<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report February 23, 1999
(Date of Earliest Event Reported)
COLUMBIA/HCA HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE
(State of Incorporation)
001-11239 75-2497104
(Commission (I.R.S. Employer
File Number) Identification No.)
One Park Plaza, Nashville, Tennessee 37203
(Address of principal executive offices) (Zip Code)
(615) 344-9551
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
On February 23, 1999, Columbia/HCA Healthcare Corporation (the
"Company") announced operating results for the year and fourth quarter ended
December 31, 1998. The Company also announced that its Board of Directors has
authorized the repurchase of up to an additional $1 billion of its common stock.
In addition, the Company announced that it has entered into a Letter of
Credit Agreement with the United States in connection with the Company's share
repurchase programs.
ITEM 7. EXHIBITS
Exhibit 20 Copy of press release dated February 23, 1999.
Exhibit 99 Copy of Letter of Credit Agreement.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
COLUMBIA/HCA HEALTHCARE CORPORATION
/s/ JOHN M. FRANCK II
- -----------------------------------------
John M. Franck II
Corporate Secretary
DATED: February 24, 1999
<PAGE>
EXHIBIT 20
[LETTERHEAD OF COLUMBIA/HCA APPEARS HERE]
NEWS
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
INVESTOR CONTACT MEDIA CONTACT
Mark Kimbrough: 615-344-2688 Jeff Prescott: 615-344-5708
COLUMBIA/HCA REPORTS 1998 RESULTS
EPS From Continuing Operations of $.91 in 1998 vs $.85 in 1997
Excluding Non-recurring Items
New $1 Billion Share Repurchase Program Announced
Nashville, Tenn., February 23, 1999 - Columbia/HCA Healthcare Corporation
(NYSE: COL) today announced operating results for the year and fourth quarter
ended December 31, 1998.
The Company also announced that its Board of Directors has authorized the
repurchase of up to an additional $1 billion of its common stock. Columbia/HCA
expects to repurchase its shares through open market purchases, privately
negotiated transactions or through a series of accelerated or forward purchase
contracts.
For the year ended December 31, 1998, revenues from continuing operations
totaled $18.68 billion compared with $18.82 billion for 1997. Net income from
continuing operations, excluding gains on sales of facilities, impairment of
long-lived assets and restructuring of operations and investigation related
costs totaled $590 million or $0.91 per diluted share in 1998 compared to $565
million or $0.85 per diluted share for 1997. Net income totaled $379 million or
$0.59 per diluted share for 1998 versus a net loss of ($305) million or ($0.46)
per diluted share for 1997.
1
<PAGE>
In 1998, the Company's remaining core assets had proforma net income from
continuing operations, excluding gains on sales of facilities, impairment of
long-lived assets and restructuring of operations and investigation related
costs, of $1.06 per diluted share; assets sold during 1998 or being held for
sale experienced a net loss of ($0.15) per diluted share, while assets being
potentially spun to shareholders broke even for the year.
During 1998, the Company sold 36 hospitals, 36 surgery centers and certain
other non-core assets resulting in a pretax gain of $744 million ($365 net of
tax), or $0.56 per diluted share. The Company also recorded asset impairment
charges of approximately $542 million ($349 net of tax), or $0.54 per diluted
share during 1998. Cash proceeds from asset sales during 1998, including those
related to the sale of discontinued businesses, totaled approximately $2.9
billion.
For the fourth quarter ended December 31, 1998, revenues from continuing
operations totaled $4.42 billion compared to $4.37 billion in the fourth quarter
of 1997. Net income from continuing operations, excluding gains on sales of
facilities, impairment of long-lived assets and restructuring of operations and
investigation related costs, totaled $27 million or $0.04 per diluted share for
the fourth quarter of 1998 compared to a net loss of ($404) million or ($0.63)
per diluted share during the fourth quarter of 1997. The Company incurred a
net loss for the fourth quarter of 1998 of ($42) million or ($0.06) per diluted
share compared to a net loss of ($1.2) billion or ($1.92) per diluted share in
the fourth quarter of 1997.
During the fourth quarter of 1998, the Company sold 14 hospitals and
certain other non-core assets for approximately $615 million, resulting in a
pretax gain of $207 million ($123 million net of tax), or $0.19 per diluted
share. Asset impairment charges were recorded during the fourth quarter of
1998 on several facilities and related assets resulting in a charge of $208
million ($152 million net of tax), or $0.23 per diluted share.
2
<PAGE>
Several factors affected the Company's financial results during the fourth
quarter and full year 1998. These factors include reduced Medicare
reimbursement mandated by the Balanced Budget Act of 1997 which reduced Medicare
payments to the Company's healthcare facilities by approximately $55 million
during the fourth quarter of 1998 and approximately $215 million for the year
1998; increased supply expense due to the increasing costs of new technology and
pharmaceuticals; increased bad debt expense; and declining patient volumes in
the fourth quarter.
For the year 1998, same facility admissions at the Company's hospitals
increased by 0.4 percent. Same facility equivalent admissions, which reflect
inpatient and outpatient volumes, increased 1.4 percent in 1998. During the
fourth quarter of 1998, same facility admissions declined by 1.0 percent while
same facility equivalent admissions were equal with the fourth quarter of 1997.
At December 31, 1998, the Company's balance sheet reflected total debt of
approximately $6.8 billion, stockholders equity of $7.6 billion and total assets
of $19.4 billion. Capital expenditures for 1998 totaled $1.25 billion. The
Company's total debt-to-capital ratio improved to 45 percent at year end 1998
compared to 54 percent at December 31, 1997.
The Company anticipates completing the previously announced tax-free spin-
offs of its LifePoint (22 rural hospitals) and Triad (39 secondary market
hospitals) hospital groups in the second quarter, subject to receipt of a
favorable ruling from the Internal Revenue Service, certain regulatory approvals
and financing.
The $1 billion repurchase program previously authorized in July 1998 has
been completed. Approximately 44 million shares have been 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 by the Company.
3
<PAGE>
In connection with the Company's share repurchase programs, the Company has
recently entered into a Letter of Credit Agreement (LOC Agreement) with the US
Department of Justice (DOJ) whereby the Company anticipates settlement of its
purchase of these 44 million shares at some time between March 1, 1999 and April
30, 1999. As a part of the LOC Agreement, the Company will provide the DOJ with
Letters of Credit totaling $1 billion. The LOC Agreement also provides that the
Company's second $1 billion share repurchase program announced today may be
made, at the Company's discretion, through open market purchases or privately
negotiated transactions. 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.
Columbia/HCA's annual shareholders meeting will be held on May 27, 1999 in
Nashville, Tennessee, for shareholders of record as of April 5, 1999.
* * *
This press release contains forward-looking statements based on current
management expectations. Numerous factors, including those detailed from time-
to-time in the Company's filings with the Securities and Exchange Commission,
may cause results to differ materially from those anticipated in the forward-
looking statements. Many of the factors that will determine the Company's
future results are beyond the ability of the Company to control or predict.
These statements are subject to risks and uncertainties and, therefore, actual
results may differ materially.
Readers should not place undue reliance on forward-looking statements, which
reflect management's views only as of the date hereof. The Company undertakes
no obligation to revise or update any forward-looking statements, or to make any
other forward-looking statements, whether as a result of new information, future
events or otherwise.
All references to "Company" and "Columbia/HCA" as used throughout this document
refer to Columbia/HCA Corporation and its affiliates.
4
<PAGE>
Columbia/HCA Healthcare Corporation
Consolidated Operating Results Summary
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Fourth Quarter Year
Ended December Ended December
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $ 4,420 $ 4,374 $ 18,681 $ 18,819
EBITDA (a) $ 489 ($175) $ 2,868 $ 2,851
Net income (loss):
Income (loss) from continuing oper-
ations, excluding gains on sales of
facilities, impairment on long-lived
assets and restructuring of operations
and investigation related costs $ 27 ($404) $ 590 $ 565
Gains on sales of facilities
(net of tax) 123 -- 365 --
Impairment of long-lived assets
(net of tax) (152) (290) (349) (290)
Restructuring of operations and
investigation related costs
(net of tax) (21) (55) (74) (93)
Discontinued operations:
Loss from operations of discontinued
businesses (net of tax) (19) (45) (80) 12
Loss on disposal of discontinued
(net of tax) -- (443) (73) (443)
Cumulative effect of accounting change
(net of tax) -- -- -- (56)
Net income (loss) ($42) ($1,237) $ 379 ($305)
Diluted earnings (loss) per share:
Income (loss) from continuing oper-
ations, excluding gains on sales of
facilities impairment on long-lived
assets and restructuring of operations
and investigation related costs $ 0.04 ($0.63) $ 0.91 $ 0.85
Gains on sales of facilities 0.19 -- 0.56 --
Impairment of long-lived assets (0.23) (0.45) (0.54) (0.44)
Restructuring of operations and
investigation related costs (0.04) (0.08) (0.11) (0.14)
Discontinued operations:
Loss from operations of discontinued
businesses (0.02) (0.07) (0.12) 0.02
Loss on disposal of discontinued
businesses -- (0.69) (0.11) (0.67)
Cumulative effect of accounting change -- -- -- (0.08)
Net income (loss) ($0.06) ($1.92) $ 0.59 ($0.46)
Shares used in computing diluted
earnings per share (000) 644,387 644,508 646,649 663,090
</TABLE>
---------------------------
(a) EBITDA is defined as income (loss) from continuing operations before
depreciation and amortization, interest expense, gains on sales of
facilities, impairment of long-lived assets, restructuring of operations and
investigation related costs, minority interests and income taxes.
<PAGE>
Columbia/HCA Healthcare Corporation
Consolidated Statements of Operations
Years Ended December 31, 1998 and 1997
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
1998 1997
Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
Revenues $ 18,681 100.0% $18,819 100.0%
Salaries and benefits 7,811 41.8 7,631 40.6
Supplies 2,901 15.5 2.722 14.5
Other operating expenses 3,771 20.2 4,263 22.6
Provisions for doubtful accounts 1,442 7.7 1,420 7.5
Equity in earnings of affiliates (112) (0.6) (68) (0.4)
15,813 84.6 15,968 84.8
EBITDA 2,868 15.4 2,851 15.2
Depreciation and amortization 1,247 6.7 1,238 6.6
Interest expense 561 3.0 493 2.6
Gains on sale of facilities (744) (4.0) -- --
Impairment of long-lived assets 542 2.9 442 2.4
Restructuring of operations and
investigation related costs 111 0.6 140 0.7
Income from continuing operations before
minority interests and income taxes 1,151 6.2 538 2.9
Minority interests in earnings of
consolidated entities 70 0.4 150 0.8
Income from continuing operations before
income taxes 1,081 5.8 388 2.1
Provisions for income taxes 549 3.0 206 1.1
Income from continuing operations 532 2.8 182 1.0
Discontinued operations:
Income (loss) from operations of
discontinued businesses (net of tax) (80) (0.4) 12 0.1
Loss on disposal of discontinued
businesses (net of tax) (73) (0.4) (443) (2.4)
Cumulative effect of accounting change
(net of tax) -- -- (56) (0.3)
Net income (loss) $ 379 2.0 ($305) (1.6)
Diluted earnings (loss) per share:
Income from continuing operations,
excluding gains on sales of facilities,
impairment of long-lived assets and
restructuring of operations and
investigation related costs $ 0.91 $ 0.85
Gains on sales of facilities 0.56 --
Impairment long-lived assets (0.54) (0.44)
Restructuring of operations and
investigation related costs (0.11) (0.14)
Discontinued operations:
Income (loss) from operations of
discontinued businesses (0.12) 0.02
Loss on disposal of discontinued
businesses (0.11) (0.67)
Cumulative effect of accounting change -- (0.08)
Net income (loss) $ 0.59 ($0.46)
Shares used in computing diluted earnings
per share (000) 646,649 663,090
</TABLE>
Certain prior year amounts have been reclassified to conform to current year
presentation.
<PAGE>
Columbia/HCA Healthcare Corporation
Consolidated Statements of Operations
Fourth Quarter ended December 31, 1998 and 1997
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
1998 1997
Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
Revenues $ 4,420 100.0% $ 4,374 100.0%
Salaries and benefits 1,900 43.0 2,010 46.0
Supplies 706 16.0 712 16.3
Other operating expenses 956 21.6 1,335 30.4
Provisions for doubtful accounts 390 8.8 444 10.2
Equity in earnings of affiliates (21) (0.5) 48 1.1
3,931 88.9 4,549 104.0
EBITDA 489 11.1 (175) (4.0)
Depreciation and amortization 315 7.2 315 7.3
Interest expense 121 2.7 132 3.0
Gains on sale of facilities (207) (4.7) -- --
Impairment of long-lived assets 208 4.7 442 10.1
Restructuring of operations and
investigation related costs 21 0.5 76 1.7
Income (loss) from continuing operations before
minority interests and income taxes 31 0.7 (1,140) (26.1)
Minority interests in earnings of
consolidated entities 16 0.4 25 0.5
Income (loss) from continuing operations
before income taxes 15 0.3 (1,165) (26.6)
Provision for income taxes (benefits) 38 0.9 (416) (9.5)
Loss from continuing operations (23) (0.6) (749) (17.1)
Discontinued operations:
Loss from operations of discontinued
businesses (net of tax) (19) (0.4) (45) (1.0)
Loss on disposal of discontinued
businesses (net of tax) -- -- (443) (10.1)
Net loss ($42) (1.0) ($1,237) (28.2)
Diluted earnings (loss) per share:
Income (loss) from continuing operations,
excluding gains on sales of facilities,
impairment of long-lived assets and
restructuring of operations and
investigation related costs $ 0.04 ($0.63)
Gains on sales of facilities 0.19 --
Impairment of long-lived assets (0.23) (0.45)
Restructuring of operations and
investigation related costs (0.04) (0.08)
Discontinued operations:
Loss from operations of discontinued
businesses (0.02) (0.07)
Loss on disposal of discontinued
businesses -- (0.69)
Net loss ($0.06) ($1.92)
Shares used in computing diluted earnings
per share (000) 644,387 644,508
</TABLE>
Certain prior year amounts have been reclassified to conform to current year
presentation.
<PAGE>
Columbia/HCA Healthcare Corporation
Operating Statistics
For the Fourth Quarters and Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Fourth Quarter Year
Ended December 31 Ended December 31
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Consolidated Hospitals
Number of Hospitals 281 309 281 309
Weighted Average Licensed
Beds 55,594 60,983 59,104 61,096
Licensed Beds at End of
Period 53,693 60,643 53,693 60,643
Admissions 448,000 479,000 1,888,800 1,915,100
Equivalent Admissions 679,400 728,600 2,870,900 2,901,400
Patient Days 2,200,600 2,337,800 9,371,400 9,492,300
Equivalent Patient Days 3,337,800 3,556,100 14,244,600 14,380,800
Emergency Room Visits 1,310,900 1,398,500 5,539,000 5,535,200
Outpatient Revenues as a
Percentage of Patient
Revenues 37.1% 37.3% 37.2% 37.0%
Average Length of Stay 4.9 4.9 5.0 5.0
Occupancy 43.0% 41.7% 43.4% 42.6%
Equivalent Occupancy 65.2% 63.5% 66.0% 64.5%
Number of Consolidated and
Non-Consolidated (50/50 Equity
Joint Ventures) Hospitals:
Consolidated 281 309
Non-Consolidated (50/50 Equity
Joint Ventures 24 27
Total Number of Hospitals 305 336
</TABLE>
1998 Group Results
($ in millions)
<TABLE>
<CAPTION>
Assets Sold
Core or Held
Assets Triad LifePoint for Sale
<S> <C> <C> <C> <C>
Revenues $ 14,909 $ 1,588 $ 479 $ 1,705
EBITDA 2,591 147 59 71
% Margin 17.4% 9.3% 12.4% 4.2%
Same-Facility Admissions 1.0% -1.9% -0.8% -4.1%
</TABLE>
Certain prior year amounts have been reclassified to conform to current year
presentation.
<PAGE>
Columbia/HCA Healthcare Corporation
Consolidated Balance Sheets
(Dollars in millions)
<TABLE>
<CAPTION>
December 31 September 30, December 31,
1998 1998 1997
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 297 $ 175 $ 110
Accounts receivable, net 2,096 2,357 2,522
Other 1,470 1,565 1,791
Total current assets 3,863 4,097 4,423
Property and equipment,
at cost 15,644 16,006 16,254
Accumulated depreciation (6,195) (6,280) (6,024)
9,449 9,726 10,230
Investments of insurance
subsidiary 1,614 1,559 1,422
Investments in and advances
to affiliates 1,275 1,155 1,329
Intangible assets, net of
accumulated amortization 2,910 3,044 3,521
Net assets of discontinued
operations -- 77 841
Other 318 350 236
$19,429 $20,008 $22,002
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 784 $ 745 $ 929
Other current liabilities 1,707 1,977 1,712
Long-term debt due within
one year 1,068 1,471 132
Total current
liabilities 3,559 4,193 2,773
Long-term debt 5,685 5,371 9,276
Professional liability risks,
deferred taxes and other
liabilities 1,839 1,910 1,867
Minority interests in equity
of consolidated entities 765 829 836
Stockholders' equity 7,581 7,705 7,250
$19,429 $20,008 $22,002
Current ratio 1.09 0.98 1.59
Ratio of debt to debt plus
common and minority equity 44.70% 44.50% 53.80%
</TABLE>
<PAGE>
EXHIBIT 99
[Execution Copy]
LETTER OF CREDIT AGREEMENT
AGREEMENT dated as of February 11, 1999 between COLUMBIA/HCA HEALTHCARE
CORPORATION, a Delaware corporation (the "Company") and the UNITED STATES OF
AMERICA (the "United States").
Background
----------
A. The Company is under an investigation that is being conducted by the
Office of Inspector General of the United States Department of Health and Human
Services, the United States Department of Justice, and various United States
Attorneys' Offices and others concerning possible violations of federal laws
relating to the Company's participation in federally-funded health care programs
(the "Investigation"). At this point in time, the Company has not admitted any
liability to the United States ensuing out of the investigation, nor does it do
so by this Agreement.
B. The Company has expressed an intent to purchase outstanding shares of
the capital stock and other outstanding securities of the Company currently held
by others (the "Company Securities") through a series of contracts for the
repurchase of its stock within a two-year period from approximately July 29,
1998, as described in a letter from the Company to the United
<PAGE>
States dated July 29, 1998 (the "Letter"). At a meeting on January 12, 1999, the
Company informed the United States that it would like to repurchase additional
Company Securities beyond those repurchases outlined in the Letter.
C. The United States has expressed concerns that the Company's purchase
of Company Securities may adversely affect the financial ability of the Company
to pay any liability that it may have to the United States relating to or
arising out of the Investigation (the "Government Claims"), and has advised the
Company that it is considering its remedies with respect to the Company's
proposed purchase of Company Securities.
D. The Company has agreed that it will not execute any of the actual
purchases of stock subject to the contracts outlined in the Letter without at
least two weeks prior notice to the Department of Justice, as described in the
Letter. By signing this agreement the United States agrees that the Company need
not give the Department of Justice specific prior notice of its repurchases. The
Company must, instead, notify the United States weekly of any stock repurchases
and the total value of such repurchases (whether through forward contracts or on
the open market) executed since the date of this agreement. Such notification
should go, until and unless instructed otherwise in
-2-
<PAGE>
writing, to David Gossett, via facsimile to (202) 616-3085. The Company agrees
also to inform the United States at least two weeks prior to the date when it
expects its repurchases of Company Securities subject to this agreement to equal
two billion dollars ($2,000,000,000), and agrees to meet with representatives of
the United States at least one week prior to the date when it expects its
repurchases to equal two billion dollars ($2,000,000,000).
E. As described in the Letter, the Company previously agreed to provide
one or more Letters of Credit in favor of the United States prior to the
purchase(s) outlined in that Letter, with the face value of those Letters of
Credit equaling or exceeding the total amount of the Company's purchase of
Company Securities that the Company would have engaged in between the date of
the Letter and the date of any such purchase. This agreement amends that prior
agreement. The Company agrees instead to provide three sets of Letters of Credit
to the United States, totaling one billion dollars ($1,000,000,000). The Company
will provide the United States the first set of Letters of Credit, totaling
fifty-five million dollars ($55,000,000), by March 1, 1999. The Company will
supply the second set of Letters of Credit to the United States, totaling four
hundred forty-five
-3-
<PAGE>
million dollars ($445,000,000) on or before March 31, 1999. The Company will
supply the third set of Letters of Credit to the United States, totaling five
hundred million dollars ($500,000,000) on or before April 15, 1999 or on or
within seven (7) days after the date of completion of the spinoff of Triad and
LifePoint (which shall be the date of the distribution of common stock of Triad
and LifePoint), whichever is later, but in no event later than April 30, 1999.
In the event the spinoff of Triad and LifePoint does not occur by April 22,
1999, the Company may request an extension of the time within which to supply
the third set of Letters of Credit. In exchange for these modifications, the
United States agrees not to object to the Company's repurchases of Company
Securities for an amount equal to or less than two billion dollars
($2,000,000,000), including the repurchases outlined in the Letter, either
through forward contracts or on the open market.
F. The Company agrees to provide these Letters of Credit, subject to and
in accordance with the terms and conditions set forth below, to the United
States to provide the United States with this financial assurance in the event
the Company enters into a settlement agreement with the United States or the
United States obtains a judgment against the Company. The Company and
-4-
<PAGE>
the United States acknowledge that the amount of these Letters of Credit is not
based on the amount or expected amount of any potential settlement payments or
potential judgments against the Company, but instead is derived from the amount
of expected repurchases by the Company of Company Securities as outlined in the
Letter and at the meeting of January 12, 1999.
G. The Company recognizes that nothing in this Agreement limits or
affects the United States' rights to seek any other remedy to protect its
interests, as agreed to in the letter from the Company to the United States
dated July 29, 1998, and by this agreement.
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the Company and the United States hereby agree to the following.
Terms and Conditions
--------------------
1. Letters of Credit. The Company is providing unconditional guarantees
-----------------
to the United States, in the form and in the amount of one or more Letters of
Credit as described below, of the prompt payment when due of obligations (the
"Obligations") of
-5-
<PAGE>
the Company to the United States in respect of the Government Claims. For
purposes of this Agreement, an alleged liability or other obligation shall be
deemed an Obligation only if (i) it is determined to be an actual liability or
obligation of the Company to the United States in respect of a Government Claim
pursuant to an Actionable Order (as defined below) or (ii) it is agreed to be
such in a writing (a "Settlement Agreement") executed by the Company and the
United States. An "Actionable Order" is an order entered by a court of competent
jurisdiction (a) that has become final and nonappealable or (b) with respect to
which enforcement during the pendency of an appeal has not been stayed by the
posting of a supersedeas bond (or similar bond or credit support) or otherwise
by order of a court of competent jurisdiction. For purposes of this Agreement,
an Obligation is due on the date (the "Obligation Due Date") when the order
giving rise to such Obligation becomes an Actionable Order or when the
Settlement Agreement giving rise to such Obligation states that such Obligation
is due. The Company will remain liable to the United States for any Obligation
until and unless the United States has collected payment directly from it or
from the Company's Letters of Credit.
2. Delivery of Letters of Credit. As credit support for
-----------------------------
-6-
<PAGE>
the foregoing guarantee, by March 1, 1999, the Company shall deliver to the
United States one or more irrevocable standby letters of credit (including any
extensions, modifications, renewals or replacements thereof or substitutions
therefor made in accordance with this Agreement, hereinafter "Letters of
Credit"), in the face amount of fifty-five million dollars ($55,000,000) and in
the form attached hereto as Exhibit A, issued by The Chase Manhattan Bank, a New
York banking corporation, or one of its banking affiliates ("Chase"), or another
commercial banking institution acceptable to the United States. As further
credit support for the foregoing guarantee, prior to March 31, 1999, the Company
shall deliver to the United States one or more additional Letters of Credit in
the face amount of four hundred forty-five million dollars ($445,000,000) and in
the form attached hereto as Exhibit A, issued by The Chase Manhattan Bank, a New
York banking corporation, or one of its banking affiliates ("Chase"), or another
commercial banking institution acceptable to the United States. As further
credit support for the foregoing guarantee, prior to April 15, 1999 or within
seven (7) days after the date of completion of the spinoff of Triad and
LifePoint (which shall be the date of the distribution of the common stock of
Triad and LifePoint),
-7-
<PAGE>
whichever is later, but in no event later than April 30, 1999, unless extended
by mutual agreement, the Company shall deliver to the United States one or more
additional Letters of Credit, in the face amount of five hundred million dollars
($500,000,000) and in the form attached hereto as Exhibit A, issued by The Chase
Manhattan Bank, a New York banking corporation, or one of its banking affiliates
("Chase"), or another commercial banking institution acceptable to the United
States. Each of these Letters of Credit shall provide that it may be drawn
immediately upon the presentation by the United States to the issuer at an
office located in the United States of a sight draft payable to the United
States or its designee in the amount of the draw and a certificate signed by the
United States stating that (i) Obligations due on the Obligation Due Date in the
amount of the draw have not been paid as of the Obligation Due Date and such
obligations are still outstanding (an "Obligation Default") or (ii) the
Cancellation Date (as defined below) has not occurred and the Letter of Credit
is scheduled to expire within 30 days and as of the 30/th/ day prior to
expiration the United States has not received a new Letter of Credit on the same
terms. The Company shall provide the United States with at least 30 days prior
written notice of the expiration of any Letter of Credit
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unless that Letter of Credit has been renewed or replaced before the 30/th/ day
preceding its expiration. Delivery to the United States of Letters of Credit for
one billion dollars ($1,000,000,000) is an express condition to the United
States' agreement to the terms of this Agreement. The United States may make
multiple draws upon any Letter of Credit issued pursuant to this Agreement,
under clause (i) above. The United States agrees that it will draw pro-rata
across all Letters of Credit issued under this agreement if it draws under
clause (i) above, except if any such draw is refused for any reason.
3. Return of Letters of Credit. The United States shall return the
---------------------------
Letters of Credit for cancellation when all Obligations shall have been paid in
full and no other Government Claims remain outstanding or it is determined, by
the United States or pursuant to a final and nonappealable final order of a
court of competent jurisdiction, that the Company does not have any liability or
obligations to the United States in respect of the Government Claims (the
"Cancellation Date"). The United States agrees that Obligations shall have been
paid in full for purposes of this Agreement and shall return the Letters of
Credit when the current issues being investigated in the areas of laboratory
billing, in-patient hospital billings, physician-
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compensation and relations, home health, and cost reports are resolved with the
United States.
4. Replacement of Letter of Credit. At any time the Company shall have the
-------------------------------
right to replace or substitute for (herein "replace") the outstanding Letters of
Credit with one or more new Letters of Credit in an amount equal to at least the
undrawn amount of credit remaining under the then outstanding Letters of Credit,
so long as the new Letters of Credit are also issued in the form attached hereto
as Exhibit A, duly completed, issued by a Letter of Credit issuer acceptable
under Paragraph 2 above. The replaced Letter(s) of Credit shall be returned for
cancellation to the Company in exchange for the replacement Letter(s) of Credit.
5. Draw if No Obligation Payment Default Exists. If the United States
--------------------------------------------
draws on any Letter of Credit pursuant to clause (ii) of the second sentence of
Paragraph 2 above at a time when no Obligation Payment Default exists, the
proceeds of such draw shall be held in the United States Treasury. The United
States will promptly pay to the Company any amount held in excess of the amount
of all unpaid Obligations, established by Actionable Orders or Settlement
Agreements, if no other Government Claims remain outstanding. It will also
promptly pay all funds held
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under this Paragraph if it is determined, by the United States or pursuant to a
final and nonappealable final order of a court of competent jurisdiction, that
the Company does not have any liability or obligations to the United States in
respect of the Government Claims.
6. Nature of Guarantee. The guarantee of the Company set forth in
-------------------
Paragraph 1 above constitutes a guarantee of payment upon the Obligation Due
Date. The obligation of the Company hereunder shall not be affected by any
event, occurrence or circumstances which might otherwise constitute a legal or
equitable discharge or defense of the Company or surety (other than payment of
the Obligations). In the event that any payment by the Company or any
Obligations is rescinded or must otherwise be returned for any reason
whatsoever, the Company shall remain liable hereunder with respect to such
Obligations as if such payment had not been made. The Company agrees that the
United States may resort to it for payment of any of the Obligations, whether or
not the United States shall have resorted to any collateral security, or shall
have proceeded against the Company or any other person or entity primarily or
secondarily obligated in respect of any of the Obligations.
7. No Waiver; Cumulative Rights. No failure on the part of
----------------------------
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the United States to exercise, and no delay in exercising, any right, remedy or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by the United States of any right, remedy, or power hereunder
preclude any other or future exercise of any right, remedy, or power. Each and
every right, remedy, and power hereby granted to the United States shall be
cumulative and not exclusive of any other, and may be exercised by the United
States from time to time.
8. Waiver of Notice. The Company waives notice of the acceptance of this
----------------
guarantee, presentment, demand, notice of dishonor, protest, notice of sale of
any collateral security and all other notices whatsoever.
9. Miscellaneous. No party to this Agreement may assign its rights,
-------------
interest or obligations hereunder to any other person or entity without the
prior written consent of the other parties. This Agreement shall not be amended
except in a writing signed by all of the parties hereto. The provisions of this
Agreement shall be binding upon the parties hereto and their successors. This
Agreement may be executed in counterparts, each of which shall constitute an
original and all of which shall constitute one and the same agreement. Each
party hereto represents and warrants that this Agreement constitutes its valid
and binding
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agreement, enforceable against such party in accordance with its terms. This
Agreement embodies the entire agreement between the Company and the United
States.
10. Notices. All notices or other communications hereunder shall be in
-------
writing, delivered in person or sent by certified or registered mail or the
equivalent (return - receipt requested), at the addresses set forth below:
The address of the Company is:
Columbia/HCA Healthcare Corporation
One Park Plaza
Nashville, Tennessee 37203
Attention: Vice President of Finance and Treasurer
The address of the United States is:
Michael F. Hertz, Esq.
Director, Commercial Litigation Branch
U.S. Department of Justice
601 "D" Street, N.W.
Washington, D.C. 20004
(or, if by mail:
P.O. Box 261
Ben Franklin Station
Washington, D.C. 20044)
11. Governing Law; Consent to Jurisdiction. This Agreement shall be
--------------------------------------
governed by and construed in accordance with federal law. The Company consents
to the nonexclusive jurisdiction of the United States District Court for the
District of Columbia in any action to enforce any term of this Agreement. The
Company
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<PAGE>
hereby appoints its General Counsel as its agent for service of process or, in
the event that the Company shall at any time fail to have a General Counsel (or
shall desire another agent), the Company shall designate in writing to the
United States the appointment of another agent. If at any point the Company
fails to have a designated agent for service of process the United States may
serve the Company through the Secretary of State of Delaware, pursuant to Del.
Code Ann. tit. 8 (s) 321 (1999).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY:
COLUMBIA HCA HEALTHCARE CORPORATION
By: /s/ Roger Goldman
---------------------------
Roger Goldman
Counsel to Columbia/HCA Healthcare Corporation
and By: /s/ David G. Anderson
--------------------------
Title: V.P. Finance & Treasurer
--------------------------
THE UNITED STATES OF AMERICA:
UNITED STATES DEPARTMENT OF JUSTICE
By: /s/ Joyce R. Branda
-------------------------------
Joyce R. Branda
Deputy Director
Commercial Litigation Branch
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<PAGE>
EXHIBIT A
---------
THE BANK OF ________
Letter
of Credit No. Issue Date Expiration Date Maximum Amount
_____________________, _____
Department of Justice of the
United States of America
Commercial Litigation Branch
Civil Division
601 D Street, N.W.
Washington, DC 20530
Ladies and Gentlemen:
We hereby establish in favor of the United States of America
("Beneficiary") our irrevocable nontransferable standby letter of credit in the
amount of _______________________________ and No/100ths Dollars ($______.00),
which is available for payment upon presentation of your sight draft in the form
of Attachment 1 together with your draw certificate in the form of Attachment 2
signed by an authorized representative of the United States of America to us at
the address shown below:
The Bank of ___________
________________________
________________________
or at such other office located in the United States as may be designated by
us. Execution of the Verification of Authority provided on the form of
Attachment 2 is adequate indicia that the representative of the United States
is authorized to execute these documents. A sight draft and draw certificate
hereunder may be submitted via hand delivery or overnight courier to the address
above.
All drafts drawn under this letter of credit must contain the clause,
"Drawn under ____________________________ Bank Letter of Credit No. _________,
dated ____________ ________, __________."
Partial drawings are permitted hereunder.
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Multiple drawings are permitted.
This letter of credit shall expire at 5:00 P.M. EST on the Expiration Date;
provided that the Expiration Date hereunder shall be automatically extended
without amendment or confirmation for an additional period of one year from the
Expiration Date shown above and each anniversary date thereafter unless at least
30 days prior to the applicable Expiration Date, we shall notify you in writing
of our election not to renew and extend the applicable Expiration Date (a
"Notice of Non-Renewal") at the address shown above by registered mail or
courier service; provided, further that the applicable Expiration Date hereunder
shall not in any event be extended to a date beyond October 31, 20XX. Where
demand for payment is made prior to 12:00 Noon EST in conformity with the
requirements hereof, then payment under this Letter of Credit shall be made by
12:00 Noon EST on the next succeeding business day, or if notice is received
after such time then by 12:00 Noon, EST on the second succeeding business day.
The undersigned issuing bank hereby agrees that all drafts drawn under and
in compliance with the terms of this letter of credit will be duly honored upon
presentation of documents as herein specified if presentation is made at our
counters on or before the indicated expiration date.
Except as otherwise expressly stated herein, this letter of credit is
subject to the International Standby Practices 1998, International Chamber of
Commerce Publication No. 590 (the "ISP") and as to matters not covered by the
ISP, shall be governed by the laws of the State of New York.
Very truly yours,
_________________________ BANK
By: _____________________________
Title: _____________________________
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Attachment 1
------------
Sight Draft
Date: ______________________
Bank Name:
Address
At sight, pay to the order of the UNITED STATES OF AMERICA by wire transfer
to:
Bank Name:
Routing No.:
Account No.:
Attn.:
the amount of _________________ Dollars ($ ______________) drawn on the Bank of
__________________, as issuer of its Irrevocable Nontransferable Letter of
Credit No. ______________ dated _________________ _______, ________.
UNITED STATES OF AMERICA
By:________________________
Title:_____________________
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Attachment 2
Draw Certificate
Date: __________ ___________
The Bank of ________________
______________________ _____
____________________________
Attn.: Letter of Credit Department
Re: The Bank of _______, Irrevocable Letter of Credit No. ____________
dated _______ ____, __ _ in favor of the United States of America,
as Beneficiary (Beneficiary) for the account of Columbia/HCA Healthcare
Corporation, a Delaware Corporation.
Ladies and Gentlemen:
The undersigned duly authorized official of the Beneficiary hereby
certifies that the Beneficiary is entitled to draw under the Letter of Credit
because (one of the following blanks will be checked):
___i. The Obligations due on the Obligation Due Date under the Letter of
Credit Agreement dated ________, ____ in the amount of the draw have not been
paid as of the Obligation Due Date and such obligations are still outstanding as
of this date. As used herein, the Letter of Credit Agreement means the Agreement
dated January ___, 1999 between Columbia/HCA Healthcare Corporation and the
United States of America. Terms used but not otherwise defined herein shall have
the meanings provided in the Letter of Credit Agreement. The amount of the draw
hereunder does not exceed the amount of the Obligations that have not been paid
as of the Obligation Due Date.
___ii. The Letter of Credit is scheduled to expire within 30 days of the date
hereof and the Beneficiary has not received a new Letter of Credit on the same
terms.
Demand for payment under the above referenced Letter of Credit is hereby made
for the following amount:
US$ ____________________________
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Payment should be made in accordance with the instructions provided in the draft
which accompanied this certificate.
Very truly yours,
United States of America
Beneficiary
By: __________________________________
Title: _______________________________
Verification of Authority
I certify under penalty of perjury under the laws of the United States of
America that I have authority to execute this Draw Certificate and the
accompanying Draft on behalf of the United States of America.
_______________________
Executed on _______________________
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