursement Obligations of the
Borrower with respect to Letters of Credit; and
(l) Liens in favor of issuers thereof against insurance
policies purchased by the Borrower or any of its Subsidiaries.
SECTION 7.2.4. Financial Condition. The Borrower covenants and
agrees as follows:
(a) Net Worth. The Borrower will not permit Net Worth at any
time during any period set forth below to be less than the amount set
forth opposite such period:
<TABLE>
<CAPTION>
Period Net Worth
------ ---------
<S> <C>
Effective Date through end
of Fiscal Year 1994 $900,000,000
First 2 Fiscal Quarters of
Fiscal Year 1995 $925,000,000
Last 2 Fiscal Quarters of
Fiscal Year 1995 $950,000,000
Fiscal Year 1996 $1,100,000,000
Fiscal Year 1997 $1,300,000,000
Fiscal Year 1998 $1,500,000,000
Fiscal Year 1999 $1,800,000,000
Fiscal Year 2000
and thereafter $2,000,000,000
</TABLE>
(b) Total Debt to EBITDA Coverage Ratio. The Borrower will
not permit the Total Debt to EBITDA Coverage Ratio (i) from the
Closing Date to August 31, 1994 to exceed 4.25:1.0 and (ii) at any
time thereafter during any period set forth
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below, to be greater than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
First 2 Fiscal Quarters
of Fiscal Year 1995 4.25:1.0
Last 2 Fiscal Quarters
of Fiscal Year 1995 4.00:1.0
First Fiscal Quarter
of Fiscal Year 1996 3.75:1.0
Second Fiscal Quarter
of Fiscal Year 1996 3.50:1.0
Third Fiscal Quarter of
of Fiscal Year 1996 3.25:1.0
Last Fiscal Quarter of
of Fiscal Year 1996 3.00:1.0
Fiscal Year 1997 2.50:1.0
Fiscal Year 1998 2.25:1.0
and thereafter
</TABLE>
(c) Cash Flow Coverage Ratio. The Borrower will not permit
the Cash Flow Coverage Ratio, at any time commencing on and after the
Effective Date, to be less than 1.0:1.0.
(d) Interest Coverage Ratio. The Borrower will not permit
the Interest Coverage Ratio, at any time during any period set forth
below, to be less than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Effective Date through end
of Fiscal Year 1994 4.0:1.0
Fiscal Year 1995 4.0:1.0
Fiscal Year 1996 4.5:1.0
Fiscal Year 1997
and thereafter 5.0:1.0
</TABLE>
SECTION 7.2.5. Investments. The Borrower will not, and will not
permit any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments existing on the Effective Date and identified
in Item 7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) Investments in the Borrower or any of its wholly-owned
Subsidiaries;
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(d) Investments in joint ventures;
(e) Investments in general acute care hospitals or other
health care businesses (other than as acquired in the Other
Transactions and Hospital Exchanges) or a Person which owns or leases
a general acute care hospital or other health care business in an
aggregate amount not to exceed $150,000,000 in any Fiscal Year or
$310,000,000 from and after the Effective Date, plus an amount equal to
the sum of (i) 100% of Net Disposition Proceeds not applied to prepay
Loans and (ii) Net Equity Proceeds designated by the Borrower to the
Administrative Agent in writing to be used for the purpose of making
such investments within one year of the receipt of such Net Equity
Proceeds;
(f) Investments arising in connection with Permitted
Dispositions under Section 7.2.9 not to exceed $100,000,000 from the
Effective Date;
(g) Investments constituting Hospital Exchanges (but only to
the extent of an Investment made with consideration other than cash or
Cash Equivalent consideration);
(h) Investments not to exceed $265,000,000 in the aggregate
constituting the Other Transactions;
(i) other Investments in an aggregate amount not to exceed at
any time $75,000,000;
provided, however, that
(i) no Investment otherwise permitted by clause (d), (e),
(f), (g) or (h) shall be permitted to be made if, immediately before
or after giving effect thereto, any Default of the type described in
clauses (a) through (d) of Section 8.1.9 subject to the proviso set
forth therein or any Event of Default shall have occurred and be
continuing;
(ii) no Investments otherwise permitted by clause (d), (e),
(f) or (g) which have not been committed to by the Borrower or any of
its Subsidiaries prior to any occurrence thereof shall be permitted
if, immediately before or after giving effect thereto, any material
adverse effect on the business, operations, assets, condition
(financial or otherwise) or prospects of the Borrower or any of its
Subsidiaries, taken as a whole, shall have occurred;
(iii) no Investment permitted by this Section may be made in
any joint venture if, as of the date such Investment is made, incurred
or assumed, all joint venture Investments permitted by this Section
shall hold assets of the Borrower
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or any of its Subsidiaries, or any assets contributed by the Borrower
or any of its Subsidiaries which are greater (in Dollar amount, in the
case of the following clause (x) and number of Facilities and Other
Health Care Facilities, in the case of the following clause (y)) than
the lesser of (x) 35% of the consolidated book value of the
consolidated assets of the Borrower and its Subsidiaries at such time
and (y) a number equal to 30% (by number) of all Facilities at such
time; provided, further, that the Borrower will not, and will not
permit any of its Subsidiaries to, make, incur, assume or suffer to
exist any Investments in Minority Ventures if the aggregate amount of
assets contributed, which assets shall be valued at book value at the
time such contribution is made, net of returns of principal or equity
thereon received by the Borrower or any of its Subsidiaries after such
contribution is made and loans made available by the Borrower or any
of its Subsidiaries to Minority Ventures at such time exceeds
$500,000,000; and
(iv) any Investments permitted under this proviso shall be
reduced by any Investments falling within the terms of clause (a)
above.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after
the Effective Date:
(a) the Borrower will not declare, pay or make any dividend
or distribution (in cash, property or obligations) on any shares of
any class of capital stock (now or hereafter outstanding) of the
Borrower or on any warrants, options or other rights with respect to
any shares of any class of capital stock (now or hereafter
outstanding) of the Borrower (other than dividends or distributions
payable in its common stock or warrants to purchase its common stock
or splitups or reclassifications of its stock into additional or other
shares of its common stock) or apply, or permit any of its
Subsidiaries to apply, any funds, property or assets to the purchase,
redemption, sinking fund or other retirement of, or agree or permit
any of its Subsidiaries to purchase or redeem, any shares of any class
of capital stock (now or hereafter outstanding) of the Borrower, or
warrants, options or other rights with respect to any shares of any
class of capital stock (now or hereafter outstanding) of the
Borrower; provided, however, that so long as (i) no Default of the type
described in clauses (a) through (d) of Section 8.1.9 subject to the
proviso set forth therein, (ii) no Event of Default or (iii) no
material adverse effect on the business, operations, assets, condition
(financial or otherwise) or prospects of the Borrower or any of its
Subsidiaries, taken as a whole, has occurred and is
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continuing or would occur as a result thereof, the Borrower may
(i) repurchase the Borrower's Common Stock from any
current or former employee of the Borrower or any of its
Subsidiaries in an aggregate amount for all such employees not
to exceed $10,000,000 in any Fiscal Year or $50,000,000 from
and after the Effective Date;
(ii) withhold (and pay related federal, state or
local income tax liability) or repurchase the Borrower's
Common Stock in satisfaction of the income tax liability
incurred under any nonqualified benefit plan established by
the Borrower for members of management of the Borrower;
(iii) make purchases of Common Stock for the purpose
of contributing such Common Stock to any Plan of the Borrower
and its Subsidiaries in lieu of making contributions to any
Plan in cash; provided, however, that (A) the Borrower may not
hold at any one time Common Stock which was so purchased
pursuant to this clause (iii) for an amount in excess of
$80,000,000 (excluding Common Stock held by the Borrower prior
to the Effective Date), (B) the Borrower may not cancel any of
such Common Stock and, (C) the Borrower must contribute all
such Common Stock before it can make any cash contribution to
any such Plan, other than cash payments made in respect of
withholding taxes thereon or to meet expenses relating to the
administration of such Plan;
(iv) purchase shares of Common Stock pursuant to the
exercise of put options exercised by employees of the Borrower
with respect to shares of Common Stock distributed pursuant to
any Plan; and
(v) purchase fractional shares of Common Stock (or
warrants therefor), which fractional shares exist as the
result of any stock split;
(b) the Borrower will not, and will not permit any of its
Subsidiaries to
(i) make any scheduled payment or prepayment of
principal of, or make any payment of interest on, any
Subordinated Debt or EPIC Tendered Debt (1) on any day other
than on or after the stated, scheduled date for such payment
or prepayment set forth in the documents and instruments
memorializing such Indebtedness, or (2) which payment or
prepayment would violate the
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subordination provisions of such Subordinated Debt, except as
set forth in clause (ii) below; or
(ii) redeem, purchase or defease, any EPIC Tendered
Debt or EPIC Redeemable Debt except so long as (i) no Default
of the type described in clauses (a) through (d) of Section
8.1.9 subject to the proviso set forth therein or (ii) no
Event of Default has occurred and is continuing or would occur
as a result thereof, the Borrower and its Subsidiaries may
Refund the EPIC Redeemable Debt and EPIC Tendered Debt; or
(iii) redeem, purchase or defease any Subordinated
Debt not constituting EPIC Redeemable Debt or EPIC Tendered
Debt except so long as (i) no Default of the type described in
clauses (a) through (d) of Section 8.1.9 subject to the
proviso set forth therein or (ii) no Event of Default has
occurred and is continuing or would occur as a result thereof,
the Borrower may Refund such Subordinated Debt in an aggregate
principal amount equal to the sum of (1) up to 25% of
cumulative Excess Cash Flow since the Effective Date, (2) the
aggregate amount of net proceeds from the issuance of any
Subordinated Debt in accordance with the terms and conditions
set forth in clause (c) of Section 7.2.2 and/or (3) the
aggregate amount of Net Equity Proceeds since the Closing Date
from the sale or issuance of common stock of the Borrower
which sale or issuance has been designated by the Borrower as
being for the purpose of generating funds to be used to Refund
Indebtedness; and
(c) the Borrower will not, and will not permit any Subsidiary
to, make any deposit for any of the foregoing purposes.
SECTION 7.2.7. Negative Pledges, Restrictive Agreements, etc. The
Borrower will not, and will not permit any of its Subsidiaries to, enter into
any agreement (excluding this Agreement, any other Loan Document and any
agreement governing any Indebtedness permitted either by clause (b) of Section
7.2.2 as in effect on the Closing Date or by clause (j) of Section 7.2.2 as to
the assets financed with the proceeds of such Indebtedness) prohibiting
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired;
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(b) the ability of the Borrower or any other Obligor to amend
or otherwise modify this Agreement or any other Loan Document; or
(c) the ability of any Subsidiary to make any payments,
directly or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and
other intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower.
SECTION 7.2.8. Consolidation, Merger, etc. The Borrower will not,
and will not permit any of its Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into or with, any other corporation, or purchase or
otherwise acquire all or substantially all of the assets of any Person (or of
any division thereof) except, so long as no Event of Default has occurred and
is continuing or would occur after giving effect thereto:
(a) any Subsidiary of the Borrower may liquidate and
distribute its assets to, and may merge with and into, any Equivalent
Subsidiary, and the assets or stock of any Subsidiary of the Borrower
may be purchased or otherwise acquired by the Borrower or any
Equivalent Subsidiary; and
(b) any Subsidiary of the Borrower may liquidate and
distribute its assets to, and may merge with and into, any joint
venture, and the assets or stock of any Subsidiary of the Borrower or
Minority Venture may be purchased or otherwise acquired by the
Borrower or any other Subsidiary of the Borrower or Minority Venture
if any such liquidation, distribution, merger or purchase is permitted
as an Investment underSection 7.2.5;
provided, however, that (i) the corporate, partnership or other existence of a
Subsidiary of the Borrower may not be terminated if such termination would
cause a Material Adverse Effect and (ii) to the extent the Borrower receives
Net Disposition Proceeds in connection with such termination, the Borrower
shall apply such proceeds in accordance with Section 3.1.5; and
(c) the Borrower or any of its Subsidiaries may purchase
all or substantially all of the assets of any Person, or acquire such
Person by merger to the extent permitted as an Investment pursuant to
Section 7.2.5.
SECTION 7.2.9. Asset Dispositions, etc. Except for (i) Permitted
Dispositions and (ii) as permitted pursuant to clause (a) or (b) of Section
7.2.8, the Borrower will not, and
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will not permit any of its Subsidiaries to, sell, transfer, lease, contribute
or otherwise convey, or grant options, warrants or other rights with respect
to, all or any substantial part of its assets (including accounts receivable
and capital stock of Subsidiaries) to any Person.
SECTION 7.2.10. Modification of Certain Agreements. After the
Closing Date, the Borrower will not consent and will not permit any Subsidiary
to consent to any amendment, supplement or other modification of any of the
terms or provisions contained in, or applicable to,
(a) the EPIC Tendered Debt, the EPIC Redeemable Debt or any
document or instrument evidencing or applicable to any Subordinated
Debt, if the effect of such amendment or change is to increase the
interest rate on such Indebtedness, change (to earlier dates) the date
upon which payments of principal or interest are due thereon, change
the subordination provisions thereof (or of any guaranty thereof) (if
any) or if the effect of such amendment or change, together with all
amendments or changes made, is to increase materially the obligations
of the obligor or confer additional rights on the holder of such
Indebtedness which would be adverse to the Borrower or the Lenders; or
(b) the AmSouth Facility.
SECTION 7.2.11. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement or contract is fair and equitable to the Borrower or
such Subsidiary and is an arrangement or contract of the kind which would be
entered into by a prudent Person in the position of the Borrower or such
Subsidiary with a Person which is not one of its Affiliates.
SECTION 7.2.12. Rate Protection Agreements. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into Rate Protection
Agreements for the purpose of currency or interest rate speculation or which is
incurred on a leveraged basis.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an "Event
of Default".
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SECTION 8.1.1. Non-Payment of Obligations. The Borrower or any other
Obligor shall default
(a) in the payment or prepayment when due of any
Reimbursement Obligation under any Letter of Credit or any deposit of
cash for collateral purposes pursuant to Section 2.8.4 after demand
shall have been made of the Borrower by the Administrative Agent; or
(b) in the payment or prepayment when due of any principal of
any Loan; or
(c) in the payment when due of any interest on any Loan and
such default shall continue unremedied for a period of three Business
Days; or
(d) in the payment when due of any fee or of any other
Obligation payable hereunder or under any other Loan Document and such
default shall continue unremedied for a period of three Business Days.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate
furnished by or on behalf of the Borrower or any other Obligor to the
Administrative Agent or any Lender for the purposes of or in connection with
this Agreement or any such other Loan Document (including any certificates
delivered pursuant to Article V) is or shall be incorrect when made in any
material respect; provided, however, that, subject to Section 8.4 in the case
of clause (iii) below, an "Event of Default" shall not occur under this Section
8.1.2 with respect to (i) any materially false representation or warranty made
by a Subsidiary of the Borrower in the Subsidiary Guaranty or made by the
Borrower with respect to the Subsidiary Guaranty, (ii) any materially false
representation or warranty made by a Subsidiary of the Borrower in the
Subsidiary Stock Pledge Agreement, or in any other Collateral Document to which
such Subsidiary is a party or made by the Borrower with respect to the
Subsidiary Stock Pledge Agreement, or any other Collateral Document, or (iii)
any materially false representation or warranty otherwise made by the Borrower
with respect to its Subsidiaries, until such time as such materially false
representation has caused a Material Adverse Effect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower shall default in the due performance and observance of any of its
obligations under Section 7.1.6, Section 7.1.9 (with respect to EPIC and its
Subsidiaries) or Section 7.2, or the Borrower or any of its Subsidiaries shall
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fail to maintain or preserve its corporate existence to the extent required
under Section 7.1.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.
Any Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by the Administrative Agent or
any Lender.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) of the Borrower or any of its Subsidiaries or any
other Obligor having a principal amount, individually or in the aggregate, in
excess of $10,000,000, or a default shall occur in the performance or
observance of any obligation or condition with respect to such Indebtedness if
the effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause such Indebtedness to become
due and payable prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of $10,000,000 or any series of judgments or orders aggregating
in excess of $20,000,0000 shall be rendered against the Borrower or any of its
Subsidiaries or any other Obligor and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of 45 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall
occur with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member
of its Controlled Group (including EPIC) or any other Person to
terminate a Pension Plan if, as a result of such termination, the
Borrower or any such member could be required to make a contribution
to such Pension Plan, or could reasonably expect to incur a liability
or obligation to such Pension Plan, in excess of $15,000,000; or
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(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. Control of the Borrower. Any Change in Control shall
occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of
its Subsidiaries or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for the
Borrower or any of its Subsidiaries or any other Obligor or any
property of any thereof, or make a general assignment for the benefit
of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of
its Subsidiaries or any other Obligor or for a substantial part of the
property of any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 60 days, provided that
the Borrower, each Subsidiary and each other Obligor hereby expressly
authorizes the Administrative Agent and each Lender to appear in any
court conducting any relevant proceeding during such 60-day period to
preserve, protect and defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower or
any of its Subsidiaries or any other Obligor, and, if any such case or
proceeding is not commenced by the Borrower or such Subsidiary or
such other Obligor, such case or proceeding shall be consented to or
acquiesced in by the Borrower or such Subsidiary or such other Obligor
or shall result in the entry of an order for relief or shall remain
for 60 days undismissed, provided that the Borrower, each Subsidiary
and each other Obligor hereby expressly authorizes the Administrative
Agent and each Lender to appear in any court conducting any such case
or proceeding during such 60-day period to preserve, protect and
defend their rights under the Loan Documents; or
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(e) take any action authorizing, or in furtherance of, any of
the foregoing;
provided, however, that, with respect to any Subsidiary of the Borrower and
subject to Section 8.4, an "Event of Default" shall not occur under this
Section 8.1.9 until such time as such a Subsidiary or Subsidiaries accounting
for more than 10.0% of the consolidated net revenues or more than 10.0% of the
consolidated assets of the Borrower (as calculated as of the Closing Date until
August 31, 1994 and thereafter for the Borrower's most recent Fiscal Year end)
is or are the subject of one or more of the events described in this Section
8.1.9.
SECTION 8.1.10. Subsidiary Guaranty. (i) Without duplication of the
terms of Section 8.1.11, the guaranty given by any Subsidiary of the Borrower
under the Subsidiary Guaranty shall for any reason other than the satisfaction
in full of all Obligations and termination of this Agreement or the release of
such Subsidiary from its Obligations under the Subsidiary Guaranty in
accordance with the terms thereof, cease to be in full force and effect at any
time or is declared to be null and void or (ii) any such Subsidiary denies that
it has any further liability under the Subsidiary Guaranty, or gives notice to
such effect, and such denial or notice is not revoked within one Business Day
after the earlier of (A) receipt by the Borrower of notice from the
Administrative Agent or any Lender of such denial or notice or (B) the Borrower
becomes aware of such denial or notice being made or given, as the case may be;
provided, however, that, subject to Section 8.4, an "Event of Default" shall
not occur under this Section 8.1.10 until such time as a Subsidiary or
Subsidiaries of the Borrower accounting for more than 10.0% of the consolidated
net revenues or more than 10.0% of the consolidated assets of the Borrower (as
calculated as of the Closing Date until August 31, 1994 and thereafter for the
Borrower's most recent Fiscal Year end) is or are the subject of one or more of
the events described in this Section 8.1.10; provided further, however, that in
making such determination (i) EPIC and its Subsidiaries shall be excluded from
such calculation for the period commencing on the Closing Date and ending on
the 90th day after the Closing Date and (ii) EPIC Properties, Inc. shall be
excluded from such calculation until such time that all of the CMOs have been
redeemed or otherwise retired.
SECTION 8.1.11. Impairment of Security, etc. Any Loan Document shall
(except in accordance with its terms), in whole or in part, terminate, cease to
be effective or cease to be the legally valid, binding and enforceable
obligation of any Obligor party thereto or any Lien granted under any Loan
Document on any substantial portion of the collateral shall, in whole or in
part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable Obligation of any Obligor party
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thereto; the Borrower or any other Obligor shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding nature or
enforceability; or any Lien securing any Obligation shall, in whole or in part,
cease to be a perfected prior to all other Liens (other than as a result of
actions of the Collateral Agent or any Lender); provided, however, that,
subject to Section 8.4, an "Event of Default" shall not occur under this
Section 8.1.11 with respect to any of the foregoing relating to any Collateral
Document to which a Subsidiary of the Borrower is a party until such time as a
Subsidiary or Subsidiaries of the Borrower accounting for more than 10.0% of
the consolidated net revenues or more than 10.0% of the consolidated assets of
the Borrower (as calculated as of the Closing Date until August 31, 1994 and
thereafter for the Borrower's most recent Fiscal Year end) is or are subject of
one or more of the events described in this Section 8.1.12; provided, however,
that in making such determination (i) EPIC and its Subsidiaries shall be
excluded from such calculation for the period commencing on the Closing Date
and ending on the 90th day after the Closing Date and (ii) EPIC Properties,
Inc. shall be excluded from such calculation until such time that all of the
CMOs have been redeemed or otherwise retired.
SECTION 8.2. Action if Bankruptcy. If any Event of Default described
in clauses (a) through (d) of Section 8.1.9 shall occur, the Commitments (if
not theretofore terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable, without notice or
demand.
SECTION 8.3. Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in clauses (a) through (d)
of Section 8.1.9) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due and
payable and/or the Commitments (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of such Loans and other
Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment,
and/or, as the case may be, the Commitments shall terminate.
SECTION 8.4. Subsidiary Events of Default. With respect to
Subsidiaries, if at any time the Subsidiary or Subsidiaries in default under
any combination of Sections 8.1.2, 8.1.9, 8.1.10 and 8.1.11 account in the
aggregate for more than 10.0% of the consolidated net revenues or more than
10.0% of the consolidated assets of the Borrower (as calculated as of the
Closing Date
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until August 31, 1994 and thereafter for the Borrower's most recent Fiscal Year
end), then for so long as such condition remains in effect the final proviso in
each of Sections 8.1.2, 8.1.9 and the first proviso in each of Sections 8.1.10
and 8.1.11 shall be deemed to be ineffective, inoperative and not a part of any
of such Sections.
ARTICLE IX
THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT
AND THE CO-AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints (i) Scotiabank as
its Administrative Agent and Collateral Agent and (ii) each of 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, The Toronto-Dominion Bank, and Scotiabank as
its Co-Agents, in each case under and for purposes of this Agreement, the Notes
and each other Loan Document. Each Lender authorizes the Administrative Agent,
the Collateral Agent and the Co-Agents to act on behalf of such Lender under
this Agreement, the Notes and each other Loan Document and, in the absence of
other written instructions from the Required Lenders received from time to time
by the Administrative Agent, the Collateral Agent or any Co-Agent, as the case
may be (with respect to which the Administrative Agent, the Collateral Agent or
any Co-Agent, as the case may be, agrees that it will comply, except as
otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Administrative Agent, the Collateral Agent or each Co-Agent
by the terms hereof and thereof, together with such powers as may be reasonably
incidental thereto. Each Lender hereby indemnifies (which indemnity shall
survive any termination of this Agreement) the Administrative Agent, the
Collateral Agent and each Co-Agent, pro rata according to such Lender's
Percentage, from and against any and all liabilities, obligations, losses,
damages, claims, costs or expenses of any kind or nature whatsoever which may
at any time be imposed on, incurred by, or asserted against, the Administrative
Agent, the Collateral Agent or such Co-Agent, as the case may be, in any way
relating to or arising out of this Agreement, the Notes and any other Loan
Document, including reasonable attorneys' fees, and as to which the
Administrative Agent, the Collateral Agent or such Co-Agent is not reimbursed
by
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the Borrower; provided, however, that no Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages, claims, costs
or expenses which are determined by a court of competent jurisdiction in a
final proceeding to have resulted solely from the Administrative Agent's, the
Collateral Agent's or such Co-Agent's gross negligence or wilful misconduct.
Neither the Administrative Agent, the Collateral Agent nor any Co-Agent shall
be required to take any action hereunder, under the Notes or under any other
Loan Document, or to prosecute or defend any suit in respect of this Agreement,
the Notes or any other Loan Document, unless it is indemnified hereunder to its
satisfaction. If any indemnity in favor of the Administrative Agent, the
Collateral Agent or any Co-Agent, as the case may be, shall be or become, in
the Administrative Agent's, the Collateral Agent's or such Co-Agent's
determination, inadequate, the Administrative Agent, the Collateral Agent or
such Co-Agent may call for additional indemnification from the Lenders and
cease to do the acts indemnified against hereunder until such additional
indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York City time, on the day prior to a Borrowing that such Lender
will not make available the amount which would constitute its Percentage of
such Borrowing on the date specified therefor, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent and, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If and to the extent that such Lender shall not have
made such amount available to the Administrative Agent, such Lender and the
Borrower severally agree to repay the Administrative Agent forthwith on demand
such corresponding amount together with all fees and expenses incurred in
connection therewith and all interest thereon, for each day from the date the
Administrative Agent made such amount available to the Borrower to the date
such amount is repaid to the Administrative Agent, (i) in the case of such
Lender, at the applicable Federal Funds Rate; provided, however, that if such
Lender has not repaid the Administrative Agent such amount on or before the
third day following demand for such amount, the interest thereon shall be at
the Alternate Base Rate plus a margin of 1/2 of 1%, and (ii) in the case of the
Borrower, at the interest rate applicable at the time to Loans comprising such
Borrowing.
SECTION 9.3. Exculpation. Neither the Administrative Agent, the
Collateral Agent nor any Co-Agent nor any of its directors, officers, employees
or agents shall be liable to any Lender for any action taken or omitted to be
taken by it under this Agreement or any other Loan Document, or in connection
herewith or therewith, except for its own wilful misconduct or
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gross negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due execution
of this Agreement or any other Loan Document, nor for the creation, perfection
or priority of any Lien purported to be created by any of the Loan Document, or
the validity, genuineness, enforceability, existence, value or sufficiency of
any collateral security, nor to make any inquiry respecting the performance by
the Borrower of its obligations hereunder or under any other Loan Document.
Any such inquiry which may be made by the Administrative Agent, the Collateral
Agent or any Co-Agent shall not obligate it to make any further inquiry or to
take any action. The Administrative Agent, the Collateral Agent and each
Co-Agent shall be entitled to rely upon advice of counsel concerning legal
matters and upon any notice, consent, certificate, statement or writing which
the Administrative Agent, the Collateral Agent or such Co-Agent believes to be
genuine and to have been presented by a proper Person.
SECTION 9.4. Successor; Removal of Agent. (a) The Administrative
Agent or the Collateral Agent may resign as such at any time upon at least 30
days' prior notice to the Borrower and all Lenders. If the Borrower becomes
liable for any Taxes (other than Taxes imposed by the United States or a
political subdivision thereof) which result from the obligation of and
performance of duties by the Administrative Agent hereunder in its capacity as
such to make distributions to or for the account of any Payee and such Taxes
would not have resulted had such distributions been made directly from the
Borrower to any Payee, the Borrower may remove the Administrative Agent and, if
the Administrative Agent is also the Collateral Agent, the Collateral Agent, by
delivering to the Administrative Agent written notice thereof and such removal
shall become effective on the date a replacement Administration Agent is
appointed in accordance with the provisions set forth below. If the
Administrative Agent or the Collateral Agent at any time shall resign or be
removed, the Required Lenders may appoint another Lender as a successor
Administrative Agent or Collateral Agent, as the case may be, which shall,
subject to the Borrower's consent, thereupon become the Administrative Agent or
Collateral Agent, as the case may be, hereunder. If no successor
Administrative Agent or Collateral Agent, as the case may be, shall have been
so appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring or removed Administrative Agent's or the
Collateral Agent's giving notice of resignation or receipt by the
Administrative Agent of the notice of removal, as the case may be, then the
retiring or removed Administrative Agent or Collateral Agent, as the case may
be, may, on behalf of the Lenders, appoint a successor Administrative Agent or
Collateral Agent, as the case may be, which shall be an Eligible Assignee.
Upon the acceptance of any appointment as
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Administrative Agent or Collateral Agent, as the case may be, hereunder by a
successor Administrative Agent or Collateral Agent, as the case may be, such
successor Administrative Agent or Collateral Agent, as the case may be, shall
be entitled to receive from the retiring or removed Administrative Agent or
Collateral Agent, as the case may be, such documents of transfer and
assignment, and in the case of the Collateral Agent delivery of the collateral
to the successor Collateral Agent, as such successor Administrative Agent or
Collateral Agent, as the case may be, may reasonably request, and shall
thereupon succeed to and become vested with all rights, powers, privileges and
duties of the retiring or removed Administrative Agent or Collateral Agent, as
the case may be, and the retiring or removed Administrative Agent or Collateral
Agent, as the case may be, shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Administrative Agent's or
Collateral Agent's, as the case may be, resignation or removal hereunder as the
Administrative Agent or Collateral Agent, as the case may be, the provisions of
(i) this Article IX shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the
Administrative Agent or Collateral Agent, as the case may be, under
this Agreement; and
(ii) Section 10.3 and Section 10.4 shall continue to inure to
its benefit.
(b) A Co-Agent may resign at any time by giving written notice
thereof to the Borrower and the Administrative Agent.
(c) Nothing in this Agreement shall preclude there being a single
Co-Agent which is both the Administrative Agent and Collateral Agent.
SECTION 9.5. Loans by Administrative Agent, Collateral Agent and
Co-Agents. 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, The
Toronto-Dominion Bank, and Scotiabank shall have the same rights and powers
with respect to the Loans made by it or any of its Affiliates, and may exercise
the same as if it were not the Administrative Agent, Collateral Agent or
Co-Agent, as the case may be. Each of ABN AMRO Bank, N.V., Bank of America
National Trust and Savings Association, The Chase Manhattan Bank, N.A.,
Chemical Bank, Citicorp USA, Inc.,
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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, The
Toronto-Dominion Bank, and Scotiabank and their respective Affiliates may
accept deposits from (to the extent permitted by law), lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary or
Affiliate of the Borrower as if it were not the Administrative Agent,
Collateral Agent or Co-Agent, as the case may be hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Administrative Agent, the Collateral Agent, each Co-Agent
and each other Lender, and based on such Lender's review of the financial
information of the Borrower, this Agreement, the other Loan Documents (the
terms and provisions of which being satisfactory to such Lender) and such other
documents, information and investigations as such Lender has deemed
appropriate, made its own credit decision to extend its Commitments. Each
Lender also acknowledges that it will, independently of the Administrative
Agent, the Collateral Agent, each Co-Agent and each other Lender, and based on
such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower).
SECTION 9.8. No Obligations on Co-Agents. It is understood and agreed
that nothing in this Agreement shall impose on the Co-Agents (as such) any
duties or obligations whatsoever.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however, that
no such amendment, modification or waiver which would:
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(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 10.1, change the definition of
"Required Lenders", increase any Commitment Amount or the Percentage
of any Lender, reduce any fees described inArticle III, reduce the
rate of interest on any Loan other than as provided herein (other than
a waiver or reduction of any increase in interest rates otherwise
applicable pursuant to Section 3.2.2), extend any Commitment
Termination Date or release all or any substantial part of the
collateral security or release all or any substantial part of the
guarantees (except, in each case, as otherwise specifically provided
in any Loan Document) shall be made without the consent of each
Lender;
(c) extend the due date for, or reduce the amount of, any
scheduled amortization of principal under Section 3.1.2 or 3.1.3 of
any Loan (or reduce the principal amount of any Loan) shall be made
without the consent of the holder of that Note evidencing such Loan;
(d) affect adversely the interests, rights or obligations of
any Issuer qua Issuer shall be made without the consent of such
Issuer;
(e) affect adversely the interests, rights or obligations of
the Collateral Agent qua the Collateral Agent shall be made without
the consent of the Collateral Agent;
(f) affect adversely the interests, rights or obligations of
the Administrative Agent qua the Administrative Agent shall be made
without consent of the Administrative Agent; or
(g) impose any duty or obligation on any Co-Agent without
the consent of such Co-Agent.
No failure or delay on the part of the Administrative Agent, any Lender or the
holder of any Note in exercising any power or right under this Agreement or any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Administrative
Agent, the Collateral Agent, any Co-Agent, any Issuer, any Lender or the holder
of any Note under this Agreement or any other Loan Document shall, except as
may be
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otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 10.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be in
writing and addressed, delivered or transmitted to such party at its address or
facsimile number set forth below its signature hereto or at such other address
or facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any notice, if transmitted by facsimile, shall be deemed
given when transmitted upon receipt of electronic confirmation of transmission.
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to
pay on demand all reasonable costs and expenses of the Administrative Agent and
the Collateral Agent (including the reasonable fees and out-of-pocket costs and
expenses of (i) Mayer, Brown & Platt and (ii) local counsel to the
Administrative Agent and the Collateral Agent, subject to the Borrower's
reasonable approval) incurred in connection with
(a) the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules
and exhibits, and any amendments, waivers, consents, supplements or
other modifications to this Agreement or any other Loan Document as
may from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated; and
(b) the filing, recording, refiling or rerecording of the
Pledge Agreements and/or any Uniform Commercial Code financing
statements relating thereto and all amendments, supplements and
modifications to any thereof and any and all other documents or
instruments of further assurance required to be filed or recorded or
refiled or rerecorded by the terms hereof or of the Pledge Agreements;
and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Administrative Agent, the
Collateral Agent, each Issuer and the Lenders harmless from all liability for,
any stamp, documentary or other similar taxes which may be payable in
connection with the execution or delivery of this Agreement, the borrowings
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hereunder, or the issuance of the Notes or any other Loan Documents. The
Borrower also agrees to reimburse the Administrative Agent, the Collateral
Agent, each Issuer and each Lender upon demand for all reasonable out-of-pocket
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Administrative Agent, the Collateral Agent, each Issuer and
each Lender in connection with (x) the negotiation of any restructuring or
"work-out", whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations.
SECTION 10.4. Indemnification. (a) In consideration of the
execution and delivery of this Agreement by each Lender and the extension of
the Commitments, the Borrower hereby indemnifies, exonerates and holds the
Administrative Agent, the Collateral Agent, each Co-Agent, each Issuer and each
Lender and each of their respective Affiliates, officers, directors, employees
and agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action
for which indemnification hereunder is sought), including reasonable attorneys'
fees and disbursements (collectively, the "Indemnified Liabilities"), incurred
by the Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(i) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan;
(ii) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties;
(iii) the issuance of the Letters of Credit, other than as a
result of the gross negligence or willful misconduct of the Issuer of
the applicable Letters of Credit as determined by a court of competent
jurisdiction;
(iv) the failure of an Issuer to honor a drawing under any
Letter of Credit issued by it as a result of an act or omission,
whether rightful or wrongful, of any present or futurede jure or de
facto government or governmental authority;
(v) any investigation, litigation or proceeding related to
any acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not the
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Administrative Agent, the Collateral Agent, any Co-Agent, any Issuer
or any Lender is party thereto;
(vi) any investigation, litigation or proceeding related to
any environmental cleanup, audit, compliance or other matter relating
to the protection of the environment or the Release by the Borrower or
any of its Subsidiaries of any Hazardous Material; or
(vii) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law except
as aforesaid to the extent not payable by reason of the Indemnified Party's
gross negligence or wilful misconduct or breach of such obligations.
(b) NEITHER THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT, ANY
ISSUER, ANY CO-AGENT NOR ANY LENDER SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY HEREUNDER OR ANY OTHER PERSON FOR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS.
SECTION 10.5. Survival. The obligations of the Borrower under
Sections 2.8.6, 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the
Lenders under Section 9.1, shall in each case survive any termination of this
Agreement, the payment in full of all the Obligations and the termination of
all the Commitments. The representations and warranties made by each Obligor
in this Agreement and in each other Loan Document shall survive the execution
and delivery of this Agreement and each such other Loan Document.
SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or
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affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Borrower and each Lender (or
notice thereof satisfactory to the Administrative Agent) shall have been
received by the Administrative Agent and notice thereof shall have been given
by the Administrative Agent to the Borrower and each Lender.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT AND
EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. Except as otherwise
provided herein, this Agreement, the Notes and the other Loan Documents
constitute the entire understanding among the parties hereto with respect to
the subject matter hereof and supersede any prior agreements, written or oral,
with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders; and
(b) the rights of sale, participation, assignment and
transfer of the Lenders are limited to those set forth in Section
10.11.
SECTION 10.11. Securities Representation; Sale and Transfer of Loans
and Notes; Participations in Loans and Notes. (a) Each Lender hereby
represents that it is a commercial lender or financial institution and that it
will make each Loan for its own account in the ordinary course of its business
and not with a view to or for sale (except as permitted under this Section
10.11); provided, however, that the disposition of indebtedness held by such
Lender shall at all times be within its exclusive control.
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(b) Each Lender may assign, or sell participations in, its Loans and
Commitments to one or more other Persons in accordance with this Section 10.11.
Any Lender may, in connection with any assignment or participation or proposed
assignment or participation pursuant to this Section 10.11, disclose to the
Participant, or proposed assignee or Participant, any information relating to
the Borrower furnished to such Lender by or on behalf of the Borrower;
provided, however, that such Lender shall require such Participant, or proposed
assignee or Participant, to execute a Confidentiality Agreement prior to its
disclosure to such Participant, or proposed assignee or Participant of any
non-public information obtained by such Lender which has been identified as
such by the Borrower.
SECTION 10.11.1. Assignments. (a) Any Lender, upon notice to the
Borrower and the Administrative Agent
(i) after receipt of written consent of the Borrower (which
consent shall not be unreasonably withheld but shall not be required
during any period in which an Event of Default has occurred and is
continuing) and, in the case of the assignment of all or part of the
Revolving Loans or Revolving Loan Commitments, the consent of
Scotiabank, in its capacity as Issuer and any Issuer which has issued
Letters of Credit which are still outstanding and, if the
Administrative Agent is not such an Issuer, the Administrative Agent
(which consents shall be given or not given in the sole and absolute
discretion of each Issuer and, if applicable, the Administrative
Agent, whose determinations may take into account, without limitation,
the creditworthiness of any proposed assignee and the likelihood of
either increased costs to, or a reduction in the rate of return of
capital of, such Issuer or Administrative Agent, as the case may be,
if such proposed assignee were to become a "Lender", all in the
opinion of each such Issuer and, if applicable, the Administrative
Agent; provided, howeve, that any proposed assignee shall be deemed to
be "creditworthy" for the purposes of the creditworthiness criterion
described in this Section if the securities of such proposed assignee
which would be its Benchmark Securities are rated at a level and in a
manner that would not cause a Replacement Event with respect to such
proposed assignee if, at the date of determination, such proposed
assignee were a "Lender"), may assign and delegate to an Eligible
Assignee (other than an affiliate of a Lender); and
(ii) may assign and delegate to any of its affiliates;
provided, however, that if any Lender making an assignment pursuant to
this clause (ii), or the affiliate of such Lender to which such
assignment is made, can reasonably
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foresee that the Borrower would be subject to additional costs
underSection 2.8.6, 4.3, 4.4, 4.5 or 4.6 to which the Borrower would
not be subject if such assignment was not made, then if such an
assignment occurs, such affiliate shall not be entitled to
reimbursement for additional costs pursuant to Section 2.8.6, 4.3, 4.4,
4.5 or 4.6 with respect to any Loans or participations in Letters of
Credit so assigned to the extent such additional costs exceed the
amount of additional costs that would have been payable with respect
to such Loans or participations in Letters of Credit to the Lender
from which such affiliate purchased such assignment
(each such assignee being referred to as an "Assignee Lender"), all or any
fraction of such Lender's Loans and Commitments (which assignment and
delegation may be non-pro rata; in a minimum aggregate amount of $5,000,000 if
to a Lender and $15,000,000 if to any other Eligible Assignee (unless (i) such
assignment is made to an affiliate of the assigning Lender or (ii) the
remaining Loans and Commitments of any assigning Lender and its affiliates is
less than $5,000,000 or $15,000,000, as the case may be, and such Lender and
its affiliates assign all of such remaining Loans and Commitments to only one
Eligible Assignee); provided, however, that the Borrower, each other Obligor
and the Administrative Agent shall be entitled to continue to deal solely and
directly with such Lender in connection with the interests so assigned and
delegated to an Assignee Lender until
(a) written notice of such assignment and delegation,
together with payment instructions, addresses and related information
with respect to such Assignee Lender, shall have been given to the
Borrower and the Administrative Agent by such Lender and such Assignee
Lender; and
(b) such Assignee Lender shall have executed and delivered to
the Borrower and the Administrative Agent a Lender Assignment
Agreement and a Confidentiality Agreement, each accepted by the
Administrative Agent; and
(c) the Assignee Lender has been registered as a Lender in
the Register in accordance with Section 10.15 hereof; and
(d) the processing fees described below shall have been paid.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement and records the Assignee Lender as a Lender in the
Register in accordance with Section 10.15 hereof, (x) the Assignee Lender
thereunder shall be deemed automatically to have become a party hereto and to
the extent
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that rights and obligations hereunder have been assigned and delegated to such
Assignee Lender in connection with such Lender Assignment Agreement, shall have
the rights and obligations of a Lender hereunder and under the other Loan
Documents, and (y) the assigning Lender, to the extent that rights and
obligations hereunder have been assigned and delegated by it in connection with
such Lender Assignment Agreement, shall be released from its obligations
hereunder and under the other Loan Documents. Such assigning Lender or such
Assignee Lender shall also pay a processing fee to the Administrative Agent
upon delivery of any Lender Assignment Agreement in the amount of $3,000. Any
attempted assignment and delegation not made in accordance with this Section
10.11.1 shall be null and void.
(b) Notwithstanding clause (a), any Lender may assign and pledge all
or any portion of its Loans and Note to any Federal Reserve Bank as collateral
security pursuant to Regulation A of the F.R.S. Board and any Operating
Circular issued by such Federal Reserve Bank; provided, however, that no such
assignment under this clause (b) shall release the assignor Lender from any of
its obligations hereunder.
SECTION 10.11.2. Participations. Any Lender may at any time sell to
one or more commercial banks or other Persons which are "accredited investors"
as defined in Regulation D of the Securities Act of 1933 (each of such
commercial banks and other Persons being herein called a "Participant")
participating interests in any of the Loans, Commitments, or other interests of
such Lender hereunder; provided, however, that
(a) no participation contemplated in this Section 10.11.2
shall relieve such Lender from its Commitments or its other
obligations hereunder or under any other Loan Document;
(b) such selling Lender shall remain solely responsible for
the performance of its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the
Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under this Agreement and each of the other Loan Documents;
(d) no Participant, as such, shall be entitled to require
such Lender to take or refrain from taking any action hereunder or
under any other Loan Document, except that such Lender may agree with
any Participant that such Lender will not, without such Participant's
consent, take
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any actions of the type described in clause (b) or (c) of Section
10.1; and
(e) the Borrower shall not be required to pay any amount
under Sections 2.8.6, 4.3, 4.4, 4.5 and 4.6 that is greater than the
amount which it would have been required to pay had no participating
interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.8 and 4.9, shall be considered a Lender; provided, however, that (i)
no Participant shall be entitled to receive any greater amount pursuant to
Sections 4.8 and 4.9 than the transferor Lender would have been entitled to
receive in respect of the amount of the participation effected by such
transferor Lender to such Participant had not such participation occurred and
(ii) each Participant shall be obligated to comply with the provisions of
Section 4.10 as if it were a "Lender" if any of the circumstances described in
said Section affect such Participant.
SECTION 10.12. Copies to Lenders. The Borrower agrees to distribute
each document, instrument or communication it delivers to the Administrative
Agent in accordance with the terms hereof.
SECTION 10.13. Other Transactions. Nothing contained herein shall
preclude the Administrative Agent, the Collateral Agent, any Issuer, any
Co-Agent or any Lender from engaging in any transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Affiliates in which the Borrower or such Affiliate is not restricted
hereby from engaging with any other Person.
SECTION 10.14. Confidentiality. Subject to clause (a)(ii) of Section
10.11, including, as required, the delivery of a Confidentiality Agreement
executed by a Participant, or proposed assignee or Participant, each Lender
shall hold all non-public information obtained pursuant to the requirements of
this Agreement that has been identified as such by the Borrower in accordance
with its customary procedure for handling confidential information of this
nature and in accordance with safe and sound banking practices, and in any
event, subject to Section 10.11, including, as required, the obtaining of a
Confidentiality Agreement, may make disclosures reasonably required by a bona
fide assignee or Participant, or a bona fide proposed assignee or Participant,
in connection with the transfer, or the contemplated transfer, of any Loans or
Commitments or any participation therein or to such Lender's auditors or
counsel or as required or requested by any central bank or other regulatory
authority having supervisory powers with respect to such Lender or any other
governmental agency or representative thereof or pursuant to a court of
competent jurisdiction (with or without a subpoena)
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or other legal process; provided, however, that, unless specifically prohibited
by applicable law or court order, each Lender shall notify the Borrower of any
request by any governmental agency or representative thereof (other than any
such request in connection with an examination of the financial condition of
such Lender by such governmental agency) for disclosure of such information;
provided, further, that in no event shall any Lender be obligated or required
to return to the Borrower any materials furnished by the Borrower or any of its
Subsidiaries. The obligations of this Section 10.14 shall not supersede or
otherwise condition the obligations of signatories to a Confidentiality
Agreement delivered in accordance with clause (b) of Section 10.11.
SECTION 10.15. The Register. The Administrative Agent, on behalf of
the Borrower, shall maintain at its address set forth below its signature
hereto a register for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amount of any Term Loans, Delayed Term
Loans or Revolving Loans and Letters of Credit issued by, each Lender from time
to time (the "Register"), together with each payment made in respect of any
thereof. The Borrower, the Administrative Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement notwithstanding any other notice, and no transfer of
any Lender's interest shall be effective until the Person to whom such interest
is transferred is recorded as a Lender in the Register. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
SECTION 10.16. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE
AGENT, THE COLLATERAL AGENT, THE ISSUERS, THE CO-AGENTS, THE LENDERS OR THE
BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF
ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY
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PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION
OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 10.17. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE
COLLATERAL AGENT, THE ISSUERS, THE CO-AGENTS, THE LENDERS AND THE BORROWER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT, THE ISSUERS, THE
CO-AGENTS, THE LENDERS OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND
EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT, THE
COLLATERAL AGENT, THE ISSUERS, THE CO-AGENTS, AND THE LENDERS ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
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<PAGE> 125
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
HEALTHTRUST, INC. -
THE HOSPITAL COMPANY
By: /s/ Glenn D. Davis
------------------------------------
Title: Treasurer
Address: 4525 Harding Road
Nashville, Tennessee 37205
Facsimile No.: (615) 298-6377
Attention: Glenn D. Davis
Treasurer
THE BANK OF NOVA SCOTIA,
as Administrative Agent,
Co-Agent and Lender
By: /s/ Mary K. Munoz
------------------------------------
Authorized Signatory
Domestic
Office: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Facsimile No.: (404) 888-8998
Attention: Mary K. Munoz
Representative
LIBOR
Office: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Facsimile No.: (404) 888-8998
Attention: Mary K. Munoz
Representative
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<PAGE> 126
ABN AMRO BANK, N.V., as Co-Agent and
Lender
By: /s/ W.P. Fischer
------------------------------------
Title: Senior Vice President
By: /s/ W.D. Suttles
------------------------------------
Title: Vice President
Domestic
Office: One Ravinia Drive, Suite 1200
Atlanta, Georgia 30346
Facsimile No.: (404) 395-9188
Attention: Adam S. Greene
LIBOR
Office: One Ravinia Drive, Suite 1200
Atlanta, Georgia 30346
Facsimile No.: (404) 395-9188
Attention: Adam S. Greene
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BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Co Agent and
Lender
By: /s/ Brad DeSpain
-----------------------------------
Title: Vice President
Domestic
Office: Credit Products Division
555 South Flower Street
11th Floor, #5618
Los Angeles, California 90071
Facsimile No.: (213) 228-2756
Attention: Brad DeSpain
LIBOR
Office: Credit Products Division
555 South Flower Street
11th Floor, #5618
Los Angeles, California 90071
Facsimile No.: (213) 228-2756
Attention: Brad DeSpain
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THE CHASE MANHATTAN BANK, N.A., as Co-
Agent and Lender
By: /s/ Elliott H. Jones
-----------------------------------
Title: Managing Director
Domestic
Office: One Chase Manhattan Plaza,
5th Floor
New York, New York 10081
Facsimile No.: (212) 552-7075
Attention: Michael Bayley
LIBOR
Office: One Chase Manhattan Plaza,
5th Floor
New York, New York 10081
Facsimile No.: (212) 552-7375
Attention: Barbara Hail or
Rocky Chan
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<PAGE> 129
CHEMICAL BANK, as Co-Agent and Lender
By: /s/ Peter C. Eckstein
------------------------------------
Title: Vice President
Domestic
Office: 270 Park Avenue
New York, New York 10017
Facsimile No.: (212) 972-0009
Attention: Peter C. Eckstein
LIBOR
Office: 270 Park Avenue
New York, New York 10017
Facsimile No.: (212) 972-0009
Attention: Peter C. Eckstein
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<PAGE> 130
CITICORP USA, INC., as Co-Agent and Lender
By: /s/ Barbara A. Cohen
------------------------------------
Title: Vice President
Domestic
Office: 399 Park Avenue
New York, New York 10022
c/o Citicorp North America, Inc.
2001 Ross Avenue, Suite 1400
Dallas, Texas 75201
Telephone No.: (214) 953-3833
Facsimile No.: (214) 953-3888
Attention: J. Lang Aston
LIBOR
Office: 399 Park Avenue
New York, New York 10022
c/o Citicorp North America, Inc.
2001 Ross Avenue, Suite 1400
Dallas, Texas 75201
Telephone No.: (214) 953-3833
Facsimile No.: (214) 953-3888
Attention: J. Lang Aston
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<PAGE> 131
CONTINENTAL BANK N.A., as Co-Agent and
Lender
By: /s/ Michael J. McKenney
-------------------------------------
Title: Vice President
Domestic
Office: 231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: (312) 987-5833
(312) 987-7384
Attention: Michael J. McKenney
LIBOR
Office: 231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: (312) 987-5833
(312) 987-7384
Attention: Michael J. McKenney
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<PAGE> 132
DEUTSCHE BANK AG, New York and/or Cayman
Islands Branch, as Co-Agent and Lender
By: /s/ Robert A. Maddux
-------------------------------------
Title: Director
By: /s/ Andreas J. Dirnagl
-------------------------------------
Title: Assistant Vice President
Domestic
Office: 31 West 52nd Street
New York, New York 10019
Facsimile No.: (212) 474-8212
Attention: Robert A. Maddux
LIBOR
Office: 31 West 52nd Street
New York, New York 10019
Facsimile No.: (212) 474-8212
Attention: Robert A. Maddux
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<PAGE> 133
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Co-Agent and Lender
By: /s/ Teresa D. Whelpley
-------------------------------------
Title: Vice President
Domestic
Office: One First Union Center TW-19
Charlotte, NC 28288-0735
Facsimile No.: (704) 374-9144
Attention: Teresa D. Whelpley
LIBOR
Office: One First Union Center TW-19
Charlotte, NC 28288-0735
Facsimile No.: (704) 374-9144
Attention: Teresa D. Whelpley
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<PAGE> 134
GENERAL ELECTRIC CAPITAL CORPORATION, as
Co-Agent and Lender
By: /s/ Brian G. Reynolds
-------------------------------------
Title: Senior Vice President
Domestic
Office: 5665 New Northside Drive
Suite 200
Atlanta, Georgia 30328
Facsimile No.: (404) 988-2328
Attention: Brian G. Reynolds
Cheryl P. Boyd
LIBOR
Office: 5665 New Northside Drive
Suite 200
Atlanta, Georgia 30328
Facsimile No.: (404) 988-2328
Attention: Brian G. Reynolds
Cheryl P. Boyd
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<PAGE> 135
THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW
YORK BRANCH, as Co-Agent and Lender
By: /s/ Junri Oda
--------------------------------
Title: Senior Vice President &
Senior Manager
Domestic
Office: 245 Park Avenue
New York, New York 10167-0037
Facsimile No.: (212) 682-2870
Attention: Mr. Jim Welch
Vice President
LIBOR
Office: 245 Park Avenue
New York, New York 10167-0037
Facsimile No.: (212) 682-2870
Attention: Mr. Jim Welch
Vice President
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<PAGE> 136
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, New York Branch, as Co-Agent and
Lender
By: /s/ Philip A. Marsden
-------------------------------
Title: Deputy General Manager
Domestic
Office: 165 Broadway
49th Floor
New York, New York 10006
Facsimile No.: (212) 608-2371
Attention: Mr. Philip A. Marsden
LIBOR
Office: 165 Broadway
49th Floor
New York, New York 10006
Facsimile No.: (212) 608-2371
Attention: Mr. Philip A. Marsden
Copies of all
Notices to:
Atlanta Representative Office
Marquis One Tower, Suite 2801
245 Peachtree Center Avenue, NE
Atlanta, Georgia 30303
Facsimile No.: (404) 659-7210
Attention: Ms. Rebecca J. Sedlar
Vice President
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<PAGE> 137
NATIONSBANK OF TENNESSEE, as Co-Agent and
Lender
By: /s/ Patrick J. Neal
--------------------------------
Title: Associate Vice President
Domestic
Office: One Nationsbank Plaza
Medical Industries, 2nd Floor
Nashville, Tennessee 37239-1697
Facsimile No.: (615) 749-4743
Attention: Patrick J. Neal
LIBOR
Office: One Nationsbank Plaza
Medical Industries, 2nd Floor
Nashville, Tennessee 37239-1697
Facsimile No.: (615) 749-4743
Attention: Patrick J. Neal
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<PAGE> 138
SWISS BANK CORPORATION, San Francisco
Branch, as Co-Agent and Lender
By: /s/ Colin T. Taylor
--------------------------------
Title: Director - Merchant Banking
By: /s/ David L. Parrot
--------------------------------
Title: Associate Director -
Merchant Banking
Domestic
Office: 101 California Street,
Suite 1700
San Francisco, CA 94111-5884
Facsimile No.: (415) 989-7570
Attention: Colin T. Taylor
LIBOR
Office: 101 California Street,
Suite 1700
San Francisco, CA 94111-5884
Facsimile No.: (415) 989-7570
Attention: Colin T. Taylor
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<PAGE> 139
THIRD NATIONAL BANK IN NASHVILLE, as Co-
Agent and Lender
By: /s/ Kevin P. Lavender
--------------------------------
Title: Group Vice President
Domestic
Office: 201 Fourth Avenue North
Nashville, Tennessee 37219
Facsimile No.: (615) 748-5161
Attention: Kevin P. Lavender
LIBOR
Office: 201 Fourth Avenue North
Nashville, Tennessee 37219
Facsimile No.: (615) 748-5161
Attention: Kevin Lavender
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<PAGE> 140
THE TORONTO-DOMINION BANK, as Co-Agent and
Lender
By: /s/ Everett E. Walker
---------------------------------------
Title: Manager - Credit Administration
Domestic
Office: 909 Fannin, Suite 1700
Houston, Texas 77010
Facsimile No.: (713) 951-9921
Attention: E.E. Walker
Manager - Credit
Administration
LIBOR
Office: 909 Fannin, Suite 1700
Houston, Texas 77010
Facsimile No.: (713) 951-9921
Attention: E.E. Walker
Manager - Credit
Administration
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<PAGE> 141
AMSOUTH BANK, N.A.
By: /s/ William P. Barnes
--------------------------------
Title: Vice President
Domestic
Office: 1900 Fifth Avenue North
Birmingham, Alabama 35203
Facsimile No.: (205) 326-4075
Attention: William P. Barnes
LIBOR
Office: 1900 Fifth Avenue North
Birmingham, Alabama 35203
Facsimile No.: (205) 326-4075
Attention: William P. Barnes
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<PAGE> 142
THE BANK OF CALIFORNIA, N.A.
By: /s/ Richard A. Lopatt
--------------------------------
Title: Vice President
Domestic
Office: 550 South Hope Street
Los Angeles, CA 90071
Facsimile No.: (213) 243-3552
Attention: Richard A. Lopatt
LIBOR
Office: 550 South Hope Street
Los Angeles, CA 90071
Facsimile No.: (213) 243-3552
Attention: Richard A. Lopatt
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<PAGE> 143
BANK OF IRELAND, Grand Cayman Branch
By: /s/ Roger M. Burns
--------------------------------
Title: Vice President
Domestic
Office: 640 Fifth Avenue
New York, New York 10019
Facsimile No.: (212) 586-7752
Attention: Roger M. Burns
LIBOR
Office: 640 Fifth Avenue
New York, New York 10019
Facsimile No.: (212) 586-7752
Attention: Roger M. Burns
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<PAGE> 144
CORESTATES BANK, N.A.
By: /s/ Cristina Lopez-Ona
--------------------------------
Title: Commercial Officer
Domestic
Office: 1500 Market Street, West Tower
Philadelphia, PA 19101
Facsimile No.: (215) 786-8448
Attention: Cristina Lopez-Ona
LIBOR
Office: 1500 Market Street, West Tower
Philadelphia, PA 19101
Facsimile No.: (215) 786-8448
Attention: Vickie D'Alonzo
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<PAGE> 145
CREDITANSTALT-BANKVEREIN
By: /s/ Robert M. Biringer
--------------------------------
Title: Senior Vice President
By: /s/ Donato R. Giuseppi, Jr.
--------------------------------
Title: Deputy General Manager
Domestic
Office: Two Ravinia Drive, Suite 1680
Atlanta, Georgia 30346
Facsimile No.: (404) 390-1851
Attention: R. Scott Newth
LIBOR
Office: 245 Park Avenue, 27th Floor
New York, New York 10167
Facsimile No.: (212) 856-1006
Attention: Sofia Spinnato
Administrative Assistant
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<PAGE> 146
THE DAIWA BANK, LIMITED
By: /s/ Teryll L. Herron
--------------------------------
Title: Vice President
By: /s/ E.B. Buchanan, Jr.
--------------------------------
Title: Vice President
Domestic
Office: 333 South Wacker Drive
Suite 5400
Chicago, Illinois 60606
Facsimile No.: (312) 876-1995
Attention: Operations Manager
LIBOR
Office: 333 South Wacker Drive
Suite 5400
Chicago, Illinois 60606
Facsimile No.: (312) 876-1995
Attention: Operations Manager
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<PAGE> 147
DRESDNER BANK AG, New York Branch
By: /s/ Peter Becker
--------------------------------
Title: Vice President
By: /s/ T. L. Darby
--------------------------------
Title: Vice President
Domestic
Office: 75 Wall Street
New York, New York 10005
Facsimile No.: (212) 574-0129
Attention: Credit Services
LIBOR
Office: 75 Wall Street
New York, New York 10005
Facsimile No.: (212) 574-0129
Attention: Credit Services
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<PAGE> 148
FIRST AMERICAN NATIONAL BANK
By: /s/ Sandra K. Grimes
--------------------------------
Title: Bank Officer
Domestic
Office: First American Center,
Second Floor
Nashville, Tennessee 37237-0203
Facsimile No.: (615) 748-2812
Attention: Sandra K. Grimes
LIBOR
Office: First American Center
Second Floor
Nashville, Tennessee 37237-0203
Facsimile No.: (615) 748-2812
Attention: Sandra K. Grimes
-142-
<PAGE> 149
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Oscar Jazdowski
---------------------------------
Title: Managing Director
Domestic
Office: 100 Federal Street MS 01-08-04
Boston, MA 02110
Facsimile No.: (617) 434-0819
Attention: Oscar Jazdowski
LIBOR
Office: 100 Federal Street MS 01-08-04
Boston, MA 02110
Facsimile No.: (617) 434-0819
Attention: Oscar Jazdowski
-143-
<PAGE> 150
MELLON BANK, N.A.
By: /s/ Marsha Wicker
--------------------------------
Title: Assistant Vice President
Domestic
Office: Two Mellon Center, Room 270
Pittsburgh, PA 15259
Facsimile No.: (412) 234-9010
Attention: Marsha Wicker
LIBOR
Office: Three Mellon Center
Loan Administration
Pittsburgh, PA 15259
Facsimile No.: (412) 234-5049
Attention: Elaine Washburn,
Loan Administration
-144-
<PAGE> 151
MIDLAND BANK plc, New York Branch
By: /s/ Christopher French
--------------------------------
Title: Director
Domestic
Office: 140 Broadway, 5th Floor
New York, New York 10005
Facsimile No.: (212) 658-2586
Attention: Christopher French
LIBOR
Office: 140 Broadway, 5th Floor
New York, New York 10005
Facsimile No.: (212) 658-2586
Attention: Christopher French
-145-
<PAGE> 152
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Masaaki Yamagishi
--------------------------------
Title: Chief Manager
Domestic
Office: 440 South LaSalle Street
Suite 3180
Chicago, Illinois 60605
Facsimile No.: (312) 663-0863
Attention: Jordan Greene
Assistant Vice President
LIBOR
Office: 440 South LaSalle Street
Suite 3180
Chicago, Illinois 60605
Facsimile No.: (312) 663-0863
Attention: Jordan Greene
Assistant Vice President
-146-
<PAGE> 153
PNC BANK
By: /s/ Christopher A. Black
--------------------------------
Title: Assistant Vice President
Domestic
Office: 500 West Jefferson
Louisville, Kentucky 40207
Facsimile No.: (502) 581-2302
Attention: Mr. Chris Black
LIBOR
Office: 500 West Jefferson
Louisville, Kentucky 40207
Facsimile No.: (502) 581-2302
Attention: Mr. Chris Black
-147-
<PAGE> 154
THE SAKURA BANK, LIMITED
By: /s/ M. Inaba
-------------------------------
Title: Vice President and
Senior Manager
Domestic
Office: 245 Peachtree Center Avenue,
Suite 2703
Atlanta, Georgia 30303
Facsimile No.: (404) 521-1133
Attention: Charles Zimmerman
Vice President
LIBOR
Office: 245 Peachtree Center Avenue,
Suite 2703
Atlanta, Georgia 30303
Facsimile No.: (404) 521-1133
Attention: Charles Zimmerman
Vice President
-148-
<PAGE> 155
SHAWMUT BANK CONNECTICUT, N.A.
By: /s/ Manfred O. Eigenbrod
--------------------------------
Title: Vice President
Domestic
Office: 777 Main Street
MSM 397
Hartford, Connecticut 06115
Facsimile No.: (203) 986-4621
(203) 986-5367
Attention: Rex Fowler
Assistant Vice President
LIBOR
Office: 777 Main Street
MSM 397
Hartford, Connecticut 06115
Facsimile No.: (203) 986-4621
(203) 986-5367
Attention: Rex Fowler
Assistant Vice President
-149-
<PAGE> 156
THE SUMITOMO BANK, LIMITED
By: /s/ Yoshinori Kawamura
----------------------------------
Title: Joint General Manager
Domestic
Office: New York Branch
One World Trade Center
Suite 9651
New York, New York 10048
Facsimile No.: (212) 553-0118
Attention: Michael D. Deadder
Assistant Vice President
LIBOR
Office: New York Branch
One World Trade Center
Suite 9651
New York, New York 10048
Facsimile No.: (212) 553-0118
Attention: Michael D. Deadder
Assistant Vice President
-150-
<PAGE> 157
THE TOKAI BANK, LIMITED, Atlanta Agency
By: /s/ Ryuji Kurihara
--------------------------------
Title: Deputy General Manager
Domestic
Office: 285 Peachtree Center Avenue, NE
Suite 2802
Atlanta, Georgia 30303
Facsimile No.: (404) 653-0737
Attention: William R. Stutts
LIBOR
Office: 285 Peachtree Center Avenue, NE
Suite 2802
Atlanta, Georgia 30303
Facsimile No.: (404) 653-0737
Attention: William R. Stutts
-151-
<PAGE> 158
UNION PLANTERS NATIONAL BANK
By: /s/ H. Blaine Strock, III
--------------------------------
Title: Vice President
Domestic
Office: 401 Union Street, Second Floor
Nashville, Tennessee 37219
Facsimile No.: (615) 726-4274
Attention: H. Blaine Strock, III
LIBOR
Office: 401 Union Street, Second Floor
Nashville, Tennessee 37219
Facsimile No.: (615) 726-4274
Attention: H. Blaine Strock, III
-152-
<PAGE> 159
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ David Wynde
--------------------------------
Title: Vice President
Domestic
Office: 111 S.W. Fifth Avenue, T-29
P.O. Box 8837
Portland, Oregon 97208
Facsimile No.: (503) 275-4267
Attention: David Wynde
National Corporate Banking
LIBOR
Office: 111 S.W. Fifth Avenue, PL-7
P.O. Box 8837
Portland, Oregon 97208
Facsimile No.: (503) 275-4600
Attention: Carol Banhart
Note Department
-153-
<PAGE> 160
WELLS FARGO BANK, N.A.
By: /s/ Brian O'Melveny
--------------------------------
Title: Assistant Vice President
Domestic
Office: 420 Montgomery Street
MAC 0101-091
San Francisco, CA 94163
Facsimile No.: (415) 421-1352
Attention: Brian O'Melveny
LIBOR
Office: 420 Montgomery Street
MAC 0101-091
San Francisco, CA 94163
Facsimile No.: (415) 989-4319
Attention: Barbara Kattman
-154-
<PAGE> 161
AMENDMENT NO. 1 TO CREDIT AGREEMENT
This AMENDATORY AGREEMENT, dated as of May 9, 1994, to the Credit
Agreement, dated as of April 28, 1994 (as amended, supplemented, amended and
restated or otherwise modified from time to time, the "Existing Credit
Agreement") by and among HEALTHTRUST, INC. -- THE HOSPITAL COMPANY, a Delaware
corporation (the "Borrower"), the various financial institutions parties
thereto (collectively, the "Lenders"), THE BANK OF NOVA SCOTIA ("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 (the "Co-Agents") for the Lenders, and
Scotiabank, as administrative agent (in such capacity, the "Administrative
Agent") for the Co-Agents and the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower has requested, and the Lenders are willing, on
the terms and subject to the conditions hereinafter set forth, to amend the
Existing Credit Agreement to restate certain covenants and schedules as set
forth herein;
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Amendatory Agreement,
including its preamble and recitals, have the following meanings (such meanings
to be equally applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Amendment No. 1" means this Amendatory Agreement.
<PAGE> 162
"Amendment No. 1 Effective Date" is defined in Section 3.1.
"Borrower" is defined in the preamble.
"Co-Agents" is defined in the preamble.
"Existing Credit Agreement" is defined in the preamble.
"Lenders" is defined in the preamble.
"Scotiabank" is defined in the preamble.
SECTION 1.2. Other Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Amendatory Agreement,
including its preamble and recitals, have the meanings provided in the Existing
Credit Agreement.
ARTICLE II
AMENDMENTS TO EXISTING CREDIT AGREEMENT AS OF
THE AMENDMENT NO. 1 EFFECTIVE DATE
Effective on (and subject to the occurrence of) the Amendment No. 1
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Article II. Except as so amended, the Existing Credit Agreement
shall continue in full force and effect.
SECTION 2.1. Amendments to the Credit Agreement.
SECTION 2.1.1. Amendments to Section 1.1. Section 1.1 of the
Existing Credit Agreement is hereby amended by inserting the following new
terms in their alphabetically appropriate places:
"Amendment No. 1" means the Amendatory Agreement,
dated as of May 9, 1994, among the parties thereto, amending
this Agreement as then in effect.
"Amendment No. 1 Effective Date" is defined in
Section 3.1 of Amendment No. 1.
SECTION 2.1.2. Amendment to Section 2.8.2 of the Existing Credit
Agreement. Section 2.8.2 of the Existing Credit Agreement is hereby amended by
deleting the phrase "and, if entitled thereto, a ratable portion of any payment
made by the Borrower" at the end of the proviso thereto.
-2-
<PAGE> 163
SECTION 2.1.3. Amendments to Article VII of the Existing Credit
Agreement. Article VII of the Existing Credit Agreement is hereby amended as
set forth below:
(a) Clause (c)(i) of Section 7.1.6 of the Existing Credit
Agreement is hereby amended by adding the phrase "or loan or
contribute such proceeds to EPIC or its Subsidiaries to pay"
after the word pay in such clause.
(b) Clause (e) of Section 7.2.5 of the Existing Credit
Agreement is hereby amended in its entirety to read as
set forth below:
"(e) Investments in general acute care hospitals or
other health care businesses (other than as acquired in the
Other Transactions and Hospital Exchanges) or a Person which
owns or leases a general acute care hospital or other health
care business (i) to the extent the consideration for which is
Common Stock or (ii) in an aggregate amount not to exceed
$150,000,000 in any Fiscal Year or $310,000,000 from and after
the Effective Date, plus an amount equal to the sum of (x)
100% of Net Disposition Proceeds not applied to prepay Loans
and (y) Net Equity Proceeds designated by the Borrower to the
Administrative Agent in writing to be used for the purpose of
making such investments within one year of the receipt of such
Net Equity Proceeds;".
(c) Clause (c) of Section 7.2.8 of the Existing Credit
Agreement is hereby amended in its entirety to read as set forth
below:
"(c) the Borrower or any of its Subsidiaries may
purchase all or substantially all of the assets of any Person,
or acquire such Person by merger to the extent permitted as an
Investment pursuant to Section 7.2.5 or if the sole
consideration for such purchase is Common Stock.".
SECTION 2.1.4. Amendment to Disclosure Schedule. The Disclosure
Schedule of the Existing Credit Agreement shall be amended to insert the items
listed on Annex I hereto at the end thereof.
-3-
<PAGE> 164
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. Amendment No. 1 Effective Date. This Amendatory
Agreement shall become effective as of the date upon which (the "Amendment No.
1 Effective Date ") all the conditions set forth in this Section 3.1 shall have
been satisfied (on or prior to such date) and, thereafter, this Amendatory
Agreement shall be known, and may be referred to, as "Amendment No. 1".
SECTION 3.1.1. Execution of Counterparts. The Administrative Agent
shall have received counterparts of this Amendatory Agreement duly executed by
the Borrower, the Co-Agents, the Administrative Agent and the Required Lenders.
The delivery of an executed counterpart hereof by the Borrower shall constitute
a representation and warranty by the Borrower that, on the date of such
delivery and on Amendment No. 1 Effective Date, after giving effect to
Amendment No. 1, all statements set forth in Section 5.2.1 of the Credit
Agreement are true and correct as of each such date.
SECTION 3.1.2. Legal Details, etc. All documents executed or
submitted pursuant hereto shall be satisfactory in form and substance to the
Administrative Agent and its counsel and shall include certified copies of
board resolutions of the Borrower and its Subsidiaries authorizing the
transactions contemplated hereby and certificates of incumbency for those
officers of such Persons authorized to execute and deliver all agreements and
instruments contemplated hereby or relating hereto. The Administrative Agent
shall have received all information, and such counterpart originals or such
certified or other copies of such other materials, as the Administrative Agent
or its counsel may reasonably request, and all legal matters incident to the
transactions contemplated by this Amendment shall be satisfactory to the
Administrative Agent and its counsel. In addition, the Administrative Agent
shall have received such other agreements and documents as it may from time to
time request.
SECTION 3.1.3. Payment of Fees and Expenses. The Borrower shall have
paid in full all reasonable fees and expenses of the Scotiabank, or its counsel
or consultants incurred in respect of the negotiation, preparation and review
of the documentation relating to the transactions contemplated by this
Amendment No. 1 invoiced on or prior thereto.
-4-
<PAGE> 165
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Cross-References. References in this Amendatory
Agreement to any Article or Section are, unless otherwise specified or
otherwise required by the context, to such Article or Section of this
Amendatory Agreement.
SECTION 4.2. Loan Document Pursuant to Credit Agreement; Limited
Waiver. This Amendatory Agreement is a Loan Document executed pursuant to the
Credit Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered, and applied in accordance with all of the terms and
provisions of the Credit Agreement. Except as expressly amended or waived
hereby, all of the representations, warranties, terms, covenants and conditions
of the Credit Agreement shall remain unamended and unwaived. The amendments,
waivers and other terms set forth herein shall be limited precisely as provided
for herein and shall not be deemed to be a waiver of, amendment of, consent to,
or modification of, any other term or provision of the Credit Agreement or of
any term or provision of any other Collateral Document or Loan Document or of
any transaction or further or future action on the part of the Borrower which
would require the consent of any of Scotiabank under the Credit Agreement.
SECTION 4.3. Successors and Assigns. This Amendatory Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
SECTION 4.4. Counterparts. This Amendatory Agreement may be executed
by the parties hereto in several counterparts and be deemed to be an original
and all of which shall constitute together but one and the same agreement.
-5-
<PAGE> 166
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to be executed and delivered by their authorized agents of representatives as
of the date first above written.
HEALTHTRUST, INC. - THE HOSPITAL
COMPANY
By:
-----------------------------
Title:
THE BANK OF NOVA SCOTIA, as
Administrative Agent, Co-Agent and
Lender
By:
-----------------------------
Title:
ABN AMRO BANK, N.V., as
Co-Agent and Lender
By:
-----------------------------
Title:
By:
-----------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Co-Agent and Lender
By:
-----------------------------
Title:
THE CHASE MANHATTAN BANK, as
Co-Agent and Lender
By:
-----------------------------
Title:
-6-
<PAGE> 167
CHEMICAL BANK, as
Co-Agent and Lender
By:
-----------------------------
Title:
CITICORP USA, INC., as
Co-Agent and Lender
By:
-----------------------------
Title:
CONTINENTAL BANK N.A., as
Co-Agent and Lender
By:
-----------------------------
Title:
DEUTSCHE BANK AG, New York and/or
Cayman Islands Branch, as
Co-Agent and Lender
By:
-----------------------------
Title:
By:
-----------------------------
Title:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as
Co-Agent and Lender
By:
-----------------------------
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Co-Agent and Lender
By:
-----------------------------
Title:
-7-
<PAGE> 168
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, New York Branch, as
Co-Agent and Lender
By:
-----------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, New York Branch, as Co-
Agent and Lender
By:
-----------------------------
Title:
NATIONSBANK OF TENNESSEE, as Co-
Agent and Lender
By:
-----------------------------
Title:
SWISS BANK CORPORATION, San
Francisco Branch, as Co-Agent and
Lender
By:
-----------------------------
Title:
By:
-----------------------------
Title:
THIRD NATIONAL BANK IN NASHVILLE,
as Co-Agent and Lender
By:
-----------------------------
Title:
THE TORONTO-DOMINION BANK, as Co-
Agent and Lender
By:
-----------------------------
Title:
-8-
<PAGE> 169
AMSOUTH BANK, N.A.
By:
-----------------------------
Title:
THE BANK OF CALIFORNIA, N.A.
By:
-----------------------------
Title:
BANK OF IRELAND, Grand Cayman
Branch
By:
-----------------------------
Title:
CORESTATES BANK, N.A.
By:
-----------------------------
Title:
CREDITANSTALT-BANKVEREIN
By:
-----------------------------
Title:
By:
-----------------------------
Title:
THE DAIWA BANK, LIMITED
By:
-----------------------------
Title:
By:
-----------------------------
Title:
-9-
<PAGE> 170
DRESDNER BANK, AG, New York Branch
By:
-----------------------------
Title:
By:
-----------------------------
Title:
FIRST AMERICAN NATIONAL BANK
By:
-----------------------------
Title:
FIRST NATIONAL BANK OF BOSTON
By:
-----------------------------
Title:
MELLON BANK, N.A.
By:
-----------------------------
Title:
MIDLAND BANK plc, New York Branch
By:
-----------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
-----------------------------
Title:
PNC BANK
By:
-----------------------------
Title:
-10-
<PAGE> 171
THE SAKURA BANK, LIMITED
By:
-----------------------------
Title:
SHAWMUT BANK CONNECTICUT, N.A.
By:
-----------------------------
Title:
THE SUMITOMO BANK, LIMITED
By:
-----------------------------
Title:
THE TOKAI BANK, LIMITED, Atlanta
Agency
By:
-----------------------------
Title:
UNION PLANTERS NATIONAL BANK
By:
-----------------------------
Title:
UNTIED STATES NATIONAL BANK OF
OREGON
By:
-----------------------------
Title:
WELLS FARGO BANK, N.A.
By:
-----------------------------
Title:
-11-
