<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
---------------------
<TABLE>
<C> <S>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
</TABLE>
COMMISSION FILE NUMBER 1-11239
---------------------
COLUMBIA/HCA HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2497104
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
ONE PARK PLAZA 37203
NASHVILLE, TENNESSEE (Zip Code)
(Address of principal executive offices)
</TABLE>
(615) 344-9551
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock of the latest practical date.
<TABLE>
<CAPTION>
CLASS OF COMMON STOCK OUTSTANDING AT APRIL 30, 1999
--------------------- -----------------------------
<S> <C>
Voting common stock, $.01 par value 547,075,056 shares
Nonvoting common stock, $.01 par value 21,000,000 shares
</TABLE>
- --------------------------------------------------------------------------------
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<PAGE> 2
COLUMBIA/HCA HEALTHCARE CORPORATION
FORM 10-Q
MARCH 31, 1999
<TABLE>
<CAPTION>
PAGE OF
FORM 10-Q
---------
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Income -- for the
quarters ended March 31, 1999 and 1998................. 1
Condensed Consolidated Balance Sheets -- March 31, 1999
and December 31, 1998.................................. 2
Condensed Consolidated Statements of Cash Flows -- for the
quarters ended March 31, 1999 and 1998................. 3
Notes to Condensed Consolidated Financial Statements...... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 11
PART II: OTHER INFORMATION
Items 1 and 6............................................... 24
</TABLE>
<PAGE> 3
COLUMBIA/HCA HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998
UNAUDITED
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Revenues.................................................... $ 4,655 $ 4,901
Salaries and benefits....................................... 1,860 2,013
Supplies.................................................... 722 746
Other operating expenses.................................... 892 940
Provision for doubtful accounts............................. 338 343
Depreciation and amortization............................... 296 309
Interest expense............................................ 111 153
Equity in earnings of affiliates............................ (35) (42)
Gains on sales of facilities................................ (249) --
Impairment of long-lived assets............................. 106 --
Restructuring of operations and investigation related
costs..................................................... 30 38
-------- --------
4,071 4,500
-------- --------
Income from continuing operations before minority interests
and income taxes.......................................... 584 401
Minority interests in earnings of consolidated entities..... 14 20
-------- --------
Income from continuing operations before income taxes....... 570 381
Provision for income taxes.................................. 248 162
-------- --------
Income from continuing operations........................... 322 219
Loss from operations of discontinued businesses, net of tax
benefit of ($16).......................................... -- (22)
-------- --------
Net income........................................ $ 322 $ 197
======== ========
Basic earnings per share:
Income from continuing operations......................... $ .50 $ .34
Loss from operations of discontinued businesses........... -- (.03)
-------- --------
Net income........................................ $ .50 $ .31
======== ========
Diluted earnings per share:
Income from continuing operations......................... $ .50 $ .34
Loss from operations of discontinued businesses........... -- (.03)
-------- --------
Net income........................................ $ .50 $ .31
======== ========
Shares used in earnings per share calculations (in
thousands):
Basic..................................................... 639,403 642,050
Diluted................................................... 645,011 644,933
Cash dividends per share.................................... $ .02 $ .02
</TABLE>
See accompanying notes.
1
<PAGE> 4
COLUMBIA/HCA HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 586 $ 297
Accounts receivable, less allowances for doubtful accounts
of $1,639 in 1999 and $1,645 in 1998................... 2,250 2,096
Inventories............................................... 419 434
Income taxes receivable................................... -- 149
Other..................................................... 979 887
------- -------
4,234 3,863
Property and equipment, at cost............................. 15,410 15,644
Accumulated depreciation.................................... (6,261) (6,195)
------- -------
9,149 9,449
Investments of insurance subsidiary......................... 1,533 1,614
Investments in and advances to affiliates................... 865 1,275
Intangible assets, net...................................... 2,815 2,910
Other....................................................... 201 318
------- -------
$18,797 $19,429
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 748 $ 784
Accrued salaries.......................................... 429 425
Other accrued expenses.................................... 1,252 1,282
Long-term debt due within one year........................ 763 1,068
------- -------
3,192 3,559
Long-term debt.............................................. 5,566 5,685
Professional liability risks, deferred taxes and other
liabilities............................................... 1,788 1,839
Minority interests in equity of consolidated entities....... 772 765
Stockholders' equity:
Common stock $.01 par; authorized 1,600,000,000 voting
shares and 50,000,000 nonvoting shares; outstanding
602,577,100 voting shares and 21,000,000 nonvoting
shares -- March 31, 1999 and 621,578,300 voting shares
and 21,000,000 nonvoting shares -- December 31, 1998... 6 6
Capital in excess of par value............................ 3,103 3,498
Other..................................................... 11 11
Accumulated other comprehensive income.................... 64 80
Retained earnings......................................... 4,295 3,986
------- -------
7,479 7,581
------- -------
$18,797 $19,429
======= =======
</TABLE>
See accompanying notes.
2
<PAGE> 5
COLUMBIA/HCA HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998
UNAUDITED
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998
------- -----
<S> <C> <C>
Cash flows from continuing operating activities:
Net income................................................ $ 322 $ 197
Adjustments to reconcile net income to net cash provided
by continuing operating activities:
Provision for doubtful accounts...................... 338 343
Depreciation and amortization........................ 296 309
Income taxes......................................... 331 501
Gains on sales of facilities......................... (249) --
Impairment of long-lived assets...................... 106 --
Loss from discontinued operations.................... -- 22
Changes in operating assets and liabilities.......... (844) (678)
Other................................................ 12 (6)
------- -----
Net cash provided by continuing operating
activities....................................... 312 688
------- -----
Cash flows from investing activities:
Purchase of property and equipment........................ (301) (316)
Acquisition of hospitals and health care entities......... -- (66)
Disposition of property and equipment..................... 506 43
Change in investments..................................... 541 (39)
Change in net assets of discontinued operations, net...... -- 30
Other..................................................... 64 71
------- -----
Net cash provided by (used in) investing
activities....................................... 810 (277)
------- -----
Cash flows from financing activities:
Issuance of long-term debt................................ 1,004 --
Net change in bank borrowings............................. (1,241) (345)
Repayment of long-term debt............................... (187) (72)
Payment of cash dividends................................. (13) (13)
Issuances (repurchases) of common stock, net.............. (408) 35
Other..................................................... 12 2
------- -----
Net cash used in financing activities............. (833) (393)
------- -----
Change in cash and cash equivalents......................... 289 18
Cash and cash equivalents at beginning of period............ 297 110
------- -----
Cash and cash equivalents at end of period.................. $ 586 $ 128
======= =====
Interest payments........................................... $ 83 $ 117
Income tax refunds, net..................................... $ (82) $(334)
</TABLE>
See accompanying notes.
3
<PAGE> 6
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- BASIS OF PRESENTATION
Columbia/HCA Healthcare Corporation is a holding company whose affiliates
own and operate hospitals and related health care entities. The term
"affiliates" includes direct and indirect subsidiaries of Columbia/HCA
Healthcare Corporation and partnerships and joint ventures in which such
subsidiaries are partners. At March 31, 1999, these affiliates owned and
operated 273 hospitals, 95 freestanding surgery centers and provided extensive
outpatient and ancillary services. Affiliates of Columbia/HCA Healthcare
Corporation are also partners in several 50/50 joint ventures that own and
operate 24 hospitals and 5 freestanding surgery centers which are accounted for
using the equity method. The affiliates' facilities are located in 31 states,
England and Switzerland. The terms "Columbia/HCA" or the "Company" as used in
this Quarterly Report on Form 10-Q refer to Columbia/HCA Healthcare Corporation
and its affiliates unless otherwise stated or indicated by context.
The accompanying unaudited condensed consolidated financial statements 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. Operating results for the
quarter ended March 31, 1999, are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
NOTE 2 -- INVESTIGATIONS
The Company is currently the subject of several Federal investigations into
its business practices, as well as governmental investigations by various
states. The Company is cooperating in these investigations and understands,
through written notice and other means, that it is a target in these
investigations. Given the breadth of the ongoing investigations, the Company
expects additional investigative and prosecutorial activity to occur in these
and other jurisdictions in the future. Columbia/HCA is a defendant in several
qui tam actions brought by private parties on behalf of the United States of
America, which have been unsealed and served on Columbia/HCA. The actions
allege, in general, that Columbia/HCA and certain subsidiaries and/or affiliated
partnerships violated the False Claims Act by submitting improper claims to the
government for reimbursement. The lawsuits generally seek damages of three times
the amount of all Medicare or Medicaid claims (involving false claims) presented
by the defendants to the Federal government, civil penalties of not less than
$5,000 nor more than $10,000 for each such Medicare or Medicaid claim,
attorney's fees and costs. The government has intervened in three qui tam
actions. Columbia/HCA is aware of additional qui tam actions that remain under
seal and believes that there are other sealed qui tam cases of which it is
unaware.
The Company is the subject of a formal order of investigation by the
Securities and Exchange Commission. The Company understands that the
investigation includes the anti-fraud, insider trading, periodic reporting and
internal accounting control provisions of the Federal securities laws.
Management believes it is too early to predict the outcome or effect of the
ongoing investigations or qui tam and other actions. If Columbia/HCA is found to
have violated Federal or state laws relating to Medicare, Medicaid or similar
programs, the Company could be subject to substantial monetary fines, civil and
criminal penalties and exclusion from participation in the Medicare and Medicaid
programs. Similarly, the amounts claimed in the qui tam and other actions are
substantial, and Columbia/HCA could be subject to substantial costs resulting
from an adverse outcome of one or more such actions. Any such sanctions or
losses could have
4
<PAGE> 7
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
NOTE 2 -- INVESTIGATIONS (CONTINUED)
a material adverse effect on the Company's financial position and results of
operations. (See Note 10 -- Contingencies and Part II, Item 1: Legal
Proceedings.)
NOTE 3 -- RESTRUCTURING OF OPERATIONS
The Company is currently in the process of restructuring its operations in
an effort to create a smaller and more focused company. The restructuring
includes the divestitures of certain hospitals, surgery centers and related
facilities, the spin-offs of two companies that represented the Pacific and
America operating groups and the divestitures of the Company's home health and
certain other businesses, as described in Note 5 -- Discontinued Operations.
Divestiture of Certain Hospitals and Surgery Centers
During the first quarter of 1999, the Company recognized a pretax gain of
$249 million ($151 million after-tax) on the sale of two hospitals and certain
related health care facilities. Proceeds from the sales were used to repay bank
borrowings.
During the first quarter of 1999, management identified and initiated, or
revised, plans to sell or close during 1999, 13 consolidated hospitals and 4
non-consolidated hospitals. The carrying value for the hospitals and other
assets expected to be sold was reduced to fair value of approximately $210
million, based upon estimates of sales values, for a total non-cash, pretax
charge of approximately $106 million. For the quarters ended March 31, 1999 and
1998, respectively, the hospitals and other assets for which the impairment
charge was recorded had net revenues of approximately $136 million and $138
million and incurred losses from continuing operations before the pretax charge
and income tax benefits of approximately $10 million and $11 million. Proceeds
from the expected divestitures will be used to repay bank borrowings.
Spin-Offs
During the first quarter, the Company continued with its previously
announced plan to create two tax-free spin-off companies that represented the
Pacific (Triad) and America (Lifepoint) operating groups. In March 1999, the
Company received a ruling from the Internal Revenue Service (the "IRS") that the
proposed spin-offs would generally be tax-free to the Company and its
shareholders. On May 11, 1999, the spin-offs were completed through a
distribution of one share of LifePoint Hospitals, Inc. common stock and one
share of Triad Hospitals, Inc. common stock for every 19 shares of the Company's
common stock outstanding on April 30, 1999.
At March 31, 1999, the Pacific group (Triad) was comprised of 35
consolidating hospitals with $368 million and $414 million in revenues for the
quarters ended March 31, 1999 and 1998, respectively. EBITDA (income from
continuing operations before depreciation and amortization, interest expense,
gains on sales of facilities, impairment of long-lived assets, management fees,
minority interests and income taxes) for Triad was $41 million and $48 million
for the quarters ended March 31, 1999 and 1998, respectively.
The America group (Lifepoint) was comprised of 23 consolidating hospitals
with $134 million and $130 million in revenues for the quarters ended March 31,
1999 and 1998, respectively. EBITDA for Lifepoint was $22 million and $20
million for the quarters ended March 31, 1999 and 1998, respectively.
5
<PAGE> 8
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
NOTE 4 -- RESTRUCTURING OF OPERATIONS AND INVESTIGATION RELATED COSTS
During 1999 and 1998, the Company recorded the following pretax charges
related to the investigation and restructuring of operations as discussed in
Note 2 -- Investigations and Note 3 -- Restructuring of Operations (in
millions):
<TABLE>
<CAPTION>
QUARTER
-----------
1999 1998
---- ----
<S> <C> <C>
Professional fees related to investigation.................. $19 $28
Severance costs............................................. 2 4
Other....................................................... 9 6
--- ---
$30 $38
=== ===
</TABLE>
NOTE 5 -- DISCONTINUED OPERATIONS
Discontinued operations included three of the four business units acquired
in the August 1997 merger with Value Health, Inc. ("Value Health") and the
Company's home health care businesses. The Company implemented plans to dispose
of these businesses during 1997.
During the second and third quarters of 1998, the Company completed the
sales of the three Value Health units for proceeds totaling $662 million. The
proceeds from the sales were used to repay bank borrowings. The Company recorded
a $73 million loss upon completion of these sales during the second quarter of
1998, representing an adjustment to the tax benefit related to the estimated
$443 million after-tax loss on disposal of discontinued operations recorded in
the fourth quarter of 1997.
During the third and fourth quarters of 1998, the Company completed five
separate sales transactions that included substantially all of the Company's
home health care operations and received approximately $90 million in proceeds.
The proceeds from the sales were used to repay bank borrowings.
Revenues of the discontinued businesses totaled $641 million for the
quarter ended March 31, 1998.
NOTE 6 -- INCOME TAXES
The Company is currently contesting before the United States Tax Court (the
"Tax Court") and the United States Court of Federal Claims certain claimed
deficiencies and adjustments proposed by the IRS in conjunction with its
examination of the Company's 1994 Federal income tax return, Columbia Healthcare
Corporation's ("CHC") 1993 and 1994 Federal income tax returns, HCA-Hospital
Corporation of America, Inc.'s ("HCA") 1981 through 1988 and 1991 through 1993
Federal income tax returns and Healthtrust, Inc. -- The Hospital Company's
("Healthtrust") 1990 through 1994 Federal income tax returns. The disputed items
include: the disallowance of certain acquisition-related costs, executive
compensation, system conversion costs and insurance premiums which were deducted
in calculating taxable income and the methods of accounting used by certain
subsidiaries for calculating taxable income related to vendor rebates and
governmental receivables. The IRS is claiming an additional $360 million in
income taxes and interest through March 31, 1999.
Tax Court decisions received in 1996 and 1997 related to HCA's 1981 through
1988 federal income tax returns may be appealed by the IRS or the Company to the
United States Court of Appeals, Sixth Circuit. The Company expects any decisions
regarding the appeal of these rulings will be made during 1999.
Management believes that adequate provisions have been recorded to satisfy
final resolution of the disputed issues. Management believes that the Company,
CHC, HCA and Healthtrust properly reported taxable income and paid taxes in
accordance with applicable laws and agreements established with the IRS
6
<PAGE> 9
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
NOTE 6 -- INCOME TAXES (CONTINUED)
during previous examinations and that final resolution of these disputes will
not have a material adverse effect on the results of operations or financial
position of the Company.
NOTE 7 -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share from continuing operations for the three months ended March
31, 1999 and 1998 (dollars in millions, except per share amounts):
<TABLE>
<CAPTION>
QUARTER
-------------------
1999 1998
-------- --------
<S> <C> <C>
Numerator (a):
Income from continuing operations......................... $ 322 $ 219
Denominator:
Share reconciliation (in thousands):
Shares used for basic earnings per share............... 639,403 642,050
Effect of dilutive securities:
Stock options........................................ 1,326 2,178
Warrants and other................................... 4,282 705
-------- --------
Shares used for dilutive earnings per share............... 645,011 644,933
======== ========
Earnings per share:
Basic earnings per share from continuing operations....... $ .50 $ .34
Diluted earnings per share from continuing operations..... $ .50 $ .34
</TABLE>
(a) Amount is used for both basic and diluted earnings per share computations
since there is no earnings effect related to the dilutive securities.
NOTE 8 -- LONG-TERM DEBT
During March 1999, the Company entered into a $1.0 billion Senior Interim
Term Loan agreement. Borrowings under this agreement will be used to fund the
$1.0 billion share repurchase program approved in February 1999 (see Note
9 -- Stock Repurchase Program). The Company's revolving credit facility and $1.0
billion term loan were amended during March 1999 to permit the spin-offs of the
Company's America and Pacific operating groups.
NOTE 9 -- STOCK REPURCHASE PROGRAM
In February 1999, the Company announced that its Board of Directors had
authorized the repurchase of up to an additional $1 billion of its common stock
through open market purchases, privately negotiated transactions or through a
series of accelerated or forward purchase contracts. During the first quarter of
1999, through open market purchases, the Company repurchased 3.6 million shares
of its common stock for approximately $68 million. During April 1999, through
open market purchases, the Company repurchased 5.0 million shares of its common
stock for approximately $110 million. Also during April 1999, the Company,
through accelerated purchase agreements, repurchased 27.0 million shares of its
common stock for approximately $700 million.
In July 1998, the Company announced a stock repurchase program under which
up to $1 billion of the Company's common stock would be repurchased by entering
into a series of forward purchase contracts. Approximately 44 million shares
were purchased at an average cost of approximately $22.65 per share. The
7
<PAGE> 10
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
NOTE 9 -- STOCK REPURCHASE PROGRAM (CONTINUED)
majority of these shares were purchased by certain financial organizations
through a series of forward purchase contracts. In accordance with the terms of
the forward purchase contracts, which permit settlement on a net shares basis,
the shares purchased remain issued and outstanding until the forward purchase
contracts are settled. During the first quarter of 1999, the Company settled
forward purchase contracts representing 15.0 million shares at a cost of
approximately $323 million. The company settled another 24.4 million shares at a
cost of approximately $566 million in April 1999.
During the first quarter of 1999, in connection with the Company's share
repurchase programs, the Company entered into a Letter of Credit Agreement (the
"LOC Agreement") with the United States Department of Justice (the "DOJ"). As
part of the LOC Agreement, the Company has provided the DOJ with Letters of
Credit totaling $1 billion. The LOC Agreement also provides that the Company's
repurchase program announced in February 1999 may be made, at the Company's
discretion, through open market purchases, privately negotiated transactions or
through a series of accelerated or forward purchase contracts. The Company and
the DOJ acknowledge that the amount in the LOC Agreement is not based upon the
amount or expected amount of any potential settlement. The LOC Agreement does
not constitute an admission of liability by the Company.
NOTE 10 -- CONTINGENCIES
Significant Legal Proceedings
Various lawsuits, claims and legal proceedings (see Note
2 -- Investigations, for a description of the ongoing government investigations)
have been and are expected to be instituted or asserted against the Company,
including those relating to shareholder derivative and class action complaints;
purported class action lawsuits filed by patients and payers alleging, in
general, improper and fraudulent billing, coding and physician referrals, as
well as other violations of law; certain qui tam or "whistleblower" actions
alleging, in general, unlawful claims for reimbursement or unlawful payments to
physicians for the referral of patients and other violations of law. While the
amounts claimed may be substantial, the ultimate liability cannot be determined
or reasonably estimated at this time due to the considerable uncertainties that
exist. Therefore, it is possible that results of operations, financial position
and liquidity in a particular period could be materially, adversely affected
upon the resolution of certain of these contingencies.
General Liability Claims
The Company is subject to claims and suits arising in the ordinary course
of business, including claims for personal injuries or wrongful restriction of,
or interference with, physicians' staff privileges. In certain of these actions
the claimants may seek punitive damages against the Company, which are usually
not covered by insurance. It is management's opinion that the ultimate
resolution of these pending claims and legal proceedings will not have a
material adverse effect on the Company's results of operations or financial
position.
8
<PAGE> 11
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
NOTE 11 -- COMPREHENSIVE INCOME
The components of comprehensive income, net of related taxes, for the
quarters ended March 31, 1999 and 1998 are as follows (in millions):
<TABLE>
<CAPTION>
QUARTER
------------
1999 1998
---- ----
<S> <C> <C>
Net income.................................................. $322 $197
Unrealized (losses) gains on securities..................... (9) 24
Foreign currency translation adjustments.................... (7) (2)
---- ----
Comprehensive income........................................ $306 $219
==== ====
</TABLE>
The components of accumulated other comprehensive income, net of related
taxes, at March 31, 1999 and 1998 are as follows (in millions):
<TABLE>
<CAPTION>
QUARTER
------------
1999 1998
---- ----
<S> <C> <C>
Net unrealized gains on securities.......................... $68 $114
Foreign currency translation adjustments.................... (4) --
--- ----
Accumulated other comprehensive income...................... $64 $114
=== ====
</TABLE>
NOTE 12 -- SEGMENT AND GEOGRAPHIC INFORMATION
Columbia/HCA operates in one line of business which is operating hospitals
and related health care entities. During the quarters ended March 31, 1999 and
1998, approximately 31% and 33%, respectively, of the Company's revenues related
to patients participating in the Medicare program.
In November 1997, Columbia/HCA restructured its operations into five
divisions which are organized geographically. Included in these five divisions
are the Eastern Group made up of 107 consolidated hospitals located in the
Eastern United States and the Western Group made up of 98 consolidated hospitals
located in the Western United States. These two divisions make up the Company's
core operations and are typically located in urban areas that are characterized
by highly integrated facility networks. The America Group (LifePoint) includes
23 consolidated hospitals which are located in non-urban areas where, in almost
every case the hospital is the only hospital in the community. The Pacific Group
(Triad) includes 35 consolidated hospitals, approximately three-quarters of
which are located in small cities, generally in the Southern, Western and
Southwestern United States where the hospital is usually the only hospital or
one of two hospitals in the community, and the remainder of Pacific's facilities
are located in larger urban areas typically characterized by a high rate of
population growth. On May 11, 1999, Columbia/HCA completed the spin-offs of
LifePoint Hospitals, Inc. and Triad Hospitals, Inc. as two independent,
publicly-traded companies. See Note 3 -- Restructuring of Operations. The
Atlantic Group includes 8 hospitals which are located outside of the Company's
core markets and are currently held for sale.
9
<PAGE> 12
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED
NOTE 12 -- SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
The geographic distributions of the Company's revenues and EBITDA for the
quarters ended March 31, 1999 and 1998 are summarized in the following table
(EBITDA is defined as income from continuing operations before depreciation and
amortization, interest expense, gains on sales of facilities, impairment of
long-lived assets, management fees, restructuring of operations and
investigation related costs, minority interests and income taxes) (dollars in
millions):
<TABLE>
<CAPTION>
QUARTER
----------------
1999 1998
------ ------
<S> <C> <C>
Revenues:
Eastern Group............................................. $2,098 $2,019
Western Group............................................. 1,865 1,723
Pacific Group............................................. 368 414
America Group............................................. 134 130
Atlantic Group............................................ 109 497
Corporate and other....................................... 81 118
------ ------
$4,655 $4,901
====== ======
EBITDA
Eastern Group............................................. $ 512 $ 476
Western Group............................................. 322 312
Pacific Group............................................. 41 48
America Group............................................. 22 20
Atlantic Group............................................ (5) 40
Corporate and other....................................... (14) 5
------ ------
$ 878 $ 901
====== ======
</TABLE>
NOTE 13 -- DERIVATIVES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which is required to be adopted in years beginning
after June 15, 1999. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of the new statement will have
a significant effect on earnings or the financial position of the Company.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains disclosures which are "forward-looking
statements." Forward-looking statements include all statements that do not
relate solely to historical or current facts, and can be identified by the use
of words such as "may," "believe," "will," "expect," "project," "estimate,"
"anticipate," "plan" or "continue". These forward-looking statements are based
on the current plans and expectations of the Company and are subject to a number
of uncertainties and risks that could significantly affect current plans and
expectations and the Company's future financial condition and results. These
factors include, but are not limited to, (i) the outcome of the known and
unknown governmental investigations and litigation involving the Company's
business practices, (ii) the highly competitive nature of the health care
business, (iii) the efforts of insurers, health care providers and others to
contain health care costs, (iv) possible changes in the Medicare program that
may further limit reimbursements to health care providers and insurers, (v)
changes in Federal, state or local regulation affecting the health care
industry, (vi) the possible enactment of Federal or state health care reform,
(vii) the ability to attract and retain qualified management and personnel,
including physicians, (viii) liabilities and other claims asserted against the
Company, (ix) fluctuations in the market value of the Company's common stock,
(x) ability to complete the share repurchase program, (xi) changes in accounting
practices, (xii) changes in general economic conditions, (xiii) future
divestitures which may result in additional charges, (xiv) the complexity of
integrated computer systems and the success and expense of the remediation
efforts of the Company and relevant third parties in achieving Year 2000
readiness, (xv) the ability to enter into managed care provider arrangements on
acceptable terms, (xvi) the availability and terms of capital to fund the
expansion of the Company's business, (xvii) changes in business strategy or
development plans, (xviii) slowness of reimbursement, and (xix) other risk
factors. As a consequence, current plans, anticipated actions and future
financial condition and results may differ from those expressed in any forward-
looking statements made by or on behalf of the Company. You are cautioned not to
unduly rely on such forward-looking statements when evaluating the information
presented in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
INVESTIGATIONS
The Company is currently the subject of several federal investigations into
certain of its business practices, as well as governmental investigations by
various states. The Company is cooperating in these investigations and
understands, through written notice and other means, that it is a target in
these investigations. Given the breadth of the ongoing investigations, the
Company expects additional investigative and prosecutorial activity to occur in
these and other jurisdictions in the future. The Company is the subject of a
formal order of investigation by the Securities and Exchange Commission ("SEC").
The Company understands that the SEC investigation includes the anti-fraud,
insider trading, periodic reporting and internal accounting control provisions
of the Federal securities laws.
The Company cannot predict the outcome or quantify effects that the ongoing
investigations, the initiation of additional investigations, if any, and the
related media coverage will have on the Company's financial condition or results
of operations in future periods. Were the Company to be found in violation of
Federal or state laws relating to Medicare, Medicaid or similar programs, the
Company could be subject to substantial monetary fines, civil and criminal
penalties and exclusion from participation in the Medicare and Medicaid
programs. Any such sanctions could have a material adverse effect on the
Company's financial position and results of operations. See Note
10-Contingencies of the Notes to Condensed Consolidated Financial Statements.
BUSINESS STRATEGY
Columbia/HCA's primary objective is to provide the communities it serves
with a comprehensive array of quality health care services in the most cost
effective manner possible. The Company's general, acute care
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
BUSINESS STRATEGY (CONTINUED)
hospitals usually provide a full range of services commonly available in
hospitals, such as internal medicine, general surgery, cardiology, oncology,
neurosurgery, orthopedics and obstetrics, as well as diagnostic and emergency
services. Outpatient and ancillary health care services are provided by the
Company, including outpatient surgery centers, diagnostic centers,
rehabilitation facilities and other facilities. In addition, Columbia/HCA
operates psychiatric hospitals which generally provide a full range of mental
health care services in inpatient, partial hospitalization and outpatient
settings. The Company also operates preferred provider organizations in 46
states.
In November 1997, Columbia/HCA reorganized its operations into five
divisions. In May 1999, Columbia/HCA established two of those divisions, America
Group ("LifePoint") and Pacific Group ("Triad"), as independent, publicly-traded
companies through tax-free spin-offs of these companies to Columbia/HCA
stockholders. LifePoint's hospitals are located in non-urban areas where, in
almost every case, LifePoint's hospital is the only hospital in the community.
Approximately three-quarters of Triad's hospitals are located in small cities,
generally in the Southern, Western and Southwestern United States, where Triad's
hospital is usually either the only hospital or one of two hospitals in the
community, and the remainder of Triad's hospitals are located in larger urban
areas.
Management believes that separating LifePoint and Triad into two smaller,
strategically focused public companies will have positive effects on the
performance and profitability of the facilities in these groups by enabling more
focused management attention, more effective operating strategies based on local
market conditions, and compensation incentives for employees that are more
closely tied to group performance.
During the third quarter of 1997, management implemented plans to divest
the Company's home health businesses and three of the four Value Health business
units (Value Health was a provider of specialty managed care benefit programs).
The divestitures of the three Value Health business units and the home health
operations were completed during 1998. The results of operations of these
divested businesses are reflected in the 1998 Condensed Consolidated Statement
of Income as discontinued operations.
The divestiture of the home health operations and the Value Health business
units and the spin-offs of LifePoint and Triad, will allow Columbia/HCA
management to focus their efforts on the Company's core markets, which are
typically located in urban areas that are characterized by highly integrated
health care facility networks.
The Company's strategy is to be a comprehensive provider of quality health
care services in select communities. The Company maintains and replaces
equipment, renovates and constructs replacement facilities and adds new services
to increase the attractiveness of its hospitals and other facilities to patients
and physicians. By developing a comprehensive health care network with a broad
range of health care services located throughout a market area, the Company
believes it achieves greater visibility and is better able to attract and serve
patients and physicians. The Company believes it is also able to reduce
operating costs by sharing certain services among several facilities in the same
area and is better positioned to work with health maintenance organizations
("HMOs"), preferred provider organizations ("PPOs") and employers.
The Company generally seeks to operate each of its facilities as part of a
network with other health care facilities that it owns or operates within the
same region. In instances where acquisitions of additional facilities in the
area are not possible or practical, the Company may seek joint ventures or
partnership arrangements with other local facilities or alternatively, may seek
to divest those assets.
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
RESULTS OF OPERATIONS
Revenue/Volume Trends
During the first quarter of 1999, the Company continued to face challenges
affecting revenues and volume growth rates. Three primary factors have
contributed these challenges: the impact of reductions in Medicare payments
mandated by the Balanced Budget Act of 1997 ("BBA-97"), the continuing trend
toward the conversion of more services to an outpatient basis and the impact of
the restructuring of operations and government investigations.
The Company's revenues continue to be affected by an increasing proportion
of revenue being derived from fixed payment, higher discount sources, including
Medicare, Medicaid and managed care plans. In addition, insurance companies,
government programs (other than Medicare) and employers purchasing health care
services for their employees are negotiating discounted amounts that they will
pay health care providers rather than paying standard prices. The Company
expects patient volumes from Medicare and Medicaid to continue to increase due
to the general aging of the population and expansion of state Medicaid programs.
However, under BBA-97, the Company's reimbursement from the Medicare and
Medicaid programs was reduced and will be further reduced as certain reductions
will be phased in over the next two years. During the first quarter of 1999,
Congress did not adopt the Administration's proposed Medicare cuts for fiscal
year 2000 and their proposal to extend BBA-97 two additional years beyond 2002.
BBA-97 has accelerated a shift, by certain Medicare beneficiaries, from
traditional Medicare coverage to medical coverage that is provided under managed
care plans. The Company generally receives lower payments per patient under
managed care plans than under traditional indemnity insurance plans. With an
increasing proportion of services being reimbursed based upon fixed payment
amounts (where the payment is based upon the diagnosis, regardless of the cost
incurred or level of service provided), revenues, earnings and cash flows are
being significantly reduced. Admissions related to Medicare, Medicaid and
managed care plan patients were 90% of total admissions for the quarters ended
March 31, 1999 and 1998. Revenues from capitation arrangements (prepaid health
service agreements) are less than 1% of consolidated revenues.
The Company's revenues also continue to be affected by the trend toward
certain services being performed more frequently on an outpatient basis. The
growth in outpatient services is expected to continue in the health care
industry as procedures performed on an inpatient basis are converted to
outpatient procedures through continuing advances in pharmaceutical and medical
technologies. The redirection of certain procedures to an outpatient basis is
also influenced by pressures from payers to direct certain procedures from
inpatient care to outpatient care. Generally, the payments received for an
outpatient procedure are less than those received for a similar procedure
performed in an inpatient setting. Outpatient revenues grew to 38% of net
patient revenues in 1999 from 36% in 1998.
Management believes that the impact of the ongoing governmental
investigations of certain of the Company's business practices and the related
media coverage, combined with the restructuring of operations (including the
spin-offs, the divestiture of the home health operations and the announced
divestitures of several facilities) have created uncertainties with physicians,
patients and payers in certain markets.
Reductions in the rate of increase in Medicare and Medicaid reimbursement,
increasing percentages of patient volume being related to patients participating
in managed care plans and continuing trends toward more services being performed
on an outpatient basis are expected to present ongoing challenges to the
Company. The challenges presented by these trends are enhanced in that the
Company does not have the ability to control these trends and the associated
risks. To maintain and improve its operating margins in future periods, the
Company must increase patient volumes while controlling the cost of providing
services. If the Company is not able to achieve reductions in the cost of
providing services through operational efficiencies, and the trend of declining
reimbursements and payments continues, results of operations and cash flows will
deteriorate.
Management believes that the proper response to these challenges includes
the delivery of a broad range of quality health care services to physicians and
patients with operating decisions being made by the local management teams and
local physicians.
13
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Operating Results Summary
The following is a summary of results from continuing operations for the
quarters ended March 31, 1999 and 1998 (dollars in millions, except per share
amounts):
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
<S> <C> <C> <C> <C>
Revenues.................................................... $4,655 100.0 $4,901 100.0
Salaries and benefits....................................... 1,860 40.0 2,013 41.1
Supplies.................................................... 722 15.5 746 15.2
Other operating expenses.................................... 892 19.0 940 19.2
Provision for doubtful accounts............................. 338 7.3 343 7.0
Depreciation and amortization............................... 296 6.4 309 6.3
Interest expense............................................ 111 2.4 153 3.1
Equity in earnings of affiliates............................ (35) (0.7) (42) (0.9)
Gains on sales of facilities................................ (249) (5.3) -- --
Impairment of long-lived assets............................. 106 2.3 -- --
Restructuring of operations and investigation related
costs..................................................... 30 0.6 38 0.8
------ ----- ------ -----
4,071 87.5 4,500 91.8
------ ----- ------ -----
Income from continuing operations before minority interests
and income taxes.......................................... 584 12.5 401 8.2
Minority interests in earnings of consolidated entities..... 14 0.3 20 0.4
------ ----- ------ -----
Income from continuing operations before income taxes....... 570 12.2 381 7.8
Provision for income taxes.................................. 248 5.3 162 3.4
------ ----- ------ -----
Income from continuing operations........................... $ 322 6.9 $ 219 4.4
====== ===== ====== =====
Basic earnings per share from continuing operations......... $ .50 $ .34
Diluted earnings per share from continuing operations....... $ .50 $ .34
% changes from prior year:
Revenues.................................................. (5.0)% (1.7)%
Income from continuing operations before income taxes..... 49.5 (49.8)
Income from continuing operations......................... 46.7 (51.8)
Basic earnings per share from continuing operations....... 47.1 (49.3)
Diluted earnings per share from continuing operations..... 47.1 (48.5)
Admissions (a)............................................ (6.0) 2.1
Equivalent admissions (b)................................. (7.1) 3.3
Revenues per equivalent admission......................... 2.2 (4.8)
Same facility % changes from prior year(c):
Revenues.................................................. 2.7 (2.6)
Admissions (a)............................................ 3.5 0.7
Equivalent admissions (b)................................. 3.6 2.0
Revenues per equivalent admission......................... (0.8) (4.6)
</TABLE>
- ---------------
(a) Represents the total number of patients admitted (in the facility for a
period in excess of 23 hours) to the Company's hospitals and is used by
management and certain investors as a general measure of inpatient volume.
(b) Equivalent admissions are used by management and certain investors as a
general measure of combined inpatient and outpatient volume. Equivalent
admissions are computed by multiplying admissions (inpatient volume) by the
sum of gross inpatient revenue and gross outpatient revenue and then
dividing the resulting amount by gross inpatient revenue. The equivalent
admissions computation "equates" outpatient revenue to the volume measure
(admissions) used to measure inpatient volume resulting in a general
measure of combined inpatient and outpatient volume.
(c) Same facility information excludes the operations of hospitals and their
related facilities which were either acquired or divested during the current
and prior period.
14
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Quarters Ended March 31, 1999 and 1998
Income from continuing operations before income taxes increased 49.5% to
$570 million in 1999 from $381 million in 1998 and pretax margins increased to
12.2% in 1999 from 7.8% in 1998. The increase in pretax income was primarily
attributable to $249 million in gains on sales of facilities (an excess of $143
million in net gains over the $106 million in impairment charges recorded in the
first quarter of 1999) and an increase in the operating margin.
Revenues decreased 5.0% to $4.7 billion in 1999 compared to $4.9 billion in
1998. Inpatient admissions decreased 6.0% from a year ago and equivalent
admissions (adjusted to reflect combined inpatient and outpatient volume)
decreased 7.1%. Revenues, admissions and equivalent admissions declined
primarily as a result of the sales of facilities. At March 31, 1999 there were
37 fewer hospitals and 47 fewer surgery centers than there were at March 31,
1998. On a same facility basis, revenues increased 2.7%, admissions increased
3.5% and equivalent admissions increased 3.6% from a year ago. Revenue per
equivalent admissions increased 2.2% from 1998 to 1999 and on a same facility
basis remained relatively unchanged from the same period last year. As
previously discussed, the increase in outpatient volume activity is primarily a
result of the continuing trend of certain services, previously provided in an
inpatient setting, being converted to an outpatient setting.
The decline in revenues was due to several factors including decreases in
Medicare rates of reimbursement mandated by the BBA-97 which became effective
October 1, 1997 (lowered 1999 revenues by approximately $30 million), continued
increases in discounts from the growing number of managed care payers (managed
care as a percent of total admissions increased to 39% in 1999 compared to 36%
during 1998) and a net decrease in the number of consolidated hospitals and
surgery centers due to the sales of several facilities during 1998.
Salaries and benefits, as a percentage of revenues, decreased to 40.0% in
1999 from 41.1% in 1998. The increase in revenues per equivalent admission was a
primary factor for the decrease. In addition, the Company was more successful in
adjusting staffing levels to correspond with the equivalent admission growth
rates (man hours per equivalent admission decreased slightly compared to last
year).
Supply costs increased as a percentage of revenues to 15.5% in 1999 from
15.2% in 1998 due to an increase in the cost of supplies per equivalent
admission.
Other operating expenses (primarily consisting of contract services,
professional fees, repairs and maintenance, rents and leases, utilities,
insurance and non-income taxes) remained relatively unchanged as a percentage of
revenues.
Provision for doubtful accounts, as a percentage of revenues, increased to
7.3% in 1999 from 7.0% in 1998 due to internal factors such as continued
computer information system conversions (including patient accounting systems)
at certain facilities and external factors such as payer mix shifts to managed
care plans (resulting in increased amounts of patient co-payments and
deductibles) and increases in claim audits and remittance denials from certain
payers. Management is unable to quantify the effects of each of these factors,
but the shift in payer mix is expected to continue and the provision for
doubtful accounts is likely to remain at higher levels than in past years.
Equity in earnings of affiliates decreased as a percentage of revenues to
0.7% in 1999 from 0.9% in 1998.
Depreciation and amortization increased as a percentage of revenues to 6.4%
in 1999 from 6.3% in 1998, primarily due to the increased capital expenditures
related to ancillary services (such as outpatient services) and information
systems. Capital expenditures in these areas generally result in shorter
depreciation and amortization lives for the assets acquired than typical
hospital acquisitions.
15
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Quarters Ended March 31, 1999 and 1998 (continued)
Interest expense decreased to $111 million in 1999 compared to $153 million
in 1998 primarily as a result of a decrease in average outstanding debt during
1999 compared to last year. This was due to the restructuring of operations
discussed earlier which has resulted in the receipt of a significant amount of
cash proceeds in 1998 which were used to pay down borrowings.
During 1999 and 1998, respectively, the Company incurred $30 million and
$38 million of costs in connection with the restructuring of operations and
investigation related costs. These costs included $19 and $28 million in
professional fees related to the investigations, $2 million and $4 million of
severance costs and $9 million and $6 million in various other costs in 1999 and
1998, respectively.
Minority interests decreased slightly as a percentage of revenues to 0.3%
in 1999 from 0.4% in 1998.
As previously discussed, the Company is currently in the process of
restructuring its operations. See Note 3-Restructuring of Operations in the
Notes to Condensed Consolidated Financial Statements. Assuming the completion of
the restructuring, the Company's remaining core assets had combined net income
from continuing operations which increased 6.9% to $231 million in 1999 from
$216 million in 1998. Excluding gains on sales of facilities, impairment of
long-lived assets and restructuring of operations and investigation related
costs, combined net income for the Company's remaining core assets increased
18.3% to $281 million in 1999 from $238 million in 1998.
Liquidity
Cash provided by continuing operating activities totaled $312 million
during the first quarter of 1999 compared to $688 million in 1998. The decrease
was primarily due to $334 million of net income tax refunds received during
1998, related to excess estimated payment amounts made during 1997, compared to
$82 million of net income tax refunds received in the first quarter of 1999.
Cash provided by investing activities increased to $810 million in 1999,
compared to cash used in investing activities of $277 million during the first
quarter of 1998. The increase was due to proceeds from the disposition of
hospitals and other health care facilities of $506 million in the first quarter
of 1999 compared with $43 million in 1998. During 1999 cash flows from the
changes in investments were $541 million (including repayment by a
nonconsolidated joint venture of Company advances approximating $330 million)
compared with cash used of $39 million in 1998.
Cash flows used in financing activities totaled $833 million in the first
quarter of 1999 compared to $393 million in 1998. The excess of cash flows from
operations over cash used in investing activities was primarily used to pay down
debt (approximately $424 million and $417 million in 1999 and 1998,
respectively) and repurchase the Company's common stock (approximately $408
million during the first quarter of 1999).
Working capital totaled $1.0 billion as of March 31, 1999 compared to $304
million at December 31, 1998. At December 31, 1998, included in current
liabilities was $741 million outstanding under the Company's former 364-day
revolving credit facility which was repaid during the first quarter of 1999.
Management believes that cash flows from operations, amounts available under the
Company's bank revolving credit facilities and proceeds from expected asset
sales will be sufficient to meet expected liquidity needs during the remainder
of 1999.
Investments of the Company's professional liability insurance subsidiary to
maintain statutory equity and pay claims totaled $1.7 billion at March 31, 1999
and $1.8 billion at December 31, 1998.
The Company has various agreements with joint venture partners whereby the
partners have an option to sell or "put" their interests in the joint venture
back to the Company within specific periods at fixed prices or
16
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Liquidity (continued)
prices based on certain formulas. The combined put price under all such
agreements was approximately $900 million at March 31, 1999. The Company cannot
predict if, or when, their joint venture partners will exercise such options (no
put options have been exercised between December 31, 1998 and March 31, 1999).
During the first quarter of 1998, the Internal Revenue Service (the "IRS")
issued guidance regarding certain tax consequences of joint ventures between
for-profits and not-for-profit hospitals. The Company has not determined the
impact of the tax ruling on its existing joint ventures and is continuing to
consult with its joint venture partners and tax advisers to develop appropriate
courses of action. The tax ruling could require the restructuring of certain
joint ventures with not-for-profits or influence the exercise of the put
agreements by certain joint venture partners.
In February 1999, the Company announced that its Board of Directors
authorized the repurchase of up to an additional $1 billion of its common stock
through open market purchases, privately negotiated transactions or through a
series of accelerated or forward purchase contracts. During the first quarter of
1999, through open market purchases, the Company repurchased 3.6 million shares
of its common stock for approximately $68 million. During April 1999, through
open market purchases, the Company repurchased 5.0 million shares of its common
stock for approximately $110 million. Also during April 1999, the Company,
through accelerated purchase agreements, repurchased 27.0 million shares of its
common stock for approximately $700 million.
In July 1998, the Company announced a stock repurchase program under which
up to $1 billion of the Company's common stock would be repurchased by entering
into a series of forward purchase contracts. Approximately 44 million shares
were purchased at an average cost of approximately $22.65 per share. The
majority of these shares were purchased by certain financial organizations
through a series of forward purchase contracts. In accordance with the terms of
the forward purchase contracts, the shares purchased remain issued and
outstanding until the forward purchase contracts are settled. During the first
quarter of 1999, the Company settled forward purchase contracts representing
15.0 million shares at a cost of approximately $323 million. The Company settled
another 24.4 million shares at a cost of approximately $565 million in April
1999.
During the first quarter of 1999, in connection with the Company's share
repurchase programs, the Company entered into a Letter of Credit Agreement (the
"LOC Agreement") with the United States Department of Justice (the "DOJ"). As
part of the LOC Agreement, the Company has provided the DOJ with Letters of
Credit totaling $1 billion. The LOC Agreement also provides that the Company's
repurchase program announced in February 1999 may be made, at the Company's
discretion, through open market purchases, privately negotiated transactions or
through a series of accelerated or forward purchase contracts. The Company and
the DOJ acknowledge that the amount in the LOC Agreement is not based upon the
amount or expected amount of any potential settlement. The LOC Agreement does
not constitute an admission of liability by the Company.
On May 11, 1999, the Company completed the spin-offs of LifePoint and Triad
through a distribution of one share of LifePoint Hospitals, Inc. and one share
of Triad Hospitals, Inc. common stock for every 19 shares of the Company's
common stock outstanding on April 30, 1999. The Company received approximately
$900 million in cash upon the completion of the spin-offs and used the proceeds
to pay down debt.
The resolution of the government investigations and the various lawsuits
and legal proceedings that have been asserted could result in substantial
liabilities to the Company. The ultimate liabilities cannot be reasonably
estimated, as to the timing or amounts, at this time; however, it is possible
that results of operations, financial position and liquidity could be
materially, adversely affected upon the resolution of certain of these
contingencies.
17
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Capital Resources
Excluding acquisitions, capital expenditures were $301 million during the
first quarter of 1999 compared to $316 million for the same period in 1998.
Planned capital expenditures in 1999 are expected to approximate $1.2 billion.
Management believes that its capital expenditure program is adequate to expand,
improve and equip its existing health care facilities.
Acquisition of hospitals and health care entities and investments in and
advances to affiliates (generally 50% interests in joint ventures that are
accounted for using the equity method) totaled $66 million during the first
quarter of 1998 compared with none during the first quarter of 1999.
The Company expects to finance all capital expenditures with internally
generated and borrowed funds. Available sources of capital include public or
private debt, amounts available under the Company's revolving credit facility
(approximately $710 million as of April 30, 1999) and equity. At March 31, 1999,
there were projects under construction which had an estimated additional cost to
complete and equip over the next two years of approximately $1.0 billion.
The Company's revolving credit facility, the $1.0 billion term loan and the
$1.0 billion senior interim term loan contain customary covenants which include
(i) limitations on additional debt, (ii) limitations on sales of assets, mergers
and changes of ownership, and (iii) maintenance of certain interest coverage
ratios. The Company is currently in compliance with all such covenants.
In February 1999, Standard & Poor's downgraded the Company's senior debt
rating to BB+ and its commercial paper rating to B.
The Company entered into a $1.0 billion senior interim term loan agreement
during March 1999. Borrowings under this agreement will be used to fund the $1.0
billion share repurchase program approved in February 1999. The Company's
revolving credit facility and $1.0 billion term loan agreement were amended
during March 1999 to permit the spin-offs of the Company's America and Pacific
operating groups (Lifepoint and Triad) and place a $1.25 billion letter of
credit sublimit in the revolving credit facility.
The Company's restructuring of operations has resulted in the receipt of a
significant amount of cash proceeds from sales of facilities during both 1998
and 1999. The Company continues to manage its capital structure during this
process through the application of such proceeds, as it considers appropriate,
to the repayment of debt and the repurchase of its common stock.
IMPACT OF YEAR 2000 COMPUTER ISSUES
The Company has dedicated substantial resources to address the impact of
the Year 2000 problem. The Company has engaged all relevant aspects of the
organization in a coordinated effort to address the Year 2000 problem and to
minimize the chance of an interruption to the Company's operations or impact to
patient safety and health. The Year 2000 problem is the result of two potential
malfunctions that could have an impact on the Company's systems and equipment.
The first problem arises due to computers being programmed to use two rather
than four digits to define the applicable year. The second problem arises in
embedded chips, where microchips and microcontrollers have been designed using
two rather than four digits to define the applicable year. Certain of the
Company's computer programs, building infrastructure components (e.g., alarm
systems and HVAC systems) and medical devices that are date sensitive, may
recognize a date using "00" as the year 1900 rather than the year 2000. If
uncorrected, the problem could result in computer system and program failures
that could result in a disruption of business operations or equipment and
medical device malfunctions that could affect patient diagnosis and treatment.
18
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
IMPACT OF YEAR 2000 COMPUTER ISSUES (CONTINUED)
With respect to the information technology ("IT") systems portion of the
Company's Year 2000 project, which address the inventory, assessment,
remediation, testing and implementation of internally developed software, the
Company has identified various software applications that are being addressed on
separate time lines. The Company has begun remediating these software
applications and is testing the software applications where remediation has been
completed. The Company has also completed the assessment of mission critical
third party software (i.e., that software which is essential for day-to-day
operations) and has developed testing and implementation plans with separate
time lines. The Company has completed and placed into production 95% of software
applications and anticipates completing, in all material respects, remediation,
testing and implementation for internally developed and mission critical third
party software by June 30, 1999. Remediation, testing and implementation of
various software applications for certain of the Company's related subsidiaries
will be completed in the fourth quarter of 1999. These exceptions to the June
1999 IT systems goals should not have a material effect on the Company's
readiness. The IT systems portion of the Company's Year 2000 project is
currently on schedule in all material respects.
With respect to the IT infrastructure portion of the Company's Year 2000
project, the Company has undertaken a program to inventory, assess and correct,
replace or otherwise address impacted, vendor-supplied products (hardware,
systems software, business software, and telecommunication equipment). The
Company has implemented a program to contact vendors, analyze information
provided, and to remediate, replace or otherwise address IT products that pose a
material Year 2000 impact. The Company anticipates completion, in all material
respects, of the IT infrastructure portion of its program by September 30, 1999
(revised from an expected completion date of June 30, 1999). With respect to
such revised date, the IT infrastructure portion of the Company's Year 2000
project is currently on schedule in all material respects.
The Company presently believes that with modifications to existing software
or the installation of upgraded software under the IT infrastructure portion,
the Year 2000 will not pose material operational problems for the Company's
computer systems. However, if such modifications or upgrades are not
accomplished in a timely manner, Year 2000 related failures may present a
material adverse impact on the operations of the Company.
With respect to the non-IT infrastructure portion of the Company's Year
2000 project, the Company has undertaken a program to inventory, assess and
correct, replace or otherwise address impacted vendor products, medical
equipment and other related equipment with embedded chips. The Company has
implemented a program to contact vendors, analyze information provided, and to
remediate, replace or otherwise address devices or equipment that pose a
material Year 2000 impact. The Company anticipates completion, in all material
respects, of the non-IT infrastructure portion of its program by September 30,
1999. The non-IT infrastructure portion of the Company's Year 2000 project is
currently on schedule in all material respects.
The Company is prioritizing its non-IT infrastructure efforts by focusing
on equipment and medical devices that will have a direct impact on patient care.
The Company is directing substantial efforts to repair, replace, upgrade or
otherwise address this equipment and these medical devices in order to minimize
risk to patient safety and health. The Company is relying on information that is
being provided to it by equipment and medical device manufacturers regarding the
Year 2000 status of their products. While the Company is attempting to evaluate
information provided by its previous and current vendors, there can be no
assurance that in all instances accurate information is being provided. The
Company also cannot in all instances guarantee that the repair, replacement or
upgrade of all non-IT infrastructure systems will occur on a timely basis or
that such repairs, replacements or upgrades will avoid all Year 2000 problems.
The Company has initiated communications with its major third party payers
and intermediaries, including government payers and intermediaries. The Company
relies on these entities for accurate and timely reimbursement of claims, often
through the use of electronic data interfaces. The Company has not received
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<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
IMPACT OF YEAR 2000 COMPUTER ISSUES (CONTINUED)
assurances that these interfaces will be timely converted. Testing with payers
and intermediaries will not be completed by June 30, 1999 because the payers and
intermediaries are not ready to test with the Company's systems. Failure of
these third party systems could have a material adverse affect on the Company's
cash flow and results of operations.
The Company also has initiated communications with its mission critical
suppliers and vendors (i.e., those suppliers and vendors whose products and
services are essential for day-to-day operations) to verify their ability to
continue to deliver goods and services through the Year 2000. The Company has
not received assurances from all mission critical suppliers and vendors that
they will be able to continue to deliver goods and services through the Year
2000, but the Company is continuing its efforts to obtain such assurances.
Failure of these third parties could have a material impact on operations and/or
the ability to provide health care services.
With the assistance of external resources, the Company has undertaken the
development of contingency plans in the event that its Year 2000 efforts, or the
efforts of third parties upon which the Company relies, are not accurately or
timely completed. The Company has developed a contingency planning methodology
and will implement contingency plans throughout 1999.
While the Company is developing contingency plans to address possible
failure scenarios, the Company recognizes that there are "worst case" scenarios
which may develop and are largely outside the Company's control. The Company
recognizes the risks associated with extended infrastructure (power, water,
telecommunications) failure, the interruption of insurance payments to the
Company and the failure of equipment or software that could impact patient
safety or health despite the assurances of third parties. The Company is
addressing these and other failure scenarios in its contingency planning effort
and is engaging third parties in discussions regarding how to manage common
failure scenarios, but the Company cannot currently estimate the likelihood or
the potential cost of such failures. Currently, the Company does not believe
that any reasonably likely worst case scenario will have a material impact on
the Company's revenues or operations. Those reasonably likely worst case
scenarios include continued expenditures for remediation, continued expenditures
for replacement or upgrade of equipment, continued efforts regarding contingency
planning, increased staffing for the periods immediately preceding and after
January 1, and possible payment delays from the Company's payers.
The Year 2000 project is currently estimated to have a minimum total cost
of $86 million, of which the Company has incurred $7 million in the first
quarter of 1999. Cumulatively, the Company has incurred $57 million of costs
related to the Year 2000 project. The estimated minimum total cost has been
increased related to estimates for repair or replacement of non-IT systems and
costs related to an affiliated subsidiary. The estimate does not include payroll
costs for certain internal employees because these costs are not separately
tracked by the Company or asset replacement costs which cannot currently be
estimated. The Company recognizes that the total cost is likely to increase as
it completes its assessment of non-IT systems and as it continues its
remediation and testing of IT systems and such increase could be material. The
Company is not currently able to reasonably estimate the ultimate cost to be
incurred for the assessment, remediation, upgrade, replacement and testing of
its impacted non-IT systems. The majority of the costs related to the Year 2000
project (except the cost of new equipment) will be expensed as incurred and are
expected to be funded through operating cash flows.
The costs of the project and estimated completion dates for the Year 2000
modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantees that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the
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<PAGE> 23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
IMPACT OF YEAR 2000 COMPUTER ISSUES (CONTINUED)
availability and cost of personnel trained in this area and the ability to
locate and correct all relevant computer codes and all medical equipment.
HEALTH CARE REFORM
In recent years, an increasing number of legislative proposals have been
introduced or proposed to Congress and in some state legislatures that would
significantly affect health care systems in the Company's markets. The cost of
certain proposals would be funded in significant part by reduction in payments
by government programs, including Medicare and Medicaid, to health care
providers (similar to the reductions incurred as part of BBA-97 as previously
discussed). While the Company is unable to predict which, if any, proposals for
health care reform will be adopted, there can be no assurance that proposals
adverse to the business of the Company will not be adopted.
PENDING IRS DISPUTES
The Company is contesting income taxes and related interest proposed by the
IRS for prior years aggregating approximately $360 million as of March 31, 1999.
Management believes that final resolution of these disputes will not have a
material adverse effect on the results of operations or liquidity of the
Company. (See Note 6 -- Income Taxes of the Notes to Condensed Consolidated
Financial Statements for a description of the pending IRS disputes).
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<PAGE> 24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
OPERATING DATA
<TABLE>
<CAPTION>
1999 1998
------- ---------
<S> <C> <C>
CONSOLIDATED
Number of hospitals in operation at:
March 31.................................................. 273 310
June 30................................................... 309
September 30.............................................. 294
December 31............................................... 281
Number of freestanding outpatient surgical centers in
operation at:
March 31.................................................. 95 142
June 30................................................... 139
September 30.............................................. 103
December 31............................................... 102
Licensed hospital beds at (a):
March 31.................................................. 51,797 60,739
June 30................................................... 60,418
September 30.............................................. 57,521
December 31............................................... 53,693
Weighted average licensed beds (b):
Quarter:
First.................................................. 52,451 60,765
Second................................................. 60,712
Third.................................................. 59,396
Fourth................................................. 55,594
Year...................................................... 59,104
Average daily census (c):
Quarter:
First.................................................. 26,546 28,816
Second................................................. 25,780
Third.................................................. 24,414
Fourth................................................. 23,932
Year...................................................... 25,719
Admissions (d):
Quarter:
First.................................................. 477,400 508,200
Second................................................. 475,400
Third.................................................. 459,700
Fourth................................................. 448,500
Year...................................................... 1,891,800
Equivalent Admissions (e):
Quarter:
First.................................................. 703,300 756,600
Second................................................. 733,500
Third.................................................. 705,100
Fourth................................................. 680,400
Year...................................................... 2,875,600
Average length of stay (days) (f):
Quarter:
First.................................................. 5.0 5.1
Second................................................. 4.9
Third.................................................. 4.9
Fourth................................................. 4.9
Year...................................................... 5.0
</TABLE>
22
<PAGE> 25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
OPERATING DATA (CONTINUED)
<TABLE>
<CAPTION>
1999 1998
------- ---------
<S> <C> <C>
NON-CONSOLIDATED (G)
Number of hospitals in operation at:
March 31.................................................. 24 26
June 30................................................... 26
September 30.............................................. 24
December 31............................................... 24
Number of freestanding outpatient surgical centers in
operation at:
March 31.................................................. 5 5
June 30................................................... 5
September 30.............................................. 5
December 31............................................... 5
Licensed hospital beds at:
March 31.................................................. 6,015 6,357
June 30................................................... 6,317
September 30.............................................. 6,029
December 31............................................... 6,015
</TABLE>
- ---------------
(a) Licensed beds are those beds for which a facility has been granted approval
to operate from the applicable state licensing agency.
(b) Weighted average licensed beds represents the average number of licensed
beds, weighted based on periods owned.
(c) Represents the average number of patients in the Company's hospital beds
each day.
(d) Represents the total number of patients admitted (in the facility for a
period in excess of 23 hours) to the Company's hospitals and is used by
management and certain investors as a general measure of inpatient volume.
(e) Equivalent admissions are used by management and certain investors as a
general measure of combined inpatient and outpatient volume. Equivalent
admissions are computed by multiplying admissions (inpatient volume) by the
sum of gross inpatient revenue and gross outpatient revenue and then
dividing the resulting amount by gross inpatient revenue. The equivalent
admissions computation "equates" outpatient revenue to the volume measure
(admissions) used to measure inpatient volume resulting in a general measure
of combined inpatient and outpatient volume.
(f) Represents the average number of days admitted patients stay in the
Company's hospitals.
(g) The non-consolidated facilities include facilities operated through 50/50
joint ventures which are not controlled by the Company. They are accounted
for using the equity method of accounting and are, therefore, not included
on a fully consolidated basis in the condensed consolidated financial
statements.
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<PAGE> 26
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is facing significant legal challenges. The Company is the
subject of various Federal and state investigations, qui tam actions,
shareholder derivative and class action suits filed in Federal court,
shareholder derivative actions filed in state courts, patient/payer actions and
general liability claims.
FEDERAL AND STATE INVESTIGATIONS
In March 1997, various facilities of the Company's El Paso, Texas
operations were searched by Federal authorities pursuant to search warrants, and
the government removed various records and documents. In February 1998, an
additional warrant was executed and a single computer was seized.
In July 1997, various Company affiliated facilities and offices were
searched pursuant to search warrants issued by the United States District Court
in several states. During July, September and November 1997, the Company was
also served with subpoenas requesting records and documents related to
laboratory billing and DRG coding in various states and home health operations
in various jurisdictions, including, but not limited to, Florida. In January
1998, the Company received a subpoena which requested records and documents
relating to physician relationships.
Also, in July 1997, the United States District Court for the Middle
District of Florida, in Fort Myers, issued an indictment against three employees
of a subsidiary of the Company. The indictment relates to the alleged false
characterization of interest payments on certain debt resulting in Medicare and
CHAMPUS overpayments since 1986 to Fawcett Memorial Hospital, a Port Charlotte,
Florida hospital that was acquired by the Company in 1992. The Company has been
served with subpoenas for various records and documents. A fourth employee of a
subsidiary of the Company was indicted in July 1998 by a superseding indictment.
The trial on this matter commenced on May 3, 1999.
In addition, several hospital facilities affiliated with the Company in
various states have received individual Federal and/or state government
inquiries, both informal and formal, requesting information related to
reimbursement from government programs.
In general, the Company believes that the United States Department of
Justice and other Federal and state governmental authorities are investigating
certain acts, practices or omissions alleged to have been engaged in by the
Company with respect to Medicare, Medicaid and CHAMPUS patients regarding (a)
allegedly improper DRG coding (commonly referred to as "upcoding") relating to
bills submitted for medical services, (b) allegedly improper outpatient
laboratory billing (e.g., unbundling of services and medically unnecessary
tests), (c) inclusion of allegedly improper items in cost reports submitted as a
basis for reimbursement under Medicare, Medicaid and similar government
programs, (d) arrangements with physicians and other parties that allegedly
violate certain Federal and state laws governing fraud and abuse, anti-kickback
and "Stark" laws and (e) allegedly improper acquisitions of home health care
agencies and allegedly excessive billing for home health care services.
The Company is cooperating in these investigations and understands, through
written notice and other means, that it is a target in these investigations.
Given the scope of the ongoing investigations, the Company expects additional
subpoenas and other investigative and prosecutorial activity to occur in these
and other jurisdictions in the future.
The Company is also the subject of a formal order of investigation by the
Securities and Exchange Commission. The Company understands that the
investigation relates to the anti-fraud, insider trading, periodic reporting and
internal accounting control provisions of the federal securities laws.
While it is too early to predict the outcome of any of the ongoing
investigations or the initiation of any additional investigations, were the
Company to be found in violation of Federal or state laws relating to Medicare,
Medicaid or similar programs, the Company could be subject to substantial
monetary fines, civil and criminal penalties and exclusion from participation in
the Medicare and Medicaid programs. Any such
24
<PAGE> 27
sanctions could have a material adverse effect on the Company's financial
position and results of operations. (See Note 2 -- Investigations and Note
10 -- Contingencies of the Notes to Condensed Consolidated Financial
Statements.)
LAWSUITS
Qui Tam Actions
Several qui tam actions have been brought by private parties ("relators")
on behalf of the United States of America and have been unsealed and served on
the Company. With the exception of three cases discussed below, the government
has declined to intervene in the qui tam actions unsealed to date. To the best
of the Company's knowledge, the actions allege, in general, that the Company and
certain subsidiaries and/or affiliated partnerships violated the False Claims
Act, 31 U.S.C. sec.3729 et seq., for improper claims submitted to the government
for reimbursement. The lawsuits generally seek damages of three times the amount
of all Medicare or Medicaid claims (involving false claims) presented by the
defendants to the Federal government, civil penalties of not less than $5,000
nor more than $10,000 for each such Medicare or Medicaid claim, attorneys' fees
and costs. The Company is aware of additional qui tam actions that remain under
seal and believes that there are other sealed qui tam cases of which it is
unaware.
On February 12, 1999, the United States filed a Motion before the Judicial
Panel on Multidistrict Litigation ("MDL Panel") seeking to transfer and
consolidate all qui tam actions against the Company, including those that are
sealed and unsealed, for purposes of discovery and pretrial matters, to the
District Court for the District of Columbia. The MDL Panel denied the Motion on
procedural grounds relating to notice but granted leave to refile.
On October 5, 1998, the matter of United States of America ex rel. James F.
Alderson v. Columbia/HCA Healthcare Corp., Healthtrust-The Hospital Company and
Quorum Health Group, et al., Case No. 97-2035-CIV-T-23E, in the Middle District
of Florida, Tampa Division, was unsealed. The government intervened in this
action on October 1, 1998. The Complaint was originally filed in Montana in 1993
but was later transferred to Florida. The Complaint alleges that defendants made
false statements in annual Medicare cost reports over a period of ten years. The
Complaint further alleges that defendants engaged in a scheme of filing improper
reimbursement claims while keeping a "secret" set of books which were known as
"reserve cost reports" and concealing these books from Medicare auditors. The
Government filed an Amended Complaint. The Government has not yet served an
Amended Complaint on the Columbia/HCA defendants.
The matter of United States of America ex rel. Sara Ortega v. Columbia/HCA
Healthcare Corp., et al., No. EP95-CA-259H, was filed on July 31, 1998 in the
Western District of Texas, El Paso Division. The Complaint alleges that
defendants submitted false statements to the Joint Commission on Accreditation
of Healthcare Organizations in order to be eligible for Medicare payments,
thereby rendering false defendants' claims for Medicare reimbursement. The
Complaint also alleges that defendants engaged in fraudulent accounting
practices. Defendants have moved to dismiss the Complaint, and that motion is
pending.
The matter of United States of America, ex rel. Scott Pogue v. Diabetes
Treatment Centers of America, Inc., et al., Civil Action No. 3-94-0515, was
filed under seal on June 23, 1994 in the United States District Court for the
Middle District of Tennessee. On February 6, 1995, the United States filed its
Notice of Non-Intervention and on that same date, the District Court ordered the
complaint unsealed. In general, the relator contends that sums paid to
physicians by the Diabetes Treatment Centers of America, who served as Medical
Directors at a hospital affiliated with the Company, were unlawful payments for
the referrals of their patients. Relator filed a motion for partial summary
judgment. The court ordered relator's motion for partial summary judgment
stricken and ordered the relator to file an amended motion for partial summary
judgment, which relator has not yet done.
In December 1998, the matter of United States of America ex rel. John W.
Schilling v. Columbia/HCA Healthcare Corporation, et al., Civil Action No.
96-1264-CIV-T-23B, in the Middle District of Florida, was unsealed. The
Government has intervened in this action. The Complaint alleges that defendants
made false
25
<PAGE> 28
statements in annual Medicare cost reports. The Complaint further alleges, as in
Alderson, that Columbia kept "reserve cost reports." The Government has not yet
served the Complaint on Defendants.
In June of 1998, the case United States of America ex rel, Joseph "Mickey"
Parslow v. Columbia/HCA Healthcare Corporation and Curative Health Services,
Incorporated, No. 98-1260-CIV-T-23F, in the Middle District of Florida, Tampa
Division, was filed. This complaint was unsealed by the Court on April 9, 1999.
The Government has intervened in this lawsuit but has not yet served the
complaint on the Company. This qui tam case alleges that the Company submitted
false claims relating to contracts with Curative for the management of certain
wound care centers. The complaint further alleges that management fees paid to
Curative were excessive and not reasonable and that the claims for reimbursement
for these management fees violated the anti-kickback statutes.
A lawsuit captioned United States of America ex rel. James Thompson v.
Columbia/HCA Healthcare Corporation, et al. was filed on March 10, 1995 in the
United States District Court for the Southern District of Texas, Corpus Christi
Division (Civil Action No. C-95-110). In general, the relator claims that the
defendants (the Company and certain subsidiaries and affiliated partnerships)
engaged in a widespread strategy to pay physicians money for referrals and
engaged in other conduct to induce referrals, such as: (i) offering physicians
equity interests in hospitals; (ii) offering loans to physicians; (iii) paying
money under the guise of "consultation fees" to physicians to guarantee their
capital investment; (iv) paying consultation fees, rent or other monies to
physicians; (v) providing office space for free or reduced rent; (vi) providing
free or reduced rate vacations and trips; (vii) providing free or reduced rate
opportunities for additional medical training; (viii) providing income
guarantees; and (ix) granting physicians exclusive rights to perform procedures
in particular fields of practice. The defendants filed a Motion to Dismiss the
Second Amended Complaint in November 1995 which was granted by the Court in July
1996. In August 1996, the relator appealed to the United States Court of Appeals
for the Fifth Circuit, and in October 1997, the Fifth Circuit affirmed in part
and vacated and remanded in part the Trial Court's rulings. Defendants filed a
Second Amended Motion to Dismiss which was denied on August 18, 1998. On August
21, 1998, relator filed a Third Amended Complaint. Discovery has begun and
defendants are in the process of producing documents at this time.
The matter of United States of America ex rel. Sandra Russell; and Sandra
Russell, in her own right v. EPIC Healthcare Management Group, et al., No.
H-95-99151, was filed on January 18, 1995 in the United States District Court
for the Southern District of Texas, Houston Division. The complaint alleges that
the defendants submitted claims, records and/or statements for Medicare
reimbursement in connection with home health services which were false. The
defendants moved to dismiss in May 1997. The Court granted defendants' motion
but allowed the relator the right to replead. Relator filed an amended
complaint. Defendants filed a second motion to dismiss which was granted on June
25, 1998. Relator filed an Appeal which is pending before the Fifth Circuit.
The matter of Mary Ann Wisz, Individually, and ex rel. United States of
America v. C/HCA Development, Inc. d/b/a Columbia-Olympia Fields Osteopathic
Hospital and Medical Center, Inc., et al., Case No. 97-C-2646, was filed on
April 16, 1997, in the United States District Court for the Northern District of
Illinois, Eastern Division. An amended complaint was filed on February 17, 1998,
and on May 15, 1998, relator was permitted leave to file its Second Amended
Complaint. In addition to adding Midwestern University as a party defendant, the
Second Amended Complaint contained allegations that Olympia Fields Osteopathic
Hospital and Medical Center and/or the Chicago Osteopathic Hospital changed
dates on out-patient surgical procedures. That portion of the Second Amended
Complaint has been answered and discovery is ongoing. The Second Amended
Complaint also alleges that one or both hospitals directed surgical nurses to
misdesignate the severity of surgeries. That portion of the Second Amended
Complaint was subject to a partial motion to dismiss, which motion was granted.
The Company intends to pursue the defense of the qui tam actions
vigorously.
26
<PAGE> 29
Shareholder Derivative and Class Action Complaints Filed in the U.S. District
Courts
Since April 1997, numerous securities class action and derivative lawsuits
have been filed in the United States District Court for the Middle District of
Tennessee against the Company and a number of its current and former directors,
officers and/or employees.
On October 10, 1997, the Court entered an order consolidating all of the
above-mentioned securities class action claims into a single-captioned case,
Morse, Sidney, et al. v. R. Clayton McWhorter, et al., Case No. 3-97-0370. All
of the other individual securities class action lawsuits were administratively
closed by the Court. The consolidated Morse lawsuit is a purported class action
seeking the certification of a class of persons or entities who acquired the
Company's common stock from April 9, 1994 to September 9, 1997. The consolidated
lawsuit was brought against the Company, Richard Scott, David Vandewater, Thomas
Frist, Jr., R. Clayton McWhorter, Carl E. Reichardt, Magdalena Averhoff, M.D.,
T. Michael Long and Donald S. MacNaughton. The lawsuit alleges, among other
things, that the defendants committed violations of the Federal securities laws
by materially inflating the Company's revenues and earnings through a number of
practices, including upcoding, maintaining reserve cost reports, disseminating
false and misleading statements, cost shifting, illegal reimbursements, improper
billing, unbundling and violating various Medicare laws. The lawsuit seeks
damages, costs and expenses. Plaintiffs filed their Motion for Class
Certification in February 1998, and defendants filed responsive briefs. No
ruling has been made on class certification.
On October 10, 1997, the Court entered an order consolidating the
above-mentioned derivative law claims into a single-captioned case, McCall, H.
Carl, as Comptroller of the State of New York and as Trustee of the New York
State Common Retirement Fund, derivatively on behalf of Columbia/HCA Healthcare
Corporation v. Richard L. Scott, et al., No. 3-97-0838. All of the other
derivative lawsuits were administratively closed by the Court. The consolidated
McCall lawsuit was brought against the Company, Thomas Frist, Jr., Richard L.
Scott, David T. Vandewater, R. Clayton McWhorter, Magdalena Averhoff, M.D.,
Frank S. Royal, M.D., T. Michael Long, William T. Young and Donald S.
MacNaughton. The lawsuit alleges, among other things, derivative claims against
the individual defendants that they intentionally or negligently breached their
fiduciary duties to the Company by authorizing, permitting or failing to prevent
the Company from engaging in various schemes to improperly increase revenue,
upcoding, improper cost reporting, improper referrals, improper acquisition
practices and overbilling. In addition, the lawsuit asserts a derivative claim
against some of the individual defendants for breaching their fiduciary duties
by allegedly engaging in improper insider trading. The lawsuit seeks
restitution, damages, recoupment of fines or penalties paid by the Company,
restitution and pre-judgment interest against the alleged insider trading
defendants, and costs and expenses. In addition, the lawsuit seeks orders: (i)
prohibiting the Company from paying individual defendants' employment benefits;
(ii) terminating all improper business relationships with individual defendants;
and (iii) requiring the Company to implement effective corporate governance and
internal control mechanisms designed to monitor compliance with Federal and
state laws and ensure reports to the Board of material violations.
The defendants filed motions to dismiss in both the Morse and McCall
lawsuits. These motions were referred to the Magistrate Judge for consideration.
In June 1998, the Magistrate Judge recommended that the Court grant the motions
to dismiss in both cases. Plaintiffs in both cases have filed objections to the
Magistrate's recommendations with the District Court, and defendants have filed
responsive pleadings.
Shareholder Derivative Actions Filed in State Courts
Several derivative actions have been filed in state court by certain
purported stockholders of the Company against certain of the Company's current
and former officers and directors alleging breach of fiduciary duty, and failure
to take reasonable steps to ensure that the Company did not engage in illegal
practices thereby exposing the Company to significant damages.
Two purported derivative actions entitled Barron, Evelyn, et al. v.
Magdelena Averhoff, et al., (Civil Action No. 15822NC), filed on July 22, 1997,
and Kovalchick, John E. v. Magdelena Averhoff, et al., Civil Action No. 15829NC,
filed on July 29, 1997, have been filed in the Court of Chancery of the State of
Delaware in and for New Castle County. The actions were brought on behalf of the
Company by certain
27
<PAGE> 30
purported shareholders of the Company against certain of the Company's current
and former officers and directors. The suits seek damages, attorneys' fees and
costs. In the Barron lawsuit, plaintiffs also seek an Order (i) requiring
individual defendants to return to the Company all salaries or remunerations
paid them by the Company, together with proceeds of the sale of Columbia/HCA
stock made in breach of their fiduciary duties; (ii) prohibiting the Company
from paying any individual defendant any benefits pursuant to the terms of
employment, consulting or partnership agreements; and (iii) terminating all
improper business relationships between the Company and any individual
defendant. In the Kovalchick lawsuit, plaintiffs also seek an Order (i)
requiring individual defendants to return to the Company all salaries or
remunerations paid to them by the Company and all proceeds from the sale of
Columbia/HCA stock made in breach of their fiduciary duties; (ii) requiring that
an impartial Compliance Committee be appointed to meet regularly; and (iii)
requiring that the Company be prohibited from paying any director/defendant any
benefits pursuant to terms of employment, consulting or partnership agreements.
Plaintiffs in both Barron and Kovalchick have granted the defendants an
indefinite extension of time to respond to the Complaint. On August 14, 1997, a
similar purported derivative action entitled State Board of Administration of
Florida, the public pension fund of the State of Florida in behalf of itself and
in behalf of all other stockholders of Columbia/HCA Healthcare Corporation
derivatively in behalf of Columbia/HCA Healthcare Corporation vs. Magdalena
Averhoff, et al., (No. 97-2729), was filed in the Circuit Court in Davidson
County, Tennessee on behalf of the Company by certain purported shareholders of
the Company against certain of the Company's current and former directors and
officers. These lawsuits seek damages and costs as well as orders (i) enjoining
the Company from paying benefits to individual defendants; (ii) requiring
termination of all improper business relationships with individual defendants;
(iii) requiring the Company to provide for "independent public directors;" and
(iv) requiring the Company to put in place proper mechanisms of corporate
governance. The Court has entered an Order temporarily staying the lawsuit. That
order recently expired and the defendants have filed a motion to extend the
duration of the stay. The Court has granted the Company's motion to temporarily
stay the lawsuit.
The matter of Louisiana State Employees Retirement System, a public pension
fund of the State of Louisiana, in behalf of itself and in behalf of all other
stockholders of Columbia/HCA Healthcare Corporation derivatively in behalf of
Columbia/HCA Healthcare Corporation v. Magdalena Averhoff, et al., another
derivative action, was filed on March 19, 1998 in the Circuit Court of the
Eleventh Judicial Circuit, Dade County, Florida, General Jurisdiction Division
(Case No. 98-6050 CA04) and the defendants removed it to the United States
District Court, Southern District of Florida (Case No. 98-814-CIV). The
Louisiana State Employees Retirement System is the public pension fund of the
State of Louisiana. The suit alleges, among other things, breach of fiduciary
duties resulting in damage to the Company. The lawsuit seeks damages from the
individual defendants to be paid to the Company and attorneys' fees, costs and
expenses. In addition, the lawsuit seeks orders (i) requiring the individual
defendants to pay to the Company all benefits received by them from the Company;
(ii) enjoining the Company from paying any benefits to individual defendants;
(iii) requiring that defendants terminate all improper business relationships
with the Company and any individual defendants; (iv) requiring that the Company
provide for appointment of a majority of "independent public directors;" and (v)
requiring that the Company put in place proper mechanisms of corporate
governance. On August 10, 1998, the Court transferred this case to the Middle
District of Tennessee. By agreement of the parties, the case has been
administratively closed pending the outcome of the Court's ruling on the
defendants' motions to dismiss the McCall action referred to above.
The Company intends to pursue the defense of these Federal and state
Shareholder Derivative and Class Action Complaints vigorously.
Patient/Payer Actions and Other Class Actions
The Company is a party to several purported class action lawsuits which
have been filed by patients and/or payers against the Company and/or certain of
its current and/or former officers and/or directors alleging, in general,
improper and fraudulent billing, overcharging, coding and physician referrals,
as well as other violations of law. Certain of the lawsuits have been
conditionally certified as class actions.
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The matter of Boyson, Cordula, on behalf of herself and all others
similarly situated v. Columbia/HCA Healthcare Corporation was filed on September
8, 1997 in the United States District Court for the Middle District of
Tennessee, Nashville Division (Civil Action No. 3-97-0936). The original
complaint, which sought certification of a national class comprised of all
persons or entities who have paid for medical services provided by the Company,
alleges, among other things, that the Company has engaged in a pattern and
practice of (i) inflating diagnosis and medical treatments of its patients to
receive larger payments from the purported class members; (ii) providing
unnecessary medical care; and (iii) billing for services never rendered. This
lawsuit seeks injunctive relief requiring the Company to perform an accounting
to identify and disgorge medical bill overcharges. It also seeks damages,
attorneys' fees, interest and costs. In an Order entered on June 11, 1998 by the
MDL Panel, other lawsuits against the Company were consolidated with the Boyson
case in the Middle District of Tennessee. The amended complaint in Boyson was
withdrawn and superseded by the Coordinated Class Action Complaint filed in the
MDL proceeding on September 21, 1998. (See In re: Columbia/HCA Healthcare
Corporation Billing Practices Litigation, below.)
The matter of Brown, Nancy, individually and on behalf of all others
similarly situated v. Columbia/HCA Healthcare Corporation was filed on November
16, 1995, in the Fifteenth Judicial Circuit Court in and for Palm Beach County,
Florida, Case No. 95-9102 AD. The suit alleges that Palms West Hospital charged
excessive amounts for goods and services associated with patient care and
treatment, including items such as pharmaceuticals, medical supplies, laboratory
tests, medical equipment and related medical services such as x-rays. The suit
seeks the certification of a nationwide class, and damages for patients who have
paid bills for the allegedly unreasonable portion of the charges as well as
interest, attorneys' fees and costs. In response to defendant's amended motion
to dismiss filed in January 1996, plaintiff amended the Complaint and defendant
subsequently filed an answer and defenses in June 1996. On October 15, 1997,
Harald Jackson moved to intervene in the lawsuit (see case below). The court
denied Jackson's motion on December 19, 1997. To date, discovery is proceeding
and no class has been certified.
Jane Doe and her husband, John Doe, on their own behalf, and on behalf of
all other persons similarly situated vs. HCA Health Services of Tennessee, Inc.,
d/b/a HCA Donelson Hospital n/k/a Summit Medical Center is a class action suit
filed on August 17, 1992 in the First Circuit Court for Davidson County,
Tennessee, Case No. 92C-2041. The suit principally alleges that Summit Medical
Center's charges for hospital services and supplies for medical services (a
hysterectomy in the plaintiff's case) exceeded the reasonable costs of its goods
and services, that the overcharges constitute a breach of contract and an unfair
or deceptive trade practice as well as a breach of the duty of good faith and
fair dealing. This suit seeks damages, costs and attorneys' fees. In addition,
the suit seeks a declaratory judgment recognizing plaintiffs' rights to be free
from predatory billing and collection practices and an Order (i) requiring
defendants to notify plaintiff class members of entry of declaratory judgment
and (ii) enjoining defendants from further efforts to collect charges from the
plaintiffs. In 1997, this case was certified as a class action consisting of all
past, present and future patients at Summit Medical Center. In July 1997, Summit
filed a Motion for Summary Judgment. In March 1998, the Court denied the Motion
for Summary Judgment and ordered the parties into mediation. In June 1998, the
Court of Appeals denied defendant's application for permission to appeal the
trial court's denial of the summary judgment motion. Summit has filed an
application for permission to appeal to the Supreme Court of Tennessee, which
the Supreme Court granted on November 9, 1998, and remanded the case to the
Court of Appeals for review on the merits. The case is set for oral argument
before the Court of Appeals on June 8, 1999. The trial court withdrew the order
for mediation pending defendant's appeal of the summary judgment denial.
Ferguson, Charles, on behalf of himself and all other similarly situated v.
Columbia/HCA Healthcare Corporation, et al. was filed on September 16, 1997 in
the Circuit Court for Washington County, Tennessee, Civil Action No. 18679. This
lawsuit seeks certification of a national class comprised of all individuals and
entities who paid or were responsible for payment of any portion of a bill for
medical care or treatment provided by the Company and alleges, among other
things, that the Company engaged in billing fraud by excessively billing
patients for services rendered, billing patients for services not rendered or
not medically necessary, uniformly using improper codes to report patient
diagnosis, and improperly and illegally recruiting doctors to refer patients to
the Company's hospitals. The proposed class is broad enough to encompass all
29
<PAGE> 32
private payers, including individuals, insurers and health and welfare plans.
The suit seeks damages, interest, attorneys' fees, costs and expenses. In
addition, the suit seeks an Order (i) requiring defendants to provide an
accounting of plaintiffs and class members who overpaid or were obligated to
overpay; and (ii) requiring defendants to disgorge all monies illegally
collected from plaintiffs and the class. Plaintiff filed a Motion for Class
Certification in September 1997 which has not been ruled on. In December 1997,
the Company filed a Motion for Summary Judgment which was denied. In January
1998, plaintiff filed a Motion for Leave to File a Second Amended Class Action
Complaint to Add an Additional Class Representative which was granted but the
Court dismissed the claims asserted by the additional plaintiff. In June 1998,
plaintiff filed a Motion for Leave of Court to File a Third Amended Class Action
Complaint, and in October 1998, plaintiff filed a Motion for Leave of Court to
File a Fourth Amended Class Action Complaint. Both proposed Amended Complaints
seek to add new named plaintiffs to represent the proposed class. Both seek to
add additional allegations of billing fraud, including improper billing for
laboratory tests, inducing doctors to perform unnecessary medical procedures,
improperly admitting patients from emergency rooms and maximizing patients'
lengths of stay as inpatients in order to increase charges, and improperly
inducing doctors to refer patients to the Company's home healthcare units or
psychiatric hospitals. Both seek an additional order that the Company's
contracts with plaintiffs and all class members are rescinded and that the
Company must repay all monies received from plaintiffs and the class members.
The Court has not ruled on either Motion for Leave to Amend. Discovery is
underway in the case. The Company in September 1998 filed another Motion for
Summary Judgment contesting the standing of the named plaintiffs to bring the
alleged claims. That motion has not been ruled on by the Court.
The matter of The United Paper Workers International Union, et al. v.
Columbia/HCA Healthcare Corporation, et al., was filed on September 3, 1998 in
the Circuit Court for Washington County, Tennessee, Civil Action No. 19350. The
lawsuit contains billing fraud allegations similar to those in the Ferguson case
and seeks certification of a national class comprised of all self-insured
employers who paid or were obligated to pay any portion of a bill for, among
other things, pharmaceuticals, medical supplies or medical services. The suit
seeks declaratory relief, damages, interest, attorneys' fees and other
litigation costs. In addition, the suit seeks an Order (i) requiring defendants
to provide an accounting to plaintiffs and class members who overpaid or were
obligated to overpay, (ii) requiring defendants to disgorge all monies illegally
collected from plaintiffs and the class, and (iii) rescinding all contracts of
defendants with plaintiffs and all class members. The complaint has not been
served formally on the Company.
The matter of Douglas, Cheryl, individually, and on behalf of all others
similarly situated v. Columbia/HCA Healthcare Corporation, et al. is a
purported class action filed on March 5, 1998 in the Circuit Court of Cook
County, Illinois, County Department, Chancery Division, Case No. 98 CH 2942. The
suit generally alleges that defendants were involved in fraudulent and deceptive
acts including wrongful billing, unnecessary treatment and wrongful diagnosis of
patients with illnesses that necessitate higher medical fees for financial gain.
The suit seeks damages, costs and expenses. On September 18, 1998, the Company's
motion to dismiss was granted and plaintiff's complaint was dismissed without
prejudice. On November 6, 1998, the plaintiff filed an amended complaint
alleging violations of the Illinois Consumer Fraud and Deceptive Trade Practices
Act, fraudulent misrepresentation, breach of contract and civil conspiracy. On
April 16, 1999, the court granted the Company's motion to dismiss the amended
complaint. Such dismissal was with prejudice as to the civil conspiracy count
and without prejudice as to the remaining counts, and plaintiff was allowed
until May 14, 1999 to replead those counts that had been dismissed without
prejudice.
The matter of Hoop, Kemp, et al. v. Columbia/HCA Health Corporation, et al.
was filed on August 18, 1997 in the District Court of Johnson County, Texas,
Civil Action No. 249-171-97. This suit seeks certification of a Texas class
comprised of persons who paid for any portion of an improper or fraudulent bill
for medical services rendered by any Texas facility owned or operated by the
Company. The suit seeks damages, attorneys' fees, costs and expenses, as well as
restitution to plaintiffs and the class in the amount by which defendants have
been unjustly enriched and equitable and injunctive relief. The lawsuit
principally alleges that the Company perpetrated a fraudulent scheme that
consisted of systematic and routine overbilling through false and inaccurate
bills, including padding, billing for services never provided, and exaggerating
the seriousness of patients' illnesses. The lawsuit also alleges that the
Company systematically entered into illegal
30
<PAGE> 33
kickback schemes with doctors for patient referrals. The Company filed its
answer in November 1997 denying the claims. Plaintiffs have recently sought to
commence discovery.
The matter of Jackson, Harald F., individually and on behalf of all others
similarly situated v. Columbia/HCA Healthcare Corporation was initially filed as
a motion to intervene in the Brown matter in October 1997 in the Fifteenth
Judicial Circuit Court in and for Palm Beach County, Florida. The Court denied
Jackson's motion on December 19, 1997, and Jackson subsequently filed a
Complaint in the same state court on December 23, 1997, Case No. 97-011419-AI.
This suit seeks certification of a national class of persons or entities who
were allegedly overcharged for medical services by the Company through an
alleged practice of systematically and unlawfully inflating prices, concealing
its practice of inflating prices, and engaging in, and concealing, a uniform
practice of overbilling. The proposed class is broad enough to encompass all
private payers, including individuals, insurers and health and welfare plans.
This suit seeks damages on behalf of the plaintiff and individual members of the
class as well as interest, attorneys' fees and costs. In January 1998, the case
was removed to the United States District Court, Southern District of Florida,
Case No. 98-CIV-8050. In February 1998, Jackson filed an amended complaint, and
the case was remanded to state court. The Company has filed motions in response
to the amended complaint which are pending. Jackson moved to transfer the case
to the judge handling the Brown case which is also pending, but the motion to
transfer was denied on April 8, 1999. Discovery has commenced.
The matter of Johnson, Bruce A., et al. v. Plantation General Hospital,
Limited Partnership was filed on March 9, 1992 in the Circuit Court for the
Seventeenth Judicial Circuit, State of Florida, Broward County, Case No.
92-06823 Division 2. In general, the suit alleges that the hospital charged
excessive amounts for pharmaceuticals, medical supplies and laboratory tests.
The suit sought certification of a class. Count I sought a price reduction on
all outstanding bills in the amount of the allegedly excessive portion of the
charges. Counts II and III sought damages for patients who have paid bills
containing allegedly excessive amounts for the alleged unreasonable portion of
the charges. Plaintiffs' Complaint claimed fees from any recovery or benefit in
the action. In September 1995, the trial court certified a class and the Fourth
District Court of Appeals affirmed. In October 1996, the hospital filed a Motion
for Summary Judgment on Counts II and III on the basis of the voluntary payment
defense. The Court granted the motion in November 1997. In April 1998, following
the hospital's statement that it would deem the six to eleven year old
outstanding debt of class members to be fully satisfied, summary judgment was
granted to the class on Count I on the ground of mootness. No monetary judgment
was recovered. In September 1998, the Court entered an order denying plaintiffs'
motion for attorneys' fees and granting their motion for costs. Both parties
have appealed the September 1998 orders. Those appeals are pending. There have
been no appeals of the final judgments.
The matter of Operating Engineers Local No. 312 Health & Welfare Fund, on
behalf of itself and as representative of a class of those similarly situated v.
Columbia/HCA Healthcare Corporation was filed on August 6, 1997 in the United
States District Court for the Eastern District of Texas, Civil Action No.
597CV203. The original complaint alleged violations of the Racketeering
Influenced and Corrupt Organization Act ("RICO") based on allegations that the
defendant has employed one or more schemes or artifices to defraud the plaintiff
and purported class members through fraudulent billing for services not
performed, fraudulent overcharging in excess of correct rates and fraudulent
concealment and misrepresentation. In October 1997, the Company filed a motion
to transfer venue and to dismiss the lawsuit on jurisdiction and venue grounds
because the RICO claims are deficient. The motion to transfer was denied on
January 23, 1998. The motion to dismiss was also denied. In February 1998,
defendant filed a petition with the MDL Panel to consolidate this case with
Boyson for pretrial proceedings in the Middle District of Tennessee. During the
pendency of the motion to consolidate, plaintiff amended its Complaint to add
allegations under the Employee Retirement Income Security Act of 1974 ("ERISA")
as well as state law claims. The amended complaint seeks damages, attorneys'
fees and costs, as well as disgorgement and injunctive relief. The MDL Panel
granted defendant's motion to consolidate in June 1998, and this action was
transferred to the Middle District of Tennessee. The amended complaint in
Operating Engineers was withdrawn and superseded by the Coordinated Class Action
Complaint filed in the MDL proceeding on September 21, 1998.
On April 24, 1998, two matters, Board of Trustees of the Carpenters &
Millwrights of Houston & Vicinity Welfare Trust Fund v. Columbia/HCA Healthcare
Corporation, Case No. 598CV157, and Board of Trustees
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<PAGE> 34
of the Texas Ironworkers' Health Benefit Plan v. Columbia/HCA Healthcare
Corporation, Case No. 598CV158, were filed in the United States District Court
for the Eastern District of Texas. The original Complaint in these suits alleged
violations of RICO only. Plaintiffs in both cases principally alleged that in
order to inflate its revenues and profits, defendant engaged in fraudulent
billing for services not performed, fraudulent overcharging in excess of correct
rates and fraudulent concealment and misrepresentation. These suits seek
damages, attorneys' fees and costs, as well as disgorgement and injunctive
relief. Plaintiffs subsequently amended their complaint to add allegations under
ERISA as well as state law claims. These suits have been consolidated by the MDL
Panel with Boyson and transferred to the Middle District of Tennessee for
pretrial proceedings. The amended complaints in these suits were withdrawn and
superseded by the Coordinated Class Action Complaint filed in the MDL proceeding
on September 21, 1998.
The matter of Tennessee Laborers Health and Welfare Fund, on behalf of
itself and all others similarly situated vs. Columbia/HCA Healthcare
Corporation, Case No. 3-98-0437, was filed in the United States District Court
of the Middle District of Tennessee, Nashville Division, on May 14, 1998. The
lawsuit seeks certification of a national class comprised of all employee
welfare benefit plans that have paid for medical services provided by the
Company. This case involves allegations under ERISA, as well as state law claims
which are similar to those alleged in Boyson. Plaintiff, an Employee Welfare
Benefit Plan, alleges that defendant violated the terms of the Plan documents by
overbilling the Plans, including but not limited to, exaggerating the severity
of illnesses, providing unnecessary treatment, billing for services not rendered
and other methods of overbilling and further violated the terms of the Plan
documents by taking Plan assets in payment of such improper bills. Plaintiff
further alleges that defendant intentionally concealed or suppressed the true
nature of its patients' illnesses, and the actual treatment provided to those
patients, and its improper billing. The suit seeks injunctive relief in the form
of an accounting, damages, attorneys' fees, interest and costs. This suit has
been consolidated by the Court with Boyson and the other cases transferred by
the MDL Panel to the Middle District of Tennessee. The complaint in Tennessee
Laborers was withdrawn and superseded with the filing of the Coordinated Class
Action Complaint in the MDL proceeding on September 21, 1998.
The matter of In re: Columbia/HCA Healthcare Corporation Billing Practices
Litigation, Master File No. MDL 1227, was commenced by Order of the MDL Panel
entered on June 11, 1998 granting the Company's petition to consolidate the
Boyson and Operating Engineers cases for pretrial purposes in the Middle
District of Tennessee pursuant to 28 U.S.C. sec. 1407. Three other cases that
have been consolidated with Boyson and Operating Engineers in the MDL proceeding
are (i) Board of Trustees of the Carpenters & Millwrights of Houston & Vicinity
Welfare Trust Fund, (ii) Board of Trustees of the Texas Ironworkers' Health
Benefit Plan, and (iii) Tennessee Laborers Health and Welfare Fund. On September
21, 1998, the plaintiffs in five consolidated cases filed a Coordinated Class
Action Complaint, which the Company answered on October 13, 1998. The plaintiffs
seek certification of two proposed classes including all private individuals and
all employee welfare benefit plans that have paid for health-related goods or
services provided by the Company. The plaintiffs allege, among other things,
that the Company has engaged in a pattern and practice of inflating charges,
concealing the true nature of patients' illnesses, providing unnecessary medical
care, and billing for services never rendered. The plaintiffs seek damages,
attorneys' fees and costs, as well as disgorgement and injunctive relief. A
scheduling order has been entered that provides for class certification motions
to be filed by February 22, 1999 and for discovery to be completed by June 30,
1999. The parties are currently engaged in discovery. In February 1999,
plaintiffs filed a motion to extend the time periods in the scheduling order,
which has not been ruled on by the Court.
The Company intends to pursue the defense of these class actions
vigorously.
While it is premature to predict the outcome of the qui tam, shareholder
derivative and class action lawsuits, the amounts claimed are substantial. It is
possible that an adverse resolution, individually or in the aggregate, could
have a material adverse impact on the Company's liquidity, financial position
and results of operations. See Note 2 -- Investigations and 10 -- Contingencies
of the Notes to Condensed Consolidated Financial Statements.
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<PAGE> 35
The Company believes the ongoing investigations, qui tam, shareholder
cases, class action cases and related media coverage have had a negative effect
on the Company's financial position and results of operations. However, the
Company is unable to measure the effect or predict the magnitude that these
matters and the related media coverage could have on the Company's future
results of operations and financial position.
General Liability and Other Claims
The matter of Landgraff, Anne M. and Gina Magarian, on behalf of the
Columbia/HCA Stock Bonus Plan v. Columbia/HCA Healthcare Corporation of America,
et al. was originally filed on November 7, 1997 in the United States District
Court for the Northern District of Georgia, Atlanta Division, Civil Action No.
97-CV-3381 and transferred by agreement of the parties to the United States
District Court for the Middle District of Tennessee, Civil Action No. 3-98-0090.
The plaintiffs filed a second amended complaint on April 24, 1998 against the
Company and certain members of the Company's Retirement Committee during 1997
alleging breach of fiduciary duty owing to the participants in the Stock Bonus
Plan by failing to sell the Plan's holdings of Company stock based upon
knowledge of material public and non-public adverse information and by failing
to act solely in the interests and for the benefit of the participants. The suit
generally alleges that the defendants fraudulently concealed information from
the public and fraudulently inflated the Company's stock price through billing
fraud, overcharges, inaccurate Medicare cost reports and illegal kickbacks for
physician referrals. The suit seeks an order allowing the plaintiffs to proceed
on behalf of the Plan as in a derivative action, a judgment for compensatory and
restitutionary damages for the losses allegedly experienced by the Plan because
of breaches of fiduciary duty, an order transferring management of the Plan to a
competent, neutral third-party, and an award of pre-judgment interest,
reasonable attorneys fees and costs. Discovery in this case is almost completed.
A trial date of June 1999 has been set.
A class action styled Mary Forsyth, et al. v. Humana, Inc., et al., Case
No. CV-S-89-249-DWH, was filed on March 29, 1989, in the United States District
Court for the District of Nevada. Plaintiffs are two classes of individuals who
paid for, or received coverage under, group insurance policies sold in the State
of Nevada by Humana Insurance. They allege violations of antitrust laws, ERISA
and RICO which arise from the sale of the policies and from incentives provided
under the policies for insureds to use Humana Sunrise Hospital in Las Vegas, a
facility now owned by the Company. The suit seeks attorneys' fees and costs, as
well as injunctive relief and insurance benefits for plaintiffs. In 1993, the
United States District Court granted summary judgment dismissing most of
plaintiffs' claims but granted plaintiffs judgment on one claim. Plaintiffs
appealed to the United States Court of Appeals for the Ninth Circuit which, in
May 1997, affirmed the judgment on the ERISA claims; reversed as to the
antitrust claims; and reversed in part as to the RICO claims, but affirmed the
District Court's grant of summary judgment limiting RICO damages to three times
the ERISA damages. In their current complaint, plaintiffs claim approximately
$133 million in antitrust damages that is subject to statutory trebling.
However, in their most recent expert report, plaintiffs' expert claims antitrust
damages of approximately $13-$21 million. Humana Inc. ("Humana") has petitioned
the United States Supreme Court for a Writ of Certiorari on the RICO claims
which was granted. On January 20, 1999, the Supreme Court affirmed the Ninth
Circuit's decision that the plaintiffs could proceed with their RICO claims. The
Supreme Court did not address the amount of damages that plaintiffs could seek
on their claim. The entire case is now back in the Nevada district court, where
Humana has filed several motions seeking dismissal of the antitrust claims. A
trial is expected to be scheduled before the end of the year.
On December 4, 1997, a lawsuit captioned Florida Software Systems, Inc., a
Florida corporation v. Columbia/HCA Healthcare Corporation, a Delaware
corporation was filed in the United States District Court for the Middle
District of Florida (Civil Action No. 97-2866-C.V.-T-17b). The lawsuit alleges
that the defendant breached an agreement under which Florida Software Systems,
Inc. was allegedly granted the exclusive right to provide medical claims
management for certain claims made by the Company for payment to any third party
payers in connection with the rendering of medical care or services. The lawsuit
alleges claims for fraud, breach of implied contract and breach of contract. The
lawsuit seeks damages, attorneys' fees and costs, as well as injunctive relief.
On October 15, 1998, the Company filed a counterclaim and third party complaint
against Florida Software Systems, Inc., Receivable Dynamics Inc., Nevada
Communications
33
<PAGE> 36
Corporation, Norman R. Dobiesz, Maureen Donovan Dobiesz, Stuart M. Lopata, and
Samuel A. Greco (a former senior officer at the Company). The counterclaim
alleges racketeering, conspiracy, breach of fiduciary duty, and breach of
contract. Defendants have filed a motion to dismiss the counterclaim, which
motion to dismiss has been partially granted.
The Company intends to pursue the defense of these actions and prosecution
of its counterclaims and third party claims vigorously.
The Company is also subject to claims and suits arising in the ordinary
course of business, including claims for personal injuries or for wrongful
restriction of, or interference with, physicians' staff privileges. In certain
of these actions the claimants have asked for punitive damages against the
Company, which are usually not covered by insurance. In the opinion of
management, the ultimate resolution of these pending claims and legal
proceedings will not have a material adverse effect on the Company's results of
operations or financial position.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits:
Exhibit 10(a) -- $1,000,000 Credit Agreement dated as of March 30, 1999
among the Company, The Several Banks and Other
Financial Institutions, Chase Securities Inc., as Lead
Arranger and Sole Book Manager, NationsBank, N.A., as
Documentation Agent, The Bank of New York, The Bank of
Nova Scotia, and Toronto-Dominion (Texas), Inc., as
Co-Syndication Agents, Deutsche Bank AG New York Branch
and/or Cayman Islands Branch and Fleet National Bank,
as Co-Agents, SunTrust Bank, Nashville, N.A. and
Wachovia Bank, N.A., as Lead Managers and The Chase
Manhattan Bank, as Administrative Agent.*
Exhibit 10(b) -- First Amendment to the July 1998 $1 Billion Agreement
dated as of March 30, 1999.*
Exhibit 10(c) -- Fifth Amendment to the Five-Year Agreement dated as of
March 30, 1999.*
Exhibit 12 -- Statement re Computation of Ratio of Earnings to
Fixed Charges.
Exhibit 27 -- Financial Data Schedule.*
*Included only in filings under the Electronic Data, Gathering,
Analysis and Retrieval system.
(b) Reports on Form 8-K filed during the quarter ended March 31, 1999:
On February 24, 1999, the Company filed a report on Form 8-K which
included its operating results for the year and fourth quarter ended
December 31, 1998 and announced a new $1.0 billion share repurchase
program. The Company also announced that it entered into a Letter of Credit
Agreement with the United States in connection with the Company's share
repurchase agreement.
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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 thereunto duly authorized.
COLUMBIA/HCA HEALTHCARE
CORPORATION
/s/ R. MILTON JOHNSON
--------------------------------------
R. Milton Johnson
Vice President and Controller
Date: May 14, 1999
35
<PAGE> 1
EXHIBIT 10(a)
EXECUTION COPY
==================================================================
$1,000,000,000 CREDIT AGREEMENT
among
COLUMBIA/HCA HEALTHCARE CORPORATION,
THE SEVERAL BANKS AND OTHER FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTIES HERETO,
CHASE SECURITIES INC.,
as Lead Arranger and Sole Book Manager,
NATIONSBANK, N.A.,
as Documentation Agent,
THE BANK OF NEW YORK,
THE BANK OF NOVA SCOTIA, and
TORONTO-DOMINION (TEXAS), INC.,
as Co-Syndication Agents,
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH and
FLEET NATIONAL BANK,
as Co-Agents,
SUNTRUST BANK, NASHVILLE, N.A.
and WACHOVIA BANK, N.A.,
as Lead Managers,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of March 30, 1999
==================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS .....................................................1
1.1 Defined Terms ...................................................1
1.2 Other Definitional Provisions ..................................12
SECTION 2. AMOUNT AND TERMS OF LOANS ......................................12
2.1 Loans and Notes ................................................12
2.2 Fees ...........................................................14
2.3 Termination or Reduction of Commitments ........................14
2.4 Optional Prepayments............................................14
2.5 Mandatory Prepayments and Commitment Reductions ................14
2.6 Conversion Options; Minimum Amount of Loans ....................15
2.7 Interest Rate and Payment Dates for Loans ......................15
2.8 Computation of Interest and Fees ...............................16
2.9 Inability to Determine Interest Rate ...........................17
2.10 Pro Rata Borrowings and Payments ...............................17
2.11 Illegality .....................................................18
2.12 Requirements of Law ............................................18
2.13 Capital Adequacy ...............................................19
2.14 Taxes ..........................................................19
2.15 Indemnity ......................................................20
2.16 Application of Proceeds of Loans ...............................21
2.17 Notice of Certain Circumstances; Assignment of Commitments
Under Certain Circumstances ....................................21
SECTION 3. REPRESENTATIONS AND WARRANTIES .................................22
3.1 Corporate Organization and Existence ...........................22
3.2 Subsidiaries ...................................................22
3.3 Financial Information ..........................................22
3.4 Changes in Condition ...........................................23
3.5 Assets .........................................................23
3.6 Litigation .....................................................23
3.7 Tax Returns ....................................................24
3.8 Contracts, etc. ................................................24
3.9 No Legal Obstacle to Agreement ................................ 24
3.10 Defaults .......................................................24
3.11 Burdensome Obligations .........................................24
3.12 Pension Plans ..................................................25
3.13 Disclosure .....................................................25
3.14 Environmental and Public and Employee Health and
Safety Matters .................................................25
3.15 Federal Regulations ............................................25
3.16 Investment Company Act; Other Regulations ......................26
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.17 Year 2000 Matters ..............................................26
SECTION 4. CONDITIONS .....................................................26
4.1 Loan Documents .................................................26
4.2 Legal Opinions .................................................26
4.3 Company Officers' Certificate ..................................27
4.4 Legality, etc. .................................................27
4.5 General ........................................................27
4.6 Fees ...........................................................27
4.7 Amendments to Existing Agreements ..............................27
SECTION 5. GENERAL COVENANTS ..............................................28
5.1 Taxes, Indebtedness, etc. ......................................28
5.2 Maintenance of Properties; Compliance with Law .................28
5.3 Transactions with Affiliates ...................................29
5.4 Insurance ......................................................29
5.5 Financial Statements ...........................................29
5.6 Ratio of Consolidated Total Debt to Consolidated Total
Capitalization .................................................32
5.7 Interest Coverage Ratio ........................................32
5.8 Distributions ..................................................32
5.9 Merger or Consolidation ........................................32
5.10 Sales of Assets ................................................32
5.11 Compliance with ERISA ..........................................33
5.12 Negative Pledge ................................................33
5.13 Sale-and-Lease-back Transactions ...............................34
SECTION 6. DEFAULTS .......................................................34
6.1 Events of Default ..............................................34
6.2 Annulment of Defaults ..........................................37
6.3 Waivers ........................................................37
6.4 Course of Dealing ..............................................37
7.1 Appointment ....................................................37
7.2 Delegation of Duties ...........................................37
7.3 Exculpatory Provisions .........................................38
7.4 Reliance by Agent ..............................................38
7.5 Notice of Default ..............................................38
7.6 Non-Reliance on Agent and Other Banks ..........................39
7.7 Indemnification ................................................39
7.8 Agent in Its Individual Capacity ...............................39
7.9 Successor Agent ................................................39
SECTION 8. MISCELLANEOUS .................................................40
8.1 Amendments and Waivers .........................................40
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.2 Notices .........................................................40
8.3 No Waiver; Cumulative Remedies ..................................41
8.4 Survival of Representations and Warranties ......................41
8.5 Payment of Expenses and Taxes; Indemnity ........................41
8.6 Successors and Assigns; Participations; Purchasing Banks ........42
8.7 Adjustments; Set-off ............................................44
8.8 Counterparts ....................................................45
8.9 GOVERNING LAW ..................................................45
8.10 WAIVERS OF JURY TRIAL ...........................................45
8.11 Submission To Jurisdiction; Waivers .............................45
</TABLE>
SCHEDULES
SCHEDULE I Commitment Amounts and Percentages; Lending Offices; Addresses for
Notice
SCHEDULE II Subsidiaries of the Company
SCHEDULE III Indebtedness
SCHEDULE IV Applicable Margins
SCHEDULE V Significant Litigation
EXHIBITS
EXHIBIT A Form of Tranche 1 Note
EXHIBIT B Form of Tranche 2 Note
EXHIBIT C Form of Commitment Transfer Supplement
iii
<PAGE> 5
CREDIT AGREEMENT, dated as of March 30, 1999 (this
"Agreement"), among COLUMBIA/HCA HEALTHCARE CORPORATION, a Delaware corporation
(the "Company"), the several banks and other financial institutions from time to
time parties hereto (the "Banks"), CHASE SECURITIES INC., as Lead Arranger and
Sole Book Manager, NATIONSBANK, N.A., as Documentation Agent, THE BANK OF NEW
YORK, THE BANK OF NOVA SCOTIA, and TORONTO-DOMINION (TEXAS), INC., as
Co-Syndication Agents, DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS
BRANCH and FLEET NATIONAL BANK, as Co-Agents, SUNTRUST BANK, NASHVILLE, N.A. and
WACHOVIA BANK, N.A., as Lead Managers, and THE CHASE MANHATTAN BANK, a New York
banking corporation, as agent for the Banks hereunder (in such capacity, the
"Agent").
In consideration of the promises and mutual agreements herein
contained and for other good and valuable consideration, the parties hereto
hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms have the following meanings:
"Affiliate": (a) any director or officer of any corporation or
partner or joint venturer or Person holding a similar position in
another Person or members of their families, whether or not living
under the same roof, or any Person owning beneficially more than 5% of
the outstanding common stock or other evidences of beneficial interest
of the Person in question, (b) any Person of which any one or more of
the Persons described in clause (a) above is an officer, director or
beneficial owner of more than 5% of the shares or other beneficial
interest and (c) any Person controlled by, controlling or under common
control with the Person in question.
"Alternate Base Rate": for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate"
shall mean the rate of interest per annum publicly announced from time
to time by the Agent as its prime rate in effect at its principal
office in New York City (each change in the Prime Rate to be effective
on the date such change is publicly announced); "Base CD Rate" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and (b)
the C/D Assessment Rate; "Three-Month Secondary CD Rate" shall mean,
for any day, the secondary market rate for three-month certificates of
deposit reported as being in effect on such day (or, if such day shall
not be a Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System (the "Board") through the
public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on
such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of
major money center banks in New York
<PAGE> 6
2
City received at approximately 10:00 A.M., New York City time, on such
day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Agent from three New York City
negotiable certificate of deposit dealers of recognized standing
selected by it; "C/D Reserve Percentage" shall mean, for any day, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board (or any successor), for determining the
maximum reserve requirement for a member bank of the Federal Reserve
System in New York City with deposits exceeding one billion Dollars in
respect of new non-personal three-month certificates of deposit in the
secondary market in Dollars in New York City and in an amount of
$100,000 or more; "C/D Assessment Rate" shall mean, for any day, the
net annual assessment rate (rounded upward to the nearest 1/100 of 1%)
determined by Chase to be payable on such day to the Federal Deposit
Insurance Corporation or any successor (the "FDIC") for FDIC's
insuring time deposits made in Dollars at offices of Chase in the
United States; and "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from
three federal funds brokers of recognized standing selected by it. If
for any reason the Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate, or
both, for any reason, including the inability or failure of the Agent
to obtain sufficient quotations in accordance with the terms thereof,
the Alternate Base Rate shall be determined without regard to clause
(b) or (c), or both, of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such inability no
longer exist. Any change in the Alternate Base Rate due to a change in
the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective on the effective day of such change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal
Funds Effective Rate, respectively.
"Alternate Base Rate Loans": Loans hereunder at such time as
they are made and/or being maintained at a rate of interest based upon
the Alternate Base Rate.
"Applicable Margin": for each Type of Loan during a Level I
Period or Level II Period, the rate per annum set forth under the
relevant column heading in Schedule IV. Increases or decreases in the
Applicable Margin shall become effective on the first day of the Level
I Period or Level II Period, as the case may be, to which such
Applicable Margin relates.
"Attributable Debt": means (i) as to any capitalized lease
obligations, the Indebtedness carried on the balance sheet in respect
thereof in accordance with GAAP and (ii) as to any operating leases,
the total net amount of rent required to be paid under such leases
during the remaining term thereof.
"Auditor": any independent certified public accountant of
nationally recognized standing and reputation selected by the Company.
<PAGE> 7
3
"Available Commitments": at a particular time, an amount equal
to the difference between (a) the amount of the Commitments at such
time and (b) the aggregate unpaid principal amount at such time of all
Loans.
"Bank Obligations": as defined in subsection 6.1.
"Benefitted Bank": as defined in subsection 8.7.
"Borrowing Date": any Business Day specified in a notice
pursuant to subsection 2.1(c) as a date on which the Company requests
the Banks to make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants, rights or options
to purchase any of the foregoing.
"Change in Control": of any corporation, (a) any Person or
"group" (as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended), other than the Company, that shall acquire more
than 50% of the Voting Stock of such corporation or (b) any Person or
group (as defined in preceding clause (a)), other than the Company,
that shall acquire more than 20% of the Voting Stock of such
corporation and, at any time following an acquisition described in this
clause (b), the Continuing Directors shall not constitute a majority of
the board of directors of such corporation.
"Chase": The Chase Manhattan Bank, a New York banking
corporation.
"Closing Date": the date on which all of the conditions
precedent for the Closing Date set forth in Section 4 are satisfied.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment": as to any Bank, its obligation to make a
Tranche 1 Loan and a Tranche 2 Loan in the respective amounts not to
exceed the amount set forth opposite such Bank's name in Schedule I,
as such amount may be reduced from time to time as provided herein.
"Commitment Percentage": as to any Bank, the percentage of
the aggregate Commitments constituted by such Bank's Commitment.
"Commitment Period": the period from and including the Closing
Date to but not including the relevant Tranche 1 or Tranche 2
Termination Date, as the case may be, or such earlier date on which
the Commitments shall terminate as provided herein.
<PAGE> 8
4
"Commitment Transfer Supplement": a Commitment Transfer
Supplement, substantially in the form of Exhibit B.
"Consolidated Assets": the consolidated assets of the Company
and its Subsidiaries, determined in accordance with GAAP.
"Consolidated Earnings Before Interest and Taxes": for any
period for which the amount thereof is to be determined, Consolidated
Net Income for such period plus all amounts deducted in computing such
Consolidated Net Income in respect of interest expense on Indebtedness
and income taxes.
"Consolidated Interest Expense": for any period for which the
amount thereof is to be determined, all amounts deducted in computing
Consolidated Net Income for such period in respect of interest expense
on Indebtedness determined in accordance with GAAP.
"Consolidated Net Income": for any period, the consolidated
net income, if any, after taxes, of the Company and its Subsidiaries
for such period determined in accordance with GAAP; provided, however,
that Consolidated Net Income shall not include any gain or loss
attributable to extraordinary items, any sale of assets not in the
ordinary course of business or any taxes or tax savings as a result
thereof.
"Consolidated Net Tangible Assets": means the total amount of
assets (less applicable reserves and other properly deductible items)
after deducting therefrom (i) all current liabilities as disclosed on
the consolidated balance sheet of the Company (excluding any thereof
which are by their terms extendable or renewable at the option of the
obligor thereon to a time more than 12 months after the time as of
which the amount thereof is being computed and excluding any deferred
income taxes that are included in current liabilities), and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangible assets, all as set forth on the
most recent consolidated balance sheet of the Company and computed in
accordance with GAAP.
"Consolidated Net Worth": as of the date of determination, all
items which in conformity with GAAP would be included under
shareholders' equity on a consolidated balance sheet of the Company
and its Subsidiaries at such date.
"Consolidated Total Capitalization": for any period for which
the amount thereof is to be determined, the sum of Consolidated Net
Worth at such date and Consolidated Total Debt at such date.
"Consolidated Total Debt": the aggregate of all Indebtedness
(including the current portion thereof) of the Company and its
Subsidiaries on a consolidated basis.
"Continuing Director": any member of the Board of Directors of
the Company who is a member of such Board on the date of this
Agreement, and any Person who is a member
<PAGE> 9
5
of such Board and whose nomination as a director was approved by a
majority of the Continuing Directors then on such Board.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of
its property is bound.
"Control Group Person": any Person which is a member of the
controlled group or is under common control with the Company within
the meaning of Section 414(b) or 414(c) of the Code or Section
4001(b)(1) of ERISA.
"Default": any of the events specified in subsection 6.1,
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Distribution": (a) the declaration or payment of any dividend
on or in respect of any shares of any class of capital stock of the
Company other than dividends payable solely in shares of common stock
of the Company; (b) the purchase, redemption or other acquisition of
any shares of any class of capital stock of the Company directly or
indirectly through a Subsidiary or otherwise; and (c) any other
distribution on or in respect of any shares of any class of capital
stock of the Company.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Domestic Lending Office": the office of each Bank designated
as such in Schedule I.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto), dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by
a member bank of such System.
"Eurodollar Lending Office": the office of each Bank
designated as such in Schedule I.
"Eurodollar Loans": Loans hereunder at such time as they are
made and/or are being maintained at a rate of interest based upon the
Eurodollar Rate.
<PAGE> 10
6
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the average (rounded upwards to the nearest whole multiple of
one sixteenth of one percent) of the respective rates notified to the
Agent by the Reference Banks as the rate at which each of their
Eurodollar Lending Offices is offered Dollar deposits two Business Days
prior to the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and
exchange operations of such Eurodollar Lending Office are then being
conducted at or about 10:00 A.M., New York City time, for delivery on
the first day of such Interest Period for the number of days comprised
therein and in an amount comparable to the amount of the Eurodollar
Loan of such Reference Bank to be outstanding during such Interest
Period.
"Eurodollar Tranche": the collective reference to Eurodollar
Loans having the same Interest Period (whether or not originally made
on the same day).
"Event of Default": any of the events specified in subsection
6.1, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, event or act has been
satisfied.
"Facility": each of (a) the Tranche 1 Commitments and the
Tranche 1 Loans made thereunder (the "Tranche 1 Facility") and (b) the
Tranche 2 Commitments and the Tranche 2 Loans made thereunder (the
"Tranche 2 Facility").
"February 1997 Five-Year Agreement and Amendment": the
Agreement and Amendment, dated as of February 26, 1997 (as amended,
modified or supplemented), among the Company, the Co-Agents (as defined
therein), Chase, as Agent and as CAF Loan Agent (as defined therein),
and the several banks and other financial institutions parties thereto,
which adopts and incorporates by reference to the extent provided
therein the Five-Year Composite Credit Agreement dated as of February
28, 1996.
"Financing Lease": any lease of property, real or personal, if
the then present value of the minimum rental commitment thereunder
should, in accordance with GAAP, be capitalized on a balance sheet of
the lessee.
"GAAP": (a) with respect to determining compliance by the
Company with the provisions of subsections 5.6, 5.7 and 5.10, generally
accepted accounting principles in the United States of America
consistent with those utilized in preparing the audited financial
statements referred to in subsection 3.3 and (b) with respect to the
financial statements referred to in subsection 3.3 or the furnishing of
financial statements pursuant to subsection 5.5 and otherwise,
generally accepted accounting principles in the United States of
America from time to time in effect.
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
<PAGE> 11
7
"Guarantee Obligation": any arrangement whereby credit is
extended to one party on the basis of any promise of another, whether
that promise is expressed in terms of an obligation to pay the
Indebtedness of another, or to purchase an obligation owed by that
other, to purchase assets or to provide funds in the form of lease or
other types of payments under circumstances that would enable that
other to discharge one or more of its obligations, whether or not such
arrangement is listed in the balance sheet of the obligor or referred
to in a footnote thereto, but shall not include endorsements of items
for collection in the ordinary course of business.
"Indebtedness": of a Person, at a particular date, the sum
(without duplication) at such date of (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of
property or services or which is evidenced by a note, bond, debenture
or similar instrument, (b) all obligations of such Person under
Financing Leases, (c) all obligations of such Person in respect of
letters of credit, acceptances, or similar obligations issued or
created for the account of such Person in excess of $1,000,000, (d) all
liabilities secured by any Lien on any property owned by the Company or
any Subsidiary even though such Person has not assumed or otherwise
become liable for the payment thereof and (e) all Guarantee Obligations
relating to any of the foregoing in excess of $1,000,000.
"Insolvency" or "Insolvent": at any particular time, a
Multiemployer Plan which is insolvent within the meaning of Section
4245 of ERISA.
"Interest Payment Date": (a) as to any Alternate Base Rate
Loan, the last day of each March, June, September and December,
commencing on the first of such days to occur after Alternate Base Rate
Loans are made or Eurodollar Loans are converted to Alternate Base Rate
Loans, (b) as to any Eurodollar Loan in respect of which the Company
has selected an Interest Period of one, two or three months, the last
day of such Interest Period and (c) as to any Eurodollar Loan in
respect of which the Company has selected a longer Interest Period than
the periods described in clause (b), the last day of each March, June,
September and December falling within such Interest Period and the last
day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loans:
(i) initially, the period commencing on the
borrowing or conversion date, as the case may be, with respect
to such Eurodollar Loans and ending one, two, three or six
months thereafter (or, in the case of the Tranche 2 Loans,
with the consent of all the Banks, nine or twelve months
thereafter), as selected by the Company in its notice of
borrowing as provided in subsection 2.2 or its notice of
conversion as provided in subsection 2.8, as the case may be;
and
(ii) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to
such Eurodollar Loans and ending one, two, three or six
months thereafter (or, in the case of the Tranche 2 Loans,
with the consent of all the Banks, nine or twelve months
thereafter), as selected by the Company by irrevocable
notice to the Agent not less than three Business Days prior
<PAGE> 12
8
to the last day of the then current Interest Period with
respect to such Eurodollar Loans;
provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
(1) if any Interest Period pertaining to a
Eurodollar Loan would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end
on the immediately preceding Business Day;
(2) if the Company shall fail to give notice as
provided above, the Company shall be deemed to have selected
an Alternate Base Rate Loan to replace the affected
Eurodollar Loan;
(3) any Interest Period pertaining to a Eurodollar
Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a
calendar month;
(4) any Interest Period pertaining to a Eurodollar
Loan that would otherwise end after the relevant Tranche 1 or
Tranche 2 Termination Date, as the case may be, shall end on
such Tranche 1 or Tranche 2 Termination Date; and
(5) the Company shall select Interest Periods so as
not to require a payment or prepayment of any Eurodollar
Loan during an Interest Period for such Loan.
"July 1998 Term Loan Agreement": the $1,000,000,000 Agreement,
dated as of July 10, 1998, among the Company, the several banks and
other financial institutions from time to time parties thereto, the
co-agents, documentation agent and syndication agents named therein and
The Chase Manhattan Bank, as Agent and as CAF Loan Agent therein, as
the same has been and may be amended, supplemented or otherwise
modified or replaced or extended from time to time.
"Level I Period": any period during which the lower of the
publicly announced ratings by S&P and Moody's of the then current
senior unsecured, non-credit enhanced, long-term Indebtedness of the
Company that has been publicly issued are BB or better or Ba2 or
better, respectively.
"Level II Period": any period during which either of the
publicly announced ratings by S&P or Moody's of the then current senior
unsecured, non-credit enhanced, long-term Indebtedness of the Company
that has been publicly issued are equal to or below BB- or unrated or
equal to or below Ba3 or unrated, as the case may be.
<PAGE> 13
9
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as
any of the foregoing).
"LifePoint": LifePoint Hospitals, Inc., a Delaware corporation
to be formed after the Closing Date.
"Loans": the collective reference to the Tranche 1 Loans and
the Tranche 2 Loans.
"Loan Documents": this Agreement and the Notes.
"Moody's": Moody's Investors Service, Inc., or any successor
thereto.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": means, with respect to any issuance or
sale of Capital Stock or debt securities by the Company or any of its
Subsidiaries, the cash proceeds received by the Company or such
Subsidiaries net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions, and other
customary fees and expenses incurred in connection with such issuance
or sale.
"Notes": as defined in subsection 2.1(b).
"Participants": as defined in subsection 8.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Company or a Control
Group Person is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined
in Section 3(5) of ERISA.
"Principal Property": means each acute care hospital providing
general medical and surgical services (including real property but
excluding equipment, personal property and hospitals which primarily
provide specialty medical services, such as psychiatric and obstetrical
and gynecological services) at least 50% of which is owned by the
Company and its Subsidiaries on a consolidated basis and located in the
United States of America.
<PAGE> 14
10
"Purchasing Banks": as defined in subsection 8.6(c).
"Reference Banks": Chase and Citibank, N.A.
"Register": as defined in subsection 8.6(d).
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System.
"Regulation X": Regulation X of the Board of Governors of the
Federal Reserve System.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
such term as used in Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13,.14,.16,.18,.19 or .20
of PBGC Reg. ss. 2615.
"Required Banks": (i) during the Commitment Period, Banks
whose Commitment Percentages aggregate at least 51% and (ii) after the
Commitments have expired or been terminated, Banks whose outstanding
Loans represent in the aggregate 51% of the aggregate unpaid principal
amount of all outstanding Loans.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": the chief executive officer, the
president, any executive or senior vice president or vice president of
the Company, the chief financial officer, treasurer or controller of
the Company.
"S&P": Standard & Poor's Ratings Service, or any successor
thereto.
"Sale-and-Leaseback Transaction": means any arrangement
entered into by the Company or any Significant Subsidiary with any
person (other than the Company or a Significant Subsidiary), or to
which any such person is a party, providing for the leasing to the
Company or any Significant Subsidiary for a period of more than three
years of any Principal Property which has been or is to be held or
transferred by the Company or such Significant Subsidiary to such
Person or to any other Person (other than the Company or a Significant
Subsidiary), to which funds have been or are to be advanced by such
Person on the security of the leased property.
<PAGE> 15
11
"Significant Subsidiary": means, at any particular time, any
Subsidiary of the Company having total assets of $15,000,000 or more at
that time.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Spin-Cos": LifePoint and Triad.
"Spin-Offs": the proposed tax-free spin-off distributions of
the common stock of the Spin-Cos to the shareholders of the Borrower.
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned directly or indirectly through one or more intermediaries,
by such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Company.
"Taxes": as defined in subsection 2.13.
"Tranche 1 Commitment": as to any Bank, the obligation of such
Bank, if any, to make a Tranche 1 Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading
"Tranche 1 Commitment" opposite such Bank's name on Schedule I. The
original aggregate amount of the Tranche 1 Commitments is $500,000,000.
"Tranche 1 Loan": as defined in Section 2.1(a).
"Tranche 1 Note": as defined in Section 2.1(b).
"Tranche 1 Percentage": as to any Bank at any time, the
percentage which such Bank's Tranche 1 Commitment then constitutes of
the aggregate Tranche 1 Commitments (or, at any time after the Closing
Date, the percentage which the aggregate principal amount of such
Bank's Tranche 1 Loans then outstanding constitutes of the aggregate
principal amount of the Tranche 1 Loans then outstanding).
"Tranche 1 Termination Date": September 30, 1999.
"Tranche 2 Commitment": as to any Bank, the obligation of such
Bank, if any, to make a Tranche 2 Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading
"Tranche 2 Commitment" opposite such Bank's name on Schedule I. The
original aggregate amount of the Tranche 2 Commitments is $500,000,000.
"Tranche 2 Loan": as defined in Section 2.1(a).
<PAGE> 16
12
"Tranche 2 Note": as defined in Section 2.1(c).
"Tranche 2 Percentage": as to any Bank at any time, the
percentage which such Bank's Tranche 2 Commitment then constitutes of
the aggregate Tranche 2 Commitments (or, at any time after the Closing
Date, the percentage which the aggregate principal amount of such
Bank's Tranche 2 Loans then outstanding constitutes of the aggregate
principal amount of the Tranche 2 Loans then outstanding).
"Tranche 2 Termination Date": September 30, 2000.
"Transfer Effective Date": as defined in each Commitment
Transfer Supplement.
"Transferee": as defined in subsection 8.6(f).
"Triad": Triad Hospitals, Inc., a Delaware corporation to be
formed after the Closing Date.
"Type": as to any Loan, its nature as an Alternate Base Rate
Loan or Eurodollar Loan.
"Voting Stock": of any corporation, shares of capital stock or
other securities of such corporation entitled to vote generally in the
election of directors of such corporation.
"Working Day": any Business Day on which dealings in foreign
currencies and exchange between banks may be carried on in London,
England.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Company and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
<PAGE> 17
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SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 Loans and Notes. (a) Subject to the terms and conditions
hereof, each Bank severally agrees to make two loans (a "Tranche 1 Loan" and a
"Tranche 2 Loan", respectively) to the Company on the Closing Date in an
aggregate principal amount not to exceed the Commitment of such Bank in the
respective amounts set forth opposite such Bank's name under the first and third
columns on Schedule I. The Loans may be (i) Eurodollar Loans, (ii) Alternate
Base Rate Loans or (iii) a combination thereof, as determined by the Company and
notified to the Agent in accordance with subsection 2.1(d).
(b) Upon the request by any Bank, the Tranche 1 Loan made by
such Bank shall be evidenced by a promissory note of the Company, substantially
in the form of Exhibit A with appropriate insertions as to payee, date and
principal amount (a "Tranche 1 Note"), payable to the order of such Bank and
evidencing the obligation of the Company to pay a principal amount equal to the
amount of the initial Tranche 1 Commitment of such Bank. Each Bank is hereby
authorized to record the date, Type and amount of each Tranche 1 Loan made or
converted by such Bank, and the date and amount of each payment or prepayment of
principal thereof, and, in the case of Eurodollar Loans, the Interest Period
with respect thereto, on the schedule annexed to and constituting a part of such
Tranche 1 Note, and any such recordation shall constitute prima facie evidence
of the accuracy of the information so recorded; provided, however, that the
failure of such Bank to make any such recordation shall not affect the
obligations of the Company hereunder or under any Tranche 1 Note. Each such
Tranche 1 Note shall (x) be dated the Closing Date, (y) be stated to mature on
the Tranche 1 Termination Date, and (z) bear interest on the unpaid principal
amount thereof from time to time outstanding at the applicable interest rate per
annum determined as provided in subsection 2.7.
(c) Upon the request by any Bank, the Tranche 2 Loan made by
such Bank shall be evidenced by a promissory note of the Company, substantially
in the form of Exhibit B with appropriate insertions as to payee, date and
principal amount (a "Tranche 2 Note"), payable to the order of such Bank and
evidencing the obligation of the Company to pay a principal amount equal to the
amount of the initial Tranche 2 Commitment of such Bank. Each Bank is hereby
authorized to record the date, Type and amount of each Tranche 2 Loan made or
converted by such Bank, and the date and amount of each payment or prepayment of
principal thereof, and, in the case of Eurodollar Loans, the Interest Period
with respect thereto, on the schedule annexed to and constituting a part of such
Tranche 2 Note, and any such recordation shall constitute prima facie evidence
of the accuracy of the information so recorded; provided, however, that the
failure of such Bank to make any such recordation shall not affect the
obligations of the Company hereunder or under any Tranche 2 Note. Each such
Tranche 2 Note shall (x) be dated the Closing Date, (y) be stated to mature on
the Tranche 2 Termination Date, and (z) bear interest on the unpaid principal
amount thereof from time to time outstanding at the applicable interest rate per
annum determined as provided in subsection 2.7.
(d) The Company may borrow under the Commitments on the
Closing Date; provided that the Company shall give the Agent irrevocable notice
(which notice must be received by the Agent (i) prior to 11:30 A.M., New York
City time, three Business Days prior to the Closing Date, in the case of
Eurodollar Loans, and (ii) prior to 10:00 A.M., New York City time, one Business
Day prior to the Closing Date, in the case of Alternate Base Rate Loans),
specifying (A)
<PAGE> 18
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the amount to be borrowed, (B) whether the borrowing is to be of Eurodollar
Loans, Alternate Base Rate Loans, or a combination thereof, and (C) if the
borrowing is to be entirely or partly of Eurodollar Loans, the length of the
Interest Period therefor. Upon receipt of such notice from the Company, the
Agent shall promptly notify each Bank thereof. Each Bank will make the amount of
its pro rata share of each borrowing available to the Agent for the account of
the Company at the office of the Agent set forth in subsection 8.2 prior to
12:00 P.M., New York City time, on the Closing Date in funds immediately
available to the Agent. The proceeds of all such Loans will then be made
available to the Company by the Agent at such office of the Agent by crediting
the account of the Company on the books of such office with the aggregate of the
amounts made available to the Agent by the Banks.
2.2 Fees. The Company agrees to pay to the Agent the other
fees in the amounts, and on the date, agreed to by the Company and the Agent in
the fee letter, dated February 25, 1999, between the Agent and the Company.
2.3 Termination or Reduction of Commitments. The Company shall
have the right, upon not less than five Business Days' notice to the Agent, to
terminate the Commitments or, from time to time, to reduce ratably the amount of
the Commitments, provided that no such termination or reduction shall be
permitted if, after giving effect thereto and to any prepayments of the Loans
made on the effective date thereof, the then outstanding principal amount of the
Loans would exceed the amount of the Commitments then in effect. In the case of
any reduction, such notice shall specify whether such reduction is of Tranche 1
Commitments or Tranche 2 Commitments or a combination thereof. Any such
reduction shall be in an amount of $10,000,000 or a whole multiple of $1,000,000
in excess thereof, and shall reduce permanently the amount of the Commitments
then in effect.
2.4 Optional Prepayments. The Company may on the last day of
the relevant Interest Period if the Loans to be prepaid are in whole or in part
Eurodollar Loans, or at any time and from time to time if the Loans to be
prepaid are Alternate Base Rate Loans, prepay the Loans, in whole or in part,
without premium or penalty, upon at least three Business Days' irrevocable
notice to the Agent, specifying the date and amount of prepayment and whether
the prepayment is of Eurodollar Loans or Alternate Base Rate Loans or a
combination thereof and whether the prepayment is of Tranche 1 Loans or Tranche
2 Loans or a combination thereof, and if of a combination thereof, the amount of
prepayment allocable to each. Upon receipt of such notice the Agent shall
promptly notify each Bank thereof. If such notice is given, the payment amount
specified in such notice shall be due and payable on the date specified therein,
together with accrued interest to such date on the amount prepaid. Partial
prepayments shall be in an aggregate principal amount of $5,000,000, or a whole
multiple of $1,000,000 in excess thereof, and may only be made if, after giving
effect thereto, subsection 2.6(c) shall not have been contravened.
2.5 Mandatory Prepayments and Commitment Reductions. (a) The
Company shall prepay the Loans and reduce the Commitments in the amount of 100%
of the Net Cash Proceeds of any sale or issuance of Capital Stock (excluding any
stock issued pursuant to employee and/or director stock option or stock purchase
plans) or incurrence of Indebtedness for borrowed money in excess of an
aggregate principal amount of $25,000,000 (excluding transactions under
$2,000,000) by the Borrower or any of its Subsidiaries after the Closing Date
(excluding any Indebtedness
<PAGE> 19
15
incurred by the Spin-Cos in connection with the Spin-Offs) within five Business
Days following the date of any such sale, issuance or incurrence.
(b) Amounts to be applied in connection with prepayments made
pursuant to subsection 2.4 and 2.5 shall be applied, first, to the prepayment of
the Tranche 1 Loans in their entirety and, second, to the Tranche 2 Loans. The
application of any prepayment pursuant to this subsection 2.5 shall be made,
first, to ABR Loans and, second, to Eurodollar Loans. Each prepayment of the
Loans under this subsection 2.5 shall be accompanied by accrued interest to the
date of such prepayment on the amount prepaid.
2.6 Conversion Options; Minimum Amount of Loans. (a) The
Company may elect from time to time to convert Eurodollar Loans to Alternate
Base Rate Loans by giving the Agent at least two Business Days' prior
irrevocable notice of such election (given before 10:00 A.M., New York City
time, on the date on which such notice is required), provided that any such
conversion of Eurodollar Loans shall, subject to the fourth following sentence,
only be made on the last day of an Interest Period with respect thereto. The
Company may elect from time to time to convert Alternate Base Rate Loans to
Eurodollar Loans by giving the Agent at least three Business Days' prior
irrevocable notice of such election (given before 11:30 A.M., New York City
time, on the date on which such notice is required). Upon receipt of such
notice, the Agent shall promptly notify each Bank thereof. Promptly following
the date on which such conversion is being made each Bank shall take such action
as is necessary to transfer its portion of such Loans to its Domestic Lending
Office or its Eurodollar Lending Office, as the case may be. All or any part of
outstanding Eurodollar Loans and Alternate Base Rate Loans may be converted as
provided herein, provided that, unless the Required Banks otherwise agree, (i)
no Loan may be converted into a Eurodollar Loan when any Event of Default has
occurred and is continuing, (ii) partial conversions shall be in an aggregate
principal amount of $5,000,000 or a whole multiple thereof, and (iii) any such
conversion may only be made if, after giving effect thereto, subsection 2.6(c)
shall not have been contravened.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by the
Company with the notice provisions contained in subsection 2.6(a); provided
that, unless the Required Banks otherwise agree, no Eurodollar Loan may be
continued as such when any Event of Default has occurred and is continuing, but
shall be automatically converted to an Alternate Base Rate Loan on the last day
of the then current Interest Period with respect thereto. The Agent shall notify
the Banks promptly that such automatic conversion contemplated by this
subsection 2.6(b) will occur.
(c) All borrowings, conversions, payments, prepayments and
selection of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of the Loans comprising any Eurodollar Tranche shall not be
less than $10,000,000. At no time shall there be more than 10 Eurodollar
Tranches.
2.7 Interest Rate and Payment Dates for Loans. (a) The
Eurodollar Loans comprising each Eurodollar Tranche shall bear interest for each
day during each Interest Period with
<PAGE> 20
16
respect thereto on the unpaid principal amount thereof at a rate per annum equal
to the Eurodollar Rate plus the Applicable Margin.
(b) Alternate Base Rate Loans shall bear interest for each
day from and including the date thereof on the unpaid principal amount thereof
at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin.
(c) If all or a portion of the principal amount of any Loans
shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), each Eurodollar Loan shall, unless the Required Banks otherwise
agree, be converted to an Alternate Base Rate Loan at the end of the last
Interest Period with respect thereto. Any such overdue principal amount shall
bear interest at a rate per annum which is 2% above the rate which would
otherwise be applicable pursuant to subsection 2.7(a) or (b), and any overdue
interest or other amount payable hereunder shall bear interest at a rate per
annum which is 2% above the Alternate Base Rate, in each case from the date of
such non-payment until paid in full (after as well as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date.
(e) The Company shall pay the entire principal amount of (i)
the Tranche 1 Loans on the Tranche 1 Termination Date and (ii) the Tranche 2
Loans on the Tranche 2 Termination Date.
2.8 Computation of Interest and Fees. (a) Interest in respect
of Alternate Base Rate Loans shall be calculated on the basis of a (i) 365-day
(or 366-day, as the case may be) year for the actual days elapsed when such
Alternate Base Rate Loans are based on the Prime Rate, and (ii) a 360-day year
for the actual days elapsed when based on the Base CD Rate or the Federal Funds
Effective Rate. Interest in respect of Eurodollar Loans shall be calculated on
the basis of a 360-day year for the actual days elapsed. The Agent shall as soon
as practicable notify the Company and the Banks of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the Alternate Base Rate or the Applicable Margin or the Eurocurrency
Reserve Requirements shall become effective as of the opening of business on the
day on which such change in the Alternate Base Rate is announced, such
Applicable Margin changes as provided herein or such change in or the
Eurocurrency Reserve Requirements shall become effective, as the case may be.
The Agent shall as soon as practicable notify the Company and the Banks of the
effective date and the amount of each such change.
(b) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Company and the Banks in the absence of manifest error. The Agent shall, at
the request of the Company, deliver to the Company a statement showing the
quotations used by the Agent in determining any interest rate pursuant to
subsection 2.7(a) or (c).
(c) If any Reference Bank's Commitment shall terminate
(otherwise than on termination of all the commitments), or its Loan shall be
assigned for any reason whatsoever, such Reference Bank shall thereupon cease to
be a Reference Bank, and if, as a result of the foregoing, there shall only be
one Reference Bank remaining, then the Agent (after consultation with the
<PAGE> 21
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Company) shall, by notice to the Company and the Banks, designate another Bank
as a Reference Bank so that there shall at all times be at least two Reference
Banks.
(d) Each Reference Bank shall use its best efforts to
furnished quotations of rates to the Agent as contemplated hereby. If any of the
Reference Banks shall be unable or otherwise fails to supply such rates to the
Agent upon its request, the rate of interest shall be determined on the basis of
the quotations of the remaining Reference Banks or Reference Bank.
2.9 Inability to Determine Interest Rate. In the event that:
(i) the Agent shall have determined (which determination
shall be conclusive and binding upon the Company) that, by reason of
circumstances affecting the interbank eurodollar market generally,
adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for any requested Interest Period;
(ii) only one of the Reference Banks is able to obtain
bids for its Dollar deposits for such Interest Period in the manner
contemplated by the term "Eurodollar Rate"; or
(iii) the Agent shall have received notice prior to the
first day of such Interest Period from Banks constituting the Required
Banks that the interest rate determined pursuant to subsection 2.8(a)
for such Interest Period does not accurately reflect the cost to such
Banks (as conclusively certified by such Banks) of making or
maintaining their affected Loans during such Interest Period;
with respect to (A) proposed Loans that the Company has requested be made as
Eurodollar Loans, (B) Eurodollar Loans that will result from the requested
conversion of Alternate Base Rate Loans into Eurodollar Loans or (C) the
continuation of Eurodollar Loans beyond the expiration of the then current
Interest Period with respect thereto, the Agent shall forthwith give facsimile
or telephonic notice of such determination to the Company and the Banks at least
one day prior to, as the case may be, the requested Borrowing Date for such
Eurodollar Loans, the conversion date of such Loans or the last day of such
Interest Period. If such notice is given (x) any requested Eurodollar Loans
shall be made as Alternate Base Rate Loans, (y) any Alternate Base Rate Loans
that were to have been converted to Eurodollar Loans shall be continued as
Alternate Base Rate Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the last day of the then current Interest Period with respect
thereto, to Alternate Base Rate Loans. Until such notice has been withdrawn by
the Agent, no further Eurodollar Loans shall be made, nor shall the Company have
the right to convert Alternate Base Rate Loans to Eurodollar Loans.
2.10 Pro Rata Borrowings and Payments. (a) Borrowing by the
Company of Loans shall be made ratably from the Banks in accordance with their
Commitment Percentages.
(b) All payments (including prepayments) to be made by the
Company on account of principal, interest and fees shall be made without
set-off, counterclaim or deduction of any kind and shall be made to the Agent,
for the account of the Banks, at the Agent's office set forth in subsection 8.2,
in lawful money of the United States of America and in immediately available
funds.
<PAGE> 22
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The Agent shall distribute such payments to the Banks promptly upon receipt in
like funds as received. If any payment hereunder (other than payments on the
Eurodollar Loans) becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. If any payment on a Eurodollar Loan
becomes due and payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month in which
event such payment shall be made on the immediately preceding Business Day.
2.11 Illegality. Notwithstanding any other provisions herein,
if after the date hereof the adoption of or any change in any Requirement of Law
or in the interpretation or application thereof shall make it unlawful for any
Bank to make or maintain Eurodollar Loans as contemplated by this Agreement, (a)
the Bank shall, within 30 Business Days after it becomes aware of such fact,
notify the Company, through the Agent, of such fact, (b) the commitment of such
Bank hereunder to make Eurodollar Loans or convert Alternate Base Rate Loans to
Eurodollar Loans shall forthwith be cancelled and (c) such Bank's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Alternate Base Rate Loans on the respective last days of the then current
Interest Periods for such Loans or within such earlier period as required by
law. Each Bank shall take such action as may be reasonably available to it
without legal or financial disadvantage (including changing its Eurodollar
Lending Office) to prevent the adoption of or any change in any such Requirement
of Law from becoming applicable to it.
2.12 Requirements of Law. (a) If after the date hereof the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof or compliance by any Bank with any request or directive
(whether or not having the force of law) after the date hereof from any central
bank or other Governmental Authority:
(i) shall subject any Bank to any tax of any kind
whatsoever with respect to this Agreement, any Note or any Eurodollar
Loans made by it, or change the basis of taxation of payments to such
Bank of principal, facility fee, interest or any other amount payable
hereunder in respect of Loans (except for changes in the rate of tax
on the overall net income of such Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Bank which are not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank, by
any amount which such Bank deems to be material, of making, renewing or
maintaining advances or extensions of credit or to reduce any amount receivable
hereunder, in each case, in respect of its Eurodollar Loans, then,
<PAGE> 23
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in any such case, the Company shall promptly pay such Bank, upon its demand, any
additional amounts necessary to compensate such Bank for such additional cost or
reduced amount receivable. If a Bank becomes entitled to claim any additional
amounts pursuant to this subsection 2.12(a), it shall, within 30 Business Days
after it becomes aware of such fact, notify the Company, through the Agent, of
the event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by such
Bank, through the Agent, to the Company shall be conclusive in the absence of
manifest error. Each Bank shall take such action as may be reasonably available
to it without legal or financial disadvantage (including changing its Eurodollar
Lending Office) to prevent any such Requirement of Law or change from becoming
applicable to it. This covenant shall survive the termination of this Agreement
and payment of the outstanding Indebtedness hereunder or pursuant to the Notes.
(b) In the event that after the date hereof a Bank is required
to maintain reserves of the type contemplated by the definition of "Eurocurrency
Reserve Requirements", such Bank may require the Company to pay, promptly after
receiving notice of the amount due, additional interest on the related
Eurodollar Loan of such Bank at a rate per annum determined by such Bank up to
but not exceeding the excess of (i) (A) the applicable Eurodollar Rate divided
by (B) one minus the Eurocurrency Reserve Requirements over (ii) the applicable
Eurodollar Rate. Any Bank wishing to require payment of any such additional
interest on account of any of its Eurodollar Loans shall notify the Company no
more than 30 Business Days after each date on which interest is payable on such
Eurodollar Loan of the amount then due it under this subsection 2.12(b), in
which case such additional interest on such Eurodollar Loan shall be payable to
such Bank at the place indicated in such notice. Each such notification shall be
accompanied by such information as the Company may reasonably request.
2.13 Capital Adequacy. If any Bank shall have determined that
after the date hereof the adoption of or any change in any Requirement of Law
regarding capital adequacy or in the interpretation or application thereof or
compliance by such Bank or any corporation controlling such Bank with any
request or directive after the date hereof regarding capital adequacy (whether
or not having the force of law) from any central bank or Governmental Authority,
does or shall have the effect of reducing the rate of return on such Bank's or
such corporation's capital as a consequence of its obligations hereunder to a
level below that which such Bank or such corporation could have achieved but for
such adoption, change or compliance (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy) by an amount which
is reasonably deemed by such Bank to be material, then from time to time,
promptly after submission by such Bank, through the Agent, to the Company of a
written request therefor (such request shall include details reasonably
sufficient to establish the basis for such additional amounts payable and shall
be submitted to the Company within 30 Business Days after it becomes aware of
such fact), the Company shall promptly pay to such Bank such additional amount
or amounts as will compensate such Bank for such reduction. The agreements in
this subsection 2.13 shall survive the termination of this Agreement and payment
of the Loans and the Notes and all other amounts payable hereunder.
2.14 Taxes. (a) All payments made by the Company under this
Agreement shall be made free and clear of, and without reduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or
<PAGE> 24
20
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority excluding, in the case of the Agent and each Bank,
net income and franchise taxes imposed on the Agent or such Bank by the
jurisdiction under the laws of which the Agent or such Bank is organized or any
political subdivision or taxing authority thereof or therein, or by any
jurisdiction in which such Bank's Domestic Lending Office or Eurodollar Lending
Office, as the case may be, is located or any political subdivision or taxing
authority thereof or therein (all such non-excluded taxes, levies, imposts,
deductions, charges or withholdings being hereinafter called "Taxes"). If any
Taxes are required to be withheld from any amounts payable to the Agent or any
Bank hereunder or under the Notes, the amounts so payable to the Agent or such
Bank shall be increased to the extent necessary to yield to the Agent or such
Bank (after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
Notes. Whenever any Taxes are payable by the Company, as promptly as possible
thereafter, the Company shall send to the Agent for its own account or for the
account of such Bank, as the case may be, a certified copy of an original
official receipt received by the Company showing payment thereof. If the Company
fails to pay any Taxes when due to the appropriate taxing authority or fails to
remit to the Agent the required receipts or other required documentary evidence,
the Company shall indemnify the Agent and the Banks for any incremental taxes,
interest or penalties that may become payable by the Agent or any Bank as a
result of any such failure.
(b) Each Bank that is not incorporated under the laws of the
United States of America or a state thereof agrees that it will deliver to the
Company and the Agent (i) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case may
be, certifying in each case that such Bank is entitled to receive payments under
this Agreement and the Notes payable to it, without deduction or withholding of
any United States federal income taxes, and (ii) an Internal Revenue Service
Form W-8 or W-9 or successor applicable form, as the case may be, to establish
an exemption from United States backup withholding tax. Each Bank which delivers
to the Company and the Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to
the next preceding sentence further undertakes to deliver to the Company and the
Agent two further copies of the said letter and Form 1001 or 4224 and Form W-8
or W-9, or successor applicable forms, or other manner of certification, as the
case may be, on or before the date that any such letter or form expires or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent letter and form previously delivered by it to the Company, and such
extensions or renewals thereof as may reasonably be requested by the Company,
certifying in the case of a Form 1001 or 4224 that such Bank is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes, unless in any such cases an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Bank from duly
completing and delivering any such letter or form with respect to it and such
Bank advises the Company that it is not capable of receiving payments without
any deduction or withholding of United States federal income tax, and in the
case of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(c) The agreements in subsection 2.14 shall survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.
<PAGE> 25
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2.15 Indemnity. The Company agrees to indemnify each Bank and
to hold each Bank harmless from any loss or expense (other than any loss of
anticipated margin or profit) which such Bank may sustain or incur as a
consequence of (a) default by the Company in payment when due of the principal
amount of or interest on any Eurodollar Loans of such Bank, (b) default by the
Company in making a borrowing or conversion after the Company has given a notice
of borrowing in accordance with subsection 2.1(d) or a notice of continuation or
conversion pursuant to subsection 2.6(a), (c) default by the Company in making
any prepayment after the Company has given a notice in accordance with
subsection 2.4 or 2.5 or (d) the making of a prepayment of a Eurodollar Loan on
a day which is not the last day of an Interest Period with respect thereto,
including, without limitation, in each case, any such loss or expense arising
from the reemployment of funds obtained by it to maintain its Eurodollar Loans
hereunder or from fees payable to terminate the deposits from which such funds
were obtained. Any Bank claiming any amount under this subsection 2.15 shall
provide calculations, in reasonable detail, of the amount of its loss or
expense. This covenant shall survive termination of this Agreement and payment
of the outstanding Indebtedness hereunder or pursuant to the Notes.
2.16 Application of Proceeds of Loans. Subject to the
provisions of the following sentence, the Company may use the proceeds of the
Loans for any lawful corporate purpose, including for the repurchase of shares
of common stock of the Company and the repayment of loans under the February
1997 Five-Year Agreement and Amendment. The Company will not, directly or
indirectly, apply any part of the proceeds of any such Loan for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation U, or to refund any indebtedness
incurred for such purpose, except in a manner which is not in violation of
Regulations U and X.
2.17 Notice of Certain Circumstances; Assignment of
Commitments Under Certain Circumstances. (a) Any Bank claiming any additional
amounts payable pursuant to subsections 2.12, 2.13 or 2.14 or exercising its
rights under subsection 2.11, shall, in accordance with the respective
provisions thereof, provide notice to the Company and the Agent. Such notice to
the Company and the Agent shall include details reasonably sufficient to
establish the basis for such additional amounts payable or the rights to be
exercised by the Bank.
(b) Any Bank claiming any additional amounts payable pursuant
to subsections 2.12, 2.13 or 2.14 or exercising its rights under subsection
2.11, shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document requested by the Company or to
change the jurisdiction of its applicable lending office if the making of such
filing or change would avoid the need for or reduce the amount of any such
additional amounts which may thereafter accrue or avoid the circumstances giving
rise to such exercise and would not, in the sole determination of such Bank, be
otherwise disadvantageous to such Bank.
(c) In the event that the Company shall be required to make
any additional payments to any Bank pursuant to subsections 2.12, 2.13 or 2.14
or any Bank shall exercise its rights under subsection 2.11, the Company shall
have the right at its own expense, upon notice to such Bank and the Agent, to
require such Bank to transfer and to assign without recourse (in accordance with
and subject to the terms of subsection 8.6) all its interest, rights and
obligations under this Agreement
<PAGE> 26
22
to another financial institution (including any Bank) acceptable to the Agent
(which approval shall not be unreasonably withheld) which shall assume such
obligations; provided that (i) no such assignment shall conflict with any
Requirement of Law and (ii) such assuming financial institution shall pay to
such Bank in immediately available funds on the date of such assignment the
outstanding principal amount of such Bank's Loans hereunder together with
accrued interest thereon and all other amounts accrued for its account or owed
to it hereunder, including, but not limited to additional amounts payable under
subsections 2.2, 2.11, 2.12, 2.13, 2.14 and 2.15.
SECTION 3. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that:
3.1 Corporate Organization and Existence. Each of the Company
and each Subsidiary is a corporation, partnership or other entity duly organized
and validly existing and in good standing under the laws of the jurisdiction in
which it is organized (except, in the case of Subsidiaries, where the failure to
be in good standing would not be material to the Company and its Subsidiaries on
a consolidated basis) and has all necessary power to carry on the business now
conducted by it. The Company has all necessary corporate power and has taken all
corporate action required to make all the provisions of this Agreement and the
Notes and all other agreements and instruments executed in connection herewith
and therewith, the valid and enforceable obligations they purport to be. Each of
the Company and each Subsidiary is duly qualified and in good standing in all
jurisdictions other than that of its organization in which the physical
properties owned, leased or operated by it are located (except, in the case of
Subsidiaries, where the failure to be in good standing would not be material to
the Company and its Subsidiaries on a consolidated basis), and is duly
authorized, qualified and licensed under all laws, regulations, ordinances or
orders of Governmental Authorities, or otherwise, to carry on its business in
the places and in the manner presently conducted.
3.2 Subsidiaries. As of the date hereof, the Company has only
the Subsidiaries set forth in Schedule II. Schedule II indicates all
Subsidiaries of the Company which are not wholly-owned Subsidiaries. The capital
stock and securities owned by the Company and its Subsidiaries in each of the
Company's Subsidiaries are owned free and clear of any mortgage, pledge, lien,
encumbrance, charge or restriction on the transfer thereof other than
restrictions on transfer imposed by applicable securities laws and restrictions,
liens and encumbrances outstanding on the date hereof and listed in said
Schedule II.
3.3 Financial Information. The Company has furnished to the
Agent and made available to each Bank copies of the following (the "SEC
Reports"):
(a) the Annual Report of the Company for the fiscal year ended
December 31, 1997, containing the consolidated balance sheet of the
Company and its Subsidiaries as at said date and the related
consolidated statements of income, common stockholders' equity and
changes in financial position for the fiscal year then ended,
accompanied by the opinion of Ernst-Young LLP;
<PAGE> 27
23
(b) the Annual Report of the Company on Form 10-K for the
fiscal year ended December 31, 1997;
(c) Quarterly Report of the Company on Form 10-Q for the
fiscal quarter ended March 31, 1998, June 30, 1998 and September 30,
1998;
(d) Current Reports on Form 8-K filed with the Securities and
Exchange Commission dated February 6, 1998, February 13, 1998, March 6,
1998, May 27, 1998, July 30, 1998, October 28, 1998, December 15, 1998
and February 24, 1999, respectively, and Schedule V attached hereto;
and
(e) the Annual Report of the Company on Form 10-K for the
fiscal year ended December 31, 1998.
Such financial statements (including any notes thereto) have been prepared in
accordance with GAAP and fairly present the financial conditions of the
corporations covered thereby at the dates thereof and the results of their
operations for the periods covered thereby, subject to normal year-end
adjustments in the case of interim statements. As of the date hereof and except
as disclosed in the above-referenced reports, neither the Company nor any of its
Subsidiaries has any known contingent liabilities of any significant amount
which are not referred to in said financial statements or in the notes thereto
which could reasonably be expected to have a material adverse effect on the
business or assets or on the condition, financial or otherwise, of the Company
and its Subsidiaries, on a consolidated basis.
3.4 Changes in Condition. Since December 31, 1998 there has
been no material adverse change in the business or assets or in the condition,
financial or otherwise, of the Company and its Subsidiaries, on a consolidated
basis.
3.5 Assets. The Company and each Subsidiary have good and
marketable title to all material assets carried on their books and reflected in
the most recent balance sheet referred to in subsection 3.3 or furnished
pursuant to subsection 5.5, except for assets held on Financing Leases or
purchased subject to security devices providing for retention of title in the
vendor, and except for assets disposed of as permitted by this Agreement.
3.6 Litigation. Except as disclosed in the Company's SEC
Reports, and except as set forth on Schedule V hereto, there is no litigation,
at law or in equity, or any proceeding before any federal, state, provincial or
municipal board or other governmental or administrative agency pending or to the
knowledge of the Company threatened which, after giving effect to any applicable
insurance, may involve any material risk of a material adverse effect on the
business or assets or on the condition, financial or otherwise, of the Company
and its Subsidiaries on a consolidated basis or which seeks to enjoin the
consummation of any of the transactions contemplated by this Agreement or any
other Loan Document and involves any material risk that any such injunction will
be issued, and no judgment, decree, or order of any federal, state, provincial
or municipal court, board or other governmental or administrative agency has
been issued against the Company or any Subsidiary which has, or may involve, a
material risk of a
<PAGE> 28
24
material adverse effect on the business or assets or on the condition, financial
or otherwise, of the Company and its Subsidiaries on a consolidated basis. With
respect to the matters disclosed in the Company's SEC Reports, and the matters
set forth on Schedule V hereto, since the date of such disclosures there has
been no development which is material and adverse to the business or assets or
to the condition, financial or otherwise, of the Company and its Subsidiaries on
a consolidated basis.
3.7 Tax Returns. The Company and each of its Subsidiaries have
filed all tax returns which are required to be filed and have paid, or made
adequate provision for the payment of, all taxes which have or may become due
pursuant to said returns or to assessments received. The Company knows of no
material additional assessments since said date for which adequate reserves
appearing in the said balance sheet have not been established.
3.8 Contracts, etc. Attached hereto as Schedule III is a
statement of outstanding Indebtedness of the Company and its Subsidiaries for
borrowed money as of the date set forth therein and a complete and correct list
of all agreements, contracts, indentures, instruments, documents and amendments
thereto to which the Company or any Subsidiary is a party or by which it is
bound pursuant to which any such Indebtedness of the Company and its
Subsidiaries in excess of $25,000,000 is outstanding on the date hereof. Said
Schedule III also includes a complete and correct list of all such Indebtedness
of the Company and its Subsidiaries outstanding on the date indicated in respect
of Guarantee Obligations in excess of $1,000,000 and letters of credit in excess
of $1,000,000, and there have been no increases in such Indebtedness since said
date other than as permitted by this Agreement.
3.9 No Legal Obstacle to Agreement. Neither the execution and
delivery of this Agreement or of any Notes, nor the making by the Company of any
borrowings hereunder, nor the consummation of any transaction herein or therein
referred to or contemplated hereby or thereby nor the fulfillment of the terms
hereof or thereof or of any agreement or instrument referred to in this
Agreement, has constituted or resulted in or will constitute or result in a
breach of the provisions of any contract to which the Company or any of its
Subsidiaries is a party or by which it is bound or of the charter or by-laws of
the Company, or the violation of any law, judgment, decree or governmental
order, rule or regulation applicable to the Company or any of its Subsidiaries,
or result in the creation under any agreement or instrument of any security
interest, lien, charge or encumbrance upon any of the assets of the Company or
any of its Subsidiaries. Other than those which have already been obtained, no
approval, authorization or other action by any governmental authority or any
other Person is required to be obtained by the Company or any of its
Subsidiaries in connection with the execution, delivery and performance of this
Agreement or the transactions contemplated hereby, or the making of any
borrowing by the Company hereunder.
3.10 Defaults. Neither the Company nor any Subsidiary is in
default under any provision of its charter or by-laws or, so as to affect
adversely in any material manner the business or assets or the condition,
financial or otherwise, of the Company and its Subsidiaries on a consolidated
basis, under any provision of any agreement, lease or other instrument to which
it is a party or by which it is bound or of any Requirement of Law.
<PAGE> 29
25
3.11 Burdensome Obligations. Neither the Company nor any
Subsidiary is a party to or bound by any agreement, deed, lease or other
instrument, or subject to any charter, by-law or other corporate restriction
which, in the opinion of the management thereof, is so unusual or burdensome as
to in the foreseeable future have a material adverse effect on the business or
assets or condition, financial or otherwise, of the Company and its Subsidiaries
on a consolidated basis. The Company does not presently anticipate that future
expenditures of the Company and its Subsidiaries needed to meet the provisions
of any federal or state statutes, orders, rules or regulations will be so
burdensome as to have a material adverse effect on the business or assets or
condition, financial or otherwise, of the Company and its Subsidiaries on a
consolidated basis.
3.12 Pension Plans. Each Plan maintained by the Company, any
Subsidiary or any Control Group Person or to which any of them makes or will
make contributions is in material compliance with the applicable provisions of
ERISA and the Code. Neither the Company nor any Subsidiary nor any Control Group
Person maintains, contributes to or participates in any Plan that is a "defined
benefit plan" as defined in ERISA. The Company and its Subsidiaries have met all
of the funding standards applicable to all Plans that are not Multiemployer
Plans, and there exists no event or condition which would permit the institution
of proceedings to terminate any Plan that is not a Multiemployer Plan. The
current value of the benefits guaranteed under Title IV of ERISA of each Plan
that is not a Multiemployer Plan does not exceed the current value of such
Plan's assets allocable to such benefits.
3.13 Disclosure. Neither this Agreement nor any agreement,
document, certificate or statement furnished to the Banks by the Company in
connection herewith contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
3.14 Environmental and Public and Employee Health and Safety
Matters. The Company and each Subsidiary has complied with all applicable
Federal, state, and other laws, rules and regulations relating to environmental
pollution or to environmental regulation or control or to public or employee
health or safety, except to the extent that the failure to so comply would not
be reasonably likely to result in a material adverse effect on the business or
assets or on the condition, financial or otherwise, of the Company and its
Subsidiaries on a consolidated basis. The Company's and the Subsidiaries'
facilities do not contain, and have not previously contained, any hazardous
wastes, hazardous substances, hazardous materials, toxic substances or toxic
pollutants regulated under the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act, the
Hazardous Materials Transportation Act, the Toxic Substance Control Act, the
Clean Air Act, the Clean Water Act or any other applicable law relating to
environmental pollution or public or employee health and safety, in violation of
any such law, or any rules or regulations promulgated pursuant thereto, except
for violations that would not be reasonably likely to result in a material
adverse effect on the business or assets or on the condition, financial or
otherwise, of the Company and its Subsidiaries on a consolidated basis. The
Company is aware of no events, conditions or circumstances involving
environmental pollution or contamination or public or employee health or safety,
in each case applicable to it or its Subsidiaries, that would be reasonably
likely to result
<PAGE> 30
26
in a material adverse effect on the business or assets or on the condition,
financial or otherwise, of the Company and its Subsidiaries on a consolidated
basis.
3.15 Federal Regulations. No part of the proceeds of any Loans
will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U as now and
from time to time hereafter in effect (except in a manner which is not in
violation of Regulation U or X) or for any purpose which violates the provisions
of the Regulations of the Board of Governors of the Federal Reserve System. If
requested by any Bank or the Agent, the Company will furnish to the Agent and
each Bank a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in said Regulation U.
3.16 Investment Company Act; Other Regulations. The Company is
not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
The Company is not subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Indebtedness.
3.17 Year 2000 Matters. Any reprogramming required to permit
the proper functioning (but only to the extent that such proper functioning
would otherwise be materially impaired by the occurrence of the year 2000) in
the year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by the Company or any of its
Subsidiaries or used or relied upon in the conduct of their business (including
any such systems and other equipment supplied by others or with which the
computer systems of the Company or any of its Subsidiaries interface), and the
testing of all material systems and other equipment as so reprogrammed, will be
completed by September 30, 1999, except where the failure to do so could not
reasonably be expected to result in a material adverse change in the business or
assets or in the condition, financial or otherwise, of the Company and its
Subsidiaries on a consolidated basis. The costs to the Company and its
Subsidiaries that have not been incurred as of the date hereof for such
reprogramming and testing and for the other reasonably foreseeable consequences
to them of any improper functioning of other computer systems and equipment
containing embedded microchips due to the occurrence of the year 2000 could not
reasonably be expected to result in a Default or Event of Default or to have a
material adverse change in the business or assets or in the condition, financial
or otherwise, of the Company and its Subsidiaries on a consolidated basis.
SECTION 4. CONDITIONS
The obligations of each Bank to make the Loans contemplated by
subsection 2.1 shall be subject to the compliance by the Company with its
agreements herein contained and to the satisfaction on or before the Closing
Date and each Borrowing Date of such of the following further conditions as are
applicable on the Closing Date or such Borrowing Date, as the case may be:
<PAGE> 31
27
4.1 Loan Documents. The Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of the Company,
with a counterpart for each Bank, and (ii) for the account of each Bank, if
requested by such Bank, a Note conforming to the requirements hereof and
executed by a duly authorized officer of the Company.
4.2 Legal Opinions. On the Closing Date and on any Borrowing
Date as the Agent shall request, each Bank shall have received from any general,
associate, or assistant general counsel to the Company, such opinions as the
Agent shall have reasonably requested with respect to the transactions
contemplated by this Agreement.
4.3 Company Officers' Certificate. The representations and
warranties contained in Section 3 (as qualified by the disclosures in (i) the
Company's Annual Report on Form 10-K for its fiscal year ended December 31,
1997, (ii) the Company's Quarterly Reports on Form 10-Q for its fiscal quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998, (iii) the Company's
Reports on Form 8-K dated February 6, 1998, February 13, 1998, March 6, 1998,
May 27, 1998, July 30, 1998, October 28, 1998, December 15, 1998 and February
24, 1999, (iv) the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1998, in the case of each of the items referred to in clauses
(i), (ii), (iii) and (iv), as filed with the Securities and Exchange Commission
and previously distributed to the Agent and made available to each Bank and (v)
Schedule V attached hereto) shall be true and correct in all material respects
on the Closing Date and on and as of each Borrowing Date with the same force and
effect as though made on and as of such date; no Default shall have occurred
(except a Default which shall have been waived in writing or which shall have
been cured) and no Default shall exist after giving effect to the Loan to be
made; between December 31, 1998 and such Borrowing Date, neither the business
nor assets, nor the condition, financial or otherwise, of the Company and its
Subsidiaries on a consolidated basis shall have been adversely affected in any
material manner as a result of any fire, flood, explosion, accident, drought,
strike, lockout, riot, sabotage, confiscation, condemnation, or any purchase of
any property by Governmental Authority, activities of armed forces, acts of God
or the public enemy, new or amended legislation, regulatory order, judicial
decision or any other event or development whether or not related to those
enumerated above (all subject to the disclosures referred to above); and the
Agent shall have received a certificate containing a representation to these
effects dated such Borrowing Date and signed by a Responsible Officer.
4.4 Legality, etc. The making of the Loan to be made by such
Bank on each Borrowing Date shall not subject such Bank to any penalty or
special tax, shall not be prohibited by any Requirement of Law applicable to
such Bank or the Company, and all necessary consents, approvals and
authorizations of any Governmental Authority or any Person to or of any such
Loan shall have been obtained and shall be in full force and effect.
4.5 General. All instruments and legal and corporate
proceedings in connection with the Loans contemplated by this Agreement shall be
satisfactory in form and substance to the Agent, and the Agent shall have
received copies of all documents, and favorable legal opinions and records of
corporate proceedings, which the Agent may have reasonably requested in
connection with the Loans and other transactions contemplated by this Agreement.
<PAGE> 32
28
4.6 Fees. The Agent shall have received the fees to be
received on the Closing Date referred to in subsection 2.2.
4.7 Amendments to Existing Agreements. The conditions to the
effectiveness of the Fifth Amendment to the February 1997 Five-Year Agreement
and Amendment and the First Amendment to the July 1998 Term Loan Agreement shall
have been satisfied.
SECTION 5. GENERAL COVENANTS
On and after the date hereof, until all of the Notes and all
other amounts payable pursuant hereto shall have been paid in full and so long
as the Commitments shall remain in effect, the Company covenants that the
Company will comply, and will cause each of its Subsidiaries to comply, with
such of the provisions of this Section 5 and such other provisions of this
Agreement as are applicable to the Person in question.
5.1 Taxes, Indebtedness, etc. (a) Each of the Company and its
Subsidiaries will duly pay and discharge, or cause to be paid and discharged,
before the same shall become in arrears, all taxes, assessments, levies and
other governmental charges imposed upon such corporation and its properties,
sales and activities, or any part thereof, or upon the income or profits
therefrom; provided, however, that any such tax, assessment, charge or levy need
not be paid if the validity or amount thereof shall currently be contested in
good faith by appropriate proceedings and if the Company or the Subsidiary in
question shall have set aside on its books appropriate reserves with respect
thereto.
(b) Each of the Company and its Subsidiaries will promptly pay
when due, or in conformance with customary trade terms, all other Indebtedness
and liabilities incident to its operations; provided, however, that any such
Indebtedness or liability need not be paid if the validity or amount thereof
shall currently be contested in good faith and if the Company or the Subsidiary
in question shall have set aside on its books appropriate reserves with respect
thereto. The Subsidiaries will not create, incur, assume or suffer to exist any
Indebtedness, except: Indebtedness outstanding on the date hereof and listed on
Schedule III; Indebtedness that is owing to the Company or any other Subsidiary;
Indebtedness incurred pursuant to an accounts receivable program; and (iv)
additional Indebtedness at any time outstanding in an aggregate principal amount
not to exceed 10% of Consolidated Assets.
5.2 Maintenance of Properties; Compliance with Law. Each of
the Company and its Subsidiaries (a) will keep its material properties in good
repair, working order and condition and will from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto and will comply at all times with the provisions of all material leases
and other material agreements to which it is a party so as to prevent any loss
or forfeiture thereof or thereunder unless compliance therewith is being
currently contested in good faith by appropriate proceedings and (b) in the case
of the Company or any Subsidiary of the Company while such Person remains a
Subsidiary, will do all things necessary to preserve, renew and keep in full
force and effect and in good standing its corporate existence and franchises
<PAGE> 33
29
necessary to continue such businesses. The Company and its Subsidiaries will
comply in all material respects with all valid and applicable Requirements of
Law (including any such laws, rules, regulations or governmental orders relating
to the protection of environmental or public or employee health or safety) of
the United States, of the States thereof and their counties, municipalities and
other subdivisions and of any other jurisdiction, applicable to the Company and
its Subsidiaries, except where compliance therewith shall be contested in good
faith by appropriate proceedings, the Company or the Subsidiary in question
shall have set aside on its books appropriate reserves in conformity with GAAP
with respect thereto, and the failure to comply therewith could not reasonably
be expected to, in the aggregate, have a material adverse effect on the business
or assets or on the condition, financial or otherwise, of the Company and its
Subsidiaries on a consolidated basis.
5.3 Transactions with Affiliates. Neither the Company nor any
of its Subsidiaries will enter into any transactions, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any of their Affiliates (other than the Company and its
Subsidiaries) (excluding the Spin-Offs and the transitional services agreements
to be entered into with LifePoint and Triad in connection therewith) unless such
transaction is otherwise permitted under this Agreement, is in the ordinary
course of the Company's or such Subsidiary's business and is upon fair and
reasonable terms no less favorable to the Company or such Subsidiary, as the
case may be, than it would obtain in an arm's-length transaction.
5.4 Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained, with financially sound and
reputable insurers including any Subsidiary which is engaged in the business of
providing insurance protection, insurance (including, without limitation,
professional liability insurance against claims for malpractice) 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 of such types
and such amounts as are customarily carried under similar circumstances by other
corporations. Such insurance may be subject to co-insurance, deductibility or
similar clauses which, in effect, result in self-insurance of certain losses,
and the Company may self-insure against such loss or damage, provided that
adequate insurance reserves are maintained in connection with such
self-insurance.
5.5 Financial Statements. The Company will and will cause each
of its Subsidiaries to maintain a standard modern system of accounting in which
full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with GAAP consistently
applied, and will furnish the following to each Bank (in duplicate if so
requested):
(a) Annual Statements. As soon as available, and in any event
within 120 days after the end of each fiscal year, the consolidated
balance sheet as at the end of each fiscal year and consolidated
statements of profit and loss and of retained earnings for such fiscal
year of the Company and its Subsidiaries, together with comparative
consolidated figures for the next preceding fiscal year, accompanied
by reports or certificates of an Auditor, to the effect that such
balance sheet and statements were prepared in accordance with GAAP
consistently applied and fairly present the financial position of the
Company and its
<PAGE> 34
30
Subsidiaries as at the end of such fiscal year and the results of
their operations and changes in financial position for the year then
ended and the statement of such Auditor and of a Responsible Officer
of the Company that such Auditor and Responsible Officer have caused
the provisions of this Agreement to be reviewed and that nothing has
come to their attention to lead them to believe that any Default
exists hereunder or, if such is not the case, specifying such Default
or possible Default and the nature thereof. In addition, such
financial statements shall be accompanied by a certificate of a
Responsible Officer of the Company containing computations showing
compliance with subsections 5.6 through 5.8, 5.10 and 5.12.
(b) Quarterly Statements. As soon as available, and in any
event within 60 days after the close of each of the first three fiscal
quarters of the Company and its Subsidiaries in each year,
consolidated balance sheets as at the end of such fiscal quarter and
consolidated profit and loss and retained earnings statements for the
portion of the fiscal year then ended, of the Company and its
Subsidiaries, together with computations showing compliance with
subsections 5.6 through 5.8, 5.10 and 5.12, accompanied by a
certificate of a Responsible Officer of the Company that such
statements and computations have been properly prepared in accordance
with GAAP, consistently applied, and fairly present the financial
position of the Company and its Subsidiaries as at the end of such
fiscal quarter and the results of their operations and changes in
financial position for such quarter and for the portion of the fiscal
year then ended, subject to normal audit and year-end adjustments, and
to the further effect that he has caused the provisions of this
Agreement and all other agreements to which the Company or any of its
Subsidiaries is a party and which relate to Indebtedness to be
reviewed, and has no knowledge that any Default has occurred under
this Agreement or under any such other agreement, or, if said
Responsible Officer has such knowledge, specifying such Default and
the nature thereof.
(c) Notice of Material Litigation; Defaults. The Company will
promptly notify each Bank in writing, by delivery of the Company's
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed with the Securities and Exchange Commission
or otherwise, as to any litigation or administrative proceeding to
which it or any of its Subsidiaries may hereafter be a party which,
after giving effect to any applicable insurance, may involve any
material risk of any material judgment or liability or which may
otherwise result in any material adverse change in the business or
assets or in the condition, financial or otherwise, of the Company and
its Subsidiaries on a consolidated basis. Promptly upon acquiring
knowledge thereof, the Company will notify each Bank of the existence
of any Default, including, without limitation, any default in the
payment of any Indebtedness for money borrowed of the Company or any
Subsidiary or under the terms of any agreement relating to such
Indebtedness, specifying the nature of such Default and what action
the Company has taken or is taking or proposes to take with respect
thereto. Promptly upon acquiring knowledge thereof, the Company will
notify each Bank of a change in the publicly announced ratings by S&P
and Moody's of the then current senior unsecured, non-credit enhanced,
long-term Indebtedness of the Company.
<PAGE> 35
31
(d) ERISA Reports. The Company will furnish the Agent with
copies of any request for waiver of the funding standards or extension
of the amortization periods required by Sections 303 and 304 of ERISA
or Section 412 of the Code promptly after any such request is
submitted by the Company to the Department of Labor or the Internal
Revenue Service, as the case may be. Promptly after a Reportable Event
occurs, or the Company or any of its Subsidiaries receives notice that
the PBGC or any Control Group Person has instituted or intends to
institute proceedings to terminate any pension or other Plan that is a
"defined benefit plan" as defined in ERISA, or prior to the Plan
administrator's terminating such Plan pursuant to Section 4041 of
ERISA, the Company will notify the Agent and will furnish to the Agent
a copy of any notice of such Reportable Event which is required to be
filed with the PBGC, or any notice delivered by the PBGC evidencing
its institution of such proceedings or its intent to institute such
proceedings, or any notice to the PBGC that a Plan is to be
terminated, as the case may be. The Company will promptly notify each
Bank upon learning of the occurrence of any of the following events
with respect to any Plan which is a Multiemployer Plan: a partial or
complete withdrawal from any Plan which may result in the incurrence
by the Company or any of is Subsidiaries of withdrawal liability in
excess of $1,000,000 under Subtitle E of Title IV of ERISA, or of the
termination, insolvency or reorganization status of any Plan under
such Subtitle E which may result in liability to the Company or any of
its Subsidiaries in excess of $1,000,000. In the event of such a
withdrawal, upon the request of the Agent or any Bank, the Company
will promptly provide information with respect to the scope and extent
of such liability, to the best of the Company's knowledge.
(e) Reports to Stockholders, etc. Promptly after the sending,
making available or filing of the same, copies of all reports and
financial statements which the Company shall send or make available to
its stockholders including, without limitation, all reports on Form
8-K, 10-Q or 10-K or any similar form hereafter in use which the
Company shall file with the Securities and Exchange Commission.
(f) Other Information. From time to time upon request of the
Agent or any Bank, the Company will furnish information regarding the
business affairs and condition, financial or otherwise, of the Company
and its Subsidiaries. The Company agrees that any authorized officers
and representatives of any Bank shall have the right during reasonable
business hours to examine the books and records of the Company and its
Subsidiaries, and to make notes and abstracts therefrom, to make an
independent examination of its books and records for the purpose of
verifying the accuracy of the reports delivered by the Company and its
Subsidiaries pursuant to this Agreement or otherwise, and ascertaining
compliance with this Agreement.
(g) Confidentiality of Information. Each Bank acknowledges
that some of the information furnished to such Bank pursuant to this
subsection 5.5 may be received by such Bank prior to the time it shall
have been made public, and each Bank agrees that it will keep all
information so furnished confidential and shall make no use of such
information until it shall have become public, except (i) in
connection with matters involving operations under or enforcement of
this Agreement or the Notes, (ii) in
<PAGE> 36
32
accordance with each Bank's obligations under law or pursuant to
subpoenas or other process to make information available to
governmental agencies and examiners or to others, (iii) to each Bank's
corporate Affiliates and Transferees and prospective Transferees so
long as such Persons agree to be bound by this subsection 5.5(g) or
(iv) with the prior consent of the Company.
5.6 Ratio of Consolidated Total Debt to Consolidated Total
Capitalization. The Company and its Subsidiaries will not at any time have
outstanding Consolidated Total Debt in an amount in excess of 65% of
Consolidated Total Capitalization.
5.7 Interest Coverage Ratio. On the last day of each fiscal
quarter of the Company, the Consolidated Earnings Before Interest and Taxes of
the Company and its Subsidiaries for the four consecutive fiscal quarters of the
Company then ending will be an amount which equals or exceeds 200% of the
Consolidated Interest Expense of the Company and its Subsidiaries for the same
four consecutive fiscal quarters.
5.8 Distributions. The Company will not make any Distribution
except that, so long as no Event of Default exists or would exist after giving
effect thereto, the Company may make a Distribution.
5.9 Merger or Consolidation. The Company will not become a
constituent corporation in any merger or consolidation unless the Company shall
be the surviving or resulting corporation and immediately before and after
giving effect to such merger or consolidation there shall exist no Default;
provided that the Company may merge into another Subsidiary owned by the Company
for the purposes of causing the Company to be incorporated in a different
jurisdiction in the United States or causing the Company to change its name.
5.10 Sales of Assets. The Company and its Subsidiaries may
from time to time sell or otherwise dispose of all or any part of their
respective assets; provided, however, that in any fiscal year, the Company and
its Subsidiaries will not (a) sell or dispose of (including, without limitation,
any disposition resulting from any merger or consolidation involving a
Subsidiary of the Company, and any Sale-and-Leaseback Transaction), outside of
the ordinary course of business, to Persons other than the Company and its
Subsidiaries, assets constituting in the aggregate more than 12% of Consolidated
Assets of the Company and its Subsidiaries as at the end of the immediately
preceding fiscal year (calculated after giving pro forma effect thereto to the
Spin-Offs) (excluding the Spin-Offs) and (b) exchange with any Persons other
than the Company and its Subsidiaries any asset or group of assets for another
asset or group of assets unless (i) such asset or group of assets are exchanged
for an asset or group of assets of a substantially similar type or nature, (ii)
on a pro forma basis both before and after giving effect to such exchange, no
Default or Event of Default shall have occurred and be continuing, (iii) the
aggregate fair market value (as determined in good faith by the Board of
Directors of the Company) of the asset or group of assets being transferred by
the Company or such Subsidiary and the asset or group of assets being acquired
by the Company or such Subsidiary are substantially equal and (iv) the aggregate
of (x) all assets of the Company and its Subsidiaries sold pursuant to
subsection 5.10(a) (including, without limitation, any disposition resulting
from
<PAGE> 37
33
any merger or consolidation involving a Subsidiary of the Company, and any
Sale-and-Leaseback Transaction) (excluding the Spin-Offs) and (y) the aggregate
fair market value (as determined in good faith by the Board of Directors of the
Company) of all assets of the Company and its Subsidiaries exchanged pursuant to
this subsection 5.10(b) does not exceed 20% of Consolidated Assets of the
Company and its Subsidiaries as at the end of the immediately preceding fiscal
year (calculated after giving pro forma effect thereto to the Spin-Offs).
5.11 Compliance with ERISA. Each of the Company and its
Subsidiaries will meet, and will cause all Control Group Persons to meet, all
minimum funding requirements applicable to any Plan imposed by ERISA or the Code
(without giving effect to any waivers of such requirements or extensions of the
related amortization periods which may be granted), and will at all times
comply, and will cause all Control Group Persons to comply, in all material
respects with the provisions of ERISA and the Code which are applicable to the
Plans. At no time shall the aggregate actual and contingent liabilities of the
Company under Sections 4062, 4063, 4064 and other provisions of ERISA with
respect to all Plans (and all other pension plans to which the Company, any
Subsidiary, or any Control Group Person made contributions prior to such time)
exceed $7,500,000. Neither the Company nor its Subsidiaries will permit any
event or condition to exist which could permit any Plan which is not a
Multiemployer Plan to be terminated under circumstances which would cause the
lien provided for in Section 4068 of ERISA to attach to the assets of the
Company or any of its Subsidiaries.
5.12 Negative Pledge. The Company will not and will ensure
that no Subsidiary will create or have outstanding any lien or security interest
on or over any Principal Property in respect of any Indebtedness and the Company
will not create or have outstanding any lien or security interest on or over the
capital stock of any of its Subsidiaries that own a Principal Property and will
ensure that no Subsidiary will create or have outstanding any lien or security
interest on or over the capital stock of any of its respective Subsidiaries that
own a Principal Property except in either case for:
(a) any security for the purchase price or cost of
construction of real property acquired by the Company or any of its
Subsidiaries (or additions, substantial repairs, alterations or
substantial improvements thereto) or equipment, provided that such
Indebtedness and such security are incurred within 18 months of the
acquisition or completion of construction (or alteration or repair)
and full operation;
(b) any security existing on property or on capital stock, as
the case may be, at the time of acquisition of such property or
capital stock, as the case maybe, by the Company or a Subsidiary or on
the property or capital stock, as the case may be, of a corporation at
the time of the acquisition of such corporation by the Company or a
Subsidiary (including acquisitions through merger or consolidation);
(c) any security created in favor of the Company or a
Subsidiary;
(d) any security created by operation of law in favor of
government agencies of the United States of America or any State
thereof;
<PAGE> 38
34
(e) any security created in connection with the borrowing of
funds if within 120 days such funds are used to repay Indebtedness in
at least the same principal amount as secured by other security of
Principal Property or capital stock of a Subsidiary that owns a
Principal Property, as the case may be, with an independent appraised
fair market value at least equal to the appraised fair market value of
the Principal Property or capital stock of a Subsidiary that owns a
Principal Property, as the case may be, secured by the new security;
and
(f) any extension, renewal or replacement of any security
referred to in the foregoing clauses (a) through (e) provided that the
amount thereby secured is not increased and such security is not
extended to other property of the Company or its Subsidiaries;
unless any Loans made and/or to be made to and all other sums payable by the
Company under this Agreement shall be secured equally and ratably with (or prior
to) such Indebtedness so long as such Indebtedness shall be so secured.
Notwithstanding the foregoing, the Company and any one or more Subsidiaries may,
without securing the Loans made and/or to be made to and all other sums payable
by the Company under this Agreement, create, issue or assume Indebtedness which
would otherwise be subject to the foregoing restrictions in an aggregate
principal amount which, together with all other such Indebtedness of the Company
and its Subsidiaries (not including (i) Indebtedness permitted to be secured
pursuant to the foregoing clauses (a) through (f) and the aggregate Attributable
Debt or (ii) Indebtedness incurred by one or more Subsidiaries of the Company
and thereafter assumed by LifePoint and/or Triad (and/or their respective
subsidiaries) in connection with the Spin-Offs and in respect of which such
Subsidiaries of the Company are thereupon released), including Indebtedness in
respect of Sale-and-Lease-back Transactions (other than those permitted by
subsection 5.13(b)), does not exceed 10% of Consolidated Net Tangible Assets of
the Company and its Subsidiaries (calculated after giving pro forma effect
thereto as if the Spin-Offs occurred on the first day of the testing period
thereof).
5.13 Sale-and-Lease-back Transactions. Neither the Company
nor any Significant Subsidiary will enter into any Sale-and-Lease-back
Transaction with respect to any Principal Property with any Person (other than
the Company or a Subsidiary) unless either (a) the Company or such Significant
Subsidiary would be entitled, pursuant to the provisions described in subsection
5.12(a) through (f) to incur Indebtedness secured by a security on the property
to be leased without equally and ratably securing the Loans made and/or to be
made to and all other sums payable by the Company under this Agreement, or (b)
the Company during or immediately after the expiration of 120 days after the
effective date of such transaction applies to the voluntary retirement of its
Indebtedness and/or the acquisition or construction of Principal Property an
amount equal to the greater of the net proceeds of the sale of the property
leased in such transaction or the fair value in the opinion of the chief
financial officer of the Company of the leased property at the time such
transaction was entered into.
<PAGE> 39
35
SECTION 6. DEFAULTS
6.1 Events of Default. Upon the occurrence of any of the
following events:
(a) any default shall be made by the Company in any payment in
respect of: (i) interest payable hereunder as the same shall become
due and such default shall continue for a period of five days; or (ii)
principal of any of the Indebtedness hereunder or evidenced by the
Notes as the same shall become due, whether at maturity, by
prepayment, by acceleration or otherwise; or
(b) any default shall be made by either the Company or any
Subsidiary of the Company in the performance or observance of any of
the provisions of subsections 5.6 through 5.10, 5.12 and 5.13; or
(c) any default shall be made in the due performance or
observance of any other covenant, agreement or provision to be
performed or observed by either the Company or any Subsidiary under
this Agreement, and such default shall not be rectified or cured to
the satisfaction of the Required Banks within a period expiring 30
days after written notice thereof by the Agent to the Company; or
(d) any representation or warranty of or with respect to the
Company or any Subsidiary of the Company to the Banks in connection
with this Agreement shall have been untrue in any material respect on
or as of the date made and the facts or circumstances to which such
representation or warranty relates shall not have been subsequently
corrected to make such representation or warranty no longer incorrect;
or
(e) any default shall be made in the payment of any item of
Indebtedness of the Company or any Subsidiary or under the terms of
any agreement relating to such Indebtedness and such default shall
continue without having been duly cured, waived or consented to,
beyond the period of grace, if any, therein specified; provided,
however, that such default shall not constitute an Event of Default
unless (i) the outstanding principal amount of such item of
Indebtedness exceeds $10,000,000, or (ii) the aggregate outstanding
principal amount of such item of Indebtedness and all other items of
Indebtedness of the Company and its Subsidiaries as to which such
defaults exist and have continued without being duly cured, waived or
consented to beyond the respective periods of grace, if any, therein
specified exceeds $25,000,000, or (iii) such default shall have
continued without being rectified or cured to the satisfaction of the
Required Banks for a period of 30 days after written notice thereof by
the Agent to the Company; or
(f) either the Company or any Significant Subsidiary shall be
involved in financial difficulties as evidenced:
(i) by its commencement of a voluntary case under Title
11 of the United States Code as from time to time in effect,
or by its authorizing, by appropriate proceedings of its
board of directors or other governing body, the commencement
of such a voluntary case;
<PAGE> 40
36
(ii) by the filing against it of a petition commencing
an involuntary case under said Title 11 which shall not have
been dismissed within 60 days after the date on which said
petition is filed or by its filing an answer or other
pleading within said 60-day period admitting or failing to
deny the material allegations of such a petition or seeking,
consenting or acquiescing in the relief therein provided;
(iii) by the entry of an order for relief in any
involuntary case commenced under said Title 11;
(iv) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction
relating to the liquidation or reorganization of debtors or
to the modification or alteration of the rights of creditors,
or by its consenting to or acquiescing in such relief;
(v) by the entry of an order by a court of competent
jurisdiction (i) finding it to be bankrupt or insolvent,
(ii) ordering or approving its liquidation, reorganization
or any modification or alteration of the rights of its
creditors, or (iii) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial part
of its property;
(vi) by its making an assignment for the benefit of, or
entering into a composition with, its creditors, or appointing
or consenting to the appointment of a receiver or other
custodian for all or a substantial part of its property; or
(g) a Change in Control of the Company shall occur;
then and in each and every such case, (x) the Agent may, with the consent of the
Required Banks, or shall, at the direction of the Required Banks, proceed to
protect and enforce the rights of the Banks by suit in equity, action at law
and/or other appropriate proceeding either for specific performance of any
covenant or condition contained in this Agreement or any Note or in any
instrument delivered to each Bank pursuant to this Agreement, or in aid of the
exercise of any power granted in this Agreement or any Note or any such
instrument or assignment, and (y) the Agent may, with the consent of the
Required Banks, or shall, at the direction of the Required Banks, by notice in
writing to the Company terminate the obligations of the Banks to make the Loans
hereunder, and thereupon such obligations shall terminate forthwith and (z)
(unless there shall have occurred an Event of Default under subsection 6.1(f),
in which case the obligations of the Banks to make the Loans hereunder shall
automatically terminate and the unpaid balance of the Indebtedness hereunder and
accrued interest thereon and all other amounts payable hereunder (the "Bank
Obligations") shall automatically become due and payable) the Agent may, with
the consent of the Required Banks, or shall, at the direction of the Required
Banks, by notice in writing to the Company declare all or any part of the unpaid
balance of the Bank Obligations then outstanding to be forthwith due and
payable, and thereupon such unpaid balance or part thereof shall become so due
and payable without presentment, protest or further demand or notice of any
kind, all of which are hereby expressly waived, the obligations of the Banks to
make further Loans hereunder shall terminate forthwith, and the Agent may, with
the consent of the Required
<PAGE> 41
37
Banks, or shall, at the direction of the Required Banks, proceed to enforce
payment of such balance or part thereof in such manner as the Agent may elect,
and each Bank may offset and apply toward the payment of such balance or part
thereof, and to the curing of any such Event of Default, any Indebtedness from
such Bank to the Company, including any Indebtedness represented by deposits in
any general or special account maintained with such Bank.
6.2 Annulment of Defaults. An Event of Default shall not be
deemed to be in existence for any purpose of this Agreement if the Agent, with
the consent of or at the direction of the Required Banks, subject to subsection
8.1, shall have waived such event in writing or stated in writing that the same
has been cured to its reasonable satisfaction, but no such waiver shall extend
to or affect any subsequent Event of Default or impair any rights of the Agent
or the Banks upon the occurrence thereof.
6.3 Waivers. The Company hereby waives to the extent permitted
by applicable law (a) all presentments, demands for performance, notices of
nonperformance (except to the extent required by the provisions hereof),
protests, notices of protest and notices of dishonor in connection with any of
the Indebtedness hereunder or evidenced by the Notes, (b) any requirement of
diligence or promptness on the part of any Bank in the enforcement of its rights
under the provisions of this Agreement or any Note, and (c) any and all notices
of every kind and description which may be required to be given by any statute
or rule of law and any defense of any kind which the Company may now or
hereafter have with respect to its liability under this Agreement or any Note.
6.4 Course of Dealing. No course of dealing between the
Company and any Bank shall operate as a waiver of any of the Banks' rights under
this Agreement or any Note. No delay or omission on the part of any Bank in
exercising any right under this Agreement or any Note or with respect to any of
the Bank Obligations shall operate as a waiver of such right or any other right
hereunder. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion. No waiver or consent shall
be binding upon any Bank unless it is in writing and signed by the Agent or such
of the Banks as may be required by the provisions of this Agreement. The making
of a Loan hereunder during the existence of a Default shall not constitute a
waiver thereof.
SECTION 7. THE AGENT
7.1 Appointment. Each Bank hereby irrevocably designates and
appoints Chase as the Agent of such Bank under this Agreement, and each such
Bank irrevocably authorizes Chase, as the Agent for such Bank, to take such
action on its behalf under the provisions of this Agreement and to exercise such
powers and perform such duties as are expressly delegated to the Agent, by the
terms of this Agreement, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Bank,
and no implied covenants, functions, responsibilities,
<PAGE> 42
38
duties, obligations or liabilities shall be read into this Agreement or
otherwise exist against the Agent.
7.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
7.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(a) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement (except for its or such
Person's own gross negligence or willful misconduct), or (b) responsible in any
manner to any of the Banks for any recitals, statements, representations or
warranties made by the Company or any officer thereof contained in this
Agreement or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or the Notes or for any failure of the Company
to perform its obligations hereunder. The Agent shall not be under any
obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Company.
7.4 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company), independent accountants
and other experts selected by the Agent. The Agent may deem and treat the payee
of any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement unless it shall first receive such advice or
concurrence of the Required Banks as it deems appropriate or it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement and the Notes in accordance with
a request of the Required Banks, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Banks and all
future holders of the Notes.
7.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Bank or the Company
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Banks. The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks; provided that,
unless and until the Agent shall have
<PAGE> 43
39
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the Banks.
7.6 Non-Reliance on Agent and Other Banks. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Company, shall be deemed to constitute any
representation or warranty by the Agent to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Company and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Company which
may come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
7.7 Indemnification. The Banks agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by the Company and without
limiting the obligation of the Company to do so), ratably according to the
respective amounts of their then existing Loans hereunder, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including without limitation at any time following the payment
of the Indebtedness hereunder or pursuant to the Notes) be imposed on, incurred
by or asserted against the Agent in any way relating to or arising out of this
Agreement, or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Bank shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this subsection shall survive the payment of the Notes and all
other amounts payable hereunder.
7.8 Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Company as though the Agent was not the Agent
hereunder. With respect to its Loans made or renewed by it and any Note issued
to it, the Agent shall have the same rights and powers under this Agreement
<PAGE> 44
40
as any Bank and may exercise the same as though it were not the Agent, and the
terms "Bank" and "Banks" shall include the Agent in its individual capacity.
7.9 Successor Agent. The Agent may resign as Agent, as the
case may be, upon 10 days' notice to the Banks. If the Agent shall resign as
Agent, under this Agreement, then the Required Banks shall appoint from among
the Banks a successor agent for the Banks which successor agent shall be
approved by the Company, whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Notes. After any retiring Agent's resignation hereunder as
Agent, the provisions of this subsection 7.9 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 8. MISCELLANEOUS
8.1 Amendments and Waivers. Neither this Agreement, any Note,
nor any terms hereof or thereof may be amended, supplemented or modified except
in accordance with the provisions of this subsection. With the written consent
of the Required Banks, the Agent and the Company may, from time to time, enter
into written amendments, supplements or modifications hereto for the purpose of
adding any provisions to this Agreement or the Notes or changing in any manner
the rights of the Banks or of the Company hereunder or thereunder or waiving, on
such terms and conditions as the Agent may specify in such instrument, any of
the requirements of this Agreement or the Notes or any Default or Event of
Default and its consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (a) extend the maturity (whether as
stated, by acceleration or otherwise) of any Indebtedness hereunder, or reduce
the rate or extend the time of payment of interest thereon, or reduce any fee
payable to the Banks hereunder, or reduce the principal amount thereof, or
change the amount of any Bank's Commitment or amend, modify or waive any
provision of this subsection 8.1 or reduce the percentage specified in the
definition of Required Banks, or consent to the assignment or transfer by the
Company of any of its rights and obligations under this Agreement, in each case
without the written consent of each Bank directly affected thereby, or (b)
amend, modify or waive any provision of Section 7 without the written consent of
the then Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Banks and shall be binding upon
the Company, the Banks, the Agent and all future holders of the Notes. In the
case of any waiver, the Company, the Banks and the Agent shall be restored to
their former position and rights hereunder and under the outstanding Notes, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
8.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or
<PAGE> 45
41
three days after being deposited in the mail, postage prepaid, or, in the case
of telecopy notice, when sent, confirmation of receipt received, addressed as
follows in the case of the Company and the Agent and as set forth in Schedule I
in the case of the other parties hereto, or to such other address as may be
hereafter notified by the respective parties hereto and any future holders of
the Notes:
The Company: Columbia/HCA Healthcare Corporation
One Park Plaza
Nashville, Tennessee 37203
Attention: David Anderson
Telecopy: (615) 344-2015
The Agent: The Chase Manhattan Bank
270 Park Avenue - 48th Floor
New York, New York 10017
Attention: Dawn Lee Lum
Telecopy: (212) 270-3279
with a copy to: Chase Agent Bank Services
1 Chase Manhattan Plaza - 8th Floor
New York, New York 10081
Attention: Janet Belden
Telecopy: (212) 552-5658
provided that any notice, request or demand to or upon the Agent or the Banks
pursuant to Section 2 shall not be effective until received.
8.3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
8.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the Notes.
8.5 Payment of Expenses and Taxes; Indemnity. (a) The Company
agrees (i) to pay or reimburse the Agent for all its reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the Notes and any other documents prepared in connection herewith, and the
consummation of the transactions contemplated hereby and thereby,
<PAGE> 46
42
including, without limitation, the reasonable fees and disbursements of counsel
to the Agent, (ii) to pay or reimburse each Bank and the Agent for all their
reasonable costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes and any such other
documents, including, without limitation, reasonable fees and disbursements of
counsel to the Agent and to each of the Banks and (iii) to pay, indemnify, and
hold each Bank and the Agent harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes and any such other documents.
(b) The Company will indemnify each of the Agent and the Banks
and the directors, officers and employees thereof and each Person, if any, who
controls each one of the Agent and the Banks (any of the foregoing, an
"Indemnified Person") and hold each Indemnified Person harmless from and against
any and all claims, damages, liabilities and expenses (including without
limitation all fees and disbursements of counsel with whom an Indemnified Person
may consult in connection therewith and all expenses of litigation or
preparation therefor) which an Indemnified Person may incur or which may be
asserted against it in connection with any litigation or investigation involving
this Agreement, the use of any proceeds of any Loans under this Agreement by the
Company or any Subsidiary, any officer, director or employee thereof other than
litigation commenced by the Company against any of the Agent or the Banks which
(i) seeks enforcement of any of the Company's rights hereunder and (ii) is
determined adversely to any of the Agent or the Banks.
(c) The agreements in this subsection 8.5 shall survive
repayment of the Notes and all other amounts payable hereunder.
8.6 Successors and Assigns; Participations; Purchasing Banks.
(a) This Agreement shall be binding upon and inure to the benefit of the
Company, the Banks, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Bank.
(b) Any Bank may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Loans owing to such Bank, any Notes held by such Bank, any Commitments of such
Bank or any other interests of such Bank hereunder. In the event of any such
sale by a Bank of a participating interest to a Participant, such Bank's
obligations under this Agreement to the other parties under this Agreement shall
remain unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Notes for all purposes
under this Agreement, and the Company and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. The Company agrees that if amounts outstanding
under this Agreement and the Notes are due or unpaid, or shall have been
<PAGE> 47
43
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of offset in respect
of its participating interest in amounts owing under this Agreement and any
Notes to the same extent as if the amount of its participating interest were
owing directly to it as a Bank under this Agreement or any Notes, provided that
such right of offset shall be subject to the obligation of such Participant to
share with the Banks, and the Banks agree to share with such Participant, as
provided in subsection 8.7. The Company also agrees that each Participant shall
be entitled to the benefits of subsections 2.11, 2.12, 2.13 and 2.15 with
respect to its participation in the Commitments and the Eurodollar Loans
outstanding from time to time; provided that no Participant shall be entitled to
receive any greater amount pursuant to such subsections than the transferor Bank
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Bank to such Participant had no
such transfer occurred. No Participant shall be entitled to consent to any
amendment, supplement, modification or waiver of or to this Agreement or any
Note, unless the same is subject to clause (a) of the proviso to subsection 8.1.
(c) Any Bank may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to any
Bank or any affiliate thereof, and, with the consent of the Company and the
Agent (which in each case shall not be unreasonably withheld) to one or more
additional banks or financial institutions ("Purchasing Banks") all or any part
of its rights and obligations under this Agreement and the Notes pursuant to a
Commitment Transfer Supplement, executed by such Purchasing Bank, such
transferor Bank and the Agent (and, in the case of a Purchasing Bank that is not
then a Bank or an affiliate thereof, by the Company); provided, however, that
(i) the Commitments purchased by such Purchasing Bank that is not then a Bank
shall be equal to or greater than $10,000,000 and (ii) the transferor Bank which
has transferred part of its Loans and Commitments to any such Purchasing Bank
shall retain a minimum Commitment, after giving effect to such sale, equal to or
greater than $10,000,000. Upon (i) such execution of such Commitment Transfer
Supplement, (ii) delivery of an executed copy thereof to the Company and (iii)
payment by such Purchasing Bank, such Purchasing Bank shall for all purposes be
a Bank party to this Agreement and shall have all the rights and obligations of
a Bank under this Agreement, to the same extent as if it were an original party
hereto with the Commitment Percentage of the Commitments set forth in such
Commitment Transfer Supplement. Such Commitment Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Bank and the resulting adjustment of
Commitment Percentages arising from the purchase by such Purchasing Bank of all
or a portion of the rights and obligations of such transferor Bank under this
Agreement and the Notes. Upon the consummation of any transfer to a Purchasing
Bank, pursuant to this subsection 8.6(c), the transferor Bank, the Agent and the
Company shall make appropriate arrangements so that, if required, replacement
Notes are issued to such transferor Bank and new Notes or, as appropriate,
replacement Notes, are issued to such Purchasing Bank, in each case in principal
amounts reflecting their Commitment Percentages or, as appropriate, their
outstanding Loans as adjusted pursuant to such Commitment Transfer Supplement.
(d) The Agent shall maintain at its address referred to in
subsection 8.2 a copy of each Commitment Transfer Supplement delivered to it and
a register (the "Register") for the
<PAGE> 48
44
recordation of the names and addresses of the Banks and the Commitment of, and
principal amount of the Loans owing to, each Bank from time to time. The entries
in the Register shall be conclusive, in the absence of manifest error, and the
Company, the Agent and the Banks may treat each Person whose name is recorded in
the Register as the owner of the Loan recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the Company or any
Bank at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement
executed by a transferor Bank and a Purchasing Bank (and, in the case of a
Purchasing Bank that is not then a Bank or an affiliate thereof, by the Company
and the Agent) together with payment to the Agent of a registration and
processing fee of $2,500, the Agent shall (i) promptly accept such Commitment
Transfer Supplement (ii) on the Transfer Effective Date determined pursuant
thereto record the information contained therein in the Register and give notice
of such acceptance and recordation to the Banks and the Company.
(f) Subject to subsection 5.5(g), the Company authorizes each
Bank to disclose to any Participant or Purchasing Bank (each, a "Transferee")
and any prospective Transferee any and all financial information in such Bank's
possession concerning the Company which has been delivered to such Bank by the
Company pursuant to this Agreement or which has been delivered to such Bank by
the Company in connection with such Bank's credit evaluation of the Company
prior to entering into this Agreement.
(g) If, pursuant to this subsection 8.6, any interest in this
Agreement or any Note is transferred to any Transferee which is organized under
the laws of any jurisdiction other than the United States or any State thereof,
the transferor Bank shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Bank (for the
benefit of the transferor Bank, the Agent and the Company) that under applicable
law and treaties no taxes will be required to be withheld by the Agent, the
Company or the transferor Bank with respect to any payments to be made to such
Transferee in respect of the Loans, (ii) to furnish to the transferor Bank (and,
in the case of any Purchasing Bank registered in the Register, the Agent and the
Company) either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein such Transferee claims entitlement to complete
exemption from U.S. federal withholding tax on all interest payments hereunder)
and (iii) to agree (for the benefit of the transferor Bank, to provide the
transferor Bank (and, in the case of any Purchasing Bank registered in the
Register, the Agent and the Company) a new form 4224 or Form 1001 upon the
obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and amendments duly
executed and completed by such Transferee, and to comply from time to time with
all applicable U.S. laws and regulations with regard to such withholding tax
exemption.
(h) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection 8.6 concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including any pledge or
assignment by a Bank of any Loan or Note to any Federal Reserve Bank in
accordance with applicable law.
<PAGE> 49
45
8.7 Adjustments; Set-off. If any Bank (a "Benefitted Bank")
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by offset, pursuant to events or proceedings of the nature
referred to in subsection 6.1(f), or otherwise) in a greater proportion than any
such payment to and collateral received by any other Bank, if any, in respect of
such other Bank's Loans, or interest thereon, such Benefitted Bank shall
purchase for cash from the other Banks such portion of each such other Bank's
Loans, or shall provide such other Banks with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
Benefitted Bank to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Banks; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
Benefitted Bank, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Company agrees that each Bank so purchasing a portion of another Bank's Loan may
exercise all rights of a payment (including, without limitation, rights of
offset) with respect to such portion as fully as if such Bank were the direct
holder of such portion.
8.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Company and the Agent.
8.9 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
8.10 WAIVERS OF JURY TRIAL. THE COMPANY, THE AGENT AND THE
BANKS EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.11 Submission To Jurisdiction; Waivers. The Company hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement, or for recognition
and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New
York, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof; and
(ii) consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same.
<PAGE> 50
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COLUMBIA/HCA HEALTHCARE CORPORATION
By: /s/ David G. Anderson
----------------------------------------------
Name: David G. Anderson
Title: Vice President-Finance & Treasurer
THE CHASE MANHATTAN BANK, as Agent and as a Bank
By: /s/ Dawn Lee Lum
----------------------------------------------
Name: Dawn Lee Lum
Title: Vice President
<PAGE> 51
47
THE BANK OF NEW YORK
By: /s/ Ann Marie Hughes
------------------------------------------
Name: Ann Marie Hughes
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By:
------------------------------------------
Name:
Title:
DEN DANSKE BANK AKTIESELSKAB
By:
------------------------------------------
Name:
Title:
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Susan L. Pearson
------------------------------------------
Name: Susan L. Pearson
Title: Director
By: /s/ Stephan A. Wiedemann
------------------------------------------
Name: Stephan A. Wiedemann
Title: Director
FIRST AMERICAN NATIONAL BANK
By: /s/ Sandy Hamrick
------------------------------------------
Name: Sandy Hamrick
Title: Senior Vice President
<PAGE> 52
48
FIRST COMMERCIAL BANK
By:
------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ L. Richard Schiller
------------------------------------------
Name: L. Richard Schiller
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Maryann S. Smith
------------------------------------------
Name: Maryann S. Smith
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By: /s/ Koichi Hasegawa
------------------------------------------
Name: Koichi Hasegawa
Title: Senior Vice President and
Deputy General Manager
NATIONSBANK, N.A.
By: /s/ Kevin Wagley
------------------------------------------
Name: Kevin Wagley
Title: Vice President
<PAGE> 53
49
THE NORTHERN TRUST COMPANY
By: /s/ Stephen B. Bowman
------------------------------------------
Name: Stephen B. Bowman
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ W.J. Brown
------------------------------------------
Name: W.J. Brown
Title: Vice President
SOCIETE GENERALE
By: /s/ J. Staley Stewart
------------------------------------------
Name: J. Staley Stewart
Title: Director
THE SUMITOMO BANK, LIMITED
By:
------------------------------------------
Name:
Title:
SUNTRUST BANK, NASHVILLE, N.A.
By: /s/ Mark D. Mattson
------------------------------------------
Name: Mark D. Mattson
Title: Vice President
<PAGE> 54
50
TORONTO-DOMINION (TEXAS), INC.
By: /s/ Alva J. Jones
------------------------------------------
Name:
Title:
WACHOVIA BANK, N.A.
By: /s/ Kenneth Washington
------------------------------------------
Name: Kenneth Washington
Title: Vice President
<PAGE> 55
SCHEDULE I
Commitment Amounts and Percentages;
Lending Offices; Addresses for Notice
A. COMMITMENT AMOUNTS AND PERCENTAGES.
<TABLE>
<CAPTION>
TRANCHE 1 PERCENTAGE OF TRANCHE 2 PERCENTAGE OF
COMMITMENT TRANCHE 1 COMMITMENT TRANCHE 2
NAME OF BANK AMOUNT TOTAL AMOUNT TOTAL
------------ ------ ------ ------- ------
<S> <C> <C> <C> <C>
The Chase Manhattan Bank $ 92,500,000 18.5000% $ 92,500,000 12.2500%
NationsBank, N.A. 61,250,000 12.2500% 61,250,000 12.2500%
The Bank of New York 61,250,000 12.2500% 61,250,000 12.2500%
The Bank of Nova Scotia 61,250,000 12.2500% 61,250,000 12.2500%
Toronto-Dominion (Texas) Inc. 61,250,000 12.2500% 61,250,000 12.2500%
Deutsche Bank AG New York Branch 32,500,000 6.5000% 32,500,000 6.5000%
and/or Cayman Islands Branch
Fleet National Bank 32,500,000 6.5000% 32,500,000 6.5000%
SunTrust Bank, Nashville, N.A. 22,500,000 4.5000% 22,500,000 4.5000%
Wachovia Bank, N.A. 22,500,000 4.5000% 22,500,000 4.5000%
The First National Bank of Chicago 12,500,000 2.5000% 12,500,000 2.5000%
The Industrial Bank of Japan, Limited, 12,500,000 2.5000% 12,500,000 2.5000%
Atlanta Agency
The Northern Trust Company 12,500,000 2.5000% 12,500,000 2.5000%
Societe Generale 12,500,000 2.5000% 12,500,000 2.5000%
First American National Bank 2,500,000 0.5000% 2,500,000 2.5000%
TOTAL $500,000,000 100.0% $500,000,000 100.0%
- -----
</TABLE>
<PAGE> 56
B. LENDING OFFICES; ADDRESSES FOR NOTICE.
THE CHASE MANHATTAN BANK
Domestic Lending Office: The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Eurodollar Lending Office: The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Address for Notices: The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: Dawn Lee Lum
Telephone: (212) 270-2472
Telecopy: (212) 270-3279
With a copy to: Chase Agent Bank Services
1 Chase Manhattan Plaza
New York, NY 10081
Attention: Janet Belden
Telecopy: (212) 552-5658
NATIONSBANK, N.A.
Domestic Lending Office: Nationsbank (Charlotte)
414 Union Street, 7th Floor
Nashville, TN 37239-1697
Eurodollar Lending Office: Nationsbank (Charlotte)
414 Union Street, 7th Floor
Nashville, TN 37239-1697
Address for Notices: Nationsbank (Charlotte)
414 Union Street, 7th Floor
Nashville, TN 37239-1697
Attention: Kevin Wagley
Telephone: (615) 749-3802
Telecopy: (615) 749-4640
<PAGE> 57
THE BANK OF NEW YORK
Domestic Lending Office: Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
Eurodollar Lending Office: Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
Address for Notices: Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
Attention: Anne Marie Hughes
Telephone: (212) 635-1339
Telecopy: (212) 635-6434
THE BANK OF NOVA SCOTIA
Domestic Lending Office: Bank of Nova Scotia (Atlanta)
600 Peachtree Street N.E., Suite 2700
Atlanta, GA 30308
Eurodollar Lending Office: Bank of Nova Scotia (Atlanta)
600 Peachtree Street N.E., Suite 2700
Atlanta, GA 30308
Address for Notices: Bank of Nova Scotia (Atlanta)
600 Peachtree Street N.E., Suite 2700
Atlanta, GA 30308
Attention: Carolyn Calloway
Telephone: (404) 877-1507
Telecopy: (404) 888-8998
TORONTO-DOMINION (TEXAS), INC.
Domestic Lending Office: Toronto-Dominion (Texas), Inc.
909 Fannin Street, 17th Floor
Houston, TX 77010
Eurodollar Lending Office: Toronto-Dominion (Texas), Inc.
909 Fannin Street, 17th Floor
Houston, TX 77010
<PAGE> 58
Address for Notices: Toronto Dominion
Corporate Banking
31 West 52nd Street
New York, NY 10019-6101
Attention: Darlene Haut
Telephone: (212) 827-7746
Telecopy: (212) 262-1926
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
Domestic Lending Office: Deutsche Bank AG
31 West 52nd Street
New York, NY 10019
Eurodollar Lending Office: Deutsche Bank AG
31 West 52nd Street
New York, NY 10019
Address for Notices: Deutsche Bank AG
31 West 52nd Street
New York, NY 10019
Attention: Sue Pearson
Telephone: (212) 469-7140
Telecopy: (212) 469-8701
FLEET NATIONAL BANK
Domestic Lending Office: Fleet Bank (Boston-State Street)
1 Federal Street - MA0FD07B
Boston, MA 02110
Eurodollar Lending Office: Fleet Bank (Boston-State Street)
1 Federal Street - MA0FD07B
Boston, MA 02110
Address for Notices: Fleet Bank (Boston-State Street)
1 Federal Street - MA0FD07B
Boston, MA 02110
Attention: Mary Ann Smith
<PAGE> 59
Telephone: (617) 346-4613
Telecopy: (617) 346-4666
SUNTRUST BANK, NASHVILLE, N.A.
Domestic Lending Office: SunTrust Bank
201 4th Avenue North, 3rd Floor
Nashville, TN 37219
Eurodollar Lending Office: SunTrust Bank
201 4th Avenue North, 3rd Floor
Nashville, TN 37219
Address for Notices: SunTrust Bank
201 4th Avenue North, 3rd Floor
Nashville, TN 37219
Attention: Mark D. Mattson
Telephone: (615) 748-4831
Telecopy: (615) 748-5269
WACHOVIA BANK, N.A.
Domestic Lending Office: Wachovia Bank (Atlanta)
191 Peachtree Street N.E.,
Mail Code 3940
Atlanta, GA 30303
Eurodollar Lending Office: Wachovia Bank (Atlanta)
191 Peachtree Street N.E.,
Mail Code 3940
Atlanta, GA 30303
Address for Notices: Wachovia Bank (Atlanta)
191 Peachtree Street N.E.,
Mail Code 3940
Atlanta, GA 30303
Attention: Kenneth Washington
Telephone: (404) 332-1044
Telecopy: (404) 332-5016
THE FIRST NATIONAL BANK OF CHICAGO
Domestic Lending Office: First Chicago NBD Corp. (Chicago)
One First National Plaza, 8th Floor
Chicago, IL 60670
<PAGE> 60
Eurodollar Lending Office: First Chicago NBD Corp. (Chicago)
One First National Plaza, 8th Floor
Chicago, IL 60670
Address for Notices: First Chicago NBD Corp. (Chicago)
One First National Plaza, 8th Floor
Chicago, IL 60670
Attention: Richard Schiller
Telephone: (312) 732-5932
Telecopy: (312) 732-2016
THE INDUSTRIAL BANK OF JAPAN, LIMITED
ATLANTA AGENCY
Domestic Lending Office: Industrial Bank of Japan (Atlanta)
191 Peachtree Street N.E., Suite 3600
Atlanta, GA 30303-1757
Eurodollar Lending Office: Industrial Bank of Japan (Atlanta)
191 Peachtree Street N.E., Suite 3600
Atlanta, GA 30303-1757
Address for Notices: Industrial Bank of Japan (Atlanta)
191 Peachtree Street N.E., Suite 3600
Atlanta, GA 30303-1757
Attention: James Masters
Telephone: (404) 420-3327
Telecopy: (404) 524-8509
THE NORTHERN TRUST COMPANY
Domestic Lending Office: Northern Trust Company (Chicago)
50 South LaSalle Street - B-0
Chicago, IL 60675
Eurodollar Lending Office: Northern Trust Company (Chicago)
50 South LaSalle Street - B-0
Chicago, IL 60675
Address for Notices: Northern Trust Company (Chicago)
50 South LaSalle Street - B-0
Chicago, IL 60675
Attention: Stephen B. Bowman
<PAGE> 61
Telephone: (312) 444-7946
Telecopy: (312) 630-6082
SOCIETE GENERALE
Domestic Lending Office: SG Cowen (Los Angeles)
2029 Century Park East, Suite 2900
Los Angeles, CA 90067
Eurodollar Lending Office: SG Cowen (Los Angeles)
2029 Century Park East, Suite 2900
Los Angeles, CA 90067
Address for Notices: SG Cowen (Los Angeles)
2029 Century Park East, Suite 2900
Los Angeles, CA 90067
Attention: J. Staley Stewart
Telephone: (310) 788-7103
Telecopy: (310) 551-1537
FIRST AMERICAN NATIONAL BANK
Domestic Lending Office: First American National Bank
(Nashville)
First American Center, 2nd Floor
Nashville, TN 37237-0203
Eurodollar Lending Office: First American National Bank
(Nashville)
First American Center, 2nd Floor
Nashville, TN 37237-0203
Address for Notices: First American National Bank
(Nashville)
First American Center, 2nd Floor
Nashville, TN 37237-0203
Attention: Sandy Hamrick
Telephone: (615) 748-2191
Telecopy: (615) 748-8480
<PAGE> 62
SCHEDULE IV
Applicable Margins
<TABLE>
<CAPTION>
================================================================================
LOANS
- --------------------------------------------------------------------------------
ALTERNATE BASE RATE LOANS EURODOLLAR LOANS
- --------------------------------------------------------------------------------
<S> <C> <C>
LEVEL I PERIOD .7500% 1.750%
- --------------------------------------------------------------------------------
LEVEL II PERIOD 1.500% 2.500%
================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10(b)
EXECUTION COPY
FIRST AMENDMENT
FIRST AMENDMENT, dated as of March 30, 1999 (this
"Amendment"), to the Credit Agreement, dated as of July 10, 1998 (the "July 1998
Credit Agreement"), among COLUMBIA/HCA HEALTHCARE CORPORATION, a Delaware
corporation (the "Company"), the several banks and other financial institutions
from time to time parties hereto (the "Banks"), BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, THE BANK OF NEW YORK, THE FIRST NATIONAL BANK OF
CHICAGO, FLEET NATIONAL BANK, TORONTO DOMINION (TEXAS), INC. AND WACHOVIA BANK
OF GEORGIA, N.A. as Co-Agents (collectively, the "Co-Agents"), NATIONSBANK,
N.A., as documentation agent for the Banks hereunder (the "Documentation Agent")
and THE BANK OF NOVA SCOTIA and DEUTSCHE BANK SECURITIES INC., as co-syndication
agents for the Banks hereunder (the "Co-Syndication Agents"); and THE CHASE
MANHATTAN BANK, a New York banking corporation, as agent for the Banks hereunder
(in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend certain provisions
of the July 19998 Credit Agreement on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the July 1998 Credit Agreement shall be used as so defined.
2. Amendment to Section 1.1 of the July 1998 Credit Agreement.
Section 1.1 of the July 1998 Credit Agreement is hereby amended as follows:
(a) by inserting in such section the following new defined
terms in proper alphabetical order:
"'First Amendment': First Amendment dated March 30, 1999
to the Agreement."
"'LifePoint': LifePoint Hospitals, Inc., a Delaware
corporation to be formed."
"'Triad': Triad Hospitals, Inc., a Delaware corporation to
be formed."
(b) by deleting the defined term "Subsidiary" in its entirety
and inserting in lieu thereof the following new defined term in proper
alphabetical order:
"'Subsidiary': as to any Person, a corporation,
partnership or other entity of which shares of stock or
other ownership interests having ordinary voting power
(other than stock or such other ownership interests having
such power only
<PAGE> 2
2
by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time
owned, directly or indirectly through one or more
intermediaries, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the
Company.".
3. Amendment to Section 3.12 of the July 1998 Credit
Agreement. Section 3.12 of the July 1998 Credit Agreement is hereby amended by
deleting the following sentence:
"Neither the Company nor any Subsidiary nor any Control Group
Person maintains, contributes to or participates in any Plan
that is a "defined benefit plan" as defined in ERISA."
4. Amendment to Section 3.17 of the July 1998 Credit
Agreement. Section 3.17 of the July 1998 Credit Agreement is hereby amended by
inserting the following clause immediately following the words "September 30,
1999":
", except where the failure to do so could not reasonably be
expected to result in a material adverse change in the
business or assets or in the condition, financial or
otherwise, of the Company and its Subsidiaries on a
consolidated basis."
5. Amendment to Section 4.3 of the July 1998 Credit Agreement.
Section 4.3 of the July 1998 Credit Agreement is hereby amended by deleting such
section in its entirety and substituting in lieu thereof the following:
"4.3 Company Officers' Certificate. The representations and
warranties contained in Section 3 (as qualified by the
disclosures in (i) the Company's Annual Report on Form 10-K
for its fiscal year ended December 31, 1997, (ii) the
Company's Quarterly Reports on Form 10-Q for its fiscal
quarters ended March 31, 1998, June 30, 1998 and September 30,
1998, (iii) the Company's Reports on Form 8-K dated February
6, 1998, February 13, 1998, March 6, 1998, May 27, 1998, July
30, 1998, October 28, 1998, December 15, 1998 and February 24,
1999 and (iv) the Company's Annual Report on Form 10-K for its
fiscal year ended December 31, 1998, as filed with the
Securities and Exchange Commission, previously distributed to
the Agent and made available to the Banks) shall be true and
correct in all material respects on the Closing Date and on
and as of each Borrowing Date with the same force and effect
as though made on and as of such date; no Default shall have
occurred (except a Default which shall have been waived in
writing or which shall have been cured) and no Default shall
exist after giving effect to the Loan to be made; between
December 31, 1997 and such Borrowing Date, neither the
business nor assets, nor the condition, financial or
otherwise, of the Company and its Subsidiaries on a
consolidated basis shall have been adversely affected in any
material manner as a result of any fire, flood, explosion,
accident, drought, strike, lockout, riot, sabotage,
confiscation,
<PAGE> 3
3
condemnation, or any purchase of any property by Governmental
Authority, activities or armed forces, acts of God or the
public enemy, new or amended legislation, regulatory order,
judicial decision or any other event or development whether or
not related to those enumerated above (all subject to the
disclosures enumerated above); and the Agent shall have
received a certificate containing a representation to these
effects dated such Borrowing Date and signed by a Responsible
Officer.".
6. Amendment to Section 5.3 of the July 1998 Credit Agreement.
Section 5.3 of the July 1998 Credit Agreement is hereby amended by deleting such
section in its entirety and substituting in lieu thereof the following:
"5.3 Transactions with Affiliates. Neither the Company nor
any of its Subsidiaries will enter into any transactions,
including, without limitation, the purchase, sale or exchange
of property or the rendering of any service, with any of their
Affiliates (other than the Company and its Subsidiaries)
(excluding the tax-free spin-off distributions of the common
stock of Life Point and Triad to the shareholders of the
Company and the transitional services agreements to be entered
into with LifePoint and Triad in connection therewith) unless
such transaction is otherwise permitted under this Agreement,
is in the ordinary course of the Company's or such
Subsidiary's business and is upon fair and reasonable terms no
less favorable to the Company or such Subsidiary, as the case
may be, than it would obtain in an arm's-length transaction.".
7. Amendment to Section 5.5 of the July 1998 Credit Agreement.
Section 5.5 of the July 1998 Credit Agreement is hereby amended by deleting
subsection 5.5(d) in its entirety and substituting in lieu thereof the
following:
"(d) ERISA Reports. The Company will furnish the Agent with
copies of any request for waiver of the funding standards or
extension of the amortization periods required by Sections
303 and 304 of ERISA or Section 412 of the Code promptly
after any such request is submitted by the Company to the
Department of Labor or the Internal Revenue Service, as the
case may be. Promptly after a Reportable Event occurs, or
the Company or any of its Subsidiaries receives notice that
the PBGC or any Control Group Person has instituted or
intends to institute proceedings to terminate any pension or
other Plan that is a "defined benefit plan" as defined in
ERISA, or prior to the Plan administrator's terminating such
Plan pursuant to Section 4041 of ERISA, the Company will
notify the Agent and will furnish to the Agent a copy of any
notice of such Reportable Event which is required to be
filed with the PBGC, or any notice delivered by the PBGC
evidencing its institution of such proceedings or its intent
to institute such proceedings, or any notice to the PBGC
that a Plan is to be terminated, as the case may be. The
Company will promptly notify each Bank upon learning of the
occurrence of any of the following events with respect to
any Plan which is a Multiemployer Plan: a partial or
complete withdrawal from any Plan which may
<PAGE> 4
4
result in the incurrence by the Company or any of is
Subsidiaries of withdrawal liability in excess of $1,000,000
under Subtitle E of Title IV of ERISA, or of the termination,
insolvency or reorganization status of any Plan under such
Subtitle E which may result in liability to the Company or any
of its Subsidiaries in excess of $1,000,000. In the event of
such a withdrawal, upon the request of the Agent or any Bank,
the Company will promptly provide information with respect to
the scope and extent of such liability, to the best of the
Company's knowledge.
8. Amendment to Section 5.9 of the July 1998 Credit Agreement.
Section 5.9 of the July 1998 Credit Agreement is hereby amended by inserting the
following clause at the end of the paragraph immediately following the words
"United States":
"or causing the Company to change its name."
9. Amendment to Section 5.10 of the July 1998 Credit
Agreement. Section 5.10 of the July 1998 Credit Agreement is hereby amended by
deleting such section in its entirety and substituting in lieu thereof the
following:
"5.10 Sales of Assets. The Company and its Subsidiaries may
from time to time sell or otherwise dispose of all or any
part of their respective assets; provided, however, that in
any fiscal year, the Company and its Subsidiaries will not
(a) sell or dispose of (including, without limitation, any
disposition resulting from any merger or consolidation
involving a Subsidiary of the Company, and any Sale-and-
Leaseback Transaction), outside of the ordinary course of
business, to Persons other than the Company and its
Subsidiaries, assets constituting in the aggregate more than
12% of Consolidated Assets of the Company (calculated after
giving pro forma effect thereto as if the tax-free spin-off
distributions of the common stock of LifePoint and Triad to
the shareholders of the Company occurred on the first day of
the testing period thereof) and its Subsidiaries as at the
end of the immediately preceding fiscal year (excluding the
tax-free spin-off distributions of the common stock of
LifePoint and Triad to the shareholders of the Company) and
(b) exchange with any Persons other than the Company and its
Subsidiaries any asset or group of assets for another asset
or group of assets unless (i) such asset or group of assets
are exchanged for an asset or group of assets of a
substantially similar type or nature, (ii) on a pro forma
basis both before and after giving effect to such exchange,
no Default or Event of Default shall have occurred and be
continuing, (iii) the aggregate fair market value (as
determined in good faith by the Board of Directors of the
Company) of the asset or group of assets being transferred
by the Company or such Subsidiary and the asset or group of
assets being acquired by the Company or such Subsidiary are
substantially equal and (iv) the aggregate of (x) all assets
of the Company and its Subsidiaries sold pursuant to
subsection 5.10(a) (including, without limitation, any
disposition resulting from any merger or consolidation
involving a Subsidiary of the Company, and any Sale-
and-Leaseback Transaction) (excluding the tax-free spin-off
distributions of the common stock of LifePoint and Triad to
the shareholders
<PAGE> 5
5
of the Company) and (y) the aggregate fair market value (as
determined in good faith by the Board of Directors of the
Company) of all assets of the Company and its Subsidiaries
exchanged pursuant to this subsection 5.10(b) does not
exceed 20% of Consolidated Assets of the Company and its
Subsidiaries as at the end of the immediately preceding
fiscal year (calculated after giving pro forma effect
thereto as if the tax-free spin-off distributions of the
common stock of LifePoint and Triad to the shareholders of
the Company occurred on the first day of the testing period
thereof).".
10. Amendment to Section 5.11 of the July 1998 Credit
Agreement. Section 5.11 of the July 1998 Credit Agreement is hereby amended by
deleting such section in its entirety and substituting in lieu thereof the
following:
"5.11 Compliance with ERISA. Each of the Company and
its Subsidiaries will meet, and will cause all Control Group
Persons to meet, all minimum funding requirements applicable
to any Plan imposed by ERISA or the Code (without giving
effect to any waivers of such requirements or extensions of
the related amortization periods which may be granted), and
will at all times comply, and will cause all Control Group
Persons to comply, in all material respects with the
provisions of ERISA and the Code which are applicable to the
Plans. At no time shall the aggregate actual and contingent
liabilities of the Company under Sections 4062, 4063, 4064 and
other provisions of ERISA with respect to all Plans (and all
other pension plans to which the Company, any Subsidiary, or
any Control Group Person made contributions prior to such
time) exceed $7,500,000. Neither the Company nor its
Subsidiaries will permit any event or condition to exist which
could permit any Plan which is not a Multiemployer Plan to be
terminated under circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to the assets
of the Company or any of its Subsidiaries."
11. Amendment to Section 5.12 of the July 1998 Credit
Agreement. Section 5.12 of the July 1998 Credit Agreement is hereby amended by
deleting the paragraph immediately after clause (f) in its entirety and
substituting in lieu thereof the following:
"unless any Loans made and/or to be made to and all other sums
payable by the Company under this Agreement shall be secured
equally and ratably with (or prior to) such Indebtedness so
long as such Indebtedness shall be so secured. Notwithstanding
the foregoing, the Company and any one or more Subsidiaries
may, without securing the Loans made and/or to be made to and
all other sums payable by the Company under this Agreement,
create, issue or assume Indebtedness which would otherwise be
subject to the foregoing restrictions in an aggregate
principal amount which, together with all other such
Indebtedness of the Company and its Subsidiaries (not
including (i) Indebtedness permitted to be secured pursuant to
the foregoing clauses (a) through (f) and the aggregate
Attributable Debt or (ii) Indebtedness incurred by one or more
Subsidiaries of the
<PAGE> 6
6
Company and thereafter assumed by Life Point and/or Triad
(and/or their respective Subsidiaries) in connection with
the tax-free spin-off distributions of the common stock of
LifePoint and Triad to the shareholders of the Company),
including Indebtedness in respect of Sale-and-Lease-back
Transactions (other than those permitted by subsection
5.13(b)), does not exceed 10% of Consolidated Net Tangible
Assets of the Company and its Subsidiaries (calculated after
giving pro forma effect thereto as if the tax-free spin-off
distributions of the common stock of LifePoint and Triad to
the shareholders of the Company occurred on the first day of
the testing period thereof).".
12. Effective Date; Conditions Precedent. This Amendment will
become effective on March 30, 1999 (the "Effective Date") subject to the
compliance by the Company with its agreements herein contained and to the
satisfaction on or before the Effective Date of the following further
conditions:
(a) Loan Documents. The Agent shall have received copies
of this Amendment, executed and delivered by a duly authorized officer
of the Company, with a counterpart for each Bank, and executed and
delivered by the Required Banks.
(b) Company Officers' Certificate. The representations and
warranties contained in Section 3 of the July 1998 Credit Agreement
(as qualified by the disclosures in (i) the Company's Annual Report on
Form 10-K for its fiscal year ended December 31, 1997, (ii) the
Company's Quarterly Reports on Form 10-Q for its fiscal quarters ended
March 31, 1998, June 30, 1998, September 30, 1998 and (iii) the
Company's Reports on Form 8-K dated February 6, 1998, February 13,
1998, March 6, 1998, May 27, 1998, July 30, 1998, October 28, 1998,
December 15, 1998 and February 24, 1998 and (iv) the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1998, as
filed with the Securities and Exchange Commission, previously
distributed to the Agent and made available to the Banks) shall be
true and correct in all material respects on the Effective Date with
the same force and effect as though made on and as of such date; on
and as of the Effective Date and after giving effect to this
Amendment, no Default shall have occurred (except a Default which
shall have been waived in writing or which shall have been cured); and
the Agent shall have received a certificate containing a
representation to these effects dated the Effective Date and signed by
a Responsible Officer.
(c) Fifth Amendment to February 1997 Five-Year Agreement
and Amendment. The February 1997 Five-Year Agreement and Amendment
shall have been amended in a manner corresponding to the amendments
hereof.
13. Legal Obligation. The Company represents and warrants to
each Bank that this Amendment constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyances,
reorganization, moratorium and other similar laws relating
<PAGE> 7
7
to or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied covenant
of good faith and fair dealing.
14. Continuing Effect; Application. Except as expressly
amended hereby, the July 1998 Credit Agreement shall continue to be and shall
remain in full force and effect in accordance with its terms.
15. Expenses. The Company agrees to pay or reimburse the Agent
for all of its reasonable out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Amendment and any other documents
prepared in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Agent.
16. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
17. Counterparts. This Amendment may be executed by one or
more of the parties to this Amendment on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this Amendment signed by all the
parties shall be lodged with the Company and the Agent.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
COLUMBIA/HCA HEALTHCARE CORPORATION
By: /s/ David G. Anderson
-----------------------------------------
Name: David G. Anderson
Title: Vice President - Finance and
Treasurer
THE CHASE MANHATTAN BANK, as Agent and as a
Bank
By: /s/ Dawn Lee Lum
-----------------------------------------
Name: Dawn Lee Lum
Title: Vice President
ABN AMRO BANK N.V., as a Bank
By: /s/ Steven L. Hipsman
-----------------------------------------
Name: Steven L. Hipsman
Title: Vice President
By: /s/ Robert A. Budnek
-----------------------------------------
Name: Robert A. Budnek
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Co-Agent
By: /s/ Kevin Wagley
-----------------------------------------
Name: Kevin Wagley
Title: Vice President
<PAGE> 9
9
THE BANK OF NEW YORK, as Co-Agent
By: /s/ Ann Marie Hughes
-----------------------------------------
Name: Ann Marie Hughes
Title: Vice President
THE BANK OF NOVA SCOTIA, as Co-Syndication
Agent and as a Bank
By: /s/ W.J. Brown
-----------------------------------------
Name: W.J. Brown
Title: Vice President
DEUTSCHE BANK SECURITIES, INC., as
Co-Syndication Agent
By: /s/ Iain Stewart By: /s/ Steven N. Warden
-------------------------- -----------------------------------------
Name: Iain Stewart Name: Steven N. Warden
Title: Vice President Title: Managing Director
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH(ES), as a Bank
By: /s/ Stephan A. Wiedemann By: /s/ Susan L. Pearson
--------------------------- -----------------------------------------
Name: Stephan A. Wiedemann Name: Susan L. Pearson
Title: Director Title: Director
FIRST AMERICAN NATIONAL BANK, as a Bank
By: /s/ Sandy Hamrick
-----------------------------------------
Name: Sandy Hamrick
Title: Senior Vice President
<PAGE> 10
10
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Agent
By: /s/ L. Richard Schiller
-----------------------------------------
Name: L. Richard Schiller
Title: Vice President
FIRST UNION NATIONAL BANK, as a Bank
By: /s/ Joseph H. Tower
-----------------------------------------
Name:
Title:
FLEET NATIONAL BANK, as Co-Agent
By: /s/ Maryann S. Smith
-----------------------------------------
Name: Maryann Smith
Title: Vice President
KEYBANK NATIONAL ASSOCIATION, as a Bank
By: /s/ Thomas J. Purcell
-----------------------------------------
Name: Thomas J. Purcell
Title: Vice President
NATIONSBANK, N.A. as Documentation Agent
and as a Bank
By: /s/ Kevin Wagley
-----------------------------------------
Name: Kevin Wagley
Title: Vice President
<PAGE> 11
11
SUNTRUST BANK, NASHVILLE, N.A., as a Bank
By: /s/ Mark D. Mattson
-----------------------------------------
Name: Mark D. Mattson
Title: Vice President
TORONTO DOMINION (TEXAS), INC., as Co-Agent
By: /s/ Alva J. Jones
-----------------------------------------
Name: Alva J. Jones
Title: Vice President
UNION PLANTERS BANK OF MIDDLE TENNESSEE,
N.A., as a Bank
By: /s/ William A. Collier
-----------------------------------------
Name: William A. Collier
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A., as Co-Agent
By: /s/ Kenneth Washington
-----------------------------------------
Name: Kenneth Washington
Title: Vice President
<PAGE> 1
EXHIBIT 10(c)
EXECUTION COPY
FIFTH AMENDMENT
FIFTH AMENDMENT, dated as of March 30, 1999 (this "Fifth
Amendment"), to the Agreement and Amendment dated as of February 26, 1997, as
amended by the First Amendment, dated as of June 17, 1997, the Second Amendment,
dated as of February 3, 1998, the Third Amendment, dated as of March 26, 1998
and the Fourth Amendment, dated as of July 10, 1998 (as the same may be amended,
supplemented or modified from time to time, the "February 1997 Five-Year
Agreement and Amendment") among COLUMBIA/HCA HEALTHCARE CORPORATION, a Delaware
corporation (the "Company"), the several banks and other financial institutions
from time to time parties hereto (the "Banks"), BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION, THE BANK OF NEW YORK, DEUTSCHE BANK AG, FLEET NATIONAL
BANK, THE FUJI BANK LIMITED, THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA
AGENCY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, NATIONSBANK, N.A., PNC BANK
NATIONAL ASSOCIATION, TORONTO DOMINION (TEXAS), INC., UNION BANK OF SWITZERLAND,
NEW YORK BRANCH AND WACHOVIA BANK OF GEORGIA, N.A., as Co-Agents (collectively,
the "Co-Agents"), THE SAKURA BANK, LTD. NEW YORK BRANCH, THE SUMITOMO BANK
LIMITED, SUNTRUST BANK, NASHVILLE, N.A., WELLS FARGO BANK, N.A., as Lead
Managers (collectively, the "Lead Managers") and THE CHASE MANHATTAN BANK, a New
York banking corporation as Agent for the Banks hereunder ("Chase", and in such
capacity, the "Agent") and as CAF Loan Agent (in such capacity, the "CAF Loan
Agent").
W I T N E S S E T H :
WHEREAS, for the convenience of the parties to the agreement
and amendment dated as of February 28, 1996 (the "February 1996 Agreement and
Amendment"), among the Company, the several banks and other financial
institutions from time to time parties thereto and Chase, as agent for the Banks
hereunder and as CAF Loan Agent, a composite conformed copy (the "Five-Year
Composite Conformed Credit Agreement") of the Credit Agreement, dated as of
February 10, 1994 as incorporated by reference into and amended by the September
1994 Agreement and Amendment, the February 1995 Agreement and Amendment and the
February 1996 Agreement and Amendment was prepared and delivered to such
parties;
WHEREAS, the February 1997 Five-Year Agreement and Amendment
adopts and incorporates by reference all of the terms and provisions of the
Five-Year Composite Conformed Credit Agreement, subject to the amendment thereto
provided for in the February 1997 Five-Year Agreement and Amendment;
WHEREAS, the parties hereto wish to amend certain provisions
of the February 1997 Five-Year Agreement and Amendment on the terms set forth
herein;
<PAGE> 2
2
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the February 1997 Five-Year Agreement and Amendment shall be used as so
defined.
2. Amendments to the February 1997 Five-Year Agreement and
Amendment in respect of the Letter of Credit Facility. (a) Section 3 of the
February 1997 Five-Year Agreement and Amendment is hereby amended as follows:
(1) by inserting in such section the following new defined terms in
proper alphabetical order:
"`Aggregate Outstanding Extensions of Credit`: as to any Bank
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Loans made by such Bank then outstanding and (b) such
Bank's Commitment Percentage of the L/C Obligations then outstanding.";
"`Application`: an application, in such form as the Issuing
Bank may specify from time to time, requesting the Issuing Bank to open
a Letter of Credit.";
"`Issuing Bank`: Chase or any of its Affiliates in their
capacity as issuer of any Letter of Credit.";
"`L/C Commitment`: $1,250,000,000.";
"`L/C Fee Payment Date`: the last day of each March, and June,
September and December.";
"`L/C Obligations`: at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
subsection 2A.5(a).";
"`L/C Participants`: the collective reference to all the Banks
other than the Issuing Bank.";
"`Letters of Credit`: as defined in paragraph 2A.1(a).";
"`Reimbursement Obligation`: the obligation of the Company to
reimburse the Issuing Bank pursuant to subsection 2A.5(a) for amounts
drawn under Letters of Credit.";
"`Uniform Customs`: the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.";
<PAGE> 3
3
(2) by deleting the defined terms "Available Commitment", "Borrowing
Date", "Commitment" and "Loan Documents" in their entirety and
substituting in lieu thereof the following new defined terms in proper
alphabetical order:
"`Available Commitment`: as to any Bank, at any time, an
amount equal to the excess, if any, of (a) such Bank's Commitment over
(b) such Bank's Aggregate Outstanding Extensions of Credit.";
"`Borrowing Date`: any Business Day specified in a notice
pursuant to subsection 2.1(c), 2.2(b) or 2A.2 as a date on which the
Company requests the Banks to make Revolving Credit Loans or CAF Loans
or issue Letters of Credit, as the case may be, hereunder.";
"`Commitment`: as to any Bank, the obligation of such Bank to
make Loans to and/or issue or participate in Letters of Credit issued
on behalf of the Company hereunder in an aggregate principal and/or
face amount at any one time outstanding not to exceed the amount set
forth opposite such Bank's name on Schedule I.";
"`Loan Documents`: this Agreement, the Notes and the
Applications.".
(b) The February 1997 Five-Year Agreement and Amendment is hereby
amended by adding the following new Sections after Section 5A reading as
follows:
(1) "SECTION 5B. Letter of Credit Facility. The Five-Year Composite
Conformed Credit Agreement as adopted and incorporated by reference
into this February 1997 Five-Year Agreement and Amendment is hereby
amended by adding the following new Section 2A immediately prior to
Section 3 as follows:
`SECTION 2A. LETTERS OF CREDIT
2A.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Bank, in reliance on the agreements of the other
Banks set forth in subsection 2A.4(a), agrees to issue letters of
credit (such letters of credit, "Letters of Credit") for the account of
the Company on any Business Day during the Commitment Period in such
form as may be approved from time to time by the Issuing Bank; provided
that the Issuing Bank shall have no obligation to issue any Letter of
Credit if, after giving effect to such issuance, (1) the L/C
Obligations would exceed the L/C Commitment or (2) the aggregate amount
of the Available Commitments would be less than zero.
(b) Each Letter of Credit shall expire no later than the
earlier of (x) the first anniversary of its date of issuance (it being
agreed that a provision in a Letter of Credit for automatic renewal of
such Letter of Credit for a period of no more than one year at a time
in the absence of a termination notice shall not be deemed to be an
expiry date of later than the date such termination notice would be
effective) and (y) the date that is five Business Days prior to the
Termination Date, provided that any Letter of Credit with a
<PAGE> 4
4
one-year term may provide for the renewal thereof for additional
one-year periods (which shall in no event extend beyond the date
referred to in clause (y) above).
(c) The Issuing Bank shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict
with, or cause the Issuing Bank or any L/C Participant to exceed any
limits imposed by, any applicable Requirement of Law.
2A.2 Procedure for Issuance of Letters of Credit. The Company
may from time to time request that the Issuing Bank issue a Letter of
Credit by delivering to the Issuing Bank at its address for notices
specified herein an Application therefor, completed to the satisfaction
of the Issuing Bank, and such other certificates, documents and other
papers and information as the Issuing Bank may request. Upon receipt of
any Application, the Issuing Bank will process such Application and the
certificates, documents and other papers and information delivered to
it in connection therewith in accordance with its customary procedures
and shall promptly issue the Letter of Credit requested thereby (but in
no event shall the Issuing Bank be required to issue any Letter of
Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and
other papers and information relating thereto) by issuing the original
of such Letter of Credit to the beneficiary thereof or as otherwise may
be agreed by the Issuing Bank and the Company. The Issuing Bank shall
furnish a copy of such Letter of Credit to the Company promptly
following the issuance thereof.
2A.3 Fees and Other Charges. (a) The Company will pay a fee on
all outstanding Letters of Credit at a per annum rate equal to the
Applicable Margin then in effect with respect to Eurodollar Loans,
shared ratably among the Banks and payable quarterly in arrears on each
L/C Fee Payment Date after the date of issuance of each Letter of
Credit. In addition, the Company shall pay to the Agent, for the
account of the Issuing Bank, a fronting fee with respect to each Letter
of Credit in an amount equal to 0.125% of the face amount of such
Letter of Credit. Such fronting fee shall be payable quarterly in
arrears and shall be nonrefundable.
(b) In addition to the foregoing fees, the Company shall pay
or reimburse the Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by the Issuing Bank in issuing,
effecting payment under, amending or otherwise administering any Letter
of Credit.
(c) The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the L/C Participants all fees
received by the Agent for their respective accounts pursuant to this
subsection.
2A.4 L/C Participations. (a) The Issuing Bank irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to
induce the Issuing Bank to issue Letters of Credit hereunder, each L/C
Participant irrevocably agrees to accept and purchase and hereby
accepts and purchases from the Issuing Bank, on the terms and
conditions hereinafter stated, for such L/C Participant's own account
and risk an undivided interest
<PAGE> 5
5
equal to such L/C Participant's Commitment Percentage in the Issuing
Bank's obligations and rights under each Letter of Credit issued
hereunder and the amount of each draft paid by the Issuing Bank
thereunder. Each L/C Participant unconditionally and irrevocably agrees
with the Issuing Bank that, if a draft is paid under any Letter of
Credit for which the Issuing Bank is not reimbursed in full by the
Company in accordance with the terms of this Agreement, such L/C
Participant shall pay to the Issuing Bank upon demand at the Issuing
Bank's address specified herein an amount equal to such L/C
Participant's Commitment Percentage of the amount of such draft, or any
part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Bank pursuant to paragraph 2A.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Bank under any
Letter of Credit is paid to the Issuing Bank within three Business Days
after the date such payment is due, such L/C Participant shall pay to
the Issuing Bank on demand an amount equal to the product of (1) such
amount, times (2) the daily average Federal funds rate, as quoted by
the Issuing Bank, during the period from and including the date such
payment is required to the date on which such payment is immediately
available to the Issuing Bank, times (3) a fraction the numerator of
which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by
any L/C Participant pursuant to paragraph 2A.4(a) is not in fact made
available to the Issuing Bank by such L/C Participant within three
Business Days after the date such payment is due, the Issuing Bank
shall be entitled to recover from such L/C Participant, on demand, such
amount with interest thereon calculated from such due date at the rate
per annum applicable to Alternate Base Rate Loans hereunder. A
certificate of the Issuing Bank submitted to any L/C Participant with
respect to any amounts owing under this subsection shall be conclusive
in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made
payment under any Letter of Credit and has received from any L/C
Participant its pro rata share of such payment in accordance with
subsection 2A.4(a), the Issuing Bank receives any payment related to
such Letter of Credit (whether directly from the Company or otherwise,
including proceeds of collateral applied thereto by the Issuing Bank),
or any payment of interest on account thereof, the Issuing Bank will
distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by
the Issuing Bank shall be required to be returned by the Issuing Bank,
such L/C Participant shall return to the Issuing Bank the portion
thereof previously distributed by the Issuing Bank to it.
2A.5 Reimbursement Obligation of the Company. (a) The Company
agrees to reimburse the Issuing Bank on each date on which the Issuing
Bank notifies the Company of the date and amount of a draft presented
under any Letter of Credit and paid by the Issuing Bank for the amount
of (1) such draft so paid and (2) any taxes, fees, charges or other
costs or expenses incurred by the Issuing Bank in connection with such
payment. Each such payment shall be made to the Issuing Bank at its
address for notices specified
<PAGE> 6
6
herein in lawful money of the United States of America and in
immediately available funds.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Company under this subsection from the date such amounts
become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate set forth in (i) until the
second Business Day following the date of the applicable drawing,
subsection 2.7(b) and (ii) thereafter, subsection 2.7(c).
2A.6 Obligations Absolute. (a) The Company's obligations under
this Section 2A shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense
to payment which the Company may have or have had against the Issuing
Bank or any beneficiary of a Letter of Credit.
(b) The Company also agrees with the Issuing Bank that the
Issuing Bank shall not be responsible for, and the Company's
Reimbursement Obligations under subsection 2A.5(a) shall not be
affected by, among other things, (1) the validity or genuineness of
documents or of any endorsements thereon, even though such documents
shall in fact prove to be invalid, fraudulent or forged, or (2) any
dispute between or among the Company and any beneficiary of any Letter
of Credit or any other party to which such Letter of Credit may be
transferred or (3) any claims whatsoever of the Company against any
beneficiary of such Letter of Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions caused by the Issuing
Bank's gross negligence or willful misconduct.
(d) The Company agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence
of willful misconduct and in accordance with the standards of care
specified in the Uniform Commercial Code of the State of New York,
shall be binding on the Company and shall not result in any liability
of the Issuing Bank to the Company.
2A.7 Letter of Credit Payments. If any draft shall be
presented for payment under any Letter of Credit, the Issuing Bank
shall promptly notify the Company of the date and amount thereof. The
responsibility of the Issuing Bank to the Company in connection with
any draft presented for payment under any Letter of Credit shall, in
addition to any payment obligation expressly provided for in such
Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of
Credit.
<PAGE> 7
7
2A.8 Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the
provisions of this Section 2A, the provisions of this Section 2A shall
apply.`".
(2) "SECTION 5C. Paragraph (a) of subsection 2.1 of the Five-Year
Composite Conformed Credit Agreement as adopted and incorporated by
reference into this February 1997 Five-Year Agreement and Amendment is
hereby amended by deleting the first sentence of such paragraph (a) and
substituting in lieu thereof the following:
`Subject to the terms and conditions hereof, each
Bank severally agrees to make loans ("Revolving Credit Loans")
to the Company from time to time during the Commitment Period
in an aggregate principal amount at any one time outstanding
which, when added to such Bank's Commitment Percentage of the
then outstanding L/C Obligations, does not exceed the amount
of such Bank's Commitment.`".
(3) "SECTION 5D. Paragraph (a) of subsection 2.4 of the Five-Year
Composite Conformed Credit Agreement as adopted and incorporated by
reference into this February 1997 Five-Year Agreement and Amendment is
hereby amended by deleting the proviso at the end of the first sentence
of such paragraph (a) and substituting in lieu thereof the following:
`provided that no such termination or reduction shall be
permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans made on the
effective date thereof, the aggregate principal amount of the
Revolving Credit Loans then outstanding, when added to the
then outstanding L/C Obligations, would exceed the Commitments
then in effect.`".
(4) "SECTION 5E. Clause (i) of paragraph (a) of subsection 2.12 of the
Five-Year Composite Conformed Credit Agreement as adopted and
incorporated by reference into this February 1997 Five-Year Agreement
and Amendment is hereby amended by deleting such clause (i) of such
paragraph and substituting in lieu thereof the following:
`(i) shall subject any Bank to any tax of any kind
whatsoever with respect to this Agreement, any Note, any
Letter of Credit, any Application or any Eurodollar Loan made
by it, or change the basis of taxation of payments to such
Bank in respect thereof (except for taxes covered by
subsection 2.14 and changes in the rate of tax on the overall
net income of such Bank);`".
(5) "SECTION 5F. Paragraph (a) of subsection 2.12 of the Five-Year
Composite Conformed Credit Agreement as adopted and incorporated by
reference into this February 1997 Five-Year Agreement and Amendment is
hereby amended by deleting the end of the first sentence of such
paragraph (a) and substituting in lieu thereof the following:
<PAGE> 8
8
`and the result of any of the foregoing is to increase the
cost to such Bank, by an amount which such Bank deems to be
material, of making, converting into, continuing or
maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder
in respect thereof then, in any such case, the Company shall
promptly pay such Bank, upon its demand, any additional
amounts necessary to compensate such Bank for such increased
cost or reduced amount receivable.`".
(6) "SECTION 5G. Subsection 2.13 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into this
February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting the first sentence of such subsection 2.13 and substituting in
lieu thereof the following:
`In the event that any Bank shall have determined that any
change in any Requirement of Law regarding capital adequacy or
in the interpretation or application thereof or compliance by
such Bank or any corporation controlling such Bank with any
request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority
made subsequent to the date hereof does or shall have the
effect of reducing the rate of return on such Bank's or such
corporation's capital as a consequence of its obligations
hereunder or under any Letter of Credit to a level below that
which such Bank or such corporation could have achieved but
for such change or compliance (taking into consideration such
Bank's or such corporation's policies with respect to capital
adequacy) by an amount deemed by such Bank to be material,
then from time to time, after submission by such Bank, through
the Agent, to the Company of a written request therefore (such
request shall include details reasonably sufficient to
establish the basis for such amounts payable and shall be
submitted to the Company within 30 Business Days after it
becomes aware of such fact), the Company shall pay to such
Bank such additional amount or amounts as will compensate such
Bank for such reduction.`".
(7) "SECTION 5H. Subsection 3.1 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into this
February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting the second sentence of such subsection 3.1 and substituting in
lieu thereof the following:
`The Company has all necessary corporate power and has taken
all corporate action required to make all the provisions of
this Agreement, the Notes, the Applications and all other
agreements and instruments executed in connection herewith and
therewith, the valid and enforceable obligations they purport
to be`".
(8) "SECTION 5I. Subsection 3.9 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into this
February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting such subsection 3.9 in its entirety and substituting in lieu
thereof the following:
<PAGE> 9
9
`3.9 No Legal Obstacle to Agreement. Neither the
execution and delivery of this Agreement, the Applications or
any Notes, nor the making by the Company of any borrowings
hereunder, nor the consummation of any transaction herein or
therein referred to or contemplated hereby or thereby nor the
fulfillment of the terms hereof or thereof or of any agreement
or instrument referred to in this Agreement, has constituted
or resulted in or will constitute or result in a breach of the
provisions of any contract to which the Company or any of its
Subsidiaries is a party or by which it is bound or of the
charter or by-laws of the Company, or the violation of any
law, judgment, decree or governmental order, rule or
regulation applicable to the Company or any of its
Subsidiaries, or result in the creation under any agreement or
instrument of any security interest, lien, charge or
encumbrance upon any of the assets of the Company or any of
its Subsidiaries. Other than those which have already been
obtained, no approval, authorization or other action by any
governmental authority or any other Person is required to be
obtained by the Company or any of its Subsidiaries in
connection with the execution, delivery and performance of
this Agreement, the Applications or the transactions
contemplated hereby, or the making of any borrowing by the
Company hereunder.`".
(9) "SECTION 5J. Section 4 of the Five-Year Composite Conformed Credit
Agreement as adopted and incorporated by reference into this February
1997 Five-Year Agreement and Amendment is hereby amended by deleting
the lead-in sentence of such Section 4 and substituting in lieu thereof
the following:
`The obligations of each Bank to make the extensions
of credit requested to be made by it shall be subject to the
compliance by the Company with its agreements herein contained
and to the satisfaction, immediately prior to or concurrently
with the making of such extensions of credit on the Closing
Date and each Borrowing Date of such of the following further
conditions as are applicable on the Closing Date or the
Borrowing Date, as the case may be:`".
(10) "Section 5K. Section 4.5 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into this
February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting such subsection 4.5 in its entirety and substituting in lieu
thereof the following:
4.5 Legality, etc. The making of any extension of
credit to be made by such Bank on each Borrowing Date shall
not subject such Bank to any penalty or special tax, shall not
be prohibited by any Requirement of Law applicable to such
Bank or the Company, and all necessary consents, approvals and
authorizations of any Governmental Authority or any Person to
or of any such extension of credit shall have been obtained
and shall be in full force and effect.`"
(11) "SECTION 5L. Section 5 of the Five-Year Composite Conformed Credit
Agreement as adopted and incorporated by reference into this February
1997 Five-Year
<PAGE> 10
10
Agreement and Amendment is hereby amended by deleting the lead-in
sentence of such Section 5 and substituting in lieu thereof the
following:
`On and after the date hereof, until all of the
Notes, any Letter of Credit and all other amounts payable
pursuant hereto shall have been paid in full and so long as
the Commitments shall remain in effect, the Company covenants
that the Company will comply, and will cause each of its
Subsidiaries to comply, with such of the provisions of this
Section 5 and such other provisions of this Agreement as are
applicable to the Person in question.`".
(12) "SECTION 5M. Paragraph (a) of subsection 6.1 of the Five-Year
Composite Conformed Credit Agreement as adopted and incorporated by
reference into this February 1997 Five-Year Agreement and Amendment is
hereby amended by deleting such paragraph (a) and substituting in lieu
thereof the following:
`(a) any default shall be made by the Company in any
payment in respect of: (i) interest on any of the Notes, on
any Reimbursement Obligation or any facility fee payable
hereunder as the same shall become due and such default shall
continue for a period of five days; or (ii) principal of any
of the Indebtedness evidenced by the Notes or any
Reimbursement Obligation as the same shall become due, whether
at maturity, by prepayment, by acceleration or otherwise;
or`".
(13) "SECTION 5N. The acceleration clause immediately following
paragraph (g) of subsection 6.1 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into this
February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting such acceleration clause in its entirety and substituting in
lieu thereof the following:
`then and in each and every such case, (x) the Agent may, with
the consent of the Required Banks, or shall, at the direction
of the Required Banks, proceed to protect and enforce the
rights of the Banks by suit in equity, action at law and/or
other appropriate proceeding either for specific performance
of any covenant or condition contained in this Agreement, any
Letter of Credit or any Note or in any instrument delivered to
each Bank pursuant to this Agreement, or in aid of the
exercise of any power granted in this Agreement, any Letter of
Credit or any Note or any such instrument or assignment, and
(y) the Agent may, with the consent of the Required Banks, or
shall, at the direction of the Required Banks, by notice in
writing to the Company terminate the obligations of the Banks
to make further extensions of credit hereunder, and thereupon
such obligations shall terminate forthwith and (z) (unless
there shall have occurred an Event of Default under subsection
6.1(f), in which case the obligations of the Banks to make
further extensions of credit hereunder shall automatically
terminate and the unpaid balance of the Notes and accrued
interest thereon and all other amounts payable hereunder
(including, without limitation, all amounts of L/C
Obligations, whether
<PAGE> 11
11
or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder
(collectively, the "Bank Obligations") shall automatically
become due and payable) the Agent may, with the consent of the
Required Banks, or shall, at the direction of the Required
Banks, by notice in writing to the Company declare all or any
part of the unpaid balance of the Bank Obligations then
outstanding to be forthwith due and payable, and thereupon
such unpaid balance or part thereof shall become so due and
payable without presentment, protest or further demand or
notice of any kind, all of which are hereby expressly waived,
the obligations of the Banks to make further extensions of
credit hereunder shall terminate forthwith, and the Agent may,
with the consent of the Required Banks, or shall, at the
direction of the Required Banks, proceed to enforce payment of
such balance or part thereof in such manner as the Agent may
elect, and each Bank may offset and apply toward the payment
of such balance or part thereof, and to the curing of any such
Event of Default, any Indebtedness from such Bank to the
Company, including any Indebtedness represented by deposits in
any general or special account maintained with such Bank.
With respect to all Letters of Credit with respect to
which presentment for honor shall not have occurred at the
time of an acceleration pursuant to the preceding paragraph,
the Company shall at such time deposit in a cash collateral
account opened by the Agent an amount equal to the aggregate
then undrawn and unexpired amount of such Letters of Credit.
The Company hereby grants to the Agent, for the benefit of the
Issuing Bank and the L/C Participants, a security interest in
such cash collateral to secure all obligations of the Company
under this Agreement and the other Loan Documents. Amounts
held in such cash collateral account shall be applied by the
Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters
of Credit shall have been expired or been fully drawn upon, if
any, shall be applied to repay other obligations of the
Company hereunder and under the Notes. After all such Letters
of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all
other obligations of the Company hereunder and under the Notes
shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Company. The
Company shall execute and deliver to the Agent, for the
account of the Issuing Bank and the L/C Participants, such
further documents and instruments as the Agent may request to
evidence the creation and perfection of the within security
interest in such cash collateral account`".
(14) "SECTION 5O. Subsection 7.8 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into this
February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting the second sentence of such subsection 7.8 and substituting in
lieu thereof the following:
<PAGE> 12
12
`With respect to its Loans made or renewed by it and any Note
issued to it and with respect to any Letter of Credit issued
or participated in by it, the Agent and the CAF Agent shall
have the same rights and powers under this Agreement and the
other Loan Documents as any Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks"
shall include the Agent in its individual capacity.`".
(15) "SECTION 5P. Subsection 8.7 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into this
February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting such subsection 8.7 in its entirety and substituting in lieu
thereof the following:
`8.7 Adjustments; Set-off. (a) If any Bank (a
"benefitted Bank") at any time shall receive any payment of
all or part of its Loans or its interests in the Reimbursement
Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings
of the nature referred to in subsection 6.1(f), for
otherwise), in a greater proportion than any such payment to
or collateral received by any other Bank, if any, in respect
of such other Bank's Loans or its interests in the
Reimbursement Obligations owing to it, or interest thereon,
such benefitted Bank shall purchase for cash from the other
Banks such portion of each such other Bank's Loan or its
interests in the Reimbursement Obligations owing to it, or
shall provide such other Banks with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to
cause such benefitted Bank to share the excess payment or
benefits of such collateral or proceeds ratably with each of
the Banks; provided, however, that if all or any portion of
such excess payment or benefits is thereafter recovered from
such Benefitted Bank, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of
such recovery, but without interest. The Company agrees that
each Bank so purchasing a portion of another Bank's Loan may
exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if
such Bank were the direct holder of such portion.`".
3. Other Amendments to the February 1997 Agreement and
Amendment. (a) Section 3 of the February 1997 Five-Year Agreement and Amendment
is hereby amended as follows:
(1) by inserting in such section the following new defined
terms in proper alphabetical order:
"`Fifth Amendment`: Fifth Amendment dated March 30,
1999 to the Five-Year Agreement and Amendment."
"`Fifth Amendment Date`: March 30, 1999."
<PAGE> 13
13
"`LifePoint`: LifePoint Hospitals, Inc., Delaware
corporation to be formed."
"`Triad`: Triad Hospitals, Inc., a Delaware
corporation to be formed."
(2) by deleting the defined term "Subsidiary" in its entirety
and inserting in lieu thereof the following new defined term in proper
alphabetical order:
"`Subsidiary`: as to any Person, a corporation,
partnership or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time
owned, directly or indirectly through one or more
intermediaries, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the
Company."
(b) Section 6B of the February 1997 Five-Year Agreement and
Amendment is hereby amended by adding the following new paragraphs after Section
6B as follows:
"SECTION 6C. Pension Plans. The Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference to this
February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting subsection 3.12 in its entirety and substituting in lieu
thereof the following:
`3.12. Pension Plans. Each Plan maintained by the Company, any
Subsidiary or any Control Group Person or to which any of them
makes or will make contributions is in material compliance
with the applicable provisions of ERISA and the Code. Neither
the Company, any Subsidiary, nor any Control Group Person has
since August 31, 1986 maintained, contributed to or
participated in any Multiemployer Plan, with respect to which
a complete withdrawal would result in any withdrawal
liability. The Company and its Subsidiaries have met all of
the funding standards applicable to all Plans that are not
Multiemployer Plans, and there exists no event or condition
which would permit the institution of proceedings to terminate
any Plan that is not a Multiemployer Plan. The current value
of the benefits guaranteed under Title IV of ERISA of each
Plan that is not a Multiemployer Plan does not exceed the
current value of such Plan's assets allocable to such
benefits.`"
"SECTION 6D. Year 2000 Matters. The Five-Year Composite
Conformed Credit Agreement as adopted and incorporated by reference to
this February 1997 Five-
<PAGE> 14
14
Year Agreement and Amendment is hereby amended by adding the following
new subsection immediately following subsection 3.16 therein as
follows:
`3.17 Year 2000 Matters. As of the Fifth Amendment Date, any
reprogramming required to permit the proper functioning (but
only to the extent that such proper functioning would
otherwise be materially impaired by the occurrence of the year
2000) in the year 2000 of computer systems and other equipment
containing embedded microchips, in either case owned or
operated by the Company or any of its Subsidiaries or used or
relied upon in the conduct of their business (including any
such systems and other equipment supplied by others or with
which the computer systems of the Company or any of its
Subsidiaries interface), and the testing of all material
systems and other equipment as so reprogrammed, will be
completed by September 30, 1999, except where the failure to
do so could not reasonably be expected to result in a material
adverse change in the business or assets or in the condition,
financial or otherwise, of the Company and its Subsidiaries on
a consolidated basis. As of the Fifth Amendment Date, the
costs to the Company and its Subsidiaries that have not been
incurred as of the date hereof for such reprogramming and
testing and for the other reasonably foreseeable consequences
to them of any improper functioning of other computer systems
and equipment containing embedded microchips due to the
occurrence of the year 2000 could not reasonably be expected
to result in a Default or Event of Default or to have a
material adverse change in the business or assets or in the
condition, financial or otherwise, of the Company and its
Subsidiaries on a consolidated basis.`".
(c) Section 8I of the February 1997 Five-Year Agreement and
Amendment is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
"SECTION 8I. Sales of Assets. Subsection 5.10 of the Five-Year
Composite Conformed Credit Agreement as adopted and incorporated by
reference into this February 1997 Five-Year Agreement and Amendment is
hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
`5.10 Sales of Assets. The Company and its
Subsidiaries may from time to time sell or otherwise dispose
of all or any part of their respective assets; provided,
however, that in any fiscal year, the Company and its
Subsidiaries will not (a) sell or dispose of (including,
without limitation, any disposition resulting from any merger
or consolidation involving a Subsidiary of the Company, and
any Sale-and-Leaseback Transaction), outside of the ordinary
course of business, to Persons other than the Company and its
Subsidiaries, assets constituting in the aggregate more than
12% of Consolidated Assets of the Company (calculated after
giving pro forma effect thereto as if the tax-free spin-off
distributions of the common stock of LifePoint and Triad to
the shareholders of the Company occurred on the first day of
the testing period thereof) and its Subsidiaries as at the
<PAGE> 15
15
end of the immediately preceding fiscal year (excluding the
tax-free spin-off distributions of the common stock of
LifePoint and Triad to the shareholders of the Company) and
(b) exchange with any Persons other than the Company and its
Subsidiaries any asset or group of assets for another asset or
group of assets unless (i) such asset or group of assets are
exchanged for an asset or group of assets of a substantially
similar type or nature, (ii) on a pro forma basis both before
and after giving effect to such exchange, no Default or Event
of Default shall have occurred and be continuing, (iii) the
aggregate fair market value (as determined in good faith by
the Board of Directors of the Company) of the asset or group
of assets being transferred by the Company or such Subsidiary
and the asset or group of assets being acquired by the Company
or such Subsidiary are substantially equal and (iv) the
aggregate of (x) all assets of the Company and its
Subsidiaries sold pursuant to subsection 5.10(a) (including,
without limitation, any disposition resulting from any merger
or consolidation involving a Subsidiary of the Company, and
any Sale-and-Leaseback Transaction) (excluding the tax-free
spin-off distributions of the common stock of LifePoint and
Triad to the shareholders of the Company) and (y) the
aggregate fair market value (as determined in good faith by
the Board of Directors of the Company) of all assets of the
Company and its Subsidiaries exchanged pursuant to this
subsection 5.10(b) does not exceed 20% of Consolidated Assets
of the Company and its Subsidiaries as at the end of the
immediately preceding fiscal year (calculated after giving pro
forma effect thereto as if the tax-free spin-off distributions
of the common stock of LifePoint and Triad to the shareholders
of the Company occurred on the first day of the testing period
thereof).`".
(d) Section 8K of the February 1997 Five-Year Agreement and
Amendment is hereby amended by deleting such section in its entirety and
substituting in lieu thereof the following:
"SECTION 8K. Company Officers' Certificate. Subsection 4.3 of
the Five-Year Composite Conformed Credit Agreement as adopted and
incorporated by reference into this February 1997 Five-Year Agreement
and Amendment is hereby amended by deleting such subsection in its
entirety and substituting in lieu thereof the following:
`4.3 Company Officers' Certificate. The representations and
warranties contained in Section 3 (as qualified by the
disclosures in (i) the Company's Annual Report on Form 10-K
for its fiscal year ended December 31, 1997, (ii) the
Company's Quarterly Reports on Form 10-Q for its fiscal
quarters ended March 31, 1998, June 30, 1998 and September 30,
1998, (iii) the Company's Reports on Form 8-K dated February
6, 1998, February 13, 1998, March 6, 1998, May 27, 1998, July
30, 1998, October 28, 1998, December 15, 1998 and February 24,
1999 and (iv) the Company's Annual Report on Form 10-K for its
fiscal year ended December 31, 1998, as filed with the
Securities and Exchange Commission, previously distributed to
the Agent and made available to the Banks) shall be true and
correct in all material respects on the Closing Date and on
and as of each Borrowing Date with the same force and effect
as though made on and as
<PAGE> 16
16
of each Borrowing Date with the same force and effect as
though made on and as of such date; no Default shall have
occurred (except a Default which shall have been waived in
writing or which shall have been cured) and no Default shall
exist after giving effect to the Loan to be made; between
December 31, 1994 and such Borrowing Date, neither the
business nor assets, nor the condition, financial or
otherwise, of the Company and its Subsidiaries on a
consolidated basis shall have been adversely affected in any
material manner as a result of any fire, flood, explosion,
accident, drought, strike, lockout, riot, sabotage,
confiscation, condemnation, or any purchase of any property by
Governmental Authority, activities or armed forces, acts of
God or the public enemy, new or amended legislation,
regulatory order, judicial decision or any other event or
development whether or not related to those enumerated above
(all subject to the disclosures enumerated above); and the
Agent shall have received a certificate containing a
representation to these effects dated such Borrowing Date and
signed by a Responsible Officer`".
(e) The February 1997 Five-Year Agreement and Amendment is
hereby amended by adding the following new paragraphs after Section 8K reading
as follows:
"SECTION 8L. ERISA Reports. Subsection 5.5(d) of the Five-Year
Composite Conformed Credit as adopted and incorporated by reference into this
February 1997 Five-Year Agreement and Amendment is hereby amended by deleting
such subsection in its entirety and substituting in lieu thereof the following:
`5.5(d) ERISA Reports. The Company will furnish the
Agent with copies of any request for waiver of the funding
standards or extension of the amortization periods required by
Sections 303 and 304 of ERISA or Section 412 of the Code
promptly after any such request is submitted by the Company to
the Department of Labor or the Internal Revenue Service, as
the case may be. Promptly after a Reportable Event occurs, or
the Company or any of its Subsidiaries receives notice that
the PBGC or any Control Group Person has instituted or intends
to institute proceedings to terminate any pension or other
Plan that is a "defined benefit plan" as defined in ERISA, or
prior to the Plan administrator's terminating such Plan
pursuant to Section 4041 of ERISA, the Company will notify the
Agent and will furnish to the Agent a copy of any notice of
such Reportable Event which is required to be filed with the
PBGC, or any notice delivered by the PBGC evidencing its
institution of such proceedings or its intent to institute
such proceedings, or any notice to the PBGC that a Plan is to
be terminated, as the case may be. The Company will promptly
notify each Bank upon learning of the occurrence of any of the
following events with respect to any Plan which is a
Multiemployer Plan: a partial or complete withdrawal from any
Plan which may result in the incurrence by the Company or any
of is Subsidiaries of withdrawal liability in excess of
$1,000,000 under Subtitle E of Title IV of ERISA, or of the
termination, insolvency or reorganization status of any Plan
under such Subtitle E which may result in liability to the
Company or any of its Subsidiaries in excess of
<PAGE> 17
17
$1,000,000. In the event of such a withdrawal, upon the
request of the Agent or any Bank, the Company will promptly
provide information with respect to the scope and extent of
such liability, to the best of the Company's knowledge.`".
"SECTION 8M. Compliance with ERISA. Subsection 5.11 of the
Five-Year Composite Conformed Credit Agreement as adopted and incorporated by
reference into this February 1997 Five-Year Agreement and Amendment is hereby
amended by deleting such subsection in its entirety and substituting in lieu
thereof the following:
"`5.11 Compliance with ERISA. Each of the Company and its
Subsidiaries will meet, and will cause all Control Group
Persons to meet, all minimum funding requirements applicable
to any Plan imposed by ERISA or the Code (without giving
effect to any waivers of such requirements or extensions of
the related amortization periods which may be granted), and
will at all times comply, and will cause all Control Group
Persons to comply, in all material respects with the
provisions of ERISA and the Code which are applicable to the
Plans. At no time shall the aggregate actual and contingent
liabilities of the Company under Sections 4062, 4063, 4064 and
other provisions of ERISA with respect to all Plans (and all
other pension plans to which the Company, any Subsidiary, or
any Control Group Person made contributions prior to such
time) exceed $7,500,000. Neither the Company nor its
Subsidiaries will permit any event or condition to exist which
could permit any Plan which is not a Multiemployer Plan to be
terminated under circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to the assets
of the Company or any of its Subsidiaries.`".
"SECTION 8N. Negative Pledge. Subsection 5.12 of the Five-Year
Composite Conformed Credit Agreement as adopted and incorporated by reference
into this February 1997 Five-Year Agreement and Amendment is hereby amended by
deleting such subsection in its entirety and substituting in lieu thereof the
following:
`5.12 Negative Pledge. The Company will not and will ensure
that no Subsidiary will create or have outstanding any
security on or over any Principal Property in respect of any
Indebtedness and the Company will not create or have
outstanding any security on or over the capital stock of any
of its Subsidiaries that own a Principal Property and will
ensure that no Subsidiary will create or have outstanding any
security on or over the capital stock of any of its respective
Subsidiaries that own a Principal Property except in either
case for:
(a) any security for the purchase price or cost of
construction of real property acquired by the Company or any
of its Subsidiaries (or additions, substantial repairs,
alterations or substantial improvements thereto) or equipment,
provided that such Indebtedness and such security are incurred
within 18 months of the acquisition or completion of
construction (or alteration or repair) and full operation;
<PAGE> 18
18
(b) any security existing on property or on capital stock, as
the case may be, at the time of acquisition of such property
or capital stock, as the case maybe, by the Company or a
Subsidiary or on the property or capital stock, as the case
may be, of a corporation at the time of the acquisition of
such corporation by the Company or a Subsidiary (including
acquisitions through merger or consolidation);
(c) any security created in favor of the Company or a
Subsidiary;
(d) any security created by operation of law in favor of
government agencies of the United States of America or any
State thereof;
(e) any security created in connection with the borrowing of
funds if within 120 days such funds are used to repay
Indebtedness in at least the same principal amount as secured
by other security of Principal Property or capital stock of a
Subsidiary that owns a Principal Property, as the case may be,
with an independent appraised fair market value at least equal
to the appraised fair market value of the Principal Property
or capital stock of a Subsidiary that owns a Principal
Property, as the case may be, secured by the new security; and
(f) any extension, renewal or replacement of any security
referred to in the foregoing clauses (a) through (e) provided
that the amount thereby secured is not increased;
unless any Loans made and/or to be made to and all other sums payable by the
Company under this Agreement shall be secured equally and ratably with (or prior
to) such Indebtedness so long as such Indebtedness shall be so secured.
Notwithstanding the foregoing, the Company and any one or more Subsidiaries may,
without securing the Loans made and/or to be made to and all other sums payable
by the Company under this Agreement, create, issue or assume Indebtedness which
would otherwise be subject to the foregoing restrictions in an aggregate
principal amount which, together with all other such Indebtedness of the Company
and its Subsidiaries (not including (i) Indebtedness permitted to be secured
pursuant to the foregoing clauses (a) through (f) and the aggregate Attributable
Debt or (ii) Indebtedness incurred by one or more Subsidiaries of the Company
and thereafter assumed by Life Point and/or Triad (and/or their respective
Subsidiaries) in connection with the tax-free spin-off distributions of the
common stock of Life Point and Triad to the shareholders of the Company),
including Indebtedness in respect of Sale-and-Lease-back Transactions (other
than those permitted by subsection 5.13(b)), does not exceed 10% of Consolidated
Net Tangible Assets of the Company and its Subsidiaries (calculated after giving
pro forma effect thereto as if the tax-free spin-off distributions of the common
stock of LifePoint and Triad to the shareholders of the Company occurred on the
first day of the testing period thereof).`".
"SECTION 8O. Transactions with Affiliates. Subsection 5.3 of
the Five-Year Composite Conformed Credit Agreement as adopted and
incorporated by reference into this February 1997 Five-Year Agreement
and Amendment is hereby amended by deleting such subsection in its
entirety and substituting the following:
<PAGE> 19
19
`5.3 Transactions with Affiliates. Neither the Company nor any
of its Subsidiaries will enter into any transactions,
including, without limitation, the purchase, sale or exchange
of property or the rendering of any service, with any of their
Affiliates (other than the Company and its Subsidiaries)
(excluding the tax-free spin-off distributions of the common
stock of Life Point and Triad to the shareholders of the
Company and the transitional services agreements to be entered
into with Life Point and Triad in connection therewith) unless
such transaction is otherwise permitted under this Agreement,
is in the ordinary course of the Company's or such
Subsidiary's business and is upon fair and reasonable terms no
less favorable to the Company or such Subsidiary, as the case
may be, than it would obtain in an arm's-length
transaction.`".
"SECTION 8P. Merger or Consolidation. Subsection 5.9 of the
Five-Year Composite Conformed Credit Agreement as adopted and
incorporated by reference into this February 1997 Five-year Agreement
and Amendment is hereby amended by deleting such subsection in its
entirety and substituting the following:
`5.9 Merger or Consolidation. The Company will not become a
constituent corporation in any merger or consolidation unless
the Company shall be the surviving or resulting corporation
and immediately before and after giving effect to such merger
or consolidation there shall exist no Default; provided that
the Company may merge into another Subsidiary owned by the
Company for the purposes of causing the Company to be
incorporated in a different jurisdiction in the United States
or causing the Company to change its name.`".
4. Effective Date; Conditions Precedent. This Fifth Amendment
will become effective on March 30, 1999 (the "Effective Date") subject to the
compliance by the Company with its agreements herein contained and to the
satisfaction on or before the Effective Date of the following further
conditions:
(a) Loan Documents. The Agent shall have received copies of
this Fifth Amendment, executed and delivered by a duly authorized
officer of the Company, with a counterpart for each Bank, and executed
and delivered by the Required Banks.
(b) Company Officers' Certificate. The representations and
warranties contained in Section 3 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into, and as
amended by, the February 1997 Five-Year Agreement and Amendment (as
qualified by the disclosures in (i) the Company's Annual Report on Form
10-K for its fiscal year ended December 31, 1997, (ii) the Company's
Quarterly Reports on Form 10-Q for its fiscal quarters ended March 31,
1998, June 30, 1998 and September 30, 1998, (iii) the Company's Reports
on Form 8-K dated February 6, 1998, February 13, 1998, March 6, 1998,
May 27, 1998, July 30, 1998, October 28, 1998, December 15, 1998 and
February 24, 1999 and (iv) the Company's Annual Report on Form 10-K for
its fiscal year ended December 31, 1998, as filed with the Securities
and Exchange Commission, previously distributed to the Agent and made
<PAGE> 20
20
available to the Banks) shall be true and correct in all material
respects on the Effective Date with the same force and effect as though
made on and as of such date; on and as of the Effective Date and after
giving effect to this Fifth Amendment, no Default shall have occurred
(except a Default which shall have been waived in writing or which
shall have been cured); and the Agent shall have received a certificate
containing a representation to these effects dated the Effective Date
and signed by a Responsible Officer.
(c) Amendment to July 1998 Term Loan Facility. The July
1998 Term Loan Facility shall have been amended in a manner
corresponding to the amendments contained in Section 3 hereof.
5. Legal Obligation. The Company represents and warrants to
each Bank that this Fifth Amendment constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyances,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
6. Continuing Effect; Application. Except as expressly amended
hereby, the February 1997 Five-Year Agreement and Amendment shall continue to be
and shall remain in full force and effect in accordance with its terms.
7. Expenses. The Company agrees to pay or reimburse the Agent
for all of its reasonable out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Fifth Amendment and any other
documents prepared in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Agent.
8. GOVERNING LAW. THIS FIFTH AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS FIFTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9. Counterparts. This Fifth Amendment may be executed by one
or more of the parties to this Fifth Amendment on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Fifth
Amendment signed by all the parties shall be lodged with the Company and the
Agent.
<PAGE> 21
21
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
COLUMBIA/HCA HEALTHCARE CORPORATION
By: /s/ David G. Anderson
------------------------------------
Name: David G. Anderson
Title: Vice President-Finance and
Treasurer
THE CHASE MANHATTAN BANK, as Agent, as
CAF Loan Agent and as a Bank
By: /s/ Dawn Lee Lum
------------------------------------
Name: Dawn Lee Lum
Title: Vice President
THE CHASE MANHATTAN BANK or any of its
Affiliates, as Issuing Bank
By: /s/ Dawn Lee Lum
------------------------------------
Name: Dawn Lee Lum
Title: Vice President
ABN AMRO BANK N.V., as a Bank
By: /s/ Steven L. Hipsman
------------------------------------
Name: Steven L. Hipsman
Title: Vice President
By: /s/ Robert A. Budnek
------------------------------------
Name: Robert A. Budnek
Title: Vice President
<PAGE> 22
22
ARAB BANK PLC, GRAND CAYMAN BRANCH, as a
Bank
By: /s/ Nofal Barbar
------------------------------------
Name: Nofal Barbar
Title: Executive Vice President and
Regional Manager
BANCA MONTE DEI PASCHI DI SIENA SpA, as
a Bank
By: /s/ G. Natalicchi
------------------------------------
Name: G. Natalicchi
Title: Senior Vice President and
General Manager
By: /s/ Brian R. Landy
------------------------------------
Name: Brian R. Landy
Title: Vice President
BANCA NAZIONALE DEL LAVORO, SpA, as a
Bank
By: /s/ Giulio Giovine
------------------------------------
Name: Giulio Giovine
Title: Vice President
By: /s/ Leonardo Valentini
------------------------------------
Name: Leonardo Valentini
Title: First Vice President
BANK ONE TEXAS, N.A., as a Bank
By: /s/ L. Richard Schiller
------------------------------------
Name: L. Richard Schiller
Title: Vice President
<PAGE> 23
23
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Co-Agent and
as a Bank
By: /s/ Kevin Wagley
------------------------------------
Name: Kevin Wagley
Title: Vice President
THE BANK OF NEW YORK, as a Co-Agent and
as a Bank
By: /s/ Ann Marie Hughes
------------------------------------
Name: Ann Marie Hughes
Title: Vice President
THE BANK OF NOVA SCOTIA, as a Bank
By: /s/ W.J. Brown
------------------------------------
Name: W.J. Brown
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
as a Bank
By: /s/ Jesse A. Reid, Jr.
------------------------------------
Name: Jesse A. Reid, Jr.
Title: Vice President
BANQUE NATIONALE DE PARIS -Houston
Agency, as a Bank
By: /s/ Warren G. Parham
------------------------------------
Name: Warren G. Parham
Title: Vice President
<PAGE> 24
24
BARNETT BANK, N.A., as a Bank
By:
------------------------------------
Name:
Title:
CITIBANK, N.A., as a Bank
By: /s/ Gregory K. Park
------------------------------------
Name: Gregory K. Park
Title: Vice President
COMERICA BANK, as a Bank
By: /s/ Colleen M. Murphy
------------------------------------
Name: Colleen M. Murphy
Title: Assistant Vice President
CORESTATES BANK, N.A., as a Bank
By:
------------------------------------
Name:
Title:
CRESTAR BANK, as a Bank
By: /s/ C. Gray Key
------------------------------------
Name: C. Gray Key
Title: Vice President
THE DAI-ICHI KANGYO BANK, LIMITED,
ATLANTA AGENCY, as a Bank
By: /s/ Christopher Fahey
------------------------------------
Name: Christopher Fahey
Title: Vice President
<PAGE> 25
25
DEN DANSKE BANK AKTIESELSKAB, as a Bank
CAYMAN ISLANDS BRANCH c/o New York
Branch
By: /s/ Dennis T. Shugrue
------------------------------------
Name: Dennis T. Shugrue
Title: Assistant Vice President
By: /s/ John A. O'Neill
------------------------------------
Name: John A. O'Neill
Title: Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH(ES), as a Co-Agent
and as a Bank
By: /s/ Susan L. Pearson
------------------------------------
Name: Susan L. Pearson
Title: Director
By: /s/ Stephan A. Wiedemann
------------------------------------
Name: Stephan A. Wiedemann
Title: Director
FIRST HAWAIIAN BANK, as a Bank
By: /s/ Charles L. Jenkins
------------------------------------
Name: Charles L. Jenkins
Title: Vice President, Manager
FIRST AMERICAN NATIONAL BANK, as a Bank
By: /s/ Sandy Hamrick
------------------------------------
Name: Sandy Hamrick
Title: Senior Vice President
<PAGE> 26
26
THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank
By: /s/ L. Richard Schiller
------------------------------------
Name: L. Richard Schiller
Title: Vice President
FIRST UNION NATIONAL BANK, as a Bank
By: /s/ Joseph H. Tower
------------------------------------
Name:
Title:
FLEET NATIONAL BANK, as a Co-Agent and
as a Bank
By: /s/ Maryann Smith
------------------------------------
Name: Maryann Smith
Title: Vice President
THE FUJI BANK LIMITED, as a Co-Agent
and as a Bank
By: /s/ Raymond Ventura
------------------------------------
Name: Raymond Ventura
Title: Vice President and Manager
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY, as a Co-Agent and as a
Bank
By: /s/ Koichi Hasegawa
------------------------------------
Name: Koichi Hasegawa
Title: Senior Vice President and
Deputy General Manager
<PAGE> 27
27
KEYBANK NATIONAL ASSOCIATION, as a Bank
By: /s/ Thomas J. Purcell
------------------------------------
Name: Thomas J. Purcell
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION, as a Bank
By: /s/ Beatrice E. Kossodo
------------------------------------
Name: Beatrice E. Kossodo
Title: Senior Vice President
THE MITSUI TRUST AND BANKING COMPANY,
LIMITED, NEW YORK BRANCH, as a Bank
By: /s/ Margaret Holloway
------------------------------------
Name: Margaret Holloway
Title: Vice President and Manager
NATIONAL CITY BANK OF KENTUCKY, as a
Bank
By: /s/ Deroy Scott
------------------------------------
Name: Deroy Scott
Title: Vice President
NATIONSBANK, N.A. as a Co-Agent and as
a Bank
By: /s/ Kevin Wagley
------------------------------------
Name: Kevin Wagley
Title: Vice President
<PAGE> 28
28
THE NORTHERN TRUST COMPANY, as a Bank
By: /s/ Christina L. Jaluc
------------------------------------
Name: Christina L. Jaluc
Title: Second Vice President
PNC BANK, N.A., as a Co-Agent and as a
Bank
By: /s/ Kathryn M. Bohr
------------------------------------
Name: Kathryn M. Bohr
Title: Vice President
THE SAKURA BANK, LTD. NEW YORK BRANCH,
as a Lead Manager and as a Bank
By: /s/ Yasuhiro Terada
------------------------------------
Name: Yasuhiro Terada
Title: Senior Vice President
THE SUMITOMO BANK, LIMITED, as a Lead
Manager and as a Bank
By: /s/ Gary Franke
------------------------------------
Name: Gary Franke
Title: Vice President and Manager
STB DELAWARE FUNDING TRUST I, as a Bank
By: /s/ Donald C. Hargadon
------------------------------------
Name: Donald C. Hargadon
Title: Assistant Vice President
<PAGE> 29
29
SUNTRUST BANK, NASHVILLE, N.A., as a
Lead Manager and as a Bank
By:
------------------------------------
Name:
Title:
THE TOKAI BANK, LIMITED, NEW YORK
BRANCH, as a Bank
By: /s/ Shinichi Nakatani
------------------------------------
Name: Shinichi Nakatani
Title: Assistant General Manager
TORONTO DOMINION (TEXAS), INC., as a
Bank
By: /s/ Jimmy Simlen
------------------------------------
Name: Jimmy Simlen
Title: Vice President
THE TOKYO TRUST & BANKING CO., LTD., as
a Bank
By: /s/ M. Hosoda
------------------------------------
Name: M. Hosoda
Title: Vice President
UBS AG, STAMFORD BRANCH, as a Co-Agent
and as a Bank
By: /s/ Leo L. Baltz
------------------------------------
Name: Leo L. Baltz
Title: Director
By: /s/ Robert H. Riley III
------------------------------------
Name: Robert H. Riley III
Title: Executive Director
<PAGE> 30
30
UNION PLANTERS BANK OF MIDDLE TENNESSEE,
N.A.
By: /s/ William A. Collier
------------------------------------
Name: William A. Collier
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A., as a
Co-Agent and as a Bank
By: /s/ Kenneth Washington
------------------------------------
Name: Kenneth Washington
Title: Vice President
WELLS FARGO BANK, N.A., as a Lead
Manager and as a Bank
By: /s/ Timothy A. McDevitt
------------------------------------
Name: Timothy A. McDevitt
Title: Vice President
By: /s/ Donald A. Hartmann
------------------------------------
Name: Donald A. Hartmann
Title: Senior Vice President
YASUDA TRUST AND BANKING CO., LTD., as
a Bank
By: /s/ Junichiro Kawamura
------------------------------------
Name: Junichiro Kawamura
Title: Vice President
<PAGE> 31
31
THE NORINCHUKIN BANK, NEW YORK BRANCH,
as a Bank
By: /s/ Yoshiro Niiro
------------------------------------
Name: Yoshiro Niiro
Title: General Manager
NATIONAL WESTMINSTER BANK PLC
By: NatWest Capital Markets Limited,
its Agent
By: /s/ Jeremy Hood
------------------------------------
Name: Jeremy Hood
Title: Vice President
By: Greenwich Capital Markets, Inc.,
its Agent
By: /s/ Jeremy Hood
------------------------------------
Name: Jeremy Hood
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ William E. Magee
------------------------------------
Name: William E. Magee
Title: Duly Authorized Signatory
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Henry Reukauf
------------------------------------
Name: Henry Reukauf
Title: Vice President
<PAGE> 1
EXHIBIT 12
COLUMBIA/HCA HEALTHCARE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
EARNINGS:
Income from continuing operations before minority interests
and income taxes.......................................... $584 $401
Fixed charges, excluding capitalized interest............... 142 188
---- ----
$726 $589
==== ====
FIXED CHARGES:
Interest charged to expense................................. $111 $153
Interest portion of rental expense and amortization of
deferred loan costs....................................... 31 35
---- ----
Fixed charges, excluding capitalized interest............... 142 188
Capitalized interest........................................ 6 4
---- ----
$148 $192
==== ====
Ratio of earnings to fixed charges.......................... 4.91 3.07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF INCOME AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 586
<SECURITIES> 0
<RECEIVABLES> 3,889
<ALLOWANCES> 1,639
<INVENTORY> 419
<CURRENT-ASSETS> 4,234
<PP&E> 15,410
<DEPRECIATION> 6,261
<TOTAL-ASSETS> 18,797
<CURRENT-LIABILITIES> 3,192
<BONDS> 5,566
0
0
<COMMON> 6
<OTHER-SE> 7,473
<TOTAL-LIABILITY-AND-EQUITY> 18,797
<SALES> 0
<TOTAL-REVENUES> 4,655
<CGS> 0
<TOTAL-COSTS> 2,582
<OTHER-EXPENSES> 892
<LOSS-PROVISION> 338
<INTEREST-EXPENSE> 111
<INCOME-PRETAX> 570
<INCOME-TAX> 248
<INCOME-CONTINUING> 322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 322
<EPS-PRIMARY> 0.50<F1>
<EPS-DILUTED> 0.50<F2>
<FN>
<F1>EPS - Basic per SFAS No. 128
<F2>EPS - Diluted per SFAS No. 128
</FN>
</TABLE>
