UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the fiscal year ended December 31, 2008
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OR
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period
from
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Commission File Number 1-11239
HCA INC.
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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75-2497104
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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One Park Plaza
Nashville, Tennessee
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37203
(Zip Code)
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(Address of Principal Executive
Offices)
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Registrant’s telephone number, Including Area Code:
(615) 344-9551
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
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No
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Indicate by check mark if the Registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
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No
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Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes
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No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant’s
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
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No
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As of February 25, 2009, there were approximately
94,371,400 shares of Registrant’s common stock
outstanding. There is not a market for the Registrant’s
common stock; therefore, the aggregate market value of the
Registrant’s common stock held by non-affiliates is not
calculable.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
General
HCA Inc. is one of the leading health care services companies in
the United States. At December 31, 2008, we operated 166
hospitals, comprised of 160 general, acute care hospitals; five
psychiatric hospitals; and one rehabilitation hospital. The 166
hospital total includes eight hospitals (seven general, acute
care hospitals and one rehabilitation hospital) owned by joint
ventures in which an affiliate of HCA is a partner, and these
joint ventures are accounted for using the equity method. In
addition, we operated 105 freestanding surgery centers, eight of
which are owned by joint ventures in which an affiliate of HCA
is a partner, and these joint ventures are accounted for using
the equity method. Our facilities are located in 20 states
and England. The terms “Company,” “HCA,”
“we,” “our” or “us,” as used
herein, refer to HCA Inc. and its affiliates unless otherwise
stated or indicated by context. The term “affiliates”
means direct and indirect subsidiaries of HCA Inc. and
partnerships and joint ventures in which such subsidiaries are
partners. The terms “facilities” or
“hospitals” refer to entities owned and operated by
affiliates of HCA and the term “employees” refers to
employees of affiliates of HCA.
Our primary objective is to provide a comprehensive array of
quality health care services in the most cost-effective manner
possible. Our general, acute care hospitals typically provide a
full range of services to accommodate such medical specialties
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 our general, acute care hospitals,
freestanding surgery centers, diagnostic centers and
rehabilitation facilities. Our psychiatric hospitals provide a
full range of mental health care services through inpatient,
partial hospitalization and outpatient settings.
The Company was incorporated in Nevada in January 1990 and
reincorporated in Delaware in September 1993. Our principal
executive offices are located at One Park Plaza, Nashville,
Tennessee 37203, and our telephone number is
(615) 344-9551.
On November 17, 2006, HCA Inc. completed its merger (the
“Merger”) with Hercules Acquisition Corporation,
pursuant to which the Company was acquired by Hercules Holding
II, LLC (“Hercules Holding”), a Delaware limited
liability company owned by a private investor group comprised of
affiliates of Bain Capital Partners (“Bain”), Kohlberg
Kravis Roberts & Co. (“KKR”), Merrill Lynch
Global Private Equity (“MLGPE”) (each a
“Sponsor”) and affiliates of HCA founder,
Dr. Thomas F. Frist Jr., (the “Frist Entities,”
and together with the Sponsors, the “Investors”), and
by members of management and certain other investors. The
Merger, the financing transactions related to the Merger and
other related transactions are collectively referred to in this
annual report as the “Recapitalization.” The Merger
was accounted for as a recapitalization in our financial
statements, with no adjustments to the historical basis of our
assets and liabilities. As a result of the Recapitalization, our
outstanding capital stock is owned by the Investors, certain
members of management and key employees and certain other
investors. On April 29, 2008, we registered our common
stock pursuant to Section 12(g) of the Securities Exchange
Act of 1934, as amended, thus subjecting us to the reporting
requirements of Section 13(a) of the Securities Exchange
Act of 1934, as amended. Our common stock is not traded on a
national securities exchange.
Available
Information
We file certain reports with the Securities and Exchange
Commission (“the SEC”), including annual reports
on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K.
The public may read and copy any materials we file with the SEC
at the SEC’s Public Reference Room at
100 F Street, N.E., Washington, DC 20549. The public
may obtain information on the operation of the Public Reference
Room by calling the SEC at
1-800-SEC-0330.
We are an electronic filer, and the SEC maintains an Internet
site at
http://www.sec.gov
that contains the reports and other information we file
electronically. Our website address is www.hcahealthcare.com.
Please note that our website address is provided as an inactive
textual reference only. We make available free of charge,
through our website, our annual report on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K,
and all amendments to those reports filed or furnished pursuant
to Section 13(a) of the Exchange Act as soon as reasonably
practicable after such material is electronically filed with or
furnished to the SEC. The
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information provided on our website is not part of this report,
and is therefore not incorporated by reference unless such
information is specifically referenced elsewhere in this report.
Our Code of Conduct is available free of charge upon request to
our Corporate Secretary, HCA Inc., One Park Plaza, Nashville,
Tennessee 37203.
Business
Strategy
We are committed to providing the communities we serve high
quality, cost-effective health care while complying fully with
our ethics policy, governmental regulations and guidelines and
industry standards. As a part of this strategy, management
focuses on the following principal elements:
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maintain our dedication to the care and improvement of human
life;
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maintain our commitment to ethics and compliance;
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leverage our leading local market positions;
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expand our presence in key markets;
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continue to leverage our scale;
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continue to develop enduring physician relationships; and
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become the health care employer of choice.
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Health
Care Facilities
We currently own, manage or operate hospitals; freestanding
surgery centers; diagnostic and imaging centers; radiation and
oncology therapy centers; comprehensive rehabilitation and
physical therapy centers; and various other facilities.
At December 31, 2008, we owned and operated 153 general,
acute care hospitals with 38,014 licensed beds, and an
additional seven general, acute care hospitals with 2,267
licensed beds are operated through joint ventures, which are
accounted for using the equity method. Most of our general,
acute care hospitals provide medical and surgical services,
including inpatient care, intensive care, cardiac care,
diagnostic services and emergency services. The general, acute
care hospitals also provide outpatient services such as
outpatient surgery, laboratory, radiology, respiratory therapy,
cardiology and physical therapy. Each hospital has an organized
medical staff and a local board of trustees or governing board,
made up of members of the local community.
Our hospitals do not typically engage in extensive medical
research and education programs. However, some of our hospitals
are affiliated with medical schools and may participate in the
clinical rotation of medical interns and residents and other
education programs.
At December 31, 2008, we operated five psychiatric
hospitals with 490 licensed beds. Our psychiatric hospitals
provide therapeutic programs including child, adolescent and
adult psychiatric care, adult and adolescent alcohol and drug
abuse treatment and counseling.
We also operate outpatient health care facilities which include
freestanding surgery centers, diagnostic and imaging centers,
comprehensive outpatient rehabilitation and physical therapy
centers, outpatient radiation and oncology therapy centers and
various other facilities. These outpatient services are an
integral component of our strategy to develop comprehensive
health care networks in select communities. A majority of our
surgery centers are operated through partnerships or limited
liability companies, with majority ownership of each partnership
or limited liability company typically held by a general partner
or subsidiary that is an affiliate of HCA.
Certain of our affiliates provide a variety of management
services to our health care facilities, including patient safety
programs; ethics and compliance programs; national supply
contracts; equipment purchasing and leasing contracts;
accounting, financial and clinical systems; governmental
reimbursement assistance; construction planning and
coordination; information technology systems and solutions;
legal counsel; human resources services; and internal audit
services.
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Sources
of Revenue
Hospital revenues depend upon inpatient occupancy levels, the
medical and ancillary services ordered by physicians and
provided to patients, the volume of outpatient procedures and
the charges or payment rates for such services. Charges and
reimbursement rates for inpatient services vary significantly
depending on the type of payer, the type of service (e.g.,
medical/surgical, intensive care or psychiatric) and the
geographic location of the hospital. Inpatient occupancy levels
fluctuate for various reasons, many of which are beyond our
control.
We receive payment for patient services from the federal
government under the Medicare program, state governments under
their respective Medicaid or similar programs, managed care
plans, private insurers and directly from patients. The
approximate percentages of our revenues from such sources were
as follows:
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Year Ended
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December 31,
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2008
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2007
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2006
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Medicare
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23
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%
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24
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%
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25
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%
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Managed Medicare
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6
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5
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5
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Medicaid
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5
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5
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5
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Managed Medicaid
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3
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3
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3
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Managed care and other insurers
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53
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54
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54
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Uninsured
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10
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9
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8
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Total
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100
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%
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100
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%
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100
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%
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Medicare is a federal program that provides certain hospital and
medical insurance benefits to persons age 65 and over, some
disabled persons, persons with end-stage renal disease and
persons with Lou Gehrig’s Disease. Medicaid is a
federal-state program, administered by the states, which
provides hospital and medical benefits to qualifying individuals
who are unable to afford health care. All of our general, acute
care hospitals located in the United States are certified as
health care services providers for persons covered under
Medicare and Medicaid programs. Amounts received under Medicare
and Medicaid programs are generally significantly less than
established hospital gross charges for the services provided.
Our hospitals generally offer discounts from established charges
to certain group purchasers of health care services, including
private insurance companies, employers, HMOs, PPOs and other
managed care plans. These discount programs generally limit our
ability to increase revenues in response to increasing costs.
See Item 1, “Business — Competition.”
Patients are generally not responsible for the total difference
between established hospital gross charges and amounts
reimbursed for such services under Medicare, Medicaid, HMOs or
PPOs and other managed care plans, but are responsible to the
extent of any exclusions, deductibles or coinsurance features of
their coverage. The amount of such exclusions, deductibles and
coinsurance continues to increase. Collection of amounts due
from individuals is typically more difficult than from
governmental or third-party payers. We provide discounts to
uninsured patients who do not qualify for Medicaid or charity
care under our charity care policy. These discounts are similar
to those provided to many local managed care plans. In
implementing the discount policy, we attempt to qualify
uninsured patients for Medicaid, other federal or state
assistance or charity care under our charity care policy. If an
uninsured patient does not qualify for these programs, the
uninsured discount is applied.
Medicare
Inpatient
Acute Care
Under the Medicare program, we receive reimbursement under a
prospective payment system (“PPS”) for general, acute
care hospital inpatient services. Under the hospital inpatient
PPS, fixed payment amounts per inpatient discharge are
established based on the patient’s assigned Medicare
severity-diagnosis related group (“MS-DRG”). Effective
October 1, 2007, the Centers for Medicare and Medicaid
Services (“CMS”) began a two-year transition to full
implementation of MS-DRGs to replace the previously used
Medicare diagnosis related groups (“DRGs”) in an
effort to better recognize severity of illness in Medicare
payment rates. This change represents a refinement to the
existing DRG system. MS-DRGs classify treatments for illnesses
according to the estimated
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intensity of hospital resources necessary to furnish care for
each principal diagnosis. MS-DRG weights represent the average
resources for a given MS-DRG relative to the average resources
for all MS-DRGs. MS-DRG payments are adjusted for area wage
differentials. Hospitals, other than those defined as
“new,” receive PPS reimbursement for inpatient capital
costs based on MS-DRG weights multiplied by a geographically
adjusted federal rate. When the cost to treat certain patients
falls well outside the normal distribution, providers typically
receive additional “outlier” payments.
MS-DRG rates are updated and MS-DRG weights are recalibrated
each federal fiscal year (which begins October 1). The index
used to update the MS-DRG rates (the “market basket”)
gives consideration to the inflation experienced by hospitals
and entities outside the health care industry in purchasing
goods and services. In federal fiscal year 2008, the MS-DRG rate
was increased by the full market basket of 3.3%. For the federal
fiscal year 2009, CMS set the MS-DRG rate increase at full
market basket of 3.6%.
In August 2006, CMS changed the methodology used to recalibrate
the DRG weights from charge-based weights to cost relative
weights under a three-year transition period beginning in
federal fiscal year 2007. The adoption of the cost relative
weights is not anticipated to have a material financial impact
on us. Beginning October 1, 2008, MS-DRG weights are
calculated using 100% cost relative weights.
Effective October 1, 2007, CMS imposed a documentation and
coding adjustment to account for changes in payments under the
new MS-DRG system that are not related to changes in case mix.
Through legislative refinement, the documentation and coding
adjustments for federal fiscal years 2008 and 2009 are
reductions to the base payment rate of 0.6% and 0.9%,
respectively, for a cumulative reduction of 1.5%. However,
Congress has given CMS the ability to determine retrospectively
whether the documentation and coding adjustment levels for
federal fiscal years 2008 and 2009 were adequate to account for
changes in payments not related to changes in case mix. If the
levels are found to have been inadequate, CMS can impose an
adjustment to payments for federal fiscal years 2010, 2011 and
2012.
Further realignments in the MS-DRG system could also reduce the
payments we receive for certain specialties, including
cardiology and orthopedics. CMS has focused on payment levels
for such specialties in recent years in part because of the
proliferation of specialty hospitals. Changes in the payments
received for specialty services could have an adverse effect on
our revenues.
The Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (“MMA”) provided for DRG rate increases
for certain federal fiscal years at full market basket if data
for 10 patient care quality indicators were submitted to
the Secretary of the Department of Health and Human Services
(“HHS”). The Deficit Reduction Act of 2005 (“DRA
2005”) expanded and provided for the future expansion of
the number of quality measures that must be reported to receive
a full market basket update. CMS has published final rules that
expand to 44 the number of quality measures that hospitals are
required to report, beginning with discharges occurring in
calendar year 2009, in order to qualify for the full market
basket update to the inpatient prospective payment system in
federal fiscal year 2010. Failure to submit the required quality
indicators will result in a two percentage point reduction to
the market basket update. All of our hospitals paid under
Medicare inpatient MS-DRG PPS are participating in the quality
initiative by the Secretary of HHS by submitting the requested
quality data. While we will endeavor to comply with all data
submission requirements as additional requirements continue to
be added, our submissions may not be deemed timely or sufficient
to entitle us to the full market basket adjustment for all of
our hospitals.
As part of CMS’s goal of transforming Medicare from a
passive payer to an active purchaser of quality goods and
services, beginning October 1, 2007, CMS requires hospitals
to submit information on general acute care inpatient Medicare
claims specifying whether diagnoses were present on admission
(“POA”). For discharges occurring after
October 1, 2008, Medicare no longer assigns an inpatient
hospital discharge to a higher paying MS-DRG if a selected
hospital-acquired condition (“HAC”) was not POA. In
this situation, the case would be paid as though the secondary
diagnosis was not present. Currently, there are ten categories
of conditions on the list of HACs. On January 15, 2009, CMS
announced three National Coverage Determinations
(“NCDs”) that prohibit Medicare reimbursement for
erroneous surgical procedures performed on an inpatient or
outpatient basis. These three erroneous surgical procedures are
in addition to the HACs designated in CMS regulations. These
changes are not expected to have a material effect on our
revenues or cash flows.
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Historically, the Medicare program has set aside 5.10% of
Medicare inpatient payments to pay for outlier cases. CMS
estimates that outlier payments accounted for 4.64% and 4.65% of
total operating DRG payments for federal fiscal years 2007 and
2006, respectively. For federal fiscal year 2008, CMS
established an outlier threshold of $22,185, which resulted in
outlier payments estimated by CMS to be 4.70% of total operating
DRG payments. For federal fiscal year 2009, CMS has established
an outlier threshold of $20,045. We do not anticipate that the
change to the outlier threshold for federal fiscal year 2009
will have a material impact on our revenues.
Outpatient
CMS reimburses hospital outpatient services (and certain
Medicare Part B services furnished to hospital inpatients
who have no Part A coverage) on a PPS basis. CMS continues
to use fee schedules to pay for physical, occupational and
speech therapies, durable medical equipment, clinical diagnostic
laboratory services and nonimplantable orthotics and
prosthetics, freestanding surgery centers services and services
provided by independent diagnostic testing facilities.
Hospital outpatient services paid under PPS are classified into
groups called ambulatory payment classifications
(“APCs”). Services for each APC are similar clinically
and in terms of the resources they require. A payment rate is
established for each APC. Depending on the services provided, a
hospital may be paid for more than one APC for a patient visit.
The APC payment rates were updated for calendar years 2008 and
2007 by market baskets of 3.30% and 3.40%, respectively. On
November 18, 2008 CMS published a final rule that updated
payment rates for calendar year 2009 by the full market basket
of 3.60%. CMS continues to require that hospitals submit quality
data relating to outpatient care to receive the full market
basket increase under the outpatient PPS in calendar year 2010.
CMS requires that data on eleven quality measures be submitted
in calendar year 2009 for the payment determination in calendar
year 2010. Hospitals that fail to submit such data will receive
the market basket update minus two percentage points for the
outpatient PPS.
Rehabilitation
CMS reimburses inpatient rehabilitation facilities
(“IRFs”) on a PPS basis. Under IRF PPS, patients are
classified into case mix groups based upon impairment, age,
comorbidities (additional diseases or disorders from which the
patient suffers) and functional capability. IRFs are paid a
predetermined amount per discharge that reflects the
patient’s case mix group and is adjusted for area wage
levels, low-income patients, rural areas and high-cost outliers.
For federal fiscal years 2008 and 2007, CMS updated the PPS rate
for rehabilitation hospitals and units by market baskets of 3.2%
and 3.3%, respectively. However, CMS also applied a reduction to
the standard payment amount of 2.6% for federal fiscal year 2007
to account for coding changes that do not reflect real changes
in case mix. The Medicare, Medicaid and State Children’s
Health Insurance Program (“SCHIP”) Reauthorization Act
of 2007 eliminated the market basket update as of April 1,
2008 and continues the zero update through federal fiscal year
2009. As of December 31, 2008, we had one rehabilitation
hospital, which is operated through a joint venture, and 47
hospital rehabilitation units.
On May 7, 2004, CMS published a final rule to change the
criteria for being classified as an IRF, commonly known as the
“75% rule.” If a facility fails to meet the 75% rule
or other criteria to be classified as an IRF, it may be paid
under the acute care hospital inpatient or outpatient PPS, which
generally provide for lower payment amounts. Pursuant to the
final 75% rule, a specified percentage of a facility’s
inpatients over a given year must be treated for at least one of
13 conditions. The final rule provided for a transition period
during which the percentage threshold would increase, starting
at a 50% compliance threshold and culminating at a 75%
threshold, for cost reporting periods beginning on or after
July 1, 2007. Since then, several adjustments have been
made to the transition period. The passage of the Medicare,
Medicaid and SCHIP Reauthorization Act of 2007 set the
compliance threshold at 60% for cost reporting periods beginning
on or after July 1, 2006. Implementation of the 75% rule
has reduced our IRF admissions and can be expected to continue
to restrict the treatment of patients whose medical conditions
do not meet any of the 13 approved conditions.
7
Psychiatric
Inpatient hospital services furnished in psychiatric hospitals
and psychiatric units of general, acute care hospitals and
critical access hospitals are reimbursed under a prospective
payment system (“IPF PPS”), a per diem payment, with
adjustments to account for certain patient and facility
characteristics. IPF PPS contains an “outlier” policy
for extraordinarily costly cases and an adjustment to a
facility’s base payment if it maintains a full-service
emergency department. CMS has established the IPF PPS payment
rate in a manner intended to be budget neutral and has adopted a
July 1 update cycle. The rehabilitation, psychiatric and
long-term care (“RPL”) market basket update is used to
update the IPF PPS. The annual RPL market basket update for rate
year 2009 is 3.2%. As of December 31, 2008, we had five
psychiatric hospitals and 31 hospital psychiatric units.
Ambulatory
Surgery Centers
CMS reimburses ambulatory surgery centers (“ASCs”)
using a predetermined fee schedule. Effective January 1,
2007, as a result of DRA 2005, reimbursements for ASC overhead
costs were limited to no more than the overhead costs paid to
hospital outpatient departments under the Medicare hospital
outpatient PPS for the same procedure. On August 2, 2007,
CMS issued final regulations that changed payments for
procedures performed in an ASC. Effective January 1, 2008,
ASC payment groups increased from nine clinically disparate
payment groups to an extensive list of covered surgical
procedures among the APCs used under the outpatient PPS for
these surgical services. CMS estimates that the rates for
procedures performed in an ASC setting equal 65% of the
corresponding rates paid for the same procedures performed in an
outpatient hospital setting. Moreover, if CMS determines that a
procedure is commonly performed in a physician’s office,
the ASC reimbursement for that procedure is limited to the
reimbursement allowable under the Medicare Part B Physician
Fee Schedule, with limited exceptions. In addition, all surgical
procedures, other than those that pose a significant safety risk
or generally require an overnight stay, are payable as ASC
procedures. This rule expands the number of procedures that
Medicare will pay for if performed in an ASC. Because the new
payment system has a significant impact on payments for certain
procedures, the final rule establishes a four-year transition
period for implementing the required payment rates. This change
may result in more Medicare procedures that are now performed in
hospitals being moved to ASCs, reducing surgical volume in our
hospitals. Also, more Medicare procedures that are now performed
in ASCs may be moved to physicians’ offices. Commercial
third-party payers may adopt similar policies.
Other
Under PPS, the payment rates are adjusted for the area
differences in wage levels by a factor (“wage index”)
reflecting the relative wage level in the geographic area
compared to the national average wage level. Beginning in
federal fiscal year 2007, CMS adjusted 100% of the wage index
factor for occupational mix. The redistributive impact of wage
index changes, while slightly negative in the aggregate, is not
anticipated to have a material financial impact for 2009.
The Medicare program reimburses 70% of bad debts related to
deductibles and coinsurance for patients with Medicare coverage,
after the provider has made a reasonable effort to collect these
amounts. On March 30, 2006, the United States District
Court for the Western District of Michigan entered a final order
in
Battle Creek Health System v. Thompson,
which
provided that reasonable collection efforts have not been
satisfied as long as the Medicare accounts remained with an
external collection agency. On appeal, the United States Court
of Appeals for the Sixth Circuit upheld the lower court’s
decision. We incur substantial amounts of Medicare bad debts
every year that could be subject to the
Battle Creek
decision. We utilize extensive in-house and external
collection efforts for our accounts receivable, including
deductible and coinsurance amounts owed by patients with
Medicare coverage. We utilize a secondary collection agency
after in-house and primary collection agency efforts have been
unsuccessful. During 2007, we modified our accounts receivable
collection processes to provide us with reasonable collection
results and comply with CMS’s interpretation of reasonable
collection efforts. Possible future changes in judicial and
administrative interpretations of law and regulations governing
Medicare could disrupt our collections processes, increase our
costs or otherwise adversely affect our business and results of
operations.
8
As required by the MMA, CMS is implementing contractor reform
whereby CMS has competitively bid the Medicare fiscal
intermediary and Medicare carrier functions to 15 Medicare
Administrative Contractors (“MACs”). Hospital
companies have the option to work with the selected MAC in the
jurisdiction where a given hospital is located or, in the case
of chain providers, to use the MAC in the jurisdiction where the
hospital company’s home office is located. For chain
providers, either all hospitals in the chain must choose to stay
with the MAC chosen for their locality or all hospitals must opt
to use the home office MAC. HCA has chosen to use the MACs
assigned to the localities in which our hospitals are located.
Recently, CMS has completed the process of awarding contracts on
all 15 MAC jurisdictions. Individual MAC jurisdictions are in
varying phases of transition. For the transition periods and for
a potentially unforeseen period thereafter, all of these changes
could impact claims processing functions and the resulting cash
flow; however, we are unable to predict the impact at this time.
The MMA established the Recovery Audit Contractor
(“RAC”) three-year demonstration program to conduct
post-payment reviews to detect and correct improper payments in
the
fee-for-service
Medicare program. Beginning in 2005, CMS contracted with three
different RACs to conduct these reviews in California, Florida
and New York. The program was expanded in August 2007 to include
Arizona, Massachusetts and South Carolina. Each RAC had
discretion over the types of reviews and record requests it
would conduct within the states for which it was responsible as
long as it followed the CMS-defined Statement of Work. HCA had
46 hospitals located in the demonstration areas, and 44 of these
hospitals had a review performed. The Tax Relief and Health Care
Act of 2006 made the RAC program permanent and mandated its
nationwide expansion by 2010. CMS has awarded contracts to four
RACs that will implement the permanent RAC program on a
nationwide basis. The final impact of the demonstration program
and the permanent, nationwide program cannot be quantified at
this time.
Managed
Medicare
Managed Medicare plans relate to situations where a private
company contracts with CMS to provide members with Medicare
Part A, Part B and Part D benefits. Managed
Medicare plans can be structured as HMOs, PPOs, or private
fee-for-service
plans. The Medicare program allows beneficiaries to choose
enrollment in certain managed Medicare plans. In 2003 changes to
federal law increased reimbursement to managed Medicare plans
and limited, to some extent, the financial risk to the companies
offering the plans. Following these changes, the number of
beneficiaries choosing to receive their Medicare benefits
through such plans has increased. However, the Medicare
Improvements for Patients and Providers Act of 2008 reduced
payments to managed Medicare plans, and CMS has recently
proposed additional cuts in payments to managed Medicare plans.
Future changes may result in reduced premium payments to managed
Medicare plans and may lead to decreased enrollment in such
plans.
Medicaid
Medicaid programs are funded jointly by the federal government
and the states and are administered by states under approved
plans. Most state Medicaid program payments are made under a PPS
or are based on negotiated payment levels with individual
hospitals. Medicaid reimbursement is often less than a
hospital’s cost of services. The federal government and
many states are currently considering altering the level of
Medicaid funding (including upper payment limits) or program
eligibility that could adversely affect future levels of
Medicaid reimbursement received by our hospitals. As permitted
by law, certain states in which we operate have adopted
broad-based provider taxes to fund their Medicaid programs.
Since many states must operate with balanced budgets and since
the Medicaid program is often the state’s largest program,
states can be expected to adopt or consider adopting legislation
designed to reduce their Medicaid expenditures. DRA 2005
includes Medicaid cuts of approximately $4.8 billion over
five years. A congressional committee has estimated that
additional proposed legislative and regulatory changes, if
implemented, would reduce federal Medicaid funding by an
additional $49.7 billion over five years. The
implementation of many of these proposed changes is subject to a
statutorily mandated moratorium scheduled to expire in July
2009. States have also adopted, or are considering, legislation
designed to reduce coverage and program eligibility, enroll
Medicaid recipients in managed care programs
and/or
impose additional taxes on hospitals to help finance or expand
the states’ Medicaid systems. Future legislation or other
changes in the administration or interpretation of government
health programs could have a material, adverse effect on our
financial position and results of operations.
9
Managed
Medicaid
Managed Medicaid programs enable states to contract with one or
more entities for patient enrollment, care management and claims
adjudication. The states usually do not relinquish program
responsibilities for financing, eligibility criteria and core
benefit plan design. We generally contract directly with one of
the designated entities, usually a managed care organization.
The provisions of these programs are state-specific.
Enrollment in managed Medicaid plans has increased in recent
years, as state governments seek to control the cost of Medicaid
programs. However, general economic conditions in the states in
which we operate may require reductions in premium payments to
these plans and may reduce enrollment in these plans.
TRICARE
In December 2008, the Department of Defense implemented a
prospective payment system for hospital outpatient services
furnished to TRICARE beneficiaries similar to that utilized for
services furnished to Medicare beneficiaries. Because the
Medicare outpatient prospective payment system APC rates have
historically been below TRICARE rates, the adoption of this
payment methodology for TRICARE beneficiaries will reduce our
reimbursement. This change in TRICARE will have a material
impact on our revenues from this program; however, TRICARE
outpatient services do not represent a significant portion of
our patient volumes. The TRICARE outpatient payment rule has
been reopened for comment and the effective date delayed until
May 1, 2009. Further modification to the new outpatient
system may be made.
Annual
Cost Reports
All hospitals participating in the Medicare, Medicaid and
TRICARE programs, whether paid on a reasonable cost basis or
under a PPS, are required to meet certain financial reporting
requirements. Federal and, where applicable, state regulations
require the submission of annual cost reports covering the
revenues, costs and expenses associated with the services
provided by each hospital to Medicare beneficiaries and Medicaid
recipients.
Annual cost reports required under the Medicare and Medicaid
programs are subject to routine audits, which may result in
adjustments to the amounts ultimately determined to be due to us
under these reimbursement programs. These audits often require
several years to reach the final determination of amounts due to
or from us under these programs. Providers also have rights of
appeal, and it is common to contest issues raised in audits of
cost reports.
Managed
Care and Other Discounted Plans
Most of our hospitals offer discounts from established charges
to certain large group purchasers of health care services,
including managed care plans and private insurance companies.
Admissions reimbursed by commercial managed care and other
insurers were 35%, 37% and 36% of our total admissions for the
years ended December 31, 2008, 2007 and 2006, respectively.
Managed care contracts are typically negotiated for terms
between one and three years. While we generally received annual
average yield increases of 6% to 7% from managed care payers
during 2008, there can be no assurance that we will continue to
receive increases in the future.
Hospital
Utilization
We believe that the most important factors relating to the
overall utilization of a hospital are the quality and market
position of the hospital and the number and quality of
physicians and other health care professionals providing patient
care within the facility. Generally, we believe the ability of a
hospital to be a market leader is determined by its breadth of
services, level of technology, emphasis on quality of care and
convenience for patients and physicians. Other factors that
impact utilization include the growth in local population, local
economic conditions and market penetration of managed care
programs.
10
The following table sets forth certain operating statistics for
our health care facilities. Health care facility operations are
subject to certain seasonal fluctuations, including decreases in
patient utilization during holiday periods and increases in the
cold weather months. The data set forth in this table includes
only those facilities that are consolidated for financial
reporting purposes.
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|
|
|
|
|
|
|
|
|
|
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Years Ended December 31,
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2008
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2007
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2006
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2005
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2004
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|
Number of hospitals at end of period (a)
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158
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161
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166
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175
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182
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Number of freestanding outpatient surgery centers at end of
period (b)
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97
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99
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98
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87
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84
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Number of licensed beds at end of period (c)
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38,504
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38,405
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39,354
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41,265
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41,852
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Weighted average licensed beds (d)
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38,422
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39,065
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40,653
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41,902
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41,997
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Admissions (e)
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1,541,800
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1,552,700
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1,610,100
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1,647,800
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1,659,200
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Equivalent admissions (f)
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2,363,600
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2,352,400
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2,416,700
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2,476,600
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2,454,000
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Average length of stay (days) (g)
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4.9
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4.9
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4.9
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4.9
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5.0
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Average daily census (h)
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20,795
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21,049
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21,688
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22,225
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22,493
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Occupancy rate (i)
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54
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%
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54
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%
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53
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%
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53
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%
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54
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%
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Emergency room visits (j)
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5,246,400
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5,116,100
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5,213,500
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5,415,200
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5,219,500
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Outpatient surgeries (k)
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797,400
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804,900
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820,900
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836,600
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834,800
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Inpatient surgeries (l)
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493,100
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516,500
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533,100
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541,400
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541,000
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(a)
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Excludes eight facilities in 2008 and 2007 and seven facilities
in 2006, 2005 and 2004 that are not consolidated (accounted for
using the equity method) for financial reporting purposes.
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(b)
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Excludes eight facilities in 2008, nine facilities in 2007 and
2006, seven facilities in 2005 and eight facilities in 2004 that
are not consolidated (accounted for using the equity method) for
financial reporting purposes.
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(c)
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Licensed beds are those beds for which a facility has been
granted approval to operate from the applicable state licensing
agency.
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(d)
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Weighted average licensed beds represents the average number of
licensed beds, weighted based on periods owned.
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(e)
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Represents the total number of patients admitted to our
hospitals and is used by management and certain investors as a
general measure of inpatient volume.
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(f)
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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.
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(g)
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Represents the average number of days admitted patients stay in
our hospitals.
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(h)
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Represents the average number of patients in our hospital beds
each day.
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(i)
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Represents the percentage of hospital licensed beds occupied by
patients. Both average daily census and occupancy rate provide
measures of the utilization of inpatient rooms.
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(j)
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Represents the number of patients treated in our emergency rooms.
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(k)
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Represents the number of surgeries performed on patients who
were not admitted to our hospitals. Pain management and
endoscopy procedures are not included in outpatient surgeries.
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(l)
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Represents the number of surgeries performed on patients who
have been admitted to our hospitals. Pain management and
endoscopy procedures are not included in inpatient surgeries.
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11
Competition
Generally, other hospitals in the local communities served by
most of our hospitals provide services similar to those offered
by our hospitals. Additionally, in recent years the number of
freestanding surgery centers and diagnostic centers (including
facilities owned by physicians) in the geographic areas in which
we operate has increased significantly. As a result, most of our
hospitals operate in a highly competitive environment. In some
cases, competing hospitals are more established than our
hospitals. Some competing hospitals are owned by tax-supported
government agencies and many others are owned by
not-for-profit
entities that may be supported by endowments, charitable
contributions and/or tax revenues, and are exempt from sales,
property and income taxes. Such exemptions and support are not
available to our hospitals. In certain localities there are
large teaching hospitals that provide highly specialized
facilities, equipment and services which may not be available at
most of our hospitals. We are facing increasing competition from
physician-owned specialty hospitals and both our own and
unaffiliated freestanding surgery centers for market share in
high margin services.
Psychiatric hospitals frequently attract patients from areas
outside their immediate locale and, therefore, our psychiatric
hospitals compete with both local and regional hospitals,
including the psychiatric units of general, acute care hospitals.
Our strategies are designed to ensure our hospitals are
competitive. We believe our hospitals compete within local
communities on the basis of many factors, including the quality
of care; ability to attract and retain quality physicians,
skilled clinical personnel and other health care professionals;
location; breadth of services; technology offered and prices
charged. We have increased our focus on operating outpatient
services with improved accessibility and more convenient service
for patients, and increased predictability and efficiency for
physicians.
Two of the most significant factors to the competitive position
of a hospital are the number and quality of physicians
affiliated with the hospital. Although physicians may at any
time terminate their affiliation with a hospital we operate, our
hospitals seek to retain physicians with varied specialties on
the hospitals’ medical staffs and to attract other
qualified physicians. We believe that physicians refer patients
to a hospital on the basis of the quality and scope of services
it renders to patients and physicians, the quality of physicians
on the medical staff, the location of the hospital and the
quality of the hospital’s facilities, equipment and
employees. Accordingly, we strive to maintain and provide
quality facilities, equipment, employees and services for
physicians and patients.
Another major factor in the competitive position of a hospital
is our ability to negotiate service contracts with purchasers of
group health care services. Managed care plans attempt to direct
and control the use of hospital services and obtain discounts
from hospitals’ established gross charges. In addition,
employers and traditional health insurers continue to attempt to
contain costs through negotiations with hospitals for managed
care programs and discounts from established gross charges.
Generally, hospitals compete for service contracts with group
health care services purchasers on the basis of price, market
reputation, geographic location, quality and range of services,
quality of the medical staff and convenience. Our future success
will depend, in part, on our ability to retain and renew our
managed care contracts and enter into new managed care contracts
on favorable terms. Other health care providers may impact our
ability to enter into managed care contracts or negotiate
increases in our reimbursement and other favorable terms and
conditions. For example, some of our competitors may negotiate
exclusivity provisions with managed care plans or otherwise
restrict the ability of managed care companies to contract with
us. The trend toward consolidation among non-government payers
tends to increase their bargaining power over fee structures.
The importance of obtaining contracts with managed care
organizations varies from community to community, depending on
the market strength of such organizations.
State certificate of need (“CON”) laws, which place
limitations on a hospital’s ability to expand hospital
services and facilities, make capital expenditures and otherwise
make changes in operations, may also have the effect of
restricting competition. Before issuing a CON, these states
consider the need for additional or expanded health care
facilities or services. We currently operate health care
facilities in a number of states with CON laws. In those states
which have no CON laws or which set relatively high levels of
expenditures before they become reviewable by state authorities,
competition in the form of new services, facilities and capital
spending is more prevalent. See Item 1,
“Business — Regulation and Other Factors.”
12
We and the health care industry as a whole face the challenge of
continuing to provide quality patient care while dealing with
rising costs and strong competition for patients. Changes in
medical technology, existing and future legislation, regulations
and interpretations, and managed care contracting for provider
services by private and government payers remain ongoing
challenges.
Admissions and average lengths of stay continue to be negatively
affected by payer-required preadmission authorization,
utilization review and payer pressure to maximize outpatient and
alternative health care delivery services for less acutely ill
patients. Increased competition, admission constraints and payer
pressures are expected to continue. To meet these challenges, we
intend to expand our facilities or acquire or construct new
facilities where appropriate, to better enable the provision of
a comprehensive array of outpatient services, offer discounts to
private payer groups, upgrade facilities and equipment, and
offer new or expanded programs and services.
Regulation
and Other Factors
Licensure,
Certification and Accreditation
Health care facility construction and operation are subject to
numerous federal, state and local regulations relating to the
adequacy of medical care, equipment, personnel, operating
policies and procedures, maintenance of adequate records, fire
prevention, rate-setting and compliance with building codes and
environmental protection laws. Facilities are subject to
periodic inspection by governmental and other authorities to
assure continued compliance with the various standards necessary
for licensing and accreditation. We believe that our health care
facilities are properly licensed under applicable state laws.
All of our general, acute care hospitals are certified for
participation in the Medicare and Medicaid programs and are
accredited by The Joint Commission. If any facility were to lose
its Joint Commission accreditation or otherwise lose its
certification under the Medicare and Medicaid programs, the
facility would be unable to receive reimbursement from the
Medicare and Medicaid programs. Management believes our
facilities are in substantial compliance with current applicable
federal, state, local and independent review body regulations
and standards. The requirements for licensure, certification and
accreditation are subject to change and, in order to remain
qualified, it may become necessary for us to make changes in our
facilities, equipment, personnel and services. The requirements
for licensure also may include notification or approval in the
event of the transfer or change of ownership. Failure to obtain
the necessary state approval in these circumstances can result
in the inability to complete an acquisition or change of
ownership.
Certificates
of Need
In some states where we operate hospitals and other health care
facilities, the construction or expansion of health care
facilities, the acquisition of existing facilities, the transfer
or change of ownership and the addition of new beds or services
may be subject to review by and prior approval of state
regulatory agencies under a CON program. Such laws generally
require the reviewing state agency to determine the public need
for additional or expanded health care facilities and services.
Failure to obtain necessary state approval can result in the
inability to expand facilities, complete an acquisition or
change ownership.
State
Rate Review
Some states have adopted legislation mandating rate or budget
review for hospitals or have adopted taxes on hospital revenues,
assessments or licensure fees to fund indigent health care
within the state. In the aggregate, indigent tax provisions have
not materially, adversely affected our results of operations.
Although we do not currently operate facilities in states that
mandate rate or budget reviews, we cannot predict whether we
will operate in such states in the future, or whether the states
in which we currently operate may adopt legislation mandating
such reviews.
Utilization
Review
Federal law contains numerous provisions designed to ensure that
services rendered by hospitals to Medicare and Medicaid patients
meet professionally recognized standards, are medically
necessary and that claims for reimbursement are properly filed.
These provisions include a requirement that a sampling of
admissions of
13
Medicare and Medicaid patients must be reviewed by quality
improvement organizations to assess the appropriateness of
Medicare and Medicaid patient admissions and discharges, the
quality of care provided, the validity of DRG classifications
and the appropriateness of cases of extraordinary length of stay
or cost. Quality improvement organizations may deny payment for
services provided, may assess fines and also have the authority
to recommend to HHS that a provider, which is in substantial
noncompliance with the appropriate standards, be excluded from
participating in the Medicare program. Most nongovernmental
managed care organizations also require utilization review.
Federal
Health Care Program Regulations
Participation in any federal health care program, including the
Medicare and Medicaid programs, is heavily regulated by statute
and regulation. If a hospital fails to substantially comply with
the numerous conditions of participation in the Medicare and
Medicaid programs or performs certain prohibited acts, the
hospital’s participation in the federal health care
programs may be terminated, or civil or criminal penalties may
be imposed under certain provisions of the Social Security Act,
or both.
Anti-kickback
Statute
A section of the Social Security Act known as the
“Anti-kickback Statute” prohibits providers and others
from directly or indirectly soliciting, receiving, offering or
paying any remuneration with the intent of generating referrals
or orders for services or items covered by a federal health care
program. Courts have interpreted this statute broadly.
Violations of the Anti-kickback Statute may be punished by a
criminal fine of up to $25,000 for each violation or
imprisonment, civil money penalties of up to $50,000 per
violation and damages of up to three times the total amount of
the remuneration
and/or
exclusion from participation in federal health care programs,
including Medicare and Medicaid. Courts have held that there is
a violation of the Anti-kickback Statute if just one purpose of
the remuneration is to generate referrals, even if there are
other lawful purposes.
The Office of Inspector General at HHS (“OIG”), among
other regulatory agencies, is responsible for identifying and
eliminating fraud, abuse and waste. The OIG carries out this
mission through a nationwide program of audits, investigations
and inspections. As one means of providing guidance to health
care providers, the OIG issues “Special Fraud Alerts.”
These alerts do not have the force of law, but identify features
of arrangements or transactions that may indicate that the
arrangements or transactions violate the Anti-kickback Statute
or other federal health care laws. The OIG has identified
several incentive arrangements that constitute suspect
practices, including: (a) payment of any incentive by a
hospital each time a physician refers a patient to the hospital,
(b) the use of free or significantly discounted office
space or equipment in facilities usually located close to the
hospital, (c) provision of free or significantly discounted
billing, nursing or other staff services, (d) free training
for a physician’s office staff in areas such as management
techniques and laboratory techniques, (e) guarantees which
provide that, if the physician’s income fails to reach a
predetermined level, the hospital will pay any portion of the
remainder, (f) low-interest or interest-free loans, or
loans which may be forgiven if a physician refers patients to
the hospital, (g) payment of the costs of a
physician’s travel and expenses for conferences,
(h) coverage on the hospital’s group health insurance
plans at an inappropriately low cost to the physician,
(i) payment for services (which may include consultations
at the hospital) which require few, if any, substantive duties
by the physician, (j) purchasing goods or services from
physicians at prices in excess of their fair market value, and
(k) rental of space in physician offices, at other than
fair market value terms, by persons or entities to which
physicians refer. The OIG has encouraged persons having
information about hospitals who offer the above types of
incentives to physicians to report such information to the OIG.
The OIG also issues Special Advisory Bulletins as a means of
providing guidance to health care providers. These bulletins,
along with the Special Fraud Alerts, have focused on certain
arrangements that could be subject to heightened scrutiny by
government enforcement authorities, including:
(a) contractual joint venture arrangements and other joint
venture arrangements between those in a position to refer
business, such as physicians, and those providing items or
services for which Medicare or Medicaid pays, and
(b) certain “gainsharing” arrangements, i.e., the
practice of giving physicians a share of any reduction in a
hospital’s costs for patient care attributable in part to
the physician’s efforts.
14
In addition to issuing Special Fraud Alerts and Special Advisory
Bulletins, the OIG issues compliance program guidance for
certain types of health care providers. In January 2005, the OIG
published Supplemental Compliance Guidance for Hospitals,
supplementing its 1998 guidance for the hospital industry. In
the supplemental guidance, the OIG identifies a number of risk
areas under federal fraud and abuse statutes and regulations.
These areas of risk include compensation arrangements with
physicians, recruitment arrangements with physicians and joint
venture relationships with physicians.
As authorized by Congress, the OIG has published safe harbor
regulations that outline categories of activities that are
deemed protected from prosecution under the Anti-kickback
Statute. Currently, there are statutory exceptions and safe
harbors for various activities, including the following:
investment interests, space rental, equipment rental,
practitioner recruitment, personnel services and management
contracts, sale of practice, referral services, warranties,
discounts, employees, group purchasing organizations, waiver of
beneficiary coinsurance and deductible amounts, managed care
arrangements, obstetrical malpractice insurance subsidies,
investments in group practices, freestanding surgery centers,
ambulance replenishing, and referral agreements for specialty
services. The fact that conduct or a business arrangement does
not fall within a safe harbor, or that it is identified in a
fraud alert or advisory bulletin or as a risk area in the
Supplemental Compliance Guidelines for Hospitals, does not
automatically render the conduct or business arrangement illegal
under the Anti-kickback Statute. However, such conduct and
business arrangements may lead to increased scrutiny by
government enforcement authorities.
We have a variety of financial relationships with physicians and
others who either refer or influence the referral of patients to
our hospitals and other health care facilities, including
employment contracts, leases and professional service
agreements. We also have similar relationships with physicians
and facilities to which patients are referred from our
facilities. In addition, we provide financial incentives,
including minimum revenue guarantees, to recruit physicians into
the communities served by our hospitals. While we endeavor to
comply with the applicable safe harbors, certain of our current
arrangements, including joint ventures and financial
relationships with physicians and other referral sources and
persons and entities to which we refer patients, do not qualify
for safe harbor protection.
Although the Company believes that its arrangements with
physicians and other referral sources have been structured to
comply with current law and available interpretations, there can
be no assurance that regulatory authorities enforcing these laws
will determine these financial arrangements do not violate the
Anti-kickback Statute or other applicable laws. An adverse
determination could subject the Company to liabilities under the
Social Security Act, including criminal penalties, civil
monetary penalties and exclusion from participation in Medicare,
Medicaid or other federal health care programs.
Stark
Law
The Social Security Act also includes a provision commonly known
as the “Stark Law.” This law effectively prohibits
physicians from referring Medicare and Medicaid patients to
entities with which they or any of their immediate family
members have a financial relationship, if these entities provide
certain “designated health services” that are
reimbursable by Medicare, including inpatient and outpatient
hospital services, clinical laboratory services and radiology
services. The Stark Law also prevents the entity from billing a
federal health program for any items or services that result
from a prohibited referral and requires the entity to refund
amounts received for items or services provided pursuant to the
prohibited referral. Sanctions for violating the Stark Law
include denial of payment, civil monetary penalties of up to
$15,000 per prohibited service provided, and exclusion from the
Medicare and Medicaid programs. The statute also provides for a
penalty of up to $100,000 for a circumvention scheme. There are
exceptions to the self-referral prohibition for many of the
customary financial arrangements between physicians and
providers, including employment contracts, leases and
recruitment agreements. There is also an exception for a
physician’s ownership interest in an entire hospital, as
opposed to an ownership interest in a hospital department.
Unlike safe harbors under the Anti-kickback Statute with which
compliance is voluntary, an arrangement must comply with every
requirement of a Stark Law exception or the arrangement is in
violation of the Stark Law.
CMS has issued three phases of final regulations implementing
the Stark Law, as well as final regulations in the 2009
Inpatient Prospective Payment System (“IPPS”) final
rule. Phases I, II and III became effective in
January
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2002, July 2004 and December 2007, respectively. Some portions
of the 2009 IPPS Stark regulations became effective
October 1, 2008, and other portions become effective
October 1, 2009. While these regulations help clarify the
requirements of the exceptions to the Stark Law, it is unclear
how the government will interpret many of these exceptions for
enforcement purposes. The recent changes to the regulations
implementing the Stark Law further restrict the types of
arrangements that facilities and physicians may enter, including
additional restrictions on certain leases, percentage
compensation arrangements, and agreements under which a hospital
purchases services “under arrangements.” We may be
required to restructure or unwind some of our arrangements
because of these changes. Because many of these laws and their
implementing regulations are relatively new, we do not always
have the benefit of significant regulatory or judicial
interpretation of these laws and regulations. We attempt to
structure our relationships to meet an exception to the Stark
Law, but the regulations implementing the exceptions are
detailed and complex, and we cannot assure that every
relationship complies fully with the Stark Law.
In 2003, Congress passed legislation that modified the hospital
ownership exception to the Stark Law by creating an
18-month
moratorium on allowing physicians to own interests in new
specialty hospitals. The moratorium was extended by regulatory
and legislative action and expired on August 8, 2006. At
the conclusion of the moratorium, HHS announced that it will
require hospitals to disclose certain financial arrangements
with physicians. On September 14, 2007, CMS published an
information collection request called the Disclosure of
Financial Relationships Report (“DFRR”). HHS will
initially select 400 hospitals that will be required to report
the financial arrangements with physicians as required in the
DFRR. Those hospitals are comprised of 290 hospitals that failed
to respond to a previous voluntary CMS questionnaire about
investments and compensation relationships and 110 additional
hospitals. The DFRR and its supporting documentation are
currently under review by the Office of Management and Budget
and have not yet been released. CMS has indicated that
responding hospitals will have a limited amount of time to
compile a significant amount of information relating to their
financial relationships with physicians. A hospital may be
subject to substantial penalties if it is unable to assemble and
report this information within the required time frame or if any
applicable government agency determines that the submission is
inaccurate or incomplete. Depending on the final format of the
DFRR, responding hospitals may be subject to substantial
penalties as a result of enforcement actions brought by
government agencies and whistleblowers acting pursuant to the
FCA and similar state laws, based on such allegations as failure
to respond within required deadlines, that the response is
inaccurate or contains incomplete information, or that the
response indicates a potential violation of the Stark Law or
other requirements.
Similar
State Laws
Many states in which we operate also have laws similar to the
Anti-kickback Statute that prohibit payments to physicians for
patient referrals and laws similar to the Stark Law that
prohibit certain self-referrals. The scope of these state laws
is broad, since they can often apply regardless of the source of
payment for care, and little precedent exists for their
interpretation or enforcement. These statutes typically provide
for criminal and civil penalties, as well as loss of facility
licensure.
Other
Fraud and Abuse Provisions
The Health Insurance Portability and Accountability Act of 1996
(“HIPAA”) broadened the scope of certain fraud and
abuse laws by adding several criminal provisions for health care
fraud offenses that apply to all health benefit programs. The
Social Security Act also imposes criminal and civil penalties
for making false claims and statements to Medicare and Medicaid.
False claims include, but are not limited to, billing for
services not rendered or for misrepresenting actual services
rendered in order to obtain higher reimbursement, billing for
unnecessary goods and services, and cost report fraud. Federal
enforcement officials have the ability to exclude from Medicare
and Medicaid any investors, officers and managing employees
associated with business entities that have committed health
care fraud, even if the officer or managing employee had no
knowledge of the fraud. Criminal and civil penalties may be
imposed for a number of other prohibited activities, including
failure to return known overpayments, certain gainsharing
arrangements, billing Medicare amounts that are substantially in
excess of a provider’s usual charges, offering remuneration
to influence a Medicare or Medicaid beneficiary’s selection
of a health care provider, contracting with an individual or
entity known to be excluded from a federal health care program,
making or accepting a payment to induce a physician to reduce or
limit services, and soliciting or
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receiving any remuneration in return for referring an individual
for an item or service payable by a federal healthcare program.
Like the Anti-kickback Statute, these provisions are very broad.
To avoid liability, providers must, among other things,
carefully and accurately code claims for reimbursement, as well
as accurately prepare cost reports.
Some of these provisions, including the federal Civil Monetary
Penalty Law, require a lower burden of proof than other fraud
and abuse laws, including the Anti-kickback Statute. Civil
monetary penalties that may be imposed under the federal Civil
Monetary Penalty Law range from $10,000 to $50,000 per act, and
in some cases may result in penalties of up to three times the
remuneration offered, paid, solicited or received. In addition,
a violator may be subject to exclusion from federal and state
healthcare programs. Federal and state governments increasingly
use the federal Civil Monetary Penalty Law, especially where
they believe they cannot meet the higher burden of proof
requirements under the Anti-kickback Statute. Further,
individuals can receive up to $1,000 for providing information
on Medicare fraud and abuse that leads to the recovery of at
least $100 of Medicare funds under the Medicare Integrity
Program.
The
Federal False Claims Act and Similar State Laws
The
qui tam,
or whistleblower, provisions of the federal
False Claims Act (“FCA”) allow private individuals to
bring actions on behalf of the government alleging that the
defendant has defrauded the federal government. Further, the
government may use the FCA to prosecute Medicare and other
government program fraud in areas such as coding errors, billing
for services not provided and submitting false cost reports.
When a private party brings a
qui tam
action under the
FCA, the defendant often will not be made aware of the lawsuit
until the government commences its own investigation or makes a
determination whether it will intervene. When a defendant is
determined by a court of law to be liable under the FCA, the
defendant may be required to pay three times the actual damages
sustained by the government, plus mandatory civil penalties of
between $5,500 and $11,000 for each separate false claim. There
are many potential bases for liability under the FCA. Liability
often arises when an entity knowingly submits a false claim for
reimbursement to the federal government. The FCA defines the
term “knowingly” broadly. Though simple negligence
will not give rise to liability under the FCA, submitting a
claim with reckless disregard to its truth or falsity
constitutes a “knowing” submission under the FCA and,
therefore, will qualify for liability.
In some cases, whistleblowers and the federal government have
taken the position, and some courts have held, that providers
who allegedly have violated other statutes, such as the
Anti-kickback Statute and the Stark Law, have thereby submitted
false claims under the FCA. Every entity that receives at least
$5 million annually in Medicaid payments must have written
policies for all employees, contractors or agents, providing
detailed information about false claims, false statements and
whistleblower protections under certain federal laws, including
the FCA, and similar state laws. In addition, federal law
provides an incentive to states to enact false claims laws that
are comparable to the FCA. A number of states in which we
operate have adopted their own false claims provisions as well
as their own whistleblower provisions under which a private
party may file a civil lawsuit in state court.
HIPAA
Administrative Simplification and Privacy and Security
Requirements
The Administrative Simplification Provisions of HIPAA require
the use of uniform electronic data transmission standards for
certain health care claims and payment transactions submitted or
received electronically. These provisions are intended to
encourage electronic commerce in the health care industry. HHS
has issued regulations implementing the HIPAA Administrative
Simplification Provisions and compliance with these regulations
is mandatory for our facilities. In January 2009, CMS published
a final rule regarding updated standard code sets for certain
diagnoses and procedures known as ICD-10 code sets and related
changes to the formats used for certain electronic transactions.
While use of the ICD-10 code sets is not mandatory until
October 1, 2013, we will be modifying our payment systems
and processes to prepare for the implementation. In addition,
HIPAA requires that each provider use a National Provider
Identifier. While use of the ICD-10 code sets will require
significant administrative changes, we believe that the cost of
compliance with these regulations has not had and is not
expected to have a material, adverse effect on our business,
financial position or results of operations.
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The privacy and security regulations promulgated pursuant to
HIPAA extensively regulate the use and disclosure of
individually identifiable health information and require covered
entities, including health plans, to implement administrative,
physical and technical safeguards to protect the security of
such information. Recently, the American Recovery and
Reinvestment Act of 2009 (“ARRA”) broadened the scope
of the HIPAA privacy and security regulations. Among other
things, the ARRA provides that HHS must issue regulations
requiring covered entities to report certain security breaches
to individuals affected by the breach and, in some cases, to HHS
or to the public via a website. This reporting obligation will
apply broadly to breaches involving unsecured protected health
information and will become effective 30 days from the date
HHS issues these regulations. In addition, the ARRA extends the
application of certain provisions of the security and privacy
regulations to business associates (entities that handle
identifiable health information on behalf of covered entities)
and subjects business associates to civil and criminal penalties
for violation of the regulations. We enforce a HIPAA compliance
plan, which we believe complies with HIPAA privacy and security
requirements and under which a HIPAA compliance group monitors
our compliance. The privacy regulations and security regulations
have and will continue to impose significant costs on our
facilities in order to comply with these standards.
Violations of the HIPAA privacy and security regulations may
result in civil and criminal penalties, and the ARRA has
strengthened the enforcement provisions of HIPAA, which may
result in increased enforcement activity. Under the ARRA, HHS is
required to conduct periodic compliance audits of covered
entities and their business associates. The ARRA broadens the
applicability of the criminal penalty provisions to employees of
covered entities and requires HHS to impose penalties for
violations resulting from willful neglect. The ARRA also
significantly increases the amount of the civil penalties, with
penalties of up to $50,000 per violation for a maximum civil
penalty of $1,500,000 in a calendar year for violations of the
same requirement. In addition, the ARRA authorizes state
attorneys general to bring civil actions seeking either
injunction or damages in response to violations of HIPAA privacy
and security regulations that threaten the privacy of state
residents.
We remain subject to any state laws that relate to privacy or
the reporting of security breaches that are more restrictive
than the regulations issued under HIPAA and the requirements of
the ARRA. For example, various state laws and regulations may
require us to notify affected individuals in the event of a data
breach involving certain individually identifiable health or
financial information. In addition, the Federal Trade Commission
issued a final rule in October 2007 requiring financial
institutions and creditors, which may include health providers
and health plans, to implement written identity theft prevention
programs to detect, prevent, and mitigate identity theft in
connection with certain accounts. The compliance date for this
rule has been postponed until May 1, 2009.
EMTALA
All of our hospitals are subject to the Emergency Medical
Treatment and Active Labor Act (“EMTALA”). This
federal law requires any hospital participating in the Medicare
program to conduct an appropriate medical screening examination
of every individual who presents to the hospital’s
emergency room for treatment and, if the individual is suffering
from an emergency medical condition, to either stabilize the
condition or make an appropriate transfer of the individual to a
facility able to handle the condition. The obligation to screen
and stabilize emergency medical conditions exists regardless of
an individual’s ability to pay for treatment. There are
severe penalties under EMTALA if a hospital fails to screen or
appropriately stabilize or transfer an individual or if the
hospital delays appropriate treatment in order to first inquire
about the individual’s ability to pay. Penalties for
violations of EMTALA include civil monetary penalties and
exclusion from participation in the Medicare program. In
addition, an injured individual, the individual’s family or
a medical facility that suffers a financial loss as a direct
result of a hospital’s violation of the law can bring a
civil suit against the hospital.
The government broadly interprets EMTALA to cover situations in
which individuals do not actually present to a hospital’s
emergency room, but present for emergency examination or
treatment to the hospital’s campus, generally, or to a
hospital-based clinic that treats emergency medical conditions
or are transported in a hospital-owned ambulance, subject to
certain exceptions. EMTALA does not generally apply to
individuals admitted for inpatient services. The government also
has expressed its intent to investigate and enforce EMTALA
violations actively in the future. We believe our hospitals
operate in substantial compliance with EMTALA.
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Corporate
Practice of Medicine/Fee Splitting
Some of the states in which we operate have laws prohibiting
corporations and other entities from employing physicians,
practicing medicine for a profit and making certain direct and
indirect payments or fee-splitting arrangements between health
care providers designed to induce or encourage the referral of
patients to, or the recommendation of, particular providers for
medical products and services. Possible sanctions for violation
of these restrictions include loss of license and civil and
criminal penalties. In addition, agreements between the
corporation and the physician may be considered void and
unenforceable. These statutes vary from state to state, are
often vague and have seldom been interpreted by the courts or
regulatory agencies.
Health
Care Industry Investigations
Significant media and public attention has focused in recent
years on the hospital industry. This media and public attention,
changes in government personnel or other factors may lead to
increased scrutiny of the health care industry. While we are
currently not aware of any material investigations of the
Company under federal or state health care laws or regulations,
it is possible that governmental entities could initiate
investigations or litigation in the future at facilities we
operate and that such matters could result in significant
penalties, as well as adverse publicity. It is also possible
that our executives and managers could be included in
governmental investigations or litigation or named as defendants
in private litigation.
Our substantial Medicare, Medicaid and other governmental
billings result in heightened scrutiny of our operations. We
continue to monitor all aspects of our business and have
developed a comprehensive ethics and compliance program that is
designed to meet or exceed applicable federal guidelines and
industry standards. Because the law in this area is complex and
constantly evolving, governmental investigations or litigation
may result in interpretations that are inconsistent with our or
industry practices.
In public statements surrounding current investigations,
governmental authorities have taken positions on a number of
issues, including some for which little official interpretation
previously has been available, that appear to be inconsistent
with practices that have been common within the industry and
that previously have not been challenged in this manner. In some
instances, government investigations that have in the past been
conducted under the civil provisions of federal law may now be
conducted as criminal investigations.
Both federal and state government agencies have increased their
focus on and coordination of civil and criminal enforcement
efforts in the health care area. The OIG and the Department of
Justice have, from time to time, established national
enforcement initiatives, targeting all hospital providers, that
focus on specific billing practices or other suspected areas of
abuse. In addition, governmental agencies and their agents, such
as the Medicare Administrative Contractors, fiscal
intermediaries and carriers, may conduct audits of our health
care operations. Private payers may conduct similar post-payment
audits, and we also perform internal audits and monitoring.
In addition to national enforcement initiatives, federal and
state investigations relate to a wide variety of routine health
care operations such as: cost reporting and billing practices,
including for Medicare outliers; financial arrangements with
referral sources; physician recruitment activities; physician
joint ventures; and hospital charges and collection practices
for self-pay patients. We engage in many of these routine health
care operations and other activities that could be the subject
of governmental investigations or inquiries. For example, we
have significant Medicare and Medicaid billings, numerous
financial arrangements with physicians who are referral sources
to our hospitals, and joint venture arrangements involving
physician investors. Certain of our individual facilities have
received, and other facilities may receive, government inquiries
from federal and state agencies. Any additional investigations
of the Company, our executives or managers could result in
significant liabilities or penalties to us, as well as adverse
publicity.
Commencing in 1997, we became aware we were the subject of
governmental investigations and litigation relating to our
business practices. As part of the investigations, the United
States intervened in a number of
qui tam
actions brought
by private parties. The investigations related to, among other
things, DRG coding, outpatient laboratory billing, home health
issues, physician relations, cost report and wound care issues.
The investigations were concluded through a series of agreements
executed in 2000 and 2003 with the Criminal Division of the
Department of Justice, the Civil Division of the Department of
Justice, various U.S. Attorneys’ offices, CMS, a
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negotiating team representing states with claims against us, and
others. In January 2001, we entered into an eight year Corporate
Integrity Agreement (“CIA”) with the Office of
Inspector General of the Department of Health and Human
Services, which expired January 24, 2009. Violation or
breach of the CIA or other violation of federal or state laws
relating to Medicare, Medicaid or similar programs, could
subject us to substantial monetary fines, civil and criminal
penalties
and/or
exclusion from participation in the Medicare and Medicaid
programs and other federal and state health care programs.
Alleged violations may be pursued by the government or through
private qui tam actions. Sanctions imposed against us as a
result of such actions could have a material, adverse effect on
our results of operations and financial position.
Health
Care Reform
Health care is one of the largest industries in the United
States and continues to attract much legislative interest and
public attention. In recent years, various legislative proposals
regarding health care reform have been introduced or proposed in
Congress. We anticipate that national health care reform will be
a focus at the federal level in the near term. Several states
are also considering health care reform measures. This focus on
health care reform may increase the likelihood of significant
changes affecting the health care industry. Possible future
changes in the Medicare, Medicaid, and other state programs,
including Medicaid supplemental payments pursuant to upper
payment limit programs, may impact reimbursements to health care
providers and insurers. In addition, many states have enacted,
or are considering enacting, measures designed to reduce their
Medicaid expenditures and change private health care insurance.
States have also adopted, or are considering, legislation
designed to reduce coverage and program eligibility, enroll
Medicaid recipients in managed care programs
and/or
impose additional taxes on hospitals to help finance or expand
states’ Medicaid systems. Some states, including the states
in which we operate, have applied for and have been granted
federal waivers from current Medicaid regulations to allow them
to serve some or all of their Medicaid participants through
managed care providers. Hospital operating margins have been,
and may continue to be, under significant pressure because of
deterioration in pricing flexibility and payer mix, and growth
in operating expenses in excess of the increase in PPS payments
under the Medicare program.
General
Economic and Demographic Factors
Recently, the United States economy has weakened
significantly. Tightening credit markets, depressed consumer
spending and higher unemployment rates continue to pressure many
industries. During economic downturns, governmental entities
often experience budgetary constraints as a result of increased
costs and lower than expected tax collections. These budgetary
constraints may result in decreased spending for health and
human service programs, including Medicare, Medicaid and similar
programs, which represent significant payer sources for our
hospitals. Other risks we face from general economic weakness
include potential declines in the population covered under
managed care agreements, patient decisions to postpone or cancel
elective and non-emergent health care procedures, potential
increases in the uninsured and underinsured populations and
further difficulties in our collecting patient copayment and
deductible receivables.
The health care industry is impacted by the overall United
States financial pressures. The federal deficit, the
growing magnitude of Medicare expenditures and the aging of the
United States population will continue to place pressure on
federal health care programs.
Compliance
Program and Corporate Integrity Agreement
We maintain a comprehensive ethics and compliance program that
is designed to meet or exceed applicable federal guidelines and
industry standards. The program is intended to monitor and raise
awareness of various regulatory issues among employees and to
emphasize the importance of complying with governmental laws and
regulations. As part of the ethics and compliance program, we
provide annual ethics and compliance training to our employees
and encourage all employees to report any violations to their
supervisor, an ethics and compliance officer or a toll-free
telephone ethics line.
Until January 24, 2009, we operated under a CIA, which was
structured to assure the federal government of our overall
federal health care program compliance and specifically covered
DRG coding, outpatient PPS billing and physician relations. We
underwent major training efforts to ensure that our employees
learned and applied the
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policies and procedures implemented under the CIA and our ethics
and compliance program. The CIA had the effect of increasing the
amount of information we provided to the federal government
regarding our health care practices and our compliance with
federal regulations. Under the CIA, we had numerous affirmative
obligations, including the requirement to report potential
violations of applicable federal health care laws and
regulations. Pursuant to this obligation, we reported a number
of potential violations of the Stark Law, the Anti-kickback
Statute, EMTALA, HIPAA and other laws, most of which we consider
to be nonviolations or technical violations. We will submit our
final report pursuant to the CIA by April 30, 2009. These
reports could result in greater scrutiny by regulatory
authorities. The government could determine that our reporting
and/or
our
resolution of reported issues was inadequate. A determination
that we breached the CIA
and/or
a
finding of violations of applicable health care laws or
regulations could subject us to repayment requirements,
substantial monetary penalties, civil penalties, exclusion from
participation in the Medicare and Medicaid and other federal and
state health care programs and, for violations of certain laws
and regulations, criminal penalties. Though the CIA expired on
January 24, 2009, we maintain our ethics and compliance
program in substantially the same form. However, the audit plans
in the CIA have been modified and the reportable events process
will be converted to an internal reporting process.
Antitrust
Laws
The federal government and most states have enacted antitrust
laws that prohibit certain types of conduct deemed to be
anti-competitive. These laws prohibit price fixing, concerted
refusal to deal, market monopolization, price discrimination,
tying arrangements, acquisitions of competitors and other
practices that have, or may have, an adverse effect on
competition. Violations of federal or state antitrust laws can
result in various sanctions, including criminal and civil
penalties. Antitrust enforcement in the health care industry is
currently a priority of the Federal Trade Commission. We believe
we are in compliance with such federal and state laws, but
future review of our practices by courts or regulatory
authorities could result in a determination that could adversely
affect our operations.
Environmental
Matters
We are subject to various federal, state and local statutes and
ordinances regulating the discharge of materials into the
environment. Management does not believe that we will be
required to expend any material amounts in order to comply with
these laws and regulations or that compliance will materially
affect our capital expenditures, results of operations or
financial condition.
Insurance
As typical in the health care industry, we are subject to claims
and legal actions by patients in the ordinary course of
business. Subject to a $5 million per occurrence
self-insured retention, our facilities are insured by our
wholly-owned insurance subsidiary for losses up to
$50 million per occurrence. The insurance subsidiary has
obtained reinsurance for professional liability risks generally
above a retention level of $15 million per occurrence. We
also maintain professional liability insurance with unrelated
commercial carriers for losses in excess of amounts insured by
our insurance subsidiary.
We purchase, from unrelated insurance companies, coverage for
directors and officers liability and property loss in amounts
that we believe are adequate. The directors and officers
liability coverage includes a $25 million corporate
deductible for the periods prior to the Merger and a
$1 million corporate deductible subsequent to the Merger.
In addition, we will continue to purchase coverage for our
directors and officers on an ongoing basis. The property
coverage includes varying deductibles depending on the cause of
the property damage. These deductibles range from $500,000 per
claim up to 5% of the affected property values for certain flood
and wind and earthquake related incidents.
Employees
and Medical Staffs
At December 31, 2008 we had approximately
191,000 employees, including approximately
51,000 part-time employees. References herein to
“employees” refer to employees of affiliates of HCA.
We are subject to various state and federal laws that regulate
wages, hours, benefits and other terms and conditions relating
to employment. Employees at 21 of our hospitals were represented
by various labor unions at December 31, 2008 and 2007. We
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consider our employee relations to be satisfactory. Our
hospitals, as well as others, have experienced some recent union
organizational activity. We had elections at two hospitals in
California and one in Missouri during 2007 and no elections
during 2008. We expect to have one election in Missouri in 2009
as hospital employees have filed a decertification petition with
the National Labor Relations Board. We do not expect such
efforts to materially affect our future operations. Our
hospitals, like most hospitals, have experienced labor costs
rising faster than the general inflation rate. In some markets,
nurse and medical support personnel availability has become a
significant operating issue to health care providers. To address
this challenge, we have implemented several initiatives to
improve retention, recruiting, compensation programs and
productivity.
Our hospitals are staffed by licensed physicians, who generally
are not employees of our hospitals. However, some physicians
provide services in our hospitals under contracts which
generally describe a term of service, provide and establish the
duties and obligations of such physicians, require the
maintenance of certain performance criteria and fix compensation
for such services. Any licensed physician may apply to be
accepted to the medical staff of any of our hospitals, but the
hospital’s medical staff and the appropriate governing
board of the hospital, in accordance with established
credentialing criteria, must approve acceptance to the staff.
Members of the medical staffs of our hospitals often also serve
on the medical staffs of other hospitals and may terminate their
affiliation with one of our hospitals at any time.
We may be required to continue to enhance wages and benefits to
recruit and retain nurses and other medical support personnel or
to hire more expensive temporary or contract personnel. We also
depend on the available labor pool of semi-skilled and unskilled
employees in each of the markets in which we operate. As the
competition increases to hire more people from labor pools that
are not growing at a rate sufficient to meet demand, our labor
costs could increase. Certain proposed changes in federal labor
laws, including the Employee Free Choice Act, may increase the
likelihood of employee unionization attempts. To the extent that
a significant portion of our employee base unionizes, our costs
could increase materially. In addition, union-mandated or
state-mandated nurse-staffing ratios could significantly affect
labor costs, and have an adverse impact on revenues if we are
unable to meet the required ratios and are required to limit
patient admissions as a result. The states in which we operate
could adopt mandatory nurse-staffing ratios or could reduce
mandatory nurse-staffing ratios already in place.
Risk
Factors
If any of the events discussed in the following risk factors
were to occur, our business, financial position, results of
operations, cash flows or prospects could be materially,
adversely affected. Additional risks and uncertainties not
presently known, or currently deemed immaterial, may also
constrain our business and operations.
Our Substantial Leverage Could Adversely Affect Our Ability
To Raise Additional Capital To Fund Our Operations, Limit
Our Ability To React To Changes In The Economy Or Our Industry,
Expose Us To Interest Rate Risk To The Extent Of Our Variable
Rate Debt And Prevent Us From Meeting Our Obligations.
Since completing the Recapitalization, we are highly leveraged.
As of December 31, 2008, our total indebtedness was
$26.989 billion. Our high degree of leverage could have
important consequences, including:
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increasing our vulnerability to downturns or adverse changes in
general economic, industry or competitive conditions and adverse
changes in government regulations;
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requiring a substantial portion of cash flow from operations to
be dedicated to the payment of principal and interest on our
indebtedness, therefore reducing our ability to use our cash
flow to fund our operations, capital expenditures and future
business opportunities;
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exposing us to the risk of increased interest rates as certain
of our unhedged borrowings are at variable rates of interest;
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limiting our ability to make strategic acquisitions or causing
us to make nonstrategic divestitures;
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limiting our ability to obtain additional financing for working
capital, capital expenditures, product or service line
development, debt service requirements, acquisitions and general
corporate or other purposes; and
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limiting our ability to adjust to changing market conditions and
placing us at a competitive disadvantage compared to our
competitors who are less highly leveraged.
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We and our subsidiaries have the ability to incur additional
indebtedness in the future, subject to the restrictions
contained in our senior secured credit facilities and the
indentures governing our outstanding notes. If new indebtedness
is added to our current debt levels, the related risks that we
now face could intensify.
We May
Not Be Able To Generate Sufficient Cash To Service All Of Our
Indebtedness And May Not Be Able To Refinance Our Indebtedness
On Favorable Terms. If We Are Unable To Do So, We May Be Forced
To Take Other Actions To Satisfy Our Obligations Under Our
Indebtedness, Which May Not Be Successful.
Our ability to make scheduled payments on or to refinance our
debt obligations depends on our financial condition and
operating performance, which is subject to prevailing economic
and competitive conditions and to certain financial, business
and other factors beyond our control. We cannot assure you that
we will maintain a level of cash flows from operating activities
sufficient to permit us to pay the principal, premium, if any,
and interest on our indebtedness.
As of December 31, 2008, our substantial indebtedness
included $14.052 billion of indebtedness under our senior
secured credit facilities that matures in 2012 and 2013,
$5.700 billion of second lien notes maturing in 2014 and
2016 and $6.831 billion of unsecured senior notes and
debentures that mature on various dates from 2009 to 2095
(including $5.442 billion maturing through 2016). Because a
significant portion of our indebtedness matures in the next few
years, we may find it necessary or prudent to refinance that
indebtedness with longer-maturity debt at a higher interest
rate. In February 2009, for example, we issued $310 million
of
9
7
/
8
% Senior
Secured Notes due in 2017. We used the net proceeds of that
offering to prepay term loans under our senior secured credit
facilities, which currently bear interest at a lower floating
rate. Our ability to refinance our indebtedness on favorable
terms, or at all, is directly affected by the current global
economic and financial crisis. In addition, our ability to incur
secured indebtedness (which may enable us to achieve better
pricing than the incurrence of unsecured indebtedness) depends
in part on the value of our assets, which depends, in turn, on
the strength of our cash flows and results of operations and on
economic and market conditions and other factors.
If our cash flows and capital resources are insufficient to fund
our debt service obligations or we are unable to refinance our
indebtedness, we may be forced to reduce or delay investments
and capital expenditures, or to sell assets, seek additional
capital or restructure our indebtedness. These alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations. If our operating results and
available cash are insufficient to meet our debt service
obligations, we could face substantial liquidity problems and
might be required to dispose of material assets or operations to
meet our debt service and other obligations. We may not be able
to consummate those dispositions, or the proceeds from the
dispositions may not be adequate to meet any debt service
obligations then due.
Our Debt
Agreements Contain Restrictions That Limit Our Flexibility In
Operating Our Business.
Our senior secured credit facilities and the indentures
governing our outstanding notes contain various covenants that
limit our ability to engage in specified types of transactions.
These covenants limit our and certain of our subsidiaries’
ability to, among other things:
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incur additional indebtedness or issue certain preferred shares;
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pay dividends on, repurchase or make distributions in respect of
our capital stock or make other restricted payments;
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make certain investments;
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sell or transfer assets;
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create liens;
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consolidate, merge, sell or otherwise dispose of all or
substantially all of our assets; and
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enter into certain transactions with our affiliates.
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Under our asset-based revolving credit facility, when (and for
as long as) the combined availability under our asset-based
revolving credit facility and our senior secured revolving
credit facility is less than a specified amount, for a certain
period of time, or if a payment or bankruptcy event of default
has occurred and is continuing, funds deposited into any of our
depository accounts will be transferred on a daily basis into a
blocked account with the administrative agent and applied to
prepay loans under the asset-based revolving credit facility and
to cash collateralize letters of credit issued thereunder.
Under our senior secured credit facilities we are required to
satisfy and maintain specified financial ratios. Our ability to
meet those financial ratios can be affected by events beyond our
control, and there can be no assurance that we will continue to
meet those ratios. A breach of any of these covenants could
result in a default under both of our senior secured credit
facilities. Upon the occurrence of an event of default under our
senior secured credit facilities, our lenders could elect to
declare all amounts outstanding under our senior secured credit
facilities to be immediately due and payable and terminate all
commitments to extend further credit. If we were unable to repay
those amounts, the lenders under our senior secured credit
facilities could proceed against the collateral granted to them
to secure each such indebtedness. We have pledged a significant
portion of our assets as collateral under our senior secured
credit facilities and our existing senior secured notes. If any
of the lenders under our senior secured credit facilities
accelerate the repayment of borrowings, there can be no
assurance that we will have sufficient assets to repay our
senior secured credit facilities and our outstanding notes.
Our
Hospitals Face Competition For Patients From Other Hospitals And
Health Care Providers.
The health care business is highly competitive, and competition
among hospitals and other health care providers for patients has
intensified in recent years. Generally, other hospitals in the
local communities served by most of our hospitals provide
services similar to those offered by our hospitals. In addition,
CMS publicizes on a website performance data related to quality
measures and data on patient satisfaction surveys that hospitals
submit in connection with their Medicare reimbursement. Federal
law provides for the future expansion of the number of quality
measures that must be reported. Additional quality measures and
future trends toward clinical transparency may have an
unanticipated impact on our competitive position and patient
volumes. If any of our hospitals achieve poor results (or
results that are lower than our competitors) on these quality
measures or on patient satisfaction surveys, patient volumes
could decline.
In addition, the number of freestanding specialty hospitals,
surgery centers and diagnostic and imaging centers in the
geographic areas in which we operate has increased
significantly. As a result, most of our hospitals operate in a
highly competitive environment. Some of the facilities that
compete with our hospitals are owned by governmental agencies or
not-for-profit corporations supported by endowments, charitable
contributions
and/or
tax
revenues and can finance capital expenditures and operations on
a tax-exempt basis. Our hospitals are facing increasing
competition from physician-owned specialty hospitals and from
both our own and unaffiliated freestanding surgery centers for
market share in high margin services and for quality physicians
and personnel. If ambulatory surgery centers are better able to
compete in this environment than our hospitals, our hospitals
may experience a decline in patient volume, and we may
experience a decrease in margin, even if those patients use our
ambulatory surgery centers. In states that do not require prior
regulatory approval, known as a certificate of need
(“CON”), for the purchase, construction or expansion
of health care facilities or services, competing health care
providers face low barriers to entry and expansion. Further, if
our competitors are better able to attract patients, recruit
physicians, expand services or obtain favorable managed care
contracts at their facilities than our hospitals and ambulatory
surgery centers, we may experience an overall decline in patient
volume. See Item 1, “Business —
Competition.”
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The
Growth Of Uninsured And Patient Due Accounts And A Deterioration
In The Collectibility Of These Accounts Could Adversely Affect
Our Results Of Operations.
The primary collection risks of our accounts receivable relate
to the uninsured patient accounts and patient accounts for which
the primary insurance carrier has paid the amounts covered by
the applicable agreement, but patient responsibility amounts
(deductibles and copayments) remain outstanding. The provision
for doubtful accounts relates primarily to amounts due directly
from patients.
The amount of the provision for doubtful accounts is based upon
management’s assessment of historical writeoffs and
expected net collections, business and economic conditions,
trends in federal and state governmental and private employer
health care coverage, the rate of growth in uninsured patient
admissions and other collection indicators. Due to a number of
factors, including the recent economic downturn and increase in
unemployment, we believe that our facilities may experience
growth in bad debts and charity care. At December 31, 2008,
our allowance for doubtful accounts represented approximately
93% of the $5.838 billion patient due accounts receivable
balance. For the year ended December 31, 2008, the
provision for doubtful accounts increased to 12.0% of revenues
compared to 11.7% of revenues in 2007.
A continuation of the trends that have resulted in an increasing
proportion of accounts receivable being comprised of uninsured
accounts and a deterioration in the collectibility of these
accounts will adversely affect our collection of accounts
receivable, cash flows and results of operations.
Changes
In Governmental And Judicial Interpretations May Negatively
Impact Our Ability To Obtain Reimbursement Of Medicare Bad
Debts
The Medicare program reimburses 70% of bad debts related to
deductibles and coinsurance for patients with Medicare coverage,
after the provider has made a reasonable effort to collect those
amounts. We utilize extensive in-house and external collection
efforts for our accounts receivable, including deductible and
coinsurance amounts owed by patients with Medicare coverage. We
use a secondary collection agency after in-house and primary
collection agency efforts have been unsuccessful. A recent court
case upheld CMS’s interpretation that reasonable collection
efforts have not been satisfied as long as the Medicare accounts
remain with an external collection agency. We incur substantial
amounts of Medicare bad debts every year that could be subject
to this decision. During 2007, we modified our accounts
receivable collection processes to provide reasonable collection
results and comply with CMS’s interpretation of reasonable
collection efforts. Possible future changes in judicial and
administrative interpretations of law and regulations governing
Medicare could disrupt our collections processes, increase our
costs or otherwise adversely affect our business and results of
operations.
Changes
In Governmental Programs May Reduce Our Revenues.
A significant portion of our patient volumes is derived from
government health care programs, principally Medicare and
Medicaid, which are highly regulated and subject to frequent and
substantial changes. We derived approximately 59% of our
admissions from the Medicare and Medicaid programs in 2008. In
recent years, legislative and regulatory changes have resulted
in limitations on and, in some cases, reductions in levels of
payments to health care providers for certain services under
these government programs. National health care reform is a
focus at the federal level, and we anticipate that it will
remain a focus in the near term. Several states are also
considering health care reform measures. This focus on health
care reform may increase the likelihood of significant changes
affecting government health care programs. Possible future
changes in the Medicare, Medicaid, and other state programs, may
reduce reimbursements to health care providers and insurers and
may also increase our operating costs, which could reduce our
profitability.
CMS issued final regulations effective January 1, 2008 that
increased ASC payment groups from nine clinically disparate
payment groups to an extensive list of covered surgical
procedures among the APCs used under the outpatient PPS for
these surgical services. CMS estimates that the payment rates
for procedures performed in an ASC setting equal 65% of the
corresponding rates paid for the same procedures performed in an
outpatient hospital setting. The final regulation establishes a
four-year transition period for implementing the revised payment
rates. This regulation significantly expands the number of
procedures that Medicare reimburses if performed in an ASC and
limits ASC reimbursement for procedures commonly performed in
physicians’ offices. More Medicare
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procedures that are now performed in hospitals, such as ours,
may be moved to ASCs, reducing surgical volume in our hospitals.
Also, more Medicare procedures that are now performed in ASCs,
such as ours, may be moved to physicians’ offices.
Commercial third-party payers may adopt similar policies.
On August 22, 2007, CMS issued a final rule for federal
fiscal year 2008 for hospital inpatient PPS. This rule adopts a
two-year implementation of MS-DRGs, a Medicare severity-adjusted
diagnosis related group system. This change represents a
refinement to the existing Medicare DRG system. Realignments in
the DRG system could impact the margins we receive for certain
services. For federal fiscal year 2009, CMS has provided a 3.6%
market basket update for hospitals that submit certain quality
patient care indicators and a 1.6% update for hospitals that do
not submit this data. While we will endeavor to comply with all
quality data submission requirements, our submissions may not be
deemed timely or sufficient to entitle us to the full market
basket adjustment for all of our hospitals. Medicare payments to
hospitals in fiscal years 2009 and 2008 have been reduced to
eliminate what CMS estimates will be the effect of coding or
classifications changes as a result of hospitals implementing
the MS-DRG system. CMS may retrospectively determine if the
adjustment levels for federal fiscal years 2009 and 2008 were
adequate and may impose an adjustment in future years if CMS
finds that the adjustment was inadequate. Additionally, Medicare
payments to hospitals are subject to a number of other
adjustments, and the actual impact on payments to specific
hospitals may vary. In some cases, commercial third-party payers
and other payers such as some state Medicaid programs rely on
all or portions of the Medicare DRG system to determine payment
rates. The change from traditional Medicare DRGs to MS-DRGs
could adversely impact those payment rates if any other payers
adopt MS-DRGs.
Since most states must operate with balanced budgets and since
the Medicaid program is often the state’s largest program,
states can be expected to adopt or consider adopting legislation
designed to reduce their Medicaid expenditures. The current
economic downturn has increased the budgetary pressures on most
states, and these budgetary pressures have resulted and likely
will continue to result in decreased spending for Medicaid
programs in many states. Further, many states have also adopted,
or are considering, legislation designed to reduce coverage and
program eligibility, enroll Medicaid recipients in managed care
programs
and/or
impose additional taxes on hospitals to help finance or expand
the states’ Medicaid systems.
Recently, the Department of Defense implemented a prospective
payment system for hospital outpatient services furnished to
TRICARE beneficiaries similar to that utilized for services
furnished to Medicare beneficiaries. Because the Medicare
outpatient prospective payment system APC rates have
historically been below TRICARE rates, the adoption of this
payment methodology for TRICARE beneficiaries will reduce our
reimbursement. This change in TRICARE will have a material
impact on our revenues from this program; however, TRICARE
outpatient services do not represent a significant portion of
our patient volumes. The TRICARE outpatient payment rule has
been reopened for comment and the effective date delayed until
May 1, 2009. Further modification to the new outpatient
payment system may be made.
Changes in laws or regulations regarding government health
programs or other changes in the administration of government
health programs could have a material, adverse effect on our
financial position and results of operations.
If We Are
Unable To Retain And Negotiate Favorable Contracts With
Nongovernment Payers, Including Managed Care Plans, Our Revenues
May Be Reduced.
Our ability to obtain favorable contracts with nongovernment
payers, including health maintenance organizations, preferred
provider organizations and other managed care plans
significantly affects the revenues and operating results of our
facilities. Revenues derived from these entities and other
insurers accounted for 53% and 54% of our patient revenues for
the years ended December 31, 2008 and 2007, respectively.
Nongovernment payers, including managed care payers, continue to
demand discounted fee structures, and the trend toward
consolidation among nongovernment payers tends to increase their
bargaining power over fee structures. Our future success will
depend, in part, on our ability to retain and renew our managed
care contracts and enter into new managed care contracts on
terms favorable to us. Other health care providers may impact
our ability to enter into managed care contracts or negotiate
increases in our reimbursement and other favorable terms and
conditions. For example, some of our competitors may negotiate
exclusivity provisions with managed care plans or otherwise
restrict the ability of
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managed care companies to contract with us. If we are unable to
retain and negotiate favorable contracts with managed care plans
or experience reductions in payment increases or amounts
received from nongovernment payers, our revenues may be reduced.
Our
Performance Depends On Our Ability To Recruit And Retain Quality
Physicians.
Physicians generally direct the majority of hospital admissions,
and the success of our hospitals depends, therefore, in part on
the number and quality of the physicians on the medical staffs
of our hospitals, the admitting practices of those physicians
and maintaining good relations with those physicians. Physicians
are often not employees of the hospitals at which they practice
and, in many of the markets that we serve, most physicians have
admitting privileges at other hospitals in addition to our
hospitals. Such physicians may terminate their affiliation with
our hospitals at any time. If we are unable to provide adequate
support personnel or technologically advanced equipment and
hospital facilities that meet the needs of those physicians,
they may be discouraged from referring patients to our
facilities, admissions may decrease and our operating
performance may decline.
Our
Hospitals Face Competition For Staffing, Which May Increase
Labor Costs And Reduce Profitability.
Our operations are dependent on the efforts, abilities and
experience of our management and medical support personnel, such
as nurses, pharmacists and lab technicians, as well as our
physicians. We compete with other health care providers in
recruiting and retaining qualified management and support
personnel responsible for the daily operations of each of our
hospitals, including nurses and other nonphysician health care
professionals. In some markets, the availability of nurses and
other medical support personnel has become a significant
operating issue to health care providers. We may be required to
continue to enhance wages and benefits to recruit and retain
nurses and other medical support personnel or to hire more
expensive temporary or contract personnel. We also depend on the
available labor pool of semi-skilled and unskilled employees in
each of the markets in which we operate. As the competition
increases to hire more people from labor pools that are not
growing at a rate sufficient to meet demand, our labor costs
could increase. Certain proposed changes in federal labor laws,
including the Employee Free Choice Act, may increase the
likelihood of employee unionization attempts. To the extent that
a significant portion of our employee base unionizes, our costs
could increase materially. In addition, union-mandated or
state-mandated nurse-staffing ratios could significantly affect
labor costs and have an adverse impact on revenue if we are
unable to meet the required ratios and are required to limit
admissions as a result. If our labor costs increase, we may not
be able to raise rates to offset these increased costs. Because
a significant percentage of our revenues consists of fixed,
prospective payments, our ability to pass along increased labor
costs is constrained. Our failure to recruit and retain
qualified management, nurses and other medical support
personnel, or to control labor costs, could have a material,
adverse effect on our results of operations.
If We
Fail To Comply With Extensive Laws And Government Regulations,
We Could Suffer Penalties Or Be Required To Make Significant
Changes To Our Operations.
The health care industry is required to comply with extensive
and complex laws and regulations at the federal, state and local
government levels relating to, among other things:
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billing for services;
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relationships with physicians and other referral sources;
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adequacy of medical care;
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quality of medical equipment and services;
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qualifications of medical and support personnel;
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confidentiality, maintenance and security issues associated with
health-related information and medical records;
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the screening, stabilization and transfer of individuals who
have emergency medical conditions;
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licensure and certification;
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hospital rate or budget review;
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operating policies and procedures; and
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addition of facilities and services.
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Among these laws are the federal Anti-kickback Statute, the
federal physician self-referral law (commonly called the Stark
Law) and the federal FCA and similar state laws. We have a
variety of financial relationships with physicians and others
who either refer or influence the referral of patients to our
hospitals and other health care facilities, and these laws
govern those relationships. The OIG has enacted safe harbor
regulations that outline practices that are deemed protected
from prosecution under the Anti-kickback Statute. While we
endeavor to comply with the applicable safe harbors, certain of
our current arrangements, including joint ventures and financial
relationships with physicians and other referral sources and
persons and entities to which we refer patients, do not qualify
for safe harbor protection. Failure to qualify for a safe harbor
does not mean that the arrangement necessarily violates the
Anti-kickback Statute but may subject the arrangement to greater
scrutiny; however, we cannot offer assurance that practices
outside of a safe harbor will not be found to violate the
Anti-kickback Statute. Allegations of violations of the
Anti-kickback Statute may be brought under the federal Civil
Monetary Penalty Law, which requires a lower burden of proof
than other fraud and abuse laws, including the Anti-kickback
Statute.
Our financial relationships with referring physicians and their
immediate family members must comply with the Stark Law by
meeting an exception. We attempt to structure our relationships
to meet an exception to the Stark Law, but the regulations
implementing the exceptions are detailed and complex, and we
cannot assure that every relationship complies fully with the
Stark Law. Unlike the Anti-kickback Statute, failure to meet an
exception under the Stark Law results in a violation of the
Stark Law, even if such violation is technical in nature.
Additionally, if we violate the Anti-kickback Statute or Stark
Law, or if we improperly bill for our services, we may be found
to violate the FCA, either under a suit brought by the
government or by a private person under a
qui tam
,
or “whistleblower,” suit.
If we fail to comply with the Anti-kickback Statute, the Stark
Law, the FCA or other applicable laws and regulations, we could
be subjected to liabilities, including civil penalties
(including the loss of our licenses to operate one or more
facilities), exclusion of one or more facilities from
participation in the Medicare, Medicaid and other federal and
state health care programs and, for violations of certain laws
and regulations, criminal penalties. See “Regulation.”
CMS is proceeding with a proposal to collect information from
400 hospitals regarding their ownership, investment and
compensation arrangements with physicians. Called the Disclosure
of Financial Relationships Report or “DFRR,” CMS
intends to use this data to monitor compliance with the Stark
Law, and CMS may share this information with other government
agencies. Many of these agencies have not previously analyzed
this information and have the authority to bring enforcement
actions against hospitals filing such reports.
Because many of these laws and their implementing regulations
are relatively new, we do not always have the benefit of
significant regulatory or judicial interpretation of these laws
and regulations. In the future, different interpretations or
enforcement of these laws and regulations could subject our
current or past practices to allegations of impropriety or
illegality or could require us to make changes in our
facilities, equipment, personnel, services, capital expenditure
programs and operating expenses. A determination that we have
violated these laws, or the public announcement that we are
being investigated for possible violations of these laws, could
have a material, adverse effect on our business, financial
condition, results of operations or prospects, and our business
reputation could suffer significantly. In addition, other
legislation or regulations at the federal or state level may be
adopted that adversely affect our business.
We
Have Been The Subject Of Governmental Investigations, Claims And
Litigation, And We Could Be The Subject Of Additional
Investigations In The Future.
Commencing in 1997, we became aware that we were the subject of
governmental investigations and litigation relating to our
business practices. The investigations were concluded through a
series of agreements executed in 2000 and 2003. In January 2001,
we entered into an eight-year CIA with the OIG, which expired
January 24, 2009.
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Under the CIA, we had numerous affirmative obligations,
including the requirement to report potential violations of
applicable federal health care laws and regulations. Pursuant to
these obligations, we reported a number of potential violations
of the Stark Law, the Anti-kickback Statute, the EMTALA and
other laws, most of which we consider to be nonviolations or
technical violations. We will submit our final report pursuant
to the CIA by April 30, 2009. The government could
determine that our reporting
and/or
our
resolution of reported issues was inadequate. If we are found to
have violated the CIA or any applicable health care laws or
regulations, we could be subject to repayment requirements,
substantial monetary fines, civil penalties, exclusion from
participation in the Medicare and Medicaid and other federal and
state health care programs, and, for violations of certain laws
and regulations, criminal penalties. Any such sanctions or
expenses could have a material, adverse effect on our financial
position, results of operations or liquidity.
Health care companies are subject to numerous investigations by
various governmental agencies. Further, under the federal FCA,
private parties have the right to bring
qui tam
, or
“whistleblower,” suits against companies that submit
false claims for payments to the government. Some states have
adopted similar state whistleblower and false claims provisions.
Certain of our individual facilities have received, and other
facilities may receive, government inquiries from federal and
state agencies. Depending on whether the underlying conduct in
these or future inquiries or investigations could be considered
systemic, their resolution could have a material, adverse effect
on our financial position, results of operations and liquidity.
Governmental agencies and their agents, such as the Medicare
Administrative Contractors, fiscal intermediaries and carriers,
as well as the OIG, conduct audits of our health care
operations. Private payers may conduct similar post-payment
audits, and we also perform internal audits and monitoring.
Depending on the nature of the conduct found in such audits and
whether the underlying conduct could be considered systemic, the
resolution of these audits could have a material, adverse effect
on our financial position, results of operations and liquidity.
The MMA established the RAC three-year demonstration program to
conduct post-payment reviews to detect and correct improper
payments in the fee-for-service Medicare program. Beginning in
2005, CMS contracted with three different RACs to conduct these
reviews in California, Florida and New York. The program was
expanded in August 2007 to include Arizona, Massachusetts and
South Carolina. We had 46 hospitals located in the demonstration
areas and 44 of these hospitals actually had a review performed.
The Tax Relief and Health Care Act of 2006 made the RAC program
permanent and mandated its nationwide expansion by 2010. Should
we be found out of compliance, depending on the nature of the
findings, our business, our financial position and our results
of operations could be negatively impacted.
Controls
Designed To Reduce Inpatient Services May Reduce Our
Revenues.
Controls imposed by Medicare, managed Medicare, Medicaid,
managed Medicaid and commercial third-party payers designed to
reduce admissions and lengths of stay, commonly referred to as
“utilization review,” have affected and are expected
to continue to affect our facilities. Utilization review entails
the review of the admission and course of treatment of a patient
by health plans. Inpatient utilization, average lengths of stay
and occupancy rates continue to be negatively affected by
payer-required preadmission authorization and utilization review
and by payer pressure to maximize outpatient and alternative
health care delivery services for less acutely ill patients.
Efforts to impose more stringent cost controls are expected to
continue. Although we are unable to predict the effect these
changes will have on our operations, significant limits on the
scope of services reimbursed and on reimbursement rates and fees
could have a material, adverse effect on our business, financial
position and results of operations.
Our
Overall Business Results May Suffer From The Recent Economic
Downturn.
Recently, the United States economy has weakened
significantly. Tightening credit markets, depressed consumer
spending and higher unemployment rates continue to pressure many
industries. During economic downturns, governmental entities
often experience budgetary constraints as a result of increased
costs and lower than expected tax collections. These budgetary
constraints may result in decreased spending for health and
human service programs, including Medicare, Medicaid and similar
programs, which represent significant payer sources for our
hospitals. Other risks we face from general economic weakness
include potential declines in the population
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covered under managed care agreements, patient decisions to
postpone or cancel elective and non-emergent healthcare
procedures, potential increases in the uninsured and
underinsured populations and further difficulties in our
collecting patient copayment and deductible receivables.
The
Industry Trend Towards Value-Based Purchasing May Negatively
Impact Our Revenues.
There is a trend in the health care industry toward value-based
purchasing of health care services. These value-based purchasing
programs include both public reporting of quality data and
preventable adverse events tied to the quality and efficiency of
care provided by facilities. Governmental programs including
Medicare and Medicaid require hospitals to report certain
quality data to receive full reimbursement updates. In addition
Medicare does not reimburse for care related to certain
preventable adverse events (also called “never
events”). Many large commercial payers currently require
hospitals to report quality data, and several commercial payers
do not reimburse hospitals for certain preventable adverse
events. Further, we have implemented a policy pursuant to which
we do not bill patients or third-party payers for fees or
expenses incurred due to certain preventable adverse events. We
expect value-based purchasing programs, including programs that
condition reimbursement on patient outcome measures, to become
more common and to involve a higher percentage of reimbursement
amounts. We are unable at this time to predict how this trend
will affect our results of operations, but it could negatively
impact our revenues.
Our
Operations Could Be Impaired By A Failure Of Our Information
Systems.
Any system failure that causes an interruption in service or
availability of our systems could adversely affect operations or
delay the collection of revenues. Even though we have
implemented network security measures, our servers are
vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering. The occurrence of any
of these events could result in interruptions, delays, the loss
or corruption of data, or cessations in the availability of
systems, all of which could have a material, adverse effect on
our financial position and results of operations and harm our
business reputation.
The performance of our sophisticated information technology and
systems is critical to our business operations. In addition to
our shared services initiatives, our information systems are
essential to a number of critical areas of our operations,
including:
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accounting and financial reporting;
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billing and collecting accounts;
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coding and compliance;
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clinical systems;
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medical records and document storage;
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inventory management;
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negotiating, pricing and administering managed care contracts
and supply contracts; and
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monitoring quality of care and collecting data on quality
measures necessary for full Medicare payment updates.
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State
Efforts To Regulate The Construction Or Expansion Of Health Care
Facilities Could Impair Our Ability To Operate And Expand Our
Operations.
Some states, particularly in the eastern part of the country,
require health care providers to obtain prior approval, known as
a CON, for the purchase, construction or expansion of health
care facilities, to make certain capital expenditures or to make
changes in services or bed capacity. In giving approval, these
states consider the need for additional or expanded health care
facilities or services. We currently operate health care
facilities in a number of states with CON laws. The failure to
obtain any requested CON could impair our ability to operate or
expand operations. Any such failure could, in turn, adversely
affect our ability to attract patients to our facilities and
grow our revenues, which would have an adverse effect on our
results of operations.
30
Our
Facilities Are Heavily Concentrated In Florida And Texas, Which
Makes Us Sensitive To Regulatory, Economic, Environmental And
Competitive Conditions And Changes In Those States.
We operated 166 hospitals at December 31, 2008, and 72 of
those hospitals are located in Florida and Texas. Our Florida
and Texas facilities’ combined revenues represented
approximately 51% of our consolidated revenues for the year
ended December 31, 2008. This concentration makes us
particularly sensitive to regulatory, economic, environmental
and competitive conditions and changes in those states. Any
material change in the current payment programs or regulatory,
economic, environmental or competitive conditions in those
states could have a disproportionate effect on our overall
business results.
In addition, our hospitals in Florida and Texas and other areas
across the Gulf Coast are located in hurricane-prone areas. In
the recent past, hurricanes have had a disruptive effect on the
operations of our hospitals in Florida, Texas and other coastal
states, and the patient populations in those states. Our
business activities could be harmed by a particularly active
hurricane season or even a single storm, and the property
insurance we obtain may not be adequate to cover losses from
future hurricanes or other natural disasters.
We May Be
Subject To Liabilities From Claims By The IRS.
We are currently contesting before the Appeals Division of the
Internal Revenue Service (the “IRS”) certain claimed
deficiencies and adjustments proposed by the IRS in connection
with its examination of the 2003 and 2004 federal income tax
returns for HCA and 17 affiliates that are treated as
partnerships for federal income tax purposes (“affiliated
partnerships”). The disputed items include the timing of
recognition of certain patient service revenues and our method
for calculating the tax allowance for doubtful accounts.
Eight taxable periods of HCA and its predecessors ended in 1995
through 2002 and the 2002 taxable year of 13 affiliated
partnerships, for which the primary remaining issue is the
computation of the tax allowance for doubtful accounts, are
pending before the IRS Examination Division or the United States
Tax Court as of December 31, 2008. The IRS began an audit
of the 2005 and 2006 federal income tax returns for HCA and
seven affiliated partnerships during 2008.
We May Be
Subject To Liabilities From Claims Brought Against Our
Facilities.
We are subject to litigation relating to our business practices,
including claims and legal actions by patients and others in the
ordinary course of business alleging malpractice, product
liability or other legal theories. See Item 3, “Legal
Proceedings.” Many of these actions involve large claims
and significant defense costs. We insure a portion of our
professional liability risks through a wholly-owned subsidiary.
Management believes our reserves for self-insured retentions and
insurance coverage are sufficient to cover insured claims
arising out of the operation of our facilities. Our wholly-owned
insurance subsidiary has entered into certain reinsurance
contracts, and the obligations covered by the reinsurance
contracts are included in its reserves for professional
liability risks, as the subsidiary remains liable to the extent
that the reinsurers do not meet their obligations under the
reinsurance contracts. If payments for claims exceed actuarially
determined estimates, are not covered by insurance or
reinsurers, if any, fail to meet their obligations, our results
of operations and financial position could be adversely affected.
We Are
Exposed To Market Risks Related To Changes In The Market Values
Of Securities And Interest Rate Changes.
We are exposed to market risk related to changes in market
values of securities. The investments in debt and equity
securities of our wholly-owned insurance subsidiary were
$1.614 billion and $8 million, respectively, at
December 31, 2008. These investments are carried at fair
value, with changes in unrealized gains and losses being
recorded as adjustments to other comprehensive income. At
December 31, 2008, we had a net unrealized loss of
$48 million on the insurance subsidiary’s investment
securities.
We are exposed to market risk related to market illiquidity.
Liquidity of the investments in debt and equity securities of
our wholly-owned insurance subsidiary could be impaired by the
inability to access the capital markets. Should the wholly-owned
insurance subsidiary require significant amounts of cash in
excess of normal cash requirements to pay claims and other
expenses on short notice, we may have difficulty selling these
investments in a
31
timely manner or be forced to sell them at a price less than
what we might otherwise have been able to in a normal market
environment. At December 31, 2008, our wholly-owned
insurance subsidiary, had invested $536 million
($573 million par value) in municipal, tax-exempt student
loan auction rate securities which were classified as long-term
investments. The auction rate securities (“ARS”) are
publicly issued securities with long-term stated maturities for
which the interest rates are reset through a Dutch auction every
seven to 35 days. With the liquidity issues experienced in
global credit and capital markets, the ARS held by our
wholly-owned insurance subsidiary have experienced multiple
failed auctions, beginning on February 11, 2008, as the
amount of securities submitted for sale exceeded the amount of
purchase orders. There is a very limited market for the ARS at
this time. We do not currently intend to attempt to sell the ARS
as the liquidity needs of our insurance subsidiary are expected
to be met by other investments in its investment portfolio. If
uncertainties in the credit and capital markets continue or
there are ratings downgrades on the ARS held by our insurance
subsidiary, we may be required to recognize other-than-temporary
impairments on these long-term investments in future periods.
We are also exposed to market risk related to changes in
interest rates and periodically enter into interest rate swap
agreements to manage our exposure to these fluctuations. Our
interest rate swap agreements involve the exchange of fixed and
variable rate interest payments between two parties, based on
common notional principal amounts and maturity dates. The net
interest payments based on the notional amounts in these
agreements generally match the timing of the cash flows of the
related liabilities. The notional amounts of the swap agreements
represent balances used to calculate the exchange of cash flows
and are not assets or liabilities of HCA. See Item 7,
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Quantitative and
Qualitative Disclosures About Market Risk.”
Since The
Recapitalization, The Investors Control Us And May Have
Conflicts Of Interest With Us In The Future.
As of December 31, 2008, the Investors and certain other
investors indirectly own 97.3% of our capital stock due to the
Recapitalization. As a result, the Investors have control over
our decisions to enter into any significant corporate
transaction and have the ability to prevent any transaction that
requires the approval of shareholders. For example, the
Investors could cause us to make acquisitions that increase the
amount of our indebtedness or sell assets.
Additionally, the Sponsors are in the business of making
investments in companies and may acquire and hold interests in
businesses that compete directly or indirectly with us. One or
more of the Sponsors may also pursue acquisition opportunities
that may be complementary to our business and, as a result,
those acquisition opportunities may not be available to us. So
long as investment funds associated with or designated by the
Sponsors continue to indirectly own a significant amount of the
outstanding shares of our common stock, even if such amount is
less than 50%, the Sponsors will continue to be able to strongly
influence or effectively control our decisions.
|
|
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
32
The following table lists, by state, the number of hospitals
(general, acute care, psychiatric and rehabilitation) directly
or indirectly owned and operated by us as of December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
State
|
|
Hospitals
|
|
Beds
|
|
|
|
Alaska
|
|
|
1
|
|
|
|
250
|
|
|
California
|
|
|
5
|
|
|
|
1,511
|
|
|
Colorado
|
|
|
7
|
|
|
|
2,257
|
|
|
Florida
|
|
|
38
|
|
|
|
9,673
|
|
|
Georgia
|
|
|
11
|
|
|
|
1,925
|
|
|
Idaho
|
|
|
2
|
|
|
|
481
|
|
|
Indiana
|
|
|
1
|
|
|
|
278
|
|
|
Kansas
|
|
|
4
|
|
|
|
1,286
|
|
|
Kentucky
|
|
|
2
|
|
|
|
384
|
|
|
Louisiana
|
|
|
10
|
|
|
|
1,625
|
|
|
Mississippi
|
|
|
1
|
|
|
|
130
|
|
|
Missouri
|
|
|
6
|
|
|
|
1,055
|
|
|
Nevada
|
|
|
3
|
|
|
|
1,075
|
|
|
New Hampshire
|
|
|
2
|
|
|
|
295
|
|
|
Oklahoma
|
|
|
2
|
|
|
|
793
|
|
|
South Carolina
|
|
|
3
|
|
|
|
740
|
|
|
Tennessee
|
|
|
13
|
|
|
|
2,287
|
|
|
Texas
|
|
|
34
|
|
|
|
10,191
|
|
|
Utah
|
|
|
6
|
|
|
|
968
|
|
|
Virginia
|
|
|
9
|
|
|
|
2,963
|
|
|
International
|
|
|
|
|
|
|
|
|
|
England
|
|
|
6
|
|
|
|
704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166
|
|
|
|
40,871
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the hospitals listed in the above table, we
directly or indirectly operate 105 freestanding surgery centers.
We also operate medical office buildings in conjunction with
some of our hospitals. These office buildings are primarily
occupied by physicians who practice at our hospitals. Under our
senior secured cash flow credit facility entered into in
connection with the Recapitalization, 14 of our general, acute
care hospitals were mortgaged as collateral.
We maintain our headquarters in approximately
1,209,000 square feet of space in the Nashville, Tennessee
area. In addition to the headquarters in Nashville, we maintain
regional service centers related to our shared services
initiatives. These service centers are located in markets in
which we operate hospitals.
We believe our headquarters, hospitals and other facilities are
suitable for their respective uses and are, in general, adequate
for our present needs. Our properties are subject to various
federal, state and local statutes and ordinances regulating
their operation. Management does not believe that compliance
with such statutes and ordinances will materially affect
our financial position or results of operations.
|
|
|
|
Item 3.
|
Legal
Proceedings
|
We operate in a highly regulated and litigious industry. As a
result, various lawsuits, claims and legal and regulatory
proceedings have been and can be expected to be instituted or
asserted against us. The resolution of any such lawsuits, claims
or legal and regulatory proceedings could have a material,
adverse effect on our results of operations or financial
position in a given period.
Government
Investigations, Claims and Litigation
In January 2001, we entered into an eight-year CIA with the OIG
which expired on January 24, 2009. Violation or breach of
the CIA, or violation of federal or state laws relating to
Medicare, Medicaid or similar programs, could subject us to
substantial monetary fines, civil and criminal penalties
and/or
exclusion from participation in the Medicare and Medicaid
programs. Alleged violations may be pursued by the government or
through private
qui tam
actions. Sanctions imposed
against us as a result of such actions could have a material,
adverse effect on our results of operations or financial
position.
33
ERISA
Litigation
On November 22, 2005, Brenda Thurman, a former employee of
an HCA affiliate, filed a complaint in the United States
District Court for the Middle District of Tennessee on behalf of
herself, the HCA Savings and Retirement Program (the
“Plan”), and a class of participants in the Plan who
held an interest in our common stock, against our Chairman and
Chief Executive Officer, President and Chief Operating Officer,
Executive Vice President and Chief Financial Officer, and other
unnamed individuals. The lawsuit, filed under
sections 502(a)(2) and 502(a)(3) of the Employee Retirement
Income Security Act (“ERISA”), 29 U.S.C.
§§ 1132(a)(2) and (3), alleges that defendants
breached their fiduciary duties owed to the Plan and to plan
participants and seeks monetary damages and injunctions and
other relief.
On January 13, 2006, the court signed an order staying all
proceedings and discovery in this matter, pending resolution of
a motion to dismiss the consolidated amended complaint in a
related federal securities class action against HCA. On
January 18, 2006, the magistrate judge signed an order
(1) consolidating Thurman’s cause of action with all
other future actions making the same claims and arising out of
the same operative facts, (2) appointing Thurman as lead
plaintiff, and (3) appointing Thurman’s attorneys as
lead counsel and liaison counsel in the case. We have reached an
agreement in principle to settle this suit, subject to final
court approval.
Merger
Litigation in State Court
On October 23, 2006, the Foundation for Seacoast Health
(the “Foundation”) filed a lawsuit against us and one
of our affiliates, HCA Health Services of New Hampshire, Inc.,
in the Superior Court of Rockingham County, New Hampshire.
Among other things, the complaint seeks to enforce certain
provisions of an asset purchase agreement between the parties,
including a purported right of first refusal to purchase a New
Hampshire hospital, that allegedly were triggered by the Merger
and other prior events. The Foundation initially sought to
enjoin the Merger. However, the parties reached an agreement
that allowed the Merger to proceed, while preserving the
plaintiff’s opportunity to litigate whether the Merger
triggered the right of first refusal to purchase the hospital
and, if so, at what price the hospital could be repurchased. On
May 25, 2007, the court granted HCA’s motion for
summary judgment disposing of the Foundation’s central
claims. The Foundation filed an appeal from the final judgment.
On July 15, 2008, the New Hampshire Supreme Court held that
the Merger did not trigger the right of first refusal. The Court
remanded to the lower court the claim that the right of first
refusal had been triggered by certain intra-corporate
transactions in 1999. The Court did not determine the merits of
that claim, and we will continue to defend the claim vigorously.
General
Liability and Other Claims
On April 10, 2006, a class action complaint was filed
against us in the District Court of Kansas alleging, among other
matters, nurse understaffing at all of our hospitals, certain
consumer protection act violations, negligence and unjust
enrichment. The complaint is seeking, among other relief,
declaratory relief and monetary damages, including disgorgement
of profits of $12.250 billion. A motion to dismiss this
action was granted on July 27, 2006, but the plaintiffs
appealed this dismissal. While the appeal was pending, the
Kansas Supreme Court for the first time construed the Kansas
Consumer Protection Act to apply to the provision of medical
services. Based on that new ruling, the 10th Circuit
reversed the district court’s dismissal and remanded the
action for further consideration by the trial court. We will
continue to defend this claim vigorously.
We are a party to certain proceedings relating to claims for
income taxes and related interest in the United States Tax
Court. For a description of those proceedings, see Item 7,
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Pending IRS
Disputes” and Note 6 to our consolidated financial
statements.
We are 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 us, which
may not be 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 our
results of operations or financial position.
|
|
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of security holders during
the fourth quarter of 2008.
34
PART II
|
|
|
|
Item 5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Our outstanding common stock is privately held, and there is no
established public trading market for our common stock. As of
February 25, 2009, there were 631 holders of our common
stock. See Item 7, “Management’s Discussion and
Analysis of Financial condition and Results of
Operations — Liquidity and Capital
Resources — Financing Activities” for a
description of the restrictions on our ability to pay dividends.
We did not pay any dividends in 2007 or 2008.
During the quarter ended December 31, 2008, HCA issued
431,216 shares of common stock in connection with the
cashless exercise of stock options for aggregate consideration
of $5,498,004 resulting in 217,732 net settled shares. The
shares were issued without registration in reliance on the
exemptions afforded by Section 4(2) of the Securities Act
of 1933, as amended, and Rule 701 promulgated thereunder.
On April 29, 2008, we registered our common stock pursuant
to Section 12(g) of the Securities Exchange Act of 1934, as
amended.
The following table provides certain information with respect to
our repurchase of common stock from October 1, 2008 through
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
|
Dollar Value of
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Shares That
|
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
|
May Yet Be
|
|
|
|
|
|
|
|
|
|
|
Part of
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
Publicly
|
|
|
Under Publicly
|
|
|
|
|
Total Number
|
|
|
|
|
|
Announced
|
|
|
Announced
|
|
|
|
|
of Shares
|
|
|
Average Price
|
|
|
Plans or
|
|
|
Plans or
|
|
|
Period
|
|
Purchased
|
|
|
Paid per Share
|
|
|
Programs
|
|
|
Programs
|
|
|
|
|
October 1, 2008 through October 31, 2008
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
November 1, 2008 through November 30, 2008
|
|
|
6,111
|
|
|
$
|
55.86
|
|
|
|
—
|
|
|
|
—
|
|
|
December 1, 2008 through December 31, 2008
|
|
|
26,121
|
|
|
$
|
55.86
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Fourth Quarter 2008
|
|
|
32,232
|
|
|
$
|
55.86
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the fourth quarter of 2008, we purchased
32,232 shares pursuant to the terms of the Management
Stockholders Agreement and/or separation agreements and stock
purchase agreements between former employees and the Company.
35
|
|
|
|
Item 6.
|
Selected
Financial Data
|
HCA
INC.
SELECTED FINANCIAL DATA
AS OF AND FOR THE YEARS ENDED DECEMBER 31
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
Summary of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
28,374
|
|
|
$
|
26,858
|
|
|
$
|
25,477
|
|
|
$
|
24,455
|
|
|
$
|
23,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
11,440
|
|
|
|
10,714
|
|
|
|
10,409
|
|
|
|
9,928
|
|
|
|
9,419
|
|
|
Supplies
|
|
|
4,620
|
|
|
|
4,395
|
|
|
|
4,322
|
|
|
|
4,126
|
|
|
|
3,901
|
|
|
Other operating expenses
|
|
|
4,554
|
|
|
|
4,241
|
|
|
|
4,056
|
|
|
|
4,034
|
|
|
|
3,769
|
|
|
Provision for doubtful accounts
|
|
|
3,409
|
|
|
|
3,130
|
|
|
|
2,660
|
|
|
|
2,358
|
|
|
|
2,669
|
|
|
Equity in earnings of affiliates
|
|
|
(223
|
)
|
|
|
(206
|
)
|
|
|
(197
|
)
|
|
|
(221
|
)
|
|
|
(194
|
)
|
|
Gains on investments
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(243
|
)
|
|
|
(53
|
)
|
|
|
(56
|
)
|
|
Depreciation and amortization
|
|
|
1,416
|
|
|
|
1,426
|
|
|
|
1,391
|
|
|
|
1,374
|
|
|
|
1,250
|
|
|
Interest expense
|
|
|
2,021
|
|
|
|
2,215
|
|
|
|
955
|
|
|
|
655
|
|
|
|
563
|
|
|
Gains on sales of facilities
|
|
|
(97
|
)
|
|
|
(471
|
)
|
|
|
(205
|
)
|
|
|
(78
|
)
|
|
|
—
|
|
|
Impairment of long-lived assets
|
|
|
64
|
|
|
|
24
|
|
|
|
24
|
|
|
|
—
|
|
|
|
12
|
|
|
Transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
442
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,204
|
|
|
|
25,460
|
|
|
|
23,614
|
|
|
|
22,123
|
|
|
|
21,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests and income taxes
|
|
|
1,170
|
|
|
|
1,398
|
|
|
|
1,863
|
|
|
|
2,332
|
|
|
|
2,169
|
|
|
Minority interests in earnings of consolidated entities
|
|
|
229
|
|
|
|
208
|
|
|
|
201
|
|
|
|
178
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
941
|
|
|
|
1,190
|
|
|
|
1,662
|
|
|
|
2,154
|
|
|
|
2,001
|
|
|
Provision for income taxes
|
|
|
268
|
|
|
|
316
|
|
|
|
626
|
|
|
|
730
|
|
|
|
755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
673
|
|
|
$
|
874
|
|
|
$
|
1,036
|
|
|
$
|
1,424
|
|
|
$
|
1,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
24,280
|
|
|
$
|
24,025
|
|
|
$
|
23,675
|
|
|
$
|
22,225
|
|
|
$
|
21,840
|
|
|
Working capital
|
|
|
2,391
|
|
|
|
2,356
|
|
|
|
2,502
|
|
|
|
1,320
|
|
|
|
1,509
|
|
|
Long-term debt, including amounts due within one year
|
|
|
26,989
|
|
|
|
27,308
|
|
|
|
28,408
|
|
|
|
10,475
|
|
|
|
10,530
|
|
|
Minority interests in equity of consolidated entities
|
|
|
995
|
|
|
|
938
|
|
|
|
907
|
|
|
|
828
|
|
|
|
809
|
|
|
Equity securities with contingent redemption rights
|
|
|
155
|
|
|
|
164
|
|
|
|
125
|
|
|
|
—
|
|
|
|
—
|
|
|
Stockholders’ (deficit) equity
|
|
|
(10,255
|
)
|
|
|
(10,538
|
)
|
|
|
(11,374
|
)
|
|
|
4,863
|
|
|
|
4,407
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
$
|
1,797
|
|
|
$
|
1,396
|
|
|
$
|
1,845
|
|
|
$
|
2,971
|
|
|
$
|
2,954
|
|
|
Cash used in investing activities
|
|
|
(1,467
|
)
|
|
|
(479
|
)
|
|
|
(1,307
|
)
|
|
|
(1,681
|
)
|
|
|
(1,688
|
)
|
|
Cash used in financing activities
|
|
|
(258
|
)
|
|
|
(1,158
|
)
|
|
|
(240
|
)
|
|
|
(1,212
|
)
|
|
|
(1,347
|
)
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of hospitals at end of period(a)
|
|
|
158
|
|
|
|
161
|
|
|
|
166
|
|
|
|
175
|
|
|
|
182
|
|
|
Number of freestanding outpatient surgical centers at end of
period(b)
|
|
|
97
|
|
|
|
99
|
|
|
|
98
|
|
|
|
87
|
|
|
|
84
|
|
|
Number of licensed beds at end of period(c)
|
|
|
38,504
|
|
|
|
38,405
|
|
|
|
39,354
|
|
|
|
41,265
|
|
|
|
41,852
|
|
|
Weighted average licensed beds(d)
|
|
|
38,422
|
|
|
|
39,065
|
|
|
|
40,653
|
|
|
|
41,902
|
|
|
|
41,997
|
|
|
Admissions(e)
|
|
|
1,541,800
|
|
|
|
1,552,700
|
|
|
|
1,610,100
|
|
|
|
1,647,800
|
|
|
|
1,659,200
|
|
|
Equivalent admissions(f)
|
|
|
2,363,600
|
|
|
|
2,352,400
|
|
|
|
2,416,700
|
|
|
|
2,476,600
|
|
|
|
2,454,000
|
|
|
Average length of stay (days)(g)
|
|
|
4.9
|
|
|
|
4.9
|
|
|
|
4.9
|
|
|
|
4.9
|
|
|
|
5.0
|
|
|
Average daily census(h)
|
|
|
20,795
|
|
|
|
21,049
|
|
|
|
21,688
|
|
|
|
22,225
|
|
|
|
22,493
|
|
|
Occupancy(i)
|
|
|
54
|
%
|
|
|
54
|
%
|
|
|
53
|
%
|
|
|
53
|
%
|
|
|
54
|
%
|
|
Emergency room visits(j)
|
|
|
5,246,400
|
|
|
|
5,116,100
|
|
|
|
5,213,500
|
|
|
|
5,415,200
|
|
|
|
5,219,500
|
|
|
Outpatient surgeries(k)
|
|
|
797,400
|
|
|
|
804,900
|
|
|
|
820,900
|
|
|
|
836,600
|
|
|
|
834,800
|
|
|
Inpatient surgeries(l)
|
|
|
493,100
|
|
|
|
516,500
|
|
|
|
533,100
|
|
|
|
541,400
|
|
|
|
541,000
|
|
|
Days revenues in accounts receivable(m)
|
|
|
49
|
|
|
|
53
|
|
|
|
53
|
|
|
|
50
|
|
|
|
48
|
|
|
Gross patient revenues(n)
|
|
$
|
102,843
|
|
|
$
|
92,429
|
|
|
$
|
84,913
|
|
|
$
|
78,662
|
|
|
$
|
71,279
|
|
|
Outpatient revenues as a % of patient revenues(o)
|
|
|
37
|
%
|
|
|
37
|
%
|
|
|
36
|
%
|
|
|
36
|
%
|
|
|
37
|
%
|
|
|
|
|
|
(a)
|
|
Excludes eight facilities in 2008
and 2007 and seven facilities in 2006, 2005 and 2004 that are
not consolidated (accounted for using the equity method) for
financial reporting purposes.
|
|
|
|
|
|
(b)
|
|
Excludes eight facilities in 2008,
nine facilities in 2007 and 2006, seven facilities in 2005 and
eight facilities in 2004 that are not consolidated (accounted
for using the equity method) for financial reporting purposes.
|
|
|
|
(c)
|
|
Licensed beds are those beds for
which a facility has been granted approval to operate from the
applicable state licensing agency.
|
|
|
|
(d)
|
|
Weighted average licensed beds
represents the average number of licensed beds, weighted based
on periods owned.
|
|
|
|
(e)
|
|
Represents the total number of
patients admitted to our hospitals and is used by management and
certain investors as a general measure of inpatient volume.
|
|
|
|
(f)
|
|
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.
|
|
|
|
(g)
|
|
Represents the average number of
days admitted patients stay in our hospitals.
|
|
|
|
(h)
|
|
Represents the average number of
patients in our hospital beds each day.
|
|
|
|
(i)
|
|
Represents the percentage of
hospital licensed beds occupied by patients. Both average daily
census and occupancy rate provide measures of the utilization of
inpatient rooms.
|
|
|
|
(j)
|
|
Represents the number of patients
treated in our emergency rooms.
|
|
|
|
(k)
|
|
Represents the number of surgeries
performed on patients who were not admitted to our hospitals.
Pain management and endoscopy procedures are not included in
outpatient surgeries.
|
|
|
|
(l)
|
|
Represents the number of surgeries
performed on patients who have been admitted to our hospitals.
Pain management and endoscopy procedures are not included in
inpatient surgeries.
|
|
|
|
(m)
|
|
Revenues per day is calculated by
dividing the revenues for the period by the days in the period.
Days revenues in accounts receivable is then calculated as
accounts receivable, net of the allowance for doubtful accounts,
at the end of the period divided by revenues per day.
|
|
|
|
(n)
|
|
Gross patient revenues are based
upon our standard charge listing. Gross charges/revenues
typically do not reflect what our hospital facilities are paid.
Gross charges/revenues are reduced by contractual adjustments,
discounts and charity care to determine reported revenues.
|
|
|
|
(o)
|
|
Represents the percentage of
patient revenues related to patients who are not admitted to our
hospitals.
|
37
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
|
|
|
|
Item 7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
The selected financial data and the accompanying consolidated
financial statements present certain information with respect to
the financial position, results of operations and cash flows of
HCA Inc. which should be read in conjunction with the following
discussion and analysis. The terms “HCA,”
“Company,” “we,” “our,” or
“us,” as used herein, refer to HCA Inc. and our
affiliates unless otherwise stated or indicated by context. The
term “affiliates” means direct and indirect
subsidiaries of HCA Inc. and partnerships and joint ventures in
which such subsidiaries are partners.
Forward-Looking
Statements
This annual report on
Form 10-K
includes certain disclosures which contain “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 like
“may,” “believe,” “will,”
“expect,” “project,” “estimate,”
“anticipate,” “plan,” “initiative”
or “continue.” These forward-looking statements are
based on our current plans and expectations and are subject to a
number of known and unknown uncertainties and risks, many of
which are beyond our control, that could significantly affect
current plans and expectations and our future financial position
and results of operations. These factors include, but are not
limited to, (1) the ability to recognize the benefits of
the Recapitalization, (2) the impact of the substantial
indebtedness incurred to finance the Recapitalization and the
ability to refinance such indebtedness on acceptable terms,
(3) increases, particularly in the current economic
downturn, in the amount and risk of collectibility of uninsured
accounts and deductibles and copayment amounts for insured
accounts, (4) the ability to achieve operating and
financial targets, and attain expected levels of patient volumes
and control the costs of providing services, (5) possible
changes in the Medicare, Medicaid and other state programs,
including Medicaid supplemental payments pursuant to upper
payment limit (“UPL”) programs, that may impact
reimbursements to health care providers and insurers,
(6) the highly competitive nature of the health care
business, (7) changes in revenue mix, including potential
declines in the population covered under managed care agreements
due to the current economic downturn and the ability to enter
into and renew managed care provider agreements on acceptable
terms, (8) the efforts of insurers, health care providers
and others to contain health care costs, (9) the outcome of
our continuing efforts to monitor, maintain and comply with
appropriate laws, regulations, policies and procedures,
(10) changes in federal, state or local laws or regulations
affecting the health care industry, (11) increases in wages
and the ability to attract and retain qualified management and
personnel, including affiliated physicians, nurses and medical
and technical support personnel, (12) the possible
enactment of federal or state health care reform, (13) the
availability and terms of capital to fund the expansion of our
business and improvements to our existing facilities,
(14) changes in accounting practices, (15) changes in
general economic conditions nationally and regionally in our
markets, (16) future divestitures which may result in
charges, (17) changes in business strategy or development
plans, (18) delays in receiving payments for services
provided, (19) the outcome of pending and any future tax
audits, appeals and litigation associated with our tax
positions, (20) potential liabilities and other claims that
may be asserted against us, and (21) other risk factors
described in this annual report on
Form 10-K.
As a consequence, current plans, anticipated actions and future
financial position and results of operations may differ from
those expressed in any forward-looking statements made by or on
behalf of HCA. You are cautioned not to unduly rely on such
forward-looking statements when evaluating the information
presented in this report.
2008
Operations Summary
Net income totaled $673 million for the year ended
December 31, 2008 compared to $874 million for the
year ended December 31, 2007. The 2008 results include
gains on sales of facilities of $97 million and impairments
of long-lived assets of $64 million. The 2007 results
include gains on investments of $8 million, gains on sales
of facilities of $471 million and an impairment of
long-lived assets of $24 million.
38
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
2008
Operations Summary (Continued)
Revenues increased 5.6% on a consolidated basis and 7.0% on a
same facility basis for the year ended December 31, 2008
compared to the year ended December 31, 2007. The
consolidated revenues increase can be attributed to the combined
impact of a 5.2% increase in revenue per equivalent admission
and a 0.5% increase in equivalent admissions. The same facility
revenues increase resulted from a 5.1% increase in same facility
revenue per equivalent admission and a 1.9% increase in same
facility equivalent admissions.
During the year ended December 31, 2008, consolidated
admissions declined 0.7% and same facility admissions increased
0.9% compared to the year ended December 31, 2007.
Inpatient surgical volumes declined 4.5% on a consolidated basis
and declined 0.5% on a same facility basis during the year ended
December 31, 2008, compared to the year ended
December 31, 2007. Outpatient surgical volumes declined
0.9% on a consolidated basis and declined 0.2% on a same
facility basis during the year ended December 31, 2008,
compared to the year ended December 31, 2007.
For the year ended December 31, 2008, the provision for
doubtful accounts increased to 12.0% of revenues from 11.7% of
revenues for the year ended December 31, 2007. Same
facility uninsured admissions increased 1.7% and same facility
uninsured emergency room visits increased 4.5% for the year
ended December 31, 2008 compared to the year ended
December 31, 2007.
Interest expense totaled $2.021 billion for the year ended
December 31, 2008 compared to $2.215 billion for the
year ended December 31, 2007. The $194 million
decrease in interest expense for 2008 was due to reductions in
both the average debt balance and average interest rate during
2008.
Business
Strategy
We are committed to providing the communities we serve high
quality, cost-effective health care while complying fully with
our ethics policy, governmental regulations and guidelines and
industry standards. As a part of this strategy, management
focuses on the following principal elements:
Maintain Our Dedication to the Care and Improvement of Human
Life.
Our business is built on putting patients
first and providing high quality health care services in the
communities we serve. Our dedicated professionals oversee our
Quality Review System, which measures clinical outcomes,
satisfaction and regulatory compliance to improve hospital
quality and performance. We are implementing hospitalist
programs in some facilities, evidence-based medicine programs
and infection reduction initiatives. In addition, we continue to
implement advanced health information technology to improve the
quality and convenience of services to our communities. We are
using our advanced electronic medication administration record,
which uses bar coding technology to ensure that each patient
receives the right medication, to build toward a fully
electronic health record that will provide convenient access,
electronic order entry and decision support for physicians.
These technologies improve patient safety, quality and
efficiency.
Maintain Our Commitment to Ethics and
Compliance.
We are committed to a corporate
culture highlighted by the following values —
compassion, honesty, integrity, fairness, loyalty, respect and
kindness. Our comprehensive ethics and compliance program
reinforces our dedication to these values.
Leverage Our Leading Local Market
Positions.
We strive to maintain and enhance the
leading positions that we enjoy in the majority of our markets.
We believe that the broad geographic presence of our facilities
across a range of markets, in combination with the breadth and
quality of services provided by our facilities, increases our
attractiveness to patients and large employers and positions us
to negotiate more favorable terms from commercial payers and
increase the number of payers with whom we contract. We also
intend to strategically enhance our outpatient presence in our
communities to attract more patients to our facilities.
39
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Business
Strategy (Continued)
Expand Our Presence in Key Markets.
We seek to
grow our business in key markets, focusing on large, high growth
urban and suburban communities, primarily in the southern and
western regions of the United States. We seek to strategically
invest in new and expanded services at our existing hospitals
and surgery centers to increase our revenues at those facilities
and provide the benefits of medical technology advances to our
communities. We intend to continue to expand high volume and
high margin specialty services, such as cardiology and
orthopedic services, and increase the capacity, scope and
convenience of our outpatient facilities. To complement this
intrinsic growth, we intend to continue to opportunistically
develop and acquire new hospitals and outpatient facilities.
Continue to Leverage Our Scale.
We will
continue to obtain price efficiencies through our group
purchasing organization and build on the cost savings and
efficiencies in billing, collection and other processes we have
achieved through our regional service centers. We are
increasingly taking advantage of our national scale by
contracting for services on a multistate basis. We will expand
our successful shared services model for additional clinical and
support functions, such as physician credentialing, medical
transcription and electronic medical recordkeeping, across
multiple markets.
Continue to Develop Enduring Physician
Relationships.
We depend on the quality and
dedication of the physicians who serve at our facilities, and we
recruit both primary care physicians and specialists to meet
community needs. We often assist recruited physicians with
establishing and building a practice or joining an existing
practice in compliance with regulatory standards. We intend to
improve both service levels and revenues in our markets by:
|
|
|
|
|
|
•
|
expanding the number of high quality specialty services, such as
cardiology, orthopedics, oncology and neonatology;
|
|
|
|
|
•
|
continuing to use joint ventures with physicians to further
develop our outpatient business, particularly through ambulatory
surgery centers and outpatient diagnostic centers;
|
|
|
|
|
•
|
developing medical office buildings to provide convenient
facilities for physicians to locate their practices and serve
their patients; and
|
|
|
|
|
•
|
continuing our focus on improving hospital quality and
performance and implementing advanced technologies in our
facilities to attract physicians to our facilities.
|
Become the Health Care Employer of Choice.
We
will continue to use a number of industry-leading practices to
help ensure our hospitals are a health care employer of choice
in their respective communities. Our staffing initiatives for
both care providers and hospital management provide strategies
for recruitment, compensation and productivity to increase
employee retention and operating efficiency at our hospitals.
For example, we maintain an internal contract nursing agency to
supply our hospitals with high quality staffing at a lower cost
than external agencies. In addition, we have developed several
proprietary training and career development programs for our
physicians and hospital administrators, including an executive
development program designed to train the next generation of
hospital leadership. We believe our continued investment in the
training and retention of employees improves the quality of
care, enhances operational efficiency and fosters employee
loyalty.
Critical
Accounting Policies and Estimates
The preparation of our consolidated financial statements
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
disclosure of contingent liabilities and the reported amounts of
revenues and expenses. Our estimates are based on historical
experience and various other assumptions we believe are
reasonable under the circumstances. We evaluate our estimates on
an ongoing basis and make changes to the estimates and related
disclosures as experience develops or new information becomes
known. Actual results may differ from these estimates.
40
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Critical
Accounting Policies and Estimates (Continued)
We believe the following critical accounting policies affect our
more significant judgments and estimates used in the preparation
of our consolidated financial statements.
Revenues
Revenues are recorded during the period the health care services
are provided, based upon the estimated amounts due from payers.
Estimates of contractual allowances under managed care health
plans are based upon the payment terms specified in the related
contractual agreements. Laws and regulations governing the
Medicare and Medicaid programs are complex and subject to
interpretation. The estimated reimbursement amounts are made on
a payer-specific basis and are recorded based on the best
information available regarding management’s interpretation
of the applicable laws, regulations and contract terms.
Management continually reviews the contractual estimation
process to consider and incorporate updates to laws and
regulations and the frequent changes in managed care contractual
terms resulting from contract renegotiations and renewals. We
have invested significant resources to refine and improve our
computerized billing systems and the information system data
used to make contractual allowance estimates. We have developed
standardized calculation processes and related training programs
to improve the utility of our patient accounting systems.
The Emergency Medical Treatment and Active Labor Act
(“EMTALA”) requires any hospital participating in the
Medicare program to conduct an appropriate medical screening
examination of every person who presents to the hospital’s
emergency room for treatment and, if the individual is suffering
from an emergency medical condition, to either stabilize the
condition or make an appropriate transfer of the individual to a
facility able to handle the condition. The obligation to screen
and stabilize emergency medical conditions exists regardless of
an individual’s ability to pay for treatment. Federal and
state laws and regulations, including but not limited to EMTALA,
require, and our commitment to providing quality patient care
encourages, the provision of services to patients who are
financially unable to pay for the health care services they
receive.
We do not pursue collection of amounts related to patients who
meet our guidelines to qualify as charity care; therefore, they
are not reported in revenues. Patients treated at our hospitals
for nonelective care, who have income at or below 200% of the
federal poverty level, are eligible for charity care. The
federal poverty level is established by the federal government
and is based on income and family size. We provide discounts
from our gross charges to uninsured patients who do not qualify
for Medicaid or charity care. These discounts are similar to
those provided to many local managed care plans.
Due to the complexities involved in the classification and
documentation of health care services authorized and provided,
the estimation of revenues earned and the related reimbursement
are often subject to interpretations that could result in
payments that are different from our estimates. A hypothetical
1% change in net receivables that are subject to contractual
discounts at December 31, 2008 would result in an impact on
pretax earnings of approximately $34 million.
Provision
for Doubtful Accounts and the Allowance for Doubtful
Accounts
The collection of outstanding receivables from Medicare, managed
care payers, other third-party payers and patients is our
primary source of cash and is critical to our operating
performance. The primary collection risks relate to uninsured
patient accounts, including patient accounts for which the
primary insurance carrier has paid the amounts covered by the
applicable agreement, but patient responsibility amounts
(deductibles and copayments) remain outstanding. The provision
for doubtful accounts and the allowance for doubtful accounts
relate primarily to amounts due directly from patients. An
estimated allowance for doubtful accounts is recorded for all
uninsured accounts, regardless of the aging of those accounts.
Accounts are written off when all reasonable internal and
external collection efforts have been performed. Prior to 2007,
we considered the return of an account from the
41
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Critical
Accounting Policies and Estimates (Continued)
Provision
for Doubtful Accounts and the Allowance for Doubtful Accounts
(Continued)
primary external collection agency to be the culmination of our
reasonable collection efforts and the timing basis for writing
off the account balance. During 2007, we modified our collection
policies to establish a review of all accounts against certain
standard collection criteria, upon completion of our internal
collection efforts. Accounts determined to possess positive
collectibility attributes are forwarded to a secondary external
collection agency and the other accounts are written off. The
accounts that are not collected by the secondary external
collection agency are written off when they are returned to us
by the collection agency (usually within 18 months). Our
collection policy change results in a delay in writing off the
accounts forwarded to the secondary external collection agency
compared to our previous policy, and during 2007 and 2008, we
incurred increases in both our gross accounts receivable and the
allowance for doubtful accounts due to this delay in recording
writeoffs. Writeoffs are based upon specific identification and
the writeoff process requires a writeoff adjustment entry to the
patient accounting system. We do not pursue collection of
amounts related to patients that meet our guidelines to qualify
as charity care. Charity care is not reported in revenues and
does not have an impact on the provision for doubtful accounts.
The amount of the provision for doubtful accounts is based upon
management’s assessment of historical writeoffs and
expected net collections, business and economic conditions,
trends in federal, state, and private employer health care
coverage and other collection indicators. Management relies on
the results of detailed reviews of historical writeoffs and
recoveries at facilities that represent a majority of our
revenues and accounts receivable (the “hindsight
analysis”) as a primary source of information in estimating
the collectibility of our accounts receivable. We perform the
hindsight analysis quarterly, utilizing rolling twelve-months
accounts receivable collection and writeoff data. At
December 31, 2008, the allowance for doubtful accounts
represented approximately 93% of the $5.838 billion patient
due accounts receivable balance, including accounts, net of the
related estimated contractual discounts, related to patients for
which eligibility for Medicaid assistance or charity was being
evaluated (“pending Medicaid accounts”). At
December 31, 2007, the allowance for doubtful accounts
represented approximately 89% of the $4.825 billion patient
due accounts receivable balance, including pending Medicaid
accounts, net of the related estimated contractual discounts.
Days revenues in accounts receivable were 49 days,
53 days and 53 days at December 31, 2008, 2007
and 2006, respectively. Management expects a continuation of the
challenges related to the collection of the patient due
accounts. Adverse changes in the percentage of our patients
having adequate health care coverage, general economic
conditions, patient accounting service center operations, payer
mix, or trends in federal, state, and private employer health
care coverage could affect the collection of accounts
receivable, cash flows and results of operations.
42
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Critical
Accounting Policies and Estimates (Continued)
Provision
for Doubtful Accounts and the Allowance for Doubtful Accounts
(Continued)
The approximate breakdown of accounts receivable by payer
classification as of December 31, 2008 and 2007 is set
forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Accounts Receivable
|
|
|
|
Under 91 Days
|
|
91—180 Days
|
|
Over 180 Days
|
|
|
|
Accounts receivable aging at December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare and Medicaid
|
|
|
10
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
|
Managed care and other insurers
|
|
|
17
|
|
|
|
4
|
|
|
|
3
|
|
|
Uninsured
|
|
|
21
|
|
|
|
9
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
48
|
%
|
|
|
14
|
%
|
|
|
38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable aging at December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare and Medicaid
|
|
|
11
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
|
Managed care and other insurers
|
|
|
19
|
|
|
|
4
|
|
|
|
4
|
|
|
Uninsured
|
|
|
20
|
|
|
|
11
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50
|
%
|
|
|
16
|
%
|
|
|
34
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
Liability Claims
We, along with virtually all health care providers, operate in
an environment with professional liability risks. Since
January 1, 2007, our facilities are insured by our
wholly-owned insurance subsidiary for losses up to
$50 million per occurrence, subject to a $5 million
per occurrence self-insured retention. Prior to 2007, our
facilities’ coverage with our insurance subsidiary was not
subject to the $5 million self-insured retention and a
substantial portion of our professional liability risks was
insured through our wholly-owned insurance subsidiary. Reserves
for professional liability risks were $1.387 billion and
$1.513 billion at December 31, 2008 and 2007,
respectively. The current portion of these reserves,
$279 million and $280 million at December 31,
2008 and 2007, respectively, is included in “other accrued
expenses.” Obligations covered by reinsurance contracts are
included in the reserves for professional liability risks, as
the insurance subsidiary remains liable to the extent reinsurers
do not meet their obligations. Reserves for professional
liability risks (net of $57 million and $44 million
receivable under reinsurance contracts at December 31, 2008
and 2007, respectively) were $1.330 billion and
$1.469 billion at December 31, 2008 and 2007,
respectively. Reserves and provisions for professional liability
risks are based upon actuarially determined estimates. The
estimated reserve ranges, net of amounts receivable under
reinsurance contracts, were $1.102 billion to
$1.332 billion at December 31, 2008 and
$1.224 billion to $1.471 billion at December 31,
2007. Reserves for professional liability risks represent the
estimated ultimate cost of all reported and unreported losses
incurred through the respective consolidated balance sheet
dates. The reserves are estimated using individual case-basis
valuations and actuarial analyses. Those estimates are subject
to the effects of trends in loss severity and frequency. The
estimates are continually reviewed and adjustments are recorded
as experience develops or new information becomes known. Changes
to the estimated reserve amounts are included in current
operating results. Provisions for losses related to professional
liability risks were $175 million, $163 million and
$217 million for the years ended December 31, 2008,
2007 and 2006, respectively.
The reserves for professional liability risks cover
approximately 2,800 and 2,600 individual claims at
December 31, 2008 and 2007, respectively, and estimates for
unreported potential claims. The time period required to resolve
these claims can vary depending upon the jurisdiction and
whether the claim is settled or litigated. The estimation of the
timing of payments beyond a year can vary significantly. Due to
the considerable variability that is
43
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Critical
Accounting Policies and Estimates (Continued)
inherent in such estimates, there can be no assurance that the
ultimate liability will not exceed management’s estimates.
Income
Taxes
We calculate our provision for income taxes using the asset and
liability method, under which deferred tax assets and
liabilities are recognized by identifying the temporary
differences that arise from the recognition of items in
different periods for tax and accounting purposes. Deferred tax
assets generally represent the tax effects of amounts expensed
in our income statement for which tax deductions will be claimed
in future periods.
Although we believe that we have properly reported taxable
income and paid taxes in accordance with applicable laws,
federal, state or international taxing authorities may challenge
our tax positions upon audit. We account for uncertain tax
positions in accordance with Financial Accounting Standards
Board (“FASB”) Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes.”
Accordingly, we report a liability for unrecognized tax benefits
from uncertain tax positions taken or expected to be taken in
our income tax return. Final audit results may vary from our
estimates.
Results
of Operations
Revenue/Volume
Trends
Our revenues depend upon inpatient occupancy levels, the
ancillary services and therapy programs ordered by physicians
and provided to patients, the volume of outpatient procedures
and the charge and negotiated payment rates for such services.
Gross charges typically do not reflect what our facilities are
actually paid. Our facilities have entered into agreements with
third-party payers, including government programs and managed
care health plans, under which the facilities are paid based
upon the cost of providing services, predetermined rates per
diagnosis, fixed per diem rates or discounts from gross charges.
We do not pursue collection of amounts related to patients who
meet our guidelines to qualify for charity care; therefore, they
are not reported in revenues. We provide discounts to uninsured
patients who do not qualify for Medicaid or charity care that
are similar to the discounts provided to many local managed care
plans.
Revenues increased 5.6% to $28.374 billion for the year
ended December 31, 2008 from $26.858 billion for the
year ended December 31, 2007 and increased 5.4% for the
year ended December 31, 2007 from $25.477 billion for
the year ended December 31, 2006. The increase in revenues
in 2008 can be primarily attributed to the combined impact of a
5.2% increase in revenue per equivalent admission and a 0.5%
increase in equivalent admissions compared to the prior year.
The increase in revenues in 2007 can be primarily attributed to
an 8.3% increase in revenue per equivalent admission, offsetting
a 2.7% decline in equivalent admissions compared to 2006.
Admissions declined 0.7% in 2008 compared to 2007 and declined
3.6% in 2007 compared to 2006. Inpatient surgeries declined 4.5%
and outpatient surgeries declined 0.9% during 2008 compared to
2007. Inpatient surgeries declined 3.1% and outpatient surgeries
declined 2.0% during 2007 compared to 2006. Emergency room
visits increased 2.5% during 2008 compared to 2007 and declined
1.9% during 2007 compared to 2006.
Same facility revenues increased 7.0% for the year ended
December 31, 2008 compared to the year ended
December 31, 2007 and increased 7.4% for the year ended
December 31, 2007 compared to the year ended
December 31, 2006. The 7.0% increase for 2008 can be
primarily attributed to the combined impact of a 5.1% increase
in same facility revenue per equivalent admission and a 1.9%
increase in same facility equivalent admissions. The 7.4%
increase for 2007 can be primarily attributed to an 8.1%
increase in same facility revenue per equivalent admission,
offsetting a 0.7% decline in equivalent admissions.
Same facility admissions increased 0.9% in 2008 compared to 2007
and declined 1.3% in 2007 compared to 2006. Same facility
inpatient surgeries declined 0.5% and same facility outpatient
surgeries declined 0.2% during
44
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Results
of Operations (Continued)
Revenue/Volume
Trends (Continued)
2008 compared to 2007. Same facility inpatient surgeries
declined 1.0% and same facility outpatient surgeries declined
1.1% during 2007 compared to 2006. Same facility emergency room
visits increased 3.6% during 2008 compared to 2007 and increased
0.7% during 2007 compared to 2006.
Same facility uninsured emergency room visits increased 4.5% and
same facility uninsured admissions increased 1.7% during 2008
compared to 2007. Same facility uninsured emergency room visits
increased 7.3% and same facility uninsured admissions increased
9.4% during 2007 compared to 2006. Management believes same
facility uninsured emergency room visits and same facility
uninsured admissions could continue to increase during 2009 if
the adverse general economic and unemployment trends continue.
Admissions related to Medicare, managed Medicare, Medicaid,
managed Medicaid, managed care and other insurers and the
uninsured for the years ended December 31, 2008, 2007 and
2006 are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
Medicare
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
37
|
%
|
|
Managed Medicare
|
|
|
9
|
|
|
|
7
|
|
|
|
6
|
|
|
Medicaid
|
|
|
8
|
|
|
|
8
|
|
|
|
9
|
|
|
Managed Medicaid
|
|
|
7
|
|
|
|
7
|
|
|
|
6
|
|
|
Managed care and other insurers
|
|
|
35
|
|
|
|
37
|
|
|
|
36
|
|
|
Uninsured
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Several factors negatively affected patient volumes in 2008 and
2007. More stringent enforcement of case management guidelines
led to certain patient services being classified as outpatient
observation visits instead of
one-day
admissions. Unit closures and changes in Medicare admission
guidelines led to reductions in rehabilitation and skilled
nursing admissions. Cardiac admissions have been affected by
competition from physician-owned heart hospitals.
The approximate percentages of our inpatient revenues related to
Medicare, managed Medicare, Medicaid, managed Medicaid, managed
care plans and other insurers and the uninsured for the years
ended December 31, 2008, 2007 and 2006 are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
Medicare
|
|
|
31
|
%
|
|
|
32
|
%
|
|
|
34
|
%
|
|
Managed Medicare
|
|
|
8
|
|
|
|
7
|
|
|
|
6
|
|
|
Medicaid
|
|
|
7
|
|
|
|
7
|
|
|
|
6
|
|
|
Managed Medicaid
|
|
|
4
|
|
|
|
4
|
|
|
|
3
|
|
|
Managed care and other insurers
|
|
|
44
|
|
|
|
44
|
|
|
|
46
|
|
|
Uninsured
|
|
|
6
|
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008, we owned and operated 38 hospitals
and 33 surgery centers in the state of Florida. Our Florida
facilities’ revenues totaled $7.099 billion and
$6.732 billion for the years ended December 31, 2008
and 2007, respectively. At December 31, 2008, we owned and
operated 34 hospitals and 23 surgery centers in the state of
45
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Results
of Operations (Continued)
Revenue/Volume
Trends (Continued)
Texas. Our Texas facilities’ revenues totaled
$7.351 billion and $6.911 billion for the years ended
December 31, 2008 and 2007, respectively. During 2008 and
2007, 55% of our admissions and 51% of our revenues were
generated by our Florida and Texas facilities. Uninsured
admissions in Florida and Texas represented 63% and 62% of our
uninsured admissions during 2008 and 2007, respectively.
We provided $1.747 billion, $1.530 billion and
$1.296 billion of charity care (amounts are based upon our
gross charges) during the years ended December 31, 2008,
2007 and 2006, respectively. We provide discounts to uninsured
patients who do not qualify for Medicaid or charity care. These
discounts are similar to those provided to many local managed
care plans and totaled $1.853 billion, $1.474 billion
and $1.095 billion for the years ended December 31,
2008, 2007 and 2006, respectively.
We receive a significant portion of our revenues from government
health programs, principally Medicare and Medicaid, which are
highly regulated and subject to frequent and substantial
changes. We have increased the indigent care services we provide
in several communities in the state of Texas, in affiliation
with other hospitals. The state of Texas has been involved in
the effort to increase the indigent care provided by private
hospitals. As a result of this additional indigent care provided
by private hospitals, public hospital districts or counties in
Texas have available funds that were previously devoted to
indigent care. The public hospital districts or counties are
under no contractual or legal obligation to provide such
indigent care. The public hospital districts or counties have
elected to transfer some portion of these newly available funds
to the state’s Medicaid program. Such action is at the sole
discretion of the public hospital districts or counties. It is
anticipated that these contributions to the state will be
matched with federal Medicaid funds. The state then may make
supplemental payments to hospitals in the state for Medicaid
services rendered. Hospitals receiving Medicaid supplemental
payments may include those that are providing additional
indigent care services. Such payments must be within the federal
UPL established by federal regulation.
During 2007, based upon a review of certain expenditures claimed
for federal Medicaid matching funds by the state of Texas, the
Centers for Medicare and Medicaid Services (“CMS”)
deferred a portion of claimed amounts. CMS completed its review
of the claimed expenditures and released the previously deferred
amounts during 2008. Our Texas Medicaid revenues included
$262 million and $232 million during 2008 and 2007,
respectively, of Medicaid supplemental payments pursuant to UPL
programs. We expect to continue to recognize net benefits
related to the Texas Medicaid supplemental payment program based
upon the routine incurrence of indigent care expenditures and
expected processing of Medicaid supplemental payments.
46
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Results
of Operations (Continued)
Operating
Results Summary
The following are comparative summaries of operating results for
the years ended December 31, 2008, 2007 and 2006 (dollars
in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
Revenues
|
|
$
|
28,374
|
|
|
|
100.0
|
|
|
$
|
26,858
|
|
|
|
100.0
|
|
|
$
|
25,477
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
11,440
|
|
|
|
40.3
|
|
|
|
10,714
|
|
|
|
39.9
|
|
|
|
10,409
|
|
|
|
40.9
|
|
|
Supplies
|
|
|
4,620
|
|
|
|
16.3
|
|
|
|
4,395
|
|
|
|
16.4
|
|
|
|
4,322
|
|
|
|
17.0
|
|
|
Other operating expenses
|
|
|
4,554
|
|
|
|
16.1
|
|
|
|
4,241
|
|
|
|
15.7
|
|
|
|
4,056
|
|
|
|
16.0
|
|
|
Provision for doubtful accounts
|
|
|
3,409
|
|
|
|
12.0
|
|
|
|
3,130
|
|
|
|
11.7
|
|
|
|
2,660
|
|
|
|
10.4
|
|
|
Equity in earnings of affiliates
|
|
|
(223
|
)
|
|
|
(0.8
|
)
|
|
|
(206
|
)
|
|
|
(0.8
|
)
|
|
|
(197
|
)
|
|
|
(0.8
|
)
|
|
Gains on investments
|
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
(243
|
)
|
|
|
(1.0
|
)
|
|
Depreciation and amortization
|
|
|
1,416
|
|
|
|
5.0
|
|
|
|
1,426
|
|
|
|
5.4
|
|
|
|
1,391
|
|
|
|
5.5
|
|
|
Interest expense
|
|
|
2,021
|
|
|
|
7.1
|
|
|
|
2,215
|
|
|
|
8.2
|
|
|
|
955
|
|
|
|
3.7
|
|
|
Gains on sales of facilities
|
|
|
(97
|
)
|
|
|
(0.3
|
)
|
|
|
(471
|
)
|
|
|
(1.8
|
)
|
|
|
(205
|
)
|
|
|
(0.8
|
)
|
|
Impairment of long-lived assets
|
|
|
64
|
|
|
|
0.2
|
|
|
|
24
|
|
|
|
0.1
|
|
|
|
24
|
|
|
|
0.1
|
|
|
Transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
442
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,204
|
|
|
|
95.9
|
|
|
|
25,460
|
|
|
|
94.8
|
|
|
|
23,614
|
|
|
|
92.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests and income taxes
|
|
|
1,170
|
|
|
|
4.1
|
|
|
|
1,398
|
|
|
|
5.2
|
|
|
|
1,863
|
|
|
|
7.3
|
|
|
Minority interests in earnings of consolidated entities
|
|
|
229
|
|
|
|
0.8
|
|
|
|
208
|
|
|
|
0.8
|
|
|
|
201
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
941
|
|
|
|
3.3
|
|
|
|
1,190
|
|
|
|
4.4
|
|
|
|
1,662
|
|
|
|
6.5
|
|
|
Provision for income taxes
|
|
|
268
|
|
|
|
0.9
|
|
|
|
316
|
|
|
|
1.1
|
|
|
|
626
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
673
|
|
|
|
2.4
|
|
|
$
|
874
|
|
|
|
3.3
|
|
|
$
|
1,036
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
5.6
|
%
|
|
|
|
|
|
|
5.4
|
%
|
|
|
|
|
|
|
4.2
|
%
|
|
|
|
|
|
Income before income taxes
|
|
|
(20.9
|
)
|
|
|
|
|
|
|
(28.4
|
)
|
|
|
|
|
|
|
(22.9
|
)
|
|
|
|
|
|
Net income
|
|
|
(23.0
|
)
|
|
|
|
|
|
|
(15.7
|
)
|
|
|
|
|
|
|
(27.2
|
)
|
|
|
|
|
|
Admissions(a)
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
(3.6
|
)
|
|
|
|
|
|
|
(2.3
|
)
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
0.5
|
|
|
|
|
|
|
|
(2.7
|
)
|
|
|
|
|
|
|
(2.4
|
)
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
5.2
|
|
|
|
|
|
|
|
8.3
|
|
|
|
|
|
|
|
6.8
|
|
|
|
|
|
|
Same facility % changes from prior year(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
7.0
|
|
|
|
|
|
|
|
7.4
|
|
|
|
|
|
|
|
6.2
|
|
|
|
|
|
|
Admissions(a)
|
|
|
0.9
|
|
|
|
|
|
|
|
(1.3
|
)
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
1.9
|
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
5.1
|
|
|
|
|
|
|
|
8.1
|
|
|
|
|
|
|
|
6.2
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents the total number of patients admitted to our
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 that were either acquired, divested
or removed from service during the current and prior year.
|
47
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Results
of Operations (Continued)
Years
Ended December 31, 2008 and 2007
Net income totaled $673 million for the year ended
December 31, 2008 compared to $874 million for the
year ended December 31, 2007. Financial results for 2008
include gains on sales of facilities of $97 million and
asset impairment charges of $64 million. Financial results
for 2007 include gains on sales of facilities of
$471 million and an asset impairment charge of
$24 million.
Revenues increased 5.6% to $28.374 billion for 2008 from
$26.858 billion for 2007. The increase in revenues was due
primarily to the combined impact of a 5.2% increase in revenue
per equivalent admission and a 0.5% increase in equivalent
admissions compared to 2007. Same facility revenues increased
7.0% due primarily to the combined impact of a 5.1% increase in
same facility revenue per equivalent admission and a 1.9%
increase in same facility equivalent admissions compared to 2007.
During 2008, same facility admissions increased 0.9%, compared
to 2007. Inpatient surgical volumes declined 4.5% on a
consolidated basis and same facility inpatient surgeries
declined 0.5% during 2008 compared to 2007. Outpatient surgical
volumes declined 0.9% on a consolidated basis and same facility
outpatient surgeries declined 0.2% during 2008 compared to 2007.
Salaries and benefits, as a percentage of revenues, were 40.3%
in 2008 and 39.9% in 2007. Salaries and benefits per equivalent
admission increased 6.3% in 2008 compared to 2007. Same facility
labor rate increases averaged 5.1% for 2008 compared to 2007.
Supplies, as a percentage of revenues, were 16.3% in 2008 and
16.4% in 2007. Supply costs per equivalent admission increased
4.5% in 2008 compared to 2007. Same facility supply costs
increased 8.0% for medical devices, 2.8% for pharmacy supplies,
18.7% for blood products and 6.6% for general medical and
surgical items in 2008 compared to 2007.
Other operating expenses, as a percentage of revenues, increased
to 16.1% in 2008 from 15.7% in 2007. Other operating expenses
are primarily comprised of contract services, professional fees,
repairs and maintenance, rents and leases, utilities, insurance
(including professional liability insurance) and nonincome
taxes. Increases in professional fees paid to hospitalists,
emergency room physicians and anesthesiologists represented
20 basis points of the 2008 increase in other operating
expenses. Other operating expenses include $143 million and
$187 million of indigent care costs in certain Texas
markets during 2008 and 2007, respectively. Provisions for
losses related to professional liability risks were
$175 million and $163 million for 2008 and 2007,
respectively.
Provision for doubtful accounts, as a percentage of revenues,
increased to 12.0% for 2008 from 11.7% in 2007. The provision
for doubtful accounts and the allowance for doubtful accounts
relate primarily to uninsured amounts due directly from
patients. The increase in the provision for doubtful accounts,
as a percentage of revenues, can be attributed to an increasing
amount of patient financial responsibility under certain managed
care plans and same facility increases in uninsured emergency
room visits of 4.5% and uninsured admissions of 1.7% in 2008
compared to 2007. At December 31, 2008, our allowance for
doubtful accounts represented approximately 93% of the $5.838
billion total patient due accounts receivable balance, including
accounts, net of estimated contractual discounts, related to
patients for which eligibility for Medicaid coverage was being
evaluated.
Equity in earnings of affiliates increased from
$206 million for 2007 to $223 million for 2008. Equity
in earnings of affiliates relates primarily to our Denver,
Colorado market joint venture.
No net gains on investments were recognized during 2008 and net
gains on investments for 2007 of $8 million relate to sales
of investment securities by our wholly-owned insurance
subsidiary. Net unrealized losses on investment securities were
$48 million at December 31, 2008, representing a
$69 million decline from a net unrealized gain position of
$21 million at December 31, 2007.
48
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Results
of Operations (Continued)
Years
Ended December 31, 2008 and 2007 (Continued)
Depreciation and amortization decreased, as a percentage of
revenue, to 5.0% in 2008 from 5.4% in 2007. Depreciation expense
was $1.412 billion for 2008 and $1.421 billion for
2007.
Interest expense decreased to $2.021 billion for 2008 from
$2.215 billion for 2007. The decrease in interest expense
was due to reductions in both the average debt balance and the
average effective interest rate on long-term debt. Our average
debt balance was $27.211 billion for 2008 compared to
$27.732 billion for 2007. The average interest rate for our
long-term debt decreased from 7.6% at December 31, 2007 to
6.9% at December 31, 2008.
Gains on sales of facilities were $97 million for 2008 and
included $81 million of net gains on the sales of two
hospital facilities and $16 million of net gains on sales
of real estate and other health care entity investments. Gains
on sales of facilities were $471 million for 2007 and
included a $312 million gain on the sale of our two
Switzerland hospitals, a $131 million gain on the sale of a
facility in Florida and $28 million of net gains on sales
of real estate and other health care entity investments.
Minority interests in earnings of consolidated entities
increased from $208 million for 2007 to $229 million
for 2008. The increase relates primarily to our Austin, Texas
market partnership and our group purchasing organization.
The effective tax rate was 28.5% for 2008 and 26.6% for 2007.
Primarily as a result of reaching a settlement with the IRS
Appeals Division and the revision of the amount of a proposed
IRS adjustment related to prior taxable periods, we reduced our
provision for income taxes by $69 million in 2008. Our 2007
provision for income taxes was reduced by $85 million,
principally based on receiving new information related to tax
positions taken in a prior taxable year, and by an additional
$39 million to adjust 2006 state tax accruals to the
amounts reported on completed tax returns and based upon an
analysis of the Recapitalization costs. Excluding the effect of
these adjustments, the effective tax rates for 2008 and 2007
would have been 35.8% and 37.0%, respectively.
Years
Ended December 31, 2007 and 2006
Net income totaled $874 million for the year ended
December 31, 2007 compared to $1.036 billion for the
year ended December 31, 2006. Financial results for 2007
include gains on sales of facilities of $471 million, gains
on investments of $8 million and an asset impairment charge
of $24 million. Financial results for 2006 include gains on
sales of facilities of $205 million, gains on investments
of $243 million, expenses related to the Recapitalization
of $442 million and an asset impairment charge of
$24 million.
Revenues increased 5.4% to $26.858 billion for 2007 from
$25.477 billion for 2006. The increase in revenues was due
primarily to an 8.3% increase in revenue per equivalent
admission, offsetting a 2.7% decline in equivalent admissions
compared to the prior year. Same facility revenues increased
7.4% due to an 8.1% increase in same facility revenue per
equivalent admission, offsetting a 0.7% decline in same facility
equivalent admissions compared to the prior year.
During 2007, same facility admissions declined 1.3% compared to
2006. Inpatient surgical volumes declined 3.1% on a consolidated
basis and same facility inpatient surgeries declined 1.0% during
2007 compared to 2006. Outpatient surgical volumes declined 2.0%
on a consolidated basis and same facility outpatient surgeries
declined 1.1% during 2007 compared to 2006.
Salaries and benefits, as a percentage of revenues, were 39.9%
in 2007 and 40.9% in 2006. Salaries and benefits per equivalent
admission increased 5.8% in 2007 compared to 2006. Labor rate
increases averaged 5.0% for 2007 compared to 2006.
Supplies, as a percentage of revenues, were 16.4% in 2007 and
17.0% in 2006. Supply costs per equivalent admission increased
4.5% in 2007 compared to 2006. Same facility supply costs
increased 6.4% for medical
49
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Results
of Operations (Continued)
Years
Ended December 31, 2007 and 2006 (Continued)
devices, primarily for orthopedic supplies, 13.1% for blood
products, and 5.6% for general medical and surgical items.
Other operating expenses, as a percentage of revenues, decreased
to 15.7% in 2007 from 16.0% in 2006. Other operating expenses
are primarily comprised of contract services, professional fees,
repairs and maintenance, rents and leases, utilities, insurance
(including professional liability insurance) and nonincome
taxes. Other operating expenses include $187 million and
$11 million of indigent care costs in certain Texas markets
during 2007 and 2006, respectively. Provisions for losses
related to professional liability risks were $163 million
and $217 million for 2007 and 2006, respectively. The
reduction in the provision for professional liability risks
reflects the recognition by our actuaries of improving frequency
and severity claim trends at our facilities.
Provision for doubtful accounts, as a percentage of revenues,
increased to 11.7% for 2007 from 10.4% in 2006. The provision
for doubtful accounts and the allowance for doubtful accounts
relate primarily to uninsured amounts due directly from
patients. The increase in the provision for doubtful accounts,
as a percentage of revenues, can be attributed to an increasing
amount of patient financial responsibility under certain managed
care plans and same facility increases in uninsured emergency
room visits of 7.3% and uninsured admissions of 9.4% in 2007
compared to 2006. At December 31, 2007, our allowance for
doubtful accounts represented approximately 89% of the
$4.825 billion total patient due accounts receivable
balance, including accounts, net of estimated contractual
discounts, related to patients for which eligibility for
Medicaid coverage was being evaluated.
Equity in earnings of affiliates increased from
$197 million for 2006 to $206 million for 2007. Equity
in earnings of affiliates relates primarily to our Denver,
Colorado market joint venture.
Gains on investments for 2007 and 2006 of $8 million and
$243 million, respectively, relate to sales of investment
securities by our wholly-owned insurance subsidiary. The
decrease in realized gains for 2007 was primarily due to the
decision to liquidate our equity investment portfolio and
reinvest in debt and interest-bearing investments during the
fourth quarter of 2006. Net unrealized gains on investment
securities declined from $25 million at December 31,
2006 to $21 million at December 31, 2007.
Depreciation and amortization decreased, as a percentage of
revenues, to 5.4% in 2007 from 5.5% in 2006. Purchases of
property and equipment of $1.444 billion during 2007 were
generally equivalent to depreciation expense for 2007 of
$1.421 billion.
Interest expense increased to $2.215 billion for 2007 from
$955 million for 2006. The increase in interest expense is
primarily due to the increased debt related to the
Recapitalization. Our average debt balance was
$27.732 billion for 2007 compared to $13.811 billion
for 2006. The average interest rate for our long-term debt
decreased from 7.9% at December 31, 2006 to 7.6% at
December 31, 2007.
Gains on sales of facilities were $471 million for 2007 and
included a $312 million gain on the sale of our two
Switzerland hospitals and a $131 million gain on the sale
of a facility in Florida. Gains on sales of facilities were
$205 million for 2006 and included a $92 million gain
on the sale of four hospitals in West Virginia and Virginia and
a $93 million gain on the sale of two hospitals in Florida.
Minority interests in earnings of consolidated entities
increased from $201 million for 2006 to $208 million
for 2007. The increase relates primarily to the operations of
surgery centers and other outpatient services entities.
The effective tax rate was 26.6% for 2007 and 37.6% for 2006.
Based on new information received in 2007 related primarily to
tax positions taken in prior taxable periods, we reduced our
provision for income taxes by $85 million, and by an
additional $39 million to adjust 2006 state tax
accruals to the amounts reported on completed
50
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Results
of Operations (Continued)
Years
Ended December 31, 2007 and 2006 (Continued)
tax returns and based upon an analysis of the Recapitalization
costs. Excluding the effect of these adjustments, the effective
tax rate for 2007 would have been 37.0%.
Liquidity
and Capital Resources
Our primary cash requirements are paying our operating expenses,
servicing of our debt, capital expenditures on our existing
properties and acquisitions of hospitals and other health care
entities. Our primary cash sources are cash flow from operating
activities, issuances of debt and equity securities and
dispositions of hospitals and other health care entities.
Cash provided by operating activities totaled
$1.797 billion in 2008 compared to $1.396 billion in
2007 and $1.845 billion in 2006. Working capital totaled
$2.391 billion at December 31, 2008 and
$2.356 billion at December 31, 2007. The
$401 million increase in cash provided by operating
activities for 2008, compared to 2007, relates primarily to
changes in working capital items. The changes in accounts
receivable (net of the provision for doubtful accounts),
inventories and other assets, and accounts payable and accrued
expenses contributed $42 million to cash provided by
operating activities for 2008 while changes in these items
decreased cash provided by operating activities by
$485 million for 2007. The $449 million decrease in
cash provided by operating activities for 2007, compared to
2006, relates primarily to the combined impact of a
$604 million increase in net cash payments for interest and
income taxes and a $205 million increase from changes in
working capital items. The net impact of the cash payments for
interest and income taxes was an increase in cash payments of
$111 million for 2008 compared to 2007 and an increase of
$604 million for 2007 compared to 2006.
Cash used in investing activities was $1.467 billion,
$479 million and $1.307 billion in 2008, 2007 and
2006, respectively. Excluding acquisitions, capital expenditures
were $1.600 billion in 2008, $1.444 billion in 2007
and $1.865 billion in 2006. We expended $85 million,
$32 million and $112 million for acquisitions of
hospitals and health care entities during 2008, 2007 and 2006,
respectively. Expenditures for acquisitions in all three years
were generally comprised of outpatient and ancillary services
entities and were funded by a combination of cash flows from
operations and the issuance or incurrence of debt. Planned
capital expenditures are expected to approximate
$1.5 billion in 2009. At December 31, 2008, there were
projects under construction which had an estimated additional
cost to complete and equip over the next five years of
$1.450 billion. We expect to finance capital expenditures
with internally generated and borrowed funds.
During 2008, we received cash proceeds of $143 million from
dispositions of two hospitals, and $50 million from sales
of other health care entities and real estate investments.
During 2007, we sold three hospitals for cash proceeds of
$661 million, and we also received cash proceeds of
$106 million related primarily to the sales of real estate
investments. The sales of nine hospitals were completed during
2006 for cash proceeds of $560 million, and we also
received cash proceeds of $91 million on the sales of real
estate investments and our equity investment in a hospital joint
venture.
Cash used in financing activities totaled $258 million in
2008, $1.158 billion in 2007 and $240 million in 2006.
During 2008 and 2007, we used cash proceeds from sales of
facilities and available cash provided by operations to make net
debt repayments of $260 million and $1.270 billion,
respectively. The Recapitalization included the issuance of
$19.964 billion of long-term debt, the receipt of
$3.782 billion of equity contributions, the repurchase of
$20.364 billion of common stock, the payment of
$745 million for Recapitalization related fees and
expenses, and the retirement of $3.182 billion of existing
long-term debt. We may in the future repurchase portions of our
debt securities, subject to certain limitations, from time to
time in either the open market or through privately negotiated
transactions, in accordance with applicable SEC and other legal
requirements. The timing, prices, and sizes of purchases depend
upon prevailing trading prices, general economic and market
conditions, and other factors,
51
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Liquidity
and Capital Resources (Continued)
including applicable securities laws. Funds for the repurchase
of debt securities have, and are expected to, come primarily
from cash generated from operations and borrowed funds.
In addition to cash flows from operations, available sources of
capital include amounts available under our senior secured
credit facilities ($1.858 billion as of December 31,
2008 and $2.038 billion as of February 28,
2009) and anticipated access to public and private debt
markets.
Investments of our professional liability insurance subsidiary,
to maintain statutory equity and pay claims incurred prior to
2007, totaled $1.622 billion and $1.899 billion at
December 31, 2008 and 2007, respectively. The insurance
subsidiary maintained reserves for professional liability risk
of $816 million and $1.165 billion at December 31, 2008 and
2007, respectively. Our facilities are insured by our
wholly-owned insurance subsidiary for losses up to
$50 million per occurrence; however, since January 2007,
this coverage is subject to a $5 million per occurrence
self-insured retention. Claims payments, net of reinsurance
recoveries, during the next twelve months are expected to
approximate $250 million. We estimate that approximately
$50 million of the expected net claim payments during the
next twelve months will relate to claims incurred subsequent to
2006.
Financing
Activities
Due to the Recapitalization, we are a highly leveraged company
with significant debt service requirements. Our debt totaled
$26.989 billion and $27.308 billion at
December 31, 2008 and 2007, respectively. Our interest
expense was $2.021 billion for 2008 and $2.215 billion
for 2007.
In connection with the Recapitalization, we entered into
(i) a $2.000 billion senior secured asset-based
revolving credit facility with a borrowing base of 85% of
eligible accounts receivable, subject to customary reserves and
eligibility criteria (fully utilized at December 31, 2008)
(the “ABL credit facility”) and (ii) a senior
secured credit agreement (the “cash flow credit
facility” and, together with the ABL credit facility, the
“senior secured credit facilities”), consisting of a
$2.000 billion revolving credit facility
($1.858 billion available at December 31, 2008 after
giving effect to certain outstanding letters of credit), a
$2.750 billion term loan A ($2.525 billion outstanding
at December 31, 2008), a $8.800 billion term loan B
($8.624 billion outstanding at December 31,
2008) and a €1.000 billion European term loan
(€611 million, or $853 million, outstanding at
December 31, 2008).
Also in connection with the Recapitalization, we issued
$4.200 billion of senior secured notes (comprised of
$1.000 billion of
9
1
/
8
% notes
due 2014 and $3.200 billion of
9
1
/
4
% notes
due 2016) and $1.500 billion of
9
5
/
8
%
cash/10
3
/
8
%
in-kind senior secured toggle notes (which allow us, at our
option, to pay interest
in-kind
during the first five years) due 2016, which are subject to
certain standard covenants. In November 2008, we elected to make
an interest payment for the interest period ending in May 2009
by paying in-kind instead of paying interest in cash.
The senior secured credit facilities and senior secured notes
are fully and unconditionally guaranteed by substantially all
existing and future, direct and indirect, wholly-owned material
domestic subsidiaries that are “Unrestricted
Subsidiaries” under our Indenture dated as of
December 16, 1993 (except for certain special purpose
subsidiaries that only guarantee and pledge their assets under
our ABL credit facility). In addition, borrowings under the
European term loan are guaranteed by all material, wholly-owned
European subsidiaries.
Management believes that cash flows from operations, amounts
available under our senior secured credit facilities and our
anticipated access to public and private debt markets will be
sufficient to meet expected liquidity needs during the next
twelve months.
52
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Contractual
Obligations and Off-Balance Sheet Arrangements
As of December 31, 2008, maturities of contractual
obligations and other commercial commitments are presented in
the table below (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
Contractual Obligations(a)
|
|
Total
|
|
|
Current
|
|
|
2-3 Years
|
|
|
4-5 Years
|
|
|
After 5 Years
|
|
|
|
|
Long-term debt including interest, excluding the senior secured
credit facilities(b)
|
|
$
|
22,500
|
|
|
$
|
1,175
|
|
|
$
|
3,291
|
|
|
$
|
3,842
|
|
|
$
|
14,192
|
|
|
Loans outstanding under the senior secured credit facilities,
including interest(b)
|
|
|
17,337
|
|
|
|
1,157
|
|
|
|
2,492
|
|
|
|
13,688
|
|
|
|
—
|
|
|
Operating leases(c)
|
|
|
1,255
|
|
|
|
225
|
|
|
|
352
|
|
|
|
224
|
|
|
|
454
|
|
|
Purchase and other obligations(c)
|
|
|
36
|
|
|
|
30
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
41,128
|
|
|
$
|
2,587
|
|
|
$
|
6,141
|
|
|
$
|
17,754
|
|
|
$
|
14,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Commercial Commitments Not Recorded on the
|
|
Commitment Expiration by Period
|
|
|
Consolidated Balance Sheet
|
|
Total
|
|
|
Current
|
|
|
2-3 Years
|
|
|
4-5 Years
|
|
|
After 5 Years
|
|
|
|
|
Surety bonds(d)
|
|
$
|
141
|
|
|
$
|
134
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Letters of credit(e)
|
|
|
92
|
|
|
|
12
|
|
|
|
—
|
|
|
|
50
|
|
|
|
30
|
|
|
Physician commitments(f)
|
|
|
39
|
|
|
|
16
|
|
|
|
23
|
|
|
|
—
|
|
|
|
—
|
|
|
Guarantees(g)
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial commitments
|
|
$
|
274
|
|
|
$
|
162
|
|
|
$
|
30
|
|
|
$
|
50
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
We have not included obligations to pay estimated professional
liability claims ($1.387 billion at December 31,
2008) in this table. The estimated professional liability
claims, which have occurred prior to 2007, are expected to be
funded by the designated investment securities that are
restricted for this purpose ($1.622 billion at
December 31, 2008). We also have not included obligations
related to unrecognized tax benefits of $625 million at
December 31, 2008, as we cannot reasonably estimate the
timing or amounts of additional cash payments, if any, at this
time.
|
|
|
|
(b)
|
|
Estimates of interest payments assumes that interest rates,
borrowing spreads and foreign currency exchange rates at
December 31, 2008, remain constant during the period
presented.
|
|
|
|
(c)
|
|
Future operating lease obligations and purchase obligations are
not recorded in our consolidated balance sheet.
|
|
|
|
(d)
|
|
Amounts relate primarily to instances in which we have agreed to
indemnify various commercial insurers who have provided surety
bonds to cover damages for malpractice cases which were awarded
to plaintiffs by the courts. These cases are currently under
appeal and the bonds will not be released by the courts until
the cases are closed.
|
|
|
|
(e)
|
|
Amounts relate primarily to instances in which we have letters
of credit outstanding with insurance companies that issued
workers compensation insurance policies to us in prior years.
The letters of credit serve as security to the insurance
companies for payment obligations we retained.
|
|
|
|
(f)
|
|
In consideration for physicians relocating to the communities in
which our hospitals are located and agreeing to engage in
private practice for the benefit of the respective communities,
we make advances to physicians, normally over a period of one
year, to assist in establishing the physicians’ practices.
The actual amount of these commitments to be advanced often
depends upon the financial results of the physicians’
private practices during the recruitment agreement payment
period. The physician commitments reflected were based on our
maximum exposure on effective agreements at December 31,
2008.
|
|
|
|
(g)
|
|
We have entered into guarantee agreements related to certain
leases.
|
53
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Market
Risk
We are exposed to market risk related to changes in market
values of securities. The investments in debt and equity
securities of our wholly-owned insurance subsidiary were
$1.614 billion and $8 million, respectively, at
December 31, 2008. These investments are carried at fair
value, with changes in unrealized gains and losses being
recorded as adjustments to other comprehensive income. At
December 31, 2008, we had a net unrealized loss of
$48 million on the insurance subsidiary’s investment
securities.
We are exposed to market risk related to market illiquidity.
Liquidity of the investments in debt and equity securities of
our wholly-owned insurance subsidiary could be impaired by the
inability to access the capital markets. Should the wholly-owned
insurance subsidiary require significant amounts of cash in
excess of normal cash requirements to pay claims and other
expenses on short notice, we may have difficulty selling these
investments in a timely manner or be forced to sell them at a
price less than what we might otherwise have been able to in a
normal market environment. At December 31, 2008, our
wholly-owned insurance subsidiary had invested $536 million
($573 million par value) in municipal, tax-exempt student
loan auction rate securities which were classified as long-term
investments. The auction rate securities (“ARS”) are
publicly issued securities with long-term stated maturities for
which the interest rates are reset through a Dutch auction every
seven to 35 days. With the liquidity issues experienced in
global credit and capital markets, the ARS held by our
wholly-owned insurance subsidiary have experienced multiple
failed auctions, beginning on February 11, 2008, as the
amount of securities submitted for sale exceeded the amount of
purchase orders. There is a very limited market for the ARS at
this time. We do not currently intend to attempt to sell the ARS
as the liquidity needs of our insurance subsidiary are expected
to be met by other investments in its investment portfolio.
These securities continue to accrue and pay interest
semi-annually based on the failed auction maximum rate formulas
stated in their respective Official Statements. During the
failed auction period beginning February 11, 2008 and
ending December 31, 2008, certain issuers of our ARS have
redeemed $93 million of our securities at par value. If
uncertainties in the credit and capital markets continue or
there are ratings downgrades on the ARS held by our insurance
subsidiary, we may be required to recognize other-than-temporary
impairments on these long-term investments in future periods.
We are also exposed to market risk related to changes in
interest rates and we periodically enter into interest rate swap
agreements to manage our exposure to these fluctuations. Our
interest rate swap agreements involve the exchange of fixed and
variable rate interest payments between two parties, based on
common notional principal amounts and maturity dates. The
notional amounts of the swap agreements represent balances used
to calculate the exchange of cash flows and are not our assets
or liabilities. Our credit risk related to these agreements is
considered low because the swap agreements are with creditworthy
financial institutions. The interest payments under these
agreements are settled on a net basis. These derivatives have
been recognized in the financial statements at their respective
fair values. Changes in the fair value of these derivatives are
included in other comprehensive income.
With respect to our interest-bearing liabilities, approximately
$5.055 billion of long-term debt at December 31, 2008
is subject to variable rates of interest, while the remaining
balance in long-term debt of $21.934 billion at
December 31, 2008 is subject to fixed rates of interest.
Both the general level of interest rates and, for the senior
secured credit facilities, our leverage affect our variable
interest rates. Our variable rate debt is comprised primarily of
amounts outstanding under the senior secured credit facilities.
Borrowings under the senior secured credit facilities bear
interest at a rate equal to an applicable margin plus, at our
option, either (a) a base rate determined by reference to
the higher of (1) the federal funds rate plus
1
/
2
of 1% and (2) the prime rate of Bank of America or
(b) a LIBOR rate for the currency of such borrowing for the
relevant interest period. The applicable margin for borrowings
under the senior secured credit facilities, with the exception
of term loan B where the margin is static, may be reduced
subject to attaining certain leverage ratios. The average rate
for our long-term debt decreased from 7.6% at December 31,
2007 to 6.9% at December 31, 2008. On February 16,
2007, we amended the cash flow credit facility to reduce the
applicable margins with respect to the term borrowings
thereunder. On June 20, 2007, we amended the ABL credit
facility to reduce the applicable margin with respect to
borrowings thereunder.
54
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
Market
Risk (Continued)
The estimated fair value of our total long-term debt was
$20.225 billion at December 31, 2008. The estimates of
fair value are based upon the quoted market prices for the same
or similar issues of long-term debt with the same maturities.
Based on a hypothetical 1% increase in interest rates, the
potential annualized reduction to future pretax earnings would
be approximately $51 million. To mitigate the impact of
fluctuations in interest rates, we generally target a portion of
our debt portfolio to be maintained at fixed rates.
Our international operations and the European term loan expose
us to market risks associated with foreign currencies. In order
to mitigate the currency exposure related to debt service
obligations through December 31, 2011 under the European
term loan, we have entered into cross currency swap agreements.
A cross currency swap is an agreement between two parties to
exchange a stream of principal and interest payments in one
currency for a stream of principal and interest payments in
another currency over a specified period.
Financial
Instruments
Derivative financial instruments are employed to manage risks,
including foreign currency and interest rate exposures, and are
not used for trading or speculative purposes. We recognize
derivative instruments, such as interest rate swap agreements
and foreign exchange contracts, in the consolidated balance
sheets at fair value. Changes in the fair value of derivatives
are recognized periodically either in earnings or in
stockholders’ equity, as a component of other comprehensive
income, depending on whether the derivative financial instrument
qualifies for hedge accounting, and if so, whether it qualifies
as a fair value hedge or a cash flow hedge. Gains and losses on
derivatives designated as cash flow hedges, to the extent they
are effective, are recorded in other comprehensive income, and
subsequently reclassified to earnings to offset the impact of
the hedged items when they occur. Changes in the fair value of
derivatives not qualifying as hedges, and for any portion of a
hedge that is ineffective, are reported in earnings.
The net interest paid or received on interest rate swaps is
recognized as interest expense. Gains and losses resulting from
the early termination of interest rate swap agreements are
deferred and amortized as adjustments to expense over the
remaining period of the debt originally covered by the
terminated swap.
Effects
of Inflation and Changing Prices
Various federal, state and local laws have been enacted that, in
certain cases, limit our ability to increase prices. Revenues
for general, acute care hospital services rendered to Medicare
patients are established under the federal government’s
prospective payment system. Total fee-for-service Medicare
revenues approximated 23% in 2008, 24% in 2007 and 25% in 2006
of our total patient revenues.
Management believes that hospital industry operating margins
have been, and may continue to be, under significant pressure
because of changes in payer mix and growth in operating expenses
in excess of the increase in prospective payments under the
Medicare program. In addition, as a result of increasing
regulatory and competitive pressures, our ability to maintain
operating margins through price increases to non-Medicare
patients is limited.
IRS
Disputes
We are currently contesting before the Appeals Division of the
Internal Revenue Service (the “IRS”) certain claimed
deficiencies and adjustments proposed by the IRS in connection
with its examinations of the 2003 and 2004 federal income
returns for HCA and 17 affiliates that are treated as
partnerships for federal income tax purposes (“affiliated
partnerships”). The disputed items include the timing of
recognition of certain patient service revenues and our method
for calculating the tax allowance for doubtful accounts.
55
HCA
INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS — (Continued)
IRS
Disputes (Continued)
Eight taxable periods of HCA and its predecessors ended in 1995
through 2002 and the 2002 taxable year of 13 affiliated
partnerships, for which the primary remaining issue is the
computation of the tax allowance for doubtful accounts, are
pending before the IRS Examination Division or the United States
Tax Court as of December 31, 2008. The IRS began an audit
of the 2005 and 2006 federal income tax returns for HCA and
seven affiliated partnerships during 2008.
Management believes that HCA, its predecessors and affiliates
properly reported taxable income and paid taxes in accordance
with applicable laws and agreements established with the IRS and
that final resolution of these disputes will not have a
material, adverse effect on our results of operations or
financial position. However, if payments due upon final
resolution of these issues exceed our recorded estimates, such
resolutions could have a material, adverse effect on our results
of operations or financial position.
56
|
|
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
The information called for by this item is provided under the
caption “Market Risk” under Item 7,
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
|
|
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Information with respect to this Item is contained in our
consolidated financial statements indicated in the Index to
Consolidated Financial Statements on
Page F-1
of this annual report on
Form 10-K.
|
|
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
|
|
Item 9A.
|
Controls
and Procedures
|
|
|
|
|
1.
|
Conclusion
Regarding the Effectiveness of Disclosure Controls and
Procedures
|
Under the supervision and with the participation of our
management, including our principal executive officer and
principal financial officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined
under
Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Based on this
evaluation, our principal executive officer and our principal
financial officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by
this annual report.
|
|
|
|
2.
|
Internal
Control Over Financial Reporting
|
(a) Management’s Report on Internal Control Over
Financial Reporting
Our management is responsible for establishing and maintaining
effective internal control over financial reporting, as such
term is defined in Exchange Act
Rule 13a-15(f).
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial
statement preparation and presentation.
Under the supervision and with the participation of our
management, including our principal executive officer and
principal financial officer, we conducted an assessment of the
effectiveness of our internal control over financial reporting
based on the framework in Internal Control —
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our
assessment under the framework in Internal Control —
Integrated Framework, our management concluded that our internal
control over financial reporting was effective as of
December 31, 2008.
Ernst & Young, LLP, the independent registered public
accounting firm that audited our consolidated financial
statements included in this
Form 10-K,
has issued a report on our internal control over financial
reporting, which is included herein.
57
(b) Attestation Report of the Independent Registered Public
Accounting Firm
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
HCA Inc.
We have audited HCA Inc.’s internal control over financial
reporting as of December 31, 2008, based on criteria
established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). HCA Inc.’s
management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting
included in the accompanying Management’s Report on
Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the Company’s internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, HCA Inc. maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2008, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of HCA Inc. as of December 31,
2008 and 2007, and the related consolidated statements of
income, stockholders’ (deficit) equity and cash flows for
each of the three years in the period ended December 31,
2008, and our report dated March 3, 2009 expressed an
unqualified opinion thereon.
/s/ Ernst & Young LLP
Nashville, Tennessee
March 3, 2009
58
|
|
|
|
Item 9B.
|
Other
Information
|
On March 2, 2009, we amended our $13.550 billion and
€1.000 billion senior secured cash flow credit
facility, dated as of November 17, 2006, as amended
February 16, 2007 (the “cash flow credit
facility”), to allow for one or more future issuances of
additional secured notes, which may include notes that are
secured on a
pari passu
basis or on a junior basis with
the obligations under the cash flow credit facility, so long as
(1) such notes do not require any scheduled payment or
redemption prior to the scheduled term loan B final maturity
date as currently in effect and (2) the proceeds from any
such issuance are used within three business days of receipt to
prepay term loans under the cash flow credit facility in
accordance with the terms of the cash flow credit facility. The
U.S. security documents related to the cash flow credit
facility were also amended and restated, or in the case of the
U.S. mortgages, will be amended and restated, in connection
with the amendment in order to give effect to the security
interests granted to holders of such additional secured notes.
On March 2, 2009, we amended our $2.000 billion senior
secured asset-based revolving credit facility, dated as of
November 17, 2006, as amended and restated as of
June 20, 2007 (the “ABL credit facility”), to
allow for one or more future issuances of additional secured
notes or loans, which may include notes or loans that are
secured on a pari passu basis or on a junior basis with the
obligations under the cash flow credit facility, so long as the
proceeds from any such issuance are used to prepay term loans
under the cash flow credit facility within three business days
of the receipt thereof. The amendment to the ABL credit facility
also altered the excess facility availability requirement to
include a separate minimum facility availability requirement
applicable to the ABL credit facility, and increased the
applicable LIBOR and ABR margins for all borrowings under the
ABL credit facility by 0.25% each.
On February 19, 2009, we issued $310 million of
9
7
/
8
%
Senior Secured Notes due in 2017, which are subject to certain
standard covenants.
See also Item 13, “Certain Relationships and Related
Transactions” for a description of certain relationships
between the Administrative Agent under the cash flow credit
facility and the ABL credit facility, and our company.
59
PART III
|
|
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
As of February 25, 2009, our directors were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
Name
|
|
Age
|
|
Since
|
|
Position(s)
|
|
|
|
Jack O. Bovender, Jr.
|
|
|
63
|
|
|
|
1999
|
|
|
Chairman of the Board
|
|
Christopher J. Birosak
|
|
|
54
|
|
|
|
2006
|
|
|
Director
|
|
George A. Bitar
|
|
|
44
|
|
|
|
2006
|
|
|
Director
|
|
Richard M. Bracken
|
|
|
56
|
|
|
|
2002
|
|
|
President, Chief Executive Officer and Director
|
|
John P. Connaughton
|
|
|
43
|
|
|
|
2006
|
|
|
Director
|
|
Kenneth W. Freeman
|
|
|
58
|
|
|
|
2009
|
|
|
Director
|
|
Thomas F. Frist III
|
|
|
41
|
|
|
|
2006
|
|
|
Director
|
|
William R. Frist
|
|
|
39
|
|
|
|
2009
|
|
|
Director
|
|
Christopher R. Gordon
|
|
|
36
|
|
|
|
2006
|
|
|
Director
|
|
Michael W. Michelson
|
|
|
57
|
|
|
|
2006
|
|
|
Director
|
|
James C. Momtazee
|
|
|
37
|
|
|
|
2006
|
|
|
Director
|
|
Stephen G. Pagliuca
|
|
|
54
|
|
|
|
2006
|
|
|
Director
|
|
Nathan C. Thorne
|
|
|
55
|
|
|
|
2006
|
|
|
Director
|
As of February 25, 2009, our executive officers (other than
Messrs. Bovender and Bracken who are listed above) were as
follows:
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position(s)
|
|
|
|
R. Milton Johnson
|
|
|
52
|
|
|
Executive Vice President and Chief Financial Officer
|
|
David G. Anderson
|
|
|
61
|
|
|
Senior Vice President — Finance and Treasurer
|
|
Victor L. Campbell
|
|
|
62
|
|
|
Senior Vice President
|
|
V. Carl George
|
|
|
64
|
|
|
Senior Vice President — Development
|
|
Charles J. Hall
|
|
|
55
|
|
|
President — Eastern Group
|
|
Samuel N. Hazen
|
|
|
48
|
|
|
President — Western Group
|
|
A. Bruce Moore, Jr.
|
|
|
49
|
|
|
President — Outpatient Services Group
|
|
Jonathan B. Perlin, M.D.
|
|
|
48
|
|
|
President — Clinical Services Group and Chief
Medical Officer
|
|
W. Paul Rutledge
|
|
|
54
|
|
|
President — Central Group
|
|
Joseph N. Steakley
|
|
|
54
|
|
|
Senior Vice President — Internal Audit Services
|
|
John M. Steele
|
|
|
53
|
|
|
Senior Vice President — Human Resources
|
|
Donald W. Stinnett
|
|
|
52
|
|
|
Senior Vice President and Controller
|
|
Beverly B. Wallace
|
|
|
58
|
|
|
President — Shared Services Group
|
|
Robert A. Waterman
|
|
|
55
|
|
|
Senior Vice President and General Counsel
|
|
Noel Brown Williams
|
|
|
53
|
|
|
Senior Vice President and Chief Information Officer
|
|
Alan R. Yuspeh
|
|
|
59
|
|
|
Senior Vice President and Chief Ethics and Compliance Officer
|
Our Board of Directors consists of thirteen directors, who are
each managers of Hercules Holding. The Amended and Restated
Limited Liability Company Agreement of Hercules Holding requires
that the members of Hercules Holding take all necessary action
to ensure that the persons who serve as managers of Hercules
Holding also serve on the Board of Directors of HCA. See
Item 13, “Certain Relationships and Related
Transactions.” In addition, Messrs. Bovender’s
and Bracken’s employment agreements provide that they will
continue to serve as
60
members of our Board of Directors so long as they remain
officers of HCA, with Mr. Bovender to serve as the Chairman
through December 15, 2009. Because of these requirements,
together with Hercules Holding’s ownership of 97.3% of our
outstanding common stock, we do not currently have a policy or
procedures with respect to shareholder recommendations for
nominees to the Board of Directors.
Jack O. Bovender, Jr.
has served as our Chairman
since January 2002. Mr. Bovender served as Chairman and
Chief Executive Officer of the Company from January 2002 to
January 2009 and President and Chief Executive Officer of the
Company from January 2001 to December 2001. From August 1997 to
January 2001, Mr. Bovender served as President and Chief
Operating Officer of the Company. From April 1994 to August
1997, he was retired. Prior to his retirement, Mr. Bovender
served as Chief Operating Officer of HCA-Hospital Corporation of
America from 1992 until 1994. Prior to 1992, Mr. Bovender
held several senior level positions with HCA-Hospital
Corporation of America.
Christopher J. Birosak
is a Managing Director in the
Merrill Lynch Global Private Equity Division which he joined in
2004. Prior to joining the Global Private Equity Division,
Mr. Birosak worked in various capacities in the Merrill
Lynch Leveraged Finance Group with particular emphasis on
leveraged buyouts and mergers and acquisitions related
financings. Mr. Birosak also serves on the board of
directors of the Atrium Companies, Inc. and NPC International.
Mr. Birosak joined Merrill Lynch in 1994.
George A. Bitar
has been a Managing Director in the
Merrill Lynch Global Private Equity Division where he serves as
Co-Head of the North America Region, and a Managing Director in
Merrill Lynch Global Private Equity, Inc., the Manager of ML
Global Private Equity Fund, L.P., a proprietary private equity
fund since 1999. Mr. Bitar serves on the Board of Hertz
Global Holdings, Inc., The Hertz Corporation, Advantage Sales
and Marketing, Inc. and Aeolus Re Ltd.
Richard M. Bracken
was appointed as our President and
Chief Executive Officer in January 2009 and has served as a
Director of the Company since 2002. Mr. Bracken was
appointed Chief Operating Officer in July 2001 and served as
President and Chief Operating Officer from January 2002 to
January 2009. Mr. Bracken served as President —
Western Group of the Company from August 1997 until July 2001.
From January 1995 to August 1997, Mr. Bracken served as
President of the Pacific Division of the Company. Prior to 1995,
Mr. Bracken served in various hospital Chief Executive
Officer and Administrator positions with HCA-Hospital
Corporation of America.
John P. Connaughton
has been a Managing Director of Bain
Capital Partners, LLC since 1997 and a member of the firm since
1989. Prior to joining Bain Capital, Mr. Connaughton was a
consultant at Bain & Company, Inc., where he worked in
the health care, consumer products and business services
industries. Mr. Connaughton currently serves as a director
of Clear Channel Communications, Inc., M/C Communications
(PriMed), CRC Health Group, Warner Chilcott, Ltd., Sungard Data
Systems, Warner Music Group, AMC Theatres, Quintiles
Transnational Corp. and The Boston Celtics.
Kenneth W. Freeman
has been a member of the general
partner of Kohlberg Kravis & Co. L.P. since 2007 and
joined the firm as Managing Director in May 2005. From May 2004
to December 2004, Mr. Freeman was Chairman of Quest
Diagnostics Incorporated, and from January 1996 to May 2004, he
served as Chairman and Chief Executive Officer of Quest
Diagnostics Incorporated. From May 1995 to December 1996,
Mr. Freeman was President and Chief Executive Officer of
Corning Clinical Laboratories, the predecessor company to Quest
Diagnostics. Prior to that, he served in various general
management and financial roles with Corning Incorporated.
Mr. Freeman currently serves as a director of Accellent,
Inc. and Masonite Corporation.
Thomas F. Frist III
is a principal of Frist Capital
LLC, a private investment vehicle for Mr. Frist and certain
related persons and has held such position since 1998.
Mr. Frist is also a general partner at Frisco Partners,
another Frist family investment vehicle. Mr. Frist is the
brother of William R. Frist, who also serves as a director.
William R. Frist
is a principal of Frist Capital LLC, a
private investment vehicle for Mr. Frist and certain
related persons and has held such position since 2003.
Mr. Frist is also a general partner at Frisco Partners,
another Frist family investment vehicle. Mr. Frist is the
brother of Thomas F. Frist, III, who also serves as a
director.
61
Christopher R. Gordon
is a Managing Director of Bain
Capital Partners, LLC and joined the firm in 1997. Prior to
joining Bain Capital, Mr. Gordon was a consultant at
Bain & Company. Mr. Gordon currently serves as a
director of Accellent, Inc. and CRC Health Corporation.
Michael W. Michelson
has been a member of the limited
liability company which serves as the general partner of
Kohlberg Kravis Roberts & Co. L.P. since 1996. Prior
to that, he was a general partner of Kohlberg Kravis
Roberts & Co. L.P. Mr. Michelson is also a
director of Biomet, Inc. and Jazz Pharmaceuticals, Inc.
James C. Momtazee
has been a member of the limited
liability company which serves as the general partner of
Kohlberg Kravis Roberts & Co. L.P. since 2009. From
1996 to 2009, he was an executive of Kohlberg Kravis
Roberts & Co. L.P. From 1994 to 1996,
Mr. Momtazee was with Donaldson, Lufkin &
Jenrette in its investment banking department. Mr. Momtazee
is also a director of Accellent, Inc. and Jazz Pharmaceuticals,
Inc.
Stephen G. Pagliuca
is a Managing Director of Bain
Capital Partners, LLC. Mr. Pagliuca is also a Managing
Partner and an Owner of the Boston Celtics Basketball franchise.
Mr. Pagliuca joined Bain & Company in 1982 and
founded the Information Partners private equity fund for Bain
Capital in 1989. He also worked as a senior accountant and
international tax specialist for Peat Marwick
Mitchell & Company in the Netherlands.
Mr. Pagliuca currently serves as a director of Burger King
Holdings Inc., Gartner, Inc., Warner Chilcott, Ltd., Quintiles
Transnational Corp. and M/C Communications.
Nathan C. Thorne
has been a Senior Vice President of
Merrill Lynch & Co., Inc., a subsidiary of Bank of
America Corporation since February 2006, and President of
Merrill Lynch Global Private Equity since 2002. Mr. Thorne
joined Merrill Lynch in 1984.
R. Milton Johnson
has served as Executive Vice
President and Chief Financial Officer of the Company since July
2004. Mr. Johnson served as Senior Vice President and
Controller of the Company from July 1999 until July 2004.
Mr. Johnson served as Vice President and Controller of the
Company from November 1998 to July 1999. Prior to that time,
Mr. Johnson served as Vice President — Tax of the
Company from April 1995 to October 1998. Prior to that time,
Mr. Johnson served as Director of Tax for Healthtrust from
September 1987 to April 1995.
David G. Anderson
has served as Senior Vice
President — Finance and Treasurer of the Company since
July 1999. Mr. Anderson served as Vice President
— Finance of the Company from September 1993 to July
1999 and was elected to the additional position of Treasurer in
November 1996. From March 1993 until September 1993,
Mr. Anderson served as Vice President — Finance
and Treasurer of Galen Health Care, Inc. From July 1988 to March
1993, Mr. Anderson served as Vice President —
Finance and Treasurer of Humana Inc.
Victor L. Campbell
has served as Senior Vice President of
the Company since February 1994. Prior to that time,
Mr. Campbell served as HCA-Hospital Corporation of
America’s Vice President for Investor, Corporate and
Government Relations. Mr. Campbell joined HCA-Hospital
Corporation of America in 1972. Mr. Campbell serves on the
Board of the Nashville Health Care Council, as a member of the
American Hospital Association’s President’s Forum, and
on the Board and Executive Committee of the Federation of
American Hospitals.
V. Carl George
has served as Senior Vice
President — Development of the Company since July
1999. Mr. George served as Vice President —
Development of the Company from April 1995 to July 1999. From
September 1987 to April 1995, Mr. George served as Director
of Development for Healthtrust. Prior to working for
Healthtrust, Mr. George served with HCA-Hospital
Corporation of America in various positions.
Charles J. Hall
was appointed President —
Eastern Group of the Company in October 2006. Prior to that
time, Mr. Hall had served as President — North
Florida Division since April 2003. Mr. Hall had previously
served the Company as President of the East Florida Division
from January 1999 until April 2003, as a Market President in the
East Florida Division from January 1998 until December 1998, as
President of the South Florida Division from February 1996 until
December 1997, and as President of the Southwest Florida
Division from October 1994 until February 1996, and in various
other capacities since 1987.
Samuel N. Hazen
was appointed President —
Western Group of the Company in July 2001. Mr. Hazen served
as Chief Financial Officer — Western Group of the
Company from August 1995 to July 2001. Mr. Hazen served as
Chief Financial Officer — North Texas Division of the
Company from February 1994 to July 1995. Prior to that
62
time, Mr. Hazen served in various hospital and regional
Chief Financial Officer positions with Humana Inc. and Galen
Health Care, Inc.
A. Bruce Moore, Jr.
was appointed
President — Outpatient Services Group in January 2006.
Mr. Moore had served as Senior Vice President and as Chief
Operating Officer — Outpatient Services Group since
July 2004 and as Senior Vice President — Operations
Administration from July 1999 until July 2004. Mr. Moore
served as Vice President — Operations Administration
of the Company from September 1997 to July 1999, as Vice
President — Benefits from October 1996 to September
1997, and as Vice President — Compensation from March
1995 until October 1996.
Dr. Jonathan B. Perlin
was appointed
President — Clinical Services Group and Chief Medical
Officer in November 2007. Dr. Perlin had served as Chief
Medical Officer and Senior Vice President — Quality of
the Company from August 2006 to November 2007. Prior to joining
the Company, Dr. Perlin served as Under Secretary for
Health in the U.S. Department of Veterans Affairs since
April 2004. Dr. Perlin joined the Veterans Health
Administration in November 1999 where he served in various
capacities, including as Deputy Under Secretary for Health from
July 2002 to April 2004, and as Chief Quality and Performance
Officer from November 1999 to September 2002.
W. Paul Rutledge
was appointed as
President — Central Group in October 2005.
Mr. Rutledge had served as President of the MidAmerica
Division since January 2001. He served as President of TriStar
Health System from June 1996 to January 2001 and served as
President of Centennial Medical Center from May 1993 to June
1996. He has served in leadership capacities with HCA for more
than 25 years, working with hospitals in the Southeast.
Joseph N. Steakley
has served as Senior Vice
President — Internal Audit Services of the Company
since July 1999. Mr. Steakley served as Vice President
— Internal Audit Services from November 1997 to July
1999. From October 1989 until October 1997, Mr. Steakley
was a partner with Ernst & Young LLP.
Mr. Steakley is a member of the board of directors of J.
Alexander’s Corporation, where he serves on the
compensation committee and as chairman of the audit committee.
John M. Steele
has served as Senior Vice
President — Human Resources of the Company since
November 2003. Mr. Steele served as Vice
President — Compensation and Recruitment of the
Company from November 1997 to October 2003. From March 1995 to
November 1997, Mr. Steele served as Assistant Vice
President — Recruitment.
Donald W. Stinnett
was appointed Senior Vice President
and Controller in December 2008. Mr. Stinnett served as
Chief Financial Officer — Eastern Group from October
2005 to December 2008 and Chief Financial Officer of the Far
West Division from July 1999 to October 2005. Mr. Stinnett
served as Chief Financial Officer and Vice President of Finance
of Franciscan Health System of the Ohio Valley from 1995 until
1999, and served in various capacities with Franciscan Health
System of Cincinnati and Providence Hospital in Cincinnati prior
to that time.
Beverly B. Wallace
was appointed President —
Shared Services Group in March 2006. From January 2003 until
March 2006, Ms. Wallace served as President
— Financial Services Group. Ms. Wallace served as
Senior Vice President — Revenue Cycle Operations
Management of the Company from July 1999 to January 2003.
Ms. Wallace served as Vice President — Managed
Care of the Company from July 1998 to July 1999. From 1997 to
1998, Ms. Wallace served as President — Homecare
Division of the Company. From 1996 to 1997, Ms. Wallace
served as Chief Financial Officer — Nashville Division
of the Company. From 1994 to 1996, Ms. Wallace served as
Chief Financial Officer —
Mid-America
Division of the Company.
Robert A. Waterman
has served as Senior Vice President
and General Counsel of the Company since November 1997.
Mr. Waterman served as a partner in the law firm of
Latham & Watkins from September 1993 to October 1997;
he was also Chair of the firm’s healthcare group during
1997.
Noel Brown Williams
has served as Senior Vice President
and Chief Information Officer of the Company since October 1997.
From October 1996 to September 1997, Ms. Williams served as
Chief Information Officer for American Service Group/Prison
Health Services, Inc. From September 1995 to September 1996,
Ms. Williams worked as an independent consultant. From June
1993 to June 1995, Ms. Williams served as Vice President,
63
Information Services for HCA Information Services. From February
1979 to June 1993, she held various positions with HCA-Hospital
Corporation of America Information Services.
Alan R. Yuspeh
has served as Senior Vice President and
Chief Ethics and Compliance Officer of the Company since May
2007. From October 1997 to May 2007, Mr. Yuspeh served as
Senior Vice President — Ethics, Compliance and
Corporate Responsibility of the Company. From September 1991
until October 1997, Mr. Yuspeh was a partner with the law
firm of Howrey & Simon. As a part of his law practice,
Mr. Yuspeh served from 1987 to 1997 as Coordinator of the
Defense Industry Initiative on Business Ethics and Conduct.
Audit
Committee Financial Expert
Our Audit and Compliance Committee is composed of Christopher J.
Birosak, Thomas F. Frist III, Christopher R. Gordon and James C.
Momtazee. In light of our status as a closely held company and
the absence of a public listing or trading market for our common
stock, our Board has not designated any member of the Audit and
Compliance Committee as an “audit committee financial
expert.” Though not formally considered by our Board given
that our securities are not traded on any national securities
exchange, based upon the listing standards of the New York Stock
Exchange (the “NYSE”), the national securities
exchange upon which our common stock was listed prior to the
Merger, we do not believe that any of Messrs. Birosak,
Frist, Gordon or Momtazee would be considered independent
because of their relationships with certain affiliates of the
funds and other entities which hold significant interests in
Hercules Holding, which owns 97.3% of our outstanding common
stock, and other relationships with us. See Item 13,
“Certain Relationships and Related Transactions.”
Code of
Ethics
We have a Code of Conduct which is applicable to all our
directors, officers and employees (the “Code of
Conduct”). The Code of Conduct is available on the Ethics
and Compliance and Corporate Governance pages of our website at
www.hcahealthcare.com. To the extent required pursuant to
applicable SEC regulations, we intend to post amendments to or
waivers from our Code of Conduct (to the extent applicable to
our chief executive officer, principal financial officer or
principal accounting officer) at this location on our website or
report the same on a Current Report on
Form 8-K.
Our Code of Conduct is available free of charge upon request to
our Corporate Secretary, HCA Inc., One Park Plaza, Nashville, TN
37203.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires our directors, executive officers and greater than
ten-percent shareholders to file initial reports of ownership
and reports of changes in ownership of any of our securities
with the SEC and us. We believe that during the 2008 fiscal
year, all of our directors, executive officers and greater than
ten-percent shareholders complied with the requirements of
Section 16(a). This belief is based on our review of forms
filed or written notice that no reports were required.
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Item 11.
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Executive
Compensation
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Compensation
Discussion and Analysis
The Compensation Committee (the “Committee”) of the
Board of Directors is generally charged with the oversight of
our executive compensation and rewards programs. The Committee
is currently composed of John P. Connaughton, Michael W.
Michelson and George A. Bitar. In 2008, the Committee also
included Thomas F. Frist, Jr., M.D., and
determinations with respect to 2008 compensation were made by
such Committee. Responsibilities of the Committee include the
review and approval of the following items:
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Executive compensation strategy and philosophy;
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Compensation arrangements for executive management;
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Design and administration of the annual cash-based Senior
Officer Performance Excellence Program (“PEP”);
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Design and administration of our equity incentive plans;
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64
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Executive benefits and perquisites (including the HCA
Restoration Plan and the Supplemental Executive Retirement
Plan); and
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Any other executive compensation or benefits related items
deemed appropriate by the Committee.
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In addition, the Committee considers the proper alignment of
executive pay policies with Company values and strategy by
overseeing employee compensation policies, corporate performance
measurement and assessment, and Chief Executive Officer
performance assessment. The Committee may retain the services of
independent outside consultants, as it deems appropriate, to
assist in the strategic review of programs and arrangements
relating to executive compensation and performance.
The following executive compensation discussion and analysis
describes the principles underlying our executive compensation
policies and decisions as well as the material elements of
compensation for our named executive officers. Our named
executive officers for 2008 were:
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Jack O. Bovender, Jr., Chairman of the Board and Chief
Executive Officer;
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Richard M. Bracken, President and Chief Operating Officer;
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R. Milton Johnson, Executive Vice President and Chief
Financial Officer;
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Samuel N. Hazen, President — Western Group; and
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Beverly B. Wallace, President — Shared Services Group.
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Effective December 31, 2008, Mr. Bovender retired as
Chief Executive Officer but retained the role of Chairman of the
Board, and effective January 1, 2009, Mr. Bracken was
appointed to serve as Chief Executive Officer and President of
the Company.
As discussed in more detail below, the material elements and
structure of the named executive officers’ compensation
program for 2008 was negotiated and determined in connection
with the Merger.
Compensation
Philosophy and Objectives
The core philosophy of our executive compensation program is to
support the Company’s primary objective of providing the
highest quality health care to our patients while enhancing the
long term value of the Company to our shareholders.
Specifically, the Committee believes the most effective
executive compensation program (for all executives, including
named executive officers):
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Reinforces HCA’s strategic initiatives;
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Aligns the economic interests of our executives with those of
our shareholders; and
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Encourages attraction and long term retention of key
contributors.
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The Committee is committed to a strong, positive link between
our objectives and our compensation and benefits practices.
Our compensation philosophy also allows for flexibility in
establishing executive compensation based on an evaluation of
information prepared by management or other advisors and other
subjective and objective considerations deemed appropriate by
the Committee. The Committee will also consider the
recommendations of our Chief Executive Officer. This flexibility
is important to ensure our compensation programs are competitive
and that our compensation decisions appropriately reflect the
unique contributions and characteristics of our executives.
65
Compensation
Structure and Benchmarking
Our compensation program is heavily weighted towards
performance-based compensation, reflecting our philosophy of
increasing the long-term value of the Company and supporting
strategic imperatives. Total direct compensation and other
benefits consist of the following elements:
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Total Direct Compensation
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• Base Salary
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• Annual Cash-Based Incentives (offered
through our PEP)
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• Long-Term Equity Incentives (in the form
of Stock Options)
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Other Benefits
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• Retirement Plans
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• Limited Perquisites and Other Personal
Benefits
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• Severance Benefits
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The Committee does not support rigid adherence to benchmarks or
compensatory formulas and strives to make compensation decisions
which effectively support our compensation objectives and
reflect the unique attributes of the Company and each executive.
Our general practice, however, with respect to pay positioning,
is that executive base salaries and annual incentive (PEP)
target values should generally position total annual cash
compensation between the median and 75th percentile of
similarly-sized general industry companies. We utilize the
general industry as our primary source for competitive pay
levels because HCA is significantly larger than its industry
peers. See the discussion of benchmarking below for further
information. The named executive officers’ pay fell within
the range noted above for jobs with equivalent market
comparisons.
The cash compensation mix between salary and PEP is currently
more weighted towards salary rather than PEP than competitive
practice among our general industry peers would suggest. Over
time, we intend to continue moving towards a mix of cash
compensation that will place a greater emphasis on annual
performance-based compensation.
Although we look at competitive long-term equity incentive award
values in similarly-sized general industry companies when
assessing the competitiveness of our compensation programs, we
did not base our 2007 stock option grants on these levels since
equity is structured differently in closely held companies than
in publicly-traded companies. As is typical in similar
situations, the Investors wanted to share a certain percentage
of the equity with executives shortly after the consummation of
the Merger and establish performance objectives and incentives
up front in lieu of annual grants to ensure our executives’
long-term economic interests would be aligned with those of the
Investors. This pool of equity was then further allocated based
on the executives’ anticipated impact on, and potential
for, driving Company strategy and performance. The resulting
total direct pay mix is heavily weighted towards
performance-based pay (PEP plus stock options) rather than fixed
pay, which the Committee believes reflects the compensation
philosophy and objectives discussed above. No additional long
term equity incentives were granted to the named executive
officers in 2008.
Compensation
Process
While our 2008 named executive officer compensation was largely
determined at the time of the Merger, the Committee ensures that
executives’ pay levels are generally consistent with the
compensation strategy described above, in part, by conducting
annual assessments of competitive executive compensation.
Management (but no named executive officer), in collaboration
with the Committee’s independent consultant, Semler Brossy
Consulting Group, LLC, collects and presents compensation data
from similarly-sized general industry companies, based to the
extent possible on comparable position matches and compensation
components. The following nationally recognized survey sources
were utilized in anticipation of establishing 2008 executive
compensation:
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Number of
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Companies in
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Survey
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Revenue Scope (Median Revenue)
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Sample
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Towers Perrin Executive Compensation Database
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Greater than $20B ($35.0B
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Hewitt Total Compensation Measurement
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$10B - $25B ($15.0B
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Hewitt Total Compensation Measurement
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Greater than $25B ($46.5B
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36
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66
These particular revenue scopes were selected because they were
the closest approximations to HCA’s revenue size. Each
survey that provided an appropriate position match and
sufficient sample size to be used in the compensation review was
weighted equally. For this purpose, the two Hewitt survey cuts
were considered as one survey, and we used a weighted average of
the two surveys (65% for the $10B — $25B cut and 35%
for the Greater than $25B).
Data was also collected from health care providers within our
industry including Community Health Systems, Inc., Health
Management Associates, Inc., Kindred Healthcare, Inc., LifePoint
Hospitals, Inc., Tenet Healthcare Corporation and Universal
Health Services, Inc. These health care providers are used only
as a secondary point of reference for industry practices since
we are significantly larger than these companies. The data from
this analysis did not affect named executive officer pay level
decisions in 2008. Semler Brossy also performed a competitive
pay analysis specific for the Chairman of the Board, the
President and Chief Executive Officer and the Executive Vice
President and Chief Financial Officer to be utilized in setting
2009 compensation for Mr. Bovender, Mr. Bracken and
Mr. Johnson. A custom proxy analysis was utilized, covering 150
selected companies in the S&P 500 (excluding the financial
services sector). The following cuts of this database were used
for market comparisons: (i) companies with $15 billion
to $35 billion in revenues (52 companies) and
(ii) companies in the broader health care sector
(21 companies).
Consistent with our flexible compensation philosophy, the
Committee is not required to approve compensation precisely
reflecting the results of these surveys, and may also consider,
among other factors (typically not reflected in these surveys):
the requirements of the applicable employment agreements, the
executive’s individual performance during the year, his or
her projected role and responsibilities for the coming year, his
or her actual and potential impact on the successful execution
of Company strategy, recommendations from our chief executive
officer and compensation consultants, an officer’s prior
compensation, experience, and professional status, internal pay
equity considerations, and employment market conditions and
compensation practices within our peer group. The weighting of
these and other relevant factors is determined on a
case-by-case
basis for each executive upon consideration of the relevant
facts and circumstances.
Employment
Agreements
In connection with the Merger, we entered into employment
agreements with each of our named executive officers and certain
other members of senior management to help ensure the retention
of those executives critical to the future success of the
Company. Among other things, these agreements set the
executives’ compensation terms, their rights upon a
termination of employment, and restrictive covenants around
non-competition, non-solicitation, and confidentiality. These
terms and conditions are further explained in the remaining
portion of this Compensation Discussion and Analysis and under
“Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table — Employment
Agreements.”
In light of Mr. Bovender’s retirement from the
position of Chief Executive Officer, effective December 31,
2008, and continuing service to the Company as executive
Chairman until December 15, 2009, the Company entered into
an Amended and Restated Employment Agreement with
Mr. Bovender, effective December 31, 2008. The
material amendments to Mr. Bovender’s prior employment
agreement as set forth in the Amended and Restated Employment
Agreement are described below under
“Mr. Bovender’s Severance Benefits” and
under “Narrative Disclosure to Summary Compensation Table
and Grants of Plan-Based Awards Table — Employment
Agreements.”
The Company also amended Mr. Bracken’s employment
agreement, effective January 1, 2009, to reflect his
appointment to the position of Chief Executive Officer and
President.
Elements
of Compensation
Base
Salary
Base salaries are intended to provide reasonable and competitive
fixed compensation for regular job duties. The threshold base
salaries for our executives are set forth in their employment
agreements. We did not increase named executive officer base
salaries in 2008, other than an approximate 5.3% increase in
Mr. Johnson’s base salary
67
in order to better align his salary with market for his position
as Chief Financial Officer based on general industry surveys. In
light of Mr. Bovender’s retirement from the position
of Chief Executive Officer and continuing role as Chairman and
Mr. Bracken’s assumption of the responsibilities of
Chief Executive Officer and President, Mr. Bovender’s
base salary for 2009 was reduced to approximately
$1.144 million for his Employment Term (as described
further in “Narrative Disclosure to Summary Compensation
Table and Grants of Plan-Based Awards Table —
Employment Agreements.”), and Mr. Bracken’s 2009
base salary was increased to $1.325 million. Similarly,
taking into consideration the additional responsibilities being
assumed by the position of Executive Vice President and Chief
Financial Officer and relevant market comparables,
Mr. Johnson’s 2009 salary was set at $850,000,
reflecting an increase of approximately 7.6%. In light of our
goal of reducing the emphasis of base salary in our cash
compensation mix, we do not intend to provide salary increases
to any of our named executive officers in 2009, other than those
described above.
Annual
Incentive Compensation: PEP
The PEP is intended to reward named executive officers for
annual financial performance, with the goals of providing high
quality health care for our patients and increasing shareholder
value. Each named executive officer in the Company’s
2008-2009
Senior Officer Performance Excellence Program
(“2008-2009
PEP”) was assigned a 2008 annual award target expressed as
a percentage of salary ranging from 66% to 126% (see individual
targets in table below). In light of our goal to further
emphasize performance-based pay, we increased the named
executive officers’ PEP target opportunities by
approximately 6% for 2008 in lieu of salary increases (with the
exception of Mr. Johnson’s 2008 salary increase).
These targets are intended to provide a meaningful incentive for
executives to achieve or exceed performance goals.
The
2008-2009
PEP was designed to provide 100% of the target award for target
performance, 50% of the target award for a minimum acceptable
(threshold) level of performance, and a maximum of 200% of the
target award for maximum performance, while no payments are made
for performance below threshold levels. The Committee believes
this payout curve is consistent with competitive practice. More
importantly, it promotes and rewards continuous growth as
performance goals have consistently been set at increasingly
higher levels each year. Actual awards under the PEP are
generally determined using the following two steps:
1. The executive’s conduct must reflect our Mission
and Values by upholding our Code of Conduct and following our
compliance policies and procedures. This step is critical to
reinforcing our commitment to integrity and the delivery of high
quality health care. In the event the Committee determines the
participant’s conduct during the fiscal year is not in
compliance with the first step, he or she will not be eligible
for an incentive award.
2. The actual award amount is determined based upon Company
performance. In 2008, the PEP for all named executive officers,
other than Mr. Hazen, incorporated one Company financial
performance measure, EBITDA, defined in the 2008-2009 PEP as
earnings before interest, taxes, depreciation, amortization,
minority interest expense, gains or losses on sales of
facilities, gains or losses on extinguishment of debt, asset or
investment impairment charges, restructuring charges, and any
other significant nonrecurring non-cash gains or charges (but
excluding any expenses for share-based compensation under
Statement of Financial Accounting Standards No. 123(R),
“Share-Based
Payment” (“SFAS 123(R)”) with respect to any
awards granted under the 2008-2009 PEP) (“EBITDA”).
The Company EBITDA target for 2008 was $4.720 billion
($4.714 billion after adjustment) for the named executive
officers. Mr. Hazen’s 2008 PEP, as the Western Group
President, was based 50% on Company EBITDA and 50% on Western
Group EBITDA (with a Western Group EBITDA target for 2008 of
$2.328 billion) to ensure his accountability for his
group’s results. The Committee chose to base annual
incentives on EBITDA for a number of reasons:
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It effectively measures overall Company performance;
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It is an important surrogate for cash flow, a critical metric
related to paying down the Company’s significant debt
obligation;
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It is the key metric driving the valuation in the internal
Company model, consistent with the valuation approach used by
industry analysts; and
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It is consistent with the metric used for the vesting of the
financial performance portion of our option grants.
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68
These EBITDA targets should not be understood as
management’s predictions of future performance or other
guidance and investors should not apply these in any other
context. Our 2008 threshold and maximum goals were set at
approximately +/- 3.6% of the target goal to reflect likely
performance volatility. EBITDA targets were linked to the
Company’s short-term and long-term business objectives to
ensure incentives are provided for appropriate annual growth and
stretch performance.
Pursuant to the terms of the
2008-2009
PEP and the named executive officer employment agreements, the
Committee exercised its ability to make adjustments to the
Company’s 2008 EBITDA performance target for dispositions
of facilities occurring during the 2008 fiscal year. The
adjustments to the target resulted in a decrease of
approximately $6 million.
The Committee intends to set the named executive officers’
2009 target performance goals based on aggressive, yet
realistic, expectations of Company performance ensuring
successful execution of our plans in order to realize the most
value from these awards. While we do not intend to disclose our
2009 PEP EBITDA target as an understanding of that target is not
necessary for a fair understanding of the named executive
officers’ compensation for 2008 and could result in
competitive harm and market confusion, we consistently set
targets that require an increase in EBITDA year over year to
promote continuous growth consistent with our business plan.
Upon review of the Company’s 2008 financial performance,
the Committee determined that Company EBITDA performance for the
fiscal year ended December 31, 2008 fell below the target
performance, but above threshold performance as set by the
Compensation Committee; likewise, the EBITDA performance of the
Western Group also exceeded threshold performance but was less
than target performance. Accordingly, the 2008 PEP will be paid
out as follows to the named executive officers (the actual 2008
PEP payout amounts are included in the “Non-Equity
Incentive Plan Compensation” column of the Summary
Compensation Table):
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2008 Target PEP
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2008 Actual PEP Award
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Named Executive Officer
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(% of Salary)
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(% of Salary)
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Jack O. Bovender, Jr. (Chairman and CEO)
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126
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%
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85.9
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%
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Richard M. Bracken (President and COO)
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96
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%
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65.5
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%
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R. Milton Johnson (Executive Vice President and CFO)
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66
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%
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45.0
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%
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Samuel N. Hazen (President, Western Group)
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66
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%
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44.5
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%
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Beverly B. Wallace (President, Shared Services Group)
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66
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%
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45.0
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%
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In 2008, the
2008-2009
PEP was approved by the Committee. Therefore, the 2009 PEP
program will work under the same plan as in 2008. Each named
executive officer in the Company’s
2008-2009
PEP was assigned a maximum 2009 annual award target expressed as
a percentage of salary ranging from 72% to 132% which under the
terms of the
2008-2009
PEP applies to the lesser of (a) the Named Executive
Officer’s 2009 base salary, or (b) 125% of the Named
Executive Officer’s 2008 base salary. The Committee has the
discretion to reduce, but not increase, the 2009 Threshold,
Target and Maximum percentages as set forth in the
2008-2009
PEP. Mr. Bovender’s 2009 PEP target or Annual Bonus is
set forth in his Amended and Restated Employment Agreement,
effective December 31, 2008, as described in
“Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table —
Mr. Bovender’s Employment Agreement”. The
Committee set Mr. Bracken’s 2009 target percentage at
130% of his 2009 base salary in connection with his appointment
as Chief Executive Officer and President and amended the
2008-2009
PEP to set Mr. Johnson’s 2009 target percentage at 80%
of his 2009 base salary in light of the additional
responsibilities assumed by the position of Executive Vice
President and Chief Financial Officer. The Committee anticipates
that the 2009 PEP target percentage will remain at 66% of base
salary for Mr. Hazen and Ms. Wallace, respectively.
The Committee also has the ability to supplement the financial
metrics and weightings with additional measures other than
EBITDA including: (a) operating income, profit or
efficiencies; (b) return on equity, assets, capital,
capital employed or investment; (c) after-tax operating
income; (d) net income; (e) earnings or book value per
share; (f) cash flow(s); (g) stock price or total
shareholder return; (h) debt reduction; (i) strategic
business objectives, consisting of one or more objectives based
on meeting specified cost targets, business expansion goals and
goals relating to acquisitions or divestitures; or (j) any
combination thereof.
69
Long-Term
Equity Incentive Awards: Options
In connection with the Merger, the Board of Directors approved
and adopted the 2006 Stock Incentive Plan for Key Employees of
HCA Inc. and its Affiliates (the “2006 Plan”). The
purpose of the 2006 Plan is to:
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Promote our long term financial interests and growth by
attracting and retaining management and other personnel and key
service providers with the training, experience and abilities to
enable them to make substantial contributions to the success of
our business;
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Motivate management personnel by means of growth-related
incentives to achieve long range goals; and
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Further the alignment of interests of participants with those of
our shareholders through opportunities for increased stock or
stock-based ownership in the Company.
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In January 2007, pursuant to the terms of the named executive
officers’ respective employment agreements, the Committee
approved long-term stock option grants to our named executive
officers under the 2006 Plan consisting solely of a one-time,
multi-year stock option grant in lieu of annual long-term equity
incentive award grants (“New Options”). In addition to
the New Options granted in 2007, the Company committed to grant
the named executive officers 2x Time Options in their respective
employment agreements, as described in more detail below under
“Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table — Employment
Agreements.” The Committee believes that stock options are
the most effective long-term vehicle to directly align the
interests of executives with those of our shareholders by
motivating performance that results in the long-term
appreciation of the Company’s value, since they only
provide value to the executive if the value of the Company
increases. As is typical in leveraged buyout situations, the
Committee determined that granting all of the stock options
(except the 2x Time Options) up front rather than annually was
appropriate to aid in retaining key leaders critical to the
Company’s success over the next several years and, coupled
with the executives’ significant personal investments in
connection with the Merger, provide an equity incentive and
stake in the Company that directly aligns the long-term economic
interests of the executives with those of the Investors.
The New Options have a ten year term and are divided so that
1
/
3
are time vested options,
1
/
3
are EBITDA-based performance vested options and
1
/
3
are performance options that vest based on investment return to
the Sponsors, each as described below. The combination of time,
performance and investor return based vesting of these awards is
designed to compensate executives for long term commitment to
the Company, while motivating sustained increases in our
financial performance and helping ensure the Sponsors have
received an appropriate return on their invested capital before
executives receive significant value from these grants.
The time vested options are granted to aid in retention.
Consistent with this goal, the time vested options granted in
2007 vest and become exercisable in equal increments of 20% on
each of the first five anniversaries of the grant date. The time
vested options have an exercise price equivalent to fair market
value on the date of grant. Since our common stock is not
currently traded on a national securities exchange, fair market
value was determined reasonably and in good faith by the Board
of Directors after consultation with the Chief Executive Officer
and other advisors.
The EBITDA-based performance vested options are intended to
motivate sustained improvement in long-term performance.
Consistent with this goal, the EBITDA-based performance vested
options granted in 2007 are eligible to vest and become
exercisable in equal increments of 20% at the end of fiscal
years 2007, 2008, 2009, 2010 and 2011 if certain annual EBITDA
performance targets are achieved. These EBITDA performance
targets were established at the time of the Merger and can be
adjusted by the Board of Directors in consultation with the
Chief Executive Officer as described below. We chose EBITDA
(defined in the award agreements as earnings before interest,
taxes, depreciation, amortization, minority interest expense,
gains or losses on sales of facilities, gains or losses on
extinguishment of debt, asset or investment impairment charges,
restructuring charges, and any other significant nonrecurring
non-cash gains or charges (but excluding any expenses for
share-based compensation under SFAS 123(R) with respect to
any awards granted under the 2006 Plan) as the performance
metric since it is a key driver of our valuation and for other
reasons as described above in the “Annual Incentive
Compensation: PEP” section of this Compensation Discussion
and Analysis. Due to the number of events that can occur within
our industry in any given year that are beyond the control of
management but may significantly impact our financial
performance (e.g., health care regulations, industry-wide
significant fluctuations in volume, etc.), we have
70
incorporated
“catch-up”
vesting provisions. The EBITDA-based performance vested options
may vest and become exercisable on a “catch up” basis,
such that, options that were eligible to vest but failed to vest
due to our failure to achieve prior EBITDA targets will vest if
at the end of any subsequent year or at the end of fiscal year
2012, the cumulative total EBITDA earned in all prior years
exceeds the cumulative EBITDA target at the end of such fiscal
year.
As discussed above, we do not intend to disclose the
2009-2011
EBITDA performance targets as they reflect competitive,
sensitive information regarding our budget. However, we
deliberately set our targets at increasingly higher levels.
Thus, while designed to be attainable, target performance levels
for these years require strong, improving performance and
execution, which in our view, provides an incentive firmly
aligned with shareholder interests.
As with the EBITDA targets under our
2008-2009
PEP, pursuant to the terms of the 2006 Plan and the Stock Option
Agreements governing the 2007 grants, the Board of Directors, in
consultation with our Chief Executive Officer, has the ability
to adjust the established EBITDA targets for significant events,
changes in accounting rules and other customary adjustment
events. We believe these adjustments may be necessary in order
to effectuate the intents and purposes of our compensation plans
and to avoid unintended consequences that are inconsistent with
these intents and purposes. The Board of Directors exercised its
ability to make adjustments to the Company’s
2008-2011
EBITDA performance targets (including cumulative EBITDA targets)
for facility dispositions and acquisitions and accounting
changes occurring during the 2008 fiscal year.
The options that vest based on investment return to the Sponsors
are intended to align the interests of executives with those of
our principal shareholders to ensure shareholders receive their
expected return on their investment before the executives can
receive their gains on this portion of the option grant. These
options vest and become exercisable with respect to 10% of the
common stock subject to such options at the end of fiscal years
2007, 2008, 2009, 2010 and 2011 if the Investor Return (as
defined below) is at least equal to two times the price paid to
shareholders in the Merger (or $102.00), and with respect to an
additional 10% at the end of fiscal years 2007, 2008, 2009, 2010
and 2011 if the Investor Return is at least equal to
two-and-a-half
times the price paid to shareholders in the Merger (or $127.50).
“Investor Return” means, on any of the first five
anniversaries of the closing date of the Merger, or any date
thereafter, all cash proceeds actually received by affiliates of
the Sponsors after the closing date in respect of their common
stock, including the receipt of any cash dividends or other cash
distributions (including the fair market value of any
distribution of common stock by the Sponsors to their limited
partners), determined on a fully diluted, per share basis. The
Sponsor investment return options also may become vested and
exercisable on a “catch up” basis if the relevant
Investor Return is achieved at any time occurring prior to the
expiration of such options.
Upon review of the Company’s 2008 financial performance,
the Committee determined that the Company achieved the 2008
EBITDA performance target of $4.603 billion
($4.592 billion after adjustment) under the New Option
awards; therefore, pursuant to the terms of the 2007 Stock
Option Agreements, 20% of each named executive officer’s
EBITDA-based performance vested options vested as of
December 31, 2008. Further, 20% of each named executive
officer’s time vested options vested on the second
anniversary of their grant date, January 30, 2009. No
portion of the options that vest based on Investor Return vested
as of the end of the 2008 fiscal year; however, such options
remain subject to the “catch up” vesting provisions
described above.
For additional information concerning the options awarded in
2007, see the Grants of Plan-Based Awards Table.
As discussed above, except in the cases of promotions or new
hires, the Committee does not intend to award additional stock
options to our named executive officers (other than the 2x Time
Options the Company committed to grant the named executive
officers in their respective employment agreements, as described
in more detail below under “Narrative Disclosure to Summary
Compensation Table and Grants of Plan-Based Awards
Table — Employment Agreements”). Grants made in
connection with promotions and new hires will be formally
approved by the Committee. The exercise price of grants made in
connection with promotions and new hires will be based on the
quarterly fair market value as determined reasonably and in good
faith by the Board of Directors after consultation with the
Chief Executive Officer and other advisors. We anticipate that
any option grants approved under the 2006 Plan in 2009 (other
than the 2x Time Options) will be structured identical to those
granted in 2007
71
except that the options will vest over a three year period
rather than a five year period, with the time vested options
vesting and becoming exercisable in equal increments of
approximately 33% on each of the first three anniversaries of
the grant date, the EBITDA-based performance vested options
being eligible to vest and become exercisable in equal
increments of approximately 33% at the end of fiscal years 2009,
2010 and 2011 if the applicable EBITDA performance targets are
achieved (with the same “catch up” provision as
described above), and the options that vest based on investment
return to the Sponsors vesting and becoming exercisable with
respect to approximately 16.67% of the common stock subject to
such options at the end of fiscal years 2009, 2010 and 2011 if
the Investor Return (as defined above) is at least equal to two
times the price paid to shareholders in the Merger (or $102.00),
and with respect to an additional approximately 16.67% at the
end of fiscal years 2009, 2010 and 2011 if the Investor Return
is at least equal to
two-and-a-half
times the price paid to shareholders in the Merger (or $127.50)
(provided that the investor return options granted in
2009 may also become vested and exercisable on a
“catch up” basis if the relevant Investor Return is
achieved prior to the eighth anniversary of the grant date).
Ownership
Guidelines
While we have maintained stock ownership guidelines in the past,
as a non-listed company, we no longer have a policy regarding
stock ownership guidelines. However, we do believe equity
ownership aligns our executive officers’ interests with
those of the Investors. Accordingly, all of our named executive
officers were required to rollover at least half their
pre-Merger equity and, therefore, maintain significant stock
ownership in the Company. See Item 12, “Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.”
Retirement
Plans
At the beginning of 2008, we maintained two qualified retirement
plans, the HCA 401(k) Plan and the HCA Retirement Plan, to aid
in retention and to assist employees in providing for their
retirement. As of April 1, 2008, the HCA Retirement Plan
merged into the HCA 401(k) Plan resulting in one qualified
retirement plan. Generally all employees who have completed the
required service are eligible to participate in the HCA 401(k)
Plan. Each of our named executive officers participates in the
plan. For additional information on these plans, including
amounts contributed by HCA in 2008 to the named executive
officers, see the Summary Compensation Table and related
footnotes and narratives and “Pension Benefits.”
Our key executives, including the named executive officers, also
participate in two supplemental retirement programs. The
Committee and the Board initially approved these supplemental
programs to:
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Recognize significant long-term contributions and commitments by
executives to the Company and to performance over an extended
period of time;
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Induce our executives to continue in our employ through a
specified normal retirement age (initially 62 through 65, but
reduced to 60 upon the change in control at the time of the
Merger in 2006); and
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Provide a competitive benefit to aid in attracting and retaining
key executive talent.
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The Restoration Plan provides a benefit to replace a portion of
the contributions lost in the HCA 401(k) Plan due to
certain IRS limitations. Effective January 1, 2008,
participants in the SERP (described below) are no longer
eligible for Restoration Plan contributions; however, the
hypothetical accounts maintained for each named executive
officer as of January 1, 2008 will continue to be
maintained and will be increased or decreased with investment
earnings based on the actual investment return. For additional
information concerning the Restoration Plan, see
“Nonqualified Deferred Compensation.”
Key executives also participate in the Supplemental Executive
Retirement Plan, or the “SERP,” adopted in 2001. The
SERP benefit brings the total value of annual retirement income
to a specific income replacement level. For named executive
officers with 25 years or more of service, this income
replacement level is 60% of final average pay (base salary and
PEP payouts) at normal retirement, a competitive level of
benefit at the time the plan was implemented. Due to the Merger,
all participants are fully vested in their SERP benefits and the
plan is now frozen to new entrants. For additional information
concerning the SERP, see “Pension Benefits.”
72
In the event a participant renders service to another health
care organization within five years following retirement or
termination of employment, he or she forfeits the rights to any
further payment, and must repay any payments already made. This
non-competition provision is subject to waiver by the Committee
with respect to the named executive officers.
Personal
Benefits
Our executive officers receive limited, if any, benefits outside
of those offered to our other employees. Generally, we provide
these benefits to increase travel and work efficiencies and
allow for more productive use of the executive’s time.
Mr. Bovender and Mr. Bracken are permitted to use the
Company aircraft for personal trips, subject to the
aircraft’s availability. Other named executive officers may
have their spouses accompany them on business trips taken on the
Company aircraft, subject to seat availability. In addition,
there are times when it is appropriate for an executive’s
spouse to attend events related to our business. On those
occasions, we will pay for the travel expenses of the
executive’s spouse. We will, on an as needed basis, provide
mobile telephones and personal digital assistants to our
employees and certain of our executive officers have obtained
such devices through us. The value of these personal benefits,
if any, is included in the executive officer’s income for
tax purposes and, in certain limited circumstances, the
additional income attributed to an executive officer as a result
of one or more of these benefits will be grossed up to cover the
taxes due on that income. Except as otherwise discussed herein,
other welfare and employee-benefit programs are the same for all
of our eligible employees, including our executive officers. For
additional information, see footnote (6) to the Summary
Compensation Table.
Severance
and Change in Control Benefits
As noted above, all of our named executive officers have entered
into employment agreements, which provide, among other things,
each executive’s rights upon a termination of employment in
exchange for non-competition, non-solicitation, and
confidentiality covenants. We believe that reasonable severance
benefits are appropriate in order to be competitive in our
executive retention efforts. These benefits should reflect the
fact that it may be difficult for such executives to find
comparable employment within a short period of time. We also
believe that these types of agreements are appropriate and
customary in situations such as the Merger wherein the
executives have made significant personal investments in the
Company and that investment is generally illiquid for a
significant period of time. Finally, we believe formalized
severance arrangements are common benefits offered by employers
competing for similar senior executive talent.
Severance
Benefits for Named Executive Officers (other than
Chairman)
If employment is terminated by the Company without
“cause” or by the executive for “good
reason” (whether or not the termination was in connection
with a
change-in-control),
the executive would be entitled to “accrued rights”
(Cause, good reason and accrued rights are as defined in
“Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table — Employment
Agreements”) plus:
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Subject to restrictive covenants and the signing of a general
release of claims, an amount equal to two times for
Mr. Hazen and Ms. Wallace and three times in the case
of Messrs. Bracken and Johnson the sum of base salary plus
PEP paid or payable in respect of the fiscal year immediately
preceding the fiscal year in which termination occurs, payable
over a two year period;
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Pro-rata bonus; and
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Continued coverage under our group health plans during the
period over which the cash severance is paid.
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Additionally, unvested options will be forfeited; however,
vested New Options will remain exercisable until the first
anniversary of the termination of the executive’s
employment.
Because we believe that a termination by the executive for good
reason (a constructive termination) is conceptually the same as
an actual termination by the Company without cause, we believe
it is appropriate to provide severance benefits following such a
constructive termination of the named executive officer’s
employment. All of our severance provisions are believed to be
within the realm of competitive practice and are intended to
provide fair and reasonable compensation to the executive upon a
termination event.
73
Mr. Bovender’s
Severance Benefits
In light of his long-term service to the Company and his
retirement from the position of Chief Executive Officer, the
Company entered into an Amended and Restated Employment
Agreement with Mr. Bovender, effective December 31,
2008 (the “Amended Employment Agreement”).
Mr. Bovender’s Amended Employment Agreement provides,
effective as of the expiration of the Employment Term (as
defined in “Narrative Disclosure to Summary Compensation
Table and Grants of Plan-Based Awards Table —
Employment Agreements”) or Mr. Bovender’s sooner
voluntary termination for any reason (including by reason of
death or disability, but other than for “good
reason”), that Mr. Bovender would be entitled to
receive the “accrued rights” as described above for
the other named executive officers. Mr. Bovender would also
be entitled to receive a pro rata portion of his bonus under the
2008-2009
PEP based on the Company’s actual results for 2009
(“Mr. Bovender’s Prorated Bonus”).
Additionally, in the event Mr. Bovender’s Additional
Bonus (as defined in “Narrative Disclosure to Summary
Compensation Table and Grants of Plan-Based Awards
Table — Employment Agreements”) has not been
earned as of the termination date, the Committee will consider
in good faith whether or not all or a portion of
Mr. Bovender’s Additional Bonus will be included as
part of Mr. Bovender’s Prorated Bonus. The same
severance applies regardless of whether the termination was in
connection with a change in control of the Company.
Mr. Bovender would also be entitled to continued coverage
under the Company’s group health plans for
Mr. Bovender and his wife until age 65, reimbursement
of any unreimbursed business expenses properly incurred and such
employee benefits, if any, as to which Mr. Bovender would
be entitled under the Company’s employee benefit plans.
The Amended Employment Agreement also provides that, effective
as of the expiration of the Employment Term or
Mr. Bovender’s sooner voluntary termination for any
reason (including by reason of death or disability, but other
than for “good reason”), (i) neither
Mr. Bovender nor the Company shall have any put or call
rights with respect to Mr. Bovender’s New Options or
stock acquired upon the exercise of any such options;
(ii) Mr. Bovender’s “rollover” stock
options will remain exercisable as if Mr. Bovender’s
employment terminated by reason of “retirement” in
accordance with the terms of the applicable equity plans and
award agreements; (iii) the unvested New Options (including
any issued 2x Time Options) held by Mr. Bovender that vest
solely based on the passage of time will vest as if
Mr. Bovender’s employment had continued through the
next three anniversaries of their date of grant (it being
understood that any 2x Time Options issued after
Mr. Bovender’s termination or retirement shall also
continue to vest through the remainder of the extended vesting
period); (iv) the unvested New Options held by
Mr. Bovender that are EBITDA performance options will
remain outstanding and will vest, if at all, on the next four
dates that they would have otherwise vested had
Mr. Bovender’s employment continued, based upon the
extent to which performance goals are met; (v) the unvested
New Options held by Mr. Bovender that are “Investor
Return” performance options will remain outstanding and
will vest, if at all, on the dates that they would have
otherwise vested had Mr. Bovender’s employment
continued through the expiration of such options, based upon the
extent to which performance goals are met; and
(vi) Mr. Bovender’s New Options will remain
exercisable until the second anniversary of the last date on
which his EBITDA performance options are eligible to vest (which
is December 31, 2014), except that
(a) Mr. Bovender’s 2x Time Options will remain
exercisable until the fifth anniversary of the last date on
which his EBITDA performance options are eligible to vest (which
is December 31, 2017), and
(b) Mr. Bovender’s “Investor Return”
performance options will remain exercisable until the expiration
of such options.
If Mr. Bovender’s employment is terminated by the
Company without “cause” or by Mr. Bovender for
“good reason” (whether or not the termination was in
connection with a
change-in-control),
Mr. Bovender would be entitled to receive the benefits
described above and, subject to the delivery of a customary
release and continued compliance with the noncompetition,
nonsolicitation and confidentiality restrictions in the Amended
Employment Agreement, an amount (if any) equal to
Mr. Bovender’s base salary that would have been
otherwise payable through the end of the Employment Term.
If Mr. Bovender’s employment is terminated by the
Company for “cause,” Mr. Bovender shall be
entitled to receive the amounts and benefits described in the
first paragraph of this section, except that Mr. Bovender
shall not be entitled to receive Mr. Bovender’s
Prorated Bonus and shall not be entitled to any other benefits
described above. Mr. Bovender’s vested New Options
will, upon such event, remain exercisable until the first
anniversary of the termination of Mr. Bovender’s
employment.
74
Change
in Control Benefits
Pursuant to the Stock Option Agreements governing the New
Options granted in 2007 under the 2006 Plan, upon a Change in
Control of the Company (as defined below), all unvested time
vesting New Options (that have not otherwise terminated or
become exercisable) shall become immediately exercisable.
Performance options that vest subject to the achievement of
EBITDA targets will become exercisable upon a Change in Control
of the Company if: (i) prior to the date of the occurrence
of such event, all EBITDA targets have been achieved for years
ending prior to such date; (ii) on the date of the
occurrence of such event, the Company’s actual cumulative
total EBITDA earned in all years occurring after the performance
option grant date, and ending on the date of the Change in
Control, exceeds the cumulative total of all EBITDA targets in
effect for those same years; or (iii) the Investor Return
is at least
two-and-a-half
times the price paid to the shareholders in the Merger (or
$127.50). For purposes of the vesting provision set forth in
clause (ii) above, the EBITDA target for the year in which
the Change in Control occurs shall be equitably adjusted by the
Board of Directors in good faith in consultation with the chief
executive officer (which adjustment shall take into account the
time during such year at which the Change in Control occurs).
Performance vesting options that vest based on the investment
return to the Sponsors will only vest upon the occurrence of a
Change in Control if, as a result of such event, the applicable
Investor Return (i.e., at least two times the price paid to the
shareholders in the Merger for half of these options and at
least
two-and-one-half
times the price paid to the shareholders in the Merger for the
other half of these options) is also achieved in such
transaction (if not previously achieved). “Change in
Control” means in one or more of a series of transactions
(i) the transfer or sale of all or substantially all of the
assets of the Company (or any direct or indirect parent of the
Company) to an Unaffiliated Person (as defined below);
(ii) a merger, consolidation, recapitalization or
reorganization of the Company (or any direct or indirect parent
of the Company) with or into another Unaffiliated Person, or a
transfer or sale of the voting stock of the Company (or any
direct or indirect parent of the Company), an Investor, or any
affiliate of any of the Investors to an Unaffiliated Person, in
any such event that results in more than 50% of the common stock
of the Company (or any direct or indirect parent of the Company)
or the resulting company being held by an Unaffiliated Person;
or (iii) a merger, consolidation, recapitalization or
reorganization of the Company (or any direct or indirect parent
of the Company) with or into another Unaffiliated Person, or a
transfer or sale by the Company (or any direct or indirect
parent of the Company), an Investor or any affiliate of any of
the Investors, in any such event after which the Investors and
their affiliates (x) collectively own less than 15% of the
Common Stock of and (y) collectively have the ability to
appoint less than 50% of the directors to the Board (or any
resulting company after a merger). For purposes of this
definition, the term “Unaffiliated Person” means a
person or group who is not an Investor, an affiliate of any of
the Investors or an entity in which any Investor holds, directly
or indirectly, a majority of the economic interest in such
entity.
Additional information regarding applicable payments under such
agreements for the named executive officers is provided under
“Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table — Employment
Agreements” and “Potential Payments Upon Termination
or Change in Control.”
Recoupment
of Compensation
While we do not presently have any formal policies or practices
that provide for the recovery or adjustment of amounts
previously paid to a named executive officer in the event the
operating results on which the payment was based were restated
or otherwise adjusted, in such event we would reserve the right
to seek all appropriate remedies available under the law.
Tax and
Accounting Implications
On April 29, 2008, we registered our common stock pursuant
to Section 12(g) of the Securities Exchange Act of 1934, as
amended; and the Company became subject to Section 162(m)
of the Internal Revenue Code, as amended (the “Code”)
for fiscal year 2008 and beyond, so long as the Company’s
stock remains registered with the SEC. The Committee considers
the impact of Section 162(m) in the design of its
compensation strategies. Under Section 162(m), compensation
paid to executive officers in excess of $1,000,000 cannot be
taken by us as a tax deduction unless the compensation qualifies
as performance-based compensation. We have determined, however,
that we will not necessarily seek to limit executive
compensation to amounts deductible under Section 162(m) if
such limitation is not in the best interests of our
stockholders. While considering the tax implications of its
75
compensation decisions, the Committee believes its primary focus
should be to attract, retain and motivate executives and to
align the executives’ interests with those of our
stakeholders.
The Committee operates its compensation programs with the good
faith intention of complying with Section 409A of the
Internal Revenue Code. We account for stock based payments with
respect to our long term equity incentive award programs in
accordance with the requirements of SFAS 123(R).
Compensation
Committee Report
The Compensation Committee has reviewed and discussed the
foregoing Compensation Discussion and Analysis with management.
Based on our review and discussion with management, we have
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this annual report on
Form 10-K.
John P. Connaughton, Chairperson
Michael W. Michelson
George A. Bitar
Summary
Compensation Table
The following table sets forth information regarding the
compensation earned by the Chief Executive Officer, the Chief
Financial Officer and our other three most highly compensated
executive officers during 2008.
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Changes in
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Pension
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Non-Equity
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Value and
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Restricted
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Incentive
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Nonqualified
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Stock
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Option
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Plan
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Deferred
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All Other
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Salary
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Awards
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Awards
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Compensation
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Compensation
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Compensation
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Name and Principal Positions
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Year
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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Earnings ($)(5)
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($)(6)
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Total ($)
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Jack O. Bovender, Jr.
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2008
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$
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1,620,228
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—
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$
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5,189,950
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$
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1,391,886
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$
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3,926,217
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$
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45,321
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$
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12,173,602
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Chairman and
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2007
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$
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1,620,228
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|
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—
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$
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1,165,087
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$
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3,888,547
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—
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$
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197,092
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$
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6,870,954
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Chief Executive Officer
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2006
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$
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1,535,137
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$
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6,393,996
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$
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6,714,520
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$
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1,944,274
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$
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10,715,751
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$
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1,013,576
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$
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28,317,254
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Richard M. Bracken
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2008
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$
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1,060,872
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|
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—
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|
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$
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1,112,136
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$
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694,370
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$
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1,740,620
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$
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31,781
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$
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4,639,779
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President, Chief
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2007
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$
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1,060,872
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|
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—
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|
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$
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1,019,458
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$
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1,909,570
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$
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590,370
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$
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142,932
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$
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4,723,202
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Operating Officer, Director
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2006
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$
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952,420
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$
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2,937,283
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$
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2,966,787
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$
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954,785
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|
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$
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4,912,088
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$
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514,772
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$
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13,238,135
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R. Milton Johnson
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2008
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$
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786,698
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|
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—
|
|
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$
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794,388
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|
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$
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355,491
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|
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$
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1,871,790
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$
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38,769
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$
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3,847,136
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|
Executive Vice President
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2007
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$
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750,379
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|
|
—
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|
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$
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728,189
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$
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900,455
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$
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509,442
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$
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82,462
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$
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2,970,927
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and Chief Financial Officer
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2006
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$
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655,016
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$
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1,820,053
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$
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1,787,629
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$
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450,227
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$
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1,848,700
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$
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295,160
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$
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6,856,785
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Samuel N. Hazen
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2008
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$
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788,672
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—
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$
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508,404
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$
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350,807
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$
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810,462
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$
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15,651
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$
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2,473,996
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President —
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2007
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$
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788,672
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—
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$
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466,037
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$
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830,779
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$
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258,787
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$
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84,767
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$
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2,429,042
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Western Group
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2006
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$
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688,438
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$
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1,812,299
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$
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1,787,629
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$
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473,203
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$
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1,828,748
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$
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329,324
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$
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6,919,641
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Beverly B. Wallace
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2008
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$
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700,000
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|
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—
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$
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444,852
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$
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314,992
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$
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2,080,836
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$
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15,651
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$
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3,556,331
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President — Shared Services Group
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2007
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$
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700,000
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|
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—
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$
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407,781
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$
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840,000
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$
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676,111
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$
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75,013
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$
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2,698,905
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(1)
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Salary amounts for 2006 do not include the value of restricted
stock awards granted pursuant to the HCA Inc. Amended and
Restated Management Stock Purchase Plan, which was terminated
upon consummation of the Merger, (the “MSPP”) in lieu
of a portion of annual salary. Such awards are included in the
“Restricted Stock Awards” column. The 2006 base salary
for each of Messrs. Bovender, Bracken, Johnson and Hazen,
were $1,615,662, $1,057,882, $748,265 and $786,450, respectively.
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(2)
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Restricted Stock Awards for 2006 include all compensation
expense recognized in our financial statements in 2006 in
accordance with SFAS 123(R) with respect to restricted
shares awarded to the named executive officers, including
restricted shares awarded pursuant to the HCA 2005 Equity
Incentive Plan (the “2005 Plan”) and predecessor
plans, and restricted shares awarded pursuant to the MSPP. As a
result of the Merger, all outstanding restricted shares vested
and therefore all compensation expense with respect to
restricted shares was recognized in 2006 in accordance with
SFAS 123(R). See Note 3 to our consolidated financial
statements.
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(3)
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Option Awards for 2007 and 2008 include the compensation expense
recognized in our financial statements for fiscal years 2007 and
2008, respectively, in accordance with SFAS 123(R) with
respect to New Options to purchase shares of our common stock
awarded to the named executive officers in fiscal year 2007
under the
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76
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2006 Plan. Pursuant to the terms of his Amended and Restated
Employment Agreement with the Company, all remaining
compensation expense with respect to the options granted to
Mr. Bovender in fiscal year 2007 under the 2006 Plan was
recognized in 2008 in accordance with SFAS 123(R). See
Note 3 to our consolidated financial statements.
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Option Awards for 2006 include all compensation expense
recognized in our financial statements for fiscal year 2006 in
accordance with SFAS 123(R) with respect to options to
purchase shares of our common stock awarded to the named
executive officers, including options awarded pursuant to the
2005 Plan and predecessor plans. As a result of the Merger, all
options outstanding at the time of the Merger vested and
therefore all compensation expense with respect to such options
was recognized in 2006 in accordance with SFAS 123(R). See
Note 3 to our consolidated financial statements.
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(4)
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Non-Equity Incentive Plan Compensation for 2008 reflects amounts
earned for the year ended December 31, 2008 under the
2008-2009
PEP, which amounts will be paid in the first quarter of 2009
pursuant to the terms of the
2008-2009
PEP. For 2008, the Company did not achieve its target
performance level, but exceeded its threshold performance level,
as adjusted, with respect to the Company’s EBITDA;
therefore, pursuant to the terms of the
2008-2009
PEP, 2008 awards under the
2008-2009
PEP will be paid out to the named executive officers at
approximately 68.2% of each such officer’s respective
target amount, with the exception of Mr. Hazen, whose award
will be paid out at approximately 67.4% of his target amount,
due to the 50% of his PEP based on the Western Group EBITDA,
which also exceeded the threshold performance level but did not
reach the target performance level.
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Non-Equity Incentive Plan Compensation for 2007 reflects amounts
earned for the year ended December 31, 2007 under the 2007
PEP, which amounts will be paid in the first quarter of 2008
pursuant to the terms of the 2007 PEP. For 2007, the Company
exceeded its maximum performance level, as adjusted, with
respect to the Company’s EBITDA; therefore, pursuant to the
terms of the 2007 PEP, awards under the 2007 PEP were paid out
to the named executive officers, at the maximum level of 200% of
their respective target amounts, with the exception of
Mr. Hazen, whose award was paid out at 175.6% of the target
amount, due to the 50% of his PEP based on the Western Group
EBITDA, which exceeded the target but did not reach the maximum
performance level.
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Non-Equity Incentive Plan Compensation for 2006 reflects amounts
paid under the 2006 PEP in November 2006, which amounts became
due and payable to certain of our executive officers, including
the named executive officers, as a result of the change in
control of the Company upon consummation of the Merger.
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(5)
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All amounts for 2008 are attributable to changes in value of the
SERP benefits. Assumptions used to calculate these figures are
provided under the table titled “Pension Benefits.”
The changes in the SERP benefit value during 2008 were impacted
mainly by: (i) the passage of time which reflects another
year of pay and service plus actual investment return,
(ii) the discount rate changing from 6.00% to 6.25%, which
resulted in a decrease in the value and (iii) the
opportunity for participants to change their benefit election
before 2009 for terminations and retirements occurring after
2008. Mr. Bovender elected to change his benefit payment
from an annuity to a lump sum. The impact of these events on the
SERP benefit values was:
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|
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|
|
|
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Bovender
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Bracken
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Johnson
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Hazen
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|
Wallace
|
|
|
|
Passage of Time
|
|
$
|
1,432,831
|
|
|
$
|
2,142,217
|
|
|
$
|
2,100,290
|
|
|
$
|
1,037,631
|
|
|
$
|
2,301,107
|
|
|
Discount Rate Change
|
|
$
|
(467,374
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)
|
|
$
|
(401,597
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)
|
|
$
|
(228,500
|
)
|
|
$
|
(227,169
|
)
|
|
$
|
(220,271
|
)
|
|
Change in Election
|
|
$
|
2,960,760
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
All amounts for 2007 are attributable to changes in value of the
SERP benefits. Assumptions used to calculate these figures are
provided under the table titled “Pension Benefits.”
The changes in the SERP benefit value during 2007 were impacted
mainly by: (i) the passage of time which reflects another
year of pay and service, (ii) the discount rate changing
from 5.75% to 6.00%, which resulted in a decrease in the value
and (iii) the use of the named executive officers’
actual elections compared to 2006 when benefits were valued
assuming a 50% probability of electing a lump sum and a 50%
probability of electing an annuity. All named executive officers
77
elected a lump sum payment at retirement, with the exception of
Mr. Bovender, who elected an annuity. The impact of these
events on the SERP benefit values was:
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|
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|
Bovender
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Bracken
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Johnson
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Hazen
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Wallace
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Passage of Time
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$
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(966,974
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)
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$
|
399,630
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|
|
$
|
510,118
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|
|
$
|
266,066
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|
|
$
|
549,404
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|
|
Discount Rate Change
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$
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(542,195
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)
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$
|
(351,603
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)
|
|
$
|
(145,992
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)
|
|
$
|
(186,325
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)
|
|
$
|
(165,945
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)
|
|
Actual Election
|
|
$
|
(1,322,788
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)
|
|
$
|
542,343
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|
|
$
|
145,315
|
|
|
$
|
179,046
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|
|
$
|
292,652
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|
All amounts for 2006 are attributable to increases in value to
the SERP benefits. In addition to the assumptions set forth
under the table titled “Pension Benefits,” for the
purposes of calculating the 2006 figures, benefits are valued
assuming a 50% probability of electing a lump sum and a 50%
probability of electing an annuity.
Messrs. Bovender’s, Bracken’s Johnson’s and
Hazen’s SERP benefit value increased in 2006 by $4,185,617,
$1,272,074, $299,972, and $287,717, respectively, as a result of
the passage of time. In 2006, their SERP benefit value further
increased due to three special, one-time events: (i) the
payments made under the 2006 Senior Officer PEP in November 2006
described in footnote (4) to the Summary Compensation
Table, which had the effect of increasing the named executive
officers’ current final average earnings; (ii) the
Merger constituted a change in control under the terms of the
SERP, which triggered a decrease in the normal retirement age
under the SERP from age 65 (or 62 with 10 years of
service) to age 60; and (iii) the Committee approved
the amendment of the SERP to include a lump sum payment
provision and to revise certain actuarial factors. The impact of
these events on the SERP benefit values was:
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Bovender
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Bracken
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Johnson
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|
Hazen
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Timing of PEP payment
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|
$
|
2,593,533
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|
|
$
|
732,167
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|
|
$
|
293,215
|
|
|
$
|
263,193
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|
|
Change to retirement age
|
|
$
|
1,250,090
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|
|
$
|
1,535,685
|
|
|
$
|
576,907
|
|
|
$
|
620,300
|
|
|
Lump sum provision and actuarial factors
|
|
$
|
2,686,511
|
|
|
$
|
1,372,162
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|
|
$
|
678,606
|
|
|
$
|
657,538
|
|
|
|
|
|
|
(6)
|
|
2008 Amounts consist of:
|
|
|
|
|
|
|
•
|
Company contributions to our Retirement Plan and matching
Company contributions to our 401(k) Plan as set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bovender
|
|
Bracken
|
|
Johnson
|
|
Hazen
|
|
Wallace
|
|
|
|
HCA Retirement Plan
|
|
$
|
3,163
|
|
|
$
|
3,163
|
|
|
$
|
3,163
|
|
|
$
|
3,163
|
|
|
$
|
3,163
|
|
|
HCA 401(k) matching contribution
|
|
$
|
12,488
|
|
|
$
|
12,488
|
|
|
$
|
12,488
|
|
|
$
|
12,488
|
|
|
$
|
12,488
|
|
|
HCA Restoration Plan
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Effective January 1, 2008, participants in the SERP are no
longer eligible for Restoration Plan contributions.
|
|
|
|
|
|
•
|
Personal use of corporate aircraft. In 2008,
Messrs. Bovender, Bracken and Johnson were allowed personal
use of Company aircraft with an estimated incremental cost of
$28,913, $15,233 and $4,546, respectively, to the Company.
Mr. Hazen and Ms. Wallace did not have any personal
travel on Company aircraft in 2008. We calculate the aggregate
incremental cost of the personal use of Company aircraft based
on a methodology that includes the average aggregate cost, on a
per nautical mile basis, of variable expenses incurred in
connection with personal plane usage, including trip-related
maintenance, landing fees, fuel, crew hotels and meals, on-board
catering, trip-related hangar and parking costs and other
variable costs. Because our aircraft are used primarily for
business travel, our incremental cost methodology does not
include fixed costs of owning and operating aircraft that do not
change based on usage. We grossed up the income attributed to
Messrs. Bovender and Bracken with respect to certain trips
on Company aircraft. The additional income attributed to them as
a result of gross ups was $588 and $599, respectively. In
addition, we will pay the expenses of our executives’
spouses associated with travel to
and/or
attendance at business related events at which spouse attendance
is appropriate. We paid approximately $107, $189 and $13,660 for
travel
and/or
other
expenses incurred by Messrs. Bovender’s,
Bracken’s and Johnson’s wives, respectively, for such
business related events, and additional income of $62, $109 and
$4,912 was attributed to Messrs. Bovender, Bracken and
Johnson, respectively, as a result of the gross up on such
amounts.
|
78
2007 Amounts consist of:
|
|
|
|
|
|
•
|
Company contributions to our Retirement Plan, matching Company
contributions to our 401(k) Plan and Company accruals for our
Restoration Plan as set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bovender
|
|
Bracken
|
|
Johnson
|
|
Hazen
|
|
Wallace
|
|
|
|
HCA Retirement Plan
|
|
$
|
19,388
|
|
|
$
|
19,388
|
|
|
$
|
19,388
|
|
|
$
|
19,388
|
|
|
$
|
19,388
|
|
|
HCA 401(k) matching contribution
|
|
$
|
2,250
|
|
|
$
|
3,375
|
|
|
$
|
3,375
|
|
|
$
|
3,375
|
|
|
$
|
3,375
|
|
|
HCA Restoration Plan
|
|
$
|
153,475
|
|
|
$
|
91,946
|
|
|
$
|
57,792
|
|
|
$
|
62,004
|
|
|
$
|
52,250
|
|
|
|
|
|
|
|
•
|
Personal use of corporate aircraft. In 2007,
Messrs. Bovender and Bracken were allowed personal use of
Company aircraft with an estimated incremental cost of $21,350
and $26,895, respectively, to the Company, calculated as
described above. Mr. Hazen and Ms. Wallace did not
have any personal travel on Company’s aircraft in 2007. We
grossed up the income attributed to Messrs. Bovender and
Bracken with respect to certain trips on Company aircraft. The
additional income attributed to them as a result of gross ups
was $629 and $863, respectively. In addition, we will pay the
travel expenses of our executives’ spouses associated with
travel to business related events at which spouse attendance is
appropriate. We paid approximately $342 for travel by
Mr. Bracken’s wife on a commercial airline and related
expenses for such an event, and additional income of $123 was
attributed to Mr. Bracken as a result of the gross up on
such amount.
|
2006 Amounts consist of:
|
|
|
|
|
|
•
|
The cash payment received as a result of the deemed purchase
under the MSPP. Salary amounts withheld on behalf of the
participants in the MSPP through the closing date of the Merger
were deemed to have been used to purchase shares of our common
stock under the terms of the MSPP, using the closing date of the
Merger as the last date of the applicable offering period, and
then converted into the right to receive a cash payment equal to
the number of shares deemed purchased under the MSPP multiplied
by $51.00. Salary amounts were refunded to the participants, and
they also received a cash payment equal to the difference
between $51.00 and the deemed purchase price, multiplied by the
number of shares the participant was deemed to have purchased.
Messrs. Bovender, Bracken, Johnson and Hazen received cash
payments of $20,860, $27,326, $24,157 and $25,379, respectively.
|
|
|
|
|
•
|
Company contributions to our Retirement Plan, matching Company
contributions to our 401(k) Plan and Company accruals for our
Restoration Plan in 2006 as set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bovender
|
|
Bracken
|
|
Johnson
|
|
Hazen
|
|
|
|
HCA Retirement Plan
|
|
$
|
19,019
|
|
|
$
|
19,019
|
|
|
$
|
19,019
|
|
|
$
|
19,019
|
|
|
HCA 401(k) matching contribution
|
|
$
|
3,125
|
|
|
$
|
3,300
|
|
|
$
|
3,300
|
|
|
$
|
3,300
|
|
|
HCA Restoration Plan
|
|
$
|
856,424
|
|
|
$
|
409,933
|
|
|
$
|
212,109
|
|
|
$
|
247,060
|
|
|
|
|
|
|
|
•
|
Dividends on restricted shares. On March 1, 2006,
June 1, 2006 and September 1, 2006, we paid dividends
of $0.15 per share, $0.17 per share and $0.17 per share,
respectively, for each issued and outstanding share of common
stock of HCA, including restricted shares.
Messrs. Bovender, Bracken, Johnson and Hazen received
aggregate dividends of $82,525, $42,030, $25,267 and $27,754,
respectively, in 2006 in respect of restricted shares held by
them.
|
|
|
|
|
•
|
Personal use of corporate aircraft. In 2006, each of
Messrs. Bovender, Bracken, Johnson and Hazen were allowed
personal use of Company aircraft with estimated incremental cost
of approximately $30,336, $12,173, $11,308 and $6,812,
respectively, to the Company, calculated as described above. We
grossed up the income attributed to Messrs. Bovender and
Bracken with respect to certain trips on Company aircraft. The
additional income attributed to them as a result of gross ups
was $1,287 and $522, respectively. In addition, we will pay the
travel expenses of our executives’ spouses associated with
travel to business related events at which spouse attendance is
appropriate. We paid approximately $469 for travel by
Mr. Bracken’s wife on a commercial airline for such an
event.
|
79
Grants of
Plan-Based Awards
The following table provides information with respect to awards
made under our
2008-2009
PEP during the 2008 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
Estimated Possible Payouts
|
|
Awards:
|
|
Exercise or
|
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive
|
|
Number of
|
|
Base Price
|
|
Grant Date
|
|
|
|
|
|
Plan Awards ($)(1)
|
|
Plan Awards (#)
|
|
Securities
|
|
of Option
|
|
Fair Value
|
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Underlying
|
|
Awards
|
|
of Option
|
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
Options
|
|
($/sh)
|
|
Awards
|
|
|
|
Jack O. Bovender, Jr.
|
|
|
N/A
|
|
|
$
|
1,020,744
|
|
|
$
|
2,041,487
|
|
|
$
|
4,082,975
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Richard M. Bracken
|
|
|
N/A
|
|
|
$
|
509,219
|
|
|
$
|
1,018,437
|
|
|
$
|
2,036,874
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
R. Milton Johnson
|
|
|
N/A
|
|
|
$
|
260,705
|
|
|
$
|
521,410
|
|
|
$
|
1,042,820
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Samuel N. Hazen
|
|
|
N/A
|
|
|
$
|
260,262
|
|
|
$
|
520,524
|
|
|
$
|
1,041,047
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Beverly B. Wallace
|
|
|
N/A
|
|
|
$
|
231,000
|
|
|
$
|
462,000
|
|
|
$
|
924,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
(1)
|
|
Non-equity incentive awards granted to each of the named
executive officers pursuant to our
2008-2009
PEP for the 2008 fiscal year, as described in more detail under
“Compensation Discussion and Analysis — Annual
Incentive Compensation: PEP.” The amounts shown in the
“Threshold” column reflect the threshold payment,
which is 50% of the amount shown in the “Target”
column. The amount shown in the “Maximum” column is
200% of the target amount. These amounts are based on the
individual’s salary and position as of the date the
2008-2009
Senior Officer PEP was approved by the Compensation Committee.
Pursuant to the terms of the
2008-2009
PEP, awards have already been determined and will be paid out to
the named executive officers at approximately 68.2% of each such
officer’s respective target amount, with the exception of
Mr. Hazen, whose award vested and will be paid out at
approximately 67.4% of the target amount. Messrs. Bovender,
Bracken, Johnson and Hazen and Ms. Wallace will receive
$1,391,886, $694,370, $355,491, $350,807 and $314,992,
respectively, under the
2008-2009
Senior Officer PEP for the 2008 fiscal year; such amounts are
reflected in the “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table.
|
Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table
Total
Compensation
In 2008 and 2007, total direct compensation, as described in the
Summary Compensation Table, consisted primarily of base salary,
annual PEP awards payable in cash, and, in 2007, long term stock
option grants designed to be one-time grants to cover at least
five years of service. This mix was intended to reflect our
philosophy that a significant portion of an executive’s
compensation should be equity-linked
and/or
tied
to our operating performance. In addition, we provided an
opportunity for executives to participate in two supplemental
retirement plans; however, effective January 1, 2008,
participants in the SERP are no longer eligible for Restoration
Plan contributions, although Restoration Plan accounts will
continue to be maintained for such participants (for additional
information concerning the Restoration Plan, see
“Nonqualified Deferred Compensation”). In 2006, by
contrast, total compensation, as described in the Summary
Compensation Table, was significantly impacted by the Merger and
related one time events.
Options
In January 2007, New Options to purchase common stock of the
Company were granted under the 2006 Plan to members of
management and key employees, including the named executive
officers. The New Options were designed to be long term equity
incentive awards, constituting a one-time stock option grant in
lieu of annual equity grants. The New Options granted in 2007
have a ten year term and are structured so that
1
/
3
are time vested options (vesting in five equal installments on
the first five anniversaries of the grant date),
1
/
3
are EBITDA-based performance vested options and
1
/
3
are performance options that vest based on investment return to
the Sponsors. The terms of the New Options granted in 2007 are
described in greater detail under “Compensation Discussion
and Analysis — Long Term Equity Incentive Awards:
Options.” Compensation expense associated with the New
Option awards was recognized in 2008 and 2007 in accordance with
SFAS 123(R) and is included under the “Option
Awards” column of the Summary Compensation Table.
80
As a result of the Merger, all unvested awards under the 2005
Plan (and all predecessor equity incentive plans) vested in
November 2006. Generally, all outstanding options under the 2005
Plan (and any predecessor plans) were cancelled and converted
into the right to receive a cash payment equal to the number of
shares of common stock underlying the option multiplied by the
amount by which the Merger consideration of $51.00 per share
exceeded the exercise price for the options (without interest
and less any applicable withholding taxes). However, certain
members of management, including the named executive officers,
were given the opportunity to convert options held by them prior
to consummation of the Merger into options to purchase shares of
common stock of the surviving corporation (“Rollover
Options”). Immediately after the consummation of the
Merger, all Rollover Options (other than those with an exercise
price below $12.75) were adjusted so that they retained the same
“spread value” (as defined below) as immediately prior
to the Merger, but the new per share exercise price for all
Rollover Options would be $12.75. The term “spread
value” means the difference between (x) the aggregate
fair market value of the common stock (determined using the
Merger consideration of $51.00 per share) subject to the
outstanding options held by the participant immediately prior to
the Merger that became Rollover Options, and (y) the
aggregate exercise price of those options. All previously
unrecognized compensation expense associated with the Rollover
Options was recognized in 2006; therefore, we did not record any
compensation expense related to the Rollover Options in 2008 or
2007. New Options and Rollover Options held by the named
executive officers are described in the Outstanding Equity
Awards at Fiscal Year-End Table.
Employment
Agreements
In connection with the Merger, on November 16, 2006,
Hercules Holding entered into substantially similar employment
agreements with each of the named executive officers and certain
other executives, which agreements were shortly thereafter
assumed by the Company and which agreements govern the terms of
each executive’s employment. However, in light of
Mr. Bovender’s retirement from the position of Chief
Executive Officer, effective December 31, 2008, and
continuing service to the Company as Chairman until
December 15, 2009, the Company entered into an Amended and
Restated Employment Agreement with Mr. Bovender, effective
December 31, 2008, the terms of which are described below.
The Company also entered into an amendment to
Mr. Bracken’s employment agreement, effective
January 1, 2009, to reflect his appointment to the position
of Chief Executive Officer and President.
Executive
Employment Agreements (Other than the
Chairman’s)
The term of employment under each of these agreements is
indefinite, and they are terminable by either party at any time;
provided that an executive must give no less than 90 days
notice prior to a resignation.
Each employment agreement sets forth the executive’s annual
base salary, which will be subject to discretionary annual
increases upon review by the Board of Directors, and states that
the executive will be eligible to earn an annual bonus as a
percentage of salary with respect to each fiscal year, based
upon the extent to which annual performance targets established
by the Board of Directors are achieved. The employment
agreements committed us to provide each executive with annual
bonus opportunities in 2008 that were consistent with those
applicable to the 2007 fiscal year, unless doing so would be
adverse to our interests or the interests of our shareholders,
and for later fiscal years, the agreements provide that the
Board of Directors will set bonus opportunities in consultation
with our Chief Executive Officer. With respect to the 2008 and
2007 fiscal years, each executive was eligible to earn under the
2008-2009
PEP and the
2008-2007
PEP, respectively, (i) a target bonus, if performance
targets were met; (ii) a specified percentage of the target
bonus, if “threshold” levels of performance were
achieved but performance targets were not met; or (iii) a
multiple of the target bonus if “maximum” performance
goals were achieved, with the annual bonus amount being
interpolated, in the sole discretion of the Board of Directors,
for performance results that exceeded “threshold”
levels but do not meet or exceed “maximum” levels. The
annual bonus opportunities for 2008 were set forth in the
2008-2009
PEP, as described in more detail under “Compensation
Discussion and Analysis — Annual Incentive
Compensation: PEP.” As described above, awards under the
2008 PEP have already been determined and will be paid out to
the named executive officers, at approximately 68.2% of each
such officer’s respective target amount, with the exception
of Mr. Hazen, whose award vested and will be paid out at
approximately 67.4% of the target amount. As described above,
awards under the 2007 PEP were paid out to the named executive
officers, at the maximum level of 200% of their respective
target amounts, with the exception
81
of Mr. Hazen, whose award was paid out at 175.6% of his
target amount. Each employment agreement also sets forth the
number of options that the executive received pursuant to the
2006 Plan as a percentage of the total equity initially made
available for grants pursuant to the 2006 Plan. Such option
awards, the New Options, were made January 30, 2007 and are
described above.
Pursuant to each employment agreement, if an executive’s
employment terminates due to death or disability, the executive
would be entitled to receive (i) any base salary and any
bonus that is earned and unpaid through the date of termination;
(ii) reimbursement of any unreimbursed business expenses
properly incurred by the executive; (iii) such employee
benefits, if any, as to which the executive may be entitled
under our employee benefit plans (the payments and benefits
described in (i) through (iii) being “accrued
rights”); and (iv) a pro rata portion of any annual
bonus that the executive would have been entitled to receive
pursuant to the employment agreement based upon our actual
results for the year of termination (with such proration based
on the percentage of the fiscal year that shall have elapsed
through the date of termination of employment, payable to the
executive when the annual bonus would have been otherwise
payable (the “pro rata bonus”)).
If an executive’s employment is terminated by us without
“cause” (as defined below) or by the executive for
“good reason” (as defined below) (each a
“qualifying termination”), the executive would be
(i) entitled to the accrued rights; (ii) subject to
compliance with certain confidentiality, non-competition and
non-solicitation covenants contained in his or her employment
agreement and execution of a general release of claims on behalf
of the Company, an amount equal to the product of (x) two
(three in the case of Richard M. Bracken and R. Milton Johnson)
and (y) the sum of (A) the executive’s base
salary and (B) annual bonus paid or payable in respect of
the fiscal year immediately preceding the fiscal year in which
termination occurs, payable over a two-year period;
(iii) entitled to the pro rata bonus; and
(iv) entitled to continued coverage under our group health
plans during the period over which the cash severance described
in clause (ii) is paid. The executive’s vested New
Options would also remain exercisable until the first
anniversary of the termination of the executive’s
employment. However, in lieu of receiving the payments and
benefits described in (ii), (iii) and (iv) immediately
above, the executive may instead elect to have his or her
covenants not to compete waived by us. The same severance
applies regardless of whether the termination was in connection
with a change in control of the Company.
“Cause” is defined as an executive’s
(i) willful and continued failure to perform his material
duties to the Company which continues beyond 10 business days
after a written demand for substantial performance is delivered;
(ii) willful or intentional engagement in material
misconduct that causes material and demonstrable injury,
monetarily or otherwise, to the Company or the Sponsors;
(iii) conviction of, or a plea of
nolo contendere
to, a crime constituting a felony, or a misdemeanor for
which a sentence of more than six months’ imprisonment is
imposed; or (iv) willful and material breach of his
covenants under the employment agreement which continues beyond
the designated cure period or of the agreements relating to the
new equity. “Good Reason” is defined as (i) a
reduction in the executive’s base salary (other than a
general reduction that affects all similarly situated employees
in substantially the same proportions which is implemented by
the Board in good faith after consultation with the chief
executive officer and chief operating officer, a reduction in
the executive’s annual incentive compensation opportunity,
or the reduction of benefits payable to the executive under the
SERP; (ii) a substantial diminution in the executive’s
title, duties and responsibilities; or (iii) a transfer of
the executive’s primary workplace to a location that is
more than 20 miles from his or her current workplace (other
than, in the case of (i) and (ii), any isolated,
insubstantial and inadvertent failure that is not in bad faith
and is cured within 10 business days after the executive’s
written notice to the Company).
In the event of an executive’s termination of employment
that is not a qualifying termination or a termination due to
death or disability, he or she will only be entitled to the
“accrued rights” (as defined above).
In each of the employment agreements with the named executive
officers, we also commit to grant, among the named executive
officers and certain other executives, 10% of the options
initially authorized for grant under the 2006 Plan at some time
before November 17, 2011 (but with a good faith commitment
to do so before a “change in control” (as defined in
the 2006 Plan and set forth above) or a “public
offering” (as defined in the 2006 Plan) and before the time
when our Board of Directors reasonably believes that the fair
market value of our common stock is likely to exceed the
equivalent of $102.00 per share) at an exercise price per share
that is the equivalent of $102.00 per share (“2x Time
Options”). A percentage of these options will be vested at
the time of the grant, such percentage
82
corresponding to the elapsed percentage of the period measured
between November 17, 2006 and November 17, 2011. When
granted, these options will be allocated among the recipients by
our Board of Directors in consultation with our chief executive
officer based upon the perceived contributions of each recipient
since November 17, 2006. The terms of the 2x Time Options
will otherwise be consistent with other time vesting options
granted under the 2006 Plan. Additionally, pursuant to the
employment agreements, we agree to indemnify each executive
against any adverse tax consequences (including, without
limitation, under Section 409A and 4999 of the Internal
Revenue Code), if any, that result from the adjustment by us of
stock options held by the executive in connection with Merger or
the future payment of any extraordinary cash dividends.
Additional information with respect to potential payments to the
named executive officers pursuant to their employment agreements
and the 2006 Plan is contained in “Potential Payments Upon
Termination or Change in Control.”
Mr. Bovender’s
Employment Agreement
The Company entered into the Amended Employment Agreement with
Jack O. Bovender, Jr. on October 27, 2008, which
became effective on December 31, 2008. Pursuant to the
terms of the Amended Employment Agreement, Mr. Bovender
will continue to be employed by HCA Management Services, L.P.,
an affiliate of the Company, and shall serve as executive
Chairman of the Company for a period commencing
December 31, 2008 and ending December 15, 2009 (the
“Employment Term”).
The Amended Employment Agreement provides that Mr. Bovender
shall receive a base salary (i) at the monthly rate of
$135,000 for the first three months of the Employment Term and
(ii) at the monthly rate of $86,957 for the next eight and
one-half months of the Employment Term
(“Mr. Bovender’s Base Salary”).
Mr. Bovender is entitled to the full amount of any annual
bonus earned, but unpaid, as of the effective date of the
Amended Employment Agreement for the year ended
December 31, 2008 under the Company’s
2008-2009
PEP. For calendar year 2009, Mr. Bovender is eligible to
earn a bonus under the
2008-2009
PEP with a “target bonus” of $500,000.
Mr. Bovender has an additional 2009 bonus opportunity of up
to $250,000 based upon the achievement of other objectives, to
be determined by the compensation committee of the Company
(“Mr. Bovender’s Additional Bonus”). The
Amended Employment Agreement generally provides for the
provision of or reimbursement of expenses associated with office
space, shared clerical support and office equipment until
Mr. Bovender reaches age 70.
The terms of Mr. Bovender’s employment agreement with
respect to termination of his employment are described in detail
under “Compensation Discussion and Analysis —
Severance and Change in Control Agreements —
Mr. Bovender’s Severance Benefits.”
Additional information with respect to potential payments to
Mr. Bovender pursuant to his Amended Employment Agreement
and the 2006 Plan is contained in “Potential Payments Upon
Termination or Change in Control.”
Outstanding
Equity Awards at Fiscal Year-End
The following table includes certain information with respect to
options held by the named executive officers as of
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Plan Awards: Number
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
of Securities
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Price
|
|
Expiration
|
|
Name
|
|
Exercisable(#)(1)(2)
|
|
Unexercisable(#)(2)
|
|
Options(#)(2)
|
|
($)(3)(4)
|
|
Date
|
|
|
|
Jack O. Bovender, Jr.
|
|
|
143,058
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/25/2011
|
|
|
Jack O. Bovender, Jr.
|
|
|
53,882
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
|
Jack O. Bovender, Jr.
|
|
|
69,411
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
|
Jack O. Bovender, Jr.
|
|
|
53,751
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
|
Jack O. Bovender, Jr.
|
|
|
24,549
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Plan Awards: Number
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
of Securities
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Price
|
|
Expiration
|
|
Name
|
|
Exercisable(#)(1)(2)
|
|
Unexercisable(#)(2)
|
|
Options(#)(2)
|
|
($)(3)(4)
|
|
Date
|
|
|
|
Jack O. Bovender, Jr.
|
|
|
15,843
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
|
Jack O. Bovender, Jr.
|
|
|
79,920
|
|
|
|
106,562
|
|
|
|
213,122
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
|
Richard M. Bracken
|
|
|
8,052
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
3/22/2011
|
|
|
Richard M. Bracken
|
|
|
26,248
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
7/26/2011
|
|
|
Richard M. Bracken
|
|
|
29,934
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
|
Richard M. Bracken
|
|
|
40,490
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
|
Richard M. Bracken
|
|
|
30,235
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
|
Richard M. Bracken
|
|
|
10,739
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
|
Richard M. Bracken
|
|
|
7,095
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
|
Richard M. Bracken
|
|
|
69,930
|
|
|
|
93,242
|
|
|
|
186,482
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
|
R. Milton Johnson
|
|
|
6,039
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
3/22/2011
|
|
|
R. Milton Johnson
|
|
|
9,579
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
|
R. Milton Johnson
|
|
|
9,254
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
|
R. Milton Johnson
|
|
|
8,062
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
|
R. Milton Johnson
|
|
|
26,013
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
7/22/2014
|
|
|
R. Milton Johnson
|
|
|
6,441
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
|
R. Milton Johnson
|
|
|
4,301
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
|
R. Milton Johnson
|
|
|
49,950
|
|
|
|
66,601
|
|
|
|
133,202
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
|
Samuel N. Hazen
|
|
|
6,039
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
3/22/2011
|
|
|
Samuel N. Hazen
|
|
|
13,124
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
7/26/2011
|
|
|
Samuel N. Hazen
|
|
|
19,158
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
|
Samuel N. Hazen
|
|
|
23,137
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
|
Samuel N. Hazen
|
|
|
16,797
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
|
Samuel N. Hazen
|
|
|
6,441
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
|
Samuel N. Hazen
|
|
|
4,301
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
|
Samuel N. Hazen
|
|
|
31,968
|
|
|
|
42,625
|
|
|
|
85,248
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
|
Beverly B. Wallace
|
|
|
6,039
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
3/22/2011
|
|
|
Beverly B. Wallace
|
|
|
9,579
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
|
Beverly B. Wallace
|
|
|
13,882
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
|
Beverly B. Wallace
|
|
|
11,422
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
|
Beverly B. Wallace
|
|
|
4,601
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
|
Beverly B. Wallace
|
|
|
3,559
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
|
Beverly B. Wallace
|
|
|
27,972
|
|
|
|
37,297
|
|
|
|
74,592
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
|
|
|
|
|
(1)
|
|
Reflects Rollover Options, as further described under
“Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table — Options,” the
20% of the named executive officer’s time vested New
Options that vested as of January 30, 2008 and 40% of the
named executive officer’s EBITDA-based performance vested
New Options, comprised of the 20% that vested as of
December 31, 2007 and the 20% that vested as of
December 31, 2008 (upon the Committee’s determination
that the Company achieved the 2007 and 2008 EBITDA performance
targets under the option awards, as adjusted, as described in
more detail under “Compensation Discussion and
Analysis — Long Term Equity Incentive Awards:
Options”).
|
84
|
|
|
|
|
(2)
|
|
Reflects New Options awarded in January 2007 under the 2006 Plan
by the Compensation Committee as part of the named executive
officer’s long term equity incentive award. The New Options
granted in 2007 are structured so that 1/3 are time vested
options (vesting in five equal installments on the first five
anniversaries of the January 30, 2007 grant date), 1/3 are
EBITDA-based performance vested options (vesting in equal
increments of 20% at the end of fiscal years 2007, 2008, 2009,
2010 and 2011 if certain annual EBITDA performance targets are
achieved, subject to “catch up” vesting, such that,
options that were eligible to vest but failed to vest due to our
failure to achieve prior EBITDA targets will vest if at the end
of any subsequent year or at the end of fiscal year 2012, the
cumulative total EBITDA earned in all prior years exceeds the
cumulative EBITDA target at the end of such fiscal year) and 1/3
are performance options that vest based on investment return to
the Sponsors (vesting with respect to 10% of the common stock
subject to such options at the end of fiscal years 2007, 2008,
2009, 2010 and 2011 if the Investor Return is at least $102.00
and with respect to an additional 10% at the end of fiscal years
2007, 2008, 2009, 2010 and 2011 if the Investor Return is at
least $127.50, subject to “catch up” vesting if the
relevant Investor Return is achieved at any time occurring prior
to January 30, 2017, so long as the named executive officer
remains employed by the Company). The time vested options are
reflected in the “Number of Securities Underlying
Unexercised Options Unexercisable” column (with the
exception of the 20% of the time vested options that vested as
of January 30, 2008, which are reflected in the
“Number of Securities Underlying Unexercised Options
Exercisable” column), and the EBITDA-based performance
vested options and investment return performance vested options
are both reflected in the “Equity Incentive Plan Awards:
Number of Securities Underlying Unexercised Unearned
Options” column (with the exception of the 40% of the
EBITDA-based performance vested options that vested as of
December 31, 2007 and December 31, 2008, which are
reflected in the “Number of Securities Underlying
Unexercised Options Exercisable” column). The terms of
these option awards are described in more detail under
“Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table — Options.”
|
|
|
|
(3)
|
|
Immediately after the consummation of the Merger, all Rollover
Options (other than those with an exercise price below $12.75)
were adjusted such that they retained the same “spread
value” (as defined below) as immediately prior to the
Merger, but the new per share exercise price for all Rollover
Options would be $12.75. The term “spread value” means
the difference between (x) the aggregate fair market value
of the common stock (determined using the Merger consideration
of $51.00 per share) subject to the outstanding options held by
the participant immediately prior to the Merger that became
Rollover Options, and (y) the aggregate exercise price of
those options.
|
|
|
|
(4)
|
|
The exercise price for the New Options granted under the 2006
Plan to the named executive officers on January 30, 2007
was equal to the fair value of our common stock on the date of
the grant, as determined by our Board of Directors in
consultation with our Chief Executive Officer and other
advisors, pursuant to the terms of the 2006 Plan.
|
Option
Exercises and Stock Vested
The following table includes certain information with respect to
options exercised by the named executive officers during the
fiscal year ended December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
Acquired on
|
|
Value Realized on
|
|
Name
|
|
Exercise(1)
|
|
Exercise ($)(2)
|
|
|
|
R. Milton Johnson
|
|
|
87,180
|
|
|
$
|
3,758,330
|
|
|
Samuel N. Hazen
|
|
|
28,123
|
|
|
$
|
1,212,383
|
|
|
|
|
|
|
(1)
|
|
Messrs. Johnson and Hazen elected a cashless exercise of
87,180 and 28,123 stock options, respectively, resulting in net
shares realized of 42,773 and 13,972, respectively.
|
|
|
|
(2)
|
|
Represents the difference between the exercise price of the
options and the fair market value of the common stock on the
date of exercise, as determined by our Board of Directors in
consultation with our Chief Executive Officer and other advisors.
|
85
Pension
Benefits
Our SERP is intended to qualify as a “top-hat” plan
designed to benefit a select group of management or highly
compensated employees. There are no other defined benefit plans
that provide for payments or benefits to any of the named
executive officers. Information about benefits provided by the
SERP is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
Present Value of
|
|
Payments During
|
|
Name
|
|
Plan Name
|
|
Credited Service
|
|
Accumulated Benefit
|
|
Last Fiscal Year
|
|
|
|
Jack O. Bovender, Jr
|
|
|
SERP
|
|
|
|
29
|
|
|
$
|
22,172,777
|
|
|
$
|
0
|
|
|
Richard M. Bracken
|
|
|
SERP
|
|
|
|
27
|
|
|
$
|
10,207,328
|
|
|
$
|
0
|
|
|
R. Milton Johnson
|
|
|
SERP
|
|
|
|
26
|
|
|
$
|
4,321,235
|
|
|
$
|
0
|
|
|
Samuel N. Hazen
|
|
|
SERP
|
|
|
|
26
|
|
|
$
|
3,605,578
|
|
|
$
|
0
|
|
|
Beverly B. Wallace
|
|
|
SERP
|
|
|
|
25
|
|
|
$
|
6,649,507
|
|
|
$
|
0
|
|
Mr. Bovender is eligible for normal retirement.
Mr. Bracken and Ms. Wallace are eligible for early
retirement. The remaining named executive officers have not
satisfied the eligibility requirements for normal or early
retirement. All of the named executive officers are 100% vested
in their accrued SERP benefit.
Plan
Provisions
In the event the employee’s “accrued benefits under
the Company’s Plans” (computed using “actuarial
factors”) are insufficient to provide the “life
annuity amount,” the SERP will provide a benefit equal to
the amount of the shortfall. Benefits can be paid in the form of
an annuity or a lump sum. The lump sum is calculated by
converting the annuity benefit using the “actuarial
factors.” All benefits with a present value not exceeding
one million dollars are paid as a lump sum regardless of the
election made.
Normal retirement eligibility requires attainment of age 60
for employees who were participants at the time of the change in
control which occurred as a result of the Merger, including all
of the named executive officers. Early retirement eligibility
requires age 55 with 20 or more years of service. The
service requirement for early retirement is waived for employees
participating in the SERP at the time of its inception in 2001,
including all of the named executive officers. The “life
annuity amount” payable to a participant who takes early
retirement is reduced by three percent for each full year or
portion thereof that the participant retires prior to normal
retirement age.
The “life annuity amount” is the annual benefit
payable as a life annuity to a participant upon normal
retirement. It is equal to the participant’s “accrual
rate” multiplied by the product of the participant’s
“years of service” times the participant’s
“pay average.” The SERP benefit for each year equals
the life annuity amount less the annual life annuity amount
produced by the employee’s “accrued benefit under the
Company’s Plans.”
The “accrual rate” is a percentage assigned to each
participant, and is either 2.2% or 2.4%. All of the named
executive officers are assigned a percentage of 2.4%.
A participant is credited with a “year of service” for
each calendar year that the participant performs
1,000 hours of service for HCA or one of our subsidiaries,
or for each year the participant is otherwise credited by us,
subject to a maximum credit of 25 years of service.
A participant’s “pay average” is an amount equal
to one-fifth of the sum of the compensation during the period of
60 consecutive months for which total compensation is greatest
within the 120 consecutive month period immediately preceding
the participant’s retirement. For purposes of this
calculation, the participant’s compensation includes base
compensation, payments under the PEP, and bonuses paid prior to
the establishment of the PEP.
The “accrued benefits under the Company’s Plans”
for an employee equals the sum of the employer-funded benefits
accrued under the HCA Retirement Plan, the HCA 401(k) Plan and
any other tax-qualified plan maintained by us or one of our
subsidiaries, the income/loss adjusted amount distributed to the
participant under any of these plans, the account credit and the
income/loss adjusted amount distributed to the participant under
the Restoration Plan and any other nonqualified retirement plans
sponsored by us or one of our subsidiaries.
The “actuarial factors” include (a) interest at
the long term Applicable Federal Rate under Section 1274(d)
of the Code or any successor thereto as of the first day of
November preceding the plan year in or for which a benefit
86
amount is calculated, and (b) mortality based on the
prevailing commissioner’s standard table (as described in
Code section 807(d)(5)(A)) used in determining reserves for
group annuity contracts.
Credited service does not include any amount other than service
with us or one of our subsidiaries.
Assumptions
The Present Value of Accumulated Benefit is based on a
measurement date of December 31, 2008.
The assumption is made that there is no probability of
pre-retirement death or termination. Retirement age is assumed
to be the Normal Retirement Age as defined in the SERP for all
named executive officers, as adjusted by the provisions relating
to change in control, or age 60. Age 60 also
represents the earliest date the named executive officers are
eligible to receive an unreduced benefit.
All other assumptions used in the calculations are the same as
those used for the valuation of the plan liabilities in this
annual report.
Supplemental
Information
In the event a participant renders service to another health
care organization within five years following retirement or
termination of employment, he or she forfeits his rights to any
further payment, and must repay any benefits already paid. This
non-competition provision is subject to waiver by the Committee
with respect to the named executive officers.
Nonqualified
Deferred Compensation
Amounts shown in the table are attributable to the HCA
Restoration Plan, an unfunded, nonqualified defined contribution
plan designed to restore benefits under the HCA Retirement Plan
based on compensation in excess of the Code
Section 401(a)(17) compensation limit ($230,000 in 2008).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
Contributions
|
|
Earnings
|
|
Aggregate
|
|
Balance
|
|
|
|
in Last
|
|
in Last
|
|
in Last
|
|
Withdrawals/
|
|
at Last
|
|
Name
|
|
Fiscal Year
|
|
Fiscal Year
|
|
Fiscal Year
|
|
Distributions
|
|
Fiscal Year
|
|
|
|
Jack O. Bovender, Jr
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
(849,699
|
)
|
|
$
|
0
|
|
|
$
|
2,193,745
|
|
|
Richard M. Bracken
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
(445,541
|
)
|
|
$
|
0
|
|
|
$
|
1,151,250
|
|
|
R. Milton Johnson
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
(182,049
|
)
|
|
$
|
0
|
|
|
$
|
472,090
|
|
|
Samuel N. Hazen
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
(243,513
|
)
|
|
$
|
0
|
|
|
$
|
630,201
|
|
|
Beverly B. Wallace
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
(149,832
|
)
|
|
$
|
0
|
|
|
$
|
388,934
|
|
The following amounts from the column titled “Aggregate
Balance at Last Fiscal Year” have been reported in the
Summary Compensation Tables in prior years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restoration Contribution
|
|
Name
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
Jack O. Bovender, Jr
|
|
$
|
268,523
|
|
|
$
|
289,899
|
|
|
$
|
363,481
|
|
|
$
|
295,062
|
|
|
$
|
856,424
|
|
|
$
|
153,475
|
|
|
Richard M. Bracken
|
|
$
|
146,549
|
|
|
$
|
162,344
|
|
|
$
|
192,858
|
|
|
$
|
172,571
|
|
|
$
|
409,933
|
|
|
$
|
91,946
|
|
|
R. Milton Johnson
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
71,441
|
|
|
$
|
212,109
|
|
|
$
|
57,792
|
|
|
Samuel N. Hazen
|
|
|
—
|
|
|
$
|
79,510
|
|
|
$
|
101,488
|
|
|
$
|
97,331
|
|
|
$
|
247,060
|
|
|
$
|
62,004
|
|
|
Beverly B. Wallace
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
52,250
|
|
Plan
Provisions
Until 2008, hypothetical accounts for each participant were
credited each year with a contribution designed to restore the
HCA Retirement Plan based on compensation in excess of the Code
Section 401(a)(17) compensation limit ($230,000 in 2008),
based on years of service. Effective January 1, 2008,
participants in the SERP are no longer eligible for Restoration
Plan contributions. However, the hypothetical accounts as of
January 1, 2008 will
87
continue to be maintained and will be increased or decreased
with investment earnings based on the actual investment return.
No employee deferrals are allowed under this or any other
nonqualified deferred compensation plan.
Eligible employees make a one time election prior to
participation (or prior to December 31, 2006, if earlier)
regarding the form of distribution of the benefit. Participants
choose between a lump sum and five or ten installments.
Distributions are paid (or begin) during the July following the
year of termination of employment or retirement. All balances
not exceeding $500,000 are automatically paid as a lump sum. If
no election is made, the benefit is paid in a lump sum.
Supplemental
Information
In the event a participant renders service to another health
care organization within five years following retirement or
termination of employment, he or she forfeits the rights to any
further payment, and must repay any payments already made. This
non-competition provision is subject to waiver by the Committee
with respect to the named executive officers.
Potential
Payments Upon Termination or Change in Control
The following tables show the estimated amount of potential cash
severance payable to each of the named executive officers, as
well as the estimated value of continuing benefits, based on
compensation and benefit levels in effect on December 31,
2008, assuming the executive’s employment terminates or the
Company undergoes a Change in Control (as defined in the 2006
Plan and set forth above under “Narrative to Summary
Compensation Table and Grants of Plan-Based Awards
Table — Options”) effective December 31,
2008. Due to the numerous factors involved in estimating these
amounts, the actual value of benefits and amounts to be paid can
only be determined upon an executive’s termination of
employment.
Jack O.
Bovender, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
Early
|
|
Normal
|
|
Without
|
|
Termination
|
|
for Good
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
Retirement
|
|
Retirement
|
|
Cause
|
|
for Cause
|
|
Reason
|
|
Disability
|
|
Death
|
|
Control
|
|
|
|
Cash Severance(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,144,134
|
|
|
|
—
|
|
|
$
|
1,144,134
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
1,391,886
|
|
|
$
|
1,391,886
|
|
|
$
|
1,391,886
|
|
|
$
|
1,391,886
|
|
|
$
|
1,391,886
|
|
|
$
|
1,391,886
|
|
|
$
|
1,391,886
|
|
|
$
|
1,391,886
|
|
|
$
|
1,391,886
|
|
|
Unvested Stock Options(3)
|
|
$
|
1,424,184
|
|
|
$
|
1,424,184
|
|
|
$
|
1,424,184
|
|
|
$
|
1,424,184
|
|
|
|
—
|
|
|
$
|
1,424,184
|
|
|
$
|
1,424,184
|
|
|
$
|
1,424,184
|
|
|
$
|
1,553,664
|
|
|
SERP(4)
|
|
$
|
22,431,999
|
|
|
$
|
22,431,999
|
|
|
$
|
22,431,999
|
|
|
$
|
22,431,999
|
|
|
$
|
22,431,999
|
|
|
$
|
22,431,999
|
|
|
$
|
22,431,999
|
|
|
$
|
18,736,776
|
|
|
|
—
|
|
|
Retirement Plans(5)
|
|
$
|
2,398,833
|
|
|
$
|
2,398,833
|
|
|
$
|
2,398,833
|
|
|
$
|
2,398,833
|
|
|
$
|
2,398,833
|
|
|
$
|
2,398,833
|
|
|
$
|
2,398,833
|
|
|
$
|
2,398,833
|
|
|
|
—
|
|
|
Health and Welfare Benefits(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
15,505
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability Income(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,275,926
|
|
|
|
—
|
|
|
|
—
|
|
|
Life Insurance Benefits(8)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
2,021,000
|
|
|
|
—
|
|
|
Accrued Vacation Pay
|
|
$
|
224,339
|
|
|
$
|
224,339
|
|
|
$
|
224,339
|
|
|
$
|
224,339
|
|
|
$
|
224,339
|
|
|
$
|
224,339
|
|
|
$
|
224,339
|
|
|
$
|
224,339
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
27,871,241
|
|
|
$
|
27,871,241
|
|
|
$
|
27,871,241
|
|
|
$
|
29,030,880
|
|
|
$
|
26,447,057
|
|
|
$
|
29,015,375
|
|
|
$
|
29,147,167
|
|
|
$
|
26,197,018
|
|
|
$
|
2,945,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents the amounts Mr. Bovender would be entitled to
receive pursuant to Mr. Bovender’s Amended Employment
Agreement in effect on December 31, 2008. Under his prior
employment agreement, Mr. Bovender would have been entitled
to receive $16,526,325 in cash severance if his employment had
been involuntarily terminated without cause or voluntarily
terminated for good reason on December 31, 2008 prior to
his resignation from the position of Chief Executive Officer.
See “Narrative to Summary Compensation Table and Grants of
Plan-Based Awards Table — Employment Agreements.”
|
|
|
|
(2)
|
|
Represents the amount Mr. Bovender would be entitled to
receive for the 2008 fiscal year pursuant to the
2008-2009
PEP and his Amended Employment Agreement, which amount is also
included in the “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table.
Under his prior employment agreement, Mr. Bovender would
have been entitled to receive $0 in non-equity incentive plan
compensation if his employment had been terminated for cause on
December 31, 2008 prior to his resignation from the
position
|
88
|
|
|
|
|
|
|
of Chief Executive Officer. See “Narrative to Summary
Compensation Table and Grants of Plan-Based Awards
Table —
2008-2009
PEP and — Employment Agreements.”
|
|
|
|
(3)
|
|
The amounts set forth in the “Voluntary Termination,”
“Early Retirement,” “Normal Retirement,”
“Involuntary Termination Without Cause,”
“Voluntary Termination for Good Reason,”
“Disability” and “Death” columns represent
the intrinsic value of all unvested stock options, which,
pursuant to Mr. Bovender’s Amended Employment
Agreement, will continue to vest after the termination of his
employment (other than a termination for cause), calculated as
the difference between the exercise price of
Mr. Bovender’s unvested New Options subject to such
continued vesting provision and the fair value price of our
common stock on December 31, 2008 as determined by our
Board of Directors in consultation with our Chief Executive
Officer and other advisors for internal purposes ($55.86 per
share). For the purposes of this calculation, it is assumed that
the 2009, 2010 and 2011 EBITDA performance targets under the
option awards are achieved by the Company and that the Company
achieves an Investor Return of at least 2.5 times the Base Price
of $51.00 at the end of each of the 2009, 2010 and 2011 fiscal
years, respectively. See “Compensation Discussion and
Analysis — Severance and Change in Control
Agreements.”
|
|
|
|
|
|
The amount set forth in the “Change in Control” column
represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Bovender’s unvested New Options and the fair value
price of our common stock on December 31, 2008 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($55.86 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2008 fiscal
year.
|
|
|
|
(4)
|
|
Reflects the actual lump sum value of the SERP based on the 2008
interest rate of 4.89%.
|
|
|
|
(5)
|
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Mr. Bovender would
be entitled. The value includes $169,452 from the HCA Retirement
Plan, $35,636 from the HCA 401(k) Plan (which represents the
value of the Company’s matching contributions), and
$2,193,745 from the HCA Restoration Plan.
|
|
|
|
(6)
|
|
Reflects the present value of the medical premiums for
Mr. Bovender and his spouse from termination to age 65
as required pursuant to Mr. Bovender’s Amended
Employment Agreement. See “Narrative Disclosure to Summary
Compensation Table and Grants of Plan-Based Awards
Table — Employment Agreements.”
|
|
|
|
(7)
|
|
Reflects the estimated lump sum present value of all future
payments which Mr. Bovender would be entitled to receive
under our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period for
42 months, and monthly benefits of $10,000 per month from
our Supplemental Insurance Program payable after the six-month
elimination period for 36 months.
|
|
|
|
(8)
|
|
No post-retirement or post-termination life insurance or death
benefits are provided to Mr. Bovender.
Mr. Bovender’s payment upon death while actively
employed includes $1,621,000 of Company-paid life insurance and
$400,000 from the Executive Death Benefit Plan.
|
89
Richard
M. Bracken
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
Early
|
|
Normal
|
|
Without
|
|
Termination
|
|
for Good
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
Retirement
|
|
Retirement
|
|
Cause
|
|
for Cause
|
|
Reason
|
|
Disability
|
|
Death
|
|
Control
|
|
|
|
Cash Severance(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
8,911,326
|
|
|
|
—
|
|
|
$
|
8,911,326
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
694,370
|
|
|
$
|
694,370
|
|
|
$
|
694,370
|
|
|
$
|
694,370
|
|
|
|
—
|
|
|
$
|
694,370
|
|
|
$
|
694,370
|
|
|
$
|
694,370
|
|
|
$
|
694,370
|
|
|
Unvested Stock Options(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,359,459
|
|
|
SERP(4)
|
|
$
|
12,950,117
|
|
|
$
|
12,950,117
|
|
|
|
—
|
|
|
$
|
12,950,117
|
|
|
$
|
12,950,117
|
|
|
$
|
12,950,117
|
|
|
$
|
12,950,117
|
|
|
$
|
11,608,638
|
|
|
|
—
|
|
|
Retirement Plans(5)
|
|
$
|
2,016,285
|
|
|
$
|
2,016,285
|
|
|
$
|
2,016,285
|
|
|
$
|
2,016,285
|
|
|
$
|
2,016,285
|
|
|
$
|
2,016,285
|
|
|
$
|
2,016,285
|
|
|
$
|
2,016,285
|
|
|
|
—
|
|
|
Health and Welfare Benefits
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability Income(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,710,666
|
|
|
|
—
|
|
|
|
—
|
|
|
Life Insurance Benefits(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,136,000
|
|
|
|
—
|
|
|
Accrued Vacation Pay
|
|
$
|
146,890
|
|
|
$
|
146,890
|
|
|
$
|
146,890
|
|
|
$
|
146,890
|
|
|
$
|
146,890
|
|
|
$
|
146,890
|
|
|
$
|
146,890
|
|
|
$
|
146,890
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,807,662
|
|
|
$
|
15,807,662
|
|
|
$
|
2,857,545
|
|
|
$
|
24,718,988
|
|
|
$
|
15,113,292
|
|
|
$
|
24,718,988
|
|
|
$
|
17,518,328
|
|
|
$
|
15,602,183
|
|
|
$
|
2,053,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents amounts Mr. Bracken would be entitled to receive
pursuant to his employment agreement. See “Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table — Employment Agreements.”
|
|
|
|
(2)
|
|
Represents the amount Mr. Bracken would be entitled to
receive for the 2008 fiscal year pursuant to the
2008-2009
PEP and his employment agreement, which amount is also included
in the “Non-Equity Incentive Plan Compensation” column
of the Summary Compensation Table. See “Narrative to
Summary Compensation Table and Grants of Plan-Based Awards
Table —
2008-2009
PEP and — Employment Agreements.”
|
|
|
|
(3)
|
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Bracken’s unvested New Options and the fair value
price of our common stock on December 31, 2008 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($55.86 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2008 fiscal
year.
|
|
|
|
(4)
|
|
Reflects the actual lump sum value of the SERP based on the 2008
interest rate of 4.89%.
|
|
|
|
(5)
|
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Mr. Bracken would be
entitled. The value includes $607,368 from the HCA Retirement
Plan, $257,667 from the HCA 401(k) Plan (which represents the
value of the Company’s matching contributions), and
$1,151,250 from the HCA Restoration Plan.
|
|
|
|
(6)
|
|
Reflects the estimated lump sum present value of all future
payments which Mr. Bracken would be entitled to receive
under our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 65, and monthly benefits of $10,000 per month from our
Supplemental Insurance Program payable after the six-month
elimination period to age 65.
|
|
|
|
(7)
|
|
No post-retirement or post-termination life insurance or death
benefits are provided to Mr. Bracken.
Mr. Bracken’s payment upon death while actively
employed includes $1,061,000 of Company-paid life insurance and
$75,000 from the Executive Death Benefit Plan.
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
Early
|
|
Normal
|
|
Without
|
|
Termination
|
|
for Good
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
Retirement
|
|
Retirement
|
|
Cause
|
|
for Cause
|
|
Reason
|
|
Disability
|
|
Death
|
|
Control
|
|
|
|
Cash Severance(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
5,071,410
|
|
|
|
—
|
|
|
$
|
5,071,410
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
355,491
|
|
|
$
|
355,491
|
|
|
$
|
355,491
|
|
|
$
|
355,491
|
|
|
|
—
|
|
|
$
|
355,491
|
|
|
$
|
355,491
|
|
|
$
|
355,491
|
|
|
$
|
355,491
|
|
|
Unvested Stock Options(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
971,043
|
|
|
SERP(4)
|
|
$
|
6,030,535
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
6,030,535
|
|
|
$
|
6,030,535
|
|
|
$
|
6,030,535
|
|
|
$
|
6,030,535
|
|
|
$
|
5,725,084
|
|
|
|
—
|
|
|
Retirement Plans(5)
|
|
$
|
1,182,513
|
|
|
$
|
1,182,513
|
|
|
$
|
1,182,513
|
|
|
$
|
1,182,513
|
|
|
$
|
1,182,513
|
|
|
$
|
1,182,513
|
|
|
$
|
1,182,513
|
|
|
$
|
1,182,513
|
|
|
|
—
|
|
|
Health and Welfare Benefits
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability Income(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,980,591
|
|
|
|
—
|
|
|
|
—
|
|
|
Life Insurance Benefits(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
790,000
|
|
|
|
—
|
|
|
Accrued Vacation Pay
|
|
$
|
109,387
|
|
|
$
|
109,387
|
|
|
$
|
109,387
|
|
|
$
|
109,387
|
|
|
$
|
109,387
|
|
|
$
|
109,387
|
|
|
$
|
109,387
|
|
|
$
|
109,387
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,677,926
|
|
|
$
|
1,647,391
|
|
|
$
|
1,647,391
|
|
|
$
|
12,749,336
|
|
|
$
|
7,322,435
|
|
|
$
|
12,749,336
|
|
|
$
|
9,658,517
|
|
|
$
|
8,162,475
|
|
|
$
|
1,326,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents amounts Mr. Johnson would be entitled to receive
pursuant to his employment agreement. See “Narrative to
Summary Compensation Table and Grants of Plan-Based Awards
Table — Employment Agreements.”
|
|
|
|
(2)
|
|
Represents the amount Mr. Johnson would be entitled to
receive for the 2008 fiscal year pursuant to the
2008-2009
PEP and his employment agreement, which amount is also included
in the “Non-Equity Incentive Plan Compensation” column
of the Summary Compensation Table. See “Narrative to
Summary Compensation Table and Grants of Plan-Based Awards
Table —
2008-2009
PEP and — Employment Agreements.”
|
|
|
|
(3)
|
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Johnson’s unvested New Options and the fair value
price of our common stock on December 31, 2008 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($55.86 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2008 fiscal
year.
|
|
|
|
(4)
|
|
Reflects the actual lump sum value of the SERP based on the 2008
interest rate of 4.89%.
|
|
|
|
(5)
|
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Mr. Johnson would be
entitled. The value includes $209,470 from the HCA Retirement
Plan, $500,953 from the HCA 401(k) Plan (which represents the
value of the Company’s matching contributions), and
$472,090 from the HCA Restoration Plan.
|
|
|
|
(6)
|
|
Reflects the estimated lump sum present value of all future
payments which Mr. Johnson would be entitled to receive
under our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 65, and monthly benefits of $10,000 per month from our
Supplemental Insurance Program payable after the six-month
elimination period to age 65.
|
|
|
|
(7)
|
|
No post-retirement or post-termination life insurance or death
benefits are provided to Mr. Johnson.
Mr. Johnson’s payment upon death while actively
employed includes $790,000 of Company-paid life insurance.
|
91
Samuel N.
Hazen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
Early
|
|
Normal
|
|
Without
|
|
Termination
|
|
for Good
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
Retirement
|
|
Retirement
|
|
Cause
|
|
for Cause
|
|
Reason
|
|
Disability
|
|
Death
|
|
Control
|
|
|
|
Cash Severance(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
3,238,902
|
|
|
|
—
|
|
|
$
|
3,238,902
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
350,807
|
|
|
$
|
350,807
|
|
|
$
|
350,807
|
|
|
$
|
350,807
|
|
|
|
—
|
|
|
$
|
350,807
|
|
|
$
|
350,807
|
|
|
$
|
350,807
|
|
|
$
|
350,807
|
|
|
Unvested Stock Options(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
621,463
|
|
|
SERP(4)
|
|
$
|
5,166,117
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
5,166,117
|
|
|
$
|
5,166,117
|
|
|
$
|
5,166,117
|
|
|
$
|
5,166,117
|
|
|
$
|
5,102,711
|
|
|
|
—
|
|
|
Retirement Plans(5)
|
|
$
|
1,044,566
|
|
|
$
|
1,044,566
|
|
|
$
|
1,044,566
|
|
|
$
|
1,044,566
|
|
|
$
|
1,044,566
|
|
|
$
|
1,044,566
|
|
|
$
|
1,044,566
|
|
|
$
|
1,044,566
|
|
|
|
—
|
|
|
Health and Welfare Benefits
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability Income(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
2,227,535
|
|
|
|
—
|
|
|
|
—
|
|
|
Life Insurance Benefits(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
789,000
|
|
|
|
—
|
|
|
Accrued Vacation Pay
|
|
$
|
109,201
|
|
|
$
|
109,201
|
|
|
$
|
109,201
|
|
|
$
|
109,201
|
|
|
$
|
109,201
|
|
|
$
|
109,201
|
|
|
$
|
109,201
|
|
|
$
|
109,201
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,670,691
|
|
|
$
|
1,504,574
|
|
|
$
|
1,504,574
|
|
|
$
|
9,909,593
|
|
|
$
|
6,319,884
|
|
|
$
|
9,909,593
|
|
|
$
|
8,898,226
|
|
|
$
|
7,396,285
|
|
|
$
|
972,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents amounts Mr. Hazen would be entitled to receive
pursuant to his employment agreement. See “Narrative to
Summary Compensation Table and Grants of Plan-Based Awards
Table — Employment Agreements.”
|
|
|
|
(2)
|
|
Represents the amount Mr. Hazen would be entitled to
receive for the 2008 fiscal year pursuant to the
2008-2009
PEP and his employment agreement, which amount is also included
in the “Non-Equity Incentive Plan Compensation” column
of the Summary Compensation Table. See “Narrative to
Summary Compensation Table and Grants of Plan-Based Awards
Table —
2008-2009
PEP and — Employment Agreements.”
|
|
|
|
(3)
|
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Hazen’s unvested New Options and the fair value
price of our common stock on December 31, 2008 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($55.86 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2008 fiscal
year.
|
|
|
|
(4)
|
|
Reflects the actual lump sum value of the SERP based on the 2008
interest rate of 4.89%.
|
|
|
|
(5)
|
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Mr. Hazen would be
entitled. The value includes $230,172 from the HCA Retirement
Plan, $184,193 from the HCA 401(k) Plan (which represents the
value of the Company’s matching contributions), and
$630,201 from the HCA Restoration Plan.
|
|
|
|
(6)
|
|
Reflects the estimated lump sum present value of all future
payments which Mr. Hazen would be entitled to receive under
our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 65, and monthly benefits of $10,000 per month from our
Supplemental Insurance Program payable after the six-month
elimination period to age 65.
|
|
|
|
(7)
|
|
No post-retirement or post-termination life insurance or death
benefits are provided to Mr. Hazen. Mr. Hazen’s
payment upon death while actively employed with the Company
includes $789,000 of the Company-paid life insurance.
|
92
Beverly
B. Wallace
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
Early
|
|
Normal
|
|
Without
|
|
Termination
|
|
for Good
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
Retirement
|
|
Retirement
|
|
Cause
|
|
for Cause
|
|
Reason
|
|
Disability
|
|
Death
|
|
Control
|
|
|
|
Cash Severance(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
3,080,000
|
|
|
|
—
|
|
|
$
|
3,080,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
314,992
|
|
|
$
|
314,992
|
|
|
$
|
314,992
|
|
|
$
|
314,992
|
|
|
|
—
|
|
|
$
|
314,992
|
|
|
$
|
314,992
|
|
|
$
|
314,992
|
|
|
$
|
314,992
|
|
|
Unvested Stock Options(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
543,781
|
|
|
SERP(4)
|
|
$
|
7,579,094
|
|
|
$
|
7,579,094
|
|
|
|
—
|
|
|
$
|
7,579,094
|
|
|
$
|
7,579,094
|
|
|
$
|
7,579,094
|
|
|
$
|
7,579,094
|
|
|
$
|
6,890,049
|
|
|
|
—
|
|
|
Retirement Plans(5)
|
|
$
|
751,634
|
|
|
$
|
751,634
|
|
|
$
|
751,634
|
|
|
$
|
751,634
|
|
|
$
|
751,634
|
|
|
$
|
751,634
|
|
|
$
|
751,634
|
|
|
$
|
751,634
|
|
|
|
—
|
|
|
Health and Welfare Benefits
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability Income(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,378,922
|
|
|
|
—
|
|
|
|
—
|
|
|
Life Insurance Benefits(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
700,000
|
|
|
|
—
|
|
|
Accrued Vacation Pay
|
|
$
|
96,923
|
|
|
$
|
96,923
|
|
|
$
|
96,923
|
|
|
$
|
96,923
|
|
|
$
|
96,923
|
|
|
$
|
96,923
|
|
|
$
|
96,923
|
|
|
$
|
96,923
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,742,643
|
|
|
$
|
8,742,643
|
|
|
$
|
1,163,549
|
|
|
$
|
11,822,643
|
|
|
$
|
8,427,651
|
|
|
$
|
11,822,643
|
|
|
$
|
10,121,565
|
|
|
$
|
8,753,598
|
|
|
$
|
858,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents amounts Ms. Wallace would be entitled to receive
pursuant to her employment agreement. See “Narrative to
Summary Compensation Table and Grants of Plan-Based Awards
Table — Employment Agreements.”
|
|
|
|
(2)
|
|
Represents the amount Ms. Wallace would be entitled to
receive for the 2008 fiscal year pursuant to the
2008-2009
PEP and her employment agreement, which amount is also included
in the “Non-Equity Incentive Plan Compensation” column
of the Summary Compensation Table. See “Narrative to
Summary Compensation Table and Grants of Plan-Based Awards
Table —
2008-2009
PEP and — Employment Agreements.”
|
|
|
|
(3)
|
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Ms. Wallace’s unvested New Options and the fair value
price of our common stock on December 31, 2008 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($55.86 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2008 fiscal
year.
|
|
|
|
(4)
|
|
Reflects the actual lump sum value of the SERP based on the 2008
interest rate of 4.89%.
|
|
|
|
(5)
|
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Ms. Wallace would be
entitled. The value includes $212,350 from the HCA Retirement
Plan, $150,350 from the HCA 401(k) Plan (which represents the
value of the Company’s matching contributions), and
$388,934 from the HCA Restoration Plan.
|
|
|
|
(6)
|
|
Reflects the estimated lump sum present value of all future
payments which Ms. Wallace would be entitled to receive
under our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 65, and monthly benefits of $10,000 per month from our
Supplemental Insurance Program payable after the six-month
elimination period to age 65.
|
|
|
|
(7)
|
|
No post-retirement or post-termination life insurance or death
benefits are provided to Ms. Wallace.
Ms. Wallace’s payment upon death while actively
employed includes $700,000 of Company-paid life insurance.
|
Director
Compensation
During the year ended December 31, 2008, none of our
directors received compensation for their service as a member of
our Board. Our directors are reimbursed for any expenses
incurred in connection with their service.
Compensation
Committee Interlocks and Insider Participation
During 2008, the Compensation Committee of the Board of
Directors was composed of Michael W. Michelson, George A. Bitar,
John P. Connaughton and Thomas F. Frist, Jr., M.D.
Dr. Frist served as an executive officer and Chairman of
our Board of Directors from January 2001 to January 2002. From
July 1997 to January 2001, Dr. Frist served as our Chairman
and Chief Executive Officer. Dr. Frist served as Vice
Chairman of the Board of Directors from April 1995 to July 1997
and as Chairman from February 1994 to April 1995. He was
Chairman,
93
Chief Executive Officer and President of HCA-Hospital
Corporation of America from 1988 to February 1994.
Dr. Frist, who retired from our Board of Directors
effective January 1, 2009, is the father of Thomas F.
Frist, III and William R. Frist, who currently serve as
directors. (Thomas F. Frist, III has been a director since
November 2006, and William R. Frist has been a director since
January 2009.) None of the other members of the Compensation
Committee have at any time been an officer or employee of HCA or
any of its subsidiaries. Each member of the Compensation
Committee is also a manager of Hercules Holding, and the Amended
and Restated Limited Liability Company Agreement of Hercules
Holding requires that the members of Hercules Holding take all
necessary action to ensure that the persons who serves as
managers of Hercules Holding also serve on our Board of
Directors. Messrs. Michelson, Bitar and Connaughton are
affiliated with KKR, MLGPE (an affiliate of Bank of America
Corporation), and Bain, respectively, each of which is a party
to the sponsor management agreement with us. Dr. Frist and
certain other members of the Frist family, are also party to the
sponsor management agreement with us. The Amended and Restated
Limited Liability Company Agreement of Hercules Holding, the
sponsor management agreement and certain transactions with
affiliates of MLGPE and KKR are described in greater detail in
Item 13, “Certain Relationships and Related
Transactions.”
|
|
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The following table sets forth information regarding the
beneficial ownership of our common stock as of February 25,
2009 for:
|
|
|
|
|
|
•
|
each person who is known by us to own beneficially more than 5%
of the outstanding shares of our common stock;
|
|
|
|
|
•
|
each of our directors;
|
|
|
|
|
•
|
each of our executive officers named in the Summary Compensation
Table; and
|
|
|
|
|
•
|
all of our directors and executive officers as a group.
|
94
The percentages of shares outstanding provided in the tables are
based on 94,371,407 shares of our common stock, par value
$0.01 per share, outstanding as of February 25, 2009.
Beneficial ownership is determined in accordance with the rules
of the SEC and generally includes voting or investment power
with respect to securities. Shares issuable upon the exercise of
options that are exercisable within 60 days of
February 25, 2009 are considered outstanding for the
purpose of calculating the percentage of outstanding shares of
our common stock held by the individual, but not for the purpose
of calculating the percentage of outstanding shares held by any
other individual. The address of each of our directors and
executive officers listed below is
c/o HCA
Inc., One Park Plaza, Nashville, Tennessee 37203.
|
|
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner
|
|
Number of Shares
|
|
Percent
|
|
|
|
Hercules Holding II, LLC
|
|
|
91,845,692
|
(1)
|
|
|
97.3
|
%
|
|
Christopher J. Birosak
|
|
|
|
(1)
|
|
|
—
|
|
|
George A. Bitar
|
|
|
|
(1)
|
|
|
—
|
|
|
Jack O. Bovender, Jr.
|
|
|
588,836
|
(2)
|
|
|
|
*
|
|
Richard M. Bracken
|
|
|
327,516
|
(3)
|
|
|
|
*
|
|
John P. Connaughton
|
|
|
|
(1)
|
|
|
—
|
|
|
Kenneth W. Freeman
|
|
|
|
(1)
|
|
|
—
|
|
|
Thomas F. Frist III
|
|
|
|
(1)
|
|
|
—
|
|
|
William R. Frist
|
|
|
|
(1)
|
|
|
—
|
|
|
Christopher R. Gordon
|
|
|
|
(1)
|
|
|
—
|
|
|
Samuel N. Hazen
|
|
|
165,593
|
(4)
|
|
|
|
*
|
|
R. Milton Johnson
|
|
|
179,062
|
(5)
|
|
|
|
*
|
|
Michael W. Michelson
|
|
|
|
(1)
|
|
|
—
|
|
|
James C. Momtazee
|
|
|
|
(1)
|
|
|
—
|
|
|
Stephen G. Pagliuca
|
|
|
|
(1)
|
|
|
—
|
|
|
Nathan C. Thorne
|
|
|
|
(1)
|
|
|
—
|
|
|
Beverly B. Wallace
|
|
|
88,778
|
(6)
|
|
|
|
*
|
|
All directors and executive officers as a group (29 persons)
|
|
|
2,257,973
|
(7)
|
|
|
2.4
|
%
|
|
|
|
|
|
*
|
|
Less than one percent.
|
|
|
|
(1)
|
|
Hercules Holding holds 91,845,692 shares, or 97.3%, of our
outstanding common stock. Hercules Holding is held by a private
investor group, including affiliates of Bain Capital Partners
(“Bain”), Kohlberg Kravis Roberts & Co. L.P.
(“KKR”) and Merrill Lynch Global Private Equity
(“MLGPE,” previously the private equity arm of Merrill
Lynch & Co., Inc. which is a wholly-owned subsidiary of
Bank of America Corporation), and affiliates of HCA founder
Dr. Thomas F. Frist, Jr., including Mr. Thomas F.
Frist III and Mr. William R. Frist, who serve as
directors. Messrs. Connaughton, Gordon and Pagliuca are
affiliated with Bain, whose affiliated funds may be deemed to
have indirect beneficial ownership of 23,373,333 shares, or
24.8%, of our outstanding common stock through their interests
in Hercules Holding. Messrs. Freeman, Michelson and
Momtazee are affiliated with KKR, which indirectly holds
23,373,332 shares, or 24.8%, of our outstanding common
stock through the interests of certain of its affiliated funds
in Hercules Holding. Messrs. Birosak, Bitar and Thorne are
affiliated with Bank of America Corporation, which indirectly
holds 23,373,333 shares, or 24.8%, of our outstanding
common stock through the interests of certain of its affiliated
funds in Hercules Holding and 980,393, or 1.0%, of our
outstanding common stock through Banc of America Securities LLC.
Thomas F. Frist, III and William R. Frist may each be
deemed to indirectly beneficially hold 17,804,125 shares,
or 18.9%, of our outstanding common stock through their
interests in Hercules Holding. Each of such persons, other than
Hercules Holdings disclaims membership in any such group and
disclaims beneficial ownership of these securities, except to
the extent of its pecuniary interest therein. The principal
office addresses of Hercules Holding are
c/o Bain
Capital Partners, LLC, 111 Huntington Avenue, Boston, MA 02199,
c/o Kohlberg
Kravis Roberts & Co. L.P., 2800 Sand Hill Road,
Suite 200, Menlo Park, CA 94025,
c/o Merrill
Lynch Global Private
|
95
|
|
|
|
|
|
|
Equity, Four World Financial Center, Floor 23, New York, NY
10080 and
c/o Dr. Thomas
F. Frist, Jr., 3100 West End Ave., Suite 500,
Nashville, TN 37203.
|
|
|
|
(2)
|
|
Includes 467,054 shares issuable upon exercise of options.
|
|
|
|
(3)
|
|
Includes 246,033 shares issuable upon exercise of options.
|
|
|
|
(4)
|
|
Includes 131,621 shares issuable upon exercise of options.
|
|
|
|
(5)
|
|
Includes 136,289 shares issuable upon exercise of options.
|
|
|
|
(6)
|
|
Includes 86,378 shares issuable upon exercise of options.
|
|
|
|
(7)
|
|
Includes 1,708,580 shares issuable upon exercise of options.
|
This table provides certain information as of December 31,
2008 with respect to our equity compensation plans (shares in
thousands):
EQUITY
COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
Number of securities
|
|
|
Weighted-average
|
|
|
Number of securities remaining
|
|
|
|
|
to be issued
|
|
|
exercise price of
|
|
|
available for future issuance
|
|
|
|
|
upon exercise of
|
|
|
outstanding
|
|
|
under equity compensation
|
|
|
|
|
outstanding options,
|
|
|
options,
|
|
|
plans (excluding securities
|
|
|
|
|
warrants and rights
|
|
|
warrants and rights
|
|
|
reflected in column(a) )
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
10,636,700
|
|
|
$
|
45.02
|
|
|
|
1,788,300
|
|
|
Equity compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,636,700
|
|
|
$
|
45.02
|
|
|
|
1,788,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
For additional information concerning our equity compensation
plans, see the discussion in Note 3 — Share-Based
Compensation in the notes to the consolidated financial
statements.
|
|
|
|
|
Item 13.
|
Certain
Relationships and Related Transactions
|
In accordance with its charter, our Audit and Compliance
Committee reviews and approves all material related party
transactions. Prior to its approval of any material related
party transaction, the Audit and Compliance Committee will
discuss the proposed transaction with management and our
independent auditor. In addition, our Code of Conduct requires
that all of our employees, including our executive officers,
remain free of conflicts of interest in the performance of their
responsibilities to the Company. An executive officer who wishes
to enter into a transaction in which their interests might
conflict with ours must first receive the approval of the Audit
and Compliance Committee. The Amended and Restated Limited
Liability Company Agreement of Hercules Holding II, LLC
generally requires that an Investor must obtain the prior
written consent of each other Investor before it or any of its
affiliates (including our directors) enter into any transaction
with us.
Stockholder
Agreements
On January 30, 2007, our Board of Directors awarded to
members of management and certain key employees New Options to
purchase shares of our common stock (New Options together with
the Rollover Options, “Options”) pursuant to the 2006
Plan. Our Compensation Committee approved additional option
awards periodically throughout the years ended December 31,
2008 and 2007 to members of management and certain key employees
in cases of promotions, significant contributions to the Company
and new hires. In connection with their option awards, the
participants under the 2006 Plan were required to enter into a
Management Stockholder’s Agreement, a Sale Participation
Agreement, and an Option Agreement with respect to the New
Options. Below are brief summaries of the principal terms of the
Management Stockholder’s Agreement and the Sale
Participation Agreement each of which are qualified in their
entirety by reference to the agreements themselves, forms of
which were filed as Exhibits 10.12 and 10.13, respectively,
to our annual report on
Form 10-K
for the fiscal year ended December 31, 2006. The terms of
the Option Agreement with respect to New Options and the 2006
Plan are
96
described in more detail in Item 11, “Executive
Compensation — Compensation Discussion and
Analysis — Long Term Equity Incentive Awards.”
Management Stockholder’s Agreement.
The
Management Stockholder’s Agreement imposes significant
restrictions on transfers of shares of our common stock.
Generally, shares will be nontransferable by any means at any
time prior to the earlier of a “Change in Control” (as
defined in the Management Stockholder’s Agreement) or the
fifth anniversary of the closing date of the Merger, except
(i) sales pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the
“Securities Act”) filed by the Company in accordance
with the Management Stockholder’s Agreement, (ii) a
sale pursuant to the Sale Participation Agreement (described
below), (iii) a sale to certain “Permitted
Transferees” (as defined in the Management
Stockholder’s Agreement), or (iv) as otherwise
permitted by our Board of Directors or pursuant to a waiver of
the restrictions on transfers given by unanimous agreement of
the Sponsors. On and after such fifth anniversary through the
earlier of a Change in Control or the eighth anniversary of the
closing date of the Merger, a management stockholder will be
able to transfer shares of our common stock, but only to the
extent that, on a cumulative basis, the management stockholders
in the aggregate do not transfer a greater percentage of their
equity than the percentage of equity sold or otherwise disposed
of by the Sponsors.
In the event that a management stockholder wishes to sell their
stock at any time following the fifth anniversary of the closing
date of the Merger but prior to an initial public offering of
our common stock, the Management Stockholder’s Agreement
provides the Company with a right of first offer on those shares
upon the same terms and conditions pursuant to which the
management stockholder would sell them to a third party. In the
event that a registration statement is filed with respect to our
common stock in the future, the Management Stockholder’s
Agreement prohibits management stockholders from selling shares
not included in the registration statement from the time of
receipt of notice until 180 days (in the case of an initial
public offering) or 90 days (in the case of any other
public offering) of the date of the registration statement. The
Management Stockholder’s Agreement also provides for the
management stockholder’s ability to cause us to repurchase
their outstanding stock and options in the event of the
management stockholder’s death or disability, and for our
ability to cause the management stockholder to sell their stock
or options back to the Company upon certain termination events.
The Management Stockholder’s Agreement provides that, in
the event we propose to sell shares to the Sponsors, certain
members of senior management, including the executive officers
(the “Senior Management Stockholders”) have a
preemptive right to purchase shares in the offering. The maximum
shares a Senior Management Stockholder may purchase is a
proportionate number of the shares offered to the percentage of
shares owned by the Senior Management Stockholder prior to the
offering. Additionally, following the initial public offering of
our common stock, the Senior Management Stockholders will have
limited “piggyback” registration rights with respect
to their shares of common stock. The maximum number of shares of
Common Stock which a Senior Management Stockholder may register
is generally proportionate with the percentage of common stock
being sold by the Sponsors (relative to their holdings thereof).
Sale Participation Agreement.
The Sale
Participation Agreement grants the Senior Management
Stockholders the right to participate in any private direct or
indirect sale of shares of common stock by the Sponsors (such
right being referred to herein as the “Tag-Along
Right”), and requires all management stockholders to
participate in any such private sale if so elected by the
Sponsors in the event that the Sponsors are proposing to sell at
least 50% of the outstanding common stock held by the Sponsors,
whether directly or through their interests in Hercules Holding
(such right being referred to herein as the “Drag-Along
Right”). The number of shares of common stock which would
be required to be sold by a management stockholder pursuant to
the exercise of the Drag-Along Right will be the sum of the
number of shares of common stock then owned by the management
stockholder and his affiliates plus all shares of common stock
the management stockholder is entitled to acquire under any
unexercised Options (to the extent such Options are exercisable
or would become exercisable as a result of the consummation of
the proposed sale), multiplied by a fraction (x) the
numerator of which shall be the aggregate number of shares of
common stock proposed to be transferred by the Sponsors in the
proposed sale and (y) the denominator of which shall be the
total number of shares of common stock owned by the sponsors
entitled to participate in the proposed sale. Management
stockholders will bear their pro rata share of any fees,
commissions, adjustments to purchase price, expenses or
indemnities in connection with any sale under the Sale
Participation Agreement.
97
Amended
and Restated Limited Liability Company Agreement of Hercules
Holding II, LLC
The Investors and certain other investment funds who agreed to
co-invest with them through a vehicle jointly controlled by the
Investors to provide equity financing for the Recapitalization
entered into a limited liability company operating agreement in
respect of Hercules Holding (the “LLC Agreement”). The
LLC Agreement contains agreements among the parties with respect
to the election of our directors, restrictions on the issuance
or transfer of interests in us, including a right of first
offer, tag-along rights and drag-along rights, and other
corporate governance provisions (including the right to approve
various corporate actions).
Pursuant to the LLC Agreement, Hercules Holding and its members
are required to take necessary action to ensure that each
manager on the board of Hercules Holding also serves on our
Board of Directors. Each of the Sponsors has the right to
appoint three managers to Hercules Holding’s board, the
Frist family has the right to appoint two managers to the board,
and the remaining two managers on the board are to come from our
management team (currently Messrs. Bovender and Bracken).
The rights of the Sponsors and the Frist family to designate
managers are subject to their ownership percentages in Hercules
Holding remaining above a specified percentage of the
outstanding ownership interests in Hercules Holding.
The LLC Agreement also requires that, in addition to a majority
of the total number of managers being present to constitute a
quorum for the transaction of business at any board or committee
meeting, at least one manager designated by each of the
Investors must be present, unless waived by that Investor. The
LLC Agreement further provides that, for so long as at least two
Sponsors are entitled to designate managers to Hercules
Holding’s board, at least one manager from each of two
Sponsors must consent to any board or committee action in order
for it to be valid. The LLC Agreement requires that our
organizational and governing documents contain provisions
similar to those described in this paragraph.
Registration
Rights Agreement
Hercules Holding and the Investors entered into a registration
rights agreement with us upon completion of the
Recapitalization. Pursuant to this agreement, the Investors can
cause us to register shares of our common stock held by Hercules
Holding under the Securities Act and, if requested, to maintain
a shelf registration statement effective with respect to such
shares. The Investors are also entitled to participate on a pro
rata basis in any registration of our common stock under the
Securities Act that we may undertake.
Sponsor
Management Agreement
In connection with the Merger, we entered into a management
agreement with affiliates of each of the Sponsors and certain
members of the Frist family, including Thomas F.
Frist, Jr., M.D., Thomas F. Frist, III and
William R. Frist, pursuant to which such entities or their
affiliates will provide management services to us. Pursuant to
the agreement, in 2008, we paid management fees of
$15 million and reimbursed out-of-pocket expenses incurred
in connection with the provision of services pursuant to the
agreement. The agreement provides that the aggregate annual
management fee, initially set at $15 million, increases
annually beginning in 2008 at a rate equal to the percentage
increase of Adjusted EBITDA (as defined in the Management
Agreement) in the applicable year compared to the preceding
year. The agreement also provides that we will pay a 1% fee in
connection with certain subsequent financing, acquisition,
disposition and change of control transactions, as well as a
termination fee based on the net present value of future payment
obligations under the management agreement, in the event of an
initial public offering or under certain other circumstances. No
fees were paid under either of these provisions in 2008. The
agreement includes customary exculpation and indemnification
provisions in favor of the Sponsors and their affiliates and the
Frists.
Other
Relationships
In 2008, we paid approximately $25.5 million to HCP, Inc.
(NYSE: HCP), representing the aggregate annual lease payments
for certain medical office buildings leased by the Company.
Charles A. Elcan was an executive officer of HCP, Inc. until
April 30, 2008 and is the
son-in-law
of Dr. Thomas F. Frist, Jr. (who was a member of our
Board of Directors in 2008) and
brother-in-law
of Thomas F. Frist, III, and William R. Frist, who are
members of our Board of Directors.
98
Christopher S. George serves as the chief executive officer of
an HCA-affiliated hospital, and in 2008, Mr. George earned
total compensation in respect of base salary and bonus of
approximately $440,000 for his services. Mr. George also
received certain other benefits, including awards of equity,
customary to similar positions within the Company.
Mr. George’s father, V. Carl George, is an executive
officer of HCA.
Dustin A. Greene serves as the chief operating officer of an
HCA-affiliated hospital, and in 2008, Mr. Greene earned
total compensation in respect of base salary and bonus of
approximately $143,000 for his services. Mr. Greene also
received certain other benefits, including awards of equity,
customary to similar positions within the Company.
Mr. Greene’s
father-in-law,
W. Paul Rutledge, is an executive officer of HCA.
Bank of America, N.A. (“Bank of America”) acts as
administrative agent and is a lender under each of our senior
secured cash flow credit facility and our asset-based revolving
credit facility. Affiliates of Bank of America indirectly own
approximately 25.8% of the shares of our company. We have
engaged Banc of America Securities LLC, an affiliate of Bank of
America, as arranger and documentation agent in connection with
certain amendments to our senior secured cash flow credit
facility and our senior secured asset-based revolving credit
facility. Under that engagement, upon such amendments becoming
effective, we paid Banc of America Securities LLC aggregate fees
of $6 million relating to the amendments to our senior
secured credit facilities.
In addition, Banc of America Securities LLC acted as joint
book-running manager and a representative of the initial
purchasers of the
9
7
/
8
% Senior
Secured Notes due 2017 (the “2009 Second Lien Notes”)
that we issued on February 19, 2009. The proceeds of the
issuance of the notes were used to repay indebtedness under the
senior secured credit facilities, and Bank of America received
its pro rata portion of such repayment. In addition, Banc of
America Securities LLC received placement fees of $1,401,034 in
connection with the issuance of the 2009 Second Lien Notes.
KKR Capital Markets LLC, one of the other initial purchasers of
the 2009 Second Lien Notes, is an affiliate of KKR, whose
affiliates own approximately 24.8% of the shares of our company,
and received placement fees of $191,050 in connection with the
issuance of the 2009 Second Lien Notes.
Director
Independence
Our Board of Directors is composed of Jack O.
Bovender, Jr., Chairman, Christopher J. Birosak, George A.
Bitar, Richard M. Bracken, John P. Connaughton, Kenneth W.
Freeman, William R. Frist, Thomas F. Frist III, Christopher R.
Gordon, Michael W. Michelson, James C. Momtazee, Stephen G.
Pagliuca, and Nathan C. Thorne. Our Board of Directors currently
has four standing committees: the Audit and Compliance
Committee, the Compensation Committee, the Executive Committee
and the Patient Safety and Quality of Care Committee. Each of
the Investors has the right to have at least one director serve
on all standing committees.
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Patient
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Safety and
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Audit and
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Quality of
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Name of Director
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Compliance
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Compensation
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Executive
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Care
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Christopher J. Birosak
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X
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George A. Bitar
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X
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Jack O. Bovender, Jr.*
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Chair
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Richard M. Bracken*
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John P. Connaughton
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Chair
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Kenneth W. Freeman
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X
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Thomas F. Frist III
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X
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X
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William R. Frist
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X
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Christopher R. Gordon
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X
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Michael W. Michelson
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X
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X
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James C. Momtazee
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Chair
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Stephen G. Pagliuca
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X
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X
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Nathan C. Thorne
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X
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Chair
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*
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Indicates management director.
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99
Though not formally considered by our Board because our common
stock is not currently listed or traded on any national
securities exchange, based upon the listing standards of the
NYSE, the national securities exchange upon which our common
stock was traded prior to the Merger, we do not believe that any
of our directors would be considered “independent”
because of their relationships with certain affiliates of the
funds and other entities which hold significant interests in
Hercules Holding, which, as of December 31, 2008, owned
97.3% of our outstanding common stock, and other relationships
with us. See Item 13, “Certain Relationships and
Related Transactions.” Accordingly, we do not believe that
any of Messrs. Birosak, Frist, Gordon or Momtazee, the
members of our Audit and Compliance committee, would meet the
independence requirements or
Rule 10A-1
of the Exchange Act or the NYSE’s audit committee
independence requirements, or that Messrs. Bitar,
Connaughton or Michelson, the members of our Compensation
Committee, would meet the NYSE’s independence requirements.
We do not have a nominating/corporate governance committee, or a
committee that serves a similar purpose.
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Item 14.
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Principal
Accountant Fees and Services
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The Audit and Compliance Committee has appointed
Ernst & Young LLP as our independent registered public
accounting firm. The independent registered public accounting
firm will audit our consolidated financial statements for 2009
and the effectiveness of our internal controls over financial
reporting as of December 31, 2009.
Audit Fees.
The aggregate audit fees billed by
Ernst & Young LLP for professional services rendered
for the audit of our annual consolidated financial statements,
for the reviews of the condensed consolidated financial
statements included in our quarterly reports on
Form 10-Q,
for the audit of the effectiveness of the Company’s
internal control over financial reporting, under the
Sarbanes-Oxley Act of 2002, and services that are normally
provided by the independent registered public accounting firm in
connection with statutory and regulatory filings totaled
$8.5 million for 2008 and $8.9 million for 2007.
Audit-Related Fees.
The aggregate fees billed
by Ernst & Young LLP for assurance and related
services not described above under “Audit Fees” were
$1.4 million for 2008 and $1.3 million for 2007.
Audit-related services principally include audits of certain of
our subsidiaries and benefit plans.
Tax Fees.
The aggregate fees billed by
Ernst & Young LLP for professional services rendered
for tax compliance, tax advice and tax planning were
$1.9 million for 2008 and $2.2 million for 2007.
All Other Fees.
The aggregate fees billed by
Ernst & Young LLP for products or services other than
those described above were $92,000 for 2008 and $749,000 for
2007.
The Board of Directors has adopted an Audit and Compliance
Committee Charter which, among other things, requires the Audit
and Compliance Committee to preapprove all audit and permitted
nonaudit services (including the fees and terms thereof) to be
performed for us by our independent registered public accounting
firm, subject to the ability to delegate authority to a
subcommittee for certain preapprovals.
All services performed for us by Ernst & Young LLP in
2008 were preapproved by the Audit and Compliance Committee. The
Audit and Compliance Committee concluded that the provision of
audit-related services, tax services and other services by
Ernst & Young LLP was compatible with the maintenance
of the firm’s independence in the conduct of its auditing
functions.
100
PART IV
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Item 15.
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Exhibits
and Financial Statement Schedules
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(a)
Documents filed as part of the report:
1.
Financial Statements.
The accompanying Index to
Consolidated Financial Statements on
page F-1
of this annual report on
Form 10-K
is provided in response to this item.
2.
List of Financial Statement Schedules.
All
schedules are omitted because the required information is either
not present, not present in material amounts or presented within
the consolidated financial statements.
3.
List of Exhibits
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2
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.1
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—
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Agreement and Plan of Merger, dated July 24, 2006, by and
among HCA Inc., Hercules Holding II, LLC and Hercules
Acquisition Corporation (filed as Exhibit 2.1 to the
Company’s Current Report on
Form 8-K
filed July 25, 2006, and incorporated herein by reference).
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3
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.1
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—
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Amended and Restated Certificate of Incorporation of the Company
(filed as Exhibit 3.1 to the Company’s Annual Report
on
Form 10-K
for the fiscal year ended December 31, 2007, and
incorporated herein by reference).
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3
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.2
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—
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Amended and Restated Bylaws of the Company (filed as
Exhibit 3.2 to the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, and
incorporated herein by reference).
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4
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.1
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—
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Specimen Certificate for shares of Common Stock, par value $0.01
per share, of the Company (filed as Exhibit 3 to the
Company’s
Form 8-A/A,
Amendment No. 2, dated March 11, 2004, and
incorporated herein by reference).
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4
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.2
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—
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Indenture, dated November 17, 2006, among HCA Inc., the
guarantors party thereto and The Bank of New York, as trustee
(filed as Exhibit 4.1 to the Company’s Current Report
on
Form 8-K
filed November 24, 2006, and incorporated herein by
reference).
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4
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.3
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—
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Security Agreement, dated as of November 17, 2006, among
HCA Inc., the subsidiary grantors party thereto and The Bank of
New York, as collateral agent (filed as Exhibit 4.2 to the
Company’s Current Report on
Form 8-K
filed November 24, 2006, and incorporated herein by
reference).
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4
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.4
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—
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Pledge Agreement, dated as of November 17, 2006, among HCA
Inc., the subsidiary pledgors party thereto and The Bank of New
York, as collateral agent (filed as Exhibit 4.3 to the
Company’s Current Report of
Form 8-K
filed November 24, 2006, and incorporated herein by
reference).
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4
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.5(a)
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—
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Form of
9
1
/
8
% Senior
Secured Notes due 2014 (included in Exhibit 4.2).
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4
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.5(b)
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—
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Form of
9
1
/
4
% Senior
Secured Notes due 2016 (included in Exhibit 4.2).
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4
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.5(c)
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—
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Form of
9
5
/
8
%/10
3
/
8
% Senior
Secured Toggle Notes due 1016 (included in Exhibit 4.2).
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4
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.6
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—
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Indenture, dated February 19, 2009, among HCA Inc, the
guarantors party thereto, The Bank of New York Mellon, as
collateral agent and The Bank of New York Mellon
Trust Company, N.A., as trustee. (filed as Exhibit 4.1
to the Company’s Current Report on
Form 8-K
filed February 25, 2009, and incorporated herein by
reference).
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4
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.7
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—
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Form of
9
7
/
8
% Senior
Secured Notes due 2017 (included in Exhibit 4.6).
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4
|
.8(a)
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—
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$13,550,000,000 — €1,000,000,000 Credit
Agreement, dated as of November 17, 2006, among HCA Inc.,
HCA UK Capital Limited, the lending institutions from time to
time parties thereto, Banc of America Securities LLC,
J.P. Morgan Securities Inc., Citigroup Global Markets Inc.
and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as joint lead arrangers and joint bookrunners,
Bank of America, N.A., as administrative agent, JPMorgan Chase
Bank, N.A. and Citicorp North America, Inc., as
co-syndication
agents and Merrill Lynch Capital Corporation, as documentation
agent (filed as Exhibit 4.8 to the Company’s Current
Report on
Form 8-K
filed November 24, 2006, and incorporated herein by
reference).
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101
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4
|
.8(b)
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—
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Amendment No. 1 to the Credit Agreement, dated as of
February 16, 2007, among HCA Inc., HCA UK Capital Limited,
the lending institutions from time to time parties thereto, Bank
of America, N.A., as administrative agent, JPMorgan Chase Bank,
N.A., and Citicorp North America, Inc., as Co-Syndication
Agents, Banc of America Securities, LLC, J.P. Morgan
Securities Inc., Citigroup Global Markets Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as joint
lead arrangers and bookrunners, Deutsche Bank Securities and
Wachovia Capital Markets LLC, as joint bookrunners and Merrill
Lynch Capital Corporation, as documentation agent (filed as
Exhibit 4.7(b) to the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).
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4
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.8(c)
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—
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Amendment No. 2 to the Credit Agreement, dated as of
March 2, 2009, among HCA Inc., HCA UK Capital Limited, the
lending institutions from time to time parties thereto, Bank of
America, N.A., as administrative agent, JPMorgan Chase Bank,
N.A., and Citicorp North America, Inc., as Co-Syndication
Agents, Banc of America Securities, LLC, J.P. Morgan
Securities Inc., Citigroup Global Markets Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as joint
lead arrangers and bookrunners, Deutsche Bank Securities and
Wachovia Capital Markets LLC, as joint bookrunners and Merrill
Lynch Capital Corporation, as documentation agent.
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4
|
.9
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|
—
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U.S. Guarantee, dated November 17, 2006, among HCA Inc.,
the subsidiary guarantors party thereto and Bank of America,
N.A., as administrative agent (filed as Exhibit 4.9 to the
Company’s Current Report on
Form 8-K
filed November 24, 2006, and incorporated herein by
reference).
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4
|
.10
|
|
—
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Amended and Restated Security Agreement, dated as of
March 2, 2009, among the Company, the Subsidiary Grantors
named therein and Bank of America, N.A., as collateral agent.
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4
|
.11
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—
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Amended and Restated Pledge Agreement, dated as of March 2,
2009, among the Company, the Subsidiary Pledgors named therein
and Bank of America, N.A., as Collateral Agent.
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4
|
.12(a)
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|
—
|
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$2,000,000,000 Amended and Restated Credit Agreement, dated as
of June 20, 2007, among HCA Inc., the subsidiary borrowers
parties thereto, the lending institutions from time to time
parties thereto, Banc of America Securities LLC,
J.P. Morgan Securities Inc., Citigroup Global Markets Inc.
and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as joint lead arrangers and joint bookrunners,
Bank of America, N.A., as administrative agent, JPMorgan Chase
Bank, N.A. and Citicorp North America, Inc., as co-syndication
agents, and Merrill Lynch Capital Corporation, as documentation
agent (filed as Exhibit 4.1 to the Company’s Current
Report on
Form 8-K
filed June 26, 2007, and incorporated herein by reference).
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4
|
.12(b)
|
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—
|
|
Amendment No. 1 to the $2,000,000,000 Amended and Restated
Credit Agreement, dated as of March 2, 2009, among HCA
Inc., the subsidiary borrowers parties thereto, the lending
institutions from time to time parties thereto, Banc of America
Securities LLC, J.P. Morgan Securities Inc., Citigroup
Global Markets Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, as joint lead arrangers
and joint bookrunners, Bank of America, N.A., as administrative
agent, JPMorgan Chase Bank, N.A. and Citicorp North America,
Inc., as co-syndication agents, and Merrill Lynch Capital
Corporation, as documentation agent.
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4
|
.13
|
|
—
|
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Security Agreement, dated as of November 17, 2006, among
HCA Inc., the subsidiary borrowers party thereto and Bank of
America, N.A., as collateral agent (filed as Exhibit 4.13
to the Company’s Current Report on
Form 8-K
filed November 24, 2006, and incorporated herein by
reference).
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4
|
.14(a)
|
|
—
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General Intercreditor Agreement, dated as of November 17,
2006, between Bank of America, N.A., as First Lien Collateral
Agent, and The Bank of New York, as Junior Lien Collateral Agent
(filed as Exhibit 4.13(a) to the Company’s
Registration Statement on
Form S-4
(File
No. 333-145054),
and incorporated herein by reference).
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4
|
.14(b)
|
|
—
|
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Receivables Intercreditor Agreement, dated as of
November 17, 2006, among Bank of America, N.A., as ABL
Collateral Agent, Bank of America, N.A., as CF Collateral Agent
and The Bank of New York, as Bonds Collateral Agent (filed as
Exhibit 4.13(b) to the Company’s Registration
Statement on
Form S-4
(File
No. 333-145054),
and incorporated herein by reference).
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4
|
.15
|
|
—
|
|
Registration Rights Agreement, dated as of November 17,
2006, among HCA Inc., Hercules Holding II, LLC and certain other
parties thereto (filed as Exhibit 4.4 to the Company’s
Current Report on
Form 8-K
filed November 24, 2006, and incorporated herein by
reference).
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102
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4
|
.16
|
|
—
|
|
Registration Rights Agreement, dated as of March 16, 1989,
by and among HCA-Hospital Corporation of America and the persons
listed on the signature pages thereto (filed as Exhibit(g)(24)
to Amendment No. 3 to the
Schedule 13E-3
filed by HCA-Hospital Corporation of America, Hospital
Corporation of America and The HCA Profit Sharing Plan on
March 22, 1989, and incorporated herein by reference).
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4
|
.17
|
|
—
|
|
Assignment and Assumption Agreement, dated as of
February 10, 1994, between HCA-Hospital Corporation of
America and the Company relating to the Registration Rights
Agreement, as amended (filed as Exhibit 4.7 to the
Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 1993, and
incorporated herein by reference).
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4
|
.18(a)
|
|
—
|
|
Indenture, dated as of December 16, 1993 between the
Company and The First National Bank of Chicago, as Trustee
(filed as Exhibit 4.11 to the Company’s Annual Report
on
Form 10-K
for the fiscal year ended December 31, 1993, and
incorporated herein by reference).
|
|
|
4
|
.18(b)
|
|
—
|
|
First Supplemental Indenture, dated as of May 25, 2000
between the Company and Bank One Trust Company, N.A., as
Trustee (filed as Exhibit 4.4 to the Company’s
Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2000, and incorporated
herein by reference).
|
|
|
4
|
.18(c)
|
|
—
|
|
Second Supplemental Indenture, dated as of July 1, 2001
between the Company and Bank One Trust Company, N.A., as
Trustee (filed as Exhibit 4.1 to the Company’s
Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2001, and incorporated
herein by reference).
|
|
|
4
|
.18(d)
|
|
—
|
|
Third Supplemental Indenture, dated as of December 5, 2001
between the Company and The Bank of New York, as Trustee (filed
as Exhibit 4.5(d) to the Company’s Annual Report of
Form 10-K
for the fiscal year ended December 31, 2001, and
incorporated herein by reference).
|
|
|
4
|
.18(e)
|
|
—
|
|
Fourth Supplemental Indenture, dated as of November 14,
2006, between the Company and The Bank of New York, as Trustee
(filed as Exhibit 4.1 to the Company’s Current Report
on
Form 8-K
filed November 16, 2006, and incorporated herein by
reference).
|
|
|
4
|
.19
|
|
—
|
|
Form of 7.5% Debentures due 2023 (filed as Exhibit 4.2
to the Company’s Current Report on
Form 8-K
dated December 15, 1993, and incorporated herein by
reference).
|
|
|
4
|
.20
|
|
—
|
|
Form of 8.36% Debenture due 2024 (filed as Exhibit 4.1
to the Company’s Current Report on
Form 8-K
dated April 20, 1994, and incorporated herein by reference).
|
|
|
4
|
.21
|
|
—
|
|
Form of Fixed Rate Global Medium Term Note (filed as
Exhibit 4.1 to the Company’s Current Report on
Form 8-K
dated July 11, 1994, and incorporated herein by reference).
|
|
|
4
|
.22
|
|
—
|
|
Form of Floating Rate Global Medium Term Note (filed as
Exhibit 4.2 to the Company’s Current Report on
Form 8-K
dated July 11, 1994, and incorporated herein by reference).
|
|
|
4
|
.23
|
|
—
|
|
Form of 7.69% Note due 2025 (filed as Exhibit 4.10 to
the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004, and
incorporated herein by reference).
|
|
|
4
|
.24
|
|
—
|
|
Form of 7.19% Debenture due 2015 (filed as Exhibit 4.1
to the Company’s Current Report on
Form 8-K
dated November 20, 1995, and incorporated herein by
reference).
|
|
|
4
|
.25
|
|
—
|
|
Form of 7.50% Debenture due 2095 (filed as Exhibit 4.2
to the Company’s Current Report on
Form 8-K
dated November 20, 1995, and incorporated herein by
reference).
|
|
|
4
|
.26
|
|
—
|
|
Form of 7.05% Debenture due 2027 (filed as Exhibit 4.1
to the Company’s Current Report on
Form 8-K
dated December 5, 1995, and incorporated herein by
reference).
|
|
|
4
|
.27
|
|
—
|
|
Form of Fixed Rate Global Medium Term Note (filed as
Exhibit 4.1 to the Company’s Current Report on
Form 8-K
dated July 2, 1996, and incorporated herein by reference).
|
|
|
4
|
.28(a)
|
|
—
|
|
8.750% Note in the principal amount of $400,000,000 due
2010 (filed as Exhibit 4.1 to the Company’s Current
Report on
Form 8-K
dated August 23, 2000, and incorporated herein by
reference).
|
|
|
4
|
.28(b)
|
|
—
|
|
8.750% Note in the principal amount of $350,000,000 due
2010 (filed as Exhibit 4.2 to the Company’s Current
Report on
Form 8-K
dated August 23, 2000, and incorporated herein by
reference).
|
|
|
4
|
.29
|
|
—
|
|
8.75% Note due 2010 in the principal amount of
£150,000,000 (filed as Exhibit 4.1 to the
Company’s Current Report on
Form 8-K
dated October 25, 2000, and incorporated herein by
reference).
|
|
|
4
|
.30(a)
|
|
—
|
|
7
7
/
8
% Note
in the principal amount of $100,000,000 due 2011 (filed as
Exhibit 4.1 to the Company’s Current Report on
Form 8-K
dated January 23, 2001, and incorporated herein by
reference).
|
|
|
4
|
.30(b)
|
|
—
|
|
7
7
/
8
% Note
in the principal amount of $400,000,000 due 2011 (filed as
Exhibit 4.2 to the Company’s Current Report on
Form 8-K
dated January 23, 2001, and incorporated herein by
reference).
|
103
|
|
|
|
|
|
|
|
|
|
4
|
.31(a)
|
|
—
|
|
6.95% Note due 2012 in the principal amount of
$400,000,000. (filed as Exhibit 4.5 to the Company’s
Current Report on
Form 8-K
dated April 23, 2002, and incorporated herein by reference).
|
|
|
4
|
.31(b)
|
|
—
|
|
6.95% Note due 2012 in the principal amount of
$100,000,000. (filed as Exhibit 4.6 to the Company’s
Current Report on
Form 8-K
dated April 23, 2002, and incorporated herein by reference).
|
|
|
4
|
.32(a)
|
|
—
|
|
6.30% Note due 2012 in the principal amount of
$400,000,000. (filed as Exhibit 4.1 to the Company’s
Current Report on
Form 8-K
dated September 18, 2002, and incorporated herein by
reference).
|
|
|
4
|
.32(b)
|
|
—
|
|
6.30% Note due 2012 in the principal amount of
$100,000,000. (filed as Exhibit 4.2 to the Company’s
Current Report on
Form 8-K
dated September 18, 2002, and incorporated herein by
reference).
|
|
|
4
|
.33(a)
|
|
—
|
|
6.25% Note due 2013 in the principal amount of $400,000,000
(filed as Exhibit 4.1 to the Company’s Current Report
on
Form 8-K
dated February 5, 2003, and incorporated herein by
reference).
|
|
|
4
|
.33(b)
|
|
—
|
|
6.25% Note due 2013 in the principal amount of $100,000,000
(filed as Exhibit 4.2 to the Company’s Current Report
on
Form 8-K
dated February 5, 2003, and incorporated herein by
reference).
|
|
|
4
|
.34(a)
|
|
—
|
|
6
3
/
4
% Note
due 2013 in the principal amount of $400,000,000 (filed as
Exhibit 4.1 to the Company’s Current Report on
Form 8-K
dated July 23, 2003, and incorporated herein by reference).
|
|
|
4
|
.34(b)
|
|
—
|
|
6
3
/
4
% Note
due 2013 in the principal amount of $100,000,000 (filed as
Exhibit 4.2 to the Company’s Current Report on
Form 8-K
dated July 23, 2003, and incorporated herein by reference).
|
|
|
4
|
.35
|
|
—
|
|
7.50% Note due 2033 in the principal amount of $250,000,000
(filed as Exhibit 4.2 to the Company’s Current Report
on
Form 8-K
dated November 6, 2003, and incorporated herein by
reference).
|
|
|
4
|
.36
|
|
—
|
|
5.75% Note due 2014 in the principal amount of $500,000,000
(filed as Exhibit 4.1 to the Company’s Current Report
on
Form 8-K
dated March 8, 2004, and incorporated herein by reference).
|
|
|
4
|
.37
|
|
—
|
|
5.500% Note due 2009 in the principal amount of
$500,000,000 (filed as Exhibit 4.1 to the Company’s
Current Report on
Form 8-K
dated November 16, 2004, and incorporated herein by
reference).
|
|
|
4
|
.38(a)
|
|
—
|
|
6.375% Note due 2015 in the principal amount of
$500,000,000 (filed as Exhibit 4.2 to the Company’s
Current Report on
Form 8-K
dated November 16, 2004, and incorporated herein by
reference).
|
|
|
4
|
.38(b)
|
|
—
|
|
6.375% Note due 2015 in the principal amount of
$250,000,000 (filed as Exhibit 4.3 to the Company’s
Current Report on
Form 8-K
dated November 16, 2004, and incorporated herein by
reference).
|
|
|
4
|
.39(a)
|
|
—
|
|
6.500% Note due 2016 in the principal amount of
$500,000,000 (filed as Exhibit 4.1 to the Company’s
Current Report on
Form 8-K
filed on February 8, 2006, and incorporated herein by
reference).
|
|
|
4
|
.39(b)
|
|
—
|
|
6.500% Note due 2016 in the principal amount of
$500,000,000 (filed as Exhibit 4.2 to the Company’s
Current Report on
Form 8-K
filed on February 8, 2006, and incorporated herein by
reference).
|
|
|
10
|
.1(a)
|
|
—
|
|
Amended and Restated Columbia/HCA Healthcare Corporation 1992
Stock and Incentive Plan (filed as Exhibit 10.7(b) to the
Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 1998, and
incorporated herein by reference).*
|
|
|
10
|
.1(b)
|
|
—
|
|
First Amendment to Amended and Restated Columbia/HCA Healthcare
Corporation 1992 Stock and Incentive Plan (filed as
Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q
for the quarter ended September 30, 1999, and incorporated
herein by reference).*
|
|
|
10
|
.2
|
|
—
|
|
HCA-Hospital Corporation of America Nonqualified Initial Option
Plan (filed as Exhibit 4.6 to the Company’s
Registration Statement on
Form S-3
(File
No. 33-52379),
and incorporated herein by reference).*
|
|
|
10
|
.3
|
|
—
|
|
Form of Indemnity Agreement with certain officers and directors
(filed as Exhibit 10(kk) to Galen Health Care, Inc.’s
Registration Statement on Form 10, as amended, and
incorporated herein by reference).
|
|
|
10
|
.4
|
|
—
|
|
Form of Galen Health Care, Inc. 1993 Adjustment Plan (filed as
Exhibit 4.15 to the Company’s Registration Statement
on
Form S-8
(File
No. 33-50147),
and incorporated herein by reference).*
|
|
|
10
|
.5
|
|
—
|
|
HCA-Hospital
Corporation of America 1992 Stock Compensation Plan (filed as
Exhibit 10(t) to
HCA-Hospital
Corporation of America’s Registration Statement on
Form S-1
(File
No. 33-44906),
and incorporated herein by reference).*
|
|
|
10
|
.6
|
|
—
|
|
Columbia/HCA Healthcare Corporation 2000 Equity Incentive Plan
(filed as Exhibit A to the Company’s Proxy Statement
for the Annual Meeting of Stockholders on May 25, 2000, and
incorporated herein by reference).*
|
104
|
|
|
|
|
|
|
|
|
|
10
|
.7
|
|
—
|
|
Form of Non-Qualified Stock Option Award Agreement (Officers)
(filed as Exhibit 99.2 to the Company’s Current Report
on
Form 8-K
dated February 2, 2005, and incorporated herein by
reference).*
|
|
|
10
|
.8
|
|
—
|
|
HCA 2005 Equity Incentive Plan (filed as Exhibit B to the
Company’s Proxy Statement for the Annual Meeting of
Shareholders on May 26, 2005, and incorporated herein by
reference);.*
|
|
|
10
|
.9
|
|
—
|
|
Form of 2005 Non-Qualified Stock Option Agreement (Officers)
(filed as Exhibit 99.2 to the Company’s Current Report
on
Form 8-K
dated October 6, 2005, and incorporated herein by
reference).*
|
|
|
10
|
.10
|
|
—
|
|
Form of 2006 Non-Qualified Stock Option Award Agreement
(Officers) (filed as Exhibit 10.2 to the Company’s
Current Report on
Form 8-K
dated February 1, 2006, and incorporated herein by
reference).*
|
|
|
10
|
.11
|
|
—
|
|
2006 Stock Incentive Plan for Key Employees of HCA Inc. and its
Affiliates (filed as Exhibit 10.11 to the Company’s
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).*
|
|
|
10
|
.12
|
|
—
|
|
Management Stockholder’s Agreement dated November 17,
2006 (filed as Exhibit 10.12 to the Company’s Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).
|
|
|
10
|
.13
|
|
—
|
|
Sale Participation Agreement dated November 17, 2006 (filed
as Exhibit 10.13 to the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).
|
|
|
10
|
.14
|
|
—
|
|
Form of Option Rollover Agreement (filed as Exhibit 10.14
to the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).*
|
|
|
10
|
.15
|
|
—
|
|
Form of Option Agreement (2007) (filed as Exhibit 10.15 to
the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).*
|
|
|
10
|
.16
|
|
—
|
|
Form of Option Agreement (2008) (filed as Exhibit 10.16 to
the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, and
incorporated herein by reference).*
|
|
|
10
|
.17
|
|
—
|
|
Form of Option Agreement (2009).*
|
|
|
10
|
.18
|
|
—
|
|
Exchange and Purchase Agreement (filed as Exhibit 10.16 to
the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).
|
|
|
10
|
.19
|
|
—
|
|
Civil and Administrative Settlement Agreement, dated
December 14, 2000 between the Company, the United States
Department of Justice and others (filed as Exhibit 99.2 to
the Company’s Current Report on
Form 8-K
dated December 20, 2000, and incorporated herein by
reference).
|
|
|
10
|
.20
|
|
—
|
|
Plea Agreement, dated December 14, 2000 between the
Company, Columbia Homecare Group, Inc., Columbia Management
Companies, Inc. and the United States Department of Justice
(filed as Exhibit 99.3 to the Company’s Current Report
on
Form 8-K
dated December 20, 2000, and incorporated herein by
reference).
|
|
|
10
|
.21
|
|
—
|
|
Corporate Integrity Agreement, dated December 14, 2000
between the Company and the Office of Inspector General of the
United States Department of Health and Human Services (filed as
Exhibit 99.4 to the Company’s Current Report on
Form 8-K
dated December 20, 2000, and incorporated herein by
reference).
|
|
|
10
|
.22
|
|
—
|
|
Management Agreement, dated November 17, 2006, among HCA
Inc., Bain Capital Partners, LLC, Kohlberg Kravis
Roberts & Co. L.P., Dr. Thomas F. Frist Jr.,
Patricia F. Elcan, William R. Frist and Thomas F.
Frist, III, and Merrill Lynch Global Partners, Inc. (filed
as Exhibit 10.20 to the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).
|
|
|
10
|
.23
|
|
—
|
|
Retirement Agreement between the Company and Thomas F. Frist,
Jr., M.D. dated as of January 1, 2002 (filed as
Exhibit 10.30 to the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2001, and
incorporated herein by reference).*
|
|
|
10
|
.24
|
|
—
|
|
Amended and Restated HCA Supplemental Executive Retirement Plan,
effective January 1, 2007, except as provided therein.*
|
|
|
10
|
.25
|
|
—
|
|
Amended and Restated HCA Restoration Plan, effective
January 1, 2008.*
|
105
|
|
|
|
|
|
|
|
|
|
10
|
.26
|
|
—
|
|
HCA Inc. 2006 Senior Officer Performance Excellence Program
(filed as Exhibit 10.3 to the Company’s Current Report
on
8-K
filed
February 1, 2006, and incorporated herein by reference).*
|
|
|
10
|
.27
|
|
—
|
|
HCA Inc. 2007 Senior Officer Performance Excellence Program
(filed as Exhibit 10.26 to the Company’s Annual Report
on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).*
|
|
|
10
|
.28(a)
|
|
—
|
|
HCA Inc.
2008-2009
Senior Officer Performance Excellence Program (filed as
Exhibit 10.27 to the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, and
incorporated herein by reference).*
|
|
|
10
|
.28(b)
|
|
—
|
|
HCA Inc. Amendment No. 1 to the
2008-2009
Senior Officer Performance Excellence Program.*
|
|
|
10
|
.29(a)
|
|
—
|
|
Employment Agreement dated November 16, 2006 (Jack O.
Bovender Jr.) (filed as Exhibit 10.27(a) to the
Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).*
|
|
|
10
|
.29(b)
|
|
—
|
|
Employment Agreement dated November 16, 2006 (Richard M.
Bracken) (filed as Exhibit 10.27(b) to the Company’s
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).*
|
|
|
10
|
.29(c)
|
|
—
|
|
Employment Agreement dated November 16, 2006 (R. Milton
Johnson) (filed as Exhibit 10.27(c) to the Company’s
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).*
|
|
|
10
|
.29(d)
|
|
—
|
|
Employment Agreement dated November 16, 2006 (Samuel N.
Hazen) (filed as Exhibit 10.27(d) to the Company’s
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
incorporated herein by reference).*
|
|
|
10
|
.29(e)
|
|
—
|
|
Employment Agreement dated November 16, 2006 (Beverly B.
Wallace) (filed as Exhibit 10.28(e) to the Company’s
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, and
incorporated herein by reference).*
|
|
|
10
|
.29(f)
|
|
|
|
Amended and Restated Employment Agreement dated October 27,
2008 (Jack O. Bovender, Jr.).*
|
|
|
10
|
.29(g)
|
|
|
|
Amendment to Employment Agreement effective January 1, 2009
(Richard M. Bracken).*
|
|
|
10
|
.30
|
|
—
|
|
Administrative Settlement Agreement dated June 25, 2003 by
and between the United States Department of Health and Human
Services, acting through the Centers for Medicare and Medicaid
Services, and the Company (filed as Exhibit 10.1 to the
Company’s Quarterly Report of
Form 10-Q
for the quarter ended June 30, 2003, and incorporated
herein by reference).
|
|
|
10
|
.31
|
|
—
|
|
Civil Settlement Agreement by and among the United States of
America, acting through the United States Department of Justice
and on behalf of the Office of Inspector General of the
Department of Health and Human Services, the TRICARE Management
Activity (filed as Exhibit 10.2 to the Company’s
Quarterly Report of
Form 10-Q
for the quarter ended June 30, 2003, and incorporated
herein by reference).
|
|
|
10
|
.32
|
|
—
|
|
Form of Amended and Restated Limited Liability Company Agreement
of Hercules Holding II, LLC dated as of November 17, 2006,
among Hercules Holding II, LLC and certain other parties thereto
(filed as Exhibit 10.3 to the Company’s Registration
Statement on Form 8-A (File No. 000-18406) and
incorporated herein by reference).
|
|
|
21
|
|
|
—
|
|
List of Subsidiaries.
|
|
|
23
|
|
|
—
|
|
Consent of Ernst & Young LLP.
|
|
|
31
|
.1
|
|
—
|
|
Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31
|
.2
|
|
—
|
|
Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32
|
|
|
—
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
|
|
|
|
*
|
|
Management compensatory plan or arrangement.
|
106
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HCA INC.
|
|
|
|
|
|
By:
|
/s/
Richard
M. Bracken
|
Richard M. Bracken
President and Chief
Executive Officer
Dated: March 4, 2009
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
/s/
Jack
O. Bovender, Jr.
Jack
O. Bovender, Jr.
|
|
Chairman of the Board
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
Richard
M. Bracken
Richard
M. Bracken
|
|
President, Chief Executive Officer and Director (Principal
Executive Officer)
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
R.
Milton Johnson
R.
Milton Johnson
|
|
Executive Vice President and Chief Financial Officer (Principal
Financial Officer and Principal Accounting Officer)
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
Christopher
J. Birosak
Christopher
J. Birosak
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
George
A. Bitar
George
A. Bitar
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
John
P. Connaughton
John
P. Connaughton
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
Kenneth
W. Freeman
Kenneth
W. Freeman
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
Thomas
F. Frist, III
Thomas
F. Frist, III
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
William
R. Frist
William
R. Frist
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
Christopher
R. Gordon
Christopher
R. Gordon
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
Michael
W. Michelson
Michael
W. Michelson
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
James
C. Momtazee
James
C. Momtazee
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
Stephen
G. Pagliuca
Stephen
G. Pagliuca
|
|
Director
|
|
March 3, 2009
|
|
|
|
|
|
|
|
/s/
Nathan
C. Thorne
Nathan
C. Thorne
|
|
Director
|
|
March 3, 2009
|
107
HCA
INC.
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
F-2
|
|
|
Consolidated Financial Statements:
|
|
|
|
|
|
|
|
|
F-3
|
|
|
|
|
|
F-4
|
|
|
|
|
|
F-5
|
|
|
|
|
|
F-6
|
|
|
|
|
|
F-7
|
|
|
|
|
|
F-42
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
HCA Inc.
We have audited the accompanying consolidated balance sheets of
HCA Inc. as of December 31, 2008 and 2007, and the related
consolidated statements of income, stockholders’ (deficit)
equity, and cash flows for each of the three years in the period
ended December 31, 2008. These financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of HCA Inc. at December 31, 2008 and
2007, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2008, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), HCA
Inc.’s internal control over financial reporting as of
December 31, 2008, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated March 3, 2009 expressed an
unqualified opinion thereon.
/s/ Ernst & Young LLP
Nashville, Tennessee
March 3, 2009
F-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Revenues
|
|
$
|
28,374
|
|
|
$
|
26,858
|
|
|
$
|
25,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
11,440
|
|
|
|
10,714
|
|
|
|
10,409
|
|
|
Supplies
|
|
|
4,620
|
|
|
|
4,395
|
|
|
|
4,322
|
|
|
Other operating expenses
|
|
|
4,554
|
|
|
|
4,241
|
|
|
|
4,056
|
|
|
Provision for doubtful accounts
|
|
|
3,409
|
|
|
|
3,130
|
|
|
|
2,660
|
|
|
Equity in earnings of affiliates
|
|
|
(223
|
)
|
|
|
(206
|
)
|
|
|
(197
|
)
|
|
Gains on investments
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(243
|
)
|
|
Depreciation and amortization
|
|
|
1,416
|
|
|
|
1,426
|
|
|
|
1,391
|
|
|
Interest expense
|
|
|
2,021
|
|
|
|
2,215
|
|
|
|
955
|
|
|
Gains on sales of facilities
|
|
|
(97
|
)
|
|
|
(471
|
)
|
|
|
(205
|
)
|
|
Impairment of long-lived assets
|
|
|
64
|
|
|
|
24
|
|
|
|
24
|
|
|
Transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,204
|
|
|
|
25,460
|
|
|
|
23,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests and income taxes
|
|
|
1,170
|
|
|
|
1,398
|
|
|
|
1,863
|
|
|
Minority interests in earnings of consolidated entities
|
|
|
229
|
|
|
|
208
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
941
|
|
|
|
1,190
|
|
|
|
1,662
|
|
|
Provision for income taxes
|
|
|
268
|
|
|
|
316
|
|
|
|
626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
673
|
|
|
$
|
874
|
|
|
$
|
1,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
ASSETS
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
465
|
|
|
$
|
393
|
|
|
Accounts receivable, less allowance for doubtful accounts of
$5,435 and $4,289
|
|
|
3,780
|
|
|
|
3,895
|
|
|
Inventories
|
|
|
737
|
|
|
|
710
|
|
|
Deferred income taxes
|
|
|
914
|
|
|
|
592
|
|
|
Other
|
|
|
405
|
|
|
|
615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,301
|
|
|
|
6,205
|
|
|
Property and equipment, at cost:
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
1,189
|
|
|
|
1,240
|
|
|
Buildings
|
|
|
8,670
|
|
|
|
8,518
|
|
|
Equipment
|
|
|
12,833
|
|
|
|
12,088
|
|
|
Construction in progress
|
|
|
1,022
|
|
|
|
733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,714
|
|
|
|
22,579
|
|
|
Accumulated depreciation
|
|
|
(12,185
|
)
|
|
|
(11,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,529
|
|
|
|
11,442
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary
|
|
|
1,422
|
|
|
|
1,669
|
|
|
Investments in and advances to affiliates
|
|
|
842
|
|
|
|
688
|
|
|
Goodwill
|
|
|
2,580
|
|
|
|
2,629
|
|
|
Deferred loan costs
|
|
|
458
|
|
|
|
539
|
|
|
Other
|
|
|
1,148
|
|
|
|
853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,280
|
|
|
$
|
24,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,370
|
|
|
$
|
1,370
|
|
|
Accrued salaries
|
|
|
854
|
|
|
|
780
|
|
|
Other accrued expenses
|
|
|
1,282
|
|
|
|
1,391
|
|
|
Long-term debt due within one year
|
|
|
404
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,910
|
|
|
|
3,849
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
26,585
|
|
|
|
27,000
|
|
|
Professional liability risks
|
|
|
1,108
|
|
|
|
1,233
|
|
|
Income taxes and other liabilities
|
|
|
1,782
|
|
|
|
1,379
|
|
|
Minority interests in equity of consolidated entities
|
|
|
995
|
|
|
|
938
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities with contingent redemption rights
|
|
|
155
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
Common stock $0.01 par; authorized
125,000,000 shares — 2008 and 2007; outstanding
94,367,500 shares — 2008 and
94,182,400 shares — 2007
|
|
|
1
|
|
|
|
1
|
|
|
Capital in excess of par value
|
|
|
165
|
|
|
|
112
|
|
|
Accumulated other comprehensive loss
|
|
|
(604
|
)
|
|
|
(172
|
)
|
|
Retained deficit
|
|
|
(9,817
|
)
|
|
|
(10,479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,255
|
)
|
|
|
(10,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,280
|
|
|
$
|
24,025
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
Other
|
|
|
Retained
|
|
|
|
|
|
|
|
Shares
|
|
|
Par
|
|
|
Par
|
|
|
Comprehensive
|
|
|
Earnings
|
|
|
|
|
|
|
|
(000)
|
|
|
Value
|
|
|
Value
|
|
|
Income (Loss)
|
|
|
(Deficit)
|
|
|
Total
|
|
|
|
|
Balances, December 31, 2005
|
|
|
417,513
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
130
|
|
|
$
|
4,729
|
|
|
$
|
4,863
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,036
|
|
|
|
1,036
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net unrealized gains on investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
|
|
|
|
|
|
(102
|
)
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
19
|
|
|
Defined benefit plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
|
Change in fair value of derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56
|
)
|
|
|
1,036
|
|
|
|
980
|
|
|
Recapitalization — repurchase of common stock
|
|
|
(411,957
|
)
|
|
|
(4
|
)
|
|
|
(5,005
|
)
|
|
|
|
|
|
|
(16,364
|
)
|
|
|
(21,373
|
)
|
|
Recapitalization — equity contributions
|
|
|
92,218
|
|
|
|
1
|
|
|
|
4,476
|
|
|
|
|
|
|
|
|
|
|
|
4,477
|
|
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(139
|
)
|
|
|
(139
|
)
|
|
Stock repurchases
|
|
|
(13,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(653
|
)
|
|
|
(653
|
)
|
|
Stock options exercised
|
|
|
3,970
|
|
|
|
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
163
|
|
|
Employee benefit plan issuances
|
|
|
3,531
|
|
|
|
|
|
|
|
366
|
|
|
|
|
|
|
|
|
|
|
|
366
|
|
|
Adjustment to initially apply FAS 158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2006
|
|
|
92,218
|
|
|
|
1
|
|
|
|
—
|
|
|
|
16
|
|
|
|
(11,391
|
)
|
|
|
(11,374
|
)
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
874
|
|
|
|
874
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net unrealized gains on investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
Defined benefit plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
|
Change in fair value of derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(194
|
)
|
|
|
|
|
|
|
(194
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(188
|
)
|
|
|
874
|
|
|
|
686
|
|
|
Equity contributions
|
|
|
1,961
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
Share-based benefit plans
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
Adjustment to initially apply FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
38
|
|
|
Other
|
|
|
3
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2007
|
|
|
94,182
|
|
|
|
1
|
|
|
|
112
|
|
|
|
(172
|
)
|
|
|
(10,479
|
)
|
|
|
(10,538
|
)
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
673
|
|
|
|
673
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net unrealized gains and losses on investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
(44
|
)
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
(62
|
)
|
|
Defined benefit plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
(62
|
)
|
|
Change in fair value of derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(264
|
)
|
|
|
|
|
|
|
(264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(432
|
)
|
|
|
673
|
|
|
|
241
|
|
|
Share-based benefit plans
|
|
|
185
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2008
|
|
|
94,367
|
|
|
$
|
1
|
|
|
$
|
165
|
|
|
$
|
(604
|
)
|
|
$
|
(9,817
|
)
|
|
$
|
(10,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
673
|
|
|
$
|
874
|
|
|
$
|
1,036
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
3,409
|
|
|
|
3,130
|
|
|
|
2,660
|
|
|
Depreciation and amortization
|
|
|
1,416
|
|
|
|
1,426
|
|
|
|
1,391
|
|
|
Income taxes
|
|
|
(448
|
)
|
|
|
(105
|
)
|
|
|
(552
|
)
|
|
Gains on sales of facilities
|
|
|
(97
|
)
|
|
|
(471
|
)
|
|
|
(205
|
)
|
|
Impairment of long-lived assets
|
|
|
64
|
|
|
|
24
|
|
|
|
24
|
|
|
Amortization of deferred loan costs
|
|
|
79
|
|
|
|
78
|
|
|
|
18
|
|
|
Change in minority interests
|
|
|
36
|
|
|
|
40
|
|
|
|
58
|
|
|
Share-based compensation
|
|
|
32
|
|
|
|
24
|
|
|
|
324
|
|
|
Increase (decrease) in cash from operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(3,328
|
)
|
|
|
(3,345
|
)
|
|
|
(3,043
|
)
|
|
Inventories and other assets
|
|
|
159
|
|
|
|
(241
|
)
|
|
|
(12
|
)
|
|
Accounts payable and accrued expenses
|
|
|
(198
|
)
|
|
|
(29
|
)
|
|
|
115
|
|
|
Other
|
|
|
—
|
|
|
|
(9
|
)
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,797
|
|
|
|
1,396
|
|
|
|
1,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(1,600
|
)
|
|
|
(1,444
|
)
|
|
|
(1,865
|
)
|
|
Acquisition of hospitals and health care entities
|
|
|
(85
|
)
|
|
|
(32
|
)
|
|
|
(112
|
)
|
|
Disposal of hospitals and health care entities
|
|
|
193
|
|
|
|
767
|
|
|
|
651
|
|
|
Change in investments
|
|
|
21
|
|
|
|
207
|
|
|
|
26
|
|
|
Other
|
|
|
4
|
|
|
|
23
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,467
|
)
|
|
|
(479
|
)
|
|
|
(1,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of long-term debt
|
|
|
—
|
|
|
|
—
|
|
|
|
21,758
|
|
|
Net change in revolving bank credit facility
|
|
|
700
|
|
|
|
(520
|
)
|
|
|
(435
|
)
|
|
Repayment of long-term debt
|
|
|
(960
|
)
|
|
|
(750
|
)
|
|
|
(3,728
|
)
|
|
Issuances of common stock
|
|
|
—
|
|
|
|
100
|
|
|
|
108
|
|
|
Repurchases of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(653
|
)
|
|
Recapitalization-repurchase of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,364
|
)
|
|
Recapitalization-equity contributions
|
|
|
—
|
|
|
|
—
|
|
|
|
3,782
|
|
|
Payment of debt issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
(586
|
)
|
|
Payment of cash dividends
|
|
|
—
|
|
|
|
—
|
|
|
|
(201
|
)
|
|
Other
|
|
|
2
|
|
|
|
12
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(258
|
)
|
|
|
(1,158
|
)
|
|
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
72
|
|
|
|
(241
|
)
|
|
|
298
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
393
|
|
|
|
634
|
|
|
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
465
|
|
|
$
|
393
|
|
|
$
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments
|
|
$
|
1,979
|
|
|
$
|
2,163
|
|
|
$
|
893
|
|
|
Income tax payments, net of refunds
|
|
$
|
716
|
|
|
$
|
421
|
|
|
$
|
1,087
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
NOTE 1 —
|
ACCOUNTING
POLICIES
|
Merger,
Recapitalization and Reporting Entity
On November 17, 2006 HCA Inc. (the “Company”)
completed its merger (the “Merger”) with Hercules
Acquisition Corporation, pursuant to which the Company was
acquired by Hercules Holding II, LLC, a Delaware limited
liability company owned by a private investor group including
affiliates of Bain Capital Partners, Kohlberg Kravis
Roberts & Co., Merrill Lynch Global Private Equity
(each a “Sponsor”) and affiliates of HCA founder,
Dr. Thomas F. Frist Jr., (the “Frist Entities,”
and together with the Sponsors, the “Investors”), and
by members of management and certain other investors. The
Merger, the financing transactions related to the Merger and
other related transactions are collectively referred to in this
annual report as the “Recapitalization.” The Merger
was accounted for as a recapitalization in our financial
statements, with no adjustments to the historical basis of our
assets and liabilities. As a result of the Recapitalization, our
outstanding capital stock is owned by the Investors, certain
members of management and key employees and certain other
investors. On April 29, 2008, we registered our common
stock pursuant to Section 12(g) of the Securities Exchange
Act of 1934, thus subjecting us to the reporting requirements of
Section 13(a) of the Securities Exchange Act of 1934. Our
common stock is not traded on a national securities exchange.
HCA Inc. is a holding company whose affiliates own and operate
hospitals and related health care entities. The term
“affiliates” includes direct and indirect subsidiaries
of HCA Inc. and partnerships and joint ventures in which such
subsidiaries are partners. At December 31, 2008, these
affiliates owned and operated 158 hospitals, 97 freestanding
surgery centers and provided extensive outpatient and ancillary
services. Affiliates of HCA are also partners in joint ventures
that own and operate eight hospitals and eight freestanding
surgery centers, which are accounted for using the equity
method. The Company’s facilities are located in
20 states and England. The terms “HCA,”
“Company,” “we,” “our” or
“us,” as used in this annual report on
Form 10-K,
refer to HCA Inc. and its affiliates unless otherwise stated or
indicated by context.
Basis of
Presentation
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
The consolidated financial statements include all subsidiaries
and entities controlled by HCA. We generally define
“control” as ownership of a majority of the voting
interest of an entity. The consolidated financial statements
include entities in which we absorb a majority of the
entity’s expected losses, receive a majority of the
entity’s expected residual returns, or both, as a result of
ownership, contractual or other financial interests in the
entity. Significant intercompany transactions have been
eliminated. Investments in entities that we do not control, but
in which we have a substantial ownership interest and can
exercise significant influence, are accounted for using the
equity method.
We have completed various acquisitions and joint venture
transactions. The accounts of these entities have been included
in our consolidated financial statements for periods subsequent
to our acquisition of controlling interests. The majority of our
expenses are “cost of revenue” items. Costs that could
be classified as general and administrative include our
corporate office costs, which were $174 million,
$169 million and $187 million for the years ended
December 31, 2008, 2007 and 2006, respectively.
Revenues
Revenues consist primarily of net patient service revenues that
are recorded based upon established billing rates less
allowances for contractual adjustments. Revenues are recorded
during the period the health care services are provided, based
upon the estimated amounts due from the patients and third-party
payers. Third-party payers include federal and state agencies
(under the Medicare and Medicaid programs), managed care health
plans,
F-7
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 1 —
|
ACCOUNTING
POLICIES (Continued)
|
Revenues
(Continued)
commercial insurance companies and employers. Estimates of
contractual allowances under managed care health plans are based
upon the payment terms specified in the related contractual
agreements. Contractual payment terms in managed care agreements
are generally based upon predetermined rates per diagnosis, per
diem rates or discounted fee-for-service rates.
Laws and regulations governing the Medicare and Medicaid
programs are complex and subject to interpretation. As a result,
there is at least a reasonable possibility that recorded
estimates will change by a material amount. The estimated
reimbursement amounts are adjusted in subsequent periods as cost
reports are prepared and filed and as final settlements are
determined (in relation to certain government programs,
primarily Medicare, this is generally referred to as the
“cost report” filing and settlement process). The
adjustments to estimated reimbursement amounts, which resulted
in net increases to revenues, related primarily to cost reports
filed during the respective year were $32 million,
$47 million and $55 million in 2008, 2007 and 2006,
respectively. The adjustments to estimated reimbursement
amounts, which resulted in net increases to revenues, related
primarily to cost reports filed during previous years were
$35 million, $83 million and $62 million in 2008,
2007 and 2006, respectively.
The Emergency Medical Treatment and Active Labor Act
(“EMTALA”) requires any hospital participating in the
Medicare program to conduct an appropriate medical screening
examination of every person who presents to the hospital’s
emergency room for treatment and, if the individual is suffering
from an emergency medical condition, to either stabilize the
condition or make an appropriate transfer of the individual to a
facility able to handle the condition. The obligation to screen
and stabilize emergency medical conditions exists regardless of
an individual’s ability to pay for treatment. Federal and
state laws and regulations, including but not limited to EMTALA,
require, and our commitment to providing quality patient care
encourages, us to provide services to patients who are
financially unable to pay for the health care services they
receive. Because we do not pursue collection of amounts
determined to qualify as charity care, they are not reported in
revenues. Patients treated at hospitals for nonelective care,
who have income at or below 200% of the federal poverty level,
are eligible for charity care. The federal poverty level is
established by the federal government and is based on income and
family size. We provide discounts to uninsured patients who do
not qualify for Medicaid or charity care. These discounts are
similar to those provided to many local managed care plans. In
implementing the discount policy, we first attempt to qualify
uninsured patients for Medicaid, other federal or state
assistance or charity care. If an uninsured patient does not
qualify for these programs, the uninsured discount is applied.
Cash and
Cash Equivalents
Cash and cash equivalents include highly liquid investments with
a maturity of three months or less when purchased. Our insurance
subsidiary’s cash equivalent investments in excess of the
amounts required to pay estimated professional liability claims
during the next twelve months are not included in cash and cash
equivalents as these funds are not available for general
corporate purposes. Carrying values of cash and cash equivalents
approximate fair value due to the short-term nature of these
instruments.
Our cash management system provides for daily investment of
available balances and the funding of outstanding checks when
presented for payment. Outstanding, but unpresented, checks
totaling $382 million and $370 million at
December 31, 2008 and 2007, respectively, have been
included in “accounts payable” in the consolidated
balance sheets. Upon presentation for payment, these checks are
funded through available cash balances or our credit facility.
F-8
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 1 —
|
ACCOUNTING
POLICIES (Continued)
|
Accounts
Receivable
We receive payments for services rendered from federal and state
agencies (under the Medicare and Medicaid programs), managed
care health plans, commercial insurance companies, employers and
patients. During the years ended December 31, 2008, 2007
and 2006, 23%, 24% and 25%, respectively, of our revenues
related to patients participating in the fee-for-service
Medicare program and 6%, 5% and 5%, respectively, of our
revenues related to patients participating in managed Medicare
programs. We recognize that revenues and receivables from
government agencies are significant to our operations, but do
not believe there are significant credit risks associated with
these government agencies. We do not believe there are any other
significant concentrations of revenues from any particular payer
that would subject us to any significant credit risks in the
collection of our accounts receivable.
Additions to the allowance for doubtful accounts are made by
means of the provision for doubtful accounts. Accounts written
off as uncollectible are deducted from the allowance for
doubtful accounts and subsequent recoveries are added. The
amount of the provision for doubtful accounts is based upon
management’s assessment of historical and expected net
collections, business and economic conditions, trends in
federal, state and private employer health care coverage and
other collection indicators. The provision for doubtful accounts
and the allowance for doubtful accounts relate primarily to
“uninsured” amounts (including copayment and
deductible amounts from patients who have health care coverage)
due directly from patients. Accounts are written off when all
reasonable internal and external collection efforts have been
performed. We consider the return of an account from the
secondary external collection agency to be the culmination of
our reasonable collection efforts and the timing basis for
writing off the account balance (prior to 2007, we wrote
accounts off upon their return from the primary external
agency). Writeoffs are based upon specific identification and
the writeoff process requires a writeoff adjustment entry to the
patient accounting system. Management relies on the results of
detailed reviews of historical writeoffs and recoveries at
facilities that represent a majority of our revenues and
accounts receivable (the “hindsight analysis”) as a
primary source of information to utilize in estimating the
collectibility of our accounts receivable. We perform the
hindsight analysis quarterly, utilizing rolling twelve-months
accounts receivable collection and writeoff data. At
December 31, 2008 and 2007, our allowance for doubtful
accounts represented approximately 93% and 89%, respectively, of
the $5.838 billion and $4.825 billion, respectively,
patient due accounts receivable balance, including accounts, net
of estimated contractual discounts, related to patients for
which eligibility for Medicaid coverage was being evaluated
(“pending Medicaid accounts”). Revenue days in
accounts receivable were 49 days, 53 days and
53 days at December 31, 2008, 2007 and 2006,
respectively. Adverse changes in general economic conditions,
patient accounting service center operations, payer mix or
trends in federal or state governmental health care coverage
could affect our collection of accounts receivable, cash flows
and results of operations.
Inventories
Inventories are stated at the lower of cost
(first-in,
first-out) or market.
Property
and Equipment and Amortizable Intangibles
Depreciation expense, computed using the straight-line method,
was $1.412 billion in 2008, $1.421 billion in 2007,
and $1.384 billion in 2006. Buildings and improvements are
depreciated over estimated useful lives ranging generally from
10 to 40 years. Estimated useful lives of equipment vary
generally from four to 10 years.
Debt issuance costs are amortized based upon the terms of the
respective debt obligations. The gross carrying amount of
deferred loan costs at December 31, 2008 and 2007 was
$650 million and $652 million, respectively, and
accumulated amortization was $192 million and
$113 million, respectively. Amortization of deferred loan
costs is included in interest expense and was $79 million,
$78 million and $18 million for 2008, 2007 and 2006,
respectively.
F-9
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 1 —
|
ACCOUNTING
POLICIES (Continued)
|
Property
and Equipment and Amortizable Intangibles (Continued)
When events, circumstances or operating results indicate the
carrying values of certain long-lived assets and related
identifiable intangible assets (excluding goodwill) expected to
be held and used, might be impaired, we prepare projections of
the undiscounted future cash flows expected to result from the
use of the assets and their eventual disposition. If the
projections indicate the recorded amounts are not expected to be
recoverable, such amounts are reduced to estimated fair value.
Fair value may be estimated based upon internal evaluations that
include quantitative analyses of revenues and cash flows,
reviews of recent sales of similar facilities and independent
appraisals.
Long-lived assets to be disposed of are reported at the lower of
their carrying amounts or fair value less costs to sell or
close. The estimates of fair value are usually based upon recent
sales of similar assets and market responses based upon
discussions with and offers received from potential buyers.
Investments
of Insurance Subsidiary
At December 31, 2008 and 2007, the investments of our
wholly-owned insurance subsidiary were classified as
“available-for-sale” as defined in Statement of
Financial Accounting Standards No. 115, “Accounting
for Certain Investments in Debt and Equity Securities” and
are recorded at fair value. The investment securities are held
for the purpose of providing the funding source to pay
professional liability claims covered by the insurance
subsidiary. We perform a quarterly assessment of individual
investment securities to determine whether declines in market
value are temporary or other-than-temporary. Our investment
securities evaluation process involves multiple subjective
judgments, often involves estimating the outcome of future
events, and requires a significant level of professional
judgment in determining whether an impairment has occurred. We
evaluate, among other things, the financial position and near
term prospects of the issuer, conditions in the issuer’s
industry, liquidity of the investment, changes in the amount or
timing of expected future cash flows from the investment, and
recent downgrades of the issuer by a rating agency, to determine
if, and when, a decline in the fair value of an investment below
amortized cost is considered other-than-temporary. The length of
time and extent to which the fair value of the investment is
less than amortized cost and our ability and intent to retain
the investment, to allow for any anticipated recovery of the
investment’s fair value, are important components of our
investment securities evaluation process.
Goodwill
Goodwill is not amortized, but is subject to annual impairment
tests. In addition to the annual impairment review, impairment
reviews are performed whenever circumstances indicate a possible
impairment may exist. Impairment testing for goodwill is done at
the reporting unit level. Reporting units are one level below
the business segment level, and our impairment testing is
performed at the operating division or market level. We compare
the fair value of the reporting unit assets to the carrying
amount, on at least an annual basis, to determine if there is
potential impairment. If the fair value of the reporting unit
assets is less than their carrying value, we compare the fair
value of the goodwill to its carrying value. If the fair value
of the goodwill is less than its carrying value, an impairment
loss is recognized. Fair value of goodwill is estimated based
upon internal evaluations of the related long-lived assets for
each reporting unit that include quantitative analyses of
revenues and cash flows and reviews of recent sales of similar
facilities. We recognized goodwill impairments of
$48 million during 2008. No goodwill impairments were
recognized during 2007 and 2006.
During 2008, goodwill increased by $43 million related to
acquisitions, decreased by $14 million related to facility
sales, decreased by $48 million related to impairments and
decreased by $30 million related to foreign currency
translation and other adjustments. During 2007, goodwill
increased by $44 million related to acquisitions, decreased
by $45 million related to facility sales and increased by
$29 million related to foreign currency translation and
other adjustments.
F-10
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 1 —
|
ACCOUNTING
POLICIES (Continued)
|
Physician
Recruiting Agreements
In order to recruit physicians to meet the needs of our
hospitals and the communities they serve, we enter into minimum
revenue guarantee arrangements to assist the recruited
physicians during the period they are relocating and
establishing their practices. A guarantor is required to
recognize, at the inception of a guarantee, a liability for the
fair value of the stand-ready obligation undertaken in issuing
the guarantee. We expense the total estimated guarantee
liability amount at the time the physician recruiting agreement
becomes effective as we are not able to justify recording a
contract-based asset based upon our analysis of the related
control, regulatory and legal considerations.
The physician recruiting liability amounts of $27 million
and $22 million at December 31, 2008 and 2007,
respectively, represent the amount of expense recognized in
excess of payments made through December 31, 2008 and 2007,
respectively. At December 31, 2008 the maximum amount of
all effective minimum revenue guarantees that could be paid
prospectively was $66 million.
Professional
Liability Claims
Reserves for professional liability risks were
$1.387 billion and $1.513 billion at December 31,
2008 and 2007, respectively. The current portion of the
reserves, $279 million and $280 million at
December 31, 2008 and 2007, respectively, is included in
“other accrued expenses” in the consolidated balance
sheet. Provisions for losses related to professional liability
risks were $175 million, $163 million and
$217 million for 2008, 2007 and 2006, respectively, and are
included in “other operating expenses” in our
consolidated income statement. Provisions for losses related to
professional liability risks are based upon actuarially
determined estimates. Loss and loss expense reserves represent
the estimated ultimate net cost of all reported and unreported
losses incurred through the respective consolidated balance
sheet dates. The reserves for unpaid losses and loss expenses
are estimated using individual case-basis valuations and
actuarial analyses. Those estimates are subject to the effects
of trends in loss severity and frequency. The estimates are
continually reviewed and adjustments are recorded as experience
develops or new information becomes known. Adjustments to the
estimated reserve amounts are included in current operating
results. The reserves for professional liability risks cover
approximately 2,800 and 2,600 individual claims at
December 31, 2008 and 2007, respectively, and estimates for
unreported potential claims. The time period required to resolve
these claims can vary depending upon the jurisdiction and
whether the claim is settled or litigated. During 2008 and 2007,
$314 million and $236 million, respectively, of net
payments were made for professional and general liability
claims. The estimation of the timing of payments beyond a year
can vary significantly. Although considerable variability is
inherent in professional liability reserve estimates, we believe
the reserves for losses and loss expenses are adequate; however,
there can be no assurance that the ultimate liability will not
exceed our estimates.
A portion of our professional liability risks is insured through
a wholly-owned insurance subsidiary. Subject to a
$5 million per occurrence self-insured retention (in place
since January 1, 2007), our facilities are insured by our
wholly-owned insurance subsidiary for losses up to
$50 million per occurrence. The insurance subsidiary has
obtained reinsurance for professional liability risks generally
above a retention level of $15 million per occurrence. We
also maintain professional liability insurance with unrelated
commercial carriers for losses in excess of amounts insured by
our insurance subsidiary.
The obligations covered by reinsurance contracts are included in
the reserves for professional liability risks, as the insurance
subsidiary remains liable to the extent the reinsurers do not
meet their obligations under the reinsurance contracts. The
amounts receivable under the reinsurance contracts include
$28 million and $14 million at December 31, 2008
and 2007, respectively, recorded in “other assets” and
$29 million and $30 million at December 31, 2008
and 2007, respectively, recorded in “other current
assets”.
F-11
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 1 —
|
ACCOUNTING
POLICIES (Continued)
|
Financial
Instruments
Derivative financial instruments are employed to manage risks,
including interest rate and foreign currency exposures, and are
not used for trading or speculative purposes. We recognize
derivative instruments, such as interest rate swap agreements
and foreign exchange contracts, in the consolidated balance
sheets at fair value. Changes in the fair value of derivatives
are recognized periodically either in earnings or in
stockholders’ equity, as a component of other comprehensive
income, depending on whether the derivative financial instrument
qualifies for hedge accounting, and if so, whether it qualifies
as a fair value hedge or a cash flow hedge. Generally, changes
in fair values of derivatives accounted for as fair value hedges
are recorded in earnings, along with the changes in the fair
value of the hedged items that relate to the hedged risk. Gains
and losses on derivatives designated as cash flow hedges, to the
extent they are effective, are recorded in other comprehensive
income, and subsequently reclassified to earnings to offset the
impact of the forecasted transactions when they occur. In the
event the forecasted transaction to which a cash flow hedge
relates is no longer likely, the amount in other comprehensive
income is recognized in earnings and generally the derivative is
terminated. Changes in the fair value of derivatives not
qualifying as hedges, and for any portion of a hedge that is
ineffective, are reported in earnings.
The net interest paid or received on interest rate swaps is
recognized as interest expense. Gains and losses resulting from
the early termination of interest rate swap agreements are
deferred and amortized as adjustments to interest expense over
the remaining term of the debt originally covered by the
terminated swap.
Minority
Interests in Consolidated Entities
The consolidated financial statements include all assets,
liabilities, revenues and expenses of less than 100% owned
entities that we control. Accordingly, we have recorded minority
interests in the earnings and equity of such entities.
Recent
Pronouncements
In December 2007, the Financial Accounting Standards Board (the
“FASB”) issued Statement of Financial Accounting
Standards No. 141(R), “Business Combinations”
(“SFAS 141(R)”). This new standard will change
the financial accounting and reporting of business combination
transactions in consolidated financial statements. SFAS 141(R)
replaces FASB Statement No. 141, “Business
Combinations” (“SFAS 141”). SFAS 141(R)
retains the fundamental requirements in SFAS 141 that the
acquisition method of accounting (which SFAS 141 called the
purchase method) be used for all business combinations and for
an acquirer to be identified for each business combination.
SFAS 141(R) defines the acquirer as the entity that obtains
control of one or more businesses in the business combination
and establishes the acquisition date as the date the acquirer
achieves control. The scope of SFAS 141(R) is broader than
that of SFAS 141, which applied only to business
combinations in which control was obtained by transferring
consideration. SFAS 141(R) applies the acquisition method
to all transactions and other events in which one entity obtains
control over one or more other businesses. SFAS 141(R) is
effective for business combination transactions for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2008.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 160, “Noncontrolling
Interests in Consolidated Financial Statements, an amendment of
ARB No. 51” (“SFAS 160”). This new
standard will change the financial accounting and reporting of
noncontrolling (or minority) interests in consolidated financial
statements. SFAS 160 applies to all entities that prepare
consolidated financial statements, except not-for-profit
organizations. SFAS 160 amends certain of ARB
No. 51’s consolidation procedures to provide
consistency with the requirements of SFAS 141(R).
SFAS 160 is required to be adopted concurrently with
SFAS 141(R) and is effective for fiscal years and interim
periods beginning on or after December 15, 2008.
SFAS 160 will require retroactive restatement to provide
for consistent presentation of noncontrolling interests for all
periods presented.
F-12
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 1 —
|
ACCOUNTING
POLICIES (Continued)
|
Recent
Pronouncements (Continued)
We do not expect the adoption of SFAS 160 to have a
material effect on our financial position or results of
operations.
In March 2008, the FASB issued Statement of Financial Accounting
Standards No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB
Statement No. 133” (“SFAS 161”). This
new standard will require entities to provide enhanced
disclosures about (a) how and why an entity uses
derivatives instruments, (b) how derivative instruments and
related hedged items are accounted for and (c) how
derivative instruments and related hedged items affect an
entity’s financial position, financial performance and cash
flows. SFAS 161 is effective for financial statements
issued for fiscal years and interim periods beginning after
November 15, 2008. We do not expect the adoption of
SFAS 161 to have a material effect on our financial
position or results of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the 2008 presentation.
|
|
|
|
NOTE 2 —
|
MERGER
AND RECAPITALIZATION
|
On July 24, 2006, we entered into an Agreement and Plan of
Merger (the “Merger Agreement”) with Hercules Holding
II, LLC, a Delaware limited liability company (“Hercules
Holding”), and Hercules Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Hercules Holding
(“Merger Sub”). Our board of directors approved the
Merger Agreement on the unanimous recommendation of a special
committee comprised entirely of disinterested directors. The
Merger was approved by a majority of HCA’s shareholders at
a special meeting of shareholders held on November 16, 2006.
On November 17, 2006, pursuant to the terms of the Merger
Agreement, the Investors consummated the acquisition of the
Company through the merger of Merger Sub with and into the
Company. The Company was the surviving corporation in the
Merger. At December 31, 2008, 97.3% of our common stock is
owned by the Investors and certain other investors, with the
remainder being owned by certain members of management and
employees of the Company.
Rollover
and Stockholder Agreements And Equity Securities with Contingent
Redemption Rights
In connection with the Merger, the Frist Entities and certain
members of our management entered into agreements with the
Company
and/or
Hercules Holding, pursuant to which they elected to invest in
the Company, as the surviving corporation in the Merger, through
a rollover of employee stock options, a rollover of shares of
common stock of the Company, or a combination thereof. Pursuant
to the rollover agreements the Frist Entities and management
team made rollover investments of $885 million and
$125 million, respectively.
The stockholder agreements, among other things, contain
agreements among the parties with respect to restrictions on the
transfer of shares, including tag along rights and drag along
rights, registration rights (including customary indemnification
provisions) and other rights. Pursuant to the management
stockholder agreements, the applicable employees can elect to
have the Company redeem their common stock and vested stock
options in the events of death or permanent disability, prior to
the consummation of the initial public offering of common stock
by the Company. At December 31, 2008, 1,698,400 common
shares and 2,937,000 vested stock options were subject to these
contingent redemption terms.
F-13
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 2 —
|
MERGER
AND RECAPITALIZATION (Continued)
|
Management
Agreement
Affiliates of the Investors entered into a management agreement
with us pursuant to which such affiliates will provide us with
management services. Under the management agreement, the
affiliates of the Investors are entitled to receive an aggregate
annual management fee of $15 million, which amount will
increase annually, beginning in 2008, at a rate equal to the
percentage increase in Adjusted EBITDA (as defined in the
Management Agreement) in the applicable year compared to the
preceding year, and reimbursement of out-of-pocket expenses
incurred in connection with the provision of services pursuant
to the agreement. The management agreement has an initial term
expiring on December 31, 2016, provided that the term will
be extended annually for one additional year unless we or the
Investors provide notice to the other of their desire not to
automatically extend the term. In addition, the management
agreement provides that the affiliates of the Investors are
entitled to receive a fee equal to 1% of the gross transaction
value in connection with certain financing, acquisition,
disposition, and change of control transactions, as well as a
termination fee based on the net present value of future payment
obligations under the management agreement in the event of an
initial public offering or under certain other circumstances.
The agreement also contains customary exculpation and
indemnification provisions in favor of the Investors and their
affiliates.
Recapitalization
Transaction Costs
For the year ended December 31, 2006, our results of
operations include the following expenses related to the
Recapitalization (dollars in millions):
|
|
|
|
|
|
|
Compensation expense related to accelerated vesting of stock
options and restricted stock, and other employee benefits
|
|
$
|
258
|
|
|
Consulting, legal, accounting and other transaction costs
|
|
|
131
|
|
|
Loss on extinguishment of debt
|
|
|
53
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
442
|
|
|
|
|
|
|
|
In addition to these amounts, approximately $77 million of
transaction costs were recorded directly to shareholders’
deficit, and an additional $568 million of transaction
costs were capitalized as deferred loan costs.
|
|
|
|
NOTE 3 —
|
SHARE-BASED
COMPENSATION
|
Effective January 1, 2006, we adopted Statement of
Financial Accounting Standards No. 123(R),
“Share-Based Payment” (“SFAS 123(R)”),
using the modified prospective application transition method.
Under this method, compensation cost is recognized, beginning
January 1, 2006, based on the requirements of
SFAS 123(R) for all share-based awards granted after the
effective date, and based on Statement of Financial Accounting
Standards No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”), for all awards
granted to employees prior to January 1, 2006 that were
unvested on the effective date.
Upon consummation of the Merger, all outstanding stock options
(other than certain options held by certain rollover
shareholders) became fully vested, were cancelled and converted
into the right to receive a cash payment equal to the number of
shares underlying the options multiplied by the amount (if any)
by which $51.00 exceeded the option exercise price. The
acceleration of vesting of stock options resulted in the
recognition of $42 million of additional share-based
compensation expense for 2006.
Certain management holders of outstanding HCA stock options were
permitted to retain certain of their stock options (the
“Rollover Options”) in lieu of receiving the merger
consideration (the amount, if any, by which $51.00 exceeded the
option exercise price). The Rollover Options remain outstanding
in accordance with the terms of the governing stock incentive
plans and grant agreements pursuant to which the holder
originally received the stock
F-14
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 3 —
|
SHARE-BASED
COMPENSATION (Continued)
|
option grants, except the exercise price and number of shares
subject to the rollover option agreement were adjusted so that
the aggregate intrinsic value for each applicable option holder
was maintained and the exercise price for substantially all the
options was adjusted to $12.75 per option. Pursuant to the
rollover option agreement, 10,967,500 prerecapitalization HCA
stock options were converted into 2,285,200 Rollover Options, of
which 1,797,200 are outstanding and exercisable at
December 31, 2008.
SFAS 123(R) requires that the benefits of tax deductions in
excess of amounts recognized as compensation cost be reported as
a financing cash flow. Tax benefits of $7 million,
$1 million and $97 million from tax deductions in
excess of amounts recognized as compensation cost were reported
as financing cash flows in 2008, 2007 and 2006, respectively.
2006
Stock Incentive Plan
In connection with the Recapitalization, the 2006 Stock
Incentive Plan for Key Employees of HCA Inc. and its Affiliates
(the “2006 Plan”) was established. The 2006 Plan is
designed to promote the long term financial interests and growth
of the Company and its subsidiaries by attracting and retaining
management and other personnel and key service providers and to
motivate management personnel by means of incentives to achieve
long range goals and further the alignment of interests of
participants with those of our stockholders through
opportunities for increased stock, or stock-based, ownership in
the Company. A portion of the options under the 2006 Plan vests
solely based upon continued employment over a specific period of
time, and a portion of the options vests based both upon
continued employment over a specific period of time and upon the
achievement of predetermined financial and Investor return
targets over time. We granted 357,500 and 9,328,000 options
under the 2006 Plan during 2008 and 2007, respectively. As of
December 31, 2008, 1,186,200 options granted under the 2006
Plan have vested, and there were 1,788,300 shares available
for future grants under the 2006 Plan.
2005
Equity Incentive Plan
Prior to the Recapitalization, the HCA 2005 Equity Incentive
Plan was the primary plan under which stock options and
restricted stock were granted to officers, employees and
directors. Upon consummation of the Recapitalization, all shares
of restricted stock became fully vested, were cancelled and
converted into the right to receive a cash payment of $51.00 per
restricted share. During 2006, we recognized $247 million
of compensation costs related to restricted share grants. The
acceleration of vesting of restricted stock resulted in the
recognition of $201 million of the total compensation
expense related to restricted stock for 2006.
A summary of restricted share activity during 2006 follows
(share amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
Number of
|
|
|
Grant Date Fair
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
|
|
Restricted shares, December 31, 2005
|
|
|
3,748
|
|
|
$
|
43.42
|
|
|
Granted
|
|
|
2,979
|
|
|
|
49.11
|
|
|
Vested
|
|
|
(494
|
)
|
|
|
41.40
|
|
|
Cancelled
|
|
|
(232
|
)
|
|
|
45.98
|
|
|
Settled in Recapitalization
|
|
|
(6,001
|
)
|
|
|
46.31
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares, December 31, 2006
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Option Activity — All Plans
The fair value of each stock option award is estimated on the
grant date, using option valuation models and the weighted
average assumptions indicated in the following table. Awards
under the 2006 Plan generally vest based on
F-15
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 3 —
|
SHARE-BASED
COMPENSATION (Continued)
|
Stock
Option Activity — All Plans (Continued)
continued employment and based upon achievement of certain
financial and Investor return-based targets. Each grant is
valued as a single award with an expected term equal to the
average expected term of the component vesting tranches. We use
historical option exercise behavior data and other factors to
estimate the expected term of the options. The expected term of
the option is limited by the contractual term, and employee
post-vesting termination behavior is incorporated in the
historical option exercise behavior data. Compensation cost is
recognized on the straight-line attribution method. The
straight-line attribution method requires that total
compensation expense recognized must at least equal the vested
portion of the grant-date fair value. The expected volatility is
derived using historical stock price information of certain peer
group companies for a period of time equal to the expected
option term. The risk-free interest rate is the approximate
yield on United States Treasury Strips having a life equal to
the expected option life on the date of grant. The expected life
is an estimate of the number of years an option will be held
before it is exercised.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Risk-free interest rate
|
|
|
2.50
|
%
|
|
|
4.86
|
%
|
|
|
4.70
|
%
|
|
Expected volatility
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
24
|
%
|
|
Expected life, in years
|
|
|
4
|
|
|
|
5
|
|
|
|
5
|
|
|
Expected dividend yield
|
|
|
—
|
|
|
|
—
|
|
|
|
1.09
|
%
|
Information regarding stock option activity during 2008, 2007
and 2006 is summarized below (share amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
Stock
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Intrinsic Value
|
|
|
|
|
Options
|
|
|
Price
|
|
|
Contractual Term
|
|
|
(dollars in millions)
|
|
|
|
|
Options outstanding, December 31, 2005
|
|
|
27,806
|
|
|
$
|
36.35
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,566
|
|
|
|
48.64
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(5,220
|
)
|
|
|
26.24
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(1,008
|
)
|
|
|
49.76
|
|
|
|
|
|
|
|
|
|
|
Settled in Recapitalization
|
|
|
(13,177
|
)
|
|
|
36.22
|
|
|
|
|
|
|
|
|
|
|
Rolled over in Recapitalization — existing
|
|
|
(10,967
|
)
|
|
|
42.98
|
|
|
|
|
|
|
|
|
|
|
Rolled over in Recapitalization — new
|
|
|
2,285
|
|
|
|
12.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, December 31, 2006
|
|
|
2,285
|
|
|
|
12.50
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
9,328
|
|
|
|
51.34
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(36
|
)
|
|
|
12.75
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(405
|
)
|
|
|
51.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, December 31, 2007
|
|
|
11,172
|
|
|
|
43.54
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
357
|
|
|
|
58.21
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(480
|
)
|
|
|
15.01
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(412
|
)
|
|
|
51.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, December 31, 2008
|
|
|
10,637
|
|
|
|
45.02
|
|
|
|
7.5 years
|
|
|
$
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, December 31, 2008
|
|
|
2,937
|
|
|
$
|
27.55
|
|
|
|
5.6 years
|
|
|
$
|
83
|
|
F-16
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 3 —
|
SHARE-BASED
COMPENSATION (Continued)
|
Stock
Option Activity — All Plans (Continued)
The weighted average fair values of stock options granted during
2008, 2007 and 2006 were $14.01, $16.01 and $10.76 per share,
respectively. The total intrinsic value of stock options
exercised in the year ended December 31, 2008 was
$20 million.
|
|
|
|
NOTE 4 —
|
ACQUISITIONS
AND DISPOSITIONS
|
During 2008, we paid $18 million to acquire one hospital
and $67 million to acquire other health care entities.
During 2007, we did not acquire any hospitals, but paid
$32 million for other health care entities. During 2006, we
paid $63 million to acquire three hospitals and
$49 million to acquire other health care entities. Purchase
price amounts have been allocated to the related assets acquired
and liabilities assumed based upon their respective fair values.
The purchase price paid in excess of the fair value of
identifiable net assets of acquired entities aggregated
$43 million, $44 million and $38 million in 2008,
2007 and 2006, respectively. The consolidated financial
statements include the accounts and operations of the acquired
entities subsequent to the respective acquisition dates. The pro
forma effects of the acquired entities on our results of
operations for periods prior to the respective acquisition dates
were not significant.
During 2008, we received proceeds of $143 million and
recognized a net pretax gain of $81 million
($48 million after tax) on the sales of two hospitals. We
also received proceeds of $50 million and recognized a net
pretax gain of $16 million ($10 million after tax)
from sales of other health care entities and real estate
investments. During 2007, we received proceeds of
$661 million and recognized a net pretax gain of
$443 million ($272 million after tax) from sales of
three hospitals. We also received proceeds of $106 million
and recognized a net pretax gain of $28 million
($18 million after tax) from sales of real estate
investments. During 2006, we received proceeds of
$560 million and recognized a net pretax gain of
$176 million ($85 million after tax) on the sales of
nine hospitals. We also received proceeds of $91 million
and recognized a net pretax gain of $29 million
($18 million after tax) from sales of real estate
investments and our equity investment in a hospital joint
venture.
|
|
|
|
NOTE 5 —
|
IMPAIRMENTS
OF LONG-LIVED ASSETS
|
During 2008, we recorded pretax charges of $64 million to
reduce the carrying value of identified assets to estimated fair
value. The $64 million asset impairment includes
$55 million related to other health care entity investments
in our Eastern Group and $9 million related to certain
hospital facilities in our Central Group. During 2007, we
recorded a pretax charge of $24 million to adjust the value
of a building in our Central Group to estimated fair value.
During 2006, the carrying value for a closed hospital was
reduced to fair value, based upon estimates of sales value,
resulting in a pretax charge of $16 million that affected
our Corporate and Other Group. During 2006, we also decided to
terminate a construction project and incurred a pretax charge of
$8 million that affected our Corporate and Other Group.
The asset impairment charges did not have a significant impact
on our operations or cash flows and are not expected to
significantly impact cash flows for future periods. The
impairment charges affected our property and equipment asset
category by $16 million, $24 million and
$24 million in 2008, 2007 and 2006, respectively.
F-17
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The provision for income taxes consists of the following
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
699
|
|
|
$
|
566
|
|
|
$
|
993
|
|
|
State
|
|
|
56
|
|
|
|
37
|
|
|
|
62
|
|
|
Foreign
|
|
|
25
|
|
|
|
32
|
|
|
|
35
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(505
|
)
|
|
|
(391
|
)
|
|
|
(426
|
)
|
|
State
|
|
|
(29
|
)
|
|
|
(62
|
)
|
|
|
(43
|
)
|
|
Foreign
|
|
|
22
|
|
|
|
134
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
268
|
|
|
$
|
316
|
|
|
$
|
626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the federal statutory rate to the effective
income tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
State income taxes, net of federal tax benefit
|
|
|
3.7
|
|
|
|
0.2
|
|
|
|
0.4
|
|
|
Change in liability for uncertain tax positions
|
|
|
(7.4
|
)
|
|
|
(7.2
|
)
|
|
|
—
|
|
|
Nondeductible intangible assets
|
|
|
0.4
|
|
|
|
—
|
|
|
|
1.5
|
|
|
Tax exempt interest income
|
|
|
(2.5
|
)
|
|
|
(2.1
|
)
|
|
|
(1.1
|
)
|
|
Other items, net
|
|
|
(0.7
|
)
|
|
|
0.7
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
28.5
|
%
|
|
|
26.6
|
%
|
|
|
37.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of a settlement reached with the Appeals Division of
the Internal Revenue Service (the “IRS”) and the
revision of a proposed IRS adjustment related to prior taxable
years, we reduced our provision for income taxes by
$69 million in 2008. Our 2007 provision for income taxes
was reduced by $85 million, principally based on new
information received related to tax positions taken in a prior
taxable year, and by an additional $39 million to adjust
2006 state tax accruals to the amounts reported on completed tax
returns and based upon an analysis of the Recapitalization costs.
A summary of the items comprising the deferred tax assets and
liabilities at December 31 follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
|
Depreciation and fixed asset basis differences
|
|
$
|
—
|
|
|
$
|
324
|
|
|
$
|
—
|
|
|
$
|
329
|
|
|
Allowances for professional liability and other risks
|
|
|
244
|
|
|
|
—
|
|
|
|
197
|
|
|
|
—
|
|
|
Accounts receivable
|
|
|
1,263
|
|
|
|
—
|
|
|
|
884
|
|
|
|
—
|
|
|
Compensation
|
|
|
201
|
|
|
|
—
|
|
|
|
156
|
|
|
|
—
|
|
|
Other
|
|
|
786
|
|
|
|
287
|
|
|
|
633
|
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,494
|
|
|
$
|
611
|
|
|
$
|
1,870
|
|
|
$
|
588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008, state net operating loss
carryforwards (expiring in years 2009 through
2028) available to offset future taxable income
approximated $145 million. Utilization of net operating
loss carryforwards in any
F-18
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 6 —
|
INCOME
TAXES (Continued)
|
one year may be limited and, in certain cases, result in an
adjustment to intangible assets. Net deferred tax assets related
to such carryforwards are not significant.
We are currently contesting before the IRS Appeals Division
certain claimed deficiencies and adjustments proposed by the IRS
in connection with its examination of the 2003 and 2004 federal
income tax returns for HCA and 17 affiliates that are treated as
partnerships for federal income tax purposes (“affiliated
partnerships”). The disputed items include the timing of
recognition of certain patient service revenues and our method
for calculating the tax allowance for doubtful accounts.
Eight taxable periods of HCA and its predecessors ended in 1995
through 2002 and the 2002 taxable year for 13 affiliated
partnerships, for which the primary remaining issue is the
computation of the tax allowance for doubtful accounts, are
pending before the IRS Examination Division or the United States
Tax Court as of December 31, 2008. The IRS began an audit
of the 2005 and 2006 federal income tax returns for HCA and
seven affiliated partnerships during 2008.
Effective January 1, 2007, we adopted FASB Interpretation
No. 48, “Accounting for Uncertainty in Income
Taxes” (“FIN 48”). FIN 48 creates a
single model to address uncertainty in income tax positions and
clarifies the accounting for income taxes by prescribing the
minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. FIN 48
applies to all tax positions related to income taxes subject to
FASB Statement No. 109, “Accounting for Income
Taxes.” The provision for income taxes reflects a
$20 million ($12 million net of tax) reduction in
interest related to taxing authority examinations for the year
ended December 31, 2008 and interest expense of
$17 million ($11 million net of tax) for the year
ended December 31, 2007.
The following table summarizes the activity related to our
unrecognized tax benefits (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Balance at January 1
|
|
$
|
622
|
|
|
$
|
555
|
|
|
Additions based on tax positions related to the current year
|
|
|
32
|
|
|
|
70
|
|
|
Additions for tax positions of prior years
|
|
|
55
|
|
|
|
112
|
|
|
Reductions for tax positions of prior years
|
|
|
(57
|
)
|
|
|
(101
|
)
|
|
Settlements
|
|
|
(162
|
)
|
|
|
2
|
|
|
Lapse of applicable statutes of limitations
|
|
|
(8
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
482
|
|
|
$
|
622
|
|
|
|
|
|
|
|
|
|
|
|
During 2008, we reached a settlement with the IRS Appeals
Division relating to the deductibility of the 2001 government
settlement payment, the timing of recognition of certain patient
service revenues for 2001 and 2002, and the amount of insurance
expense deducted in 2001 and 2002. As a result of the
settlement, $111 million of the $215 million
refundable deposit made in 2006 has been applied to tax and
interest due for the 2001 and 2002 taxable years.
Our liability for unrecognized tax benefits was
$625 million, including accrued interest of
$156 million and excluding $13 million that was
recorded as reductions of the related deferred tax assets, as of
December 31, 2008 ($828 million, $218 million and
$12 million, respectively, as of December 31, 2007).
Unrecognized tax benefits of $264 million
($489 million as of December 31, 2007) would
affect the effective rate, if recognized. The liability for
unrecognized tax benefits does not reflect deferred tax assets
related to deductible interest and state income taxes or the
balance of a refundable deposit we made in 2006, which is
recorded in noncurrent assets.
Depending on the resolution of the IRS disputes, the completion
of examinations by federal, state or international taxing
authorities, or the expiration of statutes of limitation for
specific taxing jurisdictions, we
F-19
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 6 —
|
INCOME
TAXES (Continued)
|
believe it is reasonably possible that our liability for
unrecognized tax benefits may significantly increase or decrease
within the next twelve months. However, we are currently unable
to estimate the range of any possible change.
|
|
|
|
NOTE 7 —
|
INVESTMENTS
OF INSURANCE SUBSIDIARY
|
A summary of the insurance subsidiary’s investments at
December 31 follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
|
Amortized
|
|
|
Amounts
|
|
|
Fair
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
808
|
|
|
$
|
20
|
|
|
$
|
(23
|
)
|
|
$
|
805
|
|
|
Auction rate securities
|
|
|
576
|
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
536
|
|
|
Asset-backed securities
|
|
|
51
|
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
47
|
|
|
Money market funds
|
|
|
226
|
|
|
|
—
|
|
|
|
—
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,661
|
|
|
|
21
|
|
|
|
(68
|
)
|
|
|
1,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stocks
|
|
|
6
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
5
|
|
|
Common stocks and other equities
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,670
|
|
|
$
|
21
|
|
|
$
|
(69
|
)
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 7 —
|
INVESTMENTS
OF INSURANCE SUBSIDIARY (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
|
Amortized
|
|
|
Amounts
|
|
|
Fair
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
944
|
|
|
$
|
23
|
|
|
$
|
(2
|
)
|
|
$
|
965
|
|
|
Auction rate securities
|
|
|
731
|
|
|
|
—
|
|
|
|
—
|
|
|
|
731
|
|
|
Asset-backed securities
|
|
|
59
|
|
|
|
1
|
|
|
|
—
|
|
|
|
60
|
|
|
Corporate
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
Money market funds
|
|
|
109
|
|
|
|
—
|
|
|
|
—
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,845
|
|
|
|
24
|
|
|
|
(2
|
)
|
|
|
1,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stocks
|
|
|
26
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
25
|
|
|
Common stocks and other equities
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,878
|
|
|
$
|
24
|
|
|
$
|
(3
|
)
|
|
|
1,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008 and 2007 the investments of our
insurance subsidiary were classified as
“available-for-sale.” Changes in temporary unrealized
gains and losses are recorded as adjustments to other
comprehensive income. At December 31, 2008 and 2007,
$119 million and $106 million, respectively, of our
investments were subject to the restrictions included in
insurance bond collateralization and assumed reinsurance
contracts.
Scheduled maturities of investments in debt securities at
December 31, 2008 were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
|
Due in one year or less
|
|
$
|
313
|
|
|
$
|
314
|
|
|
Due after one year through five years
|
|
|
305
|
|
|
|
311
|
|
|
Due after five years through ten years
|
|
|
252
|
|
|
|
254
|
|
|
Due after ten years
|
|
|
164
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,034
|
|
|
|
1,031
|
|
|
Auction rate securities
|
|
|
576
|
|
|
|
536
|
|
|
Asset-backed securities
|
|
|
51
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,661
|
|
|
$
|
1,614
|
|
|
|
|
|
|
|
|
|
|
|
The average expected maturity of the investments in debt
securities at December 31, 2008 was 3.9 years,
compared to the average scheduled maturity of 12.8 years.
Expected and scheduled maturities may differ because the issuers
of certain securities have the right to call, prepay or
otherwise redeem such obligations prior to their scheduled
maturity date. The average expected maturities for our auction
rate and asset-backed securities were derived from valuation
models of expected cash flows and involved management’s
judgment. The average expected
F-21
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 7 —
|
INVESTMENTS
OF INSURANCE SUBSIDIARY (Continued)
|
maturities for our auction rate and asset-backed securities at
December 31, 2008 were 5.5 years and 6.9 years,
respectively, compared to average scheduled maturities of
25.5 years and 26.2 years, respectively.
The cost of securities sold is based on the specific
identification method. Sales of securities for the years ended
December 31 are summarized below (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds
|
|
$
|
23
|
|
|
$
|
272
|
|
|
$
|
401
|
|
|
Gross realized gains
|
|
|
—
|
|
|
|
8
|
|
|
|
1
|
|
|
Gross realized losses
|
|
|
—
|
|
|
|
1
|
|
|
|
2
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds
|
|
$
|
4
|
|
|
$
|
87
|
|
|
$
|
1,509
|
|
|
Gross realized gains
|
|
|
2
|
|
|
|
1
|
|
|
|
256
|
|
|
Gross realized losses
|
|
|
2
|
|
|
|
—
|
|
|
|
12
|
|
|
|
|
|
NOTE 8 —
|
FINANCIAL
INSTRUMENTS
|
Interest
Rate Swap Agreements
We have entered into interest rate swap agreements to manage our
exposure to fluctuations in interest rates. These swap
agreements involve the exchange of fixed and variable rate
interest payments between two parties based on common notional
principal amounts and maturity dates. Pay-fixed interest rate
swaps effectively convert LIBOR indexed variable rate
instruments to fixed interest rate obligations. The net interest
payments, based on the notional amounts in these agreements,
generally match the timing of the related liabilities. The
notional amounts of the swap agreements represent amounts used
to calculate the exchange of cash flows and are not our assets
or liabilities. Our credit risk related to these agreements is
considered low because the swap agreements are with creditworthy
financial institutions. The interest payments under these
agreements are settled on a net basis.
The following table sets forth our interest rate swap
agreements, which have been designated as cash flow hedges, at
December 31, 2008 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
|
Amount
|
|
Termination Date
|
|
Value
|
|
|
|
Pay-fixed interest rate swap
|
|
$
|
4,000
|
|
|
|
November 2011
|
|
|
$
|
(327
|
)
|
|
Pay-fixed interest rate swap
|
|
|
4,000
|
|
|
|
November 2011
|
|
|
|
(301
|
)
|
|
Pay-fixed interest rate swap
|
|
|
500
|
|
|
|
March 2011
|
|
|
|
(15
|
)
|
|
Pay-fixed interest rate swap
|
|
|
500
|
|
|
|
March 2011
|
|
|
|
(14
|
)
|
The fair value of the interest rate swaps at December 31,
2008 represents the estimated amounts we would pay upon
termination of these agreements.
Cross
Currency Swaps
The Company and certain subsidiaries have incurred obligations
and entered into various intercompany transactions where such
obligations are denominated in currencies (Great Britain
Pound and Euro), other than the functional currencies (United
States Dollar and Great Britain Pound) of the parties executing
the trade. In order to better match the cash flows of our
obligations and intercompany transactions with cash flows from
operations, we entered into various cross currency swaps. Our
credit risk related to these agreements is considered low
because the swap agreements are with creditworthy financial
institutions.
F-22
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 8 —
|
FINANCIAL
INSTRUMENTS (Continued)
|
Cross
Currency Swaps (Continued)
Certain of our cross currency swaps were not designated as
hedges, and changes in fair value are recognized in results of
operations. The following table sets forth these cross currency
swap agreements at December 31, 2008 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
|
Amount
|
|
Termination Date
|
|
Value
|
|
|
|
Euro — United States Dollar Currency Swap
|
|
|
557 Euro
|
|
|
|
December 2011
|
|
|
$
|
81
|
|
|
Euro — Great Britain Pound (GBP) Currency Swap
|
|
|
27 GBP
|
|
|
|
December 2011
|
|
|
|
16
|
|
The following table sets forth our cross currency swap
agreements, which have been designated as cash flow hedges, at
December 31, 2008 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
|
Amount
|
|
Termination Date
|
|
Value
|
|
|
|
GBP — United States Dollar Currency Swap
|
|
|
50 GBP
|
|
|
|
November 2010
|
|
|
$
|
(13
|
)
|
|
GBP — United States Dollar Currency Swap
|
|
|
50 GBP
|
|
|
|
November 2010
|
|
|
|
(13
|
)
|
The fair value of the cross currency swaps at December 31,
2008 represents the estimated amounts we would receive (pay)
upon termination of these agreements.
|
|
|
|
NOTE 9 —
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE
|
On January 1, 2008, we adopted Statement of Financial
Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157
defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements.
SFAS 157 applies to reported balances that are required or
permitted to be measured at fair value under existing accounting
pronouncements.
SFAS 157 emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. Therefore, a
fair value measurement should be determined based on the
assumptions that market participants would use in pricing the
asset or liability. As a basis for considering market
participant assumptions in fair value measurements,
SFAS 157 establishes a fair value hierarchy that
distinguishes between market participant assumptions based on
market data obtained from sources independent of the reporting
entity (observable inputs that are classified within
Levels 1 and 2 of the hierarchy) and the reporting
entity’s own assumptions about market participant
assumptions (unobservable inputs classified within Level 3
of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active
markets for identical assets or liabilities. Level 2 inputs
are inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
or indirectly. Level 2 inputs may include quoted prices for
similar assets and liabilities in active markets, as well as
inputs that are observable for the asset or liability (other
than quoted prices), such as interest rates, foreign exchange
rates, and yield curves that are observable at commonly quoted
intervals. Level 3 inputs are unobservable inputs for the
asset or liability, which are typically based on an
entity’s own assumptions, as there is little, if any,
related market activity. In instances where the determination of
the fair value measurement is based on inputs from different
levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls
is based on the lowest level input that is significant to the
fair value measurement in its entirety. Our assessment of the
significance of a particular input to the fair value measurement
in its entirety requires judgment, and considers factors
specific to the asset or liability.
Cash
Traded Investments
Our cash traded investments are generally classified within
Level 1 or Level 2 of the fair value hierarchy because
they are valued using quoted market prices, broker or dealer
quotations, or alternative pricing sources with
F-23
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 9 —
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE (Continued)
|
Cash
Traded Investments (Continued)
reasonable levels of price transparency. Certain types of cash
traded instruments are classified within Level 3 of the
fair value hierarchy because they trade infrequently and
therefore have little or no price transparency. Such instruments
include auction rate securities (“ARS”) and limited
partnership investments. The transaction price is initially used
as the best estimate of fair value.
Our wholly-owned insurance subsidiary had investments in
municipal, tax-exempt ARS, that are backed by student loans
substantially guaranteed by the federal government, of
$536 million ($573 million par value) at
December 31, 2008. We do not currently intend to attempt to
sell the ARS as the liquidity needs of our insurance subsidiary
are expected to be met by other investments in its investment
portfolio. These securities continue to accrue and pay interest
semi-annually based on the failed auction maximum rate formulas
stated in their respective Official Statements. During 2008,
certain issuers of our ARS redeemed $93 million of our
securities at par value. The valuation of these securities
involved management’s judgment, after consideration of
market factors and the absence of market transparency, market
liquidity and observable inputs. Our valuation models derived a
fair market value compared to tax-equivalent yields of other
student loan backed variable rate securities of similar credit
worthiness.
Derivative
Financial Instruments
We have entered into interest rate and cross currency swap
agreements to manage our exposure to fluctuations in interest
rates and foreign currency risks. The valuation of these
instruments is determined using widely accepted valuation
techniques, including discounted cash flow analysis on the
expected cash flows of each derivative. This analysis reflects
the contractual terms of the derivatives, including the period
to maturity, and uses observable market-based inputs, including
interest rate curves, foreign exchange rates and implied
volatilities. To comply with the provisions of SFAS 157, we
incorporate credit valuation adjustments to reflect both our own
nonperformance risk and the respective counterparty’s
nonperformance risk in the fair value measurements.
Although we have determined that the majority of the inputs used
to value our derivatives fall within Level 2 of the fair
value hierarchy, the credit valuation adjustments associated
with our derivatives utilize Level 3 inputs, such as
estimates of current credit spreads to evaluate the likelihood
of default by us and our counterparties. We have assessed the
significance of the impact of the credit valuation adjustments
on the overall valuation of our derivative positions and have
determined that the credit valuation adjustments are significant
to the overall valuation of our derivatives. As a result, we
have determined that our derivative valuations in their entirety
are classified in Level 3 of the fair value hierarchy at
December 31, 2008.
F-24
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 9 —
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE (Continued)
|
Derivative
Financial Instruments (Continued)
The following table summarizes our assets and liabilities
measured at fair value on a recurring basis as of
December 31, 2008, aggregated by the level in the fair
value hierarchy within which those measurements fall (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identical Assets
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
|
and Liabilities
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary
|
|
$
|
1,622
|
|
|
$
|
227
|
|
|
$
|
857
|
|
|
$
|
538
|
|
|
Less amounts classified as current assets
|
|
|
(200
|
)
|
|
|
(200
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,422
|
|
|
|
27
|
|
|
|
857
|
|
|
|
538
|
|
|
Cross currency swaps (Other assets)
|
|
|
97
|
|
|
|
—
|
|
|
|
—
|
|
|
|
97
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (Income taxes and other liabilities)
|
|
|
657
|
|
|
|
—
|
|
|
|
—
|
|
|
|
657
|
|
|
Cross currency swaps (Income taxes and other liabilities)
|
|
|
26
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26
|
|
The following table summarizes the activity related to the
investments of our insurance subsidiary and our cross currency
and interest rate swaps which have fair value measurements based
on significant unobservable inputs (Level 3) during
the year ended December 31, 2008 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
Cross
|
|
|
Interest
|
|
|
|
|
of Insurance
|
|
|
Currency
|
|
|
Rate
|
|
|
|
|
Subsidiary
|
|
|
Swaps (net)
|
|
|
Swaps
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Realized gains and losses included in earnings
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
Unrealized gains and losses included in other comprehensive
income
|
|
|
(41
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Purchases, issuances and settlements
|
|
|
(95
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Transfers into Level 3
|
|
|
668
|
|
|
|
71
|
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
538
|
|
|
$
|
71
|
|
|
$
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A summary of long-term debt at December 31, including
related interest rates at December 31, 2008, follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Senior secured asset-based revolving credit facility (effective
interest rate of 2.8%)
|
|
$
|
2,000
|
|
|
$
|
1,350
|
|
|
Senior secured revolving credit facility (effective interest
rate of 2.7%)
|
|
|
50
|
|
|
|
—
|
|
|
Senior secured term loan facilities (effective interest rate of
6.0%)
|
|
|
12,002
|
|
|
|
12,317
|
|
|
Other senior secured debt (effective interest rate of 6.8%)
|
|
|
406
|
|
|
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
First lien debt
|
|
|
14,458
|
|
|
|
14,094
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured cash-pay notes (effective interest rate of 9.6%)
|
|
|
4,200
|
|
|
|
4,200
|
|
|
Senior secured toggle notes (effective interest rate of 10.0%)
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Second lien debt
|
|
|
5,700
|
|
|
|
5,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes payable through 2095 (effective interest
rate of 7.2%)
|
|
|
6,831
|
|
|
|
7,514
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt (average life of six years, rates averaging 6.9%)
|
|
|
26,989
|
|
|
|
27,308
|
|
|
Less amounts due within one year
|
|
|
404
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,585
|
|
|
$
|
27,000
|
|
|
|
|
|
|
|
|
|
|
|
Senior
Secured Credit Facilities
In connection with the Recapitalization, we entered into
(i) a $2.000 billion senior secured asset-based
revolving credit facility with a borrowing base of 85% of
eligible accounts receivable, subject to customary reserves and
eligibility criteria (fully utilized at December 31, 2008)
(the “ABL credit facility”) and (ii) a senior
secured credit agreement (the “cash flow credit
facility” and, together with the ABL credit facility, the
“senior secured credit facilities”), consisting of a
$2.000 billion revolving credit facility
($1.858 billion available at December 31, 2008 after
giving effect to certain outstanding letters of credit), a
$2.750 billion term loan A ($2.525 billion outstanding
at December 31, 2008), a $8.800 billion term loan B
($8.624 billion outstanding at December 31,
2008) and a €1.000 billion European term loan
(€611 million, or $853 million, outstanding at
December 31, 2008) under which one of our European
subsidiaries is the borrower.
Borrowings under the senior secured credit facilities bear
interest at a rate equal to, as determined by the type of
borrowing, either an applicable margin plus, at our option,
either (a) a base rate determined by reference to the
higher of (1) the federal funds rate plus
1
/
2
of 1% or (2) the prime rate of Bank of America or
(b) a LIBOR rate for the currency of such borrowing for the
relevant interest period, plus, in each case, an applicable
margin. The applicable margin for borrowings under the senior
secured credit facilities, with the exception of term loan B
where the margin is static, may be reduced subject to attaining
certain leverage ratios.
The ABL facility and the $2.000 billion revolving credit
facility portion of the cash flow credit facility expire
November 2012. The term loan facilities require quarterly
installment payments. The final payment under term loan A is in
November 2012. The final payments under term loan B and the
European term loan are in November 2013. The senior secured
credit facilities contain a number of covenants that restrict,
subject to certain exceptions, our (and some or all of our
subsidiaries’) ability to incur additional indebtedness,
repay subordinated indebtedness, create liens on assets, sell
assets, make investments, loans or advances, engage in certain
transactions with affiliates, pay dividends and distributions,
and enter into sale and leaseback transactions. In addition, we
are required to satisfy and maintain a maximum total leverage
ratio covenant under the cash flow facility and, in certain
situations under the ABL credit facility, a minimum interest
coverage ratio covenant.
F-26
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 10 —
|
LONG-TERM
DEBT (Continued)
|
Senior
Secured Credit Facilities (Continued)
We use interest rate swap agreements to manage the floating rate
exposure of our debt portfolio. We entered into interest rate
swap agreements, in a total notional amount of $9 billion,
in order to hedge a portion of our exposure to variable rate
interest payments associated with the senior secured credit
facility. The effect of the interest rate swaps is reflected in
the effective interest rate for the senior secured credit
facilities.
Senior
Secured Notes
In November 2006, we issued $4.200 billion of senior
secured notes (comprised of $1.000 billion of
9
1
/
8
% notes
due 2014 and $3.200 billion of
9
1
/
4
% notes
due 2016), and $1.500 billion of
9
5
/
8
%
cash/10
3
/
8
%
in-kind senior secured toggle notes (which allow us, at our
option, to pay interest in-kind during the first five years) due
2016, which are subject to certain standard covenants. In
November 2008, we elected to make an interest payment for the
interest period ending in May 2009 by paying in-kind instead of
paying interest in cash.
General
Information
The senior secured credit facilities and senior secured notes
are fully and unconditionally guaranteed by substantially all
existing and future, direct and indirect, wholly-owned material
domestic subsidiaries that are “Unrestricted
Subsidiaries” under our Indenture dated December 16,
1993 (except for certain special purpose subsidiaries that only
guarantee and pledge their assets under our ABL credit
facility). In addition, borrowings under the European term loan
are guaranteed by all material, wholly-owned European
subsidiaries.
Maturities of long-term debt in years 2010 through 2013 are
$1.144 billion, $896 million, $4.707 billion and
$10.095 billion, respectively.
The estimated fair value of our long-term debt was
$20.225 billion and $26.127 billion at
December 31, 2008 and 2007, respectively, compared to
carrying amounts aggregating $26.989 billion and
$27.308 billion, respectively. The estimates of fair value
are generally based upon the quoted market prices for the same
or similar issues of long-term debt with the same maturities.
We operate in a highly regulated and litigious industry. As a
result, various lawsuits, claims and legal and regulatory
proceedings have been and can be expected to be instituted or
asserted against us. The resolution of any such lawsuits, claims
or legal and regulatory proceedings could have a material,
adverse affect on our results of operations or financial
position in a given period.
We are 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 us which may not be 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 our results of operations
or financial position.
|
|
|
|
NOTE 12 —
|
CAPITAL
STOCK AND STOCK REPURCHASES
|
Capital
Stock
The Company’s certificate of incorporation and by-laws were
amended and restated, effective March 27, 2008 and
March 26, 2008, respectively. The amended and restated
certificate of incorporation authorizes the Company to issue up
to 125,000,000 shares of common stock, and the amended and
restated by-laws set the number of directors constituting the
board of directors of the Company at not less than one nor more
than 15.
F-27
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 12 —
|
CAPITAL
STOCK AND STOCK REPURCHASES (Continued)
|
Stock
Repurchase Program
In 2005, we announced the authorization of a modified
“Dutch” auction tender offer to purchase up to
$2.500 billion of our common stock. During 2006, we
repurchased 13.0 million shares of our common stock for
$653 million, through open market purchases, which
completed this authorization.
|
|
|
|
NOTE 13 —
|
EMPLOYEE
BENEFIT PLANS
|
We maintained a noncontributory, defined contribution retirement
plan which covered substantially all employees. Benefits were
determined as a percentage of a participant’s salary and
vest over specified periods of employee service. Retirement plan
expense was $46 million for 2008, $203 million for
2007 and $190 million for 2006. Amounts approximately equal
to retirement plan expense are funded annually. Effective
April 1, 2008, the noncontributory plan and the related
participant account balances were merged into the contributory
HCA 401(k) Plan.
We maintain contributory, defined contribution benefit plans
that are available to employees who meet certain minimum
requirements. Certain of the plans require that we match
specified percentages of participant contributions up to certain
maximum levels (generally, 100% of the first 3% to 9%, depending
upon years of vesting service, of compensation deferred by
participants for periods subsequent to March 31, 2008, and
50% of the first 3% of compensation deferred by participants for
periods prior to April 1, 2008). The cost of these plans
totaled $233 million for 2008, $86 million for 2007
and $71 million for 2006. Our contributions are funded
periodically during each year.
We maintain a Supplemental Executive Retirement Plan
(“SERP”) for certain executives. The plan is designed
to ensure that upon retirement the participant receives the
value of a prescribed life annuity from the combination of the
SERP and our other benefit plans. Compensation expense under the
plan was $20 million for 2008, $20 million for 2007
and $15 million for 2006. Accrued benefits liabilities
under this plan totaled $133 million at December 31,
2008 and $109 million at December 31, 2007.
We maintain defined benefit pension plans which resulted from
certain hospital acquisitions in prior years. Compensation
expense under these plans was $24 million for 2008,
$27 million for 2007, and $31 million for 2006.
Accrued benefits liabilities under these plans totaled
$142 million at December 31, 2008 and $48 million
at December 31, 2007.
|
|
|
|
NOTE 14 —
|
SEGMENT
AND GEOGRAPHIC INFORMATION
|
We operate in one line of business, which is operating hospitals
and related health care entities. During the years ended
December 31, 2008, 2007 and 2006, approximately 23%, 24%
and 25%, respectively, of our revenues related to patients
participating in the fee-for-service Medicare program.
Our operations are structured into three geographically
organized groups: the Eastern Group includes 48 consolidating
hospitals located in the Eastern United States, the Central
Group includes 51 consolidating hospitals located in the Central
United States and the Western Group includes 53 consolidating
hospitals located in the Western United States. We also operate
six consolidating hospitals in England, and these facilities are
included in the Corporate and other group.
Adjusted segment EBITDA is defined as income before depreciation
and amortization, interest expense, gains on sales of
facilities, impairment of long-lived assets, transaction costs,
minority interests and income taxes. We use adjusted segment
EBITDA as an analytical indicator for purposes of allocating
resources to geographic areas and assessing their performance.
Adjusted segment EBITDA is commonly used as an analytical
indicator within the health care industry, and also serves as a
measure of leverage capacity and debt service ability. Adjusted
segment EBITDA should not be considered as a measure of
financial performance under generally accepted accounting
F-28
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 14 —
|
SEGMENT
AND GEOGRAPHIC INFORMATION (Continued)
|
principles, and the items excluded from adjusted segment EBITDA
are significant components in understanding and assessing
financial performance. Because adjusted segment EBITDA is not a
measurement determined in accordance with generally accepted
accounting principles and is thus susceptible to varying
calculations, adjusted segment EBITDA, as presented, may not be
comparable to other similarly titled measures of other
companies. The geographic distributions of our revenues, equity
in earnings of affiliates, adjusted segment EBITDA, depreciation
and amortization, assets and goodwill are summarized in the
following table (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Group
|
|
$
|
8,570
|
|
|
$
|
8,204
|
|
|
$
|
7,775
|
|
|
Central Group
|
|
|
6,740
|
|
|
|
6,302
|
|
|
|
5,917
|
|
|
Western Group
|
|
|
12,118
|
|
|
|
11,378
|
|
|
|
10,495
|
|
|
Corporate and other
|
|
|
946
|
|
|
|
974
|
|
|
|
1,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,374
|
|
|
$
|
26,858
|
|
|
$
|
25,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Group
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
$
|
(6
|
)
|
|
Central Group
|
|
|
(2
|
)
|
|
|
8
|
|
|
|
(3
|
)
|
|
Western Group
|
|
|
(219
|
)
|
|
|
(212
|
)
|
|
|
(187
|
)
|
|
Corporate and other
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(223
|
)
|
|
$
|
(206
|
)
|
|
$
|
(197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Group
|
|
$
|
1,288
|
|
|
$
|
1,268
|
|
|
$
|
1,196
|
|
|
Central Group
|
|
|
1,061
|
|
|
|
1,082
|
|
|
|
975
|
|
|
Western Group
|
|
|
2,270
|
|
|
|
2,196
|
|
|
|
2,088
|
|
|
Corporate and other
|
|
|
(45
|
)
|
|
|
46
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,574
|
|
|
$
|
4,592
|
|
|
$
|
4,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Group
|
|
$
|
358
|
|
|
$
|
369
|
|
|
$
|
363
|
|
|
Central Group
|
|
|
359
|
|
|
|
364
|
|
|
|
329
|
|
|
Western Group
|
|
|
552
|
|
|
|
529
|
|
|
|
492
|
|
|
Corporate and other
|
|
|
147
|
|
|
|
164
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,416
|
|
|
$
|
1,426
|
|
|
$
|
1,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment EBITDA
|
|
$
|
4,574
|
|
|
$
|
4,592
|
|
|
$
|
4,470
|
|
|
Depreciation and amortization
|
|
|
1,416
|
|
|
|
1,426
|
|
|
|
1,391
|
|
|
Interest expense
|
|
|
2,021
|
|
|
|
2,215
|
|
|
|
955
|
|
|
Gains on sales of facilities
|
|
|
(97
|
)
|
|
|
(471
|
)
|
|
|
(205
|
)
|
|
Impairment of long-lived assets
|
|
|
64
|
|
|
|
24
|
|
|
|
24
|
|
|
Transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests and income taxes
|
|
$
|
1,170
|
|
|
$
|
1,398
|
|
|
$
|
1,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 14 —
|
SEGMENT
AND GEOGRAPHIC INFORMATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Eastern Group
|
|
$
|
4,906
|
|
|
$
|
4,928
|
|
|
Central Group
|
|
|
5,251
|
|
|
|
5,157
|
|
|
Western Group
|
|
|
8,597
|
|
|
|
8,152
|
|
|
Corporate and other
|
|
|
5,526
|
|
|
|
5,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,280
|
|
|
$
|
24,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
|
Central
|
|
|
Western
|
|
|
Corporate
|
|
|
|
|
|
|
|
Group
|
|
|
Group
|
|
|
Group
|
|
|
and Other
|
|
|
Total
|
|
|
|
|
Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
628
|
|
|
$
|
1,015
|
|
|
$
|
749
|
|
|
$
|
237
|
|
|
$
|
2,629
|
|
|
Acquisitions
|
|
|
38
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
43
|
|
|
Sales
|
|
|
(14
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(14
|
)
|
|
Impairments
|
|
|
(48
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(48
|
)
|
|
Foreign currency translation and other
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(26
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
602
|
|
|
$
|
1,013
|
|
|
$
|
754
|
|
|
$
|
211
|
|
|
$
|
2,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 15 —
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
The components of accumulated other comprehensive income (loss)
are as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Foreign
|
|
|
|
|
|
in Fair
|
|
|
|
|
|
|
|
Gains (Losses) on
|
|
|
Currency
|
|
|
Defined
|
|
|
Value of
|
|
|
|
|
|
|
|
Available-for-Sale
|
|
|
Translation
|
|
|
Benefit
|
|
|
Derivative
|
|
|
|
|
|
|
|
Securities
|
|
|
Adjustments
|
|
|
Plans
|
|
|
Instruments
|
|
|
Total
|
|
|
|
|
Balances at December 31, 2005
|
|
$
|
118
|
|
|
$
|
30
|
|
|
$
|
(18
|
)
|
|
$
|
—
|
|
|
$
|
130
|
|
|
Unrealized gains on available-for-sale securities, net of $30 of
income taxes
|
|
|
53
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
53
|
|
|
Gains reclassified into earnings from other comprehensive
income, net of $88 of income taxes
|
|
|
(155
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(155
|
)
|
|
Foreign currency translation adjustments, net of $10 of income
taxes
|
|
|
—
|
|
|
|
19
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19
|
|
|
Defined benefit plans, net of $30 income tax benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
(49
|
)
|
|
|
—
|
|
|
|
(49
|
)
|
|
Change in fair value of derivative instruments, net of $10 of
income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2006
|
|
|
16
|
|
|
|
49
|
|
|
|
(67
|
)
|
|
|
18
|
|
|
|
16
|
|
|
Unrealized gains on available-for-sale securities, net of $1 of
income taxes
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
Foreign currency translation adjustments, net of $3 income tax
benefit
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(7
|
)
|
|
Gains reclassified into earnings from other comprehensive
income, net of $3 and $5, respectively, of income taxes
|
|
|
(5
|
)
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(13
|
)
|
|
Defined benefit plans, net of $14 of income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
23
|
|
|
|
—
|
|
|
|
23
|
|
|
Change in fair value of derivative instruments, net of $112
income tax benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(194
|
)
|
|
|
(194
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2007
|
|
|
14
|
|
|
|
34
|
|
|
|
(44
|
)
|
|
|
(176
|
)
|
|
|
(172
|
)
|
|
Unrealized losses on available-for-sale securities, net of $25
income tax benefit
|
|
|
(44
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(44
|
)
|
|
Foreign currency translation adjustments, net of $33 income tax
benefit
|
|
|
—
|
|
|
|
(62
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(62
|
)
|
|
Defined benefit plans, net of $36 income tax benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
(62
|
)
|
|
|
—
|
|
|
|
(62
|
)
|
|
Change in fair value of derivative instruments, net of $152
income tax benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(264
|
)
|
|
|
(264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2008
|
|
$
|
(30
|
)
|
|
$
|
(28
|
)
|
|
$
|
(106
|
)
|
|
$
|
(440
|
)
|
|
$
|
(604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 16 —
|
ACCRUED
EXPENSES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
A summary of other accrued expenses at December 31 follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Professional liability risks
|
|
$
|
279
|
|
|
$
|
280
|
|
|
Interest
|
|
|
212
|
|
|
|
223
|
|
|
Employee benefit plans
|
|
|
89
|
|
|
|
217
|
|
|
Income taxes
|
|
|
224
|
|
|
|
190
|
|
|
Taxes other than income
|
|
|
189
|
|
|
|
139
|
|
|
Other
|
|
|
289
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,282
|
|
|
$
|
1,391
|
|
|
|
|
|
|
|
|
|
|
|
A summary of activity for the allowance of doubtful accounts
follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
|
|
|
Accounts
|
|
|
|
|
|
|
|
Balance at
|
|
|
for
|
|
|
Written off,
|
|
|
Balance
|
|
|
|
|
Beginning
|
|
|
Doubtful
|
|
|
Net of
|
|
|
at End
|
|
|
|
|
of Year
|
|
|
Accounts
|
|
|
Recoveries
|
|
|
of Year
|
|
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006
|
|
$
|
2,897
|
|
|
$
|
2,660
|
|
|
$
|
(2,129
|
)
|
|
$
|
3,428
|
|
|
Year ended December 31, 2007
|
|
|
3,428
|
|
|
|
3,130
|
|
|
|
(2,269
|
)
|
|
|
4,289
|
|
|
Year ended December 31, 2008
|
|
|
4,289
|
|
|
|
3,409
|
|
|
|
(2,263
|
)
|
|
|
5,435
|
|
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION
|
The senior secured credit facilities and senior secured notes
described in Note 10 are fully and unconditionally
guaranteed by substantially all existing and future, direct and
indirect, wholly-owned material domestic subsidiaries that are
“Unrestricted Subsidiaries” under our Indenture dated
December 16, 1993 (except for certain special purpose
subsidiaries that only guarantee and pledge their assets under
our ABL credit facility).
Our condensed consolidating balance sheets at December 31,
2008 and 2007 and condensed consolidating statements of income
and cash flows for each of the three years in the period ended
December 31, 2008, segregating the parent company issuer,
the subsidiary guarantors, the subsidiary non-guarantors and
eliminations, follow.
F-32
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
For The Year Ended December 31, 2008
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
Revenues
|
|
$
|
—
|
|
|
$
|
16,507
|
|
|
$
|
11,867
|
|
|
$
|
—
|
|
|
$
|
28,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
—
|
|
|
|
6,846
|
|
|
|
4,594
|
|
|
|
—
|
|
|
|
11,440
|
|
|
Supplies
|
|
|
—
|
|
|
|
2,671
|
|
|
|
1,949
|
|
|
|
—
|
|
|
|
4,620
|
|
|
Other operating expenses
|
|
|
(6
|
)
|
|
|
2,444
|
|
|
|
2,116
|
|
|
|
—
|
|
|
|
4,554
|
|
|
Provision for doubtful accounts
|
|
|
—
|
|
|
|
2,073
|
|
|
|
1,336
|
|
|
|
—
|
|
|
|
3,409
|
|
|
Equity in earnings of affiliates
|
|
|
(2,100
|
)
|
|
|
(82
|
)
|
|
|
(141
|
)
|
|
|
2,100
|
|
|
|
(223
|
)
|
|
Gains on investments
|
|
|
—
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
776
|
|
|
|
640
|
|
|
|
—
|
|
|
|
1,416
|
|
|
Interest expense
|
|
|
2,190
|
|
|
|
(328
|
)
|
|
|
159
|
|
|
|
—
|
|
|
|
2,021
|
|
|
Gains on sales of facilities
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
(92
|
)
|
|
|
—
|
|
|
|
(97
|
)
|
|
Impairment of long-lived assets
|
|
|
—
|
|
|
|
—
|
|
|
|
64
|
|
|
|
—
|
|
|
|
64
|
|
|
Management fees
|
|
|
—
|
|
|
|
(426
|
)
|
|
|
426
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
|
|
13,970
|
|
|
|
11,050
|
|
|
|
2,100
|
|
|
|
27,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests and income taxes
|
|
|
(84
|
)
|
|
|
2,537
|
|
|
|
817
|
|
|
|
(2,100
|
)
|
|
|
1,170
|
|
|
Minority interests in earnings of consolidated entities
|
|
|
—
|
|
|
|
53
|
|
|
|
176
|
|
|
|
—
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(84
|
)
|
|
|
2,484
|
|
|
|
641
|
|
|
|
(2,100
|
)
|
|
|
941
|
|
|
Provision for income taxes
|
|
|
(757
|
)
|
|
|
803
|
|
|
|
222
|
|
|
|
—
|
|
|
|
268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
673
|
|
|
$
|
1,681
|
|
|
$
|
419
|
|
|
$
|
(2,100
|
)
|
|
$
|
673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
For The Year Ended December 31, 2007
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
Revenues
|
|
$
|
—
|
|
|
$
|
15,598
|
|
|
$
|
11,260
|
|
|
$
|
—
|
|
|
$
|
26,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
—
|
|
|
|
6,441
|
|
|
|
4,273
|
|
|
|
—
|
|
|
|
10,714
|
|
|
Supplies
|
|
|
—
|
|
|
|
2,549
|
|
|
|
1,846
|
|
|
|
—
|
|
|
|
4,395
|
|
|
Other operating expenses
|
|
|
(2
|
)
|
|
|
2,279
|
|
|
|
1,964
|
|
|
|
—
|
|
|
|
4,241
|
|
|
Provision for doubtful accounts
|
|
|
—
|
|
|
|
1,942
|
|
|
|
1,188
|
|
|
|
—
|
|
|
|
3,130
|
|
|
Equity in earnings of affiliates
|
|
|
(2,245
|
)
|
|
|
(90
|
)
|
|
|
(116
|
)
|
|
|
2,245
|
|
|
|
(206
|
)
|
|
Gains on investments
|
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
(8
|
)
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
779
|
|
|
|
647
|
|
|
|
—
|
|
|
|
1,426
|
|
|
Interest expense
|
|
|
2,161
|
|
|
|
(95
|
)
|
|
|
149
|
|
|
|
—
|
|
|
|
2,215
|
|
|
Gains on sales of facilities
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(468
|
)
|
|
|
—
|
|
|
|
(471
|
)
|
|
Impairment of long-lived assets
|
|
|
—
|
|
|
|
—
|
|
|
|
24
|
|
|
|
—
|
|
|
|
24
|
|
|
Management fees
|
|
|
—
|
|
|
|
(392
|
)
|
|
|
392
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86
|
)
|
|
|
13,410
|
|
|
|
9,891
|
|
|
|
2,245
|
|
|
|
25,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests and income taxes
|
|
|
86
|
|
|
|
2,188
|
|
|
|
1,369
|
|
|
|
(2,245
|
)
|
|
|
1,398
|
|
|
Minority interests in earnings of consolidated entities
|
|
|
—
|
|
|
|
28
|
|
|
|
180
|
|
|
|
—
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
86
|
|
|
|
2,160
|
|
|
|
1,189
|
|
|
|
(2,245
|
)
|
|
|
1,190
|
|
|
Provision for income taxes
|
|
|
(788
|
)
|
|
|
712
|
|
|
|
392
|
|
|
|
—
|
|
|
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
874
|
|
|
$
|
1,448
|
|
|
$
|
797
|
|
|
$
|
(2,245
|
)
|
|
$
|
874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
For The Year Ended December 31, 2006
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
Revenues
|
|
$
|
—
|
|
|
$
|
14,913
|
|
|
$
|
10,564
|
|
|
$
|
—
|
|
|
$
|
25,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
—
|
|
|
|
6,319
|
|
|
|
4,090
|
|
|
|
—
|
|
|
|
10,409
|
|
|
Supplies
|
|
|
—
|
|
|
|
2,487
|
|
|
|
1,835
|
|
|
|
—
|
|
|
|
4,322
|
|
|
Other operating expenses
|
|
|
—
|
|
|
|
2,253
|
|
|
|
1,803
|
|
|
|
—
|
|
|
|
4,056
|
|
|
Provision for doubtful accounts
|
|
|
—
|
|
|
|
1,652
|
|
|
|
1,008
|
|
|
|
—
|
|
|
|
2,660
|
|
|
Equity in earnings of affiliates
|
|
|
(1,995
|
)
|
|
|
(79
|
)
|
|
|
(118
|
)
|
|
|
1,995
|
|
|
|
(197
|
)
|
|
Gains on investments
|
|
|
—
|
|
|
|
—
|
|
|
|
(243
|
)
|
|
|
—
|
|
|
|
(243
|
)
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
755
|
|
|
|
636
|
|
|
|
—
|
|
|
|
1,391
|
|
|
Interest expense
|
|
|
895
|
|
|
|
(99
|
)
|
|
|
159
|
|
|
|
—
|
|
|
|
955
|
|
|
Gains on sales of facilities
|
|
|
—
|
|
|
|
7
|
|
|
|
(212
|
)
|
|
|
—
|
|
|
|
(205
|
)
|
|
Impairment of long-lived assets
|
|
|
—
|
|
|
|
5
|
|
|
|
19
|
|
|
|
—
|
|
|
|
24
|
|
|
Transaction costs
|
|
|
429
|
|
|
|
25
|
|
|
|
(12
|
)
|
|
|
—
|
|
|
|
442
|
|
|
Management fees
|
|
|
—
|
|
|
|
(377
|
)
|
|
|
377
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(671
|
)
|
|
|
12,948
|
|
|
|
9,342
|
|
|
|
1,995
|
|
|
|
23,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests and income taxes
|
|
|
671
|
|
|
|
1,965
|
|
|
|
1,222
|
|
|
|
(1,995
|
)
|
|
|
1,863
|
|
|
Minority interests in earnings of consolidated entities
|
|
|
—
|
|
|
|
21
|
|
|
|
180
|
|
|
|
—
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
671
|
|
|
|
1,944
|
|
|
|
1,042
|
|
|
|
(1,995
|
)
|
|
|
1,662
|
|
|
Provision for income taxes
|
|
|
(365
|
)
|
|
|
612
|
|
|
|
379
|
|
|
|
—
|
|
|
|
626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,036
|
|
|
$
|
1,332
|
|
|
$
|
663
|
|
|
$
|
(1,995
|
)
|
|
$
|
1,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-35
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
HCA
INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2008
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
134
|
|
|
$
|
331
|
|
|
$
|
—
|
|
|
$
|
465
|
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
2,214
|
|
|
|
1,566
|
|
|
|
—
|
|
|
|
3,780
|
|
|
Inventories
|
|
|
—
|
|
|
|
455
|
|
|
|
282
|
|
|
|
—
|
|
|
|
737
|
|
|
Deferred income taxes
|
|
|
914
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
914
|
|
|
Other
|
|
|
—
|
|
|
|
140
|
|
|
|
265
|
|
|
|
—
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
914
|
|
|
|
2,943
|
|
|
|
2,444
|
|
|
|
—
|
|
|
|
6,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
—
|
|
|
|
7,122
|
|
|
|
4,407
|
|
|
|
—
|
|
|
|
11,529
|
|
|
Investments of insurance subsidiary
|
|
|
—
|
|
|
|
—
|
|
|
|
1,422
|
|
|
|
—
|
|
|
|
1,422
|
|
|
Investments in and advances to affiliates
|
|
|
—
|
|
|
|
243
|
|
|
|
599
|
|
|
|
—
|
|
|
|
842
|
|
|
Goodwill
|
|
|
—
|
|
|
|
1,643
|
|
|
|
937
|
|
|
|
—
|
|
|
|
2,580
|
|
|
Deferred loan costs
|
|
|
458
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
458
|
|
|
Investments in and advances to subsidiaries
|
|
|
19,290
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(19,290
|
)
|
|
|
—
|
|
|
Other
|
|
|
1,050
|
|
|
|
31
|
|
|
|
67
|
|
|
|
—
|
|
|
|
1,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,712
|
|
|
$
|
11,982
|
|
|
$
|
9,876
|
|
|
$
|
(19,290
|
)
|
|
$
|
24,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
881
|
|
|
$
|
489
|
|
|
$
|
—
|
|
|
$
|
1,370
|
|
|
Accrued salaries
|
|
|
—
|
|
|
|
549
|
|
|
|
305
|
|
|
|
—
|
|
|
|
854
|
|
|
Other accrued expenses
|
|
|
435
|
|
|
|
284
|
|
|
|
563
|
|
|
|
—
|
|
|
|
1,282
|
|
|
Long-term debt due within one year
|
|
|
355
|
|
|
|
—
|
|
|
|
49
|
|
|
|
—
|
|
|
|
404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
790
|
|
|
|
1,714
|
|
|
|
1,406
|
|
|
|
—
|
|
|
|
3,910
|
|
|
Long-term debt
|
|
|
26,089
|
|
|
|
99
|
|
|
|
397
|
|
|
|
—
|
|
|
|
26,585
|
|
|
Intercompany balances
|
|
|
3,663
|
|
|
|
(8,136
|
)
|
|
|
4,473
|
|
|
|
—
|
|
|
|
—
|
|
|
Professional liability risks
|
|
|
—
|
|
|
|
—
|
|
|
|
1,108
|
|
|
|
—
|
|
|
|
1,108
|
|
|
Income taxes and other liabilities
|
|
|
1,270
|
|
|
|
379
|
|
|
|
133
|
|
|
|
—
|
|
|
|
1,782
|
|
|
Minority interests in equity of consolidated entities
|
|
|
—
|
|
|
|
138
|
|
|
|
857
|
|
|
|
—
|
|
|
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,812
|
|
|
|
(5,806
|
)
|
|
|
8,374
|
|
|
|
—
|
|
|
|
34,380
|
|
|
Equity securities with contingent redemption rights
|
|
|
155
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (deficit) equity
|
|
|
(10,255
|
)
|
|
|
17,788
|
|
|
|
1,502
|
|
|
|
(19,290
|
)
|
|
|
(10,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,712
|
|
|
$
|
11,982
|
|
|
$
|
9,876
|
|
|
$
|
(19,290
|
)
|
|
$
|
24,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-36
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
HCA
INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2007
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
165
|
|
|
$
|
228
|
|
|
$
|
—
|
|
|
$
|
393
|
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
2,248
|
|
|
|
1,647
|
|
|
|
—
|
|
|
|
3,895
|
|
|
Inventories
|
|
|
—
|
|
|
|
432
|
|
|
|
278
|
|
|
|
—
|
|
|
|
710
|
|
|
Deferred income taxes
|
|
|
592
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
592
|
|
|
Other
|
|
|
—
|
|
|
|
123
|
|
|
|
492
|
|
|
|
—
|
|
|
|
615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
592
|
|
|
|
2,968
|
|
|
|
2,645
|
|
|
|
—
|
|
|
|
6,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
—
|
|
|
|
6,960
|
|
|
|
4,482
|
|
|
|
—
|
|
|
|
11,442
|
|
|
Investments of insurance subsidiary
|
|
|
—
|
|
|
|
—
|
|
|
|
1,669
|
|
|
|
—
|
|
|
|
1,669
|
|
|
Investments in and advances to affiliates
|
|
|
—
|
|
|
|
221
|
|
|
|
467
|
|
|
|
—
|
|
|
|
688
|
|
|
Goodwill
|
|
|
—
|
|
|
|
1,644
|
|
|
|
985
|
|
|
|
—
|
|
|
|
2,629
|
|
|
Deferred loan costs
|
|
|
539
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
539
|
|
|
Investments in and advances to subsidiaries
|
|
|
17,190
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,190
|
)
|
|
|
—
|
|
|
Other
|
|
|
798
|
|
|
|
18
|
|
|
|
37
|
|
|
|
—
|
|
|
|
853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,119
|
|
|
$
|
11,811
|
|
|
$
|
10,285
|
|
|
$
|
(17,190
|
)
|
|
$
|
24,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
883
|
|
|
$
|
487
|
|
|
$
|
—
|
|
|
$
|
1,370
|
|
|
Accrued salaries
|
|
|
—
|
|
|
|
515
|
|
|
|
265
|
|
|
|
—
|
|
|
|
780
|
|
|
Other accrued expenses
|
|
|
411
|
|
|
|
372
|
|
|
|
608
|
|
|
|
—
|
|
|
|
1,391
|
|
|
Long-term debt due within one year
|
|
|
271
|
|
|
|
—
|
|
|
|
37
|
|
|
|
—
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
682
|
|
|
|
1,770
|
|
|
|
1,397
|
|
|
|
—
|
|
|
|
3,849
|
|
|
Long-term debt
|
|
|
26,439
|
|
|
|
103
|
|
|
|
458
|
|
|
|
—
|
|
|
|
27,000
|
|
|
Intercompany balances
|
|
|
1,368
|
|
|
|
(6,524
|
)
|
|
|
5,156
|
|
|
|
—
|
|
|
|
—
|
|
|
Professional liability risks
|
|
|
—
|
|
|
|
—
|
|
|
|
1,233
|
|
|
|
—
|
|
|
|
1,233
|
|
|
Income taxes and other liabilities
|
|
|
1,004
|
|
|
|
238
|
|
|
|
137
|
|
|
|
—
|
|
|
|
1,379
|
|
|
Minority interests in equity of consolidated entities
|
|
|
—
|
|
|
|
117
|
|
|
|
821
|
|
|
|
—
|
|
|
|
938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,493
|
|
|
|
(4,296
|
)
|
|
|
9,202
|
|
|
|
—
|
|
|
|
34,399
|
|
|
Equity securities with contingent redemption rights
|
|
|
164
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (deficit) equity
|
|
|
(10,538
|
)
|
|
|
16,107
|
|
|
|
1,083
|
|
|
|
(17,190
|
)
|
|
|
(10,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,119
|
|
|
$
|
11,811
|
|
|
$
|
10,285
|
|
|
$
|
(17,190
|
)
|
|
$
|
24,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-37
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
HCA
INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended December 31, 2008
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
673
|
|
|
$
|
1,681
|
|
|
$
|
419
|
|
|
$
|
(2,100
|
)
|
|
$
|
673
|
|
|
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
—
|
|
|
|
2,073
|
|
|
|
1,336
|
|
|
|
—
|
|
|
|
3,409
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
776
|
|
|
|
640
|
|
|
|
—
|
|
|
|
1,416
|
|
|
Income taxes
|
|
|
(448
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(448
|
)
|
|
Gains on sales of facilities
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
(92
|
)
|
|
|
—
|
|
|
|
(97
|
)
|
|
Impairment of long-lived assets
|
|
|
—
|
|
|
|
—
|
|
|
|
64
|
|
|
|
—
|
|
|
|
64
|
|
|
Amortization of deferred loan costs
|
|
|
79
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
79
|
|
|
Change in minority interests
|
|
|
—
|
|
|
|
21
|
|
|
|
15
|
|
|
|
—
|
|
|
|
36
|
|
|
Share-based compensation
|
|
|
32
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32
|
|
|
Equity in earnings of affiliates
|
|
|
(2,100
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
2,100
|
|
|
|
—
|
|
|
Decrease in cash from operating assets and liabilities
|
|
|
(11
|
)
|
|
|
(2,085
|
)
|
|
|
(1,271
|
)
|
|
|
—
|
|
|
|
(3,367
|
)
|
|
Other
|
|
|
—
|
|
|
|
(19
|
)
|
|
|
19
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,775
|
)
|
|
|
2,442
|
|
|
|
1,130
|
|
|
|
—
|
|
|
|
1,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
—
|
|
|
|
(927
|
)
|
|
|
(673
|
)
|
|
|
—
|
|
|
|
(1,600
|
)
|
|
Acquisition of hospitals and health care entities
|
|
|
—
|
|
|
|
(34
|
)
|
|
|
(51
|
)
|
|
|
—
|
|
|
|
(85
|
)
|
|
Disposal of hospitals and health care entities
|
|
|
—
|
|
|
|
27
|
|
|
|
166
|
|
|
|
—
|
|
|
|
193
|
|
|
Change in investments
|
|
|
—
|
|
|
|
(26
|
)
|
|
|
47
|
|
|
|
—
|
|
|
|
21
|
|
|
Other
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
8
|
|
|
|
—
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
—
|
|
|
|
(964
|
)
|
|
|
(503
|
)
|
|
|
—
|
|
|
|
(1,467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in revolving bank credit facility
|
|
|
700
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
700
|
|
|
Repayment of long-term debt
|
|
|
(851
|
)
|
|
|
(4
|
)
|
|
|
(105
|
)
|
|
|
—
|
|
|
|
(960
|
)
|
|
Changes in intercompany balances with affiliates, net
|
|
|
1,935
|
|
|
|
(1,505
|
)
|
|
|
(430
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
11
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,775
|
|
|
|
(1,509
|
)
|
|
|
(524
|
)
|
|
|
—
|
|
|
|
(258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
—
|
|
|
|
(31
|
)
|
|
|
103
|
|
|
|
—
|
|
|
|
72
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
—
|
|
|
|
165
|
|
|
|
228
|
|
|
|
—
|
|
|
|
393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
134
|
|
|
$
|
331
|
|
|
$
|
—
|
|
|
$
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-38
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
HCA
INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended December 31, 2007
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
874
|
|
|
$
|
1,448
|
|
|
$
|
797
|
|
|
$
|
(2,245
|
)
|
|
$
|
874
|
|
|
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
—
|
|
|
|
1,942
|
|
|
|
1,188
|
|
|
|
—
|
|
|
|
3,130
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
779
|
|
|
|
647
|
|
|
|
—
|
|
|
|
1,426
|
|
|
Income taxes
|
|
|
(105
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(105
|
)
|
|
Gains on sales of facilities
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(468
|
)
|
|
|
—
|
|
|
|
(471
|
)
|
|
Impairment of long-lived assets
|
|
|
—
|
|
|
|
—
|
|
|
|
24
|
|
|
|
—
|
|
|
|
24
|
|
|
Amortization of deferred loan costs
|
|
|
78
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
78
|
|
|
Change in minority interests
|
|
|
—
|
|
|
|
16
|
|
|
|
24
|
|
|
|
—
|
|
|
|
40
|
|
|
Share-based compensation
|
|
|
24
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24
|
|
|
Equity in earnings of affiliates
|
|
|
(2,245
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
2,245
|
|
|
|
—
|
|
|
Decrease in cash from operating assets and liabilities
|
|
|
(6
|
)
|
|
|
(2,127
|
)
|
|
|
(1,482
|
)
|
|
|
—
|
|
|
|
(3,615
|
)
|
|
Other
|
|
|
7
|
|
|
|
18
|
|
|
|
(34
|
)
|
|
|
—
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,373
|
)
|
|
|
2,073
|
|
|
|
696
|
|
|
|
—
|
|
|
|
1,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
—
|
|
|
|
(640
|
)
|
|
|
(804
|
)
|
|
|
—
|
|
|
|
(1,444
|
)
|
|
Acquisition of hospitals and health care entities
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
(21
|
)
|
|
|
—
|
|
|
|
(32
|
)
|
|
Disposal of hospitals and health care entities
|
|
|
—
|
|
|
|
24
|
|
|
|
743
|
|
|
|
—
|
|
|
|
767
|
|
|
Change in investments
|
|
|
—
|
|
|
|
3
|
|
|
|
204
|
|
|
|
—
|
|
|
|
207
|
|
|
Other
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
31
|
|
|
|
—
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
—
|
|
|
|
(632
|
)
|
|
|
153
|
|
|
|
—
|
|
|
|
(479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in revolving bank credit facility
|
|
|
(520
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(520
|
)
|
|
Repayment of long-term debt
|
|
|
(255
|
)
|
|
|
(4
|
)
|
|
|
(491
|
)
|
|
|
—
|
|
|
|
(750
|
)
|
|
Issuances of common stock
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
Changes in intercompany balances with affiliates, net
|
|
|
2,059
|
|
|
|
(1,554
|
)
|
|
|
(505
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
23
|
|
|
|
—
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,373
|
|
|
|
(1,558
|
)
|
|
|
(973
|
)
|
|
|
—
|
|
|
|
(1,158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
—
|
|
|
|
(117
|
)
|
|
|
(124
|
)
|
|
|
—
|
|
|
|
(241
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
—
|
|
|
|
282
|
|
|
|
352
|
|
|
|
—
|
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
165
|
|
|
$
|
228
|
|
|
$
|
—
|
|
|
$
|
393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-39
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
HCA
INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended December 31, 2006
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,036
|
|
|
$
|
1,332
|
|
|
$
|
663
|
|
|
$
|
(1,995
|
)
|
|
$
|
1,036
|
|
|
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
—
|
|
|
|
1,652
|
|
|
|
1,008
|
|
|
|
—
|
|
|
|
2,660
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
755
|
|
|
|
636
|
|
|
|
—
|
|
|
|
1,391
|
|
|
Income taxes
|
|
|
(552
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(552
|
)
|
|
Gains on sales of facilities
|
|
|
—
|
|
|
|
7
|
|
|
|
(212
|
)
|
|
|
—
|
|
|
|
(205
|
)
|
|
Impairment of long-lived assets
|
|
|
—
|
|
|
|
5
|
|
|
|
19
|
|
|
|
—
|
|
|
|
24
|
|
|
Amortization of deferred loan costs
|
|
|
18
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
Change in minority interests
|
|
|
—
|
|
|
|
18
|
|
|
|
40
|
|
|
|
—
|
|
|
|
58
|
|
|
Share-based compensation
|
|
|
324
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
324
|
|
|
Equity in earnings of affiliates
|
|
|
(1,995
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,995
|
|
|
|
—
|
|
|
Increase (decrease) in cash from operating assets and liabilities
|
|
|
78
|
|
|
|
(1,552
|
)
|
|
|
(1,466
|
)
|
|
|
—
|
|
|
|
(2,940
|
)
|
|
Other
|
|
|
56
|
|
|
|
2
|
|
|
|
(27
|
)
|
|
|
—
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,035
|
)
|
|
|
2,219
|
|
|
|
661
|
|
|
|
—
|
|
|
|
1,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
—
|
|
|
|
(1,058
|
)
|
|
|
(807
|
)
|
|
|
—
|
|
|
|
(1,865
|
)
|
|
Acquisition of hospitals and health care entities
|
|
|
—
|
|
|
|
(29
|
)
|
|
|
(83
|
)
|
|
|
—
|
|
|
|
(112
|
)
|
|
Disposal of hospitals and health care entities
|
|
|
—
|
|
|
|
108
|
|
|
|
543
|
|
|
|
—
|
|
|
|
651
|
|
|
Change in investments
|
|
|
—
|
|
|
|
13
|
|
|
|
13
|
|
|
|
—
|
|
|
|
26
|
|
|
Other
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
—
|
|
|
|
(970
|
)
|
|
|
(337
|
)
|
|
|
—
|
|
|
|
(1,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of long-term debt
|
|
|
21,207
|
|
|
|
—
|
|
|
|
551
|
|
|
|
—
|
|
|
|
21,758
|
|
|
Net change in revolving bank credit facility
|
|
|
(435
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(435
|
)
|
|
Repayment of long-term debt
|
|
|
(3,621
|
)
|
|
|
(3
|
)
|
|
|
(104
|
)
|
|
|
—
|
|
|
|
(3,728
|
)
|
|
Issuances of common stock
|
|
|
108
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
108
|
|
|
Repurchases of common stock
|
|
|
(653
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(653
|
)
|
|
Recapitalization-repurchase of common stock
|
|
|
(20,364
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,364
|
)
|
|
Recapitalization-equity contributions
|
|
|
3,782
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,782
|
|
|
Payment of debt issuance costs
|
|
|
(586
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(586
|
)
|
|
Payment of cash dividends
|
|
|
(201
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(201
|
)
|
|
Changes in intercompany balances with affiliates, net
|
|
|
1,719
|
|
|
|
(1,095
|
)
|
|
|
(624
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
79
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,035
|
|
|
|
(1,098
|
)
|
|
|
(177
|
)
|
|
|
—
|
|
|
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
—
|
|
|
|
151
|
|
|
|
147
|
|
|
|
—
|
|
|
|
298
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
—
|
|
|
|
131
|
|
|
|
205
|
|
|
|
—
|
|
|
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
282
|
|
|
$
|
352
|
|
|
$
|
—
|
|
|
$
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Healthtrust, Inc. — The Hospital Company
(“Healthtrust”) is the first-tier subsidiary of HCA
Inc. The common stock of Healthtrust has been pledged as
collateral for the senior secured credit facilities and senior
secured notes described in Note 10.
Rule 3-16
of
Regulation S-X
under the Securities Act requires the filing of separate
financial
F-40
HCA
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
NOTE 17 —
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER
COLLATERAL-RELATED INFORMATION (Continued)
|
statements for any affiliate of the registrant whose securities
constitute a substantial portion of the collateral for any class
of securities registered or being registered. We believe the
separate financial statements requirement applies to Healthtrust
due to the pledge of its common stock as collateral for the
senior secured notes. Due to the corporate structure
relationship of HCA and Healthtrust, HCA’s operating
subsidiaries are also the operating subsidiaries of Healthtrust.
The corporate structure relationship, combined with the
application of push-down accounting in Healthtrust’s
consolidated financial statements related to HCA’s debt and
financial instruments, results in the consolidated financial
statements of Healthtrust being substantially identical to the
consolidated financial statements of HCA. The consolidated
financial statements of HCA and Healthtrust present the
identical amounts for revenues, expenses, net income, assets,
liabilities, total stockholders’ (deficit) equity, net cash
provided by operating activities, net cash used in investing
activities and net cash used in financing activities. Certain
individual line items in the HCA consolidated statements of
stockholders’ (deficit) equity and cash flows are combined
into one line item in the Healthtrust consolidated statements of
stockholder’s (deficit) equity and cash flows.
Reconciliations of the HCA Inc. Consolidated Statements of
Stockholders’ (Deficit) Equity and Consolidated Statements
of Cash Flows presentations to the Healthtrust, Inc. —
The Hospital Company Consolidated Statements of
Stockholder’s (Deficit) Equity and Consolidated Statements
of Cash Flows presentations for the years ended
December 31, 2008, 2007 and 2006 are as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Presentation in HCA Inc. Consolidated Statements of
Stockholders’ (Deficit) Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapitalization-repurchase of common stock
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(21,373
|
)
|
|
Recapitalization-equity contribution
|
|
|
—
|
|
|
|
—
|
|
|
|
4,477
|
|
|
Cash dividends declared
|
|
|
—
|
|
|
|
—
|
|
|
|
(139
|
)
|
|
Stock repurchases
|
|
|
—
|
|
|
|
—
|
|
|
|
(653
|
)
|
|
Stock options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
163
|
|
|
Employee benefit plan issuances
|
|
|
—
|
|
|
|
—
|
|
|
|
366
|
|
|
Equity contributions
|
|
|
—
|
|
|
|
60
|
|
|
|
—
|
|
|
Share-based benefit plans
|
|
|
40
|
|
|
|
24
|
|
|
|
—
|
|
|
Other
|
|
|
2
|
|
|
|
28
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Presentation in Healthtrust, Inc. — The Hospital
Company Consolidated Statements of Stockholder’s (Deficit)
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from (to) HCA Inc., net of contributions to (from)
HCA Inc.
|
|
$
|
42
|
|
|
$
|
112
|
|
|
$
|
(17,159
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Presentation in HCA Inc. Consolidated Statements of Cash Flows
(cash flows from financing activities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of common stock
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
108
|
|
|
Repurchases of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(653
|
)
|
|
Recapitalization-repurchase of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,364
|
)
|
|
Recapitalization-equity contributions
|
|
|
—
|
|
|
|
—
|
|
|
|
3,782
|
|
|
Payment of cash dividends
|
|
|
—
|
|
|
|
—
|
|
|
|
(201
|
)
|
|
Other
|
|
|
(9
|
)
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Presentation in Healthtrust Inc. — The Hospital
Company Consolidated Statements of Cash Flows (cash flows from
financing activities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash distributions from (to) HCA Inc.
|
|
$
|
(9
|
)
|
|
$
|
98
|
|
|
$
|
(17,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to the consolidated financial statements of Healthtrust
being substantially identical to the consolidated financial
statements of HCA, except for the items presented in the tables
above, the separate consolidated financial statements of
Healthtrust are not presented.
F-41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
Revenues
|
|
$
|
7,127
|
|
|
$
|
6,980
|
|
|
$
|
7,002
|
|
|
$
|
7,265
|
|
|
Net income
|
|
$
|
170
|
(a)
|
|
$
|
141
|
(b)
|
|
$
|
86
|
(c)
|
|
$
|
276
|
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
Revenues
|
|
$
|
6,677
|
|
|
$
|
6,729
|
|
|
$
|
6,569
|
|
|
$
|
6,883
|
|
|
Net income
|
|
$
|
180
|
(e)
|
|
$
|
116
|
(f)
|
|
$
|
300
|
(g)
|
|
$
|
278
|
(h)
|
|
|
|
|
|
(a)
|
|
First quarter results include
$30 million of gains on sales of facilities (See
NOTE 4 of the notes to consolidated financial statements).
|
|
|
|
(b)
|
|
Second quarter results include
$6 million of losses on sales of facilities (See
NOTE 4 of the notes to consolidated financial statements)
and $6 million of costs related to the impairment of
long-lived assets (See NOTE 5 of the notes to consolidated
financial statements).
|
|
|
|
(c)
|
|
Third quarter results include
$29 million of gains on sales of facilities (See
NOTE 4 of the notes to consolidated financial statements)
and $28 million of costs related to the impairment of
long-lived assets (See NOTE 5 of the notes to consolidated
financial statements).
|
|
|
|
(d)
|
|
Fourth quarter results include
$5 million of gains on sales of facilities (See NOTE 4
of the notes to consolidated financial statements) and
$6 million of costs related to the impairment of long-lived
assets (See NOTE 5 of the notes to consolidated financial
statements).
|
|
|
|
(e)
|
|
First quarter results include
$2 million of gains on sales of facilities (See NOTE 4
of the notes to consolidated financial statements).
|
|
|
|
(f)
|
|
Second quarter results include
$7 million of gains on sales of facilities (See NOTE 4
of the notes to consolidated financial statements) and
$15 million of costs related to the impairment of
long-lived assets (See NOTE 5 of the notes to consolidated
financial statements).
|
|
|
|
(g)
|
|
Third quarter results include
$193 million of gains on sales of facilities (See
NOTE 4 of the notes to consolidated financial statements).
|
|
|
|
(h)
|
|
Fourth quarter results include
$88 million of gains on sales of facilities (See
NOTE 4 of the notes to consolidated financial statements).
|
F-42
Exhibit 4.12(b)
AMENDMENT NO. 1
, dated as of March 2, 2009 (this “
Amendment
”), to the Credit
Agreement, dated as of November 17, 2006 as amended and restated as of June 20, 2007 among HCA
INC., a Delaware corporation (“
HCA
”), the Subsidiary Borrowers party thereto, the lending
institutions from time to time party thereto (each a “
Lender
” and, collectively, the
“
Lenders
”), BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the
“
Administrative Agent
”) and the other parties named therein (as amended from time to time,
the “
Credit Agreement
”). Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.
WHEREAS, the Credit Parties desire to amend the Credit Agreement and certain of the other
Credit Documents on the terms set forth herein;
WHEREAS, Section 14.1 of the Credit Agreement provides that the relevant Credit Parties and
the Required Lenders may amend the Credit Agreement and the other Credit Documents;
NOW, THEREFORE, in consideration of the premises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
SECTION 1.
Amendment
.
The Credit Agreement is hereby
amended to delete the
stricken text
(indicated textually in the same manner as the following example: stricken text) and to add
the double-underlined text (indicated textually in the same manner as the following example:
double-underlined text
) as set forth in the pages of the Credit Agreement attached as
Exhibit A
hereto.
SECTION 2.
Consent to Amend Intercreditor Agreement
. The Required Lenders hereby give
their consent to permit the Administrative Agent to acknowledge or otherwise enter into amendments
to the Intercreditor Agreement solely to give effect to incurrences of Future Secured Notes (as
defined in
Exhibit A
hereto) to the extent permitted by the Credit Agreement after giving
effect to the amendments contemplated by
Exhibit A
hereto.
SECTION 3.
Representations and Warranties, No Default
. The Borrowers hereby represent
and warrant that immediately prior to and immediately after giving effect to this Amendment (i) no
Default or Event of Default exists and (ii) all representations and warranties contained in the
Credit Agreement or in any other Credit Document are true and correct in all material respects with
the same effect as though such representations and warranties had been made on the date hereof
(except that any representation or warranty which by its terms is made only as of a specified date
is true and correct in all material respects only as of such specified date).
SECTION 4.
Effectiveness
. Upon receipt by the Administrative Agent of executed
signature pages hereto from the Required Lenders and each Credit Party party to the Credit
Agreement, the terms and conditions of this Amendment shall become effective as part of the terms
and conditions of the Credit Agreement for any and all purposes; however, the
amendments to the Credit Agreement attached as
Exhibit A
hereto shall not become
operative until an amendment to the CF Agreement permitting Future Secured Notes has become
operative.
SECTION 5.
Counterparts
. This Amendment may be executed in any number of counterparts
and by different parties hereto on separate counterparts, each of which when so executed and
delivered shall be deemed to be an original, but all of which when taken together shall constitute
a single instrument. Delivery of an executed counterpart of a signature page of this Amendment by
facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.
SECTION 6.
Applicable Law
.
THIS AMENDMENT SHALL BE GOVERNED BY, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.
Headings
. The headings of this Amendment are for purposes of reference
only and shall not limit or otherwise affect the meaning hereof.
SECTION 8.
Effect of Amendment
. Except as expressly set forth herein, this Amendment
shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the
rights and remedies of the Lenders or the other Secured Parties under the Credit Agreement or any
other Credit Document, and shall not alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Credit Agreement or any other
provision of either such agreement or any other Credit Document. Each and every term, condition,
obligation, covenant and agreement contained in the Credit Agreement or any other Credit Document
is hereby ratified and re-affirmed in all respects and shall continue in full force and effect.
Each Credit Party reaffirms its obligations under the Credit Documents to which it is party and the
validity of the Liens granted by it pursuant to the Security Documents. From and after the
effective date of this Amendment, all references to the Credit Agreement in any Credit Document
shall, unless expressly provided otherwise, refer to the Credit Agreement as amended by this
Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their
respective authorized officers as of the day and year first above written.
|
|
|
|
|
|
|
|
HCA INC.
|
|
|
|
By:
|
/s/ David G. Anderson
|
|
|
|
|
Name:
|
David G. Anderson
|
|
|
|
|
Title:
|
Senior Vice President, Finance and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
The SUBSIDIARY BORROWERS listed on
Schedule 1 hereto (or, to the extent so listed on
Schedule 1 hereto, by the General Partner, Sole
Member or General Partner of the Sole Member of
of such Subsidiary Borrower)
|
|
|
|
By:
|
/s/ John M. Franck II
|
|
|
|
|
Name:
|
John M. Franck II
|
|
|
|
|
Title:
|
Vice President and Asst. Secretary
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
BANK OF AMERICA, N.A., as Administrative Agent
and Collateral Agent
|
|
|
|
By:
|
/s/ William S. Wilson
|
|
|
|
|
Name:
|
William S. Wilson
|
|
|
|
|
Title:
|
Sr. Vice President
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
BANK OF AMERICA, N.A., as a Lender
|
|
|
|
By:
|
/s/ William S. Wilson
|
|
|
|
|
Name:
|
William S. Wilson
|
|
|
|
|
Title:
|
Sr. Vice President
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
CITICORP NORTH AMERICA, INC.,
as a Lender
|
|
|
|
By:
|
/s/ Shane Azzara
|
|
|
|
|
Name:
|
Shane Azzara
|
|
|
|
|
Title:
|
Director
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
Deutsche Bank AG New York Branch,
as a Lender
|
|
|
|
By:
|
/s/ Erin Morrissey
|
|
|
|
|
Name:
|
Erin Morrissey
|
|
|
|
|
Title:
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Evelyn Thierry
|
|
|
|
|
Name:
|
Evelyn Thierry
|
|
|
|
|
Title:
|
Vice President
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
General Electric Capital Corporation,
as a Lender
|
|
|
|
By:
|
/s/ Dennis Cloud
|
|
|
|
|
Name:
|
Dennis Cloud
|
|
|
|
|
Title:
|
Duly Authorized Signatory
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
J.P. Morgan Chase Bank, N.A.,
as a Lender
|
|
|
|
By:
|
/s/ Dawn L. LeeLum
|
|
|
|
|
Name:
|
Dawn L. LeeLum
|
|
|
|
|
Title:
|
Executive Director
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
Landesbank Baden-Wuerttemberg
New York and / or Cayman Islands Branch,
as a Lender
|
|
|
|
By:
|
/s/ Francois Delangle
|
|
|
|
|
Name:
|
Francois Delangle
|
|
|
|
|
Title:
|
VP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Ralf Enders
|
|
|
|
|
Name:
|
Ralf Enders
|
|
|
|
|
Title:
|
AVP
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
Merrill Lynch Mortgage Capital, Inc.,
as a Lender
|
|
|
|
By:
|
/s/ Joseph Magnus
|
|
|
|
|
Name:
|
Joseph Magnus
|
|
|
|
|
Title:
|
Vice President
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
Mizuho Corporate Bank, Ltd.,
as a Lender
|
|
|
|
By:
|
/s/ James R. Fayen
|
|
|
|
|
Name:
|
James R. Fayen
|
|
|
|
|
Title:
|
Deputy General Manager
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
WACHOVIA BANK, NATIONAL ASSOCIATION, as a Lender
|
|
|
|
By:
|
/s/ Sang Kim
|
|
|
|
|
Name:
|
Sang Kim
|
|
|
|
|
Title:
|
Vice President
|
|
|
|
[Signature Page to Amendment]
|
|
|
|
|
|
|
|
WELLS FARGO FOOTHILL, LLC,
as a Lender
|
|
|
|
By:
|
/s/ Maged Ghebrial
|
|
|
|
|
Name:
|
Maged Ghebrial
|
|
|
|
|
Title:
|
Vice President
|
|
|
|
[Signature Page to Amendment]
SCHEDULE 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By its
|
|
|
By its
|
|
|
By the General
|
|
|
|
|
|
|
General
|
|
|
Sole
|
|
|
Partner of its
|
|
|
|
Subsidiary Borrower
|
|
|
Partner
|
|
|
Member
|
|
|
Sole Member
|
|
|
|
American Medicorp Development Co.
|
|
|
|
|
|
|
|
|
|
|
|
|
AR Holding 1, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 2, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 3, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 4, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 5, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 6, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 7, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 8, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 9, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 10, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 11, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 12, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 13, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 14, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 15, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 16, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 17, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 18, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 19, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 20, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 21, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 22, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 23, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 24, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 25, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 26, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 27, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 28, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
AR Holding 29, LLC
|
|
|
|
|
|
|
|
|
*
|
|
|
|
AR Holding 30, LLC
|
|
|
|
|
|
*
|
|
|
|
|
|
|
Bay Hospital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Brigham City Community Hospital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Brookwood Medical Center of Gulfport, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Division, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Centerpoint Medical Center of Independence, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Florida Regional Hospital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Shared Services, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By its
|
|
|
By its
|
|
|
By the General
|
|
|
|
|
|
|
General
|
|
|
Sole
|
|
|
Partner of its
|
|
|
|
Subsidiary Borrower
|
|
|
Partner
|
|
|
Member
|
|
|
Sole Member
|
|
|
|
Central Tennessee Hospital Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
CHCA Bayshore, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
CHCA Conroe, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
CHCA Mainland, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
CHCA West Houston, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
CHCA Woman’s Hospital, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Chippenham & Johnston-Willis Hospitals, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
CMS GP, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado Health Systems, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia ASC Management, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Columbia Jacksonville Healthcare System, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia LaGrange Hospital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia Medical Center of Arlington Subsidiary, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Columbia Medical Center of Denton Subsidiary, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Columbia Medical Center of Las Colinas, Inc.
|
|
|
|
|
|
|
|
|
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|
|
Columbia Medical Center of Lewisville Subsidiary, L.P.
|
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|
*
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Columbia Medical Center of McKinney Subsidiary, L.P.
|
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*
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|
Columbia Medical Center of Plano Subsidiary, L.P.
|
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|
*
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Columbia North Hills Hospital Subsidiary, L.P.
|
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*
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|
Columbia Ogden Medical Center, Inc.
|
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Columbia Parkersburg Healthcare System, LLC
|
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Columbia Plaza Medical Center of Fort Worth Subsidiary, L.P.
|
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*
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|
Columbia Polk General Hospital, Inc.
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Columbia Rio Grande Healthcare, L.P.
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*
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Columbia Riverside, Inc.
|
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Columbia Valley Healthcare System, L.P.
|
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*
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Columbia/Alleghany Regional Hospital, Incorporated
|
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Columbia/HCA John Randolph, Inc.
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Columbine Psychiatric Center, Inc.
|
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Columbus Cardiology, Inc.
|
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Conroe Hospital Corporation
|
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Dallas/Ft. Worth Physician, LLC
|
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Dauterive Hospital Corporation
|
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Dublin Community Hospital, LLC
|
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Eastern Idaho Health Services, Inc.
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Edmond Regional Medical Center, LLC
|
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Edward White Hospital, Inc.
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El Paso Surgicenter, Inc.
|
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Encino Hospital Corporation, Inc.
|
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EP Health, LLC
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Fairview Park GP, LLC
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Fairview Park, Limited Partnership
|
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*
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|
Frankfort Hospital, Inc.
|
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Galen Property, LLC
|
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2
|
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|
By its
|
|
|
By its
|
|
|
By the General
|
|
|
|
|
|
|
General
|
|
|
Sole
|
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|
Partner of its
|
|
|
|
Subsidiary Borrower
|
|
|
Partner
|
|
|
Member
|
|
|
Sole Member
|
|
|
|
General Healthserv, LLC
|
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|
Good Samaritan Hospital, L.P.
|
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|
*
|
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|
Goppert-Trinity Family Care, LLC
|
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|
GPCH-GP, Inc.
|
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Grand Strand Regional Medical Center, LLC
|
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|
Green Oaks Hospital Subsidiary, L.P.
|
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|
*
|
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|
Greenview Hospital, Inc.
|
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|
Hamilton Medical Center, Inc.
|
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|
HCA — IT&S Field Operations, Inc.
|
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|
HCA — IT&S Inventory Management, Inc.
|
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|
HCA Central Group, Inc.
|
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|
HCA Health Services of Florida, Inc.
|
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|
HCA Health Services of Louisiana, Inc.
|
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|
HCA Health Services of Oklahoma, Inc.
|
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|
HCA Health Services of Tennessee, Inc.
|
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|
HCA Health Services of Virginia, Inc.
|
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|
HCA Management Services, L.P.
|
|
|
*
|
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|
|
HCA Realty, Inc.
|
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|
HD&S Corp. Successor, Inc.
|
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|
Health Midwest Office Facilities Corporation
|
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|
Health Midwest Ventures Group, Inc.
|
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|
Healthtrust MOB, LLC
|
|
|
|
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|
*
|
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|
|
|
|
Hendersonville Hospital Corporation
|
|
|
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|
Hospital Corporation of Tennessee
|
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|
Hospital Corporation of Utah
|
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|
|
Hospital Development Properties, Inc.
|
|
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|
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|
HSS Holdco, LLC
|
|
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|
HSS Systems VA, LLC
|
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|
HSS Systems, LLC
|
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|
HSS Virginia, L.P.
|
|
|
*
|
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|
|
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|
|
|
HTI Memorial Hospital Corporation
|
|
|
|
|
|
|
|
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|
|
|
|
Integrated Regional Lab, LLC
|
|
|
|
|
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|
|
|
Integrated Regional Laboratories, LLP
|
|
|
*
|
|
|
|
|
|
|
|
|
|
JFK Medical Center Limited Partnership
|
|
|
*
|
|
|
|
|
|
|
|
|
|
KPH-Consolidation, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Lakeland Medical Center, LLC
|
|
|
|
|
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|
Lakeview Medical Center, LLC
|
|
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|
Largo Medical Center, Inc.
|
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|
|
Las Vegas Surgicare, Inc.
|
|
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|
Lawnwood Medical Center, Inc.
|
|
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|
|
Lewis-Gale Hospital, Incorporated
|
|
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|
Lewis-Gale Medical Center, LLC
|
|
|
|
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|
Lewis-Gale Physicians, LLC
|
|
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|
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|
Los Robles Regional Medical Center
|
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|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By its
|
|
|
By its
|
|
|
By the General
|
|
|
|
|
|
|
General
|
|
|
Sole
|
|
|
Partner of its
|
|
|
|
Subsidiary Borrower
|
|
|
Partner
|
|
|
Member
|
|
|
Sole Member
|
|
|
|
Management Services Holdings, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Marietta Surgical Center, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Marion Community Hospital, Inc.
|
|
|
|
|
|
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|
|
|
|
|
|
MCA Investment Company
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Centers of Oklahoma, LLC
|
|
|
|
|
|
|
|
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|
|
|
|
Medical Office Buildings of Kansas, LLC
|
|
|
|
|
|
|
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|
|
|
|
Memorial Healthcare Group, Inc.
|
|
|
|
|
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|
|
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|
|
Midwest Division — ACH, LLC
|
|
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|
|
Midwest Division — LRHC, LLC
|
|
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|
|
Midwest Division — LSH, LLC
|
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|
|
Midwest Division — MCI, LLC
|
|
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|
Midwest Division — MMC, LLC
|
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|
Midwest Division — OPRMC, LLC
|
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|
Midwest Division — PFC, LLC
|
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|
|
Midwest Division — RBH, LLC
|
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|
Midwest Division — RMC, LLC
|
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|
Midwest Division — RPC, LLC
|
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|
|
Midwest Holdings, Inc.
|
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|
|
Montgomery Regional Hospital, Inc.
|
|
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|
Mountain View Hospital, Inc.
|
|
|
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|
|
|
|
|
Nashville Shared Services General Partnership
|
|
|
*
|
|
|
|
|
|
|
|
|
|
National Patient Account Services, Inc.
|
|
|
|
|
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|
New Port Richey Hospital, Inc.
|
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|
New Rose Holding Company, Inc.
|
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|
North Florida Immediate Care Center, Inc.
|
|
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|
North Florida Regional Medical Center, Inc.
|
|
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|
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|
Northern Utah Healthcare Corporation
|
|
|
|
|
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|
Northern Virginia Community Hospital, LLC
|
|
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|
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|
Northlake Medical Center, LLC
|
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|
Notami Hospitals of Louisiana, Inc.
|
|
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|
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|
Notami Hospitals, LLC
|
|
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|
Okaloosa Hospital, Inc.
|
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|
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|
Okeechobee Hospital, Inc.
|
|
|
|
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|
Outpatient Cardiovascular Center of Central Florida, LLC
|
|
|
|
|
|
|
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|
|
|
|
|
Palms West Hospital Limited Partnership
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Palmyra Park Hospital, Inc.
|
|
|
|
|
|
|
|
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|
Pasadena Bayshore Hospital, Inc.
|
|
|
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|
Plantation General Hospital Limited Partnership
|
|
|
*
|
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|
|
|
|
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|
|
|
Pulaski Community Hospital, Inc.
|
|
|
|
|
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|
Redmond Park Hospital, LLC
|
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Redmond Physician Practice Company
|
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|
Reston Hospital Center, LLC
|
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|
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Retreat Hospital, LLC
|
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|
Rio Grande Regional Hospital, Inc.
|
|
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|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By its
|
|
|
By its
|
|
|
By the General
|
|
|
|
|
|
|
General
|
|
|
Sole
|
|
|
Partner of its
|
|
|
|
Subsidiary Borrower
|
|
|
Partner
|
|
|
Member
|
|
|
Sole Member
|
|
|
|
Riverside Healthcare System, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Riverside Hospital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Samaritan, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
San Jose Healthcare System, LP
|
|
|
*
|
|
|
|
|
|
|
|
|
|
San Jose Hospital, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
San Jose Medical Center, LLC
|
|
|
|
|
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|
San Jose, LLC
|
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|
Sarasota Doctors Hospital, Inc.
|
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|
SJMC, LLC
|
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|
Southern Hills Medical Center, LLC
|
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|
Spotsylvania Medical Center, Inc.
|
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|
Spring Branch Medical Center, Inc.
|
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|
Spring Hill Hospital, Inc.
|
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|
St. Mark’s Lone Peak Hospital, Inc.
|
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|
Sun City Hospital, Inc.
|
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|
Sunrise Mountainview Hospital, Inc.
|
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|
Surgicare of Brandon, Inc.
|
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|
Surgicare of Florida, Inc.
|
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|
Surgicare of Houston Women’s, Inc.
|
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|
Surgicare of Manatee, Inc.
|
|
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|
Surgicare of New Port Richey, Inc.
|
|
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|
Surgicare of Palms West, LLC
|
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|
Surgicare of Riverside, LLC
|
|
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|
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|
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|
|
Tallahassee Medical Center, Inc.
|
|
|
|
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|
|
TCMC Madison-Portland, Inc.
|
|
|
|
|
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|
|
Terre Haute Hospital GP, Inc.
|
|
|
|
|
|
|
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|
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|
Terre Haute Hospital Holdings, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Terre Haute MOB, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Terre Haute Regional Hospital, L.P.
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Timpanogos Regional Medical Services, Inc.
|
|
|
|
|
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|
Trident Medical Center, LLC
|
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|
Utah Medco, LLC
|
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|
VH Holdco, Inc.
|
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|
VH Holdings, Inc.
|
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|
|
Virginia Psychiatric Company, Inc.
|
|
|
|
|
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|
|
|
|
|
W & C Hospital, Inc.
|
|
|
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|
|
Walterboro Community Hospital, Inc.
|
|
|
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|
|
Wesley Medical Center, LLC
|
|
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|
|
West Florida Regional Medical Center, Inc.
|
|
|
|
|
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|
|
West Valley Medical Center, Inc.
|
|
|
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|
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|
|
Western Plains Capital, Inc.
|
|
|
|
|
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|
|
|
|
WHMC, Inc.
|
|
|
|
|
|
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|
|
Woman’s Hospital of Texas, Incorporated
|
|
|
|
|
|
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|
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Women’s and Children’s Hospital, Inc.
|
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|
5
$2,000,000,000
CREDIT AGREEMENT
Dated as of November 17, 2006
as amended and restated on June 20, 2007
among
HCA INC.,
as the Parent Borrower,
THE SEVERAL SUBSIDIARY BORROWERS PARTY HERETO,
The Several Lenders
from Time to Time Parties Hereto,
BANK OF AMERICA, N.A.,
as Administrative Agent, Swingline Lender
and Letter of Credit Issuer,
JPMORGAN CHASE BANK, N.A.
and
CITICORP NORTH AMERICA, INC.,
as Co-Syndication Agents,
and
MERRILL LYNCH CAPITAL CORPORATION,
as Documentation Agent
BANC OF AMERICA SECURITIES LLC,
J.P. MORGAN SECURITIES INC.,
CITIGROUP GLOBAL MARKETS INC.
and
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
as Joint Lead Arrangers and Bookrunners,
DEUTSCHE BANK SECURITIES INC.
and
WACHOVIA CAPITAL MARKETS, LLC,
as Joint Bookrunners
Cahill Gordon & Reindel
LLP
80 Pine Street
New York, New York 10005
TABLE OF CONTENTS
|
|
|
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|
|
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|
|
|
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|
|
|
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Page
|
|
SECTION 1.
|
|
Definitions
|
|
|
3
|
|
|
|
1.1.
|
|
Defined Terms
|
|
|
3
|
|
|
|
1.2.
|
|
Other Interpretive Provisions
|
|
|
55
|
|
|
|
1.3.
|
|
Accounting Terms
|
|
|
55
|
|
|
|
1.4.
|
|
Rounding
|
|
|
56
55
|
|
|
|
1.5.
|
|
References to Agreements, Laws, Etc.
|
|
|
56
|
|
|
|
1.6.
|
|
Exchange Rates
|
|
|
56
|
|
|
|
1.7.
|
|
Reserve Amounts
[Reserved]
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 2.
|
|
Amount and Terms of Credit
|
|
|
56
|
|
|
|
2.1.
|
|
Commitments
|
|
|
56
|
|
|
|
2.2.
|
|
Minimum Amount of Each Borrowing; Maximum Number of Borrowings
|
|
|
59
|
|
|
|
2.3.
|
|
Notice of Borrowing
|
|
|
59
|
|
|
|
2.4.
|
|
Disbursement of Funds
|
|
|
60
|
|
|
|
2.5.
|
|
Repayment of Loans; Evidence of Debt
|
|
|
61
|
|
|
|
2.6.
|
|
Conversions and Continuations
|
|
|
62
|
|
|
|
2.7.
|
|
Pro Rata Borrowings
|
|
|
63
|
|
|
|
2.8.
|
|
Interest
|
|
|
63
|
|
|
|
2.9.
|
|
Interest Periods
|
|
|
65
64
|
|
|
|
2.10.
|
|
Increased Costs, Illegality, Etc
|
|
|
66
64
|
|
|
|
2.11.
|
|
Compensation
|
|
|
67
66
|
|
|
|
2.12.
|
|
Change of Lending Office
|
|
|
68
67
|
|
|
|
2.13.
|
|
Notice of Certain Costs
|
|
|
68
67
|
|
|
|
2.14.
|
|
Incremental Facilities
|
|
|
68
67
|
|
|
|
2.15.
|
|
Reserves
|
|
|
70
69
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 3.
|
|
Letters of Credit
|
|
|
70
69
|
|
|
|
3.1.
|
|
Letters of Credit
|
|
|
70
69
|
|
|
|
3.2.
|
|
Letter of Credit Requests
|
|
|
72
71
|
|
|
|
3.3.
|
|
Letter of Credit Participations
|
|
|
74
73
|
|
|
|
3.4.
|
|
Agreement to Repay Letter of Credit Drawings
|
|
|
76
75
|
|
|
|
3.5.
|
|
Increased Costs
|
|
|
77
76
|
|
|
|
3.6.
|
|
New or Successor Letter of Credit Issuer
|
|
|
78
77
|
|
|
|
3.7.
|
|
Role of Letter of Credit Issuer
|
|
|
79
78
|
|
|
|
3.8.
|
|
Cash Collateral
|
|
|
80
79
|
|
|
|
3.9.
|
|
Applicability of ISP and UCP
|
|
|
81
80
|
|
|
|
3.10.
|
|
Conflict with Issuer Documents
|
|
|
81
80
|
|
|
|
3.11.
|
|
Letters of Credit Issued for Restricted Subsidiaries
|
|
|
81
80
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 4.
|
|
Fees; Commitments
|
|
|
81
80
|
|
|
|
4.1.
|
|
Fees
|
|
|
81
80
|
|
|
|
4.2.
|
|
Voluntary Reduction of New Revolving Credit Commitments
|
|
|
84
81
|
|
|
|
|
|
|
|
|
|
|
|
-i-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Page
|
|
|
4.3.
|
|
Mandatory Termination of Commitments
|
|
|
84
81
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 5.
|
|
Payments
|
|
|
84
82
|
|
|
|
5.1.
|
|
Voluntary Prepayments
|
|
|
84
82
|
|
|
|
5.2.
|
|
Mandatory Prepayments
|
|
|
85
82
|
|
|
|
5.3.
|
|
Method and Place of Payment
|
|
|
86
84
|
|
|
|
5.4.
|
|
Net Payments
|
|
|
87
84
|
|
|
|
5.5.
|
|
Computations of Interest and Fees
|
|
|
90
87
|
|
|
|
5.6.
|
|
Limit on Rate of Interest
|
|
|
90
87
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 6.
|
|
Conditions Precedent to Amendment and Restatement
|
|
|
90
88
|
|
|
|
6.1.
|
|
Credit Documents
|
|
|
91
88
|
|
|
|
6.2.
|
|
Amendment Agreement Conditions
|
|
|
91
88
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 7.
|
|
Conditions Precedent to All Credit Events
|
|
|
91
88
|
|
|
|
7.1.
|
|
No Default; Representations and Warranties
|
|
|
91
88
|
|
|
|
7.2.
|
|
Notice of Borrowing; Letter of Credit Request
|
|
|
91
89
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 8.
|
|
Representations, Warranties and Agreements
|
|
|
91
89
|
|
|
|
8.1.
|
|
Corporate Status
|
|
|
92
89
|
|
|
|
8.2.
|
|
Corporate Power and Authority
|
|
|
92
89
|
|
|
|
8.3.
|
|
No Violation
|
|
|
92
90
|
|
|
|
8.4.
|
|
Litigation
|
|
|
92
90
|
|
|
|
8.5.
|
|
Margin Regulations
|
|
|
92
90
|
|
|
|
8.6.
|
|
Governmental Approvals
|
|
|
93
90
|
|
|
|
8.7.
|
|
Investment Company Act
|
|
|
93
90
|
|
|
|
8.8.
|
|
True and Complete Disclosure
|
|
|
93
91
|
|
|
|
8.9.
|
|
Financial Condition; Financial Statements
|
|
|
93
91
|
|
|
|
8.10.
|
|
Tax Matters
|
|
|
93
91
|
|
|
|
8.11.
|
|
Compliance with ERISA
|
|
|
94
92
|
|
|
|
8.12.
|
|
Subsidiaries
|
|
|
94
92
|
|
|
|
8.13.
|
|
Intellectual Property
|
|
|
94
92
|
|
|
|
8.14.
|
|
Environmental Laws
|
|
|
95
93
|
|
|
|
8.15.
|
|
Properties
|
|
|
95
93
|
|
|
|
8.16.
|
|
Solvency
|
|
|
95
93
|
|
|
|
8.17.
|
|
Delayed Equity Arrangements
|
|
|
95
93
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 9.
|
|
Affirmative Covenants
|
|
|
95
93
|
|
|
|
9.1.
|
|
Information Covenants
|
|
|
95
94
|
|
|
|
9.2.
|
|
Books, Records and Inspections
|
|
|
100
98
|
|
|
|
9.3.
|
|
Maintenance of Insurance
|
|
|
101
99
|
|
|
|
9.4.
|
|
Payment of Taxes
|
|
|
101
99
|
|
|
|
9.5.
|
|
Consolidated Corporate Franchises
|
|
|
101
99
|
|
|
|
9.6.
|
|
Compliance with Statutes, Regulations, Etc
|
|
|
101
100
|
|
|
|
9.7.
|
|
ERISA
|
|
|
101
100
|
|
|
|
9.8.
|
|
Maintenance of Properties
|
|
|
102
100
|
|
|
|
9.9.
|
|
Transactions with Affiliates
|
|
|
102
100
|
|
|
|
|
|
|
|
|
|
|
|
-ii-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
9.10.
|
|
End of Fiscal Years; Fiscal Quarters
|
|
|
103
101
|
|
|
|
9.11.
|
|
Additional Borrowers
|
|
|
103
102
|
|
|
|
9.12.
|
|
[Reserved]
|
|
|
103
102
|
|
|
|
9.13.
|
|
Use of Proceeds
|
|
|
103
102
|
|
|
|
9.14.
|
|
Further Assurances
|
|
|
104
102
|
|
|
|
9.15.
|
|
Cash Management Systems
|
|
|
104
102
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 10.
|
|
Negative Covenants
|
|
|
109
107
|
|
|
|
10.1.
|
|
Limitation on Indebtedness
|
|
|
109
108
|
|
|
|
10.2.
|
|
Limitation on Liens
|
|
|
116
115
|
|
|
|
10.3.
|
|
Limitation on Fundamental Changes
|
|
|
119
118
|
|
|
|
10.4.
|
|
Limitation on Sale of Assets
|
|
|
121
120
|
|
|
|
10.5.
|
|
Limitation on Investments
|
|
|
123
122
|
|
|
|
10.6.
|
|
Limitation on Dividends
|
|
|
126
125
|
|
|
|
10.7.
|
|
Limitations on Debt Payments and Amendments; Matters Relating
to Required Additional Equity Investments
|
|
|
128
127
|
|
|
|
10.8.
|
|
Limitations on Sale Leasebacks
|
|
|
130
129
|
|
|
|
10.9.
|
|
Minimum Interest Coverage Ratio
|
|
|
130
129
|
|
|
|
10.10.
|
|
Changes in Business
|
|
|
130
129
|
|
|
|
10.11.
|
|
1993 Indenture Restricted Subsidiaries
|
|
|
130
129
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 11.
|
|
Events of Default
|
|
|
130
129
|
|
|
|
11.1.
|
|
Payments
|
|
|
130
|
|
|
|
11.2.
|
|
Representations, Etc
|
|
|
130
|
|
|
|
11.3.
|
|
Covenants
|
|
|
131
130
|
|
|
|
11.4.
|
|
Default Under Other Agreements
|
|
|
131
130
|
|
|
|
11.5.
|
|
Bankruptcy, Etc
|
|
|
131
|
|
|
|
11.6.
|
|
ERISA
|
|
|
132
131
|
|
|
|
11.7.
|
|
[Reserved]
|
|
|
132
|
|
|
|
11.8.
|
|
[Reserved]
|
|
|
132
|
|
|
|
11.9.
|
|
Security Agreement
|
|
|
132
|
|
|
|
11.10.
|
|
[Reserved]
|
|
|
133
132
|
|
|
|
11.11.
|
|
Judgments
|
|
|
133
132
|
|
|
|
11.12.
|
|
Change of Control
|
|
|
133
132
|
|
|
|
11.13.
|
|
Certain Amendments and Waivers to CF Agreement
|
|
|
134
133
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 12.
|
|
Investors’ Right To Cure
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 13.
|
|
The Agents
|
|
|
135
134
|
|
|
|
13.1.
|
|
Appointment
|
|
|
135
134
|
|
|
|
13.2.
|
|
Delegation of Duties
|
|
|
136
135
|
|
|
|
13.3.
|
|
Exculpatory Provisions
|
|
|
136
135
|
|
|
|
13.4.
|
|
Reliance by Agents
|
|
|
136
|
|
|
|
13.5.
|
|
Notice of Default
|
|
|
137
136
|
|
|
|
13.6.
|
|
Non-Reliance on Administrative Agent, Collateral Agent and Other Lenders
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
-iii-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
13.7.
|
|
Indemnification
|
|
|
138
137
|
|
|
|
13.8.
|
|
Administrative Agent in its Individual Capacity
|
|
|
138
|
|
|
|
13.9.
|
|
Successor Agents
|
|
|
138
|
|
|
|
13.10.
|
|
Withholding Tax
|
|
|
139
|
|
|
|
13.11.
|
|
Reports and Financial Statements
|
|
|
140
139
|
|
|
|
|
|
|
|
|
|
|
|
|
SECTION 14.
|
|
Miscellaneous
|
|
|
140
|
|
|
|
14.1.
|
|
Amendments and Waivers
|
|
|
140
|
|
|
|
14.2.
|
|
Notices
|
|
|
143
142
|
|
|
|
14.3.
|
|
No Waiver; Cumulative Remedies
|
|
|
143
|
|
|
|
14.4.
|
|
Survival of Representations and Warranties
|
|
|
143
|
|
|
|
14.5.
|
|
Payment of Expenses
|
|
|
143
|
|
|
|
14.6.
|
|
Successors and Assigns; Participations and Assignments
|
|
|
144
|
|
|
|
14.7.
|
|
Replacements of Lenders under Certain Circumstances
|
|
|
148
147
|
|
|
|
14.8.
|
|
Adjustments; Set-off
|
|
|
149
148
|
|
|
|
14.9.
|
|
Counterparts
|
|
|
150
149
|
|
|
|
14.10.
|
|
Severability
|
|
|
150
149
|
|
|
|
14.11.
|
|
Integration
|
|
|
150
149
|
|
|
|
14.12.
|
|
GOVERNING LAW
|
|
|
150
149
|
|
|
|
14.13.
|
|
Submission to Jurisdiction; Waivers
|
|
|
150
|
|
|
|
14.14.
|
|
Acknowledgments
|
|
|
151
150
|
|
|
|
14.15.
|
|
WAIVERS OF JURY TRIAL
|
|
|
152
151
|
|
|
|
14.16.
|
|
Confidentiality
|
|
|
152
151
|
|
|
|
14.17.
|
|
Direct Website Communications
|
|
|
152
|
|
|
|
14.18.
|
|
USA Patriot Act
|
|
|
154
153
|
|
|
|
14.19.
|
|
Joint and Several Liability
|
|
|
154
|
|
|
|
14.20.
|
|
Contribution and Indemnification Among the Borrowers
|
|
|
155
|
|
|
|
14.21.
|
|
Agency of the Parent Borrower for Each Other Borrower
|
|
|
156
155
|
|
|
|
14.22.
|
|
Reinstatement
|
|
|
156
|
|
|
|
14.23.
|
|
Express Waivers by Borrowers in Respect of Cross Guaranties and Cross
Collateralization
|
|
|
156
|
|
|
|
|
|
|
SCHEDULES
1
|
|
|
|
|
|
Schedule 1.1(d)
|
|
Excluded Subsidiaries
|
|
Schedule 1.1(f)
|
|
Retained Indebtedness
|
|
Schedule 1.1(g)
|
|
Debt Repayment
|
|
Schedule 1.1(h)
|
|
Consolidated Persons
|
|
Schedule 6.3(a)
|
|
Local Counsel to Borrowers and Administrative Agent
|
|
|
|
|
|
1
|
|
Schedules are not being amended or restated
except for Schedule 1.1(c) which is being deleted hereby. The original
schedules are attached hereto for your convenience.
|
-iv-
|
|
|
|
|
Schedule 8.4
|
|
Litigation
|
|
Schedule 8.12
|
|
Subsidiaries
|
|
Schedule 9.9
|
|
Closing Date Affiliate Transactions
|
|
Schedule 9.15(a)
|
|
Government Receivables Deposit Accounts
|
|
Schedule 9.15(c)
|
|
Blocked Accounts
|
|
Schedule 9.15(e)
|
|
Credit Card Arrangements
|
|
Schedule 10.1
|
|
Closing Date Indebtedness
|
|
Schedule 10.2
|
|
Closing Date Liens
|
|
Schedule 10.5
|
|
Closing Date Investments
|
|
Schedule 14.2
|
|
Notice Addresses
|
|
|
|
|
|
EXHIBITS
2
|
|
|
|
|
|
Exhibit A
|
|
Form of Borrowing Base Certificate
|
|
Exhibit D
|
|
Form of Perfection Certificate
|
|
Exhibit F
|
|
Form of Security Agreement
|
|
Exhibit G
|
|
Form of Letter of Credit Request
|
|
Exhibit H-1
|
|
Form of Legal Opinion of Simpson Thacher & Bartlett LLP
|
|
Exhibit H-2
|
|
Form of Legal Opinion of General Counsel
|
|
Exhibit I
|
|
Form of Closing Certificate
|
|
Exhibit J
|
|
Form of Assignment and Acceptance
|
|
Exhibit K
|
|
Form of Promissory Note
|
|
Exhibit L
|
|
Form of Joinder Agreement
|
|
|
|
|
|
2
|
|
Exhibits are not being amended and restated
hereby except for Exhibits H-1 and K. All other original exhibits are attached
hereto for your convenience.
|
-v-
CREDIT AGREEMENT, dated as of November 17, 2006, as amended and restated on June 20, 2007 (the
“Agreement”), among HCA Inc., a Delaware corporation (“
HCA
” or the “
Parent Borrower
”), the
Subsidiary Borrowers party hereto, the lending institutions from time to time parties hereto (each
a “
Lender
” and, collectively, the “
Lenders
”), BANK OF AMERICA, N.A., as Administrative Agent,
Swingline Lender and Letter of Credit Issuer (such terms and each other capitalized term used but
not defined in this introductory statement having the meaning provided in
Section 1
),
JPMORGAN CHASE BANK, N.A. and CITICORP NORTH AMERICA, INC., as co-syndication agents (in such
capacity, the “
Co-Syndication Agents
”), BANC OF AMERICA SECURITIES LLC, J.P. MORGAN SECURITIES
INC., CITIGROUP GLOBAL MARKETS INC. and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as
joint lead arrangers (in such capacity, the “
Joint Lead Arrangers
”) and bookrunners (in such
capacity, the “
Bookrunners
”), DEUTSCHE BANK SECURITIES INC. and WACHOVIA CAPITAL MARKETS LLC, as
joint bookrunners (in such capacity, the “
Joint Bookrunners
”), and MERRILL LYNCH CAPITAL
CORPORATION, as documentation agent (in such capacity, the “
Documentation Agent
”).
WHEREAS, the Parent Borrower, the Subsidiary Borrowers, the several lenders from time to time
party thereto (the “
Original Lenders
”), the Administrative Agent, the Co-Syndication Agents, the
Joint Lead Arrangers, the Bookrunners, the Joint Bookrunners and the Documentation Agent originally
entered into a credit agreement on November 17, 2006 (the “
Original Credit Agreement
”), and the
parties thereto desire to amend and restate the Original Credit Agreement on and subject to the
terms and conditions set forth herein and in the Amendment Agreement dated as of the Amendment and
Restatement Date (the “
Amendment Agreement
”);
WHEREAS, the parties hereto intend to (i) create a new tranche of revolving credit commitments
(the “
New Revolving Credit Commitments
”) in an aggregate principal amount equal to $2,000,000,000
and (ii) exchange (the “
Exchange
”) up to $2,000,000,000 of Revolving Credit Commitments (as defined
in the Original Credit Agreement) and related outstanding Revolving Credit Loans (as defined in the
Original Credit Agreement) of Original Lenders opting to so exchange, for like principal amounts of
New Revolving Credit Commitments and related revolving loans (the “
New Revolving Credit Loans
”)
and, for those Original Lenders not opting to participate in the Exchange, terminate the Revolving
Credit Commitments and repay in full the Revolving Credit Loans of such non-exchanging Original
Lenders (the “
Repayment
”). After giving effect to the Exchange and Repayment on the effective date
of the Agreement, all outstanding Revolving Credit Loans and the Revolving Credit Commitments (each
as defined in the Original Credit Agreement) shall be deemed terminated;
WHEREAS, Parent Borrower and Subsidiary Borrowers intend to prepay their Revolving Credit
Loans (as defined in the Original Credit Agreement) with the proceeds from the New Revolving Credit
Loans (it being understood that Original Lenders that execute and deliver the Amendment Agreement
are exchanging all or a portion of their Revolving Credit Loans (as stipulated therein) under the
Original Credit Agreement for New Revolving Credit Loans hereunder);
WHEREAS, the Borrowers shall pay to each Original Lender all accrued and unpaid interest
(including any Reserve Amount
as defined in the Original Credit Agreement
) and Commitment
Fees to, but not including, the Amendment and Restatement Date.
WHEREAS, the parties hereto intend that (a) the Obligations under the Original Credit
Agreement that remain unpaid and outstanding as of the Amendment and Restatement Date shall
continue to exist under this Agreement on the terms set forth herein and in the Amendment
Agreement, (b) any letters of credit outstanding under the Original Credit Agreement as of the
Amendment and Restatement Date shall be Letters of Credit as defined in this Agreement, (c) the
Security Documents shall continue (in accordance with their terms) to secure, guarantee, support
and otherwise benefit, as applicable, the Obligations under the Original Credit Agreement as well
as the other Obligations of the Parent Borrower, the Subsidiary Borrowers and the other Credit
Parties under this Agreement (including, without limitation, Obligations in respect of the New
Revolving Credit Loans) and the other Credit Documents and (d) all schedules and exhibits to the
Original Credit Agreement shall be incorporated by reference herein, mutatis mutandis, except for
and to the extent that Schedule 1.1(c) is being deleted and Exhibits H-1 and K are expressly
amended and restated in connection herewith;
WHEREAS, pursuant to the Agreement and Plan of Merger (as amended from time to time in
accordance therewith, the “
Acquisition Agreement
”), dated as of July 24, 2006, by and among HCA,
Holdings and Merger Sub, Merger Sub will merge with and into HCA (the “
Merger
”), with HCA surviving
the Merger as a wholly-owned Subsidiary of Holdings;
WHEREAS, to fund, in part, the Merger, the Sponsors and certain other investors (including the
Management Investors) contributed an amount in cash to Holdings and/or a direct or indirect parent
thereof in exchange for Stock and Stock Equivalents (which cash has been contributed to the Parent
Borrower in exchange for common Stock of the Parent Borrower), which together with the amount of
any rollover equity issued to existing shareholders of the Parent Borrower (such contribution and
rollover, collectively, the “
Equity Investments
”) was approximately 15% of the aggregate pro forma
capitalization of the Parent Borrower on the Original Closing Date;
WHEREAS, to consummate the transactions contemplated by the Acquisition Agreement, (a) the
Parent Borrower issued under the Junior Lien Notes Indenture $1,000,000,000 aggregate principal
amount of 9
1
/
8
% senior secured notes due 2014 (the “
2014 Cash Pay Notes
”), $3,200,000,000 aggregate
principal amount of 9
1
/
4
% senior secured notes due 2016 (the “
2016 Cash Pay Notes
” and together with
the 2014 Cash Pay Notes, the “
Cash Pay Notes
”) and $1,500,000,000 aggregate principal amount of
9
5
/
8
%/10
3
/
8
% senior secured toggle notes due 2016 (the “
Toggle Notes
,” and together with the Cash Pay
Notes, the “
Junior Lien Notes
”) in sales pursuant to Rule 144A and Regulation S under the
Securities Act of 1933, as amended (the “
Junior Lien Notes Offering
”), generating aggregate gross
proceeds of $5,700,000,000 and (b) the Parent Borrower and the European Subsidiary Borrower (as
defined in the CF Agreement) entered into the CF Facilities to borrow (i) tranche A term loans on
the Original Closing Date in an aggregate principal amount of $2,750,000,000, (ii) tranche B term
loans on the Original Closing Date in an aggregate principal amount of $8,800,000,000, (iii)
-2-
European tranche term loans on the Original Closing Date in an aggregate principal amount of
€
1,00,000,000, and (iv) revolving credit loans made available to the Parent Borrower at any
time and from time to time in accordance with the terms of the CF Agreement in an aggregate
principal amount at any time outstanding not in excess of $2,000,000,000 less the sum of (A) the
aggregate letters of credit outstanding thereunder at such time and (B) the aggregate principal
amount of all swingline loans outstanding thereunder at such time;
WHEREAS, the proceeds of New Revolving Credit Loans and Swingline Loans will be used by the
Borrowers on or after the Amendment and Restatement Date for general corporate purposes (including
Permitted Acquisitions). Letters of Credit will be used by the Borrowers for general corporate
purposes; and
WHEREAS, the Lenders and Letter of Credit Issuer are willing to make available to the
Borrowers such revolving credit and letter of credit facilities upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained
herein, the parties hereto hereby agree as follows:
SECTION 9.
Definitions
9.1
Defined Terms
(a) As used herein, the following terms shall have the meanings specified
in this
Section 1.1
unless the context otherwise requires (it being understood that defined
terms in this Agreement shall include in the singular number the plural and in the plural the
singular):
“
ABL Entity
” shall mean a direct Restricted Subsidiary of a 1993 Indenture Restricted
Subsidiary, substantially all of the business of which consists of financing the acquisition or
disposition of accounts receivable and related assets.
“
ABR
” shall mean for any day a fluctuating rate per annum equal to the higher of (a) the
Federal Funds Effective Rate
plus
1/2 of 1% and (b) the rate of interest in effect for such
day as publicly announced from time to time by the Administrative Agent as its “prime rate.” The
“prime rate” is a rate set by the Administrative Agent based upon various factors including the
Administrative Agent’s costs and desired return, general economic conditions and other factors, and
is used as a reference point for pricing some loans, which may be priced at, above, or below such
announced rate. Any change in the ABR due to a change in such rate announced by the Administrative
Agent or in the Federal Funds Effective Rate shall take effect at the opening of business on the
day specified in the public announcement of such change or on the effective date of such change in
the Federal Funds Effective Rate, respectively.
“
ABR Loan
” shall mean each Loan bearing interest at the rate provided in
Section
2.8(a)
and, in any event, shall include all Swingline Loans.
“
Accommodation Payment
” shall have the meaning provided in
Section 14.20
.
-3-
“
Account Debtor
” shall mean “account debtor” as defined in Article 9 of the UCC, and any other
Person who may become obligated to a Credit Party under, with respect to,
or on account of an Account of such Credit Party (including without limitation any guarantor
or performance of an Account).
“
Accounts
” shall mean collectively (a) any right to payment of a monetary obligation arising
from the provision of merchandise, goods or services by the Parent Borrower or any of its
Subsidiaries in the course of their respective healthcare provision operations, (b) without
duplication, any “account” (as that term is defined in the UCC on the Original Closing Date or
thereafter in effect), any accounts receivable, any “heath-care-insurance receivables” (as that
term is defined in the UCC on the Original Closing Date or thereafter in effect), any “payment
intangibles” (as that term is defined in the UCC on the Original Closing Date or thereafter in
effect) and all other rights to payment and/or reimbursement of every kind and description, whether
or not earned by performance, in each case arising in the course of their respective healthcare
provision operations, (c) all accounts, contract rights, general intangibles, rights, remedies,
guarantees, supporting obligations, letter of credit rights and security interests in respect of
the foregoing, all rights of enforcement and collection, all books and records evidencing or
related to the foregoing, and all rights under any of the Credit Documents in respect of the
foregoing, (d) all information and data compiled or derived by any Secured Party or to which any
Secured Party is entitled in respect of or related to the foregoing (other than any such
information and data subject to legal restrictions of patient confidentiality), (e) all collateral
security of any kind, given by any Account Debtor or any other Person to any Secured Party, with
respect to any of the foregoing, and (f) all proceeds of the foregoing.
“
ACH
” shall mean automated clearing house transfers.
“
Acquired EBITDA
” shall mean, with respect to any Acquired Entity or Business or any Converted
Restricted Subsidiary (any of the foregoing, a “
Pro Forma Entity
”) for any period, the amount for
such period of Consolidated EBITDA of such Pro Forma Entity (determined using such definitions as
if references to the Parent Borrower and its Subsidiaries therein were to such Pro Forma Entity and
its Subsidiaries), all as determined on a consolidated basis for such Pro Forma Entity in a manner
not inconsistent with GAAP.
“
Acquired Entity or Business
” shall have the meaning provided in the definition of the term
“Consolidated EBITDA.”
“
Acquisition Agreement
” shall have the meaning provided in the preamble to this Agreement.
“Additional Receivables Intercreditor Agreement” shall mean, in connection with any
incurrence of any Future Secured Notes, any agreement, in form reasonably satisfactory to the
Administrative Agent, between the collateral agent, on behalf of the holders of such Future Secured
Notes, and the Collateral Agent providing that the Liens of the collateral agent for the benefit of
the holders of such Future Secured Notes on the Shared Receivables Collateral shall rank junior to
the Lien on the Shared Receivables Collateral securing the Obligations on a basis at least as
substantially favorable to the Lenders as the basis on which the Lien securing the CF Facilities
ranks junior to the Lien
-4-
on the Shared Receivables Collateral securing the Obligations pursuant to
the Intercreditor Agreement.
“
Adjusted Total New Revolving Credit Commitment
” shall mean at any time the Total New
Revolving Credit Commitment less the aggregate New Revolving Credit Commitments of all Defaulting
Lenders.
“
Administrative Agent
” shall mean Bank of America, as the administrative agent for the Lenders
under this Agreement and the other Credit Documents, or any successor administrative agent pursuant
to
Section 13
.
“
Administrative Agent’s Office
” shall mean the Administrative Agent’s address and, as
appropriate, account as set forth on
Schedule 14.2
to the Original Credit Agreement or such
other address or account as the Administrative Agent may from time to time notify to the Borrowers
and the Lenders.
“
Administrative Questionnaire
” shall have the meaning provided in
Section 14.6(b)
.
“
Affiliate
” shall mean, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with such Person. A Person
shall be deemed to control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
“
Agent Parties
” shall have the meaning provided in
Section 14.17(c)
.
“
Agents
” shall mean the Administrative Agent, the Collateral Agent, each Co-Syndication Agent,
each Joint Lead Arranger and Bookrunner, each Joint Bookrunner and the Documentation Agent.
“
Aggregate New Revolving Outstandings
” shall have the meaning provided in
Section
5.2(b)
.
“
Agreement
” shall mean this Amended and Restated Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
“
Allocable Amount
” shall have the meaning provided in
Section 14.20
.
“
Amendment Agreement
” shall have the meaning set forth in the recitals hereto.
“
Amendment and Restatement Date
” shall mean June 20, 2007.
“
Applicable ABR Margin
” shall mean at any date, with respect to each ABR Loan, the applicable
percentage
per annum
set forth below based upon the Status in effect on such date:
-5-
|
|
|
|
|
|
|
Status
|
|
Applicable ABR Margin
|
|
Level I Status
|
|
|
0.50
0.75
|
%
|
|
Level II Status
|
|
|
0.25
0.50
|
%
|
|
Level III Status
|
|
|
0.00
0.25
|
%
|
Notwithstanding the foregoing, Level
I
II
Status shall apply during the period from and
including the
interest payment date immediately prior to the First
Amendment
and
Restatement
Date to but excluding the Trigger Date.
“
Applicable Amount
” shall mean, at any time (the “
Reference Time
”), an amount equal to (a) the
sum, without duplication, of:
(i) an amount equal to the greater of (x) zero and (y) 50% of Cumulative Consolidated
Net Income for the period from October 1, 2006 until the last day of the then most recent
fiscal quarter for which Section 9.1 Financials have been delivered;
provided
that,
for the purposes of
Sections 10.6(c)(iii)
and
10.7(a)(i)(z)
only, the amount
in this
clause (i)
shall only be available if the Consolidated Total Debt to
Consolidated EBITDA Ratio for the most recently ended Test Period is less than 6.00:1.00,
determined on a Pro Forma Basis after giving effect to any dividend or prepayment,
repurchase or redemption actually made pursuant to
Section 10.6(c)(iii)
or
10.7(a)(i)(z)
; and
(ii) the amount of any capital contributions (other than (A) the Equity Investments,
(B) any Cure Amount, (C) any amount added back in the definition of Consolidated EBITDA
pursuant to
clause (a)(ix)
thereof, (D) any contributions in respect of Disqualified
Equity Interests, (E) any amount applied to redeem Stock or Stock Equivalents of the Parent
Borrower pursuant to
Section 10.6(a)
and (F) any amount received by the Parent
Borrower in satisfaction of the requirements of the first sentence of Section 10.7(d)) made
in cash to, or any proceeds of an equity issuance received by, the Parent Borrower from and
including the Business Day immediately following the Original Closing Date through and
including the Reference Time, including proceeds from the issuance of Stock or Stock
Equivalents of any direct or indirect parent of the Parent Borrower,
minus
(b) the sum, without duplication, of:
(i) the aggregate amount of Investments made pursuant to
Section 10.5(g)(ii)(y)
or
10.5(i)(ii)(y)
following the Original Closing Date and prior to the Reference
Time;
(ii) the aggregate amount of dividends pursuant to
Section 10.6(c)(iii)
following the Original Closing Date and prior to the Reference Time; and
(iii) the aggregate amount of prepayments, repurchases and redemptions of Junior
Indebtedness pursuant to
Section 10.7(a)(i)(z)
following the Original Closing Date
and prior to the Reference Time.
-6-
“
Applicable Date
” shall mean (i) with respect to any fiscal quarter commencing on January 1 of
any year, the last Business Day of April of such year, (ii) with respect to any fiscal quarter
commencing on April 1 of any year, the last Business Day of June of such year, (iii) with respect
to any fiscal quarter commencing on July 1 of any year, the last Business Day of September of such
year and (iv) with respect to any fiscal quarter commencing on October 1 of any year, the last
Business Day of December of such year.
“
Applicable LIBOR Margin
” shall mean, at any date, with respect to each LIBOR Loan, the
percentage
per annum
set forth below based upon the Status in effect on such date:
|
|
|
|
|
|
|
Status
|
|
Applicable LIBOR Margin
|
|
Level I Status
|
|
|
1.50
1.75
|
%
|
|
Level II Status
|
|
|
1.25
1.50
|
%
|
|
Level III Status
|
|
|
1.00
1.25
|
%
|
Notwithstanding the foregoing, Level
I
II
Status shall apply during the period from and
including the
interest payment date immediately
prior to the First
Amendment
and
Restatement
Date to but excluding the Trigger Date.
“
Applicable Quarter
” shall have the meaning provided in
Section 2.8(d)
.
“
Approved Fund
” shall mean any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.
“
Assignment and Acceptance
” shall mean an assignment and acceptance substantially in the form
of
Exhibit J
to the Original Credit Agreement, or such other form as may be approved by the
Administrative Agent.
“
Authorized Officer
” shall mean the President, the Chief Financial Officer, the Treasurer, the
Vice President-Finance or any other senior officer of the Parent Borrower (or, if expressly used
with reference to a Subsidiary Borrower, of such Subsidiary Borrower) designated as such in writing
to the Administrative Agent by the applicable Borrower.
“
Auto-Extension Letter of Credit
” shall have the meaning provided in
Section 3.2(d)
.
“
Auto-Reinstatement Letter of Credit
” shall have the meaning provided in
Section
3.2(e)
.
“
Availability Reserves
” shall mean, without duplication of any other reserves or items that
are otherwise addressed or excluded through eligibility criteria, such reserves, subject to
Section 2.15
, as the Administrative Agent, in its Permitted Discretion, determines as being
appropriate to reflect any impediments to the realization upon the Collateral consisting of
Eligible Accounts included in the Borrowing Base (including claims that the Administrative
-7-
Agent determines will need to be satisfied in connection with the realization upon such
Collateral).
“
Available Commitment
” shall mean an amount equal to the excess, if any, of (a) the amount of
the Total New Revolving Credit Commitment over (b) the sum of (i) the aggregate principal amount of
all New Revolving Credit Loans (but not Swingline Loans) then outstanding and (ii) the aggregate
Letters of Credit Outstanding at such time.
“
Bain
” shall mean Bain Capital Partners LLC.
“
Bank of America
” shall mean Bank of America, N.A. and its successors.
“
Bankruptcy Code
” shall have the meaning provided in
Section 11.5
.
“
Blocked Account Agreement
” shall have the meaning provided in
Section 9.15(a)
.
“
Blocked Accounts
” shall have the meaning provided in
Section 9.15(a)
.
“
Board
” shall mean the Board of Governors of the Federal Reserve System of the United States
(or any successor).
“
Borrower Materials
” shall have the meaning provided
Section 14.17(b)
.
“
Borrowers
” shall mean the Parent Borrower and the Subsidiary Borrowers, jointly, severally
and collectively.
“
Borrowing
” shall mean and include (a) the incurrence of Swingline Loans from the Swingline
Lender on a given date, (b) the incurrence of one Type of New Revolving Credit Loan on a given date
(or resulting from conversions on a given date) having, in the case of LIBOR Loans, the same
Interest Period (
provided
that ABR Loans incurred pursuant to
Section 2.10(b)
shall
be considered part of any related Borrowing of LIBOR Loans) and (c) the incurrence of any
Protective Advance.
“
Borrowing Base
” shall mean, on any date, a dollar amount equal to (x) 85% multiplied by the
book value of Eligible Accounts plus (y) 85% multiplied by the book value of Eligible Credit Card
Receivables (without duplication) minus (z) any Reserves;
provided
that the portion of the
Borrowing Base attributable to (i) Self-Pay Accounts shall not exceed the lesser of (a) $80.0
million and (b) the aggregate amount of cash collections received in respect of Self-Pay Accounts
during the three calendar month period then most recently completed for which internal financial
statements are available and (ii) Potential Medicaid Accounts shall not exceed the lesser of (a)
$75.0 million and (b) the aggregate amount of Potential Medicaid Accounts that have been converted
into Medicaid Accounts during the three calendar month period then most recently completed for
which internal financial statements are available. The Administrative Agent, in its Permitted
Discretion, may adjust the Borrowing Base by applying percentages (known as “liquidating factors”)
to Eligible Accounts by payor class based upon the applicable Borrower’s actual recent collection
history for each such payor class (
i.e
., Medicare, Medicaid,
-8-
commercial insurance, etc.) in a manner consistent with the Administrative Agent’s
underwriting practices and procedures.
“
Borrowing Base Certificate
” shall mean a certificate, duly executed by a Financial Officer or
controller of the Parent Borrower, appropriately completed and substantially in the form of
Exhibit A
to the Original Credit Agreement.
“
Business Day
” shall mean any day excluding Saturday, Sunday and any day that in the
jurisdiction where the Administrative Agent’s Office for Loans is located shall be a legal holiday
or a day on which banking institutions are authorized by law or other governmental actions to
close;
provided
,
however
, if such day relates to any interest rate settings as to a
LIBOR Loan, any fundings, disbursements, settlements and payments in respect of any such LIBOR
Loan, or any other dealings to be carried out pursuant to this Agreement in respect of any such
LIBOR Loan, such day shall be a day on which dealings in deposits are conducted by and between
banks in the London interbank eurodollar market.
“
Capital Lease
” shall mean, as applied to any Person, any lease of any property (whether real,
personal or mixed) by that Person as lessee that, in conformity with GAAP, is, or is required to
be, accounted for as a capital lease on the balance sheet of that Person.
“
Capitalized Lease Obligations
” shall mean, as applied to any Person, all obligations under
Capital Leases of such Person or any of its Subsidiaries, in each case taken at the amount thereof
accounted for as liabilities in accordance with GAAP.
“
Cash Collateralize
” shall have the meaning provided in
Section 3.8(d)
.
“
Cash Dominion Event
” shall mean either (i) the occurrence and continuance of any Event of
Default under
Section 11.1
or
11.5
, or (ii) the Parent Borrower has failed to
maintain
(x)
Excess Global Availability of at least $250.0 million
or (y) Excess
Facility Availability of at least $125.0 million, in the case of each of clause (x) and (y)
for
five (5) consecutive Business Days, and in the case of this
clause (ii)
, the Administrative
Agent has notified the Parent Borrower thereof. For purposes of this Agreement, the occurrence of
a Cash Dominion Event shall be deemed continuing at the Administrative Agent’s option (x) if the
Cash Dominion Event arises under clause (i) above, so long as such Event of Default is continuing,
or (y) if the Cash Dominion Event arises as a result of the Parent Borrower’s failure to achieve
and maintain Excess Global Availability
and Excess Facility Availability
as required
hereunder, until
(A)
Excess Global Availability has exceeded $250.0 million
and (B) Excess Facility Availability has exceeded $125.0 million, in the case of (A) and (B)
for thirty
(30) consecutive days, in which case a Cash Dominion Event shall no longer be deemed to be
continuing for purposes of this Agreement;
provided
that a Cash Dominion Event shall be
deemed continuing (even if such an Event of Default is no longer continuing and/or Excess Global
Availability
exceeds
and Excess Facility Availability exceed
the required
amount
amounts
for thirty (30) consecutive days) at all times in any four fiscal quarter
period after a Cash Dominion Event has occurred and been discontinued on two occasions in such four
fiscal quarter period.
-9-
“
Cash Management Agreement
” shall mean any agreement or arrangement to provide cash management
services, including treasury, depository, overdraft, credit or debit card, purchase card,
electronic funds transfer and other cash management arrangements.
“
Cash Management Bank
” shall mean any Person that, either (x) at the time it enters into a
Cash Management Agreement or (y) on the Original Closing Date, is a Lender or an Affiliate of a
Lender, in its capacity as a party to such Cash Management Agreement.
“
Cash Management Systems
” shall have the meaning provided in
Section 9.15(a)
.
“
Cash Pay Notes
” shall have the meaning provided in the preamble to this Agreement.
“
CF Agreement
” shall mean the Credit Agreement, dated as of November 17, 2006, among the
Parent Borrower, the European subsidiary borrowers party thereto, the lending institutions from
time to time parties thereto, Bank of America, N.A., as administrative agent, swingline lender and
letter of credit issuer, JPMorgan Chase Bank, N.A. and Citicorp North America, Inc., as
co-syndication agents, Banc of America Securities LLC, J.P. Morgan Securities Inc., Citigroup
Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers
and bookrunners, Deutsche Bank Securities Inc. and Wachovia Capital Markets LLC, as joint
bookrunners, and Merrill Lynch Capital Corporation, as documentation agent as the same may be
amended, supplemented or otherwise modified from time to time in accordance with its terms.
“
CF Collateral Agent
” shall mean the collateral agent under the CF Facilities.
“
CF Documents
” shall mean the CF Agreement, any guaranties issued thereunder and the
collateral and security documents (and intercreditor agreements) entered into in connection
therewith.
“
CF Facilities
” shall mean the credit facilities under the CF Agreement, including any
guarantees, collateral documents and account control agreements, instruments and agreements
executed in connection therewith, and any amendments, supplements, modifications, extensions,
renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities
or commercial paper facilities with banks or other institutional lenders or investors that replace,
refund or refinance any part of the loans, notes, other credit facilities or commitments
thereunder, including any such replacement, refunding or refinancing facility or indenture that
increases the amount borrowable thereunder or alters the maturity thereof.
“
CF Revolving Credit Facility
” shall mean the revolving credit facility under the CF
Agreement.
“
CHAMPVA
” shall mean, collectively, the Civilian Health and Medical Program of the Department
of Veteran Affairs, a program of medical benefits covering retirees and dependents of former
members of the armed services administered by the United States Department of Veteran Affairs, and
all laws, rules, regulations, manuals, orders, guidelines or
-10-
requirements pertaining to such
program including, without limitation, (a) all federal statutes
(whether set forth in 38 U.S.C. § 1713 or elsewhere) affecting such program to the extent
applicable to CHAMPVA and (b) all rules, regulations (including 38 C.F.R. § 17.54), manuals, orders
and administrative, reimbursement and other guidelines of all Governmental Authorities promulgated
in connection with such program (whether or not having the force of law), in each case as the same
may be amended, supplemented or otherwise modified from time to time.
“
CHAMPVA Account
” shall mean an Account payable pursuant to CHAMPVA.
“
Change in Law
” shall mean (a) the adoption of any law, treaty, order, policy, rule or
regulation after the date of this Agreement, (b) any change in any law, treaty, order, policy, rule
or regulation or in the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) any guideline, request or directive issued or made after the
Original Closing Date by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law) that requires compliance by a Lender.
“
Change of Control
” shall mean and be deemed to have occurred if (a) the Sponsors, the Frist
Shareholders and the Management Investors shall at any time not own, in the aggregate, directly or
indirectly, beneficially and of record, at least 35% of the voting power of the outstanding Voting
Stock of the Parent Borrower (other than as the result of one or more widely distributed offerings
of the common Stock of the Parent Borrower or any direct or indirect parent thereof, in each case
whether by the Parent Borrower, such parent, the Sponsors, the Frist Shareholders or the Management
Investors); or (b) any person, entity or “group” (within the meaning of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended) shall at any time have acquired direct or indirect
beneficial ownership of a percentage of the voting power of the outstanding Voting Stock of the
Parent Borrower that exceeds the percentage of the voting power of such Voting Stock then
beneficially owned, in the aggregate, by the Sponsors, the Frist Shareholders and the Management
Investors, unless, in the case of either
clause (a)
or
(b)
above, the Sponsors, the
Frist Shareholders and the Management Investors have, at such time, the right or the ability by
voting power, contract or otherwise to elect or designate for election at least a majority of the
board of directors of the Parent Borrower; or (c) Continuing Directors shall not constitute at
least a majority of the board of directors of the Parent Borrower; or (d) at any time, a Change of
Control (as defined in the Junior Lien Notes Indenture or any agreement governing Subordinated
Indebtedness) shall have occurred; or (e) the Parent Borrower shall cease to own directly 100% of
the Stock and Stock Equivalents of Healthtrust;
provided
that no Change of Control shall be
deemed to have occurred under this
clause (e)
solely as a result of the preferred Stock of
Healthtrust that is owned by Columbia-SDH and Epic Properties continuing to be owned by such
entities so long as Columbia-SDH and Epic Properties are direct or indirect wholly-owned
Subsidiaries of Healthtrust.
“
Class
,” when used in reference to any Loan or Borrowing, shall refer to whether such Loan, or
the Loans comprising such Borrowing, are New Revolving Credit Loans, Protective Advances,
Incremental Revolving Loans or Swingline Loans and, when used in reference to any Commitment,
refers to whether such Commitment is a New Revolving Credit Commitment or a Incremental Revolving
Credit Commitment.
-11-
“
Code
” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated and rulings issued thereunder. Section references to the Code are to the
Code as in effect at the date of this Agreement and any subsequent provisions of the Code
amendatory thereof, supplemental thereto or substituted therefor.
“
Collateral
” shall have the meaning assigned thereto in to the Security Agreement.
“
Collateral Agent
” shall mean Bank of America, as collateral agent under the Security
Documents, or any successor collateral agent pursuant to
Section 13
.
“
Collection Account
” shall mean the account of the Administrative Agent designated by the
Administrative Agent as such in writing. Any funds on deposit in the Collection Account shall at
all times constitute Collateral.
“
Columbia-SDH
” shall mean Columbia-SDH Holdings, Inc., a Delaware corporation.
“
Commitment Fee
” shall have the meaning provided in
Section 4.1(a)
.
“
Commitment Fee Gross-Up Date
” shall have the meaning provided in
Section 4.1(a)
.
“
Commitment Fee Payment
” shall have the meaning provided in
Section 4.1(a)
.
“
Commitment Fee Rate
” shall mean, with respect to the Available Commitment on any day, the
rate
per annum
set forth below opposite the Status in effect on such day:
|
|
|
|
|
|
|
Status
|
|
Commitment Fee Rate
|
|
Level I Status
|
|
|
0.375
|
%
|
|
Level II Status
|
|
|
0.375
|
%
|
|
Level III Status
|
|
|
0.250
|
%
|
Notwithstanding the foregoing, the term “Commitment Fee Rate” shall mean 0.375% during the period
from and including the Original Closing Date to but excluding the Trigger Date.
“
Commitments
” shall mean, with respect to each Lender (to the extent applicable), such
Lender’s New Revolving Credit Commitment, Incremental Revolving Credit Commitment and commitment to
acquire participations in Protective Advances.
“
Communications
” shall have the meaning provided in
Section 14.17(a)
.
“
Concentration Account
” shall have the meaning provided in
Section 9.15(a)
.
“
Confidential Healthcare Information
” shall have the meaning provided in
Section 9.2
.
-12-
“
Confidential Information
” shall have the meaning provided in
Section 14.16
.
“
Confidential Information Memorandum
” shall mean the Confidential Information Memorandum of
the Parent Borrower dated August 2006, the Confidential Information Memorandum of the Parent
Borrower dated September 2006, in each case delivered to Lenders in connection with this Agreement,
and the Confidential Information Memorandum of the Parent Borrower dated October 2006;
provided
that in the event and to the extent of any inconsistencies between or among any of
the foregoing, “Confidential Information Memorandum” shall refer to the most recent thereof.
“
Consolidated EBITDA
” shall mean, for any period, Consolidated Net Income for such period,
plus
:
(a) without duplication and to the extent deducted (and not added back) in arriving at
such Consolidated Net Income, the sum of the following amounts for the Parent Borrower and
the Restricted Subsidiaries for such period:
(i) total interest expense and to the extent not reflected in such total
interest expense, any losses on hedging obligations or other derivative instruments
entered into for the purpose of hedging interest rate risk, net of interest income
(other than interest income of HCI) and gains on such hedging obligations, and costs
of surety bonds in connection with financing activities,
(ii) provision for taxes based on income, profits or capital, including
federal, foreign state, franchise, excise and similar taxes and foreign withholding
taxes paid or accrued during such period, including any penalties and interest
relating to any tax examinations,
(iii) depreciation and amortization,
(iv) Non-Cash Charges,
(v) extraordinary losses, unusual or non-recurring charges, severance costs,
relocation costs, integration and facilities opening costs, signing costs, retention
or completion bonuses, transition costs and costs from curtailments or modifications
to pension and post-retirement employee benefit plans,
(vi) restructuring charges or reserves (including restructuring costs related
to acquisitions after the Original Closing Date and to closure and/or consolidation
of facilities),
(vii) the amount of any minority interest expense consisting of Subsidiary
income attributable to minority equity interests of third parties in any
non-wholly-owned Subsidiary deducted (and not added back) in such period to
Consolidated Net Income,
-13-
(viii) the amount of management, monitoring, consulting and advisory fees and
related expenses paid to the Sponsors,
(ix) any costs or expenses pursuant to any management equity plan or stock
option plan or any other management or employee benefit plan or agreement or any
stock subscription or shareholder agreement, to the extent that such costs or
expenses are funded with cash proceeds contributed to the capital of the Parent
Borrower or net cash proceeds of an issuance of Stock or Stock Equivalents (other
than Disqualified Equity Interests) of the Parent Borrower (
provided
such
capital contributions are not included in the Cure Amount and have not been applied
to increase the “Applicable Amount” pursuant to
clause (ii)
of the
definition thereof),
(x) the amount of net cost savings projected by the Parent Borrower in good
faith to be realized as a result of specified actions (i) taken by the Parent
Borrower and its Restricted Subsidiaries prior to such date of determination or (ii)
expected to be taken on or prior to the third anniversary of the Original Closing
Date (in each case, calculated on a Pro Forma Basis as though such cost savings had
been realized on the first day of such period), net of the amount of actual benefits
realized during such period from such actions,
provided
that (A) such cost
savings are reasonably identifiable and factually supportable, (B) in the case of
subclause (ii)
above, such actions are taken on or prior to the third
anniversary of the Original Closing Date, (C) no cost savings shall be added
pursuant to this
clause (x)
to the extent duplicative of any expenses or
charges relating to such cost savings that are included in
clause (vi)
above
with respect to such period and (D) the aggregate amount of cost savings added
pursuant to this
clause (x)
shall not exceed $200,000,000 for any period
consisting of four consecutive quarters,
(xi) to the extent covered by insurance and actually reimbursed, or, so long as
the Parent Borrower has made a determination that there exists reasonable evidence
that such amount will in fact be reimbursed by the insurer and only to the extent
that such amount is (A) not denied by the applicable carrier in writing within 180
days and (B) in fact reimbursed within 365 days of the date of such evidence (with a
deduction for any amount so added back to the extent not so reimbursed within such
365 days), expenses with respect to liability or casualty events or business
interruption, and
(xii) the amount of losses on Dispositions of receivables and related assets in
connection with any Permitted Receivables Financing,
less
(b) without duplication and to the extent included in arriving at such Consolidated Net
Income, the sum of the following amounts for such period:
(i) extraordinary gains and unusual or non-recurring gains,
-14-
(ii) non-cash gains (excluding any non-cash gain to the extent it represents
the reversal of an accrual or reserve for a potential cash item that reduced
Consolidated Net Income or Consolidated EBITDA in any prior period),
(iii) gains on asset sales (other than asset sales in the ordinary course of
business), and
(iv) any net after-tax income from the early extinguishment of Indebtedness or
hedging obligations or other derivative instruments,
in each case, as determined on a consolidated basis for the Parent Borrower and the Restricted
Subsidiaries in accordance with GAAP;
provided
that
(i) to the extent included in Consolidated Net Income, there shall be excluded in
determining Consolidated EBITDA currency translation gains and losses related to currency
remeasurements of Indebtedness or intercompany balances (including the net loss or gain
resulting from Hedge Agreements for currency exchange risk),
(ii) to the extent included in Consolidated Net Income, there shall be excluded in
determining Consolidated EBITDA for any period any adjustments resulting from the
application of Statement of Financial Accounting Standards No. 133,
(iii) there shall be included in determining Consolidated EBITDA for any period,
without duplication, (A) the Acquired EBITDA of any Person, property, business or asset
acquired by the Parent Borrower or any Restricted Subsidiary during such period (but not the
Acquired EBITDA of any related Person, property, business or assets to the extent not so
acquired) to the extent not subsequently sold, transferred, abandoned or otherwise disposed
by the Parent Borrower or such Restricted Subsidiary (each such Person, property, business
or asset acquired and not subsequently so disposed of, an “
Acquired Entity or Business
”) and
the Acquired EBITDA of any Unrestricted Subsidiary that is converted into a Restricted
Subsidiary during such period (each, a “
Converted Restricted Subsidiary
”), based on the
actual Acquired EBITDA of such Acquired Entity or Business or Converted Restricted
Subsidiary for such period (including the portion thereof occurring prior to such
acquisition or conversion) and (B) other than for purposes of determining the Applicable
Amount, the Applicable ABR Margin, the Applicable LIBOR Margin and the Commitment Fee Rate,
an adjustment in respect of each Acquired Entity or Business equal to the amount of the Pro
Forma Adjustment with respect to such Acquired Entity or Business for such period (including
the portion thereof occurring prior to such acquisition) as specified in a Pro Forma
Adjustment Certificate and delivered to the Lenders and the Administrative Agent, and
(iv) to the extent included in Consolidated Net Income, there shall be excluded in
determining Consolidated EBITDA for any period the Disposed EBITDA of any Person, property,
business or asset (other than an Unrestricted Subsidiary) sold, transferred, abandoned or
otherwise disposed of, closed or classified as discontinued operations by the Parent
Borrower or any Restricted Subsidiary during such period (each such Person, property,
business or asset so sold or disposed of, a “
Sold Entity or
-15-
Business
”), and the Disposed
EBITDA of any Restricted Subsidiary that is converted into an Unrestricted Subsidiary during
such period (each, a “
Converted Unrestricted Subsidiary
”) based on the actual Disposed
EBITDA of such Sold Entity or Business or
Converted Restricted Subsidiary for such period (including the portion thereof occurring
prior to such sale, transfer or disposition or conversion).
Notwithstanding anything to the contrary contained herein and subject to adjustment as provided in
clauses (iii)
and
(iv)
of the immediately preceding proviso with respect to
acquisitions and dispositions occurring following the Original Closing Date, Consolidated EBITDA
shall be deemed to be $1,233,000,000, $1,112,000,000 and $974,000,000, respectively, for the fiscal
quarters ended March 31, 2006, June 30, 2006, and September 30, 2006.
“
Consolidated EBITDA to Consolidated Interest Expense Ratio
” shall mean, as of any date of
determination, the ratio of (a) Consolidated EBITDA for the relevant Test Period to (b)
Consolidated Interest Expense for such Test Period.
“
Consolidated First Lien Debt
” shall mean Consolidated Total Debt secured by a Lien on any
assets of the Parent Borrower or any of its Restricted Subsidiaries (other than (i) a Lien ranking
junior to the Lien securing the Obligations on a basis at least as substantially favorable to the
Lenders as the basis on which the Lien securing the Junior Lien Notes ranks junior to the Lien
securing the Obligations and (ii) Liens on assets not constituting Collateral permitted pursuant to
Section 10.2
).
“
Consolidated First Lien Debt to Consolidated EBITDA Ratio
” shall mean, as of any date of
determination, the ratio of (a) Consolidated First Lien Debt as of such date to (b) Consolidated
EBITDA for the Test Period then last ended.
“
Consolidated Interest Expense
” shall mean, for any period, the sum of (i) the cash interest
expense including that attributable to Capital Leases in accordance with GAAP (
provided
that any payment of cash interest pursuant to
Section 10.6(e)
on the required date of
determination of Consolidated Interest Expense for any purpose under this Agreement shall be added
to Consolidated Interest Expense for the period for which such determination is being made), net of
cash interest income (other than interest income of HCI), of the Parent Borrower and the Restricted
Subsidiaries and, solely for purposes of calculating the Consolidated EBITDA to Consolidated
Interest Expense Ratio in
Section 10.6(e)
, Holdings, on a consolidated basis in accordance
with GAAP with respect to all outstanding Indebtedness of the Parent Borrower and the Restricted
Subsidiaries and, solely for purposes of calculating the Consolidated EBITDA to Consolidated
Interest Expense Ratio in
Section 10.6(e)
, Holdings, including all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing
and net costs under Hedge Agreements (other than currency swap agreements, currency future or
option contracts and other similar agreements) and (ii) any cash payments made during such period
in respect of obligations referred to in
clause (b)
below relating to Funded Debt that were
amortized or accrued in a previous period (other than any such obligations resulting from the
discounting of Indebtedness in connection with the application of purchase accounting in connection
with the Transaction or any Permitted Acquisition), but excluding, however, (a) amortization of
deferred financing costs and any other amounts of non-
-16-
cash interest, (b) the accretion or accrual
of discounted liabilities during such period, and (c) all non-recurring cash interest expense
consisting of liquidated damages for failure to timely comply with registration rights obligations
and financing fees, all as calculated on a consolidated basis in accordance with GAAP and
excluding, for the avoidance of doubt, any interest in respect of
items excluded from Indebtedness in the proviso to the definition thereof,
provided
that (a) except as provided in
clause (b)
below, there shall be excluded from Consolidated
Interest Expense for any period the cash interest expense (or cash interest income) of all
Unrestricted Subsidiaries for such period to the extent otherwise included in Consolidated Interest
Expense, (b) there shall be included in determining Consolidated Interest Expense for any period
the cash interest expense (or income) of any Acquired Entity or Business acquired during such
period and of any Converted Restricted Subsidiary converted during such period, in each case based
on the cash interest expense (or income) of such Acquired Entity or Business or Converted
Restricted Subsidiary for such period (including the portion thereof occurring prior to such
acquisition or conversion) assuming any Indebtedness incurred or repaid in connection with any such
acquisition or conversion had been incurred or prepaid on the first day of such period, and (c)
there shall be excluded from determining Consolidated Interest Expense for any period the cash
interest expense (or income) of any Sold Entity or Business disposed of during such period, based
on the cash interest expense (or income) relating to any Indebtedness relieved, retired or repaid
in connection with any such disposition of such Sold Entity or Business for such period (including
the portion thereof occurring prior to such disposal) assuming such debt relieved, retired or
repaid in connection with such disposition had been relieved, retired or repaid on the first day of
such period.
Notwithstanding anything to the contrary contained herein, Consolidated Interest Expense shall
be deemed to be $175,000,000, $183,000,000 and $192,000,000, respectively, for the fiscal quarters
ended March 31, 2006, June 30, 2006 and September 30, 2006.
“
Consolidated Net Income
” shall mean, for any period, the net income (loss) of the Parent
Borrower and the Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, excluding, without duplication,
(a) extraordinary items for such period,
(b) the cumulative effect of a change in accounting principles during such period to
the extent included in Consolidated Net Income,
(c) in the case of any period that includes a period ending prior to or during the
fiscal quarter ending September 30, 2007, Transaction Expenses,
(d) any fees and expenses incurred during such period, or any amortization thereof for
such period, in connection with any acquisition, investment, recapitalization, asset
disposition, issuance or repayment of debt, issuance of equity securities, refinancing
transaction or amendment or other modification of any debt instrument (in each case,
including any such transaction consummated prior to the Original Closing Date and any such
transaction undertaken but not completed) and any charges or non-recurring merger costs
incurred during such period as a result of any such transaction,
-17-
(e) any income (loss) for such period attributable to the early extinguishment of
Indebtedness or to hedging obligations or other derivative instruments,
(f) accruals and reserves required to be established or adjusted as a result of the
Transactions in accordance with GAAP or changes as a result of adoption of or
modification of accounting policies, in each case, within twelve months after the
Original Closing Date; and
(g) the income (loss) for such period of any Unrestricted Subsidiary, except to the
extent distributed to the Parent Borrower or any Restricted Subsidiary.
There shall be excluded from Consolidated Net Income for any period the purchase accounting effects
of adjustments to inventory, property, equipment and intangible assets and deferred revenue in
component amounts required or permitted by GAAP and related authoritative pronouncements (including
the effects of such adjustments pushed down to the Parent Borrower and the Restricted
Subsidiaries), as a result of the Transactions, any consummated acquisition whether consummated
before or after the Original Closing Date, or the amortization or write-off of any amounts thereof.
“
Consolidated Persons
” shall mean, at any time, each of the Persons listed on
Schedule
1.1(h)
to the Original Credit Agreement so long as (i) such Person’s financial results are
consolidated with the financial results of the Parent Borrower in accordance with GAAP at such time
and (ii) no Sponsor or Frist Shareholder (or any controlling affiliate of any Sponsor or of any
Frist Shareholder) holds any Stock or Stock Equivalents of such Person at such time.
“
Consolidated Total Assets
” shall mean, as of any date of determination, the amount that
would, in conformity with GAAP, be set forth opposite the caption “total assets” (or any like
caption) on a consolidated balance sheet of the Parent Borrower and the Restricted Subsidiaries at
such date.
“
Consolidated Total Debt
” shall mean, as of any date of determination, (a) the sum of all
Indebtedness of the types described in
clause (a)
,
clause (c)
(but, in the case of
clause (c)
, only to the extent of any unreimbursed drawings under any letter of credit) and
clause (e)
of the definition thereof actually owing by the Parent Borrower and the
Restricted Subsidiaries on such date to the extent appearing on the balance sheet of the Parent
Borrower determined on a consolidated basis in accordance with GAAP (
provided
that the
amount of any Capitalized Lease Obligations or any such Indebtedness issued at a discount to its
face value shall be determined in accordance with GAAP)
minus
(b) the aggregate cash and
cash equivalents included in the cash and cash equivalents accounts listed on the balance sheet of
the Parent Borrower and the Restricted Subsidiaries as at such date determined on a consolidated
basis in accordance with GAAP excluding (x) all cash of HCI and (y) any cash subject to a Lien
other than nonconsensual Liens permitted by
Section 10.2
and Liens permitted by
Section
10.2(m)
,
(n)
and
(o)
.
“
Consolidated Total Debt to Consolidated EBITDA Ratio
” shall mean, as of any date of
determination, the ratio of (a) Consolidated Total Debt as of the last day of the relevant Test
Period to (b) Consolidated EBITDA for such Test Period.
-18-
“
Continuing Director
” shall mean, at any date, an individual (a) who is a member of the board
of directors of the Parent Borrower Original Closing Date, (b) who, as of the date of
determination, has been a member of such board of directors for at least the twelve preceding
months, (c) who has been nominated to be a member of such board of directors, directly or
indirectly, by a Sponsor or Persons nominated by a Sponsor or (d) who has been
nominated to be a member of such board of directors by a majority of the other Continuing
Directors then in office.
“
Contractual Requirement
” shall have the meaning provided in
Section 8.3
.
“
Converted Restricted Subsidiary
” shall have the meaning provided in the definition of the
term “Consolidated EBITDA.”
“
Converted Unrestricted Subsidiary
” shall have the meaning provided in the definition of the
term “Consolidated EBITDA.”
“
Co-Syndication Agents
” shall mean JPMorgan Chase Bank, N.A. and Citicorp North America, Inc.,
together with their respective affiliates, as co-syndication agents for the Lenders under this
Agreement and the other Credit Documents.
“
Covenant Compliance Event
” shall mean Excess Facility Availability at any time is less than
or equal to 10% of the Borrowing Base. For purposes hereof, the occurrence of a Covenant
Compliance Event shall be deemed continuing until Excess Facility Availability has exceeded 10% of
the Borrowing Base for thirty (30) consecutive days, in which case a Covenant Compliance Event
shall no longer be deemed to be continuing for purposes of this Agreement.
“
Credit Card Notifications
” shall have the meaning provided in
Section 9.15(e)
.
“
Credit Documents
” shall mean this Agreement (including the Original Credit Agreement), the
Amendment Agreement, the Security Documents, each Letter of Credit and any promissory notes issued
by a Borrower hereunder.
“
Credit Event
” shall mean and include the making (but not the conversion or continuation) of a
Loan and the issuance of a Letter of Credit.
“
Credit Facilities
” shall mean, collectively, each category of Commitments and each extension
of credit hereunder.
“
Credit Party
” shall mean the Parent Borrower and each of the Subsidiary Borrowers.
“
Cumulative Consolidated Net Income
” shall mean, for any period, Consolidated Net Income for
such period, taken as a single accounting period. Cumulative Consolidated Net Income may be a
positive or negative amount.
“
Cure Amount
” shall have the meaning provided in
Section 12
.
-19-
“
Cure Right
” shall have the meaning provided in
Section 12
.
“
Debt Repayment
” shall mean the repayment, prepayment, repurchase or defeasance of the
Indebtedness of the Parent Borrower under the 1993 Indenture that is identified on
Schedule
1.1(g)
to the Original Credit Agreement and that was repaid, prepaid, repurchased
or defeased on the Original Closing Date (or such later date as may be necessary to effect the
Debt Repayment in accordance with the tender offers therefor).
“
Default
” shall mean any event, act or condition that with notice or lapse of time, or both,
would constitute an Event of Default.
“
Defaulting Lender
” shall mean any Lender with respect to which a Lender Default is in effect.
“
Delayed Equity Arrangements
” shall have the meaning provided in
Section 8.17
.
“
Delayed Equity Amount
” means an amount, in Dollars, equal to the lesser of (x) $100,000,000
and (y) the amount by which the Equity Investment actually made on the Original Closing Date would
have to have been increased (assuming (I) a corresponding decrease in the amount of consolidated
Indebtedness of the Parent Borrower and its Subsidiaries outstanding on the Original Closing Date
and (II) that such consolidated Indebtedness had been further reduced by the Option Note Amount) in
order for the sum of (i) the Equity Investment actually made on the Original Closing Date and (ii)
the Option Note Amount to have constituted 15% of the aggregate pro forma capitalization of the
Parent Borrower on the Original Closing Date. For the avoidance of doubt, no amount deemed
received by the Parent Borrower in respect of the Option Note Amount for purposes of the first
sentence of
Section 10.7(d)
shall also be deemed received by the Parent Borrower in respect
of the Delayed Equity Amount for purposes of such sentence.
“
Designated Non-Borrower Subsidiary
” shall mean any Restricted Subsidiary of the Parent
Borrower that is designated as a Designated Non-Borrower Subsidiary by the Parent Borrower in a
written notice to the Administrative Agent,
provided
that (a) each of (i) an amount equal
to the Parent Borrower’s direct or indirect equity ownership percentage of the net worth of such
Restricted Subsidiary immediately prior to such designation (such net worth to be calculated
without regard to any guarantee provided by such designated Restricted Subsidiary) and (ii) without
duplication of any amount included in the preceding
clause (i)
, the aggregate principal
amount of any Indebtedness owed by such designated Restricted Subsidiary to the Parent Borrower or
any other Credit Party immediately prior to such designation, shall be deemed to be an Investment
by the Parent Borrower, on the date of such designation, in a Restricted Subsidiary that is not a
Credit Party, all calculated, except as set forth in the parenthetical to
clause (i)
above,
on a consolidated basis in accordance with GAAP and (b) no Default or Event of Default would result
from such designation after giving effect thereto. The Parent Borrower may, by written notice to
the Administrative Agent, re-designate any Designated Non-Borrower Subsidiary as a Borrower, and
thereafter, such Subsidiary shall no longer constitute a Designated Non-Borrower Subsidiary, but
only if (x) no Default or Event of Default would result from such re-designation and (y) such
Subsidiary becomes a party to this
-20-
Agreement by executing a joinder hereto and to the applicable
Security Documents in order to become a Borrower and pledgor, as applicable, thereunder.
“
Designated Non-Cash Consideration
” shall mean the fair market value of non-cash consideration
received by the Parent Borrower or a Restricted Subsidiary in connection with
a Disposition pursuant to
Section 10.4(b)
or
Section 10.4(c)
that is
designated as Designated Non-Cash Consideration pursuant to a certificate of an Authorized Officer
of the Parent Borrower, setting forth the basis of such valuation (which amount will be reduced by
the fair market value of the portion of the non-cash consideration converted to cash within 180
days following the consummation of the applicable Disposition).
“
Disbursement Account
” shall have the meaning provided in
Section 9.15(a)
.
“
Disposed EBITDA
” shall mean, with respect to any Sold Entity or Business or any Converted
Unrestricted Subsidiary for any period, the amount for such period of Consolidated EBITDA of such
Sold Entity or Business or Converted Unrestricted Subsidiary (determined as if references to the
Parent Borrower and the Restricted Subsidiaries in the definition of Consolidated EBITDA were
references to such Sold Entity or Business or Converted Unrestricted Subsidiary and its respective
Subsidiaries), all as determined on a consolidated basis for such Sold Entity or Business or
Converted Unrestricted Subsidiary, as the case may be.
“
Disposition
” shall have the meaning provided in
Section 10.4(b)
.
“
Disqualified Equity Interests
” shall mean any Stock or Stock Equivalent which, by its terms
(or by the terms of any security or other Stock or Stock Equivalent into which it is convertible or
for which it is exchangeable), or upon the happening of any event or condition (a) matures or is
mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking
fund obligation or otherwise (except (i) as a result of a change of control or asset sale so long
as any rights of the holders thereof upon the occurrence of a change of control or asset sale event
shall be subject to the prior repayment in full of the Loans and all other Obligations that are
accrued and payable and the termination of the Commitments or (ii) pursuant to any put option with
respect to any Stock or Stock Equivalent of a Subsidiary granted in favor of any Facility
Syndication Partner in connection with syndications of ambulatory surgery centers, outpatient
diagnostic or imaging centers, hospitals or other healthcare businesses operated or conducted by
such Subsidiary (collectively, “
Syndications
”)), (b) is redeemable at the option of the holder
thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provides for
scheduled payments of dividends in cash (other than, in the case of Stock or Stock Equivalents of a
Subsidiary issued to a Facility Syndication Partner in connection with a Syndication or held by a
Restricted Subsidiary, periodic distributions of available cash (determined in good faith by the
Parent Borrower) to the holders of such class of Stock or Stock Equivalents on a pro rata basis),
or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Stock or Stock
Equivalent that would constitute Disqualified Equity Interests, in each case, prior to the date
that is 180 days after the Final Maturity Date.
“
Dividends
” or “
dividends
” shall have the meaning provided in
Section 10.6
.
-21-
“
Documentation Agent
” shall mean Merrill Lynch Capital Corporation.
“
Dollars
” and “
$
” shall mean dollars in lawful currency of the United States of America.
“
Dollar Equivalent
” shall mean, at any time, (a) with respect to any amount denominated in
Dollars, such amount, and (b) with respect to any amount denominated in any other currency, the
equivalent amount thereof in Dollars as determined by the Administrative Agent on the basis of the
Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of Dollars
with such other currency.
“
Domestic Subsidiary
” shall mean each Subsidiary of the Parent Borrower that is organized
under the laws of the United States, any state or territory thereof, or the District of Columbia.
“
Drawing
” shall have the meaning provided in
Section 3.4(b)
.
“
Eligible Accounts
” shall mean, at any date of determination thereof, the aggregate amount of
all Accounts at such date due to a Borrower except to the extent that (determined without
duplication):
(a) such Account does not arise from the sale of goods or the performance of services
by such Borrower (or, in the case of an ABL Entity, does not arise from the sale of goods or
the performance of services by a 1993 Indenture Restricted Subsidiary) in the ordinary
course of its business;
(b) (i) such Borrower’s right to receive payment is not absolute or is contingent upon
the fulfillment of any condition whatsoever (other than the preparation and delivery of an
invoice) or (ii) as to which such Borrower is not able to bring suit or otherwise enforce
its remedies against the Account Debtor through judicial process;
(c) any defense, counterclaim, set-off or dispute exists as to such Account, but only
to the extent of such defense, counterclaim, setoff or dispute;
(d) such Account is not a true and correct statement of bona fide indebtedness incurred
in the amount of the Account for merchandise sold to or services rendered and accepted by
the applicable Account Debtor (or, in the event that the Account Debtor is a Third Party
Payor, merchandise sold to or services rendered and accepted by the intended beneficiary);
(e) an invoice, reasonably acceptable to the Administrative Agent in form and substance
or otherwise in the form otherwise required by any Account Debtor, has not been sent to the
applicable Account Debtor in respect of such Account within 30 days after the earlier of (i)
the date the patient as to which such Account relates has been discharged or (ii) the date
as of which such Account is first included in the Borrowing Base Certificate or otherwise
reported to the Administrative Agent as Collateral;
-22-
(f) such Account (i) is not owned by such Borrower or (ii) is subject to any Lien,
other than Liens permitted hereunder pursuant to
Sections 10.2(a)
,
(b)
,
(c)
and
(d)
;
(g) such Account is the obligation of an Account Debtor that is a director, officer,
other employee or Affiliate of any Borrower (other than Accounts arising from the provision
of medical care delivered to such Account Debtor in the ordinary course of
business), or to any entity (other than Third Party Payor) that has any common officer
or director with any Borrower;
(h) except for Government Accounts that are otherwise Eligible Accounts, such Account
is the obligation of an Account Debtor that is the United States government or a political
subdivision thereof, or department, agency or instrumentality thereof unless the
Administrative Agent, in its sole discretion, has agreed to the contrary in writing and such
Borrower, if necessary or desirable, has complied with respect to such obligation with the
Federal Assignment of Claims Act of 1940, or any applicable state, county or municipal law
restricting assignment thereof;
(i) [Reserved];
(j) such Borrower is liable for goods sold or services rendered by the applicable
Account Debtor to such Borrower but only to the extent of the potential offset;
(k) upon the occurrence of any of the following with respect to such Account:
(i) the Account is not paid within 180 days following the original invoice date
(it being understood that with respect to Medicaid Accounts that were formerly
Potential Medicaid Accounts, the 180-day period begins on the date of the first
invoice sent to Medicaid);
(ii) the Account Debtor obligated upon such Account suspends business, makes a
general assignment for the benefit of creditors or fails to pay its debts generally
as they come due;
(iii) any Account Debtor obligated upon such Account is a debtor or a debtor in
possession under any bankruptcy law or any other federal, state or foreign
(including any provincial) receivership, insolvency relief or other law or laws for
the relief of debtors;
provided
that Potential Medicaid Accounts shall not
be excluded from Eligible Accounts solely as a result of this
clause
(k)(iii)
;
(l) such Account is the obligation of an Account Debtor from whom 50% or more of the
dollar amount of all Accounts owing by that Account Debtor are ineligible under the criteria
set forth in this definition;
(m) such Account in one as to which the Collateral Agent’s Lien thereon, on behalf of
itself and the Lenders, is not a first priority perfected Lien, subject to Permitted Liens;
-23-
(n) any of the representations or warranties in the Credit Documents with respect to
such Account are untrue in any material respect with respect to such Account (or, with
respect to representations or warranties that are qualified by materiality, any of such
representations and warranties are untrue);
(o) such Account is evidenced by a judgment, Instrument or Chattel Paper (each such
term as defined in the UCC) (other than Instruments or Chattel Paper that are held by any
Borrower or that have been delivered to the Collateral Agent);
(p) except with respect to Government Accounts that are otherwise Eligible Accounts,
such Account, together with all other Accounts owing by such Account Debtor and its
Affiliates as of any date of determination, exceeds 20% of all Eligible Accounts (but only
the extent of such excess);
(q) such Account is payable in any currency other than Dollars;
(r) such Account is otherwise unacceptable to the Administrative Agent in its Permitted
Discretion;
(s) such Account has been redated, extended, compromised, settled or otherwise modified
or discounted, except (i) discounts or modifications that are granted by a Borrower in the
ordinary course of business and that are reflected in the calculation of the Borrowing Base
and (ii) Medicaid Accounts converted from Potential Medicaid Accounts;
(t) if such Borrower is or has been audited by any Third Party Payor either (i) any of
such audits provides for adjustments in reimbursable costs or asserts claims for
reimbursement or repayment by such Borrower of costs and/or payments theretofore made by
such Third Party Payor that, if adversely determined, in the aggregate could reasonably be
expected to have a Material Adverse Effect or (ii) such Borrower has had requests or
assertions of claims for reimbursement or repayment by it of costs and/or payments
theretofore made by any Third Party Payor that, if adversely determined, in the aggregate
could reasonably be expected to have a Material Adverse Effect;
(u) such Account exceeds the amount such Borrower is entitled to receive under any
capitation arrangement, fee schedule, discount formula, cost-based reimbursement or other
adjustment or limitation to such Person’s usual charges (to the extent of such excess);
(v) such Account is of an Account Debtor that is located in a state requiring the
filing of a notice of business activities report or similar report in order to permit a
Borrower to seek judicial enforcement in such state of payment of such Account, unless such
Borrower has qualified to do business in such state or has filed a notice of business
activities report or equivalent report for the then-current year or if such failure to file
and inability to seek judicial enforcement is capable of being remedied without any material
delay or material cost;
-24-
(w) such Accounts were acquired or originated by a Person acquired in a Permitted
Acquisition (until such time as the Administrative Agent has completed a customary due
diligence investigation as to such Accounts and such Person, which investigation may, at the
sole discretion of the Administrative Agent, include a field examination, and the
Administrative Agent is reasonably satisfied with the results thereof); or
(x) such Borrower is subject to an event of the type described in
Section 11.5
.
“
Eligible Credit Card Receivables
” shall mean, as of any date of determination, Accounts due
to a Borrower from major credit card and debit card processors (including, but not limited to,
VISA, Mastercard, American Express, Diners Club, DiscoverCard, Interlink, NYCE, Star/Mac, Tyme,
Pulse, Accel, AFF, Shazam, CU244, Alaska Option and Maestro) that arise in the ordinary course of
business and which have been earned by performance and that are not excluded as ineligible by
virtue of one or more of the criteria set forth below. None of the following shall be deemed to be
Eligible Credit Card Receivables:
(a) Accounts that have been outstanding for more than five (5) Business Days from the
date of sale, or for such longer period(s) as may be approved by the Administrative Agent in
its reasonable discretion;
(b) Accounts with respect to which a Borrower does not have good, valid and marketable
title, free and clear of any Lien (other than Liens permitted hereunder pursuant to
Sections 10.2(a), (b), (c)
and
(d))
;
(c) Accounts as to which the Collateral Agent’s Lien attached thereon on behalf of
itself and the Lenders, is not a first priority perfected Lien, subject to Permitted Liens;
(d) Accounts which are disputed, or with respect to which a claim, counterclaim, offset
or chargeback (other than chargebacks in the ordinary course by the credit card processors)
has been asserted, by the related credit card processor (but only to the extent of such
dispute, counterclaim, offset or chargeback);
(e) Except as otherwise approved by the Administrative Agent, Accounts as to which the
credit card processor has the right under certain circumstances to require a Borrower to
repurchase the Accounts from such credit card or debit card processor;
(f) Except as otherwise approved by the Administrative Agent, Accounts arising from any
private label credit card program of the Borrower; and
(g) Accounts due from major credit card and debit card processors (other than JCB,
Visa, Mastercard, American Express, Diners Club, DiscoverCard, Interlink, NYCE, Star/Mac,
Tyme, Pulse, Accel, AFF, Shazam, CU244, Alaska Option and Maestro) which the Administrative
Agent in its Permitted Discretion determines to be unlikely to be collected.
-25-
“
Environmental Claims
” shall mean any and all actions, suits, orders, decrees, demands, demand
letters, claims, liens, notices of noncompliance, violation or potential responsibility or
investigation (other than internal reports prepared by the Parent Borrower or any of the
Subsidiaries (a) in the ordinary course of such Person’s business or (b) as required in connection
with a financing transaction or an acquisition or disposition of real estate) or proceedings
relating in any way to any Environmental Law or any permit issued, or any approval given, under any
such Environmental Law (hereinafter, “
Claims
”), including, without limitation, (i) any and all
Claims by governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any applicable
Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief relating to the presence, release
or threatened release of Hazardous Materials or arising from alleged injury or threat of injury to
health or safety (to the extent relating to human exposure to Hazardous Materials), or the
environment including, without limitation, ambient air, surface water, groundwater, land surface
and subsurface strata and natural resources such as wetlands.
“
Environmental Law
” shall mean any applicable Federal, state, foreign or local statute, law,
rule, regulation, ordinance, code and rule of common law in effect on the Original Closing Date or
thereafter in effect and in each case as amended, and any binding judicial or administrative
interpretation thereof, including any binding judicial or administrative order, consent decree or
judgment, relating to the protection of environment, including, without limitation, ambient air,
surface water, groundwater, land surface and subsurface strata and natural resources such as
wetlands, or human health or safety (to the extent relating to human exposure to Hazardous
Materials), or Hazardous Materials.
“
Epic Properties
” shall mean Epic Properties, Inc., a Texas corporation.
“
Equity Investments
” shall have the meaning provided in the preamble to this Agreement.
“
ERISA
” shall mean the Employee Retirement Income Security Act of 1974, as amended from time
to time. Section references to ERISA are to ERISA as in effect at the date of this Agreement and
any subsequent provisions of ERISA amendatory thereof, supplemental thereto or substituted
therefor.
“
ERISA Affiliate
” shall mean each person (as defined in Section 3(9) of ERISA) that together
with the Parent Borrower would be deemed to be a “single employer” within the meaning of Section
414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the
Code, is treated as a single employer under Section 414 of the Code.
“
Event of Default
” shall have the meaning provided in
Section 11
.
“
Excess Amount
” shall have the meaning provided in
Section 2.14
.
“
Excess Facility Availability
” shall mean, as of any date of determination thereof by the
Administrative Agent, (x) the lesser of (1) the Borrowing Base and (2) the aggregate New Revolving
Credit Commitment,
minus
(y) the aggregate New Revolving Exposure.
-26-
“
Excess Global Availability
” shall mean, as of any date of determination thereof by the
Administrative Agent, the sum of:
(A) (x) the lesser of (1) the Borrowing Base and (2) the aggregate New Revolving Credit
Commitment hereunder
minus
(y) the aggregate New Revolving Exposure hereunder,
plus
(B) the aggregate Revolving Credit Commitment (as defined in the CF Agreement) under the CF
Revolving Credit Facility
minus
the aggregate Revolving Credit Exposure (as defined in the
CF Agreement) under the CF Revolving Credit Facility.
“
Exchange
” shall have the meaning provided in the recitals hereto.
“
Excluded Subsidiary
” shall mean (a) each Domestic Subsidiary listed on
Schedule
1.1(d)
to the Original Credit Agreement and each future Domestic Subsidiary, in each case, for
so long as any such Subsidiary does not (on a consolidated basis with its Restricted Subsidiaries)
have property, plant and equipment with a book value in excess of $5,000,000 or a contribution to
Consolidated EBITDA for any four fiscal quarter period that includes any date on or after the
Original Closing Date in excess of $5,000,000 (provided that no Domestic Subsidiary listed on
Schedule 1.1(d)
to the Original Credit Agreement that is identified on such Schedule as a
Subsidiary with respect which the Parent Borrower intends to conduct a Syndication shall cease to
be an Excluded Subsidiary pursuant to this clause (a) for so long as the Parent Borrower intends to
conduct such Syndication), (b) each Domestic Subsidiary that is not a wholly-owned Subsidiary on
any date such Subsidiary would otherwise be required to become a Subsidiary Borrower pursuant to
the requirements of Section 9.11 (for so long as such Subsidiary remains a non-wholly-owned
Restricted Subsidiary), (c) each Domestic Subsidiary that is prohibited by any applicable
Contractual Requirement or Requirement of Law from guaranteeing or incurring, directly or
indirectly, the Obligations at the time such Subsidiary becomes a Restricted Subsidiary (and for so
long as such restriction or any replacement or renewal thereof is in effect), (d) each Domestic
Subsidiary that is a Subsidiary of a Foreign Subsidiary, (e) each other Domestic Subsidiary
acquired pursuant to a Permitted Acquisition financed with secured Indebtedness incurred pursuant
to
Section 10.1(j)
or
Section 10.1(k)
and permitted by the proviso to
subclause
(y)
of such Sections and each Restricted Subsidiary thereof that guarantees such Indebtedness
to the extent and so long as the financing documentation relating to such Permitted Acquisition to
which such Restricted Subsidiary is a party prohibits such Restricted Subsidiary from guaranteeing,
or granting a Lien on any of its assets to secure, the Obligations, (f) any other Domestic
Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent (confirmed
in writing by notice to the Parent Borrower), the cost or other consequences (including any adverse
tax consequences) of providing a guarantee of or incurring, directly or indirectly, the Obligations
shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (g) each
Unrestricted Subsidiary, (h) each 1993 Indenture Restricted Subsidiary for so long as the 1993
Indenture is in effect and such Subsidiary is a “Restricted Subsidiary” under the 1993 Indenture,
(i) any Designated Non-Borrower Subsidiary and (k) HCA Health Services of New Hampshire, Inc., a
New Hampshire corporation.
-27-
“
Excluded Taxes
” shall mean, with respect to any Agent or any Lender, (a) (i) net income taxes
and franchise and excise taxes (imposed in lieu of net income taxes) imposed on such Agent or
Lender and, to the extent not duplicative, any Taxes imposed on such Agent or Lender where that Tax
is imposed upon or calculated by reference to the net income received or receivable (but not any
sum deemed to be received or receivable) by such Agent or Lender and (ii) any Taxes imposed on any
Agent or any Lender as a result of any current or former connection between such Agent or Lender
and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision
or taxing authority thereof or therein (other than any such connection arising from such Agent or
Lender having executed, delivered or performed its obligations or received a payment under, or
having been a party to or having enforced, this Agreement or any other Credit Document) and (b) in
the case of a Non-U.S. Lender, (i) any U.S. federal withholding tax that is imposed on amounts
payable to such Non-U.S. Lender under the law in effect at the time such Non-U.S. Lender becomes a
party to this Agreement (or, in the case of a Non-U.S. Participant, on the date such Non-U.S.
Participant became a Participant hereunder);
provided
that this
subclause (b)(i)
shall not apply to the extent that (x) the indemnity payments or additional amounts any Lender (or
Participant) would be entitled to receive (without regard to this
subclause (b)(i)
) do not
exceed the indemnity payment or additional amounts that the person making the assignment,
participation or transfer to such Lender (or Participant) would have been entitled to receive in
the absence of such assignment, participation or transfer or (y) any Tax is imposed on a Lender in
connection with an interest or participation in any Loan or other obligation that such Lender was
required to acquire pursuant to
Section 14.8(a)
or that such Lender acquired pursuant to
Section 14.7
(it being understood and agreed, for the avoidance of doubt, that any
withholding tax imposed on a Non-U.S. Lender as a result of a Change in Law occurring after the
time such Non-U.S. Lender became a party to this Agreement (or designates a new lending office)
shall not be an Excluded Tax) or (ii) any Tax to the extent attributable to such Non-U.S. Lender’s
failure to comply with
Section 5.4(d)
.
“
Facility Syndication Partners
” shall mean, with respect to any Subsidiary, a Physician or
employee performing services with respect to a facility operated by such Subsidiary or a
not-for-profit entity.
“
Federal Funds Effective Rate
” shall mean, for any day, the weighted average of the
per annum
rates on overnight federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on such day, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York;
provided
that (a) if such day is not a Business Day, the
Federal Funds Effective Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate
is so published on such next succeeding Business Day, the Federal Funds Effective Rate for such day
shall be the average rate charged to the Administrative Agent on such day on such transactions as
determined by the Administrative Agent.
“
Fees
” shall mean all amounts payable pursuant to, or referred to in,
Section 4.1
.
“
Final Maturity Date
” shall mean November 16, 2012, or, if such date is not a Business Day,
the next preceding Business Day.
-28-
“
Financial Officer
” shall mean the Chief Financial Officer, the Vice President-Finance, the
Treasurer, Assistant Treasurer, the officer in charge of cash management or any other senior
financial officer of the Parent Borrower.
“First Amendment Date” shall mean the date upon which the amendments hereto (as reflected
herein) provided for in Amendment No. 1 hereto dated as of March 2, 2009 become operative in
accordance with the terms thereof.
“
Foreign Currencies
” shall mean any currency other than Dollars.
“
Foreign Subsidiary
” shall mean each Subsidiary of the Parent Borrower that is not a Domestic
Subsidiary.
“
Frist Shareholders
” shall mean (i) Thomas F. Frist, Jr. and any executor, administrator,
guardian, conservator or similar legal representative thereof, (ii) any member of the immediate
family of Thomas F. Frist, Jr., (iii) any person directly or indirectly controlled by one or more
of the immediate family members of Thomas F. Frist, Jr., (iv) any Person acting as agent for any
Person described in
clauses (i)
through
(iii)
hereof and (v) the HCA Foundation so
long as a majority of the members of its board of directors consist of (a) Frist Shareholders, (b)
Continuing Directors, (c) Management Investors and/or (d) any other member of management of the
Parent Borrower (
provided
in the case of this
subclause (v)(d)
that no Change of
Control under
clause (a)
of the definition thereof (with any reference in such clause (a)
to the Frist Shareholders determined without regard to this
subclause (v)(d)
) shall have
occurred on the date such person became a member of management of the Parent Borrower).
“
Fronting Fee
” shall have the meaning provided in
Section 4.1(c)
.
“
Fund
” shall mean any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course.
“
Funded Debt
” shall mean all indebtedness of the Parent Borrower and the Restricted
Subsidiaries (and, solely for purposes of determining Consolidated Interest Expense, Holdings) for
borrowed money that matures more than one year from the date of its creation or matures within one
year from such date that is renewable or extendable, at the option of the Parent Borrower or any
Restricted Subsidiary (and, solely for purposes of determining Consolidated Interest Expense,
Holdings), to a date more than one year from such date or arises under a revolving credit or
similar agreement that obligates the lender or lenders to extend credit during a period of more
than one year from such date, including all amounts of Funded Debt required to be paid or prepaid
within one year from the date of its creation and, in the case of any Borrower, Indebtedness in
respect of the Loans.
“Future Secured Notes” shall mean senior secured notes or other senior secured
Indebtedness (which notes or other Indebtedness may either have the same lien priority as the CF
Facilities or may be a junior lien) in each case issued by the Parent Borrower or a U.S. Guarantor
(as defined in the CF Agreement), (a) the terms of which do not provide for any scheduled repayment
(other than de minimis amortization not to
-29-
exceed 1% per annum in the event that such Indebtedness is in the form of a Loan),
mandatory redemption or sinking fund obligations prior to the Tranche B Term Loan Maturity Date (as
defined in the CF Agreement as in effect on the Original Closing Date) (other than customary offers
to repurchase upon a change of control, asset sale or event of loss and customary acceleration
rights after an event of default in the case of senior secured notes and other than customary
mandatory prepayment and customary acceleration rights after an event of default consistent with
those in the CF Agreement as in effect on the Original Closing Date if such Indebtedness is in the
form of a Loan), (b) the covenants, events of default, guarantees, collateral and other terms of
which (other than interest rate and redemption premiums), taken as a whole, are not more
restrictive to the Parent Borrower and the Subsidiaries than those in the CF Facilities; provided
that a certificate of an Authorized Officer of the Parent Borrower delivered to the Administrative
Agent at least three Business Days (or such shorter period as the Administrative Agent may
reasonably agree) prior to the incurrence of such Indebtedness, together with a reasonably detailed
description of the material terms and conditions of such Indebtedness or drafts of the
documentation relating thereto, stating that the Parent Borrower has determined in good faith that
such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such
terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the
Parent Borrower within two Business Days after receipt of such certificate that it disagrees with
such determination (including a reasonable description of the basis upon which it disagrees), and
(c) of which no Subsidiary of the Parent Borrower (other than U.S. Guarantor (as defined in the CF
Agreement)) is an obligor.
“
GAAP
” shall mean generally accepted accounting principles in the United States of America, as
in effect from time to time;
provided
,
however
, that if there occurs after the
Original Closing Date any change in GAAP that affects in any respect the calculation of any
covenant contained in
Section 10
, the Lenders and the Parent Borrower shall negotiate in
good faith amendments to the provisions of this Agreement that relate to the calculation of such
covenant with the intent of having the respective positions of the Lenders and the Parent Borrower
after such change in GAAP conform as nearly as possible to their respective positions as of the
date of this Agreement and, until any such amendments have been agreed upon, the covenants in
Section 10
shall be calculated as if no such change in GAAP has occurred.
“
Government Accounts
” shall mean, collectively, any and all Accounts which are (a) Medicare
Accounts, (b) Medicaid Accounts, (c) TRICARE Accounts, (d) CHAMPVA Accounts or (e) any other
Account payable by a Governmental Authority acceptable to the Administrative Agent in its Permitted
Discretion.
“
Government Receivables Bank
” shall have the meaning provided in
Section 9.15(a)
.
“
Government Receivables Deposit Account
” shall have the meaning provided in
Section
9.15(a)
.
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“
Government Receivables Deposit Account Agreement
” shall have the meaning ascribed to it in
Section 9.15(a)
.
“
Governmental Authority
” shall mean any nation, sovereign or government, any state, province,
territory or other political subdivision thereof, and any entity or authority exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining to government,
including a central bank or stock exchange.
“
Guarantee Obligations
” shall mean, as to any Person, any obligation of such Person
guaranteeing or intended to guarantee any Indebtedness of any other Person (the “
primary obligor
”)
in any manner, whether directly or indirectly, including any obligation of such Person, whether or
not contingent, (a) to purchase any such Indebtedness or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such Indebtedness or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any such Indebtedness of
the ability of the primary obligor to make payment of such Indebtedness or (d) otherwise to assure
or hold harmless the owner of such Indebtedness against loss in respect thereof;
provided
,
however
, that the term “Guarantee Obligations” shall not include endorsements of
instruments for deposit or collection in the ordinary course of business or customary and
reasonable indemnity obligations in effect on the Original Closing Date or entered into in
connection with any acquisition or disposition of assets permitted under this Agreement (other than
such obligations with respect to Indebtedness). The amount of any Guarantee Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of
which such Guarantee Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to perform thereunder)
as determined by such Person in good faith.
“
Hazardous Materials
” shall mean (a) any petroleum or petroleum products, radioactive
materials, friable asbestos, urea formaldehyde foam insulation, transformers or other equipment
that contain dielectric fluid containing regulated levels of polychlorinated biphenyls, and radon
gas; (b) any chemicals, materials or substances defined as or included in the definition of
“hazardous substances,” “hazardous waste,” “hazardous materials,” “extremely hazardous waste,”
“restricted hazardous waste,” “toxic substances,” “toxic pollutants,” “contaminants” or
“pollutants,” or words of similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, which is prohibited, limited or regulated by any Environmental
Law.
“
HCA
” shall have the meaning provided in the preamble to this Agreement.
“
HCI
” shall mean Health Care Indemnity, Inc., an insurance company formed under the laws of
the State of Colorado.
“
Healthtrust
” shall mean Healthtrust, Inc. — The Hospital Company, a Delaware corporation, and
its successors and assigns.
-31-
“
Hedge Agreements
” shall mean interest rate swap, cap or collar agreements, interest rate
future or option contracts, currency swap agreements, currency future or option contracts,
commodity price protection agreements or other commodity price hedging agreements, and other
similar agreements entered into by the Parent Borrower or any Restricted Subsidiary in the ordinary
course of business (and not for speculative purposes) for the principal purpose of protecting the
Parent Borrower or any of the Restricted Subsidiaries against fluctuations in interest rates,
currency exchange rates or commodity prices.
“
Hedge Bank
” shall mean any Person that either (x) at the time it enters into a Secured Hedge
Agreement or (y) on the Original Closing Date, is a Lender or an Affiliate of a Lender, in its
capacity as a party to such Secured Hedge Agreement.
“
HIPAA
” shall have the meaning provided in
Section 9.2
.
“
Historical Financial Statements
” shall mean the audited consolidated balance sheets of the
Parent Borrower as of December 31, 2004 and December 31, 2005 and the audited consolidated
statements of income, stockholders’ equity and cash flows of the Parent Borrower for each of the
fiscal years in the three year period ending on December 31, 2005.
“
Holdings
” shall mean Hercules Holdings II, LLC, a Delaware limited liability company, and its
successors.
“
Increased Amount Date
” shall have the meaning provided in
Section 2.14
.
“
Incremental Revolving Credit Commitments
” shall have the meaning provided in
Section
2.14
.
“
Incremental Revolving Loan Lender
” shall have the meaning provided in
Section 2.14
.
“
Incremental Revolving Loans
” shall have the meaning provided in
Section 2.14
.
“
Indebtedness
” of any Person shall mean (a) all indebtedness of such Person for borrowed
money, (b) the deferred purchase price of assets or services that in accordance with GAAP would be
included as a liability on the balance sheet of such Person, (c) the face amount of all letters of
credit issued for the account of such Person and, without duplication, all drafts drawn thereunder,
(d) all Indebtedness of any other Person secured by any Lien on any property owned by such Person,
whether or not such Indebtedness has been assumed by such Person, (e) the principal component of
all Capitalized Lease Obligations of such Person, (f) all obligations of such Person under interest
rate swap, cap or collar agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts, commodity price protection agreements or other
commodity price hedging agreements and other similar agreements, (g) all obligations of such Person
in respect of Disqualified Equity Interests and (h) without duplication, all Guarantee Obligations
of such Person,
provided
that Indebtedness shall not include (i) trade payables and accrued
expenses arising in the ordinary course of business, (ii) deferred or prepaid revenue, (iii)
purchase price holdbacks in respect of a portion of the purchase
-32-
price of an asset to satisfy warranty or other unperformed obligations of the respective
seller and (iv) all intercompany Indebtedness having a term not exceeding 364 days (inclusive of
any roll over or extensions of terms) and incurred in the ordinary course of business.
“
Indemnified Taxes
” shall mean all Taxes (including Other Taxes) other than (i) Excluded Taxes
and (ii) any interest, penalties or expenses caused by an Agent’s or Lender’s gross negligence or
willful misconduct.
“
Intercreditor Agreement
” shall mean that certain Receivables Intercreditor Agreement, dated
as of the Original Closing Date, among the Collateral Agent, the CF Collateral Agent and the
Trustee under the Junior Lien Notes Indenture, as the same may be amended, restated, modified or
waived from time to time.
“
Interest Gross-Up Date
” shall have the meaning provided in
Section 2.8(d)
.
“
Interest Payment
” shall have the meaning provided in
Section 2.8(d)
.
“
Interest Period
” shall mean, with respect to any New Revolving Credit Loan, the interest
period applicable thereto, as determined pursuant to
Section 2.9
.
“
Investment
” shall mean, for any Person: (a) the acquisition (whether for cash, property,
services or securities or otherwise) of Stock, Stock Equivalents (or any other capital
contribution), bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person (including any “short sale” or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale); (b) the making of any
deposit with, or advance, loan or other extension of credit or capital contribution to, any other
Person (including the purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such Person), but excluding any such
advance, loan or extension of credit having a term not exceeding 364 days (inclusive of any
rollover or extension of terms) arising in the ordinary course of business; or (c) the entering
into of any guarantee of, or other contingent obligation with respect to, Indebtedness; or (d) the
purchase or other acquisition (in one transaction or a series of transactions) of all or
substantially all of the property and assets or business of another Person or assets constituting a
business unit, line of business or division of such Person;
provided
that, in the event
that any Investment is made by the Parent Borrower or any Restricted Subsidiary in any Person
through substantially concurrent interim transfers of any amount through one or more other
Restricted Subsidiaries, then such other substantially concurrent interim transfers shall be
disregarded for purposes of
Section 10.5
.
“
Investors
” shall mean the Sponsors, the Management Investors, the Frist Shareholders and each
other investor providing a portion of the Equity Investments on the Original Closing Date.
“
ISP
” shall mean, with respect to any Letter of Credit, the “International Standby Practices
1998” published by the Institute of International Banking Law & Practice (or such later version
thereof as may be in effect at the time of issuance).
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“
Issuer Documents
” shall mean with respect to any Letter of Credit, the Letter of Credit
Request, and any other document, agreement and instrument entered into by the Letter of Credit
Issuer and the Parent Borrower (or any Restricted Subsidiary) or in favor of the Letter of Credit
Issuer and relating to such Letter of Credit.
“
Joinder Agreement
” shall mean an agreement substantially in the form of
Exhibit L
to
the Original Credit Agreement.
“
Joint Bookrunners
” shall mean Deutsche Bank Securities Inc. and Wachovia Capital Markets,
LLC.
“
Joint Lead Arrangers and Bookrunners
” shall mean Banc of America Securities LLC, J.P. Morgan
Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
“
Junior Indebtedness
” shall have the meaning provided in
Section 10.7(a)
.
“
Junior Lien Notes
” shall have the meaning set forth in the preamble.
“
Junior Lien Notes Collateral
” shall mean the U.S. Collateral (as defined in the CF Agreement)
(other than any Principal Properties except to the extent that the 1993 Indenture has ceased to be
in effect as a result of a satisfaction and discharge thereof or defeasance thereof in accordance
with its terms at any time prior to the repayment in full of the Obligations (as defined in the CF
Agreement)).
“
Junior Lien Notes Indenture
” shall mean the Indenture dated as of the Original Closing Date,
among the Parent Borrower, the guarantors party thereto and The Bank of New York, as trustee,
pursuant to which the Junior Lien Notes are issued, as the same may be amended, supplemented or
otherwise modified from time to time in accordance therewith.
“
Junior Lien Notes Offering
” shall have the meaning provided in the recitals hereto.
“
JV Distribution Amount
” means, at any time, the aggregate amount of cash distributed to the
Parent Borrower or any Restricted Subsidiary by any joint venture that is not a Subsidiary
(regardless of the form of legal entity) since the Original Closing Date and prior to such time
(without duplication of any amount treated as a reduction in the outstanding amount of Investments
by the Parent Borrower or any Restricted Subsidiary pursuant to
clause (d)
,
(i)
or
(v)
of
Section 10.5)
and only to the extent that neither the Parent Borrower nor
any Restricted Subsidiary is under any obligation to repay such amount to such joint venture.
“
KKR
” shall mean each of Kohlberg Kravis Roberts & Co., L.P. and KKR Associates, L.P.
“
L/C Borrowing
” shall mean an extension of credit resulting from a drawing under any Letter of
Credit which has not been reimbursed on the date when made or refinanced as a Borrowing. All L/C
Borrowings shall be denominated in Dollars.
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“
L/C Fee Gross-Up Date
” shall have the meaning provided in
Section 4.1(b)
.
“
L/C Fee Payment
” shall have the meaning provided in
Section 4.1(b)
.
“
L/C Maturity Date
” shall mean the date that is five Business Days prior to the Final Maturity
Date.
“
L/C Obligations
” shall mean, as at any date of determination, the aggregate amount available
to be drawn under all outstanding Letters of Credit
plus
the aggregate of all Unpaid
Drawings, including all L/C Borrowings. For all purposes of this Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may still be drawn
thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be
deemed to be “outstanding” in the amount so remaining available to be drawn.
“
L/C Participant
” shall have the meaning provided in
Section 3.3(a)
.
“
L/C Participation
” shall have the meaning provided in
Section 3.3(a)
.
“
Lender
” shall have the meaning provided in the preamble to this Agreement.
“
Lender Default
” shall mean (a) the failure (which has not been cured) of a Lender to make
available its portion of any Borrowing, to fund its portion of any unreimbursed payment under
Section 3.3
or to fund its participation in a Protective Advance or (b) a Lender having
notified the Administrative Agent and/or the Parent Borrower that it does not intend to comply with
the obligations under
Section 2.1(b)
,
2.1(d)
or
3.3
, in the case of either
clause (a)
or
(b)
above or (c) a Lender becoming the subject of a bankruptcy or
insolvency proceeding.
“
Letter of Credit
” shall mean each letter of credit issued pursuant to
Section 3.1
.
“
Letter of Credit Commitment
” shall mean $200,000,000, as the same may be reduced from time to
time pursuant to
Section 3.1
.
“
Letter of Credit Exposure
” shall mean, with respect to any Lender, at any time, the sum of
(a) the principal amount of any Unpaid Drawings in respect of which such Lender has made (or is
required to have made) payments to the Letter of Credit Issuer pursuant to
Section 3.4(a)
at such time and (b) such Lender’s New Revolving Credit Commitment Percentage of the Letters of
Credit Outstanding at such time (excluding the portion thereof consisting of Unpaid Drawings in
respect of which the Lenders have made (or are required to have made) payments to the Letter of
Credit Issuer pursuant to
Section 3.4(a)
).
“
Letter of Credit Fee
” shall have the meaning provided in
Section 4.1(b)
.
“
Letter of Credit Issuer
” shall mean Bank of America, any of its Affiliates or any replacement
or successor pursuant to
Section 3.6
. The Letter of Credit Issuer may, in its discretion,
arrange for one or more Letters of Credit to be issued by Affiliates of the Letter of Credit
Issuer, and in each such case the term “Letter of Credit Issuer” shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate. In the event that there is more
-35-
than one Letter of Credit Issuer at any time, references herein and in the other Credit
Documents to the Letter of Credit Issuer shall be deemed to refer to the Letter of Credit Issuer in
respect of the applicable Letter of Credit or to all Letter of Credit Issuers, as the context
requires.
“
Letters of Credit Outstanding
” shall mean, at any time, the sum of, without duplication, (a)
the aggregate Stated Amount of all outstanding Letters of Credit and (b) the aggregate principal
amount of all Unpaid Drawings in respect of all Letters of Credit.
“
Letter of Credit Request
” shall have the meaning provided in
Section 3.2
.
“
Level I Status
” shall mean, on any date, the circumstance that the Consolidated Total Debt to
Consolidated EBITDA Ratio is greater than or equal to 6.00 to 1.00 as of such date.
“
Level II Status
” shall mean, on any date, the circumstance that Level I Status does not exist
and the Consolidated Total Debt to Consolidated EBITDA Ratio is greater than or equal to 4.50 to
1.00 as of such date.
“
Level III Status
” shall mean, on any date, the circumstance that the Consolidated Total Debt
to Consolidated EBITDA Ratio is less than 4.50 to 1.00 as of such date.
“
LIBOR Loan
” shall mean any New Revolving Credit Loan bearing interest at a rate determined by
reference to the LIBOR Rate.
“
LIBOR Rate
” shall mean, for any Interest Period with respect to a LIBOR Loan, the rate per
annum equal to the British Bankers Association LIBOR Rate (“
BBA LIBOR
”), as published by Reuters
(or other commercially available source providing quotations of BBA LIBOR as designated by the
Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period, for deposits in Dollars (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is
not available at such time for any reason, then the “LIBOR Rate” for such Interest Period shall be
the rate per annum determined by the Administrative Agent to be the rate at which deposits in
Dollars for delivery on the first day of such Interest Period in same day funds in the approximate
amount of the LIBOR Loan being made, continued or converted by the Administrative Agent and with a
term equivalent to such Interest Period would be offered by the Administrative Agent’s London
Branch to major banks in the London interbank eurodollar market at their request at approximately
11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.
“
Lien
” shall mean any mortgage, pledge, security interest, hypothecation, assignment, lien
(statutory or other) or similar encumbrance (including any agreement to give any of the foregoing,
any conditional sale or other title retention agreement or any lease in the nature thereof).
“
Loan
” shall mean any New Revolving Credit Loan, Swingline Loan, Incremental Revolving Loan or
Protective Advance made by any Lender hereunder.
-36-
“
Lock Boxes
” shall have the meaning provided in
Section 9.15(a)
.
“
Management Investors
” shall mean the directors, management officers and employees of the
Parent Borrower and its Subsidiaries on the Original Closing Date.
“
Mandatory Borrowing
” shall have the meaning provided in
Section 2.1(d)
.
“
Material Adverse Change
” shall mean any event, state of facts, circumstance, development,
change, effect or occurrence (an “
Effect
”) that is materially adverse to the business, financial
condition or results of operations of HCA and its Subsidiaries, taken as a whole, other than (i)
any Effect resulting from (A) changes in general economic or political conditions or the
securities, credit or financial markets in general, (B) general changes or developments in the
industries in which HCA and its Subsidiaries operate, including general changes in law or
regulation across such industries, (C) the announcement of the Acquisition Agreement or the
pendency or consummation of the Merger, including any labor union activities related thereto, (D)
the identity of Holdings or any of its Affiliates as the acquirer of HCA, (E) compliance with the
terms of, or the taking of any action required by, the Acquisition Agreement or consented to by
Holdings, (F) any acts of terrorism or war (other than any of the foregoing that causes any damage
or destruction to or renders unusable any facility or property of HCA or any of its Subsidiaries),
(G) changes in generally accepted accounting principles or the interpretation thereof, or (H) any
weather-related event, except, in the case of the foregoing
clauses (A)
and
(B)
, to
the extent such changes or developments referred to therein would reasonably be expected to have a
materially disproportionate impact on HCA and its Subsidiaries, taken as a whole, relative to other
for-profit participants in the industries and in the geographic markets in which HCA conducts its
businesses after taking into account the size of HCA relative to such other for-profit
participants, or (ii) any failure to meet internal or published projections, forecasts or revenue
or earning predictions for any period (
provided
that the underlying causes of such failure
shall be considered in determining whether there is a Material Adverse Change).
“
Material Adverse Effect
” shall mean a circumstance or condition affecting the business,
assets, operations, properties or financial condition of the Parent Borrower and the Subsidiaries,
taken as a whole, that would materially adversely affect (a) the ability of the Parent Borrower and
the other Credit Parties, taken as a whole, to perform their payment obligations under this
Agreement or any of the other Credit Documents or (b) the rights and remedies of the Administrative
Agent and the Lenders under this Agreement or any of the other Credit Documents.
“
Material Subsidiary
” shall mean, at any date of determination, (i) each Restricted Subsidiary
of the Parent Borrower (a) whose total assets at the last day of the Test Period ending on the last
day of the most recent fiscal period for which Section 9.1 Financials have been delivered were
equal to or greater than 1% of the consolidated total assets of the Parent Borrower and the
Restricted Subsidiaries at such date or (b) whose revenues during such Test Period were equal to or
greater than 1% of the consolidated revenues of the Parent Borrower and the Restricted Subsidiaries
for such period, in each case determined in accordance with GAAP and (ii) solely for purposes of
Sections 11.5
and
11.9
, each other Restricted Subsidiary
-37-
that is the subject of an Event of Default under one or more of such Sections and that, when
such Restricted Subsidiary’s total assets and revenues are aggregated with the total assets or
revenues, as applicable, of each other Restricted Subsidiary that is the subject of an Event of
Default under one or more of such Sections, would constitute a Material Subsidiary under
clause
(i)
above using a 4% threshold in replacement of the 1% threshold in such
clause (i)
.
“
Medicaid
” shall mean, collectively, the healthcare assistance program established by Title
XIX of the Social Security Act (42 U.S.C. §§ 1396
et seq
.) and any statutes succeeding thereto, and
all law, rules, regulations, manuals, orders, guidelines or requirements (whether or not having the
force of law) pertaining to such program, in each case as the same may be amended, supplemented or
otherwise modified from time to time.
“
Medicaid Account
” shall mean an Account payable pursuant to an agreement entered into between
a state agency or other entity administering Medicaid in such state and a healthcare facility or
physician under which the healthcare facility or physician agrees to provide services or
merchandise for Medicaid patients. Any Potential Medicaid Account shall become a Medicaid Account
at such time as such agency or entity assigns an identification number to the Account Debtor with
respect to such Potential Medicaid Account or otherwise provides documentation confirming that such
Account Debtor has qualified for Medicaid benefits.
“
Medicare
” shall mean, collectively, the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 U.S.C. §§ 1395
et seq
.) and any statutes
succeeding thereto, and all laws, rules, regulations manuals, orders or guidelines (whether or not
having the force of law) pertaining to such program, in each case as the same may be amended,
supplemented or otherwise modified from time to time.
“
Medicare Account
” means an Account payable pursuant to an agreement entered into between a
state agency or other entity administering Medicare in such state and a healthcare facility or
physician under which the healthcare facility or physician agrees to provide services or
merchandise for Medicare patients.
“
Merger
” shall have the meaning provided in the preamble to this Agreement.
“
Merger Sub
” shall mean Hercules Acquisition Corporation, a Delaware corporation.
“
Minimum Borrowing Amount
” shall mean (a) with respect to a Borrowing of LIBOR Loans,
$10,000,000 (or, if less, the entire remaining Commitments at the time of such Borrowing), (b) with
respect to a Borrowing of ABR Loans, $1,000,000 (or, if less, the entire remaining Commitments at
the time of such Borrowing), and (c) with respect to a Borrowing of Swingline Loans, $500,000 (or,
if less, the entire remaining Commitments at the time of such Borrowing).
“
MLGP
” shall mean Merrill Lynch Global Partners.
“
Monthly Borrowing Base Certificate
” shall have the meaning provided in
Section
9.1(i)
.
-38-
“
Moody’s
” shall mean Moody’s Investors Service, Inc. or any successor by merger or
consolidation to its business.
“
New Revolving Credit Commitment
” shall mean, (a) with respect to each Lender that is a Lender
on the Amendment and Restatement Date, the amount set forth opposite such Lender’s name on
Schedule 1
to the Amendment Agreement as such Lender’s “New Revolving Credit Commitment”
and (b) in the case of any Lender that becomes a Lender after the Amendment and Restatement Date,
the amount specified as such Lender’s “New Revolving Credit Commitment” in the Assignment and
Acceptance pursuant to which such Lender assumed a portion of the Total New Revolving Credit
Commitment, in each case of the same may be changed from time to time pursuant to terms hereof.
The aggregate amount of the New Revolving Credit Commitment as of the Amendment and Restatement
Date is $2,000,000,000.
“
New Revolving Credit Commitment Percentage
” shall mean at any time, for each Lender, the
percentage obtained by dividing (a) such Lender’s New Revolving Credit Commitment at such time by
(b) the amount of the Total New Revolving Credit Commitments at such time,
provided
that at
any time when the Total New Revolving Credit Commitment shall have been terminated, each Lender’s
New Revolving Credit Commitment Percentage shall be the percentage obtained by dividing (a) such
Lender’s New Revolving Exposure at such time by (b) the New Revolving Exposure of all Lenders at
such time.
“
New Revolving Credit Loans
” shall have the meaning provided in
Section 2.1(b)
.
“
New Revolving Exposure
” shall mean, with respect to any Lender at any time, the sum of (a)
the aggregate principal amount of the New Revolving Credit Loans of such Lender then outstanding,
(b) such Lender’s Letter of Credit Exposure at such time, (c) such Lender’s New Revolving Credit
Commitment Percentage of the aggregate principal amount of all outstanding Swingline Loans and (d)
with respect to Protective Advances, such Lender’s New Revolving Credit Commitment Percentage of
the aggregate principal amount of all outstanding Protective Advances;
provided
that clause
(d) of this definition shall be disregarded with respect to any Protective Advance solely for
purposes of calculating Excess Global Availability and Excess Facility Availability and solely to
the extent that the making of such Protective Advance would result in the occurrence of a Cash
Dominion Event or a Covenant Compliance Event.
“
New Revolving Lender
” shall mean, at any time, any Lender that has a New Revolving Credit
Commitment at such time.
“
New Revolving Termination Date
” shall mean the date on which the New Revolving Credit
Commitments shall have terminated, no New Revolving Credit Loans shall be outstanding and the
Letters of Credit Outstanding shall have been reduced to zero or Cash Collateralized.
“
1993 Indenture
” shall mean the Indenture dated as of December 16, 1993 between HCA and First
National Bank of Chicago, as Trustee, as may be amended, supplemented or modified from time to
time.
-39-
“
1993 Indenture Restricted Subsidiary
” shall mean any Subsidiary that on the Original Closing
Date constitutes a Restricted Subsidiary under (and as defined in) the 1993 Indenture, as in effect
on the Original Closing Date.
“
Non-Cash Charges
” shall mean (a) losses on asset sales, disposals or abandonments, (b) any
impairment charge or asset write-off related to intangible assets (including goodwill), long-lived
assets, and investments in debt and equity securities pursuant to GAAP, (c) all losses from
investments recorded using the equity method, (d) stock-based awards compensation expense,
including any such charges arising from stock options, restricted stock grants or other equity
incentive grants, and any cash compensation charges associated with the rollover or acceleration of
stock-based awards or payment of stock options in connection with the Transactions, and (e) other
non-cash charges (
provided
that if any non-cash charges referred to in this
clause
(e)
represent an accrual or reserve for potential cash items in any future period, the cash
payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to
such extent).
“
Non-Consenting Lender
” shall have the meaning provided in
Section 14.7(b)
.
“
Non-Defaulting Lender
” shall mean and include each Lender other than a Defaulting Lender.
“
Non-Extension Notice Date
” shall have the meaning provided in
Section 3.2(d)
.
“
Non-Reinstatement Deadline
” shall have the meaning provided in
Section 3.2(e)
.
“
Non-U.S. Lender
” shall mean any Agent or Lender that is not, for United States federal income
tax purposes, (a) an individual who is a citizen or resident of the United States, (b) a
corporation, partnership or entity treated as a corporation or partnership created or organized in
or under the laws of the United States, or any political subdivision thereof, (c) an estate whose
income is subject to U.S. federal income taxation regardless of its source or (d) a trust if a
court within the United States is able to exercise primary supervision over the administration of
such trust and one or more United States persons have the authority to control all substantial
decisions of such trust or a trust that has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a United States person.
“
Non-U.S. Participant
” shall mean any Participant that if it were a Lender would qualify as a
Non-U.S. Lender.
“
Notice of Borrowing
” shall have the meaning provided in
Section 2.3(b)
.
“
Notice of Conversion or Continuation
” shall have the meaning provided in
Section 2.6
.
“
Obligations
” shall mean all advances to, and debts, liabilities, obligations, covenants and
duties of, any Credit Party arising under any Credit Document or otherwise with respect to any
Commitment, Loan or Letter of Credit or under any Secured Cash Management
-40-
Agreement or Secured Hedge Agreement, in each case, entered into with the Parent Borrower or
any of its Domestic Subsidiaries, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, existing on the Original Closing Date or
thereafter existing and including interest and fees that accrue after the commencement by or
against any Credit Party or any Affiliate thereof of any proceeding under any bankruptcy or
insolvency law naming such Person as the debtor in such proceeding, regardless of whether such
interest and fees are allowed claims in such proceeding.
“
Option Note
” shall mean the promissory note, dated as of November 14, 2006, in a principal
amount equal to the Option Note Amount issued by The Community Foundation of Middle Tennessee in
favor of the Parent Borrower.
“
Option Note Amount
” shall mean $63,160,680.
“
Original Closing Date
” shall mean November 17, 2006.
“
Original Credit Agreement
” shall have the meaning set forth in the recitals hereto.
“
Original Lenders
” shall have the meaning set forth in the recitals hereto.
“
Other Taxes
” shall mean any and all present or future stamp, registration, documentary or any
other excise, property or similar taxes (including interest, fines, penalties, additions to tax and
related expenses with regard thereto) arising from any payment made or required to be made under
this Agreement or any other Credit Document or from the execution or delivery of, registration or
enforcement of, consummation or administration of, or otherwise with respect to, this Agreement or
any other Credit Document.
“
Overnight Rate
” shall mean, for any day, the greater of (i) the Federal Funds Effective Rate
and (ii) an overnight rate determined by the Administrative Agent, the Letter of Credit Issuer, or
the Swingline Lender, as the case may be, in accordance with banking industry rules on interbank
compensation.
“
Parent Borrower
” shall have the meaning set forth in the preamble hereto.
“
Participant
” shall have the meaning provided in
Section 14.6(c)
.
“
Patriot Act
” shall have the meaning provided in
Section 14.18
.
“
PBGC
” shall mean the Pension Benefit Guaranty Corporation established pursuant to Section
4002 of ERISA, or any successor thereto.
“
Perfection Certificate
” shall mean a certificate of each Borrower in the form of
Exhibit
D
to the Original Credit Agreement or any other form approved by the Administrative Agent.
-41-
“
Permitted Acquisition
” shall mean the acquisition, by merger or otherwise, by the Parent
Borrower or any of the Restricted Subsidiaries of assets or Stock or Stock Equivalents, so long as
(a) such acquisition and all transactions related thereto shall be consummated in accordance with
applicable law; (b) such acquisition shall result in the issuer of such Stock or Stock Equivalents
becoming a Restricted Subsidiary and a Subsidiary Borrower, to the extent required by
Section
9.11
; (c) after giving effect to such acquisition, no Default or Event of Default shall have
occurred and be continuing; (d) the aggregate fair market value (as determined in good faith by the
Parent Borrower) of all Investments funded or financed in any Persons that do not become Guarantors
(as defined in the CF Agreement as in effect on the Original Closing Date) in connection with all
such acquisitions following the Original Closing Date in reliance on
Section 10.5(h)
shall
not exceed $1,500,000,000 (it being understood that additional Investments in Persons that are not
Credit Parties (as defined in the CF Agreement) may be made in connection with Permitted
Acquisitions in reliance on any exception in
Section 10.5
other than
clause (h)
thereof); and (e) the Parent Borrower shall be in compliance, on a Pro Forma Basis after giving
effect to such acquisition (including any Indebtedness assumed or permitted to exist or incurred
pursuant to
Sections 10.1(j)
and
10.1(k)
, respectively, and any related Pro Forma
Adjustment), with the covenant set forth in Section 10.9 of the CF Agreement for the most recently
ended Test Period under such section as if such acquisition had occurred on the first day of such
Test Period.
“
Permitted Additional Debt
” shall mean senior unsecured or senior subordinated notes or other
Indebtedness or, subject to compliance with
Section 10.2
, junior lien secured notes or
other junior lien secured Indebtedness, issued by the Parent Borrower or a U.S. Guarantor (as
defined in the CF Agreement), (a) the terms of which (i) do not provide for any scheduled
repayment, mandatory redemption or sinking fund obligation prior to the date on which the final
maturity of the Junior Lien Notes occurs (as in effect on the Original Closing Date) (other than
customary offers to purchase upon a change of control, asset sale or event of loss and customary
acceleration rights after an event of default) and (ii) to the extent the same are senior
subordinated notes, provide for customary subordination to the Obligations under the Credit
Documents, (b) the covenants, events of default, guarantees, collateral and other terms of which
(other than interest rate and redemption premiums), taken as a whole, are not more restrictive to
the Parent Borrower and the Subsidiaries than those in the Junior Lien Notes;
provided
that
a certificate of an Authorized Officer of the Parent Borrower
is
delivered to the Administrative
Agent at least
five
three
Business Days (or such shorter period as the Administrative Agent
may reasonably agree) prior to the incurrence of such Indebtedness, together with a reasonably
detailed description of the material terms and conditions of such Indebtedness or drafts of the
documentation relating thereto, stating that the Parent Borrower has determined in good faith that
such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such
terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the
Parent Borrower
prior to such incurrence
within two Business Days after receipt of such
certificate
that it disagrees with such determination (including a reasonable description of
the basis upon which it disagrees), and (c) of which no Subsidiary of the Parent Borrower (other
than U.S. Guarantor (as defined in the CF Agreement)) is an obligor.
-42-
“
Permitted Discretion
” shall mean, the Administrative Agent’s commercially reasonable
judgment, exercised in good faith in accordance with customary business practices for comparable
asset-based lending transactions, as to any factor, event, condition or other circumstance arising
after the Original Closing Date or based on facts not known to the Administrative Agent as of the
Original Closing Date which the Administrative Agent reasonably determines: (a) will or reasonably
could be expected to adversely affect in any material respect the value of any Eligible Accounts,
the enforceability or priority of the Collateral Agent’s Liens thereon or the amount which the
Administrative Agent, the Lenders or the Letter of Credit Issuer would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in the liquidation of such
Eligible Accounts or (b) evidences that any collateral report or financial information delivered to
the Administrative Agent by any Person on behalf of the Parent Borrower is incomplete, inaccurate
or misleading in any material respect. In exercising such judgment, the Administrative Agent may
consider, without duplication, factors already included in or tested by the definition of Eligible
Accounts, and any of the following: (i) changes after the Original Closing Date in any material
respect in any concentration of risk with respect to Eligible Accounts and (ii) any other factors
arising after the Original Closing Date that change in any material respect the credit risk of
lending to the Borrowers on the security of the Eligible Accounts.
“
Permitted Investments
” shall mean:
(a) securities issued or unconditionally guaranteed by the United States government or
any agency or instrumentality thereof, in each case having maturities of not more than 24
months from the date of acquisition thereof;
(b) securities issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof or any political
subdivision of any such state or any public instrumentality thereof having maturities of not
more than 24 months from the date of acquisition thereof and, at the time of acquisition,
having an investment grade rating generally obtainable from either S&P or Moody’s (or, if at
any time neither S&P nor Moody’s shall be rating such obligations, then from another
nationally recognized rating service);
(c) commercial paper issued by any Lender or any bank holding company owning any
Lender;
(d) commercial paper maturing no more than 12 months after the date of creation thereof
and, at the time of acquisition, having a rating of at least A-2 or P-2 from either S&P or
Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an
equivalent rating from another nationally recognized rating service);
(e) domestic and LIBOR certificates of deposit or bankers’ acceptances maturing no more
than two years after the date of acquisition thereof issued by any Lender or any other bank
having combined capital and surplus of not less than $250,000,000 in the case of domestic
banks and $100,000,000 (or the Dollar Equivalent thereof) in the case of foreign banks;
-43-
(f) repurchase agreements with a term of not more than 30 days for underlying
securities of the type described in
clauses (a)
,
(b)
and
(e)
above
entered into with any bank meeting the qualifications specified in
clause (e)
above
or securities dealers of recognized national standing;
(g) marketable short-term money market and similar funds (x) either having assets in
excess of $250,000,000 or (y) having a rating of at least A-2 or P-2 from either S&P or
Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an
equivalent rating from another nationally recognized rating service);
(h) shares of investment companies that are registered under the Investment Company Act
of 1940 and substantially all the investments of which are one or more of the types of
securities described in
clauses (a)
through
(g)
above;
(i) in the case of Investments by any Restricted Foreign Subsidiary, other customarily
utilized high-quality Investments in the country where such Restricted Foreign Subsidiary is
located or in which such Investment is made; and
(j) investments made by HCI that are permitted or required by any Requirement of Law or
otherwise consistent with past practice, including without limitation investments in
exchange-traded funds, common stocks and bonds.
“
Permitted Junior Lien Debt
” shall mean the Junior Lien Notes and any other Indebtedness
secured by a Lien on the Junior Lien Notes Collateral permitted by
Section 10.2(c)
or
(r)
.
“
Permitted Liens
” shall mean:
(a) Liens for taxes, assessments or governmental charges or claims not yet delinquent
or that are being contested in good faith and by appropriate proceedings for which
appropriate reserves have been established to the extent required by and in accordance with
GAAP;
(b) Liens in respect of property or assets of the Parent Borrower or any of the
Subsidiaries imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens and
other similar Liens arising in the ordinary course of business, in each case so long as such
Liens arise in the ordinary course of business and do not individually or in the aggregate
have a Material Adverse Effect;
(c) Liens arising from judgments or decrees in circumstances not constituting an Event
of Default under
Section 11.11
;
(d) Liens incurred or deposits made in connection with workers’ compensation,
unemployment insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations incurred in the ordinary
course of business;
-44-
(e) ground leases in respect of real property on which facilities owned or leased by
the Parent Borrower or any of its Subsidiaries are located;
(f) easements, rights-of-way, restrictions, minor defects or irregularities in title
and other similar charges or encumbrances not interfering in any material respect with the
business of the Parent Borrower and its Subsidiaries, taken as a whole;
(g) any interest or title of a lessor or secured by a lessor’s interest under any lease
permitted by this Agreement;
(h) Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(i) Liens on goods the purchase price of which is financed by a documentary letter of
credit issued for the account of the Parent Borrower or any of its Subsidiaries,
provided
that such Lien secures only the obligations of the Parent Borrower or such
Subsidiaries in respect of such letter of credit to the extent permitted under
Section
10.1
;
(j) leases or subleases granted to others not interfering in any material respect with
the business of the Parent Borrower and its Subsidiaries, taken as a whole;
(k) Liens arising from precautionary Uniform Commercial Code financing statement or
similar filings made in respect of operating leases entered into by the Parent Borrower or
any of its Subsidiaries; and
(l) Liens created in the ordinary course of business in favor of banks and other
financial institutions over credit balances of any bank accounts of the Parent Borrower and
the Restricted Subsidiaries held at such banks or financial institutions, as the case may
be, to facilitate the operation of cash pooling and/or interest set-off arrangements in
respect of such bank accounts in the ordinary course of business.
“
Permitted Receivables Financing
” shall mean any customary accounts receivable financing
facility (including customary back-to-back intercompany arrangements in respect thereof) to the
extent (i) the amount thereof does not exceed the amount permitted by
Section 10.1(a)
and
(ii) either (x) the Accounts contributed, sold or otherwise financed thereby are Accounts that
immediately prior to being contributed, sold or otherwise financed thereunder did not constitute
Collateral or (y) after giving effect thereto, any Borrower that shall have contributed, sold or
otherwise financed any of its Accounts in connection therewith shall thereafter cease to be a
Borrower for all purposes hereunder and no Accounts originated or owned by such Borrower shall
thereafter be included in the Borrowing Base at any time.
“
Permitted Sale Leaseback
” shall mean any Sale Leaseback consummated by the Parent Borrower or
any of the Restricted Subsidiaries after the Original Closing Date,
provided
that any such
Sale Leaseback not between (i) a Credit Party and another Credit Party, (ii) a Restricted
Subsidiary that is not a Credit Party or a 1993 Indenture Restricted Subsidiary to another
Restricted Subsidiary that is not a Credit Party or a 1993 Indenture Restricted Subsidiary or (iii)
a 1993 Indenture Restricted Subsidiary to another 1993 Indenture Restricted Subsidiary is
-45-
consummated for fair value as determined at the time of consummation in good faith by the
Parent Borrower or such Restricted Subsidiary and, in the case of any Sale Leaseback (or series of
related Sales Leasebacks) the aggregate proceeds of which exceed $250,000,000 the board of
directors of the Parent Borrower or such Restricted Subsidiary (which such determination may take
into account any retained interest or other Investment of the Parent Borrower or such Restricted
Subsidiary in connection with, and any other material economic terms of, such Sale Leaseback).
“
Person
” shall mean any individual, partnership, joint venture, firm, corporation, limited
liability company, association, trust or other enterprise or any Governmental Authority.
“
Physician
” shall mean a doctor of medicine or osteopathy, a doctor of dental surgery or
dental medicine, a doctor of podiatric medicine, a doctor of optometry or a chiropractor.
“
PIK Interest Amount
” shall mean the aggregate principal amount of all increases in
outstanding principal amount of Toggle Notes and issuances of PIK Notes (as defined in the Junior
Lien Notes Indenture) in connection with an election by the Parent Borrower to pay interest on the
Toggle Notes in kind.
“
Plan
” shall mean any multiemployer or single-employer plan, as defined in Section 4001 of
ERISA and subject to Title IV of ERISA, that is or was within any of the preceding six plan years
maintained or contributed to by (or to which there is or was an obligation to contribute or to make
payments to) the Parent Borrower or an ERISA Affiliate.
“
Platform
” shall have the meaning provided in
Section 14.17(b)
.
“
Post-Acquisition Period
” shall mean, with respect to any Permitted Acquisition, the period
beginning on the date such Permitted Acquisition is consummated and ending on the last day of the
sixth full consecutive fiscal quarter immediately following the date on which such Permitted
Acquisition is consummated.
“
Potential Medicaid Account
” shall mean any Account for which the Account Debtor is a natural
person and for which the Borrowers in good faith and consistent with past practice, have submitted
an application to have such Accounts of such Account Debtor made eligible to become a valid
Medicaid Account. Once an identification number has been obtained for the patient or the
applicable State agency or other entity administering Medicaid in such State has provided
documentation confirming that such Account Debtor has qualified for Medicaid benefits, such
patient’s Accounts shall no longer be Potential Medicaid Accounts.
“
Prime Rate
” shall mean the “prime rate” referred to in the definition of ABR.
“
Principal Properties
” shall mean each acute care hospital providing general medical and
surgical services (excluding equipment, personal property and hospitals that primarily provide
specialty medical services, such as psychiatric and obstetrical and gynecological services) owned
solely by the Parent Borrower and/or one or more of its Subsidiaries (as defined in the 1993
Indenture as in effect on the Original Closing Date) and
-46-
located in the United States of America for so long as the 1993 Indenture is in effect and
such acute care hospital is a “Principal Property” under the 1993 Indenture.
“
Private Accounts
” shall mean, collectively, any and all Accounts that are not Government
Accounts.
“
Pro Forma Adjustment
” shall mean, for any Test Period that includes all or any part of a
fiscal quarter included in any Post-Acquisition Period, with respect to the Acquired EBITDA of the
applicable Acquired Entity or Business or the Consolidated EBITDA of the Parent Borrower, the pro
forma increase or decrease in such Acquired EBITDA or such Consolidated EBITDA, as the case may be,
projected by the Parent Borrower in good faith as a result of (a) actions taken during such
Post-Acquisition Period for the purposes of realizing reasonably identifiable and factually
supportable cost savings or (b) any additional costs incurred during such Post-Acquisition Period,
in each case in connection with the combination of the operations of such Acquired Entity or
Business with the operations of the Parent Borrower and the Restricted Subsidiaries;
provided
that (i) at the election of the Parent Borrower, such Pro Forma Adjustment shall
not be required to be determined for any Acquired Entity or Business to the extent the aggregate
consideration paid in connection with such acquisition was less than $100,000,000 and (ii) so long
as such actions are taken during such Post-Acquisition Period or such costs are incurred during
such Post-Acquisition Period, as applicable, it may be assumed, for purposes of projecting such pro
forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be,
that the applicable amount of such cost savings will be realizable during the entirety of such Test
Period, or the applicable amount of such additional costs, as applicable, will be incurred during
the entirety of such Test Period;
provided
further
that any such pro forma increase
or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, shall be
without duplication for cost savings or additional costs already included in such Acquired EBITDA
or such Consolidated EBITDA, as the case may be, for such Test Period.
“
Pro Forma Adjustment Certificate
” shall mean any certificate of an Authorized Officer of the
Parent Borrower delivered pursuant to
Section 9.1(h)
or
Section 9.1(d)
.
“
Pro Forma Basis
,” “
Pro Forma Compliance
” and “
Pro Forma Effect
” shall mean, with respect to
compliance with any test or covenant hereunder, that (A) to the extent applicable and other than
for purposes of determining the Applicable Amount, the Applicable ABR Margin, the Applicable LIBOR
Margin and the Commitment Fee Rate, the Pro Forma Adjustment shall have been made and (B) all
Specified Transactions and the following transactions in connection therewith shall be deemed to
have occurred as of the first day of the applicable period of measurement in such test or covenant:
(a) income statement items (whether positive or negative) attributable to the property or Person
subject to such Specified Transaction, (i) in the case of a sale, transfer or other disposition of
all or substantially all Capital Stock in any Subsidiary of the Parent Borrower or any division,
product line, or facility used for operations of the Parent Borrower or any of its Subsidiaries,
shall be excluded, and (ii) in the case of a Permitted Acquisition or Investment described in the
definition of “Specified Transaction,” shall be included, (b) any retirement of Indebtedness, and
(c) any incurrence or assumption of Indebtedness by the Parent Borrower or any of the Restricted
Subsidiaries in connection
-47-
therewith (it being agreed that if such Indebtedness has a floating or formula rate, such
Indebtedness shall have an implied rate of interest for the applicable period for purposes of this
definition determined by utilizing the rate that is or would be in effect with respect to such
Indebtedness as at the relevant date of determination);
provided
that, without limiting the
application of the Pro Forma Adjustment pursuant to (A) above (but without duplication thereof),
the foregoing pro forma adjustments may be applied to any such test or covenant solely to the
extent that such adjustments are consistent with the definition of Consolidated EBITDA and give
effect to events (including operating expense reductions) that are (i) (x) directly attributable to
such transaction, (y) expected to have a continuing impact on the Parent Borrower and the
Restricted Subsidiaries and (z) factually supportable or (ii) otherwise consistent with the
definition of Pro Forma Adjustment.
“
Protective Advance
” shall have the meaning provided in
Section 2.1(e)
.
“
Public Lender
” shall have the meaning provided in
Section 14.17(b)
.
“
Qualified Equity Interest
” shall mean any Stock or Stock Equivalent that does not constitute
a Disqualified Equity Interest.
“
Qualified Holdings Debt
” shall mean (1) any Indebtedness issued by Holdings (a) that does not
provide for any cash interest payments thereon prior to the fifth anniversary of the date of
issuance thereof, (b) that does not have any scheduled payment of principal prior to the Final
Maturity Date (except as a result of a change of control or asset sale so long as any rights of the
holders thereof upon the occurrence of a change of control or asset sale event shall be subject to
the prior repayment in full of the Loans and all other Obligations that are accrued and payable and
the termination of the Commitments), and (c) that is not guaranteed by, or secured by a Lien on any
assets of, the Parent Borrower or any of the Restricted Subsidiaries.
“
Real Estate
” shall have the meaning provided in
Section 9.1(f)
.
“
Receivables Reserves
” shall mean, without duplication of any other reserves or items that are
otherwise addressed or excluded through eligibility criteria, such reserves, subject to Section
2.15, as the Administrative Agent in the Administrative Agent’s Permitted Discretion determines as
being appropriate with respect to the determination of the collectability in the ordinary course of
business of Eligible Accounts, including, without limitation, on account of bad debts and dilution.
“
Register
” shall have the meaning provided in
Section 14.6(b)(iv)
.
“
Regulation D
” shall mean Regulation D of the Board as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
“
Regulation T
” shall mean Regulation T of the Board as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
“
Regulation U
” shall mean Regulation U of the Board as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
-48-
“
Regulation X
” shall mean Regulation X of the Board as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
“
Reimbursement Date
” shall have the meaning provided in
Section 3.4(a)
.
“
Related Parties
” shall mean, with respect to any specified Person, such Person’s Affiliates
and the directors, officers, employees, agents, trustees, advisors of such Person and any Person
that possesses, directly or indirectly, the power to direct or cause the direction of the
management or policies of such Person, whether through the ability to exercise voting power, by
contract or otherwise.
“
Related Person
” shall have the meaning provided in
Section 9.15(a)
.
“
Repayment
” shall have the meaning provided in the recitals hereto.
“
Reportable Event
” shall mean an event described in Section 4043 of ERISA and the regulations
thereunder, other than any event as to which the thirty day notice period has been waived.
“
Reports
” shall have the meaning ascribed to it in
Section 13.11(a)
.
“
Required Lenders
” shall mean, at any date, (a) Non-Defaulting Lenders having or holding a
majority of the Adjusted Total New Revolving Credit Commitment at such date or (b) if the Total New
Revolving Credit Commitment has been terminated or for the purposes of acceleration pursuant to
Section 11
, Non-Defaulting Lenders having or holding a majority of the outstanding
principal amount of the Loans (other than Protective Advances) and Letter of Credit Exposure
(excluding the Loans and Letter of Credit Exposure of Defaulting Lenders) in the aggregate at such
date.
“
Requirement of Law
” shall mean, 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 assets or to which such
Person or any of its property or assets is subject.
“
Reserve Amount
” shall mean:
(a) with respect to any New Revolving Credit Loan or Swingline Loan, for any period,
(i) if Level I Status is in effect as of the beginning of such period, an amount equal to
0.50% per annum on the average daily principal amount of such Loan over such period, (ii) if
Level II Status is in effect as of the beginning of such period, an amount equal to 0.25%
per annum on the average daily principal amount of such Loan over such period and (iii) if
Level III Status is in effect as of the beginning of such period, zero;
(b) with respect to any Letter of Credit Fee on any Letter of Credit for any period,
(i) if Level I Status is in effect as of the beginning of such period, an amount equal to
0.50%
per annum
on the average daily Stated Amount of such Letter of Credit
-49-
during such period, (ii) if Level II Status is in effect as of the beginning of such
period, an amount equal to 0.25% per annum on the average daily Stated Amount of such Letter
of Credit during such period and (iii) if Level III Status is in effect as of the beginning
of such period, zero;
(c) with respect to any Commitment Fee on any Available Commitment for any period, (i)
if Level I Status or Level II Status is in effect as of the beginning of such period, an
amount equal to 0.125%
per annum
on the average daily amount of such Available Commitment
over such period and (ii) if Level III Status is in effect at the beginning of such period,
zero;
provided
that notwithstanding the foregoing, during the fiscal quarter during which the
Final Maturity Date is scheduled to occur, the Reserve Amount for such Loan, Letter of Credit Fee
or Commitment Fee, as applicable, shall be zero.
For the avoidance of doubt, the
per annum
rate to be used in the determination of the Reserve
Amount for any interest, Letter of Credit Fee or Commitment Fee shall be determined in the same
manner as the underlying interest or fee in accordance with
Section 5.5
.
“
Reserves
” shall mean all (if any) Availability Reserves and Receivables Reserves it being
understood that Reserves on the Original Closing Date were equal to $0.
“
Restricted Subsidiary
” shall mean any Subsidiary of the Parent Borrower other than an
Unrestricted Subsidiary;
provided
that, solely for purposes of calculating any financial
definition set forth in this agreement for the Parent Borrower and its Restricted Subsidiaries on a
consolidated basis and clauses (a), (b) and (d) of
Section 9.1
, each Consolidated Person
shall be deemed to be a Restricted Subsidiary.
“
Retained Indebtedness
” shall mean the debt securities issued under the 1993 Indenture that
are identified on
Schedule 1.1(f)
to the Original Credit Agreement.
“
S&P
” shall mean Standard & Poor’s Ratings Services or any successor by merger or
consolidation to its business.
“
Sale Leaseback
” shall mean any transaction or series of related transactions pursuant to
which the Parent Borrower or any of the Restricted Subsidiaries (a) sells, transfers or otherwise
disposes of any property, real or personal, whether owned as of the Original Closing Date or
thereafter acquired, and (b) as part of such transaction, thereafter rents or leases such property
or other property that it intends to use for substantially the same purpose or purposes as the
property being sold, transferred or disposed.
“
SEC
” shall mean the Securities and Exchange Commission or any successor thereto.
“
Section 9.1 Financials
” shall mean the financial statements delivered, or required to be
delivered, pursuant to
Section 9.1(a)
or
(b)
together with the accompanying
officer’s certificate delivered, or required to be delivered, pursuant to
Section 9.1(d)
.
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“
Secured Cash Management Agreement
” shall mean any Cash Management Agreement that is entered
into by and between the Parent Borrower or any of its Subsidiaries and any Cash Management Bank.
“
Secured Hedge Agreement
” shall mean any Hedge Agreement that is entered into by and between
the Parent Borrower or any of its Subsidiaries and any Hedge Bank.
“
Secured Parties
” shall mean the Administrative Agent, the Collateral Agent, the Letter of
Credit Issuer, each Lender, each Hedge Bank that is party to any Secured Hedge Agreement with the
Parent Borrower or any Domestic Subsidiary, each Cash Management Bank that is party to a Secured
Cash Management Agreement with the Parent Borrower or any Domestic Subsidiary and each sub-agent
pursuant to
Section 13
appointed by the Administrative Agent with respect to matters
relating to the Credit Facilities or the Collateral Agent with respect to matters relating to any
Security Document.
“
Securitization
” shall mean a public or private offering by a Lender or any of its Affiliates
or their respective successors and assigns of securities or notes which represent an interest in,
or which are collateralized, in whole or in part, by the Loans and the Lenders’ rights under the
Credit Documents.
“
Security Agreement
” shall mean the Security Agreement dated as of November 17, 2006 entered
into by the Borrowers, any other grantors party thereto and the Collateral Agent for the benefit of
the Secured Parties, substantially in the form of
Exhibit F
to the Original Credit
Agreement, as the same may be amended, supplemented or otherwise modified from time to time.
“
Security Documents
” shall mean, collectively, (a) the Security Agreement, (b) the
Intercreditor Agreement, (c) Government Receivables Deposit Account Agreements, (d) Blocked Account
Agreements, (e) Credit Card Notifications and (f) each other security agreement or other instrument
or document executed and delivered pursuant to
Section 9.11
or
9.14
or pursuant to
any other such Security Documents to secure all of the Obligations.
“
Self-Pay Account
” shall mean any Account for which a Third Party Payor is not the Account
Debtor other than Potential Medicaid Accounts and other than Accounts for which the Account Debtor
is a credit card or debit card processor.
“
Shared Receivables Collateral
” shall have the definition set forth in the Intercreditor
Agreement.
“
Sold Entity or Business
” shall have the meaning provided in the definition of the term
“Consolidated EBITDA.”
“
Solvent
” shall mean, with respect to any Person, that as of the Original Closing Date, (a)
(i) the sum of such Person’s debt (including contingent liabilities) does not exceed the present
fair saleable value of such Person’s present assets; (ii) such Person’s capital is not unreasonably
small in relation to its business as contemplated on the Original Closing Date; and (iii) such
Person has not incurred and does not intend to incur, or believe that it will incur, debts
-51-
including current obligations beyond its ability to pay such debts as they become due (whether
at maturity or otherwise); and (b) such Person is “solvent” within the meaning given that term and
similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes
of this definition, the amount of any contingent liability at any time shall be computed as the
amount that, in light of all of the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability (irrespective of
whether such contingent liabilities meet the criteria for accrual under Statement of Financial
Accounting Standard No. 5).
“
Specified Subsidiary
” shall mean, at any date of determination (a) any Material Subsidiary or
(b) any Unrestricted Subsidiary (i) whose total assets at the last day of the Test Period ending on
the last day of the most recent fiscal period for which Section 9.1 Financials have been delivered
were equal to or greater than 6% of the consolidated total assets of the Parent Borrower and the
Subsidiaries at such date, or (ii) whose revenues during such Test Period were equal to or greater
than 6% of the consolidated revenues of the Parent Borrower and the Subsidiaries for such period,
in each case determined in accordance with GAAP, and (c) each other Unrestricted Subsidiary that is
the subject of an Event of Default under
Section 11.5
and that, when such Subsidiary’s
total assets or revenues are aggregated with the total assets or revenues, as applicable, of each
other Subsidiary that is the subject of an Event of Default under
Section 11.5
, would
constitute a Specified Subsidiary under
clause (b)
above using a 10% threshold in
replacement of the 6% threshold in such
clause (b)
.
“
Specified Transaction
” shall mean, with respect to any period, any Investment, sale, transfer
or other disposition of assets, incurrence or repayment of Indebtedness, Dividend, Subsidiary
designation, Incremental Revolving Credit Commitment or other event that by the terms of this
Agreement requires “Pro Forma Compliance” with a test or covenant hereunder or requires such test
or covenant to be calculated on a “Pro Forma Basis”.
“
Sponsor
” shall mean any of KKR, Bain and MLGP and their respective Affiliates but excluding
portfolio companies of any of the foregoing.
“
Spot Rate
” for a currency shall mean the rate determined by the Administrative Agent to be
the rate quoted by the Administrative Agent as the spot rate for the purchase by the Administrative
Agent of such currency with another currency through its principal foreign exchange trading office
at approximately 11:00 a.m. on the date two Business Days prior to the date as of which the foreign
exchange computation is made;
provided
that the Administrative Agent may obtain such spot
rate from another financial institution designated by the Administrative Agent if it does not have
as of the date of determination a spot buying rate for any such currency.
“
Stated Amount
” of any Letter of Credit shall mean the maximum amount from time to time
available to be drawn thereunder, determined without regard to whether any conditions to drawing
could then be met;
provided
,
however
, that with respect to any Letter of Credit
that by its terms or the terms of any Issuer Document provides for one or more automatic increases
in the stated amount thereof, the Stated Amount shall be deemed to be the maximum
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stated amount of such Letter of Credit after giving effect to all such increases, whether or
not such maximum stated amount is in effect at such time.
“
Status
” shall mean, as to the Parent Borrower as of any date, the existence of Level I
Status, Level II Status or Level III Status, as the case may be, on such date. Changes in Status
resulting from changes in the Consolidated Total Debt to Consolidated EBITDA Ratio shall become
effective as of the first day
of the calendar month immediately
following each date that
(a) Section 9.1 Financials are
required to be
delivered to the Lenders under
Section
9.1
and (b) an officer’s certificate is delivered by the Parent Borrower to the Lenders setting
forth, with respect to such Section 9.1 Financials, the then-applicable Status, and shall remain in
effect until the next change to be effected pursuant to this definition,
provided
that each
determination of the Consolidated Total Debt to Consolidated EBITDA Ratio pursuant to this
definition shall be made as of the end of the Test Period ending at the end of the fiscal period
covered by the relevant Section 9.1 Financials.
“
Stock
” shall mean shares of capital stock or shares in the capital, as the case may be
(whether denominated as common stock or preferred stock or ordinary shares or preferred shares, as
the case may be), beneficial, partnership or membership interests, participations or other
equivalents (regardless of how designated) of or in a corporation, partnership, limited liability
company or equivalent entity, whether voting or non-voting.
“
Stock Equivalents
” shall mean all securities convertible into or exchangeable for Stock and
all warrants, options or other rights to purchase or subscribe for any Stock, whether or not
presently convertible, exchangeable or exercisable.
“
Subordinated Indebtedness
” shall mean Indebtedness of any Borrower that is by its terms
subordinated in right of payment to the obligations of such Borrower, under this Agreement.
“
Subsidiary
” of any Person shall mean and include (a) any corporation more than 50% of whose
Stock of any class or classes having by the terms thereof ordinary voting power to elect a majority
of the directors of such corporation (irrespective of whether or not at the time Stock of any class
or classes of such corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries
and (b) any limited liability company, partnership, association, joint venture or other entity of
which such Person (i) directly or indirectly through Subsidiaries owns or controls more than 50% of
the capital accounts, distribution rights, total equity and voting interests or general or limited
partner interests and (ii) is a controlling general partner or otherwise controls such entity at
such time. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean
a Subsidiary of the Parent Borrower.
“
Subsidiary Borrowers
” shall mean (a) each Domestic Subsidiary that was a party to the
Original Credit Agreement as of the Original Closing Date, (b) each Domestic Subsidiary that became
party to the Original Credit Agreement after the Original Closing Date and prior to the Amendment
and Restatement Date pursuant to
Section 9.11
of the Original Credit Agreement and (c) each
Domestic Subsidiary that becomes a party to this Agreement on or after the Amendment Restatement
Date pursuant to
Section 9.11
or otherwise.
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“
Successor Borrower
” shall have the meaning provided in
Section 10.3(a)
.
“
Successor Parent Borrower
” shall have the meaning provided in
Section 10.3(a)
.
“
Supermajority Lenders
” shall mean, at any date, (a) Non-Defaulting Lenders having or holding
at least 75% of the Adjusted Total New Revolving Credit Commitment at such date or (b) if the Total
New Revolving Credit Commitment has been terminated, Non-Defaulting Lenders having or holding at
least 75% of the outstanding principal amount of the Loans and Letter of Credit Exposure (excluding
the Loans and Letter of Credit Exposure of Defaulting Lenders) in the aggregate at such date.
“
Swap Contract
” shall mean (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price or bond index
swaps or options or forward bond or forward bond price or forward bond index transactions, interest
rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions, currency options,
spot contracts, or other similar transactions or any combination of any of the foregoing (including
any options to enter into any of the foregoing), whether or not any such transaction is governed by
or subject to any master agreement, and (b) any and all transactions of any kind, and the related
confirmations, that are subject to the terms and conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives Association, Inc., any International
Foreign Exchange Master Agreement, or any other master agreement (any such master agreement,
together with any related schedules, a “
Master Agreement
”), including any such obligations or
liabilities under any Master Agreement.
“
Swingline Commitment
” shall mean $100,000,000.
“
Swingline Lender
” shall mean Bank of America, in its capacity as lender of Swingline Loans
hereunder.
“
Swingline Loans
” shall have the meaning provided in
Section 2.1(c)
.
“
Swingline Maturity Date
” shall mean, with respect to any Swingline Loan, the date that is
five Business Days prior to the Final Maturity Date.
“
Syndications
” shall have the meaning provided in the definition of Disqualified Equity
Interests.
“
Taxes
” shall mean any and all present or future taxes, duties, levies, imposts, assessments,
deductions, withholdings or other similar charges imposed by any Governmental Authority whether
computed on a separate, consolidated, unitary, combined or other basis and any interest, fines,
penalties or additions to tax with respect to the foregoing.
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“
Test Period
” shall mean, for any determination under this Agreement, the four consecutive
fiscal quarters of the Parent Borrower then last ended.
“
Third Party Payor
” shall mean any governmental entity, insurance company, health maintenance
organization, professional provider organization or similar entity that is obligated to make
payments on any Account.
“
Toggle Notes
” shall have the meaning set forth in the preamble hereto.
“
Total New Revolving Exposure
” shall mean, at any date, the Total New Revolving Credit
Commitment at such date (or, if the Total New Revolving Credit Commitment shall have terminated on
such date, the aggregate New Revolving Exposure of all Lenders at such date).
“
Total New Revolving Credit Commitment
” shall mean the sum of the New Revolving Credit
Commitments of all the Lenders.
“
Transaction Expenses
” shall mean any fees or expenses incurred or paid by the Parent Borrower
or any of its Subsidiaries in connection with the Transactions, this Agreement and the other Credit
Documents (including fees and expenses related to the Amendment Agreement and the amendment and
restatement of this Agreement) and the transactions contemplated hereby and thereby.
“
Transactions
” shall mean, collectively, the transactions contemplated by (i) this Agreement
to be made on the Amendment and Restatement Date, and (ii) the transactions contemplated by the
Original Credit Agreement, the CF Agreement, the Junior Lien Notes Indenture, the Debt Repayment,
the Merger and the Equity Investments and the intercompany transfers of the proceeds of the CF
Facilities, Junior Lien Notes and Loans made on the Original Closing Date.
“
Transferee
” shall have the meaning provided in
Section 14.6(e)
.
“
TRICARE
” shall mean, collectively, a program of medical benefits covering former and active
members of the uniformed services and certain of their dependents, financed and administered by the
United States Departments of Defense, Health and Human Services and Transportation, which program
was formerly know as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS),
and all laws, rules, regulations, manuals, orders and administrative, reimbursement and other
guidelines of all Governmental Authorities promulgated in connection with such program (whether or
not having the force of law), in each case as the same may be amended, supplemented or otherwise
modified from time to time.
“
TRICARE Account
” shall mean an Account payable pursuant to TRICARE.
“
Trigger Date
” shall mean the day following the date on which Section 9.1 Financials are
delivered to the Lenders for the fiscal
year
quarter
ending
on December
31, 2007.
after
the First Amendment Date.
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“
2014 Cash Pay Notes
” shall have the meaning provided in the preamble to this Agreement.
“
2016 Cash Pay Notes
” shall have the meaning provided in the preamble to this Agreement.
“
Type
” shall mean as to any New Revolving Credit Loan, its nature as an ABR Loan or a LIBOR
Loan.
“
UCC
” shall mean the Uniform Commercial Code of the State of New York or of any other state
the laws of which are required to be applied in connection with the perfection of security
interests in any Collateral.
“
UFCA
” shall have the meaning provided in
Section 14.20
.
“
UFTA
” shall have the meaning provided in
Section 14.20
.
“
Unfunded Current Liability
” of any Plan shall mean the amount, if any, by which the
Accumulated Benefit Obligation (as defined under Statement of Financial Accounting Standards No. 87
(“
SFAS 87
”)) under the Plan as of the close of its most recent plan year, determined in accordance
with SFAS 87 as in effect on the Original Closing Date, exceeds the fair market value of the assets
allocable thereto.
“
Unpaid Drawing
” shall have the meaning provided in
Section 3.4(a)
.
“
Unrestricted Subsidiary
” shall mean (a) any Subsidiary of the Parent Borrower that is formed
or acquired after the Original Closing Date,
provided
that at such time (or promptly
thereafter) the Parent Borrower designates such Subsidiary an Unrestricted Subsidiary in a written
notice to the Administrative Agent, (b) any Restricted Subsidiary subsequently designated as an
Unrestricted Subsidiary by the Parent Borrower in a written notice to the Administrative Agent,
provided
that in the case of
(b)
, no Restricted Subsidiary may be designated as an
Unrestricted Subsidiary if it previously had been designated as an Unrestricted Subsidiary; and
provided
further in the case of
(a)
and
(b)
, (x) such designation shall be
deemed to be an Investment (or reduction in an outstanding Investment, in the case of a designation
of an Unrestricted Subsidiary as a Restricted Subsidiary), on the date of such designation in an
amount equal to the sum of (i) the Parent Borrower’s direct or indirect equity ownership percentage
of the net worth of such designated Restricted Subsidiary immediately prior to such designation
(such net worth to be calculated without regard to any guarantee provided by such designated
Restricted Subsidiary) and (ii) without duplication, the aggregate principal amount of any
Indebtedness owed by such designated Restricted Subsidiary to the Parent Borrower or any other
Restricted Subsidiary immediately prior to such designation, all calculated, except as set forth in
the parenthetical to
clause (i)
, on a consolidated basis in accordance with GAAP and (y) no
Default or Event of Default would result from such designation after giving Pro Forma Effect
thereto and the Parent Borrower shall be in compliance with the covenant set forth in
Section
10.9
determined on a Pro Forma Basis after giving effect to such designation and (c) each
Subsidiary of an Unrestricted Subsidiary. The Parent Borrower may, by written notice to the
Administrative Agent, re-designate any Unrestricted Subsidiary as a Restricted Subsidiary, and
-56-
thereafter, such Subsidiary shall no longer constitute an Unrestricted Subsidiary, but only if
no Default or Event of Default would result from such re-designation. On or promptly after the
date of its formation, acquisition, designation or re-designation, as applicable, each Unrestricted
Subsidiary (other than an Unrestricted Subsidiary that is a Foreign Subsidiary) shall have entered
into a tax sharing agreement containing terms that, in the reasonable judgment of the
Administrative Agent, provide for an appropriate allocation of tax liabilities and benefits.
“
Voting Stock
” shall mean, with respect to any Person, such Person’s Stock or Stock
Equivalents having the right to vote for the election of directors of such Person under ordinary
circumstances.
9.2.
Other Interpretive Provisions
. With reference to this Agreement and each other
Credit Document, unless otherwise specified herein or in such other Credit Document:
(a) The meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b) The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import
when used in any Credit Document shall refer to such Credit Document as a whole and not to
any particular provision thereof.
(c) Article, Section, Exhibit and Schedule references are to the Credit Document in
which such reference appears.
(d) The term “including” is by way of example and not limitation.
(e) The term “documents” includes any and all instruments, documents, agreements,
certificates, notices, reports, financial statements and other writings, however evidenced,
whether in physical or electronic form.
(f) In the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including”; the words “to” and “until” each mean “to
but excluding”; and the word “through” means “to and including.”
(g) Section headings herein and in the other Credit Documents are included for
convenience of reference only and shall not affect the interpretation of this Agreement or
any other Credit Document.
9.3.
Accounting Terms
. (a) All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including financial ratios
and other financial
calculations) required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP.
(b) Notwithstanding anything to the contrary herein, for purposes of determining compliance
with any test or covenant contained in this Agreement with respect to any period during which any
Specified Transaction occurs, the Consolidated Total Debt to
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Consolidated EBITDA Ratio shall be
calculated with respect to such period and such Specified Transaction on a Pro Forma Basis.
9.4.
Rounding
. Any financial ratios required to be maintained by the Parent Borrower
pursuant to this Agreement (or required to be satisfied in order for a specific action to be
permitted under this Agreement) shall be calculated by dividing the appropriate component by the
other component, carrying the result to one place more than the number of places by which such
ratio is expressed herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).
9.5.
References to Agreements, Laws, Etc
. Unless otherwise expressly provided herein,
(a) references to organizational documents, agreements (including the Credit Documents) and other
Contractual Requirements shall be deemed to include all subsequent amendments, restatements,
amendment and restatements, extensions, supplements and other modifications thereto, but only to
the extent that such amendments, restatements, amendment and restatements, extensions, supplements
and other modifications are permitted by any Credit Document; and (b) references to any Requirement
of Law shall include all statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting such Requirement of Law.
9.6.
Exchange Rates
. For purposes of determining compliance under
Sections
10.4
,
10.5
and
10.6
with respect to any amount in a currency other than Dollars
(other than with respect to (x) any amount derived from the financial statements of Holdings, the
Parent Borrower or its Subsidiaries, or (y) any Indebtedness denominated in a currency other than
Dollars), such amount shall be deemed to equal the Dollar Equivalent thereof based on the average
Spot Rate for such currency other than Dollars for the most recent twelve-month period immediately
prior to the date of determination determined in a manner consistent with that used in calculating
Consolidated EBITDA for the related period. For purposes of determining compliance with
Sections 10.1
,
10.2
and
10.5
, with respect to any amount of Indebtedness
denominated in a currency other than Dollars, compliance will be determined at the time of
incurrence or advancing thereof using the Dollar Equivalent thereof at the Spot Rate in effect at
the time of such incurrence or advancement.
9.7.
Reserve Amounts
[Reserved]
. The provisions of
Section 2.8
and
Section 4.1
relating to the establishment
of Reserve Amounts are intended to give the Borrowers, the Lenders and the L/C Participants the
practical benefits of any change in Status (whether resulting in an increase or decrease in the
fees payable hereunder from time to time) resulting from delivery of Section 9.1 Financials with
respect to the immediately preceding fiscal quarter within certain time periods following the
commencement of a fiscal quarter as though any such change of Status had occurred on the first day
of such fiscal quarter. The Administrative Agent and the Borrowers may amend the provisions of
Section 2.8
and
Section 4.1
without the consent of any Lender in any manner
reasonably believed by the Administrative Agent and the Borrowers to be not materially adverse the
Lenders in order to better effectuate the provisions set forth therein for achieving such benefits.
SECTION 10.
Amount and Terms of Credit
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10.1.
Commitments
.[Reserved].
(b) (i) Subject to and upon the terms and conditions herein set forth, each Lender having a
New Revolving Credit Commitment severally agrees to make a loan or loans denominated in Dollars
(each a “
New Revolving Credit Loan
” and, collectively, the “
New Revolving Credit Loans
”) to the
Parent Borrower on behalf of the Borrowers, which New Revolving Credit Loans (A) shall be made at
any time and from time to time on and after the Amendment and Restatement Date and prior to the
Final Maturity Date, (B) may, at the option of the Parent Borrower on behalf of the Borrowers be
incurred and maintained as, and/or converted into, ABR Loans or LIBOR Loans,
provided
that
all New Revolving Credit Loans made by each of the Lenders pursuant to the same Borrowing shall,
unless otherwise specifically provided herein, consist entirely of New Revolving Credit Loans of
the same Type, (C) may be repaid and reborrowed in accordance with the provisions hereof, (D) shall
not, for any Lender at any time, after giving effect thereto and to the application of the proceeds
thereof, result in such Lender’s New Revolving Exposure at such time exceeding such Lender’s New
Revolving Credit Commitment at such time and (E) shall not, after giving effect thereto and to the
application of the proceeds thereof, result at any time in the aggregate amount of the Lenders’ New
Revolving Exposures at such time exceeding the lesser of the Borrowing Base and the Total New
Revolving Credit Commitment, in each case as then in effect (subject to
Section 2.1(e)
).
(ii) Each Lender may at its option make any LIBOR Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan,
provided
that (A) any exercise of
such option shall not affect the obligation of the Borrowers to repay such Loan and (B) in
exercising such option, such Lender shall use its reasonable efforts to minimize any increased
costs to the Borrowers resulting therefrom (which obligation of the Lender shall not require it to
take, or refrain from taking, actions that it determines would result in increased costs for which
it will not be compensated hereunder or that it determines would be otherwise disadvantageous to it
and in the event of such request for costs for which compensation is
provided under this Agreement, the provisions of
Section 2.10
shall apply). On the
Final Maturity Date, all New Revolving Credit Loans shall be repaid in full.
(c) Subject to and upon the terms and conditions herein set forth, the Swingline Lender in its
individual capacity agrees, at any time and from time to time on and after the Original Closing
Date and prior to the Swingline Maturity Date, to make a loan or loans (each a “
Swingline Loan
”
and, collectively, the “
Swingline Loans
”) to the Parent Borrower on behalf of the Borrowers, which
Swingline Loans (i) shall be ABR Loans, (ii) shall have the benefit of the provisions of
Section 2.1(d)
, (iii) shall not exceed at any time outstanding the Swingline Commitment,
(iv) shall not, after giving effect thereto and to the application of the proceeds thereof, result
at any time in the aggregate amount of the Lenders’ New Revolving Exposures at such time exceeding
the lesser of the Borrowing Base and the Total New Revolving Credit Commitment then in effect and
(v) may be repaid and reborrowed in accordance with the provisions hereof. Each outstanding
Swingline Loan shall be repaid in full on the earlier of (a) 15 Business Days after such Swingline
Loan is initially Borrowed and (b) the Swingline Maturity Date. The Swingline Lender shall not
make any Swingline Loan after receiving a written notice from the Parent Borrower on behalf of the
Borrowers or any Lender stating that a Default or Event of Default exists and is continuing until
such time as the Swingline Lender shall
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have received written notice of (i) rescission of all such
notices from the party or parties originally delivering such notice or (ii) the waiver of such
Default or Event of Default in accordance with the provisions of
Section 14.1
.
(d) On any Business Day, the Swingline Lender may, in its sole discretion, give notice to each
New Revolving Lender that all then-outstanding Swingline Loans shall be funded with a Borrowing of
New Revolving Credit Loans, in which case New Revolving Credit Loans constituting ABR Loans (each
such Borrowing, a “
Mandatory Borrowing
”) shall be made on the immediately succeeding Business Day
by each New Revolving Lender
pro rata
based on each Lender’s New Revolving Credit Commitment
Percentage, and the proceeds thereof shall be applied directly to the Swingline Lender to repay the
Swingline Lender for such outstanding Swingline Loans. Each New Revolving Lender hereby
irrevocably agrees to make such New Revolving Credit Loans upon one Business Day’s notice pursuant
to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and
on the date specified to it in writing by the Swingline Lender notwithstanding (i) that the amount
of the Mandatory Borrowing may not comply with the minimum amount for each Borrowing specified in
Section 2.2
, (ii) whether any conditions specified in
Section 7
are then satisfied,
(iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of
such Mandatory Borrowing or (v) any reduction in the Total New Revolving Credit Commitment or the
Borrowing Base after any such Swingline Loans were made. In the event that, in the sole judgment
of the Swingline Lender, any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including as a result of the commencement of a proceeding under the
Bankruptcy Code in respect of any Borrower), each New Revolving Lender hereby agrees that it shall
forthwith purchase from the Swingline Lender (without recourse or warranty) such participation of
the outstanding Swingline Loans as shall be necessary to cause the Lenders to share in such
Swingline Loans ratably based upon their respective New Revolving Credit Commitment Percentages,
provided
that all principal and interest payable on such Swingline Loans shall be for the
account of the Swingline Lender until the date the respective participation
is purchased and, to the extent attributable to the purchased participation, shall be payable
to such Lender purchasing same from and after such date of purchase.
(e) Subject to the limitations set forth below (and notwithstanding anything to the contrary
in
Section 2.1(b)(i)(E)
or in
Section 7)
the Administrative Agent is authorized by
the Parent Borrower on behalf of the Borrowers and the Lenders, from time to time in the
Administrative Agent’s sole discretion (but shall have absolutely no obligation), to make New
Revolving Credit Loans that are ABR Loans on behalf of all Lenders to the Parent Borrower on behalf
of the Borrowers, at any time that any condition precedent set forth in
Section 7
has not
been satisfied or waived, which the Administrative Agent, in its Permitted Discretion, deems
necessary or desirable (x) to preserve or protect the Collateral, or any portion thereof or (y) to
enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations
(each such loan, a “
Protective Advance
”). Any Protective Advance may be made in a principal amount
that would cause the aggregate amount of the Lenders’ New Revolving Exposures to exceed the
Borrowing Base;
provided
that no Protective Advance may be made to the extent that, after
giving effect to such Protective Advance (together with the outstanding principal amount of any
outstanding Protective Advances) the aggregate principal amount of all Protective Advances
outstanding hereunder would exceed 5% of the Borrowing Base as
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determined on the date of such
proposed Protective Advance;
provided
further
that the aggregate amount of
outstanding Protective Advances plus the aggregate New Revolving Exposures at such time shall not
exceed the Total New Revolving Credit Commitment as then in effect. Each Protective Advance shall
be secured by the Liens in favor of the Collateral Agent on behalf of the Secured Parties in and to
the Collateral and shall constitute Obligations hereunder. The Administrative Agent’s
authorization to make Protective Advances may be revoked at any time by the Required Lenders. Any
such revocation must be in writing and will become effective prospectively upon the Administrative
Agent’s receipt thereof. The making of a Protective Advance on any one occasion shall not obligate
the Administrative Agent to make any Protective Advance on any other occasion and under no
circumstance shall the Parent Borrower have the right to require that a Protective Advance be made.
At any time that the conditions precedent set forth in
Section 7
have been satisfied or
waived, the Administrative Agent may request the New Revolving Lenders to make a New Revolving
Credit Loan to repay a Protective Advance. At any other time, the Administrative Agent may require
the Lenders to fund their risk participations described in
Section 2.1(f)
.
(f) Upon the making of a Protective Advance by the Administrative Agent (whether before or
after the occurrence of a Default or an Event of Default), each Lender shall be deemed, without
further action by any party hereto, unconditionally and irrevocably to have purchased from the
Administrative Agent, without recourse or warranty, an undivided interest and participation in such
Protective Advance in proportion to its New Revolving Credit Commitment Percentage. From and after
the date, if any, on which any Lender is required to fund its participation in any Protective
Advance purchased hereunder, the Administrative Agent shall promptly distribute to such Lender,
such Lender’s New Revolving Credit Commitment Percentage of all payments of principal and interest
and all proceeds of Collateral received by the Administrative Agent in respect of such Protective
Advance.
10.2.
Minimum Amount of Each Borrowing; Maximum Number of Borrowings
. The aggregate principal amount of (i) each Borrowing of New Revolving Credit Loans shall be
in a minimum amount of at least the Minimum Borrowing Amount for such Type of Loans and in a
multiple of $1,000,000 in excess thereof and (ii) Swingline Loans shall be in a minimum amount of
$500,000 and in a multiple of $100,000 in excess thereof (except that Mandatory Borrowings and
Protective Advances shall be made in the amounts required by Sections 2.1(d) and 2.1(e),
respectively, and New Revolving Credit Loans to reimburse the Letter of Credit Issuer with respect
to any Unpaid Drawing shall be made in the amounts required by Section 3.3 or Section 3.4, as
applicable). More than one Borrowing may be incurred on any date, provided that at no time shall
there be outstanding more than 30 Borrowings of LIBOR Loans under this Agreement.
10.3.
Notice of Borrowing.
(a) [Reserved].
(b) Whenever any Borrower desires to incur New Revolving Credit Loans (other than Mandatory
Borrowings or borrowings to repay Unpaid Drawings), the Parent Borrower on behalf of the Borrowers
shall give the Administrative Agent at the Administrative
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Agent’s Office, (i) prior to 12:00 Noon
(New York City Time) at least three Business Days’ prior written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of LIBOR Loans (or prior to 9:00 a.m. (New York
City time) two Business Days’ prior written notice in the case of a Borrowing of New Revolving
Credit Loans to be made on the Amendment and Restatement Date initially as LIBOR Loans) and (ii)
prior to 10:00 a.m. (New York City time) on the date of such Borrowing prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of New Revolving Credit Loans
that are ABR Loans. Each such notice (together with each notice of a Borrowing of Swingline Loans
pursuant to
Section 2.3(c)
, a “
Notice of Borrowing
”), except as otherwise expressly
provided in
Section 2.10
, shall specify (i) the aggregate principal amount of the New
Revolving Credit Loans to be made pursuant to such Borrowing, (ii) the date of Borrowing (which
shall be a Business Day) and (iii) whether the respective Borrowing shall consist of ABR Loans or
LIBOR Loans and, if LIBOR Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall promptly give each New Revolving Lender written notice (or telephonic
notice promptly confirmed in writing) of each proposed Borrowing of New Revolving Credit Loans, of
such Lender’s New Revolving Credit Commitment Percentage thereof and of the other matters covered
by the related Notice of Borrowing.
(c) Whenever any Borrower desires to incur Swingline Loans hereunder, the Parent Borrower on
behalf of the Borrowers shall give the Administrative Agent written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of Swingline Loans prior to 2:30 p.m. (New York
City time) on the date of such Borrowing. Each such notice shall specify (i) the aggregate
principal amount of the Swingline Loans to be made pursuant to such Borrowing and (ii) the date of
Borrowing (which shall be a Business Day). The Administrative Agent shall promptly give the
Swingline Lender written notice (or telephonic notice promptly
confirmed in writing) of each proposed Borrowing of Swingline Loans and of the other matters
covered by the related Notice of Borrowing.
(d) Mandatory Borrowings shall be made upon the notice specified in
Section 2.1(d)
,
with the Parent Borrower on behalf of the Borrowers irrevocably agreeing, by its incurrence of any
Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section.
(e) Borrowings to reimburse Unpaid Drawings shall be made upon the notice specified in
Section 3.4(a)
.
(f) Without in any way limiting the obligation of any Borrower to confirm in writing any
notice it may give hereunder by telephone, the Administrative Agent may act prior to receipt of
written confirmation without liability upon the basis of such telephonic notice believed by the
Administrative Agent in good faith to be from an Authorized Officer of such Borrower.
10.4.
Disbursement of Funds
.
(a) No later than 2:00 p.m. (New York City time) on the date specified in each Notice of
Borrowing (including Mandatory Borrowings), each Lender will make available its
pro rata
portion,
if any, of each Borrowing requested to be made on such date in the manner provided below, provided
that all Swingline Loans shall be made available in the full amount
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thereof by the Swingline Lender
no later than 3:00 p.m. (New York City time) on the date requested.
(b) Each Lender shall make available all amounts it is to fund to the Parent Borrower on
behalf of the Borrowers under any Borrowing for its applicable Commitments, and in immediately
available funds to the Administrative Agent at the Administrative Agent’s Office and the
Administrative Agent will (except in the case of Mandatory Borrowings and Borrowings to repay
Unpaid Drawings) make available to the Parent Borrower on behalf of the Borrowers, by depositing to
an account designated by the Parent Borrower on behalf of the Borrowers to the Administrative Agent
the aggregate of the amounts so made available. Unless the Administrative Agent shall have been
notified by any Lender prior to the date of any such Borrowing that such Lender does not intend to
make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on
such date, the Administrative Agent may assume that such Lender has made such amount available to
the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon
such assumption, may (in its sole discretion and without any obligation to do so) make available to
the Parent Borrower on behalf of the Borrowers a corresponding amount. If such corresponding
amount is not in fact made available to the Administrative Agent by such Lender and the
Administrative Agent has made available such amount to the Parent Borrower on behalf of the
Borrowers, the Administrative Agent shall be entitled to recover such corresponding amount from
such Lender. If such Lender does not pay such corresponding amount forthwith upon the
Administrative Agent’s demand therefor the Administrative Agent shall promptly notify the Borrowers
and the Borrowers shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such Lender or the Borrowers
interest on such corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrowers to the date such
corresponding amount is recovered by the Administrative Agent, at a rate
per annum
equal to (i) if
paid by such Lender, the Federal Funds Effective Rate or (ii) if paid by the Borrowers, the
then-applicable rate of interest or fees, calculated in accordance with
Section 2.8
, for
the respective Loans.
(c) Nothing in this
Section 2.4
shall be deemed to relieve any Lender
from its obligation to fulfill its commitments hereunder or to prejudice any rights that any
Borrower may have against any Lender as a result of any default by such Lender hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any other Lender to
fulfill its commitments hereunder).
10.5.
Repayment of Loans; Evidence of Debt
.
(a) The Parent Borrower on behalf of the Borrowers shall repay to the Administrative Agent,
for the benefit of the applicable Lenders, on the Final Maturity Date, the then-outstanding New
Revolving Credit Loans made to the Borrowers. The Parent Borrower on behalf of the Borrowers shall
repay to the Administrative Agent, for the account of the Swingline Lender, on the Swingline
Maturity Date, the then-outstanding Swingline Loans.
(b) The Parent Borrower on behalf of the Borrowers shall repay to the Administrative Agent the
then unpaid amount of each Protective Advance on the Final Maturity Date.
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(c) [Reserved].
(d) [Reserved].
(e) Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrowers to the appropriate lending office of such Lender
resulting from each Loan made by such lending office of such Lender from time to time, including
the amounts of principal and interest payable and paid to such lending office of such Lender from
time to time under this Agreement.
(f) The Administrative Agent shall maintain the Register pursuant to
Section 14.6(b)
,
and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be
recorded (i) the amount of each Loan made hereunder, whether such Loan is a New Revolving Credit
Loan, Protective Advance or Swingline Loan, as applicable, the Type of each Loan made, and the
Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or
to become due and payable from the Borrowers to each Lender or the Swingline Lender hereunder and
(iii) the amount of any sum received by the Administrative Agent hereunder from the Borrowers and
each Lender’s share thereof.
(g) The entries made in the Register and accounts and subaccounts maintained pursuant to
clauses (e)
and
(f)
of this
Section 2.5
shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the obligations of the
Borrowers therein recorded;
provided
,
however
, that the failure of any Lender or
the Administrative Agent to maintain such account, such Register or such subaccount, as applicable,
or any error therein, shall not in any manner affect the obligation of the applicable Borrower to
repay (with applicable interest) the Loans made to the Borrowers by such Lender in accordance with
the terms of this Agreement.
10.6.
Conversions and Continuations
(a) Subject to the penultimate sentence of this clause (a), the Parent Borrower on behalf of
the Borrowers shall have the option on any Business Day to convert all or a portion equal to at
least $10,000,000 of the outstanding principal amount of New Revolving Credit Loans made to the
Parent Borrower on behalf of the Borrowers of one Type into a Borrowing or Borrowings of another
Type and the Parent Borrower, on behalf of the Borrowers, shall have the option on any Business Day
to continue the outstanding principal amount of any LIBOR Loans as LIBOR Loans for an additional
Interest Period,
provided
that (i) no partial conversion of LIBOR Loans shall reduce the
outstanding principal amount of LIBOR Loans made pursuant to a single Borrowing to less than the
Minimum Borrowing Amount, (ii) ABR Loans may not be converted into LIBOR Loans if a Default or
Event of Default is in existence on the date of the conversion and the Administrative Agent has or
the Required Lenders have determined in its or their sole discretion not to permit such conversion,
(iii) LIBOR Loans may not be continued as LIBOR Loans for an additional Interest Period if a
Default or Event of Default is in existence on the date of the proposed continuation and the
Administrative Agent has or the Required Lenders have determined in its or their sole discretion
not to permit such continuation, (iv) Borrowings resulting from conversions pursuant to this
Section 2.6
shall be limited in number as provided in
Section 2.2
and (v) Swingline
Loans and Protective Advances may not be converted to LIBOR
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Loans under any circumstances. Each
such conversion or continuation shall be effected by the Parent Borrower by giving the
Administrative Agent at the Administrative Agent’s Office prior to 12:00 Noon (New York City time)
at least three Business Days’ (or one Business Day’s in the case of a conversion into ABR Loans)
prior written notice (or telephonic notice promptly confirmed in writing) (each, a “
Notice of
Conversion or Continuation
”) specifying the New Revolving Credit Loans to be so converted or
continued, the Type of New Revolving Credit Loans to be converted or continued and, if such New
Revolving Credit Loans are to be converted into or continued as LIBOR Loans, the Interest Period to
be initially applicable thereto. The Administrative Agent shall give each applicable Lender notice
as promptly as practicable of any such proposed conversion or continuation affecting any of its New
Revolving Credit Loans.
(b) If any Default or Event of Default is in existence at the time of any
proposed continuation of any LIBOR Loans and the Administrative Agent has or the Required Lenders
have determined in its or their sole discretion not to permit such continuation, such LIBOR Loans
shall be automatically converted on the last day of the current Interest Period into ABR Loans. If
upon the expiration of any Interest Period in respect of LIBOR Loans, the Parent
Borrower has failed to elect a new Interest Period to be applicable thereto as provided in
clause (a)
above, the Parent Borrower shall be deemed to have elected to continue such
Borrowing of LIBOR Loans into a Borrowing of ABR Loans, effective as of the expiration date of such
current Interest Period.
10.7.
Pro Rata Borrowings
. Each Borrowing of New Revolving Credit Loans under this
Agreement shall be made by the Lenders
pro rata
on the basis of their then-applicable New Revolving
Credit Commitment Percentages. It is understood that (a) no Lender shall be responsible for any
default by any other Lender in its obligation to make Loans hereunder and that each Lender
severally but not jointly shall be obligated to make the Loans provided to be made by it hereunder,
regardless of the failure of any other Lender to fulfill its commitments hereunder and (b) other
than as expressly provided herein with respect to a Defaulting Lender, failure by a Lender to
perform any of its obligations under any of the Credit Documents shall not release any Person from
performance of its obligation under any Credit Document.
10.8.
Interest
.
(a) The unpaid principal amount of each ABR Loan shall bear interest from the date of the
Borrowing thereof until maturity thereof (whether by acceleration or otherwise) at a rate
per annum
that shall at all times be the Applicable ABR Margin plus the ABR, in each case, in effect from
time to time.
(b) The unpaid principal amount of each LIBOR Loan shall bear interest from the date of the
Borrowing thereof until maturity thereof (whether by acceleration or otherwise) at a rate
per annum
that shall at all times be the Applicable LIBOR Margin plus the relevant LIBOR Rate, in each case,
in effect from time to time.
(c) If all or a portion of (i) the principal amount of any Loan or (ii) any interest payable
thereon shall not be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate
per annum
that is (the “
Default Rate
”) (x) in the
case of overdue principal, the rate that would otherwise be applicable thereto
plus
2% or
(y) in the case of any overdue interest, to the extent permitted by
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applicable law, the rate
described in
Section 2.8(a)
plus
2% from the date of such non-payment to the date
on which such amount is paid in full (after as well as before judgment).
(d) Interest on each Loan shall accrue from and including the date of any Borrowing to but
excluding the date of any repayment thereof.
Except as provided below, interest
and
shall
be payable (i) in respect of each ABR Loan, quarterly in arrears on the last Business Day of each
March, June, September and December, (ii) in respect of each LIBOR Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in excess of three
months, on each date occurring at three-month intervals after the first day of such Interest
Period, (iii) in respect of each Loan, (A) on any prepayment (on the amount prepaid but excluding
in any event prepayments of ABR Loans), (B) at maturity (whether by
acceleration or otherwise) and (C) after such maturity, on demand.
Notwithstanding the
foregoing, with respect to any fiscal quarter of the Parent Borrower beginning on or after January
1, 2008 (each, an “
Applicable Quarter
”), on any date during such Applicable Quarter (I) that is
prior to the date on which Section 9.1 Financials are due with respect to the fiscal quarter
immediately preceding such Applicable Quarter and (II) on which interest is payable on any Loan
pursuant to this
subclause (d)
(other than pursuant to
subclause (iii)(B)
above) in
respect of any period (including any portion of an Interest Period) included in such Applicable
Quarter (commencing on the first day of such Applicable Quarter), the amount of such interest
required to be paid on such date in respect of any Loan for such period (as to any Loan, an
“
Interest Payment
”) shall be reduced by an amount equal to the Reserve Amount with respect to such
Loan for such period;
provided
that, if the amount of any Interest Payment on any Loan
shall have been reduced during any Applicable Quarter pursuant to the foregoing provisions, then,
on the date (the “
Interest Gross-Up Date
”) that is the earlier of (x) the Applicable Date in
respect of such Applicable Quarter and (y) the Final Maturity Date, the applicable Borrower shall
pay additional interest on such Loan in an amount equal to the aggregate of the Reserve Amounts for
such Loan so deducted during such Applicable Quarter unless:
(1) the Parent Borrower shall have delivered, at least four Business Days prior to such
Interest Gross-Up Date, Section 9.1 Financials for the fiscal quarter immediately preceding
such Applicable Quarter and
(2) either:
(A) such Section 9.1 Financials reveal a change in Status that results in a
decrease in the Applicable ABR Margin and Applicable LIBOR Margin for such Loan, in
which case, in lieu of paying the aggregate of the Reserve Amounts for such Loan for
such period as provided above, such Borrower shall pay on such Interest Gross-Up
Date an amount equal to the excess (if any) of (I) the aggregate amount of interest
that would have been payable on such Loan during such Applicable Quarter in respect
of any period included therein if such change of Status had taken effect on the
first day of such Applicable Quarter over (II) the aggregate amount of all interest
payments actually made on such Loan during such Applicable Quarter in respect of any
period included therein; or
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(B) such Section 9.1 Financials reveal a change in Status that results in an
increase in the Applicable ABR Margin and Applicable LIBOR Margin for such Loan, in
which case, such Borrower shall pay the aggregate of the Reserve Amounts for such
Loan for such period as provided above, and shall also pay additional interest in
respect of such Loan on such Interest Gross-Up Date in an amount equal to the amount
(if any) by which (I) the sum of (x) the aggregate amount of all interest payments
actually made on such Loan during such Applicable Quarter in respect of any period
included therein
plus
(y) the aggregate of the Reserve Amounts for such Loan
for such Applicable Quarter is less than (II) the aggregate amount of interest that
would have been payable on such Loan during such Applicable Quarter in respect of
any period included therein if such change of Status had taken effect on the first
day of such Applicable Quarter.
(e) All computations of interest hereunder shall be made in accordance with
Section
5.5
.
(f) The Administrative Agent, upon determining the interest rate for any Borrowing of LIBOR
Loans, shall promptly notify the Parent Borrower and the relevant Lenders thereof. Each such
determination shall, absent clearly demonstrable error, be final and conclusive and binding on all
parties hereto.
10.9.
Interest Periods
. At the time the Parent Borrower gives a Notice of Borrowing
or Notice of Conversion or Continuation in respect of the making of, or conversion into or
continuation as, a Borrowing of LIBOR Loans in accordance with Section 2.6(a), the Parent Borrower
shall have the right to elect by giving the Administrative Agent written notice (or telephonic
notice promptly confirmed in writing) the Interest Period applicable to such Borrowing, which
Interest Period shall, at the option of the Parent Borrower be a one, two, three, six or (in the
case of New Revolving Credit Loans, if available to all the Lenders making such loans as determined
by such Lenders in good faith based on prevailing market conditions) a nine or twelve month period
(or such other period of less than six months as to which the Administrative Agent may
consent).
Notwithstanding anything to the contrary contained above:
(a) the initial Interest Period for any Borrowing of LIBOR Loans shall commence on the
date of such Borrowing (including the date of any conversion from a Borrowing of ABR Loans)
and each Interest Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period expires;
(b) if any Interest Period relating to a Borrowing of LIBOR Loans begins on the last
Business Day of a calendar month or begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of the calendar month at the end of such Interest
Period;
(c) if any Interest Period would otherwise expire on a day that is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day,
provided
that
if any Interest Period in respect of a LIBOR Loan would otherwise expire
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on a day that is
not a Business Day but is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding Business Day; and
(d) no Borrower shall be entitled to elect any Interest Period in respect of any LIBOR
Loan if such Interest Period would extend beyond the Final Maturity Date.
10.10.
Increased Costs, Illegality, Etc
.
(a) In the event that (x) in the case of
clause (i)
below, the Administrative Agent or
(y) in the case of
clauses (ii)
and
(iii)
below, any Lender shall have reasonably
determined (which determination shall, absent clearly demonstrable error, be final and conclusive
and binding upon all parties hereto):
(i) on any date for determining the LIBOR Rate for any Interest Period that (x) Dollar
deposits in the principal amounts of the Loans comprising such LIBOR Borrowing are not
generally available in the relevant market or (y) by reason of any changes arising on or
after the Original Closing Date affecting the interbank LIBOR market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the basis provided for
in the definition of LIBOR Rate; or
(ii) at any time, that such Lender shall incur increased costs or reductions in the
amounts received or receivable hereunder with respect to any LIBOR Loans (other than any
increase or reduction attributable to Taxes) because of (x) any change since the Original
Closing Date in any applicable law, governmental rule, regulation, guideline or order (or in
the interpretation or administration thereof and including the introduction of any new law
or governmental rule, regulation, guideline or order), such as, for example, without
limitation, a change in official reserve requirements, and/or (y) other circumstances
affecting the interbank LIBOR market or the position of such Lender in such market; or
(iii) at any time, that the making or continuance of any LIBOR Loan has become unlawful
by compliance by such Lender in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental rule, regulation, guideline
or order not having the force of law even though the failure to comply therewith would not
be unlawful), or has become impracticable as a result of a contingency occurring after the
Original Closing Date that materially and adversely affects the interbank LIBOR market;
then, and in any such event, such Lender (or the Administrative Agent, in the case of
clause
(i)
above) shall within a reasonable time thereafter give notice (if by telephone, confirmed in
writing) to the Parent Borrower on behalf of the Borrowers and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to each of the other
Lenders). Thereafter (x) in the case of
clause (i)
above, LIBOR Loans shall no longer be
available until such time as the Administrative Agent notifies the Parent Borrower and the Lenders
that the circumstances giving rise to such notice by the Administrative Agent no longer exist
(which notice the Administrative Agent agrees to give at such time when such
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circumstances no
longer exist), and any Notice of Borrowing or Notice of Conversion given by the Parent Borrower
with respect to LIBOR Loans that have not yet been incurred shall be deemed rescinded by the Parent
Borrower, (y) in the case of
clause (ii)
above, the Borrowers shall pay to such Lender,
promptly after receipt of written demand therefor such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise as such Lender in
its reasonable discretion shall determine) as shall be required to compensate such Lender for such
increased costs or reductions in amounts receivable hereunder (it being agreed that a written
notice as to the additional amounts owed to such Lender, showing
in reasonable detail the basis for the calculation thereof, submitted to the Parent Borrower by
such Lender shall, absent clearly demonstrable error, be final and conclusive and binding upon all
parties hereto) and (z) in the case of
subclause (iii)
above, the Borrowers shall take one
of the actions specified in
Section 2.10(b)
as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any LIBOR Loan is affected by the circumstances described in
Section
2.10(a)(ii)
or
(iii)
, the Parent Borrower on behalf of the Borrowers may (and in the
case of a LIBOR Loan affected pursuant to
Section 2.10(a)(iii)
shall) either (x) if the
affected LIBOR Loan is then being made pursuant to a Borrowing, cancel such Borrowing by giving the
Administrative Agent telephonic notice (confirmed promptly in writing) thereof on the same date
that the Parent Borrower was notified by a Lender pursuant to
Section 2.10(a)(ii)
or
(iii)
or (y) if the affected LIBOR Loan is then outstanding, upon at least three Business
Days’ notice to the Administrative Agent, require the affected Lender to convert each such LIBOR
Loan into an ABR Loan,
provided
that if more than one Lender is affected at any time, then
all affected Lenders must be treated in the same manner pursuant to this
Section 2.10(b)
.
(c) If, after the Original Closing Date, any Change in Law relating to capital adequacy of any
Lender or compliance by any Lender or its parent with any Change in Law relating to capital
adequacy occurring after the Original Closing Date, has or would have the effect of reducing the
rate of return on such Lender’s or its parent’s or its Affiliate’s capital or assets as a
consequence of such Lender’s commitments or obligations hereunder to a level below that which such
Lender or its parent or its Affiliate could have achieved but for such Change in Law (taking into
consideration such Lender’s or its parent’s policies with respect to capital adequacy), then from
time to time, promptly after demand by such Lender (with a copy to the Administrative Agent), the
Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender
or its parent for such reduction, it being understood and agreed, however, that a Lender shall not
be entitled to such compensation as a result of such Lender’s compliance with, or pursuant to any
request or directive to comply with, any such law, rule or regulation as in effect on the Original
Closing Date. Each Lender, upon determining in good faith that any additional amounts will be
payable pursuant to this
Section 2.10(c)
, will give prompt written notice thereof to the
Parent Borrower, which notice shall set forth in reasonable detail the basis of the calculation of
such additional amounts, although the failure to give any such notice shall not, subject to
Section 2.13
, release or diminish the Borrowers’ obligations to pay additional amounts
pursuant to this
Section 2.10(c)
upon receipt of such notice.
(d) It is understood that this
Section 2.10
shall not apply to (i) Taxes indemnifiable
under
Section 5.4
, (ii) net income taxes and franchise and excise taxes (imposed in
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lieu of
net income taxes) imposed on any Agent or Lender or (iii) Taxes included under
clause (b)
of the definition of “Excluded Taxes”.
10.11.
Compensation
. If (a) any payment of principal of any LIBOR Loan is made by any
Borrower to or for the account of a Lender other than on the last day of the Interest Period for
such LIBOR Loan as a result of a payment or conversion pursuant to Section 2.5, 2.6, 2.10, 5.1, 5.2
or 14.7, as a result of acceleration of the maturity of the Loans pursuant to Section 11 or for any other
reason, (b) any Borrowing of LIBOR Loans is not made as a result of a withdrawn Notice of
Borrowing, (c) any ABR Loan is not converted into a LIBOR Loan as a result of a withdrawn Notice of
Conversion or Continuation, (d) any LIBOR Loan is not continued as a LIBOR Loan, as the case may
be, as a result of a withdrawn Notice of Conversion or Continuation or (e) any prepayment of
principal of any LIBOR Loan is not made as a result of a withdrawn notice of prepayment pursuant to
Section 5.1 or 5.2, the Borrowers shall, after the Parent Borrower’s receipt of a written request
by such Lender (which request shall set forth in reasonable detail the basis for requesting such
amount), pay to the Administrative Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses that such Lender may reasonably
incur as a result of such payment, failure to convert, failure to continue or failure to prepay,
including any loss, cost or expense (excluding loss of anticipated profits) actually incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund
or maintain such LIBOR Loan.
10.12.
Change of Lending Office
. Each Lender agrees that, upon the occurrence of any
event giving rise to the operation of
Section 2.10(a)(ii)
,
2.10(a)(iii)
,
2.10(b)
,
3.5
or
5.4
with respect to such Lender, it will, if requested by
the Parent Borrower use reasonable efforts (subject to overall policy considerations of such
Lender) to designate another lending office for any Loans affected by such event,
provided
that such designation is made on such terms that such Lender and its lending office suffer no
economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section. Nothing in this
Section 2.12
shall
affect or postpone any of the obligations of the Borrowers or the right of any Lender provided in
Section 2.10
,
3.5
or
5.4
.
10.13.
Notice of Certain Costs
. Notwithstanding anything in this Agreement to the
contrary, to the extent any notice required by Section 2.10, 2.11, 3.5 or 5.4 is given by any
Lender more than 120 days after such Lender has knowledge (or should have had knowledge) of the
occurrence of the event giving rise to the additional cost, reduction in amounts, loss, tax or
other additional amounts described in such Sections, such Lender shall not be entitled to
compensation under Section 2.10, 2.11, 3.5 or 5.4, as the case may be, for any such amounts
incurred or accruing prior to the 121st day prior to the giving of such notice to the Parent
Borrower.
10.14.
Incremental Facilities
.
(a) The Parent Borrower on behalf of the Borrowers may by written notice to Administrative
Agent elect to request the establishment of one or more increases in New Revolving Credit
Commitments (the “
Incremental Revolving Credit Commitments
”), by an
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aggregate amount not in excess
of (when taken together with the aggregate amount (the “
Excess
Amount
”) of New Loan Commitments (as defined in the CF Agreement as in effect on the Original
Closing Date) under the CF Facility on the date such Incremental Revolving Credit Commitments
become effective) $1,500,000,000 in the aggregate and not less than $100,000,000 individually (or
such lesser amount as (x) may be approved by the Administrative Agent or (y) shall constitute the
difference between $1,500,000,000 and all such Incremental Revolving Credit Commitments (when taken
together with the Excess Amount on the date such Incremental Revolving Credit Commitments become
effective) obtained on or prior to such date). Each such notice shall specify the date (each, an
“
Increased Amount Date
”) on which the Parent Borrower on behalf of the Borrowers proposes that the
Incremental Revolving Credit Commitments shall be effective, which shall be a date not less than
ten Business Days after the date on which such notice is delivered to the Administrative Agent.
The Parent Borrower may approach any Lender or any other Person (other than a natural person) to
provide all or a portion of the Incremental Revolving Credit Commitments; provided that any Lender
offered or approached to provide all or a portion of the Incremental Revolving Credit Commitments
may elect or decline, in its sole discretion, to provide a Incremental Revolving Credit Commitment.
In each case, such Incremental Revolving Credit Commitments shall become effective, as of the
applicable Increased Amount Date; provided that (i) no Default or Event of Default shall exist on
such Increased Amount Date before or after giving effect to such Incremental Revolving Credit
Commitments, as applicable; (ii) both before and after giving effect to the making of any
Incremental Revolving Loans, each of the conditions set forth in Section 7 shall be satisfied;
(iii) the Parent Borrower and its Restricted Subsidiaries shall be in Pro Forma Compliance with the
covenant set forth in Section 10.9 of the CF Agreement as of the last day of the most recently
ended fiscal quarter after giving effect to such Incremental Revolving Credit Commitments and any
Investment to be consummated in connection therewith; (iv) the Incremental Revolving Credit
Commitments shall be effected pursuant to one or more Joinder Agreements executed and delivered by
the Borrowers and Administrative Agent, and each of which shall be recorded in the Register and
shall be subject to the requirements set forth in Sections 5.4(d) and (e); (v) the Parent Borrower
on behalf of the Borrowers shall make any payments required pursuant to Section 2.11 in connection
with the Incremental Revolving Credit Commitments, as applicable; and (vi) the Parent Borrower
shall deliver or cause to be delivered any legal opinions or other documents reasonably requested
by Administrative Agent in connection with any such transaction. The Parent Borrower on behalf of
the Borrowers shall give the Administrative Agent prompt written notice of any increase in the
aggregate amount committed in respect of the CF Facility.
(b) On any Increased Amount Date on which Incremental Revolving Loan Commitments are effected,
subject to the satisfaction of the foregoing terms and conditions, (a) each of the Lenders with New
Revolving Credit Commitments shall assign to each Lender with a Incremental Revolving Credit
Commitment (each, a “
Incremental Revolving Loan Lender
”) and each of the Incremental Revolving Loan
Lenders shall purchase from each of the Lenders with New Revolving Credit Commitments, at the
principal amount thereof (together with accrued interest), such interests in the New Revolving
Credit Loans outstanding on such
Increased Amount Date as shall be necessary in order that, after giving effect to all such
assignments and purchases, such New Revolving Credit Loans will be held by existing New Revolving
Lenders and Incremental Revolving Loan Lenders ratably in accordance with their
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New Revolving
Credit Commitments after giving effect to the addition of such Incremental Revolving Credit
Commitments to the New Revolving Credit Commitments, (b) each Incremental Revolving Credit
Commitment shall be deemed for all purposes a New Revolving Credit Commitment and each Loan made
thereunder (a “
Incremental Revolving Loan
”) shall be deemed, for all purposes, a New Revolving
Credit Loan and (c) each Incremental Revolving Loan Lender shall become a Lender with respect to
the Incremental Revolving Loan Commitment and all matters relating thereto.
(c) [Reserved].
(d) The terms and provisions of the Incremental Revolving Loans and Incremental Revolving
Credit Commitments shall be identical to the New Revolving Credit Loans and the New Revolving
Credit Commitments.
(e) Each Joinder Agreement may, without the consent of any other Lenders, effect such
amendments to this Agreement and the other Credit Documents as may be necessary or appropriate, in
the opinion of the Administrative Agent, to effect the provision of this
Section 2.14
.
10.15.
Reserves
. Notwithstanding anything to the contrary, the Administrative Agent
may at any time and from time to time in the exercise of its Permitted Discretion establish and
increase or decrease Reserves; provided that the Administrative Agent shall have provided the
Parent Borrower at least 3 Business Days’ prior written notice of any such establishment or
increase; and provided further that the Administrative Agent may only establish or increase a
Reserve after the Original Closing Date based on an event, condition or other circumstance arising
after the Original Closing Date or based on facts not known to the Administrative Agent as of the
Original Closing Date. The amount of any Reserve established by the Administrative Agent shall
have a reasonable relationship to the event, condition, other circumstance or new fact that is the
basis for the Reserve. Upon delivery of such notice, the Administrative Agent shall be available
to discuss the proposed Reserve or increase, and the Borrowers may take such action as may be
required so that the event, condition, circumstance or new fact that is the basis for such Reserve
or increase no longer exists, in a manner and to the extent reasonably satisfactory to the
Administrative Agent in the exercise of its Permitted Discretion. In no event shall such notice
and opportunity limit the right of the Administrative Agent to establish or change such Reserve,
unless the Administrative Agent shall have determined in its Permitted Discretion that the event,
condition, other circumstance or new fact that is the basis for such new Reserve or such change no
longer exists or has otherwise been adequately addressed by the Borrowers.
SECTION 11.
Letters of Credit
.
11.1.
Letters of Credit
.
(a) Subject to and upon the terms and conditions herein set forth, at any time and from time
to time after the Amendment and Restatement Date and prior to the L/C Maturity Date, the Letter of
Credit Issuer agrees, in reliance upon the agreements of the New Revolving Lenders set forth in
this Section 3, to issue from time to time from the Amendment and Restatement Date through the L/C
Maturity Date upon the request of the Parent Borrower, and
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for the direct or indirect benefit of,
the Borrowers and the Restricted Subsidiaries, a letter of credit or letters of credit (the
“
Letters of Credit
” and each, a “
Letter of Credit
”) in such form as may be approved by the Letter
of Credit Issuer in its reasonable discretion; provided that the Parent Borrower shall be a
co-applicant, and jointly and severally liable with respect to, each Letter of Credit issued for
the account of a Restricted Subsidiary that is not a Borrower.
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount
of which, when added to the Letters of Credit Outstanding at such time, would exceed the Letter of
Credit Commitment then in effect; (ii) no Letter of Credit shall be issued the Stated Amount of
which would cause the aggregate amount of the Lenders’ New Revolving Exposures at such time to
exceed the lesser of the Borrowing Base and the New Revolving Credit Commitment then in effect;
(iii) each Letter of Credit shall have an expiration date occurring no later than one year after
the date of issuance thereof, unless otherwise agreed upon by the Administrative Agent and the
Letter of Credit Issuer,
provided
that in no event shall such expiration date occur later
than the L/C Maturity Date; (iv) each Letter of Credit shall be denominated in Dollars; (v) no
Letter of Credit shall be issued if it would be illegal under any applicable law for the
beneficiary of the Letter of Credit to have a Letter of Credit issued in its favor; and (vi) no
Letter of Credit shall be issued by a Letter of Credit Issuer after it has received a written
notice from any Credit Party or any Lender stating that a Default or Event of Default has occurred
and is continuing until such time as the Letter of Credit Issuer shall have received a written
notice of (x) rescission of such notice from the party or parties originally delivering such notice
or (y) the waiver of such Default or Event of Default in accordance with the provisions of
Section 14.1
.
(c) Upon at least one Business Day’s prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent and the Letter of Credit Issuer (which notice the
Administrative Agent shall promptly transmit to each of the applicable Lenders), the Parent
Borrower on behalf of the Borrowers shall have the right, on any day, permanently to terminate or
reduce the Letter of Credit Commitment in whole or in part,
provided
that, after giving
effect to such termination or reduction, the Letters of Credit Outstanding shall not exceed the
Letter of Credit Commitment.
(d) [Reserved].
(e) The Letter of Credit Issuer shall not be under any obligation to issue any Letter of
Credit if:
(i) any order, judgment or decree of any Governmental Authority or arbitrator shall by
its terms purport to enjoin or restrain the Letter of Credit Issuer from issuing such Letter
of Credit, or any law applicable to the Letter of Credit Issuer or any request or
directive (whether or not having the force of law) from any Governmental Authority with
jurisdiction over the Letter of Credit Issuer shall prohibit, or request that the Letter of
Credit Issuer refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the Letter of Credit Issuer with respect to such
Letter of Credit any restriction, reserve or capital requirement (for which the Letter of
Credit Issuer is not otherwise compensated hereunder) not in effect on the Original
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Closing
Date, or shall impose upon the Letter of Credit Issuer any unreimbursed loss, cost or
expense which was not applicable on the Original Closing Date and which the Letter of Credit
Issuer in good faith deems material to it;
(ii) the issuance of such Letter of Credit would violate one or more policies of the
Letter of Credit Issuer applicable to letters of credit generally;
(iii) except as otherwise agreed by the Administrative Agent and the Letter of Credit
Issuer, such Letter of Credit is in an initial Stated Amount less than $100,000, in the case
of a commercial Letter of Credit, or $10,000, in the case of a standby Letter of Credit;
(iv) such Letter of Credit is to be denominated in a currency other than Dollars;
(v) such Letter of Credit contains any provisions for automatic reinstatement of the
Stated Amount after any drawing thereunder; or
(vi) a default of any New Revolving Lender’s obligations to fund under
Section
3.3
exists or any New Revolving Lender is at such time a Defaulting Lender hereunder,
unless, in each case, the Letter of Credit Issuer has entered into satisfactory arrangements
with the Parent Borrower or such New Revolving Lender to eliminate the Letter of Credit
Issuer’s risk with respect to such New Revolving Lender.
(f) The Letter of Credit Issuer shall not amend any Letter of Credit if the Letter of Credit
Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under
the terms hereof.
(g) The Letter of Credit Issuer shall be under no obligation to amend any Letter of Credit if
(A) the Letter of Credit Issuer would have no obligation at such time to issue such Letter of
Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit
does not accept the proposed amendment to such Letter of Credit.
(h) The Letter of Credit Issuer shall act on behalf of the New Revolving Lenders with respect
to any Letters of Credit issued by it and the documents associated therewith, and the Letter of
Credit Issuer shall have all of the benefits and immunities (A) provided to the Administrative
Agent in
Section 13
with respect to any acts taken or omissions suffered by the Letter of
Credit Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and
Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative
Agent” as used in
Section 13
included the Letter of Credit Issuer with
respect to such acts or omissions, and (B) as additionally provided herein with respect to the
Letter of Credit Issuer.
11.2.
Letter of Credit Requests
.
(a) Whenever any Borrower desires that a Letter of Credit be issued for its account or
amended, the Parent Borrower on behalf of such Borrower shall give the
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Administrative Agent and the
Letter of Credit Issuer a Letter of Credit Request by no later than 11:00 a.m. (New York City time)
at least two (or such lesser number as may be agreed upon by the Administrative Agent and the
Letter of Credit Issuer) Business Days prior to the proposed date of issuance or amendment. Each
notice shall be executed by the Parent Borrower and shall be in the form of
Exhibit G
to
the Original Credit Agreement (each a “
Letter of Credit Request
”).
(b) In the case of a request for an initial issuance of a Letter of Credit, such Letter of
Credit Request shall specify in form and detail satisfactory to the Letter of Credit Issuer: (A)
the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B)
the Stated Amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary
thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder;
(F) the full text of any certificate to be presented by such beneficiary in case of any drawing
thereunder; and (G) such other matters as the Letter of Credit Issuer may reasonably require. In
the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit
Request shall specify in form and detail satisfactory to the Letter of Credit Issuer (A) the Letter
of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business
Day); (C) the nature of the proposed amendment; and (D) such other matters as the Letter of Credit
Issuer may reasonably require. Additionally, the Parent Borrower shall furnish to the Letter of
Credit Issuer and the Administrative Agent such other documents and information pertaining to such
requested Letter of Credit issuance or amendment, including any Issuer Documents, as the Letter of
Credit Issuer or the Administrative Agent may require.
(c) Promptly after receipt of any Letter of Credit Request, the Letter of Credit Issuer will
confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent
has received a copy of such Letter of Credit Request from the Parent Borrower on behalf of the
applicable Borrower and, if not, the Letter of Credit Issuer will provide the Administrative Agent
with a copy thereof. Unless the Letter of Credit Issuer has received written notice from any New
Revolving Lender, the Administrative Agent or any Credit Party, at least one Business Day prior to
the requested date of issuance or amendment of the applicable Letter of Credit, that one or more
applicable conditions contained in
Sections 6
and
7
shall not then be satisfied,
then, subject to the terms and conditions hereof, the Letter of Credit Issuer shall, on the
requested date, issue a Letter of Credit for the account of the applicable Borrower (or the
applicable Restricted Subsidiary) or enter into the applicable amendment, as the case may be, in
each case in accordance with the Letter of Credit Issuer’s usual and customary business practices.
(d) If the Parent Borrower on behalf of any Borrower so requests in any applicable Letter of
Credit Request, the Letter of Credit Issuer may, in its sole and absolute discretion, agree to
issue a Letter of Credit that has automatic extension provisions (each, an “
Auto-Extension Letter
of Credit
”);
provided
that any such Auto-Extension Letter of Credit must permit the Letter
of Credit Issuer to prevent any such extension at least once in each twelve-month period
(commencing with the date of issuance of such Letter of Credit) by giving prior notice to the
beneficiary thereof not later than a day (the “
Non-Extension Notice Date
”) in each such
twelve-month period to be agreed upon at the time such Letter of Credit is issued.
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Unless
otherwise directed by the Letter of Credit Issuer, the Parent Borrower shall not be required to
make a specific request to the Letter of Credit Issuer for any such extension. Once an
Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized
(but may not require) the Letter of Credit Issuer to permit the extension of such Letter of Credit
at any time to an expiry date not later than the L/C Maturity Date;
provided
,
however
, that the Letter of Credit Issuer shall not permit any such extension if (A) the
Letter of Credit Issuer has determined that it would not be permitted, or would have no obligation,
at such time to issue such Letter of Credit in its revised form (as extended) under the terms
hereof (by reason of the provisions of
clause (b)
or
(e)
of
Section 3.1
or
otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before
the day that is five Business Days before the Non-Extension Notice Date (1) from the Administrative
Agent that the Required Lenders have elected not to permit such extension or (2) from the
Administrative Agent, any Lender or the Parent Borrower that one or more of the applicable
conditions specified in
Sections 6
and
7
are not then satisfied, and in each such
case directing the Letter of Credit Issuer not to permit such extension.
(e) If the Parent Borrower on behalf of any Borrower so requests in any applicable Letter of
Credit Request, the Letter of Credit Issuer may, in its sole and absolute discretion, agree to
issue a Letter of Credit that permits the automatic reinstatement of all or a portion of the stated
amount thereof after any drawing thereunder (each, an “
Auto-Reinstatement Letter of Credit
”).
Unless otherwise directed by the Letter of Credit Issuer, the Parent Borrower shall not be required
to make a specific request to the Letter of Credit Issuer to permit such reinstatement. Once an
Auto-Reinstatement Letter of Credit has been issued, except as provided in the following sentence,
the Lenders shall be deemed to have authorized (but may not require) the Letter of Credit Issuer to
reinstate all or a portion of the stated amount thereof in accordance with the provisions of such
Letter of Credit. Notwithstanding the foregoing, if such Auto-Reinstatement Letter of Credit
permits the Letter of Credit Issuer to decline to reinstate all or any portion of the stated amount
thereof after a drawing thereunder by giving notice of such non-reinstatement within a specified
number of days after such drawing (the “
Non-Reinstatement Deadline
”), the Letter of Credit Issuer
shall not permit such reinstatement if it has received a notice (which may be by telephone or in
writing) on or before the day that is five Business Days before the Non-Reinstatement Deadline (A)
from the Administrative Agent that the Required Lenders have elected not to permit such
reinstatement or (B) from the Administrative Agent, any Lender or the Parent Borrower that one or
more of the applicable conditions specified in
Sections 6
and
7
are not then
satisfied (treating such reinstatement as the issuance of a Letter of Credit for purposes of this
clause) and, in each case, directing the Letter of Credit Issuer not to permit such reinstatement.
(f) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit
to an advising bank with respect thereto or to the beneficiary thereof, the Letter of Credit Issuer
will also deliver to the Parent Borrower and the Administrative Agent a true and complete copy of
such Letter of Credit or amendment. On the last Business Day of each March, June, September and
December, each Letter of Credit Issuer shall provide the Administrative Agent a list of all Letters
of Credit issued by it that are outstanding at such time.
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(g) The making of each Letter of Credit Request shall be deemed to be a representation and
warranty by the applicable Borrower that the Letter of Credit may be issued in accordance with, and
will not violate the requirements of,
Section 3.1(b)
.
11.3.
Letter of Credit Participations
.
(a) Immediately upon the issuance by the Letter of Credit Issuer of any Letter of Credit, the
Letter of Credit Issuer shall be deemed to have sold and transferred to each New Revolving Lender
(each such New Revolving Lender, in its capacity under this Section 3.3, an “
L/C Participant
”), and
each such L/C Participant shall be deemed irrevocably and unconditionally to have purchased and
received from the Letter of Credit Issuer, without recourse or warranty, an undivided interest and
participation (each an “
L/C Participation
”), to the extent of such L/C Participant’s New Revolving
Credit Commitment Percentage, in each Letter of Credit, each substitute therefor, each drawing made
thereunder and the obligations of the Borrowers under this Agreement with respect thereto, and any
security therefor or guaranty pertaining thereto; provided that the Letter of Credit Fees will be
paid directly to the Administrative Agent for the ratable account of the L/C Participants as
provided in Section 4.1(b) and the L/C Participants shall have no right to receive any portion of
any Fronting Fees.
(b) In determining whether to pay under any Letter of Credit, the relevant Letter of Credit
Issuer shall have no obligation relative to the L/C Participants other than to confirm that any
documents required to be delivered under such Letter of Credit have been delivered and that they
appear to comply on their face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by the relevant Letter of Credit Issuer under or in connection with any Letter
of Credit issued by it, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for the Letter of Credit Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any payment under any Letter of Credit
issued by it and the Borrowers shall not have repaid such amount in full to the respective Letter
of Credit Issuer pursuant to
Section 3.4(a)
, the Letter of Credit Issuer shall promptly
notify the Administrative Agent and each L/C Participant of such failure, and each such L/C
Participant shall promptly and unconditionally pay to the Administrative Agent for the account of
the Letter of Credit Issuer, the amount of such L/C Participant’s New Revolving Credit Commitment
Percentage of such unreimbursed payment in Dollars and in immediately available funds;
provided
,
however
, that no L/C Participant shall be obligated to pay to the
Administrative Agent for the account of the Letter of Credit Issuer its New Revolving Credit
Commitment Percentage of such unreimbursed amount arising from any wrongful payment made
by the Letter of Credit Issuer under any such Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit
Issuer. If the Letter of Credit Issuer so notifies, prior to 11:00 a.m. (New York City time) on
any Business Day, any L/C Participant required to fund a payment under a Letter of Credit, such L/C
Participant shall make available to the Administrative Agent for the account of the Letter of
Credit Issuer such L/C Participant’s New Revolving Credit Commitment Percentage of the amount of
such payment no later than 1:00 p.m. (New York City time) on such Business Day in immediately
available funds. If and to the extent such L/C Participant shall not have so made its
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New
Revolving Credit Commitment Percentage of the amount of such payment available to the
Administrative Agent for the account of the Letter of Credit Issuer, such L/C Participant agrees to
pay to the Administrative Agent for the account of the Letter of Credit Issuer, forthwith on
demand, such amount, together with interest thereon for each day from such date until the date such
amount is paid to the Administrative Agent for the account of the Letter of Credit Issuer at a rate
per annum equal to the Overnight Rate from time to time then in effect, plus any administrative,
processing or similar fees customarily charged by the Letter of Credit Issuer in connection with
the foregoing. The failure of any L/C Participant to make available to the Administrative Agent
for the account of the Letter of Credit Issuer its New Revolving Credit Commitment Percentage of
any payment under any Letter of Credit shall not relieve any other L/C Participant of its
obligation hereunder to make available to the Administrative Agent for the account of the Letter of
Credit Issuer its New Revolving Credit Commitment Percentage of any payment under such Letter of
Credit on the date required, as specified above, but no L/C Participant shall be responsible for
the failure of any other L/C Participant to make available to the Administrative Agent such other
L/C Participant’s New Revolving Credit Commitment Percentage of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment in respect of an unpaid
reimbursement obligation as to which the Administrative Agent has received for the account of the
Letter of Credit Issuer any payments from the L/C Participants pursuant to
clause (c)
above, the Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative
Agent shall promptly pay to each L/C Participant that has paid its New Revolving Credit Commitment
Percentage of such reimbursement obligation, in Dollars and in immediately available funds, an
amount equal to such L/C Participant’s share (based upon the proportionate aggregate amount
originally funded by such L/C Participant to the aggregate amount funded by all L/C Participants)
of the principal amount so paid in respect of such reimbursement obligation and interest thereon
accruing after the purchase of the respective L/C Participations at the Overnight Rate.
(e) The obligations of the L/C Participants to make payments to the Administrative Agent for
the account of a Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable and
not subject to counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this Agreement under
all circumstances, including under any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any of the other Credit
Documents;
(ii) the existence of any claim, set-off, defense or other right that a Borrower may
have at any time against a beneficiary named in a Letter of Credit, any transferee of any
Letter of Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, the Letter of Credit Issuer, any Lender or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transaction between a Borrower and
the beneficiary named in any such Letter of Credit);
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(iii) any draft, certificate or any other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance or observance of
any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default;
provided
,
however
, that no L/C Participant shall be obligated to pay to the
Administrative Agent for the account of the Letter of Credit Issuer its New Revolving Credit
Commitment Percentage of any unreimbursed amount arising from any wrongful payment made by the
Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of the Letter of Credit Issuer.
11.4.
Agreement to Repay Letter of Credit Drawings
.
(a) The Borrowers hereby agree to reimburse the Letter of Credit Issuer, by making payment in
Dollars to the Administrative Agent in immediately available funds for any payment or disbursement
made by the Letter of Credit Issuer under any Letter of Credit (each such amount so paid until
reimbursed, an “
Unpaid Drawing
”) no later than the date that is one Business Day after the date on
which the Parent Borrower receives notice of such payment or disbursement (the “
Reimbursement
Date
”), with interest on the amount so paid or disbursed by the Letter of Credit Issuer, to the
extent not reimbursed prior to 5:00 p.m. (New York City time) on the Reimbursement Date, from the
Reimbursement Date to the date the Letter of Credit Issuer is reimbursed therefor at a rate
per
annum
that shall at all times be the Applicable ABR Margin plus the ABR as in effect from time to
time,
provided
that, notwithstanding anything contained in this Agreement to the contrary,
(i) unless the Parent Borrower shall have notified the Administrative Agent and the relevant Letter
of Credit Issuer prior to 12:00 noon (New York City time) on the Reimbursement Date that the Parent
Borrower on behalf of the Borrowers intends to reimburse the relevant Letter of Credit Issuer for
the amount of such drawing with funds other than the proceeds of Loans, the Parent Borrower on
behalf of the Borrowers shall be deemed to have given a Notice of Borrowing requesting that, with
respect to Letters of Credit, the Lenders with New Revolving Credit Commitments make New Revolving
Credit Loans (which shall be ABR Loans) on the Reimbursement Date in the amount of such drawing and
(ii) the Administrative Agent shall promptly notify each relevant L/C Participant of such drawing
and the amount of its New Revolving Credit Loan to be made in respect thereof, and each L/C
Participant shall be irrevocably obligated to make a New Revolving Credit Loan to the Parent
Borrower on behalf of the Borrowers in the manner deemed to have been requested in the amount of
its New Revolving Credit Commitment Percentage of the applicable Unpaid Drawing by 2:00 p.m. (New
York City time) on such Reimbursement Date by making the amount of such New Revolving Credit Loan
available to the Administrative Agent. Such New Revolving Credit Loans shall be made without
regard to the Minimum Borrowing Amount. The Administrative Agent shall use the proceeds of such
New Revolving Credit Loans solely for purpose of reimbursing the Letter of Credit Issuer for the
related Unpaid Drawing. In the event that the Parent Borrower fails to Cash Collateralize any
Letter of Credit that is outstanding on the Final
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Maturity Date, the full amount of the Letters of
Credit Outstanding in respect of such Letter of Credit shall be deemed to be an Unpaid Drawing
subject to the provisions of this
Section 3.4
except that the Letter of Credit Issuer shall
hold the proceeds received from the L/C Participants as contemplated above as cash collateral for
such Letter of Credit to reimburse any Drawing under such Letter of Credit and shall use such
proceeds first, to reimburse itself for any Drawings made in respect of such Letter of Credit
following the L/C Maturity Date, second, to the extent such Letter of Credit expires or is returned
undrawn while any such cash collateral remains, to the repayment of obligations in respect of any
New Revolving Credit Loans that have not paid at such time and third, to the Parent Borrower or as
otherwise directed by a court of competent jurisdiction. Nothing in this
Section 3.4(a)
shall affect the Parent Borrower’s obligation to repay all outstanding New Revolving Credit Loans
when due in accordance with the terms of this Agreement.
(b) The obligations of the Borrowers under this
Section 3.4
to reimburse the Letter of
Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be
absolute and unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment that any Borrower or any other Person may have or have had
against the Letter of Credit Issuer, the Administrative Agent or any Lender (including in its
capacity as an L/C Participant), including any defense based upon the failure of any drawing under
a Letter of Credit (each a “
Drawing
”) to conform to the terms of the Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of such Drawing,
provided
that the Borrowers shall not be obligated to reimburse the Letter of Credit Issuer
for any wrongful payment made by the Letter of Credit Issuer under the Letter of Credit issued by
it as a result of acts or omissions constituting willful misconduct or gross negligence on the part
of the Letter of Credit Issuer.
11.5.
Increased Costs
.
If after the Original Closing Date, the adoption of any applicable law, rule or regulation, or
any change therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or actual compliance by the Letter of Credit Issuer or any L/C Participant
with any request or directive made or adopted after the Original Closing Date (whether or not
having the force of law), by any such authority, central bank or comparable agency shall either (a)
impose, modify or make applicable any reserve, deposit, capital adequacy
or similar requirement against letters of credit issued by the Letter of Credit Issuer, or any
L/C Participant’s L/C Participation therein, or (b) impose on the Letter of Credit Issuer or any
L/C Participant any other conditions affecting its obligations under this Agreement in respect of
Letters of Credit or L/C Participations therein or any Letter of Credit or such L/C Participant’s
L/C Participation therein, and the result of any of the foregoing is to increase the cost to the
Letter of Credit Issuer or such L/C Participant of issuing, maintaining or participating in any
Letter of Credit, or to reduce the amount of any sum received or receivable by the Letter of Credit
Issuer or such L/C Participant hereunder (other than any such increase or reduction attributable to
(i) taxes indemnified under
Section 5.4
, (ii) net income taxes and franchise and excise
taxes (imposed in lieu of net income taxes) imposed on any Agent or Lender and, to the extent not
duplicative, any Taxes imposed on any Agent or Lender where that Tax is imposed
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upon or calculated
by reference to the net income received or receivable (but not any sum deemed to be received or
receivable) by such Agent or Lender or (iii) Taxes included under
clause (b)
of the
definition of “Excluded Taxes”) in respect of Letters of Credit or L/C Participations therein,
then, promptly after receipt of written demand to the Parent Borrower by the Letter of Credit
Issuer or such L/C Participant, as the case may be (a copy of which notice shall be sent by the
Letter of Credit Issuer or such L/C Participant to the Administrative Agent), the Borrowers shall
pay to the Letter of Credit Issuer or such L/C Participant such additional amount or amounts as
will compensate the Letter of Credit Issuer or such L/C Participant for such increased cost or
reduction, it being understood and agreed, however, that the Letter of Credit Issuer or an L/C
Participant shall not be entitled to such compensation as a result of such Person’s compliance
with, or pursuant to any request or directive to comply with, any such law, rule or regulation as
in effect on the Original Closing Date. A certificate submitted to the Parent Borrower by the
relevant Letter of Credit Issuer or an L/C Participant, as the case may be (a copy of which
certificate shall be sent by the Letter of Credit Issuer or such L/C Participant to the
Administrative Agent), setting forth in reasonable detail the basis for the determination of such
additional amount or amounts necessary to compensate the Letter of Credit Issuer or such L/C
Participant as aforesaid shall be conclusive and binding on the Borrowers absent clearly
demonstrable error.
11.6.
New or Successor Letter of Credit Issuer
.
(a) The Letter of Credit Issuer may resign as a Letter of Credit Issuer upon 60 days’ prior
written notice to the Administrative Agent, the Lenders and the Parent Borrower. The Parent
Borrower may replace the Letter of Credit Issuer for any reason upon written notice to the
Administrative Agent and the Letter of Credit Issuer. The Parent Borrower may add Letter of Credit
Issuers at any time upon notice to the Administrative Agent. If the Letter of Credit Issuer shall
resign or be replaced, or if the Parent Borrower shall decide to add a new Letter of Credit Issuer
under this Agreement, then the Parent Borrower may appoint from among the Lenders a successor
issuer of Letters of Credit or a new Letter of Credit Issuer, as the case may be, or, with the
consent of the Administrative Agent (such consent not to be unreasonably withheld), another
successor or new issuer of Letters of Credit, whereupon such successor issuer shall succeed to the
rights, powers and duties of the replaced or resigning Letter of Credit Issuer under this Agreement
and the other Credit Documents, or such new issuer of Letters of Credit
shall be granted the rights, powers and duties of a Letter of Credit Issuer hereunder, and the
term “Letter of Credit Issuer” shall mean such successor or such new issuer of Letters of Credit
effective upon such appointment. At the time such resignation or replacement shall become
effective, the Parent Borrower, on behalf of the Borrowers, shall pay to the resigning or replaced
Letter of Credit Issuer all accrued and unpaid fees pursuant to
Sections 4.1(c)
and
4.1(d)
. The acceptance of any appointment as a Letter of Credit Issuer hereunder whether
as a successor issuer or new issuer of Letters of Credit in accordance with this Agreement, shall
be evidenced by an agreement entered into by such new or successor issuer of Letters of Credit, in
a form satisfactory to the Parent Borrower and the Administrative Agent and, from and after the
effective date of such agreement, such new or successor issuer of Letters of Credit shall become a
“Letter of Credit Issuer” hereunder. After the resignation or replacement of a Letter of Credit
Issuer hereunder, the resigning or replaced Letter of Credit Issuer shall remain a party hereto and
shall continue to have all the rights and obligations of a Letter of Credit Issuer under this
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Agreement and the other Credit Documents with respect to Letters of Credit issued by it prior to
such resignation or replacement, but shall not be required to issue additional Letters of Credit.
In connection with any resignation or replacement pursuant to this
clause (a)
(but, in case
of any such resignation, only to the extent that a successor issuer of Letters of Credit shall have
been appointed), either (i) the Parent Borrower, the resigning or replaced Letter of Credit Issuer
and the successor issuer of Letters of Credit shall arrange to have any outstanding Letters of
Credit issued by the resigning or replaced Letter of Credit Issuer replaced with Letters of Credit
issued by the successor issuer of Letters of Credit or (ii) the Parent Borrower shall cause the
successor issuer of Letters of Credit, if such successor issuer is reasonably satisfactory to the
replaced or resigning Letter of Credit Issuer, to issue “back-stop” Letters of Credit naming the
resigning or replaced Letter of Credit Issuer as beneficiary for each outstanding Letter of Credit
issued by the resigning or replaced Letter of Credit Issuer, which new Letters of Credit shall have
a face amount equal to the Letters of Credit being back-stopped and the sole requirement for
drawing on such new Letters of Credit shall be a drawing on the corresponding back-stopped Letters
of Credit. After any resigning or replaced Letter of Credit Issuer’s resignation or replacement as
Letter of Credit Issuer, the provisions of this Agreement relating to a Letter of Credit Issuer
shall inure to its benefit as to any actions taken or omitted to be taken by it (A) while it was a
Letter of Credit Issuer under this Agreement or (B) at any time with respect to Letters of Credit
issued by such Letter of Credit Issuer.
(b) To the extent that there are, at the time of any resignation or replacement as set forth
in
clause (a)
above, any outstanding Letters of Credit, nothing herein shall be deemed to
impact or impair any rights and obligations of any of the parties hereto with respect to such
outstanding Letters of Credit (including, without limitation, any obligations related to the
payment of Fees or the reimbursement or funding of amounts drawn), except that the Parent Borrower,
the resigning or replaced Letter of Credit Issuer and the successor issuer of Letters of Credit
shall have the obligations regarding outstanding Letters of Credit described in
clause (a)
above.
11.7.
Role of Letter of Credit Issuer
. Each Lender and the Parent Borrower agree
that, in paying any drawing under a Letter of Credit, the Letter of Credit Issuer shall not have
any responsibility to obtain any
document (other than any sight draft, certificates and documents expressly required by the
Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or
the authority of the Person executing or delivering any such document. None of the Letter of
Credit Issuer, the Administrative Agent, any of their respective affiliates nor any correspondent,
participant or assignee of the Letter of Credit Issuer shall be liable to any Lender for (i) any
action taken or omitted in connection herewith at the request or with the approval of the Required
Lenders; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct;
or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument
related to any Letter of Credit or Issuer Document. The Borrowers hereby assume all risks of the
acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit;
provided that this assumption is not intended to, and shall not, preclude the Borrowers’ pursuing
such rights and remedies as it may have against the beneficiary or transferee at law or under any
other agreement. None of the Letter of Credit Issuer, the Administrative Agent, any of their
respective affiliates nor any correspondent, participant or assignee of the Letter of Credit Issuer
shall be liable or responsible for any of the
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matters described in Section 3.3(e); provided that
anything in such Section to the contrary notwithstanding, the Borrowers may have a claim against
the Letter of Credit Issuer, and the Letter of Credit Issuer may be liable to the Borrowers, to the
extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the any Borrower which any Borrower proves were caused by the Letter of Credit Issuer’s
willful misconduct or gross negligence or the Letter of Credit Issuer’s willful failure to pay
under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing, the Letter of Credit Issuer may accept
documents that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary, and the Letter of Credit
Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective
for any reason.
11.8.
Cash Collateral
.
(a) Upon the request of the Administrative Agent, (A) if the Letter of Credit Issuer has
honored any full or partial drawing request under any Letter of Credit and such drawing has
resulted in an L/C Borrowing, or (B) if, as of the L/C Maturity Date, there are any Letters of
Credit Outstanding, the Parent Borrower, on behalf of the Borrowers, shall, in each case,
immediately Cash Collateralize the then Letters of Credit Outstanding.
(b) The Administrative Agent may, at any time and from time to time after the initial deposit
of Cash Collateral, request that additional Cash Collateral be provided in order to protect against
the results of exchange rate fluctuations.
(c) If any Event of Default shall occur and be continuing, the Administrative Agent or New
Revolving Lenders with Letter of Credit Exposure representing greater than 50% of the total Letter
of Credit Exposure may require that the L/C Obligations be Cash Collateralized.
(d) For purposes of this
Section 3.8
, “
Cash Collateralize
” means to pledge and deposit
with or deliver to the Administrative Agent, for the benefit of the Letter of Credit Issuer and the
Lenders, as collateral for the applicable L/C Obligations, cash or deposit account balances in an
amount equal to the amount of the Letters of Credit Outstanding required to be Cash Collateralized
pursuant to documentation in form and substance satisfactory to the Administrative Agent and the
Letter of Credit Issuer (which documents are hereby consented to by the Lenders). Derivatives of
such term have corresponding meanings. The Parent Borrower hereby grants to the Administrative
Agent, for the benefit of the Letter of Credit Issuer and the L/C Participants, a security interest
in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing.
Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts with the
Administrative Agent.
11.9.
Applicability of ISP and UCP
. Unless otherwise expressly agreed by the Letter
of Credit Issuer and the Parent Borrower when a Letter of Credit is issued, (i) the rules of the
ISP shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs
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and
Practice for Documentary Credits, as most recently published by the International Chamber of
Commerce at the time of issuance, shall apply to each commercial Letter of Credit.
11.10.
Conflict with Issuer Documents
. In the event of any conflict between the terms
hereof and the terms of any Issuer Document, the terms hereof shall control.
11.11.
Letters of Credit Issued for Restricted Subsidiaries
. Notwithstanding that a
Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the
account of, a Restricted Subsidiary that is not a Borrower, the Parent Borrower shall be obligated
to reimburse the Letter of Credit Issuer hereunder for any and all drawings under such Letter of
Credit. The Parent Borrower hereby acknowledges that the issuance of Letters of Credit for the
account of Restricted Subsidiaries that are not Borrowers inures to the benefit of the Parent
Borrower, and that the Parent Borrower’s business derives substantial benefits from the businesses
of such Restricted Subsidiaries.
SECTION 12.
Fees; Commitments
12.1.
Fees
.
(a) The Borrowers agree to pay to the Administrative Agent in Dollars, for the account of each
New Revolving Lender (in each case
pro rata
according to the respective New Revolving Credit
Commitments of all such Lenders), a commitment fee (the “
Commitment Fee
”) for each day from the
Amendment and Restatement Date to the New Revolving Termination Date.
Except as set forth below,
each
Each
Commitment Fee shall be payable by the Parent Borrower on behalf of the Borrowers
(x) quarterly in arrears on the last Business Day of each March, June, September and December (for
the three-month period (or portion thereof) ended on such day for which no payment has been
received) and (y) on the New Revolving Termination Date (for the period ended on such date for
which no payment has been received pursuant to clause (x) above), and shall be computed for each
day during such period at a rate
per annum
equal to the Commitment Fee Rate in effect on such day
on the Available Commitment in effect on such day.
Notwithstanding the foregoing, with respect to
any Applicable Quarter, on any date during such Applicable Quarter (I) that is prior to the date on
which Section 9.1 Financials are due with respect to the fiscal quarter immediately preceding such
Applicable Quarter and (II) on which any Commitment Fee is payable on any Available Commitment
pursuant to this subclause (a) (other than pursuant to subclause (y) above) in respect of any
period included in such Applicable Quarter, the amount of such Commitment Fee required to be paid
on such date in respect of such Available Commitment and such period (as to any Available
Commitment, a “
Commitment Fee Payment
”) shall be reduced by an amount equal to the Reserve Amount
with respect to such Commitment Fee for such period; provided that, if the amount of any Commitment
Fee Payment on any Available Commitment shall have been reduced during any Applicable Quarter
pursuant to the foregoing provisions, then, on the date (the “
Commitment Fee Gross-Up Date
”) that
is the earlier of (x) the Applicable Date in respect of such Applicable Quarter and (y) the date on
which all New Revolving Credit Commitments have been terminated in full, the Parent Borrower shall
pay an additional commitment fee on such Available Commitment in an amount equal to the aggregate
of the
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Reserve Amounts for such Available Commitment so deducted during such Applicable Quarter
unless:
(1) the Parent Borrower shall have delivered, at least four Business Days prior to such
Commitment Fee Gross-Up Date, Section 9.1 Financials for the fiscal quarter immediately
preceding such Applicable Quarter and
(2) either:
(A) such Section 9.1 Financials reveal a change in Status that results in a
decrease in the Commitment Fee Rate, in which case, no payment of any such Reserve
Amounts for such Available Commitment shall be required; or
(B) such Section 9.1 Financials reveal a change in Status that results in an
increase in the Commitment Fee Rate, in which case, the Parent Borrower shall
pay the aggregate of the Reserve Amounts for such Available Commitment for such
period as provided above, and shall also pay an additional commitment fee in respect
of such Available Commitment on such Commitment Fee Gross-Up Date in an amount equal
to the amount (if any) by which (I) the sum of (x) the aggregate amount of all
Commitment Fees actually paid during such Applicable Quarter in respect of such
Available Commitment for any period included therein
plus
(y) the aggregate
of the Reserve Amounts for such Available Commitment for such Applicable Quarter is
less than (II) the aggregate amount of Commitment Fees that would have been payable
on such Available Commitment during such Applicable Quarter in respect of any period
included therein if such change of Status had taken effect on the first day of such
Applicable Quarter.
(b) The Borrowers agree to pay to the Administrative Agent in Dollars for the account of the
Lenders
pro rata
on the basis of their respective Letter of Credit Exposure, a fee in respect of
each Letter of Credit (the “
Letter of Credit Fee
”), for the period from the date of issuance of
such Letter of Credit to the termination date of such Letter of Credit computed at the
per annum
rate for each day equal to the Applicable LIBOR Margin for New Revolving Credit Loans minus 0.125%
per annum
on the average daily Stated Amount of such Letter of Credit.
Except as provided below,
such
Such
Letter of Credit Fees shall be due and payable (x) quarterly in arrears on the
last Business Day of each March, June, September and December and (y) on the date upon which the
Total New Revolving Credit Commitment terminates and the Letters of Credit Outstanding shall have
been reduced to zero.
Notwithstanding the foregoing, with respect to any Applicable Quarter, on
any date during such Applicable Quarter (I) that is prior to the date on which Section 9.1
Financials are due with respect to the fiscal quarter immediately preceding such Applicable Quarter
and (II) on which any Letter of Credit Fee is payable on any Letter of Credit pursuant to this
subclause (b)
(other than pursuant to
subclause (y)
above) in respect of any period
included in such Applicable Quarter, the amount of such Letter of Credit Fee required to be paid on
such date in respect of such Letter of Credit for such period (as to any Letter of Credit, an “
L/C
Fee Payment
”) shall be reduced by an amount equal to the Reserve Amount with respect to such Letter
of Credit Fee for such period;
provided
that, if the amount of any L/C Fee Payment on any
Letter of Credit shall have been reduced during any Applicable Quarter
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pursuant to the foregoing
provisions, then, on the date (the “
L/C Fee Gross-Up Date
”) that is the earlier of (x) the
Applicable Date in respect of such Applicable Quarter and (y) the New Revolving Termination Date,
the Parent Borrower shall pay an additional letter of credit fee on such Letter of Credit in an
amount equal to the aggregate of the Reserve Amounts for such Letter of Credit so deducted during
such Applicable Quarter unless:
(1) the Parent Borrower shall have delivered, at least four Business Days prior to such
L/C Fee Gross-Up Date, Section 9.1 Financials for the fiscal quarter immediately preceding
such Applicable Quarter and
(2) either:
(A) such Section 9.1 Financials reveal a change in Status that results in a
decrease in the Letter of Credit Fee rate with respect to such Letter of Credit, in
which case, in lieu of paying the aggregate of the Reserve Amount for such Letter
of Credit for such period as provided above, the Parent Borrower shall pay on
such L/C Fee Gross-Up Date an amount equal to the excess (if any) of (I) the
aggregate amount of Letter of Credit Fees that would have been payable on such
Letter of Credit during such Applicable Quarter in respect of any period included
therein if such change of Status had taken effect on the first day of such
Applicable Quarter over (II) the aggregate amount of all Letter of Credit Fee
payments actually made on such Letter of Credit during such Applicable Quarter in
respect of any period included therein; or
(B) such Section 9.1 Financials reveal a change in Status that results in an
increase in the Letter of Credit Fee rate, in which case, the Parent Borrower shall
pay the aggregate of the Reserve Amounts for such Letter of Credit for such period
as provided above, and shall also pay additional letter of credit fees in respect of
such Letter of Credit on such L/C Fee Gross-Up Date in an amount equal to the amount
(if any) by which (I) the sum of (x) the aggregate amount of all Letter of Credit
Fees actually paid during such Applicable Quarter in respect of such Letter of
Credit for any period included therein
plus
(y) the aggregate of the Reserve
Amounts for such Letter of Credit for such Applicable Quarter is less than (II) the
aggregate amount of Letter of Credit Fees that would have been payable on such
Letter of Credit during such Applicable Quarter in respect of any period included
therein if such change of Status had taken effect on the first day of such
Applicable Quarter.
(c) The Borrowers agree to pay to each Letter of Credit Issuer a fee in respect of each Letter
of Credit issued by it (the “
Fronting Fee
”), for the period from the date of issuance of such
Letter of Credit to the termination date of such Letter of Credit, computed at the rate for each
day equal to 0.125%
per annum
on the average daily Stated Amount of such Letter of Credit. Such
Fronting Fees shall be due and payable by the Parent Borrower on behalf of the Borrowers (x)
quarterly in arrears on the last Business Day of each March, June, September and December and (y)
on the date upon which the Total New Revolving Credit Commitment terminates and the Letters of
Credit Outstanding shall have been reduced to zero.
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(d) The Parent Borrower on behalf of the Borrowers agrees to pay directly to the Letter of
Credit Issuer upon each issuance of, drawing under, and/or amendment of, a Letter of Credit issued
by it such amount as the Letter of Credit Issuer and the Parent Borrower shall have agreed upon for
issuances of, drawings under or amendments of, letters of credit issued by it.
(e) Notwithstanding the foregoing, the Borrowers shall not be obligated to pay any amounts to
any Defaulting Lender pursuant to this
Section 4.1
.
12.2.
Voluntary Reduction of New Revolving Credit Commitments
. Upon at least one
Business Day’s prior written notice (or telephonic notice promptly confirmed in writing) to the
Administrative Agent at the Administrative Agent’s Office (which notice the Administrative Agent
shall promptly transmit to each of the Lenders), the Parent Borrower (on behalf of itself) shall
have the right, without premium or penalty, on any
day, permanently to terminate or reduce the New Revolving Credit Commitments in whole or in
part, provided that (a) any such reduction shall apply proportionately and permanently to reduce
the New Revolving Credit Commitment of each of the Lenders, (b) any partial reduction pursuant to
this Section 4.2 shall be in the amount of at least $10,000,000 and (c) after giving effect to such
termination or reduction and to any prepayments of the Loans made on the date thereof in accordance
with this Agreement (including pursuant to Section 5.2(b)(i)), the aggregate amount of the Lenders’
New Revolving Exposures shall not exceed the Total New Revolving Credit Commitment.
12.3.
Mandatory Termination of Commitments
.
(a) The New Revolving Credit Commitment shall terminate at 5:00 p.m. (New York City time) on
the Final Maturity Date.
(b) The Swingline Commitment shall terminate at 5:00 p.m. (New York City time) on the
Swingline Maturity Date.
SECTION 13.
Payments
13.1.
Voluntary Prepayments
. The Borrowers shall have the right to prepay New
Revolving Credit Loans and Swingline Loans, in each case, without premium or penalty, in whole or
in part from time to time on the following terms and conditions: (a) the Parent Borrower, on
behalf of the Borrowers, shall give the Administrative Agent at the Administrative Agent’s Office
written notice (or telephonic notice promptly confirmed in writing) of its intent to make such
prepayment, the amount of such prepayment and (in the case of LIBOR Loans) the specific
Borrowing(s) pursuant to which made, which notice shall be given by the Parent Borrower, on behalf
of the Borrowers, no later than 12:00 noon (New York City time) (i) in the case of LIBOR Loans,
three Business Days prior to, (ii) in the case of ABR Loans (other than Swingline Loans and
Protective Advances), one Business Day prior to or (iii) in the case of Swingline Loans and
Protective Advances, on, the date of such prepayment and shall promptly be transmitted by the
Administrative Agent to each of the Lenders or the Swingline Lender, as the case may be; (b) each
partial prepayment of (i) any Borrowing of LIBOR Loans shall be in a minimum amount of
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$10,000,000
and in multiples of $1,000,000 in excess thereof, (ii) any ABR Loans (other than Swingline Loans
and Protective Advances) shall be in a minimum amount of $1,000,000 and in multiples of $1,000,000
in excess thereof and (iii) Swingline Loans shall be in a minimum amount of $500,000 and in
multiples of $100,000 in excess thereof,
provided
that no partial prepayment of LIBOR Loans
made pursuant to a single Borrowing shall reduce the outstanding LIBOR Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount for LIBOR Loans and (c) any
prepayment of LIBOR Loans pursuant to this
Section 5.1
on any day other than the last day
of an Interest Period applicable thereto shall be subject to compliance by the Parent Borrower with
the applicable provisions of
Section 2.11
. At the Parent Borrower’s election in connection
with any prepayment pursuant to this
Section 5.1
, such prepayment shall not be applied to
any New Revolving Credit Loan of a Defaulting Lender.
13.2.
Mandatory Prepayments
.
(a) [Reserved].
(b)
Repayment of New Revolving Credit Loans
. (i) If on any date the aggregate amount
of the Lenders’ New Revolving Exposures (collectively, the
“Aggregate New Revolving Outstandings”
)
for any reason exceeds 100% of the Total New Revolving Credit Commitment then in effect, the
Borrowers shall forthwith repay on such date the principal amount of any Protective Advances and
after all Protective Advances have been paid in full, Swingline Loans and, after all Swingline
Loans have been paid in full, New Revolving Credit Loans in an amount equal to such excess. If,
after giving effect to the prepayment of all outstanding Protective Advances, Swingline Loans and
New Revolving Credit Loans, the Aggregate New Revolving Outstandings exceed the Total New Revolving
Credit Commitment then in effect, the Borrowers shall Cash Collateralize the L/C Obligations to the
extent of such excess.
(ii) Except for Protective Advances, if on any date the Aggregate New Revolving Outstandings
for any reason exceed 100% of the Borrowing Base then in effect, the Borrowers shall forthwith
repay on such date the principal amount of Swingline Loans and, after all Swingline Loans have been
paid in full, New Revolving Credit Loans in an amount equal to such excess. If, after giving
effect to the prepayment of all outstanding Swingline Loans and New Revolving Credit Loans, the
Aggregate New Revolving Outstandings exceed the Borrowing Base then in effect, the Borrowers shall
Cash Collateralize the L/C Obligations to the extent of such excess.
(c) At all times following the establishment of the Cash Management Systems pursuant to
Section 9.15(a)
and after the occurrence and during the continuation of a Cash Dominion
Event and notification thereof by the Administrative Agent to the Parent Borrower (subject to the
provisions of the Security Agreement and the Intercreditor Agreement), on each Business Day, at or
before 1:00 p.m. New York City time, the Administrative Agent shall apply all immediately available
funds credited to the Collection Account, first to pay any fees or expense reimbursements then due
to the Administrative Agent, the Letter of Credit Issuer and the Lenders (other than in connection
with Secured Cash Management Agreements or Secured Hedge Agreements), pro rata, second to pay
interest due and payable in respect of any Loans (including Swingline Loans and Protective
Advances) that may be outstanding, pro rata, third to
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prepay the principal of any Protective
Advances that may be outstanding, pro rata, fourth to prepay the principal of the New Revolving
Credit Loans and Swingline Loans and to Cash Collateralize outstanding Letter of Credit Exposure,
pro rata and fifth to pay any fees or expense reimbursements then due to any Cash Management Bank
or Hedge Bank, pro rata.
Notwithstanding the foregoing (x) if a Cash Dominion Event arose
under clause (ii) of the definition thereof, then at the Parent Borrower’s election and (y) if an
Event of Default under Section 11.1 or 11.5 has occurred and is continuing, then at the
Administrative Agent’s election, in each case in connection with any application of funds credited
to the Collection Account under this clause (c), such application of funds shall not be applied to
any fees, expenses, reimbursements, interest or principal due in respect of any New
Revolving Credit Loan of a Defaulting Lender.
(d) [Reserved].
(e)
Application to New Revolving Credit Loans
. With respect to each prepayment of New
Revolving Credit Loans required by
Section 5.2(b)
, the Parent Borrower may designate (i)
the Types of Loans that are to be prepaid and the specific Borrowing(s) pursuant to which made and
(ii) the New Revolving Credit Loans to be prepaid,
provided
that (y) each prepayment of any
Loans made pursuant to a Borrowing shall be applied pro rata among such Loans; and (z)
notwithstanding the provisions of the preceding
clause (y)
, no prepayment of New Revolving
Credit Loans shall be applied to the New Revolving Credit Loans of any Defaulting Lender unless
otherwise agreed in writing by the Parent Borrower. In the absence of a designation by the Parent
Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the
above, make such designation in its reasonable discretion with a view, but no obligation, to
minimize breakage costs owing under
Section 2.11
.
(f)
LIBOR Interest Periods
. In lieu of making any payment pursuant to this
Section 5.2
in respect of any LIBOR Loan other than on the last day of the Interest Period
therefor so long as no Event of Default shall have occurred and be continuing, the Parent Borrower
at its option may deposit on behalf of the Borrowers with the Administrative Agent an amount equal
to the amount of the LIBOR Loan to be prepaid and such LIBOR Loan shall be repaid on the last day
of the Interest Period therefor in the required amount. Such deposit shall be held by the
Administrative Agent in a corporate time deposit account established on terms reasonably
satisfactory to the Administrative Agent, earning interest at the then-customary rate for accounts
of such type. Such deposit shall constitute cash collateral for the LIBOR Loans to be so prepaid,
provided
that the Parent Borrower may at any time direct that such deposit be applied to
make the applicable payment required pursuant to this
Section 5.2
.
13.3.
Method and Place of Payment
.
(a) Except as otherwise specifically provided herein, all payments under this Agreement shall
be made by the Parent Borrower on behalf of the Borrowers, without set-off, counterclaim or
deduction of any kind, to the Administrative Agent for the ratable account of the Lenders entitled
thereto, the Letter of Credit Issuer or the Swingline Lender entitled thereto, as the case may be,
not later than 2:00 p.m. (New York City time), in each case, on the date when due and shall be made
in immediately available funds at the Administrative Agent’s Office or at
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such other office as the
Administrative Agent shall specify for such purpose by notice to the Parent Borrower, it being
understood that written or facsimile notice by the Parent Borrower to the Administrative Agent to
make a payment from the funds in the Parent Borrower’s account at the Administrative Agent’s Office
shall constitute the making of such payment to the extent of such funds held in such account. All
payments under each Credit Document shall, unless otherwise specified in such Credit Document be
made in Dollars. The Administrative Agent will thereafter cause to be distributed on the same day
(if payment was actually received by the Administrative Agent prior to 2:00 p.m. (New York City
time) or, otherwise, on the next
Business Day), in like funds relating to the payment of principal or interest or Fees ratably
to the Lenders entitled thereto.
(b) Any payments under this Agreement that are made later than 2:00 p.m. (New York City time)
shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be
made hereunder shall be stated to be due on a day that is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect immediately prior
to such extension.
13.4.
Net Payments
.
(a) Any and all payments made by or on behalf of any Borrower under this Agreement or any
other Credit Document shall be made free and clear of, and without deduction or withholding for or
on account of, any Indemnified Taxes;
provided
that if any Borrower shall be required by
applicable Requirements of Law to deduct or withhold any Indemnified Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all required deductions
and withholdings (including deductions or withholdings applicable to additional sums payable under
this
Section 5.4
) the Administrative Agent, the Collateral Agent or any Lender, as the case
may be, receives an amount equal to the sum it would have received had no such deductions or
withholdings been made, (ii) the applicable Borrower shall make such deductions or withholdings and
(iii) the applicable Borrower shall timely pay the full amount deducted or withheld to the relevant
Governmental Authority within the time allowed and in accordance with applicable Requirements of
Law. Whenever any Indemnified Taxes are payable by any Borrower, as promptly as possible
thereafter, such Borrower shall send to the Administrative Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original official receipt (or
other evidence acceptable to such Lender, acting reasonably) received by such Borrower showing
payment thereof.
(b) The Borrowers shall timely pay and shall indemnify and hold harmless the Administrative
Agent, each Collateral Agent and each Lender (whether or not such Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority) with regard to any Other Taxes.
(c) The Borrowers shall indemnify and hold harmless the Administrative Agent, the Collateral
Agent and each Lender within 15 Business Days after written demand therefor, for the full amount of
any Indemnified Taxes imposed on the Administrative Agent, the
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Collateral Agent or such Lender as
the case may be, on or with respect to any payment by or on account of any obligation of any
Borrower hereunder or under any other Credit Document (including Indemnified Taxes imposed or
asserted on or attributable to amounts payable under this
Section 5.4
) and any reasonable
expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate
setting forth in reasonable detail the amount of such payment or liability delivered to the Parent
Borrower by a Lender, the Administrative Agent or
the Collateral Agent (as applicable) on its own behalf or on behalf of a Lender shall be
conclusive absent manifest error.
(d) Each Non-U.S. Lender shall, to the extent it is legally entitled to do so:
(i) deliver to the Parent Borrower and the Administrative Agent two copies of either
(x) in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax
under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest,”
United States Internal Revenue Service Form W-8BEN (together with a certificate representing
that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is not a
10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Parent Borrower and is not a controlled foreign corporation related to the Parent Borrower
(within the meaning of Section 864(d)(4) of the Code)), or (y) Internal Revenue Service Form
W-8BEN or Form W-8ECI, in each case properly completed and duly executed by such Non-U.S.
Lender claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax on
payments by the Parent Borrower under this Agreement; and
(ii) deliver to the Parent Borrower and the Administrative Agent two further copies of
any such form or certification (or any applicable successor form) on or before the date that
any such form or certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it to the Parent
Borrower;
unless in any such case any Change in Law has occurred prior to the date on which any such delivery
would otherwise be required that renders any such form inapplicable or would prevent such Non-U.S.
Lender from duly completing and delivering any such form with respect to it and such Non-U.S.
Lender promptly so advises the Parent Borrower and the Administrative Agent. Each Person that
shall become a Participant pursuant to
Section 14.6
or a Lender pursuant to
Section
14.6
shall, upon the effectiveness of the related transfer, be required to provide all the
forms and statements required pursuant to this
Section 5.4(d)
,
provided
that in the
case of a Participant such Participant shall furnish all such required forms and statements to the
Lender from which the related participation shall have been purchased.
(e) Each Lender and Agent that is entitled to an exemption from or reduction of non-U.S.
withholding tax under the laws of the jurisdiction in which any Borrower is organized, or any
treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any
other Credit Document by such Borrower shall deliver to such Borrower (with a copy to the
applicable Administrative Agent), as applicable, at the time or times prescribed by
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applicable law
and as reasonably requested by such Borrower, as applicable, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be made without such
withholding or at such reduced rate,
provided
that such Lender or Agent is legally entitled
to complete, execute and deliver such documentation and such documentation is necessary in order
for such exemption or reduction to apply.
(f) If any Lender, the Administrative Agent or the Collateral Agent, as applicable,
determines, in its sole discretion, that it had received and retained a refund of an
Indemnified Tax or Other Tax for which a payment has been made by any Borrower pursuant to
this Agreement, which refund in the good faith judgment of such Lender, the Administrative Agent or
the Collateral Agent, as the case may be, is attributable to such payment made by such Borrower,
then the Lender, the Administrative Agent or the Collateral Agent, as the case may be, shall
reimburse such Borrower for such amount (together with any interest received thereon) as the
Lender, Administrative Agent or the Collateral Agent, as the case may be, determines in its sole
discretion to be the proportion of the refund as will leave it, after such reimbursement, in no
better or worse position (taking into account expenses or any taxes imposed on the refund) than it
would have been in if the payment had not been required;
provided
that such Borrower, upon
the request of the Lender, the Administrative Agent or the Collateral Agent, agrees to repay the
amount paid over to such Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Lender, the Administrative Agent or the Collateral Agent in
the event the Lender, the Administrative Agent or the Collateral Agent is required to repay such
refund to such Governmental Authority. A Lender, the Administrative Agent or the Collateral Agent
shall claim any refund that it determines is available to it, unless it concludes in its sole
discretion that it would be adversely affected by making such a claim. Neither the Lender, the
Administrative Agent nor the Collateral Agent shall be obliged to disclose any information
regarding its tax affairs or computations to any Credit Party in connection with this
clause
(f)
or any other provision of this
Section 5.4
.
(g) If the Parent Borrower determines that a reasonable basis exists for contesting a Tax,
each Lender or Agent, as the case may be, shall use reasonable efforts to cooperate with the
Borrowers as the Parent Borrower may reasonably request in challenging such Tax. Subject to the
provisions of
Section 2.12
, each Lender and Agent agrees to use reasonable efforts to
cooperate with the Borrowers as the Parent Borrower may reasonably request to minimize any amount
payable by any Borrower or Guarantor pursuant to this
Section 5.4
. The Borrowers shall
indemnify and hold each Lender and Agent harmless against any out-of-pocket expenses incurred by
such Person in connection with any request made by the Parent Borrower pursuant to this
Section
5.4(g)
. Nothing in this
Section 5.4(g)
shall obligate any Lender or Agent to take any
action that such Person, in its sole judgment, determines may result in a material detriment to
such Person.
(h) Each Lender and Agent that is a United States person under Section 7701(a)(30) of the Code
shall, at the reasonable request of the Parent Borrower or the Administrative Agent, deliver to the
Parent Borrower and the Administrative Agent two United States Internal Revenue Service Forms W-9
(or substitute or successor form), properly completed and duly executed, certifying that such
Lender or Agent is exempt from United States backup withholding;
provided
that, for the
avoidance of doubt, the failure to deliver such forms
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shall not subject any Lender that may be
treated as an exempt recipient based on the indicators described in Treasury Regulation
1.6049-4(c)(i)(ii) to backup withholding.
(i) The agreements in this
Section 5.4
shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
13.5.
Computations of Interest and Fees
.
(a) Interest on LIBOR Loans and, except as provided in the next succeeding sentence, ABR Loans
shall be calculated on the basis of a 360-day year for the actual days elapsed. Interest on ABR
Loans in respect of which the rate of interest is calculated on the basis of the Administrative
Agent’s prime rate and interest on overdue interest shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed.
(b) Fees and the average daily Stated Amount of Letters of Credit shall be calculated on the
basis of a 360-day year for the actual days elapsed.
13.6.
Limit on Rate of Interest
.
(a)
No Payment Shall Exceed Lawful Rate
. Notwithstanding any other term of this
Agreement, the Borrowers shall not be obliged to pay any interest or other amounts under or in
connection with this Agreement or otherwise in respect of the Obligations in excess of the amount
or rate permitted under or consistent with any applicable law, rule or regulation.
(b)
Payment at Highest Lawful Rate
. If any Borrower is not obliged to make a payment
that it would otherwise be required to make, as a result of
Section 5.6(a)
, such Borrower
shall make such payment to the maximum extent permitted by or consistent with applicable laws,
rules and regulations.
(c)
Adjustment if Any Payment Exceeds Lawful Rate
. If any provision of this Agreement
or any of the other Credit Documents would obligate any Borrower to make any payment of interest or
other amount payable to any Lender in an amount or calculated at a rate that would be prohibited by
any applicable law, rule or regulation, then notwithstanding such provision, such amount or rate
shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of
interest, as the case may be, as would not be so prohibited by law, such adjustment to be effected,
to the extent necessary, by reducing the amount or rate of interest required to be paid by such
Borrower to the affected Lender under
Section 2.8
.
Notwithstanding the foregoing, and after giving effect to all adjustments contemplated
thereby, if any Lender shall have received from any Borrower an amount in excess of the maximum
permitted by any applicable law, rule or regulation, then such Borrower shall be entitled, by
notice in writing to the Administrative Agent to obtain reimbursement from that Lender in an amount
equal to such excess, and pending such reimbursement, such amount shall be deemed to be an amount
payable by that Lender to such Borrower.
SECTION 14.
Conditions Precedent to Amendment and Restatement
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The initial Borrowing under this Agreement on the Amendment and Restatement Date is subject to
the satisfaction of the following conditions precedent, except as otherwise agreed between the
Parent Borrower and the Administrative Agent.
14.1.
Credit Documents
. The Administrative Agent shall have received:
(a) this Agreement, executed and delivered by a duly authorized officer of the Parent
Borrower, each Subsidiary Borrower and each Lender;
(b) a Borrowing Base Certificate, certified as complete and correct in all material
respects, which calculates the Borrowing Base as of the last Business Day of the most recent
month ended at least 25 days prior to the Amendment and Restatement Date.
14.2.
Amendment Agreement Conditions
. All conditions in Section 4 of the Amendment
Agreement shall have been satisfied or waived.
SECTION 15.
Conditions Precedent to All Credit Events
The agreement of each Lender to make any Loan requested to be made by it on any date
(excluding Mandatory Borrowings, Protective Advances and New Revolving Credit Loans to be made by
the New Revolving Lenders in respect of Unpaid Drawings pursuant to
Sections 3.3
and
3.4
) and the obligation of the Letter of Credit Issuer to issue Letters of Credit on any
date is subject to the satisfaction of the following conditions precedent:
15.1.
No Default; Representations and Warranties
. At the time of each Credit Event
and also after giving effect thereto (a) no Default or Event of Default shall have occurred and be
continuing and (b) all representations and warranties made by any Credit Party contained herein or
in the other Credit Documents shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and as of the date of such
Credit Event (except where such representations and warranties expressly relate to an earlier date,
in which case such representations and warranties shall have been true and correct in all material
respects as of such earlier date).
15.2.
Notice of Borrowing; Letter of Credit Request
.
(a) Prior to the making of each New Revolving Credit Loan (other than any New Revolving Credit
Loan made pursuant to
Section 3.4(a)
or
2.1(e)
) and each Swingline Loan, the
Administrative Agent shall have received a Notice of Borrowing (whether in writing or by telephone)
meeting the requirements of
Section 2.3
.
(b) Prior to the issuance of each Letter of Credit, the Administrative Agent and the Letter of
Credit Issuer shall have received a Letter of Credit Request meeting the requirements of
Section 3.2(a)
.
The acceptance of the benefits of each Credit Event shall constitute a representation and warranty
by each Credit Party to each of the Lenders that all the applicable conditions specified in
Section 7
above have been satisfied as of that time.
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SECTION 16.
Representations, Warranties and Agreements
In order to induce the Lenders to enter into this Agreement, to make the Loans and issue or
participate in Letters of Credit as provided for herein, each Borrower makes the following
representations and warranties to, and agreements with, the Lenders, all of which shall survive the
execution and delivery of this Agreement and the making of the Loans and the issuance of the
Letters of Credit (it being understood that the following representations and warranties shall be
deemed made with respect to any Foreign Subsidiary only to the extent relevant under applicable
law):
16.1.
Corporate Status
. Each of the Parent Borrower and each Material Subsidiary (a)
is a duly organized and validly existing corporation or other entity in good standing under the
laws of the jurisdiction of its organization and has the corporate or other organizational power
and authority to own its property and assets and to transact the business in which it is engaged
and (b) has duly qualified and is authorized to do business and is in good standing (if applicable)
in all jurisdictions where it is required to be so qualified, except where the failure to be so
qualified could not reasonably be expected to result in a Material Adverse Effect.
16.2.
Corporate Power and Authority
. Each Credit Party has the corporate or other
organizational power and authority to execute, deliver and carry out the terms and provisions of
the Credit Documents to which it is a party and has taken all necessary corporate or other
organizational action to authorize the execution, delivery and performance of the Credit Documents
to which it is a party. Each Credit Party has duly executed and delivered each Credit Document to
which it is a party and each such Credit Document constitutes the legal, valid and binding
obligation of such Credit Party enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors’ rights generally and subject to general principles of equity.
16.3.
No Violation
. Neither the execution, delivery or performance by any Credit
Party of the Credit Documents to which it is a party nor compliance with the terms and provisions
thereof nor the consummation of the Merger and the other transactions contemplated hereby or
thereby will (a) contravene any applicable provision of any material law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental instrumentality, (b)
result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of such Credit Party or any of the Restricted
Subsidiaries (other than Liens created under the Credit Documents or Liens subject to the
Intercreditor Agreement) pursuant to the terms of any material indenture, loan agreement, lease
agreement, mortgage, deed of trust, agreement or other material instrument to which such Credit
Party or any of the Restricted Subsidiaries is a party or by which it or any of its property or
assets is bound (any such term, covenant, condition or provision, a “
Contractual Requirement
”) or
(c) violate any provision of the certificate of incorporation, by-laws or other organizational
documents of such Credit Party or any of the Restricted Subsidiaries.
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16.4.
Litigation
. Except as set forth on Schedule 8.4 to the Original Credit
Agreement, there are no actions, suits or proceedings (including Environmental Claims) pending or,
to the knowledge of the Parent Borrower, threatened with respect to the Parent Borrower or any of
its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect.
16.5.
Margin Regulations
. Neither the making of any Loan hereunder nor the use of the
proceeds thereof will violate the provisions of Regulation T, U or X of the Board.
16.6.
Governmental Approvals
. The execution, delivery and performance of the
Acquisition Agreement or any Credit Document do not require any consent or approval of,
registration or filing with, or other action by, any Governmental Authority, except for (i) such as
have been obtained or made and are in full force and effect, (ii) filings and recordings in respect
of the Liens created pursuant to the Security Agreement and (iii) such licenses, approvals,
authorizations or consents the failure to obtain or make could not reasonably be expected to have a
Material Adverse Effect.
16.7.
Investment Company Act
. No Borrower is an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
16.8.
True and Complete Disclosure
.
(a) None of the written factual information and written data (taken as a whole) furnished by
or on behalf of the Parent Borrower on or before the Original Closing Date, any of the Subsidiaries
or any of their respective authorized representatives to the Administrative Agent, any Joint Lead
Arranger and/or any Lender on or before the Original Closing Date (including all such information
and data contained in (i) the Confidential Information Memorandum (as updated prior to the Original
Closing Date) and (ii) the Credit Documents) for purposes of or in connection with this Agreement
or any transaction contemplated herein contained any untrue statement of any material fact or
omitted to state any material fact necessary to make such information and data (taken as a whole)
not misleading at such time in light of the circumstances under which such information or data was
furnished, it being understood and agreed that for purposes of this
Section 8.8(a)
, such
factual information and data shall not include projections (including financial estimates,
forecasts and other forward-looking information) and information of a general economic or general
industry nature.
(b) The projections (including financial estimates, forecasts and other forward-looking
information) contained in the information and data referred to in
clause (a)
above were
based on good faith estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by the Lenders that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods covered by any such
projections may differ from the projected results.
16.9.
Financial Condition; Financial Statements
. (a) The unaudited historical
consolidated financial information of HCA as set forth in the Confidential Information Memorandum,
and (b) the Historical Financial Statements, in each case present fairly in all material respects
the consolidated financial position of HCA at the respective dates of said information, statements
and results of operations for the respective periods covered thereby. The
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financial statements
referred to in clause (b) of this Section 8.9 have been prepared in accordance with GAAP
consistently applied except to the extent provided in the notes to said financial statements.
After the Original Closing Date, there has been no Material Adverse Effect since December 31, 2005.
16.10.
Tax Matters
. Each of the Parent Borrower and the Subsidiaries has filed all
federal income tax returns and all other material tax returns, domestic and foreign, required to be
filed by it and all such tax returns are true and correct in all material respects and has paid all
material taxes payable by it that have become due, other than those (a) not yet delinquent or (b)
contested in good faith as to which adequate reserves have been provided to the extent required by
law and in accordance with GAAP and which could not reasonably be expected to result in a Material
Adverse Effect. Each Borrower and each of the Subsidiaries have paid, or have provided adequate
reserves to the extent required by law and in accordance with GAAP for the payment of, all material
federal, state, provincial and foreign taxes applicable for the current fiscal year to the Original
Closing Date.
16.11.
Compliance with ERISA
. Each Plan is in compliance with ERISA, the Code and any
applicable Requirement of Law; no Reportable Event has occurred (or is reasonably likely to occur)
with respect to any Plan; no Plan is insolvent or in reorganization (or is reasonably likely to be
insolvent or in reorganization), and no written notice of any such insolvency or reorganization has
been given to the Parent Borrower or any ERISA Affiliate; no Plan (other than a multiemployer plan)
has an accumulated or waived funding deficiency (or is reasonably likely to have such a
deficiency); none of the Parent Borrower or any ERISA Affiliate has incurred (or is reasonably
likely to incur) any liability to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code or has been
notified in writing that it will incur any liability under any of the foregoing Sections with
respect to any Plan; no proceedings have been instituted (or are reasonably likely to be
instituted) to terminate or to reorganize any Plan or to appoint a trustee to administer any Plan,
and no written notice of any such proceedings has been given to the Parent Borrower or any ERISA
Affiliate; and no lien imposed under the Code or ERISA on the assets of the Parent Borrower or any
ERISA Affiliate exists (or is reasonably likely to exist) nor has the Parent Borrower or any ERISA
Affiliate been notified in writing that such a lien will be imposed on the assets of the Parent
Borrower or any ERISA Affiliate on account of any Plan, except to the extent that a breach of any
of the representations, warranties or agreements in this Section 8.11 would not result,
individually or in the aggregate, in an amount of liability that would be reasonably likely to have
a Material Adverse Effect. No Plan (other than a multiemployer plan) has an Unfunded Current
Liability that would, individually or when taken together with any other liabilities referenced in
this Section 8.11, be reasonably likely to have a Material Adverse Effect. With respect to Plans
that are multiemployer plans (as defined in Section 3(37) of ERISA), the representations and
warranties in this Section 8.11, other than any made with respect to (i) liability under Section
4201 or 4204 of ERISA or (ii) liability for termination or reorganization of such Plans under
ERISA, are made to the best knowledge of each Borrower.
16.12.
Subsidiaries
. Schedule 8.12 to the Original Credit Agreement lists each Subsidiary of the Parent Borrower
(and the direct and indirect ownership interest of the Parent
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Borrower therein), in each case
existing on the Original Closing Date and the Amendment and Restatement Date. Each Material
Subsidiary (under clause (i) of the definition thereof) and each 1993 Indenture Restricted
Subsidiary as of the Original Closing Date has been so designated on Schedule 8.12 to the Original
Credit Agreement.
16.13.
Intellectual Property
. The Parent Borrower and each of the Restricted
Subsidiaries have obtained all intellectual property, free from burdensome restrictions, that are
necessary for the operation of their respective businesses as currently conducted and as proposed
to be conducted, except where the failure to obtain any such rights could not reasonably be
expected to have a Material Adverse Effect.
16.14.
Environmental Laws
.
(a) Except as could not reasonably be expected to have a Material Adverse Effect: (i) the
Parent Borrower and each of the Subsidiaries and all Real Estate are in compliance with all
Environmental Laws; (ii) neither the Parent Borrower nor any Subsidiary is subject to any
Environmental Claim or any other liability under any Environmental Law; (iii) neither the Parent
Borrower nor any Subsidiary is conducting any investigation, removal, remedial or other corrective
action pursuant to any Environmental Law at any location; and (iv) no underground storage tank or
related piping, or any impoundment or other disposal area containing Hazardous Materials is located
at, on or under any Real Estate currently owned or leased by the Parent Borrower or any of its
Subsidiaries.
(b) Neither the Parent Borrower nor any of the Subsidiaries has treated, stored, transported,
released or disposed or arranged for disposal or transport for disposal of Hazardous Materials at,
on, under or from any currently or formerly owned or leased Real Estate or facility in a manner
that could reasonably be expected to have a Material Adverse Effect.
16.15.
Properties
. The Parent Borrower and each of the Subsidiaries have good and
marketable title to or leasehold interests in all properties that are necessary for the operation
of their respective businesses as currently conducted and as proposed to be conducted, free and
clear of all Liens (other than any Liens permitted by this Agreement) and except where the failure
to have such good title could not reasonably be expected to have a Material Adverse Effect.
16.16.
Solvency
. On the Original Closing Date (after giving effect to the
Transactions described in clause (ii) of the definition thereof), immediately following the making
of each Loan and after giving effect to the application of the proceeds of such Loans, the Parent
Borrower on a consolidated basis with its Subsidiaries will be Solvent.
16.17.
Delayed Equity Arrangements
. On the Original Closing Date, (i) the Parent
Borrower received a written commitment from Holdings to contribute the Delayed Equity Amount to the
Parent Borrower, to the extent not otherwise received by the Parent Borrower, on or prior to March
31, 2007 and (ii) Holdings has received written commitments from certain of the Investors to
provide the Delayed Equity Amount to Holdings, to the extent not otherwise received on or prior to
March 31, 2007 (the commitments referred to in subclauses (i) and (ii) being referred to
collectively as the
“Delayed Equity Arrangements”
).
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SECTION 17.
Affirmative Covenants
.
Each Borrower hereby covenants and agrees that on the Original Closing Date and thereafter,
until the Commitments, the Swingline Commitment and each Letter of Credit have terminated and the
Loans and Unpaid Drawings, together with interest, Fees and all other Obligations incurred
hereunder, are paid in full:
17.1.
Information Covenants
. The Parent Borrower will furnish to the Administrative
Agent (which shall make such information available to the Lenders in accordance with its customary
practice):
(a)
Annual Financial Statements
. As soon as available and in any event within
5 days after the date on which such financial statements are required to be filed with the
SEC or, if earlier, on the date such financial statements are delivered to the holders of
Junior Lien Notes (or, if such financial statements are not required to be filed with the
SEC or delivered to the holders of the Junior Lien Notes, on or before the date that is 90
days (or, in the case of the fiscal year ending December 31, 2006, 120 days) after the end
of each such fiscal year), the consolidated balance sheets of the Parent Borrower and the
Subsidiaries and, if different, the Parent Borrower and the Restricted Subsidiaries, in each
case as at the end of such fiscal year, and the related consolidated statements of
operations and cash flows for such fiscal year, setting forth comparative
consolidated figures for the preceding fiscal years (or, in lieu of such audited
financial statements of the Parent Borrower and the Restricted Subsidiaries, a detailed
reconciliation, reflecting such financial information for the Parent Borrower and the
Restricted Subsidiaries, on the one hand, and the Parent Borrower and the Subsidiaries, on
the other hand), and certified by independent certified public accountants of recognized
national standing whose opinion shall not be qualified as to the scope of audit or as to the
status of the Parent Borrower or any of the Material Subsidiaries (or group of Subsidiaries
that together would constitute a Material Subsidiary) as a going concern, together in any
event with a certificate of such accounting firm stating that in the course of either (i)
its regular audit of the consolidated business of the Parent Borrower, which audit was
conducted in accordance with generally accepted auditing standards or (ii) performing
certain other procedures permitted by professional standards, such accounting firm has
obtained no knowledge of any Event of Default relating to
Section 10.9
that has
occurred and is continuing or, if in the opinion of such accounting firm such an Event of
Default has occurred and is continuing, a statement as to the nature thereof.
(b)
Periodic Financial Statements
. As soon as available and in any event
within 5 days after the date on which such financial statements are required to be filed
with the SEC or, if earlier, on the date on which such financial statements are delivered to
the holders of the Junior Lien Notes with respect to each of the first three quarterly
accounting periods in each fiscal year of the Parent Borrower (or, if such financial
statements are not required to be filed with the SEC or delivered to the holders of the
Junior Lien Notes, on or before the date that is 45 days after the end of each such
quarterly accounting period), the consolidated balance sheets of the Parent Borrower and the
Subsidiaries and, if different, the Parent Borrower and the Restricted Subsidiaries, in
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each
case as at the end of such quarterly period and the related consolidated statements of
operations for such quarterly accounting period and for the elapsed portion of the fiscal
year ended with the last day of such quarterly period, and the related consolidated
statement of cash flows for the elapsed portion of the fiscal year ended with the last day
of such quarterly period, and setting forth comparative consolidated figures for the related
periods in the prior fiscal year or, in the case of such consolidated balance sheet, for the
last day of the prior fiscal year (or, in lieu of such unaudited financial statements of the
Parent Borrower and the Restricted Subsidiaries, a detailed reconciliation, reflecting such
financial information for the Parent Borrower and the Restricted Subsidiaries, on the one
hand, and the Parent Borrower and the Subsidiaries, on the other hand), all of which shall
be certified by an Authorized Officer of the Parent Borrower, subject to changes resulting
from audit and normal year-end audit adjustments.
(c)
Budgets
. Within 90 days after the commencement of each fiscal year of the
Parent Borrower, a budget of the Parent Borrower in reasonable detail for such fiscal year
as customarily prepared by management of the Parent Borrower for their internal use
consistent in scope with the financial statements provided pursuant to
Section
9.1(a)
, setting forth the principal assumptions upon which such budget is based.
(d)
Officer’s Certificates
. At the time of the delivery of the financial
statements provided for in
Sections 9.1(a)
and
(b)
, a certificate of an
Authorized Officer
of the Parent Borrower to the effect that no Default or Event of Default exists or, if
any Default or Event of Default does exist, specifying the nature and extent thereof, which
certificate shall set forth (i) the calculations required to establish whether the Parent
Borrower and the Subsidiaries were in compliance with the provisions of
Section 10.9
(whether or not such covenant is then applicable) as at the end of such fiscal year or
period, as the case may be, (ii) a specification of any change in the identity of the
Restricted Subsidiaries and Unrestricted Subsidiaries as at the end of such fiscal year or
period, as the case may be, from the Restricted Subsidiaries and Unrestricted Subsidiaries,
respectively, provided to the Lenders on the Original Closing Date or the most recent fiscal
year or period, as the case may be, (iii) the then applicable Status and (iv) the amount of
any Pro Forma Adjustment not previously set forth in a Pro Forma Adjustment Certificate or
any change in the amount of a Pro Forma Adjustment set forth in any Pro Forma Adjustment
Certificate previously provided and, in either case, in reasonable detail, the calculations
and basis therefor. At the time of the delivery of the financial statements provided for in
Section 9.1(a)
, (i) a certificate of an Authorized Officer of the Parent Borrower
setting forth in reasonable detail the Applicable Amount as at the end of the fiscal year to
which such financial statements relate and (ii) a certificate of an Authorized Officer of
the Parent Borrower setting forth the information required pursuant to Section 1(a) of the
Perfection Certificate or confirming that there has been no change in such information since
the Original Closing Date or the date of the most recent certificate delivered pursuant to
this
clause (d)
, as the case may be.
(e)
Notice of Default or Litigation
. Promptly after an Authorized Officer of
the Parent Borrower or any of the Subsidiaries obtains knowledge thereof, notice of (i) the
occurrence of any event that constitutes a Default or Event of Default, which notice
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shall
specify the nature thereof, the period of existence thereof and what action the Parent
Borrower proposes to take with respect thereto and (ii) any litigation or governmental
proceeding pending against the Parent Borrower or any of the Subsidiaries that could
reasonably be expected to be determined adversely and, if so determined, to result in a
Material Adverse Effect.
(f)
Environmental Matters
. Promptly after obtaining knowledge of any one or
more of the following environmental matters, unless such environmental matters would not,
individually or when aggregated with all other such matters, be reasonably expected to
result in a Material Adverse Effect, notice of:
(i) any pending or threatened Environmental Claim against any Credit Party or
any Real Estate;
(ii) any condition or occurrence on any Real Estate that (x) could reasonably
be expected to result in noncompliance by any Credit Party with any applicable
Environmental Law or (y) could reasonably be anticipated to form the basis of an
Environmental Claim against any Credit Party or any Real Estate;
(iii) any condition or occurrence on any Real Estate that could reasonably be
anticipated to cause such Real Estate to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Real
Estate under any Environmental Law; and
(iv) the conduct of any investigation, or any removal, remedial or other
corrective action in response to the actual or alleged presence, release or
threatened release of any Hazardous Material on, at, under or from any Real Estate.
All such notices shall describe in reasonable detail the nature of the claim, investigation,
condition, occurrence or removal or remedial action and the response thereto. The term
“
Real Estate
” shall mean land, buildings and improvements owned or leased by any Credit
Party, but excluding all operating fixtures and equipment, whether or not incorporated into
improvements.
(g)
Other Information
. Promptly upon filing thereof, copies of any filings
(including on Form 10-K, 10-Q or 8-K) or registration statements with, and reports to, the
SEC or any analogous Governmental Authority in any relevant jurisdiction by the Parent
Borrower or any of the Subsidiaries (other than amendments to any registration statement (to
the extent such registration statement, in the form it becomes effective, is delivered to
the Lenders and the Administrative Agent), exhibits to any registration statement and, if
applicable, any registration statements on Form S-8) and copies of all financial statements,
proxy statements, notices and reports that the Parent Borrower or any of the Subsidiaries
shall send to the holders of any publicly issued debt of the Parent Borrower and/or any of
the Subsidiaries (including the Junior Lien Notes (whether publicly issued or not)) and
lenders and agents under the CF Facility, in each case in their capacity as such holders,
lenders or agents (in each case to the extent not theretofore delivered to the
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Lenders and
the Administrative Agent pursuant to this Agreement) and, with reasonable promptness, such
other information (financial or otherwise) as the Administrative Agent on its own behalf or
on behalf of any Lender (acting through the Administrative Agent) may reasonably request in
writing from time to time.
(h)
Pro Forma Adjustment Certificate
. Not later than any date on which
financial statements are delivered with respect to any Test Period in which a Pro Forma
Adjustment is made as a result of the consummation of the acquisition of any Acquired Entity
or Business by the Parent Borrower or any Restricted Subsidiary for which there shall be a
Pro Forma Adjustment, a certificate of an Authorized Officer of the Parent Borrower setting
forth the amount of such Pro Forma Adjustment and, in reasonable detail, the calculations
and basis therefor.
(i)
Borrowing Base Certificate
. On the 25th day of each calendar month, a
Borrowing Base Certificate showing the Borrowing Base and the calculation of Excess Facility
Availability in each case as of the close of business on the last day of the immediately
preceding calendar month, each such Borrowing Base Certificate to be certified as complete
and correct in all material respects on behalf of the Parent Borrower by a Financial Officer
of the Parent Borrower (each a “
Monthly Borrowing Base Certificate
”). In addition, solely
(i) during the continuance of a Cash Dominion Event or (ii) if any Event of Default has occurred and is continuing, a Borrowing Base
Certificate showing the Parent Borrower’s reasonable estimate (which shall be based on the
most current accounts receivable aging reasonably available and shall be calculated in a
consistent manner with the most recent Monthly Borrowing Base Certificates delivered
pursuant to this Section) of the Borrowing Base (but not the calculation of Excess Facility
Availability) as of the close of business on the last day of the immediately preceding
calendar week, unless the Administrative Agent otherwise agrees, shall be furnished on
Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding
Business Day).
(j)
Collateral Reporting
.
(i) At the time of the delivery of the financial statements provided for in
Section
9.1(b)
, a certificate of an Authorized Officer setting forth (x) the amount of Potential
Medicaid Accounts at the end of such period and the aggregate amount of Potential Medicaid
Accounts that became Medicaid Accounts during such period and (y) the collection history of
Self-Pay Accounts for the immediately preceding 12 month period.
(ii) At the time of the delivery of the Monthly Borrowing Base Certificate provided for
in
Section 9.1(i)
, the Parent Borrower shall provide a current accounts receivable
aging for the Borrowers along with a reconciliation between the amounts that appear on such
aging and the amount of accounts receivable presented on the concurrently delivered balance
sheet.
(k)
Change of Name, Locations, Etc
. Not later than 60 days following the
occurrence of any change referred to in
subclauses (i)
through
(iv)
below,
written notice
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of any change (i) in the legal name of any Credit Party, (ii) in the
jurisdiction of organization or location of any Credit Party for purposes of the Uniform
Commercial Code, (iii) in the identity or type of organization of any Credit Party or (iv)
in the Federal Taxpayer Identification Number or organizational identification number of any
Credit Party. The Parent Borrower shall also promptly provide the Collateral Agent with
certified organizational documents reflecting any of the changes described in the first
sentence of this
clause (k)
.
Notwithstanding the foregoing, the obligations in
clauses (a)
and
(b)
of this
Section 9.1
may be satisfied with respect to financial information of the Parent Borrower
and the Restricted Subsidiaries by furnishing (A) the applicable financial statements of any direct
or indirect parent of the Parent Borrower or (B) the Parent Borrower’s (or any direct or indirect
parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC;
provided
that, with respect to each of
subclauses (A)
and
(B)
of this
paragraph, to the extent such information relates to a parent of the Parent Borrower, such
information is accompanied by consolidating or other information that explains in reasonable detail
the differences between the information relating to such parent, on the one hand, and the
information relating to the Parent Borrower and the Restricted Subsidiaries on a standalone basis,
on the other hand.
17.2.
Books, Records and Inspections
.
(a) The Parent Borrower will, and will cause each Restricted Subsidiary to, permit officers
and designated representatives of the Administrative Agent or the Required Lenders to visit and
inspect any of the properties or assets of the Parent Borrower and any such Subsidiary in
whomsoever’s possession to the extent that it is within such party’s control to permit such
inspection, and to examine the books and records of the Parent Borrower and any such Subsidiary and
discuss the affairs, finances and accounts of the Parent Borrower and of any such Subsidiary with,
and be advised as to the same by, its and their officers and independent accountants, all at such
reasonable times and intervals and to such reasonable extent as the Administrative Agent or the
Required Lenders may desire (and subject, in the case of any such meetings or advice from such
independent accountants, to such accountants’ customary policies and procedures);
provided
that, excluding any such visits and inspections during the continuation of an Event of Default,
only the Administrative Agent on behalf of the Required Lenders may exercise rights of the
Administrative Agent and the Lenders under this
Section 9.2
and only one such visit shall
be at the Parent Borrower’s expense;
provided
further
that when an Event of Default
exists, the Administrative Agent or any Lender (or any of their respective representatives or
independent contractors) may do any of the foregoing at the expense of the Parent Borrower at any
time during normal business hours and upon reasonable advance notice. The Administrative Agent and
the Lenders shall give the Parent Borrower the opportunity to participate in any discussions with
the Parent Borrower’s independent public accountants. During the course of the above-described
visits, inspections, examinations and discussions, representatives of the Agents and the Lenders
may encounter individually identifiable healthcare information as defined under the Administrative
Simplification (including privacy and security) regulations promulgated pursuant to the Health
Insurance Portability and Accountability Act of 1996, as amended (collectively,
“HIPAA”
), or other
confidential information relating to healthcare patients (collectively, the
“Confidential
Healthcare Information”
). The Parent Borrower or the
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Restricted Subsidiary maintaining such
Confidential Healthcare Information shall, consistent with HIPAA’s “minimum necessary” provisions,
permit such disclosure for their “healthcare operations” purposes. Unless otherwise required by
law, the Agents, the Lenders and their respective representatives shall not require or perform any
act that would cause the Parent Borrower or any of its Subsidiaries to violate any laws,
regulations or ordinances intended to protect the privacy rights of healthcare patients, including,
without limitation, HIPAA.
(b) Independently of or in connection with the visits and inspections provided for in
clause (a)
above, but not more than twice a year (unless required by applicable law or an
Event of Default has occurred and is continuing in which case the Administrative Agent may cause
additional appraisals and field examinations to be undertaken at the expense of the Borrowers) upon
the request of the Administrative Agent after reasonable prior notice, the Parent Borrower will,
and will cause each Subsidiary Borrower to, permit the Administrative Agent or professionals
reasonably acceptable to the Parent Borrower (including investment bankers, consultants,
accountants, lawyers and appraisers) retained by the Administrative Agent to conduct appraisals,
commercial finance examinations and other evaluations, including, without limitation, (i) of the
Parent Borrower’s practices in the computation of the Borrowing Base, and
(ii) inspecting, verifying and auditing the Collateral. The Borrowers shall pay the fees and
expenses of the Administrative Agent or such professionals with respect to such evaluations and
appraisals.
17.3.
Maintenance of Insurance
. The Parent Borrower will, and will cause each
Material Subsidiary to, at all times maintain in full force and effect, pursuant to self-insurance
arrangements or with insurance companies that the Parent Borrower believes (in the good faith
judgment of the management of the Parent Borrower) are financially sound and responsible at the
time the relevant coverage is placed or renewed, insurance in at least such amounts and against at
least such risks (and with such risk retentions) as are usually insured against in the same general
area by companies engaged in the same or a similar business; and will furnish to the Lenders, upon
written request from the Administrative Agent, information presented in reasonable detail as to the
insurance so carried.
17.4.
Payment of Taxes
. The Parent Borrower will pay and discharge, and will cause
each of the Subsidiaries to pay and discharge, all material taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any properties belonging
to it, prior to the date on which material penalties attach thereto, and all lawful material claims
in respect of any Taxes imposed, assessed or levied that, if unpaid, could reasonably be expected
to become a material Lien upon any properties of the Parent Borrower or any of the Restricted
Subsidiaries, provided that neither the Parent Borrower nor any of the Subsidiaries shall be
required to pay any such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with respect thereto to the
extent required by law and in accordance with GAAP and the failure to pay could not reasonably be
expected to result in a Material Adverse Effect.
17.5.
Consolidated Corporate Franchises
. The Parent Borrower will do, and will cause
each Material Subsidiary to do, or cause to be done, all things necessary to preserve and keep in
full force and effect its existence, corporate rights and authority, except to the extent
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that the
failure to do so could not reasonably be expected to have a Material Adverse Effect; provided,
however, that the Parent Borrower and its Subsidiaries may consummate any transaction permitted
under Section 10.3, 10.4 or 10.5.
17.6.
Compliance with Statutes, Regulations, Etc
. The Parent Borrower will, and will cause each Subsidiary to, comply with all applicable
laws, rules, regulations and orders applicable to it or its property, including all governmental
approvals or authorizations required to conduct its business, and to maintain all such governmental
approvals or authorizations in full force and effect, in each case except where the failure to do
so could not reasonably be expected to have a Material Adverse Effect.
17.7.
ERISA
. Promptly after the Parent Borrower or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following events that, individually or in the
aggregate (including in the aggregate such events previously disclosed or exempt from disclosure
hereunder, to the extent the liability therefor remains outstanding), would be reasonably likely to
have a Material Adverse Effect, the Parent Borrower will deliver to the Administrative Agent and
each of the Lenders a certificate of an Authorized Officer or any other senior officer of the
Parent Borrower setting forth details as to such occurrence and the action, if any, that the Parent
Borrower or such ERISA Affiliate is required or proposes to take, together with any notices
(required, proposed or otherwise) given to or filed with or by the Parent Borrower such ERISA
Affiliate, the PBGC, a Plan participant (other than notices relating to an individual participant’s
benefits) or the Plan administrator with respect thereto: that a Reportable Event has occurred;
that an accumulated funding deficiency has been incurred or an application is to be made to the
Secretary of the Treasury for a waiver or modification of the minimum funding standard (including
any required installment payments) or an extension of any amortization period under Section 412 of
the Code with respect to a Plan; that a Plan having an Unfunded Current Liability has been or is to
be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA (including
the giving of written notice thereof); that a Plan has an Unfunded Current Liability that has or
will result in a lien under ERISA or the Code; that proceedings will be or have been instituted to
terminate a Plan having an Unfunded Current Liability (including the giving of written notice
thereof); that a proceeding has been instituted against the Parent Borrower or an ERISA Affiliate
pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; that the PBGC has
notified the Parent Borrower or any ERISA Affiliate of its intention to appoint a trustee to
administer any Plan; that the Parent Borrower or any ERISA Affiliate has failed to make a required
installment or other payment pursuant to Section 412 of the Code with respect to a Plan; or that
the Parent Borrower or any ERISA Affiliate has incurred or will incur (or has been notified in
writing that it will incur) any liability (including any contingent or secondary liability) to or
on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or
4204 of ERISA or Section 4971 or 4975 of the Code.
17.8.
Maintenance of Properties
. The Parent Borrower will, and will cause each of the
Restricted Subsidiaries to, keep and maintain all property material to the conduct of its business
in good working order and condition, ordinary wear and tear excepted, except to the extent that the
failure to do so could reasonably be expected to have a Material Adverse Effect.
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17.9.
Transactions with Affiliates
. The Parent Borrower will conduct, and cause each
of the Restricted Subsidiaries to conduct, all transactions with any of its Affiliates (other than
the Parent Borrower and the Restricted Subsidiaries) on terms that are substantially as favorable
to the Parent Borrower or such Restricted Subsidiary as it would obtain in a comparable
arm’s-length transaction with a Person that is not an Affiliate, provided that the foregoing
restrictions shall not apply to (a) the payment of customary fees to the Sponsors for management,
consulting and financial services rendered to the Parent Borrower and the Subsidiaries and
customary investment banking fees paid to the Sponsors for services rendered to the Parent Borrower
and the Subsidiaries in connection with divestitures, acquisitions, financings and other
transactions, (b) transactions permitted by Section 10.6, (c) the payment of the Transaction
Expenses, (d) the issuance of Stock or Stock Equivalents of Holdings to the management of the
Parent Borrower (or any direct or indirect parent thereof) or any of its Subsidiaries in connection
with the Transactions or pursuant to arrangements described in clause (f) of this Section 9.9, (e)
loans, advances and other transactions between or among the Parent Borrower, any Subsidiary or any
joint venture (regardless of the form of legal entity) in which the Parent Borrower or any
Subsidiary has invested (and which Subsidiary or joint venture would not be an Affiliate of the
Parent Borrower but for the Parent Borrower’s or a Subsidiary’s ownership of Stock or Stock
Equivalents in such joint venture or Subsidiary) to the extent permitted under Section 10, (f)
employment and severance arrangements between the Parent Borrower and the Subsidiaries and their
respective officers and employees in the ordinary course of business, (g) payments by the Parent
Borrower (and any direct or indirect parent thereof) and the Subsidiaries pursuant to the tax
sharing agreements among the Parent Borrower (and any such parent) and the Subsidiaries on
customary terms to the extent attributable to the ownership or operation of the Parent Borrower and
the Subsidiaries; provided that in each case the amount of such payments in any fiscal year does
not exceed the amount that the Parent Borrower and its Restricted Subsidiaries would be required to
pay in respect of federal, state and local taxes for such fiscal year were the Parent Borrower and
its Restricted Subsidiaries (to the extent described above) to pay such taxes separately from any
such parent entity, (h) the payment of customary fees and reasonable out of pocket costs to, and
indemnities provided on behalf of, directors, managers, consultants, officers and employees of the
Parent Borrower and the Subsidiaries in the ordinary course of business to the extent attributable
to the ownership or operation of the Parent Borrower and the Subsidiaries and (i) transactions
pursuant to permitted agreements in existence on the Original Closing Date and set forth on
Schedule 9.9 to the Original Credit Agreement or any amendment thereto to the extent such an
amendment is not adverse, taken as a whole, to the Lenders in any material respect. The Parent
Borrower will not permit any Consolidated Entity to engage in any transaction with any Sponsor or
any Frist Shareholder (or any controlling Affiliate of any Sponsor or Frist Shareholder), to the
extent that such Consolidated Entity would be prohibited from engaging in such transaction if it
was a Restricted Subsidiary for purposes of this Section 9.9.
17.10.
End of Fiscal Years; Fiscal Quarters
. The Parent Borrower will, for financial reporting purposes,
cause (a) each of its, and each
of its Subsidiaries’, fiscal years to end on December 31 of each year and (b) each of its, and each
of its Subsidiaries’, fiscal quarters to end on dates consistent with such fiscal year-end and the
Parent Borrower’s past practice; provided, however, that the Parent Borrower may, upon written
notice to the Administrative Agent change the financial reporting
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convention specified above to any
other financial reporting convention reasonably acceptable to the Administrative Agent, in which
case the Parent Borrower and the Administrative Agent will, and are hereby authorized by the
Lenders to, make any adjustments to this Agreement that are necessary in order to reflect such
change in financial reporting.
17.11.
Additional Borrowers
. Except as otherwise provided in Section 10.1(j) or
10.1(k) and subject to any applicable limitations set forth in the Security Documents, the Parent
Borrower will cause each direct or indirect Domestic Subsidiary (excluding any Excluded Subsidiary)
formed or otherwise purchased or acquired after the Original Closing Date (including pursuant to a
Permitted Acquisition) and each other Domestic Subsidiary that ceases to constitute an Excluded
Subsidiary), to execute a joinder to this Agreement in order to become a Subsidiary Borrower and a
supplement to the Security Agreement in order to become a grantor under the Security Agreement or,
to the extent reasonably requested by the Collateral Agent, enter into a new Security Document
substantially consistent with the analogous existing Security Documents and otherwise in form and
substance reasonably satisfactory to such Collateral Agent and take all other action reasonably
requested by the Collateral Agent to grant a perfected security interest in its assets to
substantially the same extent as the Credit Parties on the Original Closing Date.
17.12. [
Reserved
].
17.13.
Use of Proceeds
. The Borrowers will use Letters of Credit, New Revolving
Credit Loans and Swingline Loans for general corporate purposes (including Permitted Acquisitions).
The Borrowers will also use the proceeds of the New Revolving Credit Loans to effect the Exchange
and the Repayment and to pay fees and expenses related thereto.
17.14.
Further Assurances
. The Parent Borrower will, and will cause each other Credit
Party to, execute any and all further documents, financing statements, agreements and instruments,
and take all such further actions (including the filing and recording of financing statements and
other documents)
that may be required under any applicable law, or that the Collateral Agent or the Required
Lenders may reasonably request, in order to grant, preserve, protect and perfect the validity and
priority of the security interests created or intended to be created by the Security Agreement, all
at the expense of the Parent Borrower and the Restricted Subsidiaries.
17.15.
Cash Management Systems.
(a) The Credit Parties will establish and maintain the cash management systems described below
(the
“Cash Management Systems”
):
(i) Within 60 calendar days after the Original Closing Date (or such later date as the
Administration Agent may, in its sole reasonable discretion, consent to in writing), (x) the
Parent Borrower will, or will cause each of the applicable Subsidiaries to, request in
writing and otherwise take reasonable steps to provide that all Account Debtors in respect
of Governmental Accounts that constitute Collateral forward payment directly to an account
of a Borrower designated as a Government Receivables Deposit Account on
Schedule
9.15(a)
to the Original Credit Agreement (such schedule to be delivered to the
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Administrative Agent on or before the 60
th
calendar day after the Original
Closing Date (or such later date as the Administration Agent may, in its sole reasonable
discretion, consent to in writing)) (each a
“Government Receivables Deposit Account”
), (y)
the Credit Parties will, or will cause each of their Subsidiaries to, establish lock boxes
(“Lock Boxes”)
or, at the Administrative Agent’s discretion, blocked accounts (
“Blocked
Accounts”
) listed on
Schedule 9.15(c)
to the Original Credit Agreement (such
schedule to be delivered to the Administrative Agent on or before the 60
th
calendar day after the Original Closing Date (or such later date as the Administrative Agent
may, in its sole reasonable discretion, consent to in writing)) at one or more banks that
are reasonably acceptable to the Collateral Agent, and shall request in writing and
otherwise take reasonable steps to provide that all Account Debtors with respect to Private
Accounts that constitute Collateral forward payments directly to such Lock Boxes or Blocked
Accounts and (z) each Borrower will deposit and cause its Subsidiaries to deposit or cause
to be deposited promptly, and in any event no later than the first Business Day after the
date of receipt thereof, all cash, checks, drafts or other similar items of payment relating
to or constituting payments made in respect of any and all Collateral (whether or not
otherwise delivered to a Lock Box) into the Blocked Accounts. Until so deposited, all such
payments shall be held in trust by each Borrower and any of its Subsidiaries for the
Administrative Agent and shall not be commingled with any other funds or property of any
Borrower. Within 60 calendar days after the Original Closing Date (or such later date as
the Administrative Agent may, in its sole reasonable discretion, consent to in writing), the
Parent Borrower shall have established a concentration account in its name (the
“Concentration Account”
) (with a bank reasonably acceptable to the Administrative Agent (it
being agreed that Wachovia Bank is acceptable to the
Administrative Agent)) that shall be designated as the Concentration Account for the
Parent Borrower listed on
Schedule 9.15(a)
to the Original Credit Agreement.
(ii) The Parent Borrower may maintain, in its name, one or more accounts (any such
account, a
“Disbursement Account”
) at any bank reasonably acceptable to the Administrative
Agent into which the Administrative Agent shall, from time to time, deposit proceeds of
Loans made to the Parent Borrower pursuant to
Section 2.1
for use by the Parent
Borrower solely in accordance with the provisions of
Section 9.13
(it being
understood that the Administrative Agent may also deposit or wire proceeds of Loans into any
other account designated by the Parent Borrower at any time other than during the
continuance of any Cash Dominion Event). The Parent Borrower may also maintain, in its
name, one or more accounts that (x) do not contain any funds that are proceeds of Accounts
that otherwise constitute Collateral or (y) include funds that are proceeds of Accounts that
otherwise constitute Collateral and that are neither Government Receivables Deposit Accounts
nor subject to a Blocked Account Agreement ,but solely (in the case of this clause (y) only)
to the extent that any such accounts are not subject to a blocked account or control
agreement with any other party (each a
“Non-Controlled Account”
).
(iii) Within 60 calendar days after the Original Closing Date (or such later date as
the Administrative Agent may, in its sole discretion, consent to in writing), each
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Borrower
that owns or originates Government Accounts shall deliver to the Collateral Agent (x) for
each Government Receivables Deposit Account established or maintained by such Borrower, a
tri-party deposit account agreement between the Collateral Agent, the bank at which such
Government Receivables Deposit Account (each a
“Government Receivables Bank”
) is maintained
and such Borrower, in form and substance reasonably satisfactory to the Collateral Agent
(each a
“Government Receivables Deposit Account Agreement”
), and (y) for the accounts of any
Borrower designated as a Blocked Account on
Schedule 9.15(c)
to the Original Credit
Agreement and for the Concentration Account and any Disbursement Accounts, a tri-party
blocked account agreement or lockbox account agreement between the Collateral Agent, the
bank at which each such Blocked Account, Concentration Account or Disbursement Account is
maintained and the relevant Borrowers, in form and substance reasonably satisfactory to the
Collateral Agent (each a
“Blocked Account Agreement”
). Each such Blocked Account Agreement
with respect to any Blocked Account shall provide, among other things, that from and after
the date thereof the bank at which any such Blocked Account is maintained, agrees to forward
immediately all amounts in each such account to the Concentration Account. In addition, any
such Blocked Account Agreement shall provide, among other things, that at all times
following the establishment of the Cash Management Systems pursuant to this
Section
9.15(a)
, upon the occurrence and during the continuation of a Cash Dominion Event, the
bank at which such Blocked Account, Concentration Account or Disbursement Account is
maintained shall, upon receipt of notice by the Collateral Agent of such Cash Dominion
Event, commence the process of daily sweeps from such accounts into the Collection Account
(it being understood that any such daily sweep in respect of any cash or other amount in a
Disbursement Account shall be subject to the rights of the Borrowers to transfer, apply or
otherwise use the proceeds of any Loans hereunder for
any purpose in accordance with
Section 9.13
by moving any cash or other amount
on deposit in any Disbursement Account out of such account for any such purpose);
provided
that any amounts in the Concentration Accounts reasonably identified (with
reasonably detailed written support) to the Administrative Agent as not constituting
Collateral will be distributed as directed by the Administrative Agent as requested by the
Parent Borrower, including to one or more Non-Controlled Accounts. Notwithstanding anything
to the contrary herein or in any other Credit Document, no cash or other amount that is
disbursed or otherwise transferred from the Disbursement Account (other than to the extent
swept back into the Collection Account) shall constitute Collateral.
(iv) Following the establishment of the Cash Management Systems pursuant to Section
9.15(a), by 10:00 a.m. (New York time) on each Business Day, each Borrower will cause the
entire available balance in each Government Receivables Deposit Account to be transferred by
ACH or book entry transfer to the Concentration Account. The Borrowers will not transfer
any funds out of the Government Receivables Deposit Account or any Blocked Account except to
the Concentration Account. The balance from time to time standing to the credit of the
Blocked Accounts shall be distributed as directed in accordance with the provisions of the
Blocked Account Agreements. Prior to the occurrence of any first Cash Dominion Event, the
balance from time to time standing to the credit of the Concentration Account shall be
distributed as directed by the Parent Borrower, including to one or more Non-Controlled
Accounts. The Parent Borrower
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shall not, and shall not cause or permit any Subsidiary
thereof to, accumulate or maintain cash (other than cash that is not proceeds of any
Collateral) in disbursement accounts or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of the date and amounts necessary to
meet minimum balance, near-term funding requirements or near-term operating requirements.
Notwithstanding anything to the contrary, cash held in overnight deposit or investment
accounts shall be deemed to be in the Concentration Account overnight.
(v) So long as no Default or Event of Default has occurred and is continuing, the
Parent Borrower, following the establishment of the Cash Management Systems pursuant to
Section 9.15
and the delivery of the applicable schedules related thereto, may amend
Schedules 9.15(a)
and
(c)
to the Original Credit Agreement to add or replace
a bank, any Government Receivables Deposit Account, the Concentration Account, any Blocked
Account or any Disbursement Account;
provided
that (x) the Administrative Agent
shall have consented in writing in advance to the opening of such new or replacement account
with the relevant bank (which consent shall not be unreasonably withheld) and (y) prior to
the time of the opening of such account, the applicable Borrower and such bank shall have
executed and delivered to the Collateral Agent a tri-party agreement, in form and substance
reasonably satisfactory to the Collateral Agent in it sole discretion. Each Borrower shall
cease using any account to hold proceeds of Collateral promptly and in any event within 30
days (or such later date as the Administrative Agent may, in its sole reasonable discretion,
consent to in writing) following notice from the Administrative Agent to the Parent Borrower
that the creditworthiness of the bank holding such account is no longer acceptable in the
Administrative Agent’s reasonable credit judgment, or as promptly as practicable and in
any event within 60 days (or such later date as the Administrative Agent may, in its
sole reasonable discretion, consent to in writing) following notice from the Administrative
Agent to the Parent Borrower that the operating performance, funds transfer or availability
procedures or performance with respect to accounts or lockboxes of the bank holding such
account or Agent’s liability under any tri-party blocked account agreement with such bank is
no longer acceptable in the Administrative Agent’s reasonable credit judgment.
(vi) The Government Receivables Deposit Accounts, the Concentration Account, the
Blocked Accounts and the Disbursement Accounts (subject to the last two sentences of Section
9.15(a)(iii)) shall be cash collateral accounts, with all cash, checks and other similar
items of payment in such accounts (to the extent constituting proceeds of Accounts otherwise
constituting Collateral) securing payment of the Loans and all other Obligations, and in
which the applicable Borrower shall have granted a Lien to the Collateral Agent, on behalf
of itself and Lenders, pursuant to the Security Agreement. The Borrowers shall use
commercially reasonable efforts to ensure that all cash, checks and other similar items of
payment in the Government Receivables Deposit Accounts, the Concentration Account and the
Blocked Accounts are solely in respect of Accounts that otherwise constitute Collateral;
provided
that following the establishment of the Cash Management Systems pursuant to
Section 9.15(a) credit card, debit card and internet bill inquiry and payment system (IBIP)
payments received in the Concentration Account that
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do not constitute proceeds of Accounts
otherwise constituting Collateral shall be permitted in the Concentration Account so long as
the Borrowers use their commercially reasonable efforts to distribute such amounts to a
Non-Controlled Account within three (3) Business Days of receipt thereof.
(vii) All amounts deposited in the Collection Account shall be deemed received by the
Administrative Agent in accordance with
Section 5
and shall be applied (and
allocated) by the Administrative Agent in accordance with
Section 5
. In no event
shall any amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(viii) The Borrowers shall and shall cause their respective Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with a Borrower (each
a “
Related Person
”) to (x) hold in trust for the Administrative Agent, for the benefit of
itself and Lenders, all checks, cash and other items of payment received by a Borrower or by
a Related Person on behalf of a Borrower in respect of Accounts that constitute Collateral,
and (y) following the establishment of the Cash Management Systems pursuant to
Section
9.15(a)
, within 1 Business Day after receipt by a Borrower or by a Related Person on
behalf of a Borrower of any checks, cash or other items of payment in respect of Accounts
that constitute Collateral, deposit the same into a Blocked Account or the Concentration
Account. Each Borrower and each Related Person thereof acknowledges and agrees that all
cash, checks or other items of payment constituting proceeds of Collateral are part of the
Collateral. Following the establishment of the Cash Management Systems pursuant to
Section 9.15(a)
, all proceeds of the sale or other disposition of any Collateral,
shall be deposited directly into a Blocked Account or the
Concentration Account (or if proceeds of Government Accounts, into a Government
Receivables Deposit Account).
(b) (i) During the continuance of a Cash Dominion Event following the establishment of the
Cash Management Systems pursuant to
Section 9.15(a)
, the Borrowers shall provide the
Collateral Agent with an accounting of the contents of the Government Receivables Deposit Accounts,
the Blocked Accounts and the Concentration Account, which shall identify, to the reasonable
satisfaction of the Collateral Agent, the proceeds from the Collateral which were deposited into a
Blocked Account and swept to the Concentration Account.
(ii) Within 1 Business Day of the occurrence of a Cash Dominion Event following the
establishment of the Cash Management Systems pursuant to
Section 9.15(a)
, the Borrowers
shall deposit into the Collection Account an amount equal to the entire amount of cash constituting
Collateral held in any Non-Controlled Account.
(c) Upon the occurrence and during the continuance of a Cash Dominion Event following the
establishment of the Cash Management Systems pursuant to
Section 9.15(a)
, the Concentration
Account and each Blocked Account shall at all times be under the sole dominion and control of the
Collateral Agent. The Borrowers hereby acknowledge and agree that during the continuance of a Cash
Dominion Event following the establishment of the Cash Management Systems pursuant to
Section
9.15(a)
, (i) the Borrowers have no right of withdrawal
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from the Concentration Account (subject
to the proviso to the last sentence of
Section 9.15(a)(iii)
), (ii) the funds on deposit in
the Concentration Account shall at all times be collateral security for all of the Obligations
(other than to the extent such funds do not constitute proceeds of Accounts that are otherwise
Collateral) and (iii) the funds on deposit in the Concentration Account shall be applied as
provided in this Agreement. In the event that, notwithstanding the provisions of this
Section
9.15
, any Borrower receives or otherwise has dominion and control of any proceeds or
collections of Accounts that otherwise constitute Collateral outside of the Government Receivables
Deposit Accounts, the Concentration Account, any Blocked Account and any Disbursement Account, such
proceeds and collections shall be held in trust by such Borrower for the Collateral Agent and
shall, not later than the Business Day after receipt thereof, be deposited into the Concentration
Account or dealt with in such other fashion as such Borrower may be instructed by the Collateral
Agent.
(d) [Intentionally Omitted].
(e) (i) Annexed as
Schedule 9.15(e)
to the Original Credit Agreement (such schedule
to be delivered to the Administrative Agent on or before the 60
th
calendar day after the
Original Closing Date (or such later date as the Administration Agent may, in its sole reasonable
discretion, consent to in writing)) is a list as of the date such Schedule is or was delivered, of
all arrangements to which any Borrower is a party with respect to the payment to such Borrower of
the proceeds of all credit card charges for services by such Borrower.
(ii) Within 60 calendar days after the Original Closing Date (or such later date as the
Administrative Agent may, in its sole discretion, consent in writing), each Borrower shall deliver
to the Collateral Agent notifications (each, a
“Credit Card Notification”
) in form and substance
reasonably satisfactory to the Collateral Agent which have been executed on behalf of
such Borrower and addressed to such Borrower’s credit card clearinghouses and processors
listed on
Schedule 9.15(e)
to the Original Credit Agreement. Each Credit Card Notification
shall provide, among other things, that from and after the date thereof, all amounts owing to a
Borrower and constituting proceeds of Collateral shall be forwarded immediately to the
Concentration Account.
(iii) Unless consented to in writing by the Collateral Agent, after the delivery of
Schedule 9.15(e)
to the Original Credit Agreement the Borrowers shall not enter into any
agreements with credit card processors other than the ones expressly contemplated herein unless
contemporaneously therewith, a Credit Card Notification, is executed and delivered to the
Collateral Agent.
(f) After the occurrence of any first Cash Dominion Event following the establishment of the
Cash Management Systems pursuant to
Section 9.15(a)
, the Borrowers will be prohibited from
depositing cash constituting Collateral in any deposit account other than Government Receivables
Deposit Accounts, Blocked Accounts, the Concentration Account, Disbursement Accounts and the
Collection Account.
SECTION 18.
Negative Covenants
.
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The Parent Borrower hereby covenants and agrees that on the Original Closing Date (immediately
after consummation of the Merger) and thereafter, until the Commitments, the Swingline Commitment
and each Letter of Credit have terminated and the Loans and Unpaid Drawings, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:
18.1.
Limitation on Indebtedness
. The Parent Borrower will not, and will not permit
any of the Restricted Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness,
except:
(a) (w) Indebtedness arising under the Credit Documents, (x) Indebtedness arising under
any Permitted Receivables Financing in an aggregate principal amount not to exceed, together
with Indebtedness arising under the Credit Documents, $2,000,000,000, (y) Indebtedness
arising under the CF Facility in an aggregate principal amount not to exceed $14,800,000,000
at any time outstanding
minus the net cash proceeds received from any Indebtedness
incurred under Section 10.
1(y)(i)
(plus additional Indebtedness under
subclauses
(x)
or
(y)
above or under any amendment thereto, which together with any
Incremental Revolving Credit Commitments incurred pursuant to
Section 2.14
of this
Agreement, do not exceed $1,500,000,000 in aggregate principal amount) and (z) intercompany
Indebtedness of Restricted Subsidiaries, and any Guarantee Obligations in respect thereof,
to allocate the Parent Borrower’s cost of borrowing with respect to Indebtedness referred to
in
subclauses (w), (x)
and
(y)
to such Subsidiaries;
(b) Subject to compliance with
Section 10.5
, Indebtedness of the Parent
Borrower or any Restricted Subsidiary owed to the Parent Borrower or any Restricted
Subsidiary;
provided
that, in each case, all such Indebtedness of any Credit Party
owed to any Person that is not a Credit Party shall be subordinated to the Obligations of
such Credit Party on customary terms;
(c) Indebtedness in respect of any bankers’ acceptance, bank guarantees, letter of
credit, warehouse receipt or similar facilities entered into in the ordinary course of
business (including in respect of workers compensation claims, health, disability or other
employee benefits or property, casualty or liability insurance or self-insurance or other
Indebtedness with respect to reimbursement-type obligations regarding workers compensation
claims);
(d) subject to compliance with
Section 10.5
, Guarantee Obligations incurred by
(i) Restricted Subsidiaries in respect of Indebtedness of the Parent Borrower or other
Restricted Subsidiaries that is permitted to be incurred under this Agreement (except to the
extent of any express restriction on Guarantee Obligations relating to such Indebtedness
provided for herein) and (ii) the Parent Borrower in respect of Indebtedness of Restricted
Subsidiaries that is permitted to be incurred under this Agreement,
provided
that,
except as provided in
clauses (j)
and
(k)
below, there shall be no guarantee
by a Restricted Subsidiary that is not a Subsidiary Borrower of any Indebtedness of a Credit
Party;
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(e) Guarantee Obligations (i) incurred in the ordinary course of business in respect of
obligations of (or to) suppliers, customers, franchisees, lessors and licensees or (ii)
otherwise constituting Investments permitted by
Sections 10.5(g)(ii)
,
10.5(i)
, or
10.5(q)
;
(f) (i) Indebtedness (including Indebtedness arising under Capital Leases) incurred
within 270 days of the acquisition, construction or improvement of fixed or capital assets
to finance the acquisition, construction or improvement of such fixed or capital assets,
(ii) Indebtedness arising under Capital Leases entered into in connection with Permitted
Sale Leasebacks and (iii) Indebtedness arising under Capital Leases, other than Capital
Leases in effect on the Original Closing Date and Capital Leases entered into pursuant to
subclauses (i)
and
(ii)
above,
provided
that the aggregate amount of
Indebtedness incurred pursuant to this
subclause (iii)
at any time outstanding shall
not exceed $300,000,000, and (iv) any modification, replacement, refinancing, refunding,
renewal or extension of any Indebtedness specified in
subclause (i)
,
(ii)
or
(iii)
above,
provided
that, except to the extent otherwise expressly
permitted hereunder, the principal amount thereof does not exceed the principal amount
thereof outstanding immediately prior to such modification, replacement, refinancing,
refunding, renewal or extension except by an amount equal to the unpaid accrued interest and
premium thereon plus other reasonable amounts paid and fees and expenses incurred in
connection with such modification, replacement, refinancing, refunding, renewal or
extension;
(g) (i) Indebtedness outstanding on the Original Closing Date listed on
Schedule
10.1
to the Original Credit Agreement (other than Retained Indebtedness with a stated
final maturity (as of the Original Closing Date) prior to the Final Maturity Date), (ii)
Indebtedness existing on the Original Closing Date (after giving effect to the Transactions
described in clause (ii) of the definition thereof) and owed by the Parent Borrower or any
Restricted Subsidiary to the Parent Borrower or any Restricted Subsidiary, and any Guarantee
Obligations in respect thereof, but only for so long as such Indebtedness or any
refinancing, refunding or renewal thereof permitted by this
subclause(ii)
is held by
the Parent Borrower, such Restricted Subsidiary or a Credit Party and, in the case of each
of the preceding
subclauses (i)
and
(ii)
, any modification, replacement,
refinancing, refunding, renewal or extension thereof (or, in the case of this
subclause
(ii)
only, any intercompany transfer of creditor positions in respect thereof pursuant
to intercompany debt restructurings);
provided
that all such Indebtedness arising as
a result of any such transfer of creditor positions as contemplated by
subclause
(ii)
of any Credit Party owed to any Person that is not a Credit Party shall be
subordinated to the Obligations of such Credit Party on customary terms;
provided
,
further
, that, except to the extent otherwise expressly permitted hereunder, in the
case of any such modification, replacement, refinancing, refunding, renewal or extension
(but not any such transfer or creditor positions), (x) the principal amount thereof does not
exceed the principal amount thereof outstanding immediately prior to such modification,
replacement, refinancing, refunding, renewal or extension, except by an amount equal to the
unpaid accrued interest and premium thereon plus other reasonable amounts paid and fees and
expenses incurred in connection with such modification, replacement, refinancing, refunding,
renewal or extension, (y) the direct and contingent obligors with respect to such
Indebtedness are not
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changed (except that any refinancing of Retained Indebtedness may
provide for guarantees by the Subsidiary Borrowers on a subordinated basis to such
Subsidiary Borrowers’ obligations hereunder), and (z) no portion of such Indebtedness
matures prior to the Final Maturity Date (except in the case of a refinancing of
Indebtedness pursuant to
subclause (ii)
) and (iii) Retained Indebtedness with a
stated final maturity (as of the Original Closing Date) prior to the Final Maturity Date and
any modification, refinancing, refunding renewal or extension thereof;
provided
that
(x) the principal amount thereof does not exceed the principal amount thereof outstanding
immediately prior to such modification, replacement, refinancing, refunding, renewal or
extension, except by an amount equal to the unpaid accrued interest and premium thereon plus
other reasonable amounts paid and fees and expenses incurred in connection with such
modification, replacement, refinancing, refunding, renewal or extension, (y) no portion of
such Indebtedness matures prior to the stated final maturity of such Retained Indebtedness
as of the Original Closing Date and (z) no portion of such Indebtedness shall be issued by
or guaranteed by any Restricted Subsidiary unless such Restricted Subsidiary is a Subsidiary
Borrower;
(h) Indebtedness in respect of Hedge Agreements;
(i) Indebtedness in respect of (i) Junior Lien Notes in an aggregate principal amount
not to exceed $5,700,000,000 plus, in respect of the Toggle Notes, the PIK Interest Amount,
(ii) any modification, replacement, refinancing, refunding, renewal or
extension of Indebtedness referred to in the foregoing
subclause (i)
that
constitutes Permitted Junior Lien Debt;
provided
that the principal amount thereof
does not exceed the principal amount thereof outstanding immediately prior to such
modification, replacement, refinancing, refunding, renewal or extension, except by an amount
equal to the unpaid accrued interest and premium thereon plus other reasonable amounts paid
and fees and expenses incurred in connection with such modification, replacement,
refinancing, refunding, renewal or extension and (z) intercompany Indebtedness of Restricted
Subsidiaries, and any Guarantee Obligations in respect thereof, to allocate the Parent
Borrower’s cost of borrowing with respect to Indebtedness referred to in
subclauses
(x)
and
(y)
to such Subsidiaries;
(j) (i) Indebtedness of a Person or Indebtedness attaching to assets of a Person that,
in either case, becomes a Restricted Subsidiary (or is a Restricted Subsidiary that survives
a merger with such Person) or Indebtedness attaching to assets that are acquired by the
Parent Borrower or any Restricted Subsidiary, in each case after the Original Closing Date
as the result of a Permitted Acquisition;
provided
that
(w) such Indebtedness existed at the time such Person became a Restricted
Subsidiary or at the time such assets were acquired and, in each case, was not
created in anticipation thereof,
(x) such Indebtedness is not guaranteed in any respect by the Parent Borrower
or any Restricted Subsidiary (other than by any such Person that so
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becomes a
Restricted Subsidiary or is the survivor of a merger with such Person or any of its
Subsidiaries),
(y) such Person executes a joinder hereto to become a Subsidiary Borrower, a
supplement to the Security Agreement (or an alternative security agreement in
relation to the Obligations reasonably acceptable to the Collateral Agent) and a
supplemental acknowledgement to the Intercreditor Agreement, in each case to the
extent required under
Section 9.11
;
provided
that the requirements
of this
subclause (y)
shall not apply to (I) an aggregate amount at any time
outstanding of up to $600,000,000 of the sum of (1) such Indebtedness (and
modifications, replacements, refinancing, refundings, renewals and extensions
thereof pursuant to
subclause (ii)
below) and (2) all Indebtedness as to
which the proviso to
clause (k)(i)(y)
below then applies and (II) any
Indebtedness of the type that could have been incurred under
subclause (i)
or
(ii)
of
Section 10.1(f)
; and
(z) (A) after giving Pro Forma Effect to the incurrence of such Indebtedness
and the application of proceeds thereof, the Parent Borrower is in compliance with
Section 10.9 of the CF Agreement for the most recently ended Test Period and (B)
except for Indebtedness consisting of Capital Lease Obligations, revenue bonds,
purchase money Indebtedness or mortgages or other Liens on specific assets, (1) no
portion of such Indebtedness matures prior to the Final Maturity Date, and (2)
except for Indebtedness permitted by the proviso to
subclause (y)
above, no portion of such Indebtedness is issued or
guaranteed by a Person that is, or as a result of such acquisition becomes, a
Restricted Subsidiary that is not a Subsidiary Borrower; and
(ii) any modification, replacement, refinancing, refunding, renewal or extension of any
Indebtedness specified in
subclause (i)
above,
provided
that, except to the
extent otherwise expressly permitted hereunder, (x) the principal amount of any such
Indebtedness does not exceed the principal amount thereof outstanding immediately prior to
such modification, replacement, refinancing, refunding, renewal or extension except by an
amount equal to the unpaid accrued interest and premium thereon
plus
other
reasonable amounts paid and fees and expenses incurred in connection with such modification,
replacement, refinancing, refunding, renewal or extension, (y) the direct and contingent
obligors with respect to such Indebtedness are not changed and (z) if the Indebtedness being
refinanced, or any guarantee thereof, constituted Subordinated Indebtedness, then such
replacement or refinancing Indebtedness, or such guarantee, respectively, shall be
subordinated to the Obligations to substantially the same extent;
(k) (i)(A) Permitted Additional Debt incurred to finance a Permitted Acquisition and
(B) Indebtedness of the Parent Borrower or any Restricted Subsidiary to finance a Permitted
Acquisition as to which the proviso to
subclause (y)
below applies and that is not
incurred or guaranteed in any respect by any Restricted
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Subsidiary (other than by any Person
acquired as a result of such Permitted Acquisition or the Restricted Subsidiary incurring
such Indebtedness) or, in the case of Indebtedness of any Restricted Subsidiary, by the
Parent Borrower;
provided
that
(x) such acquired Person executes a joinder to this Agreement to become a
Subsidiary Borrower and a supplement to the Security Agreement (or an alternative
security agreement in relation to the Obligations reasonably acceptable to the
Collateral Agent) and a supplemental acknowledgement to the Intercreditor Agreement,
in each case to the extent required under
Section 9.11
;
provided
that the requirements of this
subclause (x)
shall not apply to (I) an
aggregate amount at any time outstanding of up to $600,000,000 of the sum of (1)
such Indebtedness (and modifications, replacements, refinancing, refundings,
renewals and extensions thereof pursuant to
subclause (ii)
below) and (2)
all Indebtedness as to which
clause (I)
of the proviso to
clause
(j)(i)(y)
above then applies, and
(y) (A) after giving Pro Forma Effect to the incurrence of such Indebtedness
and the application of proceeds thereof, the Parent Borrower is in compliance with
Section 10.9 of the CF Agreement for the most recently ended Test Period and (B) (1)
no portion of such Indebtedness matures prior to the Final Maturity Date, and (2)
except for Indebtedness permitted by the proviso to
subclause (x)
above, no
portion of such Indebtedness is issued or guaranteed by a Person that is, or as a
result of such acquisition becomes, a Restricted Subsidiary that is not a Subsidiary
Borrower; and
(ii) any modification, replacement, refinancing, refunding, renewal or extension of any
Indebtedness specified in
subclause (i)
above,
provided
that, except to the
extent otherwise expressly permitted hereunder, (w) the principal amount of any such
Indebtedness does not exceed the principal amount thereof outstanding immediately prior to
such modification, replacement, refinancing, refunding, renewal or extension except by an
amount equal to the unpaid accrued interest and premium thereon
plus
other
reasonable amounts paid and fees and expenses incurred in connection with such modification,
replacement, refinancing, refunding, renewal or extension, (x) the direct and contingent
obligors with respect to such Indebtedness are not changed, (y) there is no scheduled
repayment, mandatory redemption or sinking fund obligation with respect to such Indebtedness
prior to the Final Maturity Date (other than customary offers to purchase upon a change of
control, asset sale or event of loss and customary acceleration rights after an event of
default) and (z) if the Indebtedness being refinanced, or any guarantee thereof, constituted
Subordinated Indebtedness, then such replacement or refinancing Indebtedness, or such
guarantee, respectively, shall be subordinated to the Obligations to substantially the same
extent;
(l) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds
and completion guarantees and similar obligations not in connection with money borrowed, in
each case provided in the ordinary course of business, including those incurred to secure
health, safety and environmental obligations in the ordinary course of business;
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(m) (i) Indebtedness incurred in connection with any Permitted Sale Leaseback
(
provided
that the Net Cash Proceeds (as defined in the CF Agreement) thereof are
promptly applied to permanently reduce Indebtedness of one or more Borrowers to the extent
required by the CF Agreement and (ii) any refinancing, refunding, renewal or extension of
any Indebtedness specified in
subclause (i)
above,
provided
that, except to
the extent otherwise permitted hereunder, (x) the principal amount of any such Indebtedness
is not increased above the principal amount thereof outstanding immediately prior to such
refinancing, refunding, renewal or extension and (y) the direct and contingent obligors with
respect to such Indebtedness are not changed;
(n) (i) additional Indebtedness and (ii) any refinancing, refunding, renewal or
extension of any Indebtedness specified in
subclause (i)
above;
provided
that the aggregate amount of Indebtedness incurred and remaining outstanding pursuant to
this
clause (n)
shall not at any time exceed $1,500,000,000 (of which amount, no
more than $500,000,000 shall be Indebtedness of any Restricted Subsidiary that is not a
Borrower);
(o) Indebtedness in respect of (i) Permitted Additional Debt to the extent that the Net
Cash Proceeds (as defined in the CF Agreement) therefrom are, immediately after the receipt
thereof, applied to permanently reduce Indebtedness of one or more Borrowers to the extent
required by the CF Agreement and (ii) any refinancing, refunding, renewal or extension of
any Indebtedness specified in
subclause (i)
above,
provided
that, except to
the extent otherwise permitted hereunder, (x) the principal amount of any such Indebtedness
is not increased above the principal amount thereof
outstanding immediately prior to such refinancing, refunding, renewal or extension, (y)
the direct and contingent obligors with respect to such Indebtedness are not changed and (z)
if the Indebtedness being refinanced, or any guarantee thereof, constituted Subordinated
Indebtedness, then such replacement or refinancing Indebtedness, or such guarantee,
respectively, shall be subordinated to the Obligations to substantially the same extent;
(p) Indebtedness in respect of overdraft facilities, employee credit card programs,
netting services, automatic clearinghouse arrangements and other cash management and similar
arrangements in the ordinary course of business;
(q) unsecured Indebtedness in respect of obligations of the Parent Borrower or any
Restricted Subsidiary to pay the deferred purchase price of goods or services or progress
payments in connection with such goods and services,
provided
that such obligations
are incurred in connection with open accounts extended by suppliers on customary trade terms
in the ordinary course of business and not in connection with the borrowing of money or
Hedge Agreements;
(r) Indebtedness arising from agreements of the Parent Borrower or any Restricted
Subsidiary providing for indemnification, adjustment of purchase price or similar
obligations, in each case entered into in connection with the disposition of any business,
assets or Stock permitted hereunder, other than Guarantee Obligations incurred by any Person
acquiring all or any portion of such business, assets or Stock for the
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purpose of financing
such acquisition,
provided
that such amount is not Indebtedness required to be
reflected on the balance sheet of the Parent Borrower or any Restricted Subsidiary in
accordance with GAAP (contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be deemed to be
reflected on such balance sheet for purposes of this proviso);
(s) Indebtedness of the Parent Borrower or any Restricted Subsidiary consisting of (i)
obligations to pay insurance premiums or (ii) take or pay obligations contained in supply
agreements, in each case arising in the ordinary course of business and not in connection
with the borrowing of money or Hedge Agreements;
(t) Indebtedness representing deferred compensation to employees of the Parent Borrower
(or any direct or indirect parent thereof) and the Restricted Subsidiaries incurred in the
ordinary course of business;
(u) Indebtedness consisting of promissory notes issued by any Borrower or any Guarantor
(as defined in the CF Agreement) to current or former officers, managers, consultants,
directors and employees (or their respective spouses, former spouses, successors, executors,
administrators, heirs, legatees or distributees) to finance the purchase or redemption of
Stock or Stock Equivalents of the Parent Borrower (or any direct or indirect parent thereof)
permitted by
Section 10.6(b)
;
(v) Indebtedness consisting of obligations of the Parent Borrower and the Restricted
Subsidiaries under deferred compensation or other similar arrangements to
officers, employees and directors incurred by such Person in connection with the
Transactions described in clause (ii) of the definition thereof and Permitted Acquisitions
or any other Investment expressly permitted hereunder;
(w) additional Indebtedness of Foreign Subsidiaries in an aggregate principal amount
that at the time of incurrence does not cause the aggregate principal amount of Indebtedness
incurred in reliance on this
clause (w)
to exceed 2.5% of Consolidated Total Assets
at such time;
provided
that for purposes of this
clause (w)
only,
“Consolidated Total Assets” shall be determined only with reference to the assets of Foreign
Subsidiaries; and
(x) Indebtedness of the Parent Borrower or any Restricted Subsidiary to any joint
venture (regardless of the form of legal entity) that is not a Subsidiary arising in the
ordinary course of business in connection with the cash management operations (including
with respect to intercompany self-insurance arrangements) of the Parent Borrower and its
Restricted Subsidiaries
; and
(y)
Indebtedness in respect of (i) Future Secured Notes to the extent that
such Indebtedness is incurred no earlier than 90 days before the First Amendment Date and
the net cash proceeds therefrom are, within three (3) Business Days (or within 180 days in
the case of any such Indebtedness incurred prior to the First Amendment Date) after the
receipt thereof, applied to permanently repay Term Loans (as defined in the CF Agreement)
under the CF Agreement on a pro rata
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basis across the several tranches thereof and (ii) any
refinancing, refunding, renewal or extension of any Indebtedness specified in subclause (i)
above; provided that, except to the extent otherwise permitted hereunder, (x) the principal
amount of any such Indebtedness is not increased above the principal amount thereof
outstanding immediately prior to such refinancing, refunding, renewal or extension (except
for any original issue discount thereon and the amount of fees, expenses and premium in
connection with such refinancing), (y) the direct and contingent obligors with respect to
such Indebtedness are not changed and (z) such Indebtedness otherwise complies with clauses
(a) and (b) of the definition of Future Secured Notes
.
Notwithstanding the foregoing, the Parent Borrower shall not permit any 1993 Indenture Restricted
Subsidiary to create, incur, assume or suffer to exist any Indebtedness, except that the 1993
Indenture Restricted Subsidiaries (other than Healthtrust, except in the case of Indebtedness owing
to any Credit Party) may create, incur, assume or suffer to exist (x) Indebtedness under
clause
(b)
above that is owed to a Credit Party or another 1993 Indenture Restricted Subsidiary to the
extent permitted under section 1107 of the 1993 Indenture and (y) Indebtedness that is otherwise
permitted in accordance with an exception set forth above in an aggregate principal amount
outstanding at any time that, when aggregated (without duplication) with (i) the aggregate
principal amount of all other Indebtedness (other than Indebtedness permitted by
subclause
(x)
above) secured by Liens on any assets of 1993 Indenture Restricted Subsidiaries and (ii)
the aggregate principal amount of all Indebtedness (other than the Obligations) secured by Liens on
Principal Properties, does not exceed at any time outstanding the lesser of (A) $600,000,000 and
(B) 5% of Consolidated Net Tangible Assets (as defined in the 1993 Indenture
as in effect on the Original Closing Date) determined as of the date of such incurrence, in each
case, to the extent permitted by Section 1107 or 1108 of the 1993 Indenture.
18.2.
Limitation on Liens
. The Parent Borrower will not, and will not permit any of
the Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any property
or assets of any kind (real or personal, tangible or intangible) of the Parent Borrower or any
Restricted Subsidiary, whether owned as of the Original Closing Date or thereafter acquired,
except:
(a) Liens arising under the Credit Documents;
(b) Liens securing the CF Facility arising under CF Documents
and Liens securing
the Indebtedness permitted by Section 10.1(y)
;
provided
that, with respect to
any such Liens on the Shared Receivables Collateral, at the time such Liens are created, the
holders of the Indebtedness secured thereby (or a representative thereof on behalf of such
holders) shall have entered into the Intercreditor Agreement
with such obligations as
Subordinated Lien Obligations (as defined in the Intercreditor Agreement) or an Additional
Receivables Intercreditor Agreement
(it being understood that this condition is
as to
the Liens securing the CF Facility arising under the CF Documents was
satisfied as a
result of the receipt by the Administrative Agent of the Intercreditor Agreement pursuant to
Section 6.1(d) of the Original Credit Agreement);
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(c) Liens on the Junior Lien Notes Collateral securing the Junior Lien Notes and other
Permitted Additional Debt permitted by
clauses (i)
,
(k)
or
(o)
of
Section 10.1
;
provided
that, with respect to any such Liens on the Shared
Receivables Collateral, at the time such Liens are incurred, the holders of the Indebtedness
secured thereby (or a representative thereof on behalf of such holders) shall have entered
into the Intercreditor Agreement (or, in the case of Permitted Additional Debt that is not
of the same series as any Junior Lien Notes,
either the Intercreditor Agreement or
an intercreditor agreement reasonably acceptable to the Collateral Agent providing that
the Lien on the Shared Receivables Collateral securing such Indebtedness shall rank junior
to the Lien on the Shared Receivables Collateral securing the Obligations on a basis at
least as substantially favorable to the Lenders as the basis on which the Lien securing the
Junior Lien Notes ranks junior to the Lien on the Shared Receivables Collateral securing the
Obligations on the Original Closing Date pursuant to the Intercreditor Agreement) (it being
understood that, with respect to the Junior Lien Notes, this condition is satisfied as a
result of the receipt by the Administrative Agent of the Intercreditor Agreement pursuant to
Section 6.1(d) of the Original Credit Agreement);
(d) Permitted Liens;
(e) (i) Liens securing Indebtedness permitted pursuant to
Section 10.1(f)
,
provided
that (x) such Liens attach at all times only to the assets so financed
except for accessions to the property financed with the proceeds of such Indebtedness and
the proceeds and the products thereof and (y) that individual financings of equipment
provided by one lender may be cross collateralized to other financings of equipment
provided by such lender, and (ii) Liens on the assets of Restricted Subsidiaries that
are Foreign Subsidiaries securing Indebtedness permitted pursuant to
Sections
10.1(n)
,
(p)
and
(w)
;
(f) Liens existing on the Original Closing Date and listed on
Schedule 10.2
to
the Original Credit Agreement;
(g) the replacement, extension or renewal of any Lien permitted by
clauses (d)
through
(f)
and
clause (h)
of this
Section 10.2
upon or in the same
assets theretofore subject to such Lien (or upon or in after-acquired property that is
affixed or incorporated into the property covered by such Lien) or the replacement,
extension or renewal (without increase in the amount or change in any direct or contingent
obligor except to the extent otherwise permitted hereunder) of the Indebtedness secured
thereby;
(h) Liens existing on the assets of any Person that becomes a Restricted Subsidiary (or
is a Restricted Subsidiary that survives a merger with such Person), or existing on assets
acquired, pursuant to a Permitted Acquisition to the extent the Liens on such assets secure
Indebtedness permitted by
Section 10.1(j)
or other obligations permitted by this
Agreement;
provided
that such Liens attach at all times only to the same assets to
which such Liens attached (and after-acquired property that is affixed or incorporated into
the property covered by such Lien), and secure only the same Indebtedness or obligations
that such Liens secured, immediately prior to such Permitted
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Acquisition and any
modification, replacement, refinancing, refunding, renewal or extension thereof permitted by
Section 10.1(j)
;
(i) (x) Liens placed upon the Stock and Stock Equivalents of any Restricted Subsidiary
acquired pursuant to a Permitted Acquisition to secure Indebtedness incurred pursuant to
Section 10.1(k)
in connection with such Permitted Acquisition and (y) Liens placed
upon the assets of such Restricted Subsidiary to secure Indebtedness of such Restricted
Subsidiary or a guarantee by such Restricted Subsidiary of any Indebtedness of the Parent
Borrower or any other Restricted Subsidiary incurred pursuant to
Section 10.1(k)
, in
each case, in an aggregate amount not to exceed the amount permitted by the proviso to
subclause (y)
of such
Section 10.1(k)
;
(j) Liens securing Indebtedness or other obligations (i) of the Parent Borrower or a
Restricted Subsidiary in favor of a Credit Party and (ii) of any Restricted Subsidiary that
is not either a Credit Party or a 1993 Indenture Restricted Subsidiary in favor of any
Restricted Subsidiary that is not a Credit Party;
(k) Liens (i) of a collecting bank arising under Section 4-210 of the Uniform
Commercial Code on items in the course of collection, (ii) attaching to commodity trading
accounts or other commodities brokerage accounts incurred in the ordinary course of
business; and (iii) in favor of a banking institution arising as a matter of law encumbering
deposits (including the right of set-off);
(l) Liens (i) on cash advances in favor of the seller of any property to be acquired in
an Investment permitted pursuant to
Section 10.5
to be applied against the
purchase price for such Investment, and (ii) consisting of an agreement to sell,
transfer, lease or otherwise dispose of any property in a transaction permitted under
Section 10.4
, in each case, solely to the extent such Investment or sale,
disposition, transfer or lease, as the case may be, would have been permitted on the date of
the creation of such Lien;
(m) Liens arising out of conditional sale, title retention, consignment or similar
arrangements for sale or purchase of goods entered into by the Parent Borrower or any of the
Restricted Subsidiaries in the ordinary course of business permitted by this Agreement;
(n) Liens encumbering reasonable customary initial deposits and margin deposits and
similar Liens attaching to commodity trading accounts or other brokerage accounts incurred
in the ordinary course of business and not for speculative purposes;
(o) Liens that are contractual rights of set-off (i) relating to the establishment of
depository relations with banks not given in connection with the issuance of Indebtedness,
(ii) relating to pooled deposit or sweep accounts of the Parent Borrower or any Restricted
Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the
ordinary course of business of the Parent Borrower and the Restricted Subsidiaries or (iii)
relating to purchase orders and other agreements entered into with customers of the Parent
Borrower or any Restricted Subsidiary in the ordinary course of business;
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(p) Liens solely on any cash earnest money deposits made by the Parent Borrower or any
of the Restricted Subsidiaries in connection with any letter of intent or purchase agreement
permitted hereunder;
(q) Liens on insurance policies and the proceeds thereof securing the financing of the
premiums with respect thereto incurred in the ordinary course of business;
(r) additional Liens so long as the aggregate principal amount of the obligations
secured thereby does not exceed $1,000,000,000 at any time outstanding (including second
Liens on the Junior Lien Notes Collateral but only to the extent the holders (or a
representative thereof) of the obligations secured by such junior Liens on the Shared
Receivable Collateral comply with the proviso to
clause (c)
above); and
(s) Liens on accounts receivable and related assets incurred in connection with a
Permitted Receivables Financing.
Notwithstanding the foregoing, (A) the Parent Borrower will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on any Collateral other
than (i) Liens securing the Obligations, (ii) Liens otherwise permitted by
Sections 10.2(b),
(c), (d), (h), (k) and (o)
and (iii) additional Liens permitted hereunder pursuant to any other
clause of
Section 10.2
(other than clause (s)) attaching to Collateral having an aggregate
fair value not to exceed $20.0 million at any time outstanding, and (B) the Parent Borrower will
not permit any 1993 Indenture Restricted Subsidiary to create, incur, assume or
suffer to exist any Lien on any of its assets other than (i) Liens permitted by the definition
of “Permitted Liens,” (ii) Liens in favor of the Credit Parties to the extent permitted under
section 1107 of the 1993 Indenture and (iii) additional Liens otherwise permitted by this
Section 10.2
so long as the aggregate principal amount of the obligations secured thereby,
when aggregated (without duplication) with (I) the aggregate principal amount of Indebtedness of
1993 Indenture Restricted Subsidiaries (other than Indebtedness owing to a U.S. Credit Party (as
defined in the CF Agreement) or another 1993 Indenture Restricted Subsidiary to the extent
permitted under section 1107 of the 1993 Indenture) and (II) the aggregate principal amount of
Indebtedness (other than the Obligations (as defined in the CF Agreement) secured by Liens on
Principal Properties, does not exceed at any time outstanding the lesser of (x) $600,000,000 and
(y) 5% of Consolidated Net Tangible Assets (as defined in the 1993 Indenture as in effect on the
Original Closing Date) determined as of the date of such incurrence.
18.3.
Limitation on Fundamental Changes
. Except as expressly permitted by Section
10.4 or 10.5, the Parent Borrower will not, and will not permit any of the Restricted Subsidiaries
to, enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise
dispose of, all or substantially all its business units, assets or other properties, except that:
(a) so long as no Default or Event of Default would result therefrom, any Subsidiary of
the Parent Borrower or any other Person may be merged, amalgamated or consolidated with or
into the Parent Borrower,
provided
that (i) except as permitted by
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subclause
(ii)
below, the Parent Borrower shall be the continuing or surviving corporation, (ii)
if the Person formed by or surviving any such merger, amalgamation or consolidation is not
the Parent Borrower (such other Person, the “
Successor Borrower
”), the Successor Borrower
shall be an entity organized or existing under the laws of the United States, any state
thereof, the District of Columbia or any territory thereof (such Parent Borrower or such
Successor Borrower, as the case may be, being herein referred to as the “
Successor Parent
Borrower
”), (iii) any Successor Borrower shall expressly assume all the obligations of the
Parent Borrower under this Agreement and the other Credit Documents pursuant to a supplement
hereto or thereto in form reasonably satisfactory to the Administrative Agent, (iv) each
Subsidiary Borrower, unless it is the other party to such merger or consolidation, shall
have by a supplement to this Agreement confirmed that its obligation hereunder shall apply
to any Successor Borrower’s obligations under this Agreement, (v) each Subsidiary grantor
and each Subsidiary pledgor, unless it is the other party to such merger or consolidation,
shall have by a supplement to the Security Agreement confirmed that its obligations
thereunder shall apply to any Successor Borrower’s obligations under this Agreement, (vi)
the Successor Parent Borrower shall be in compliance, on a Pro Forma Basis after giving
effect to such merger or consolidation, with the covenant set forth in Section 10.9 of the
CF Agreement for the most recent Test Period, and (vii) the Successor Parent Borrower shall
have delivered to the Administrative Agent (x) an officer’s certificate stating that such
merger
or consolidation complies with this Agreement and such supplements (if any) preserve
the enforceability of this Agreement and the perfection and priority of the Liens under the
applicable Security Documents and (y) if reasonably requested by the Administrative Agent,
an opinion of counsel to the effect that the merger and consolidation does not violate this
Agreement or any other Credit Document (it being understood that if the foregoing are
satisfied, the Successor Parent Borrower will succeed to, and be substituted for, the Parent
Borrower under this Agreement);
(b) any Subsidiary of the Parent Borrower or any other Person (in each case, other than
the Parent Borrower) may be merged, amalgamated or consolidated with or into any one or more
Subsidiaries of the Parent Borrower,
provided
that (i) in the case of any merger,
amalgamation or consolidation involving one or more Restricted Subsidiaries, (A) a
Restricted Subsidiary shall be the continuing or surviving Person or (B) the Parent Borrower
shall take all steps necessary to cause the Person formed by or surviving any such merger,
amalgamation or consolidation (if other than a Restricted Subsidiary) to become a Restricted
Subsidiary, (ii) in the case of any merger, amalgamation or consolidation involving one or
more Subsidiary Borrowers, a Subsidiary Borrower shall be the continuing or surviving Person
or the Person formed by or surviving any such merger, amalgamation or consolidation (if
other than a Subsidiary Borrower) shall execute a joinder to this Agreement to become a
Subsidiary Borrower and a supplement to the relevant Security Documents in form and
substance reasonably satisfactory to the Administrative Agent in order to become a grantor
thereunder for the benefit of the Secured Parties, (iii) in the case of any merger,
amalgamation or consolidation involving one or more 1993 Indenture Restricted Subsidiaries
(other than any such transaction subject to
subclause (ii)
above), a 1993 Indenture
Restricted Subsidiary shall be the continuing or surviving Person, (iv) no Default or Event
of
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Default would result from the consummation of such merger, amalgamation or consolidation,
(v) the Parent Borrower shall be in compliance, on a Pro Forma Basis after giving effect to
such merger, amalgamation or consolidation, with the covenant set forth in Section 10.9 of
the CF Agreement for the most recently ended Test Period, and (vi) Parent Borrower shall
have delivered to the Administrative Agent an officers’ certificate stating that such
merger, amalgamation or consolidation complies with this Agreement and, in the case of any
merger, amalgamation or consolidation involving any Borrower, any such supplements to any
Credit Document as necessary to preserve the perfection and priority of the Liens under the
applicable Security Documents;
(c) any Restricted Subsidiary that is not a Borrower or a 1993 Indenture Restricted
Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Parent Borrower or any other Restricted
Subsidiary;
(d) any Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its
assets (other than any Principal Property owned by a Subsidiary that is not a Subsidiary
Borrower) (upon voluntary liquidation or otherwise) to any Borrower,
provided
that
the consideration for any such disposition by any Person other than a Subsidiary Borrower
shall not exceed the fair value of such assets; and
(e) any Restricted Subsidiary may liquidate or dissolve if (i) the Parent Borrower
determines in good faith that such liquidation or dissolution is in the best interests of
the Parent Borrower and is not materially disadvantageous to the Lenders, (ii) to the extent
such Restricted Subsidiary is a Borrower or a 1993 Indenture Restricted Subsidiary, any
assets or business not otherwise disposed of or transferred in accordance with
Section
10.4
or
10.5
or, in the case of any such business, discontinued, shall be
transferred to, or otherwise owned or conducted by, a Borrower (or, in the case of a
liquidation or dissolution of a 1993 Indenture Restricted Subsidiary, another 1993 Indenture
Restricted Subsidiary) after giving effect to such liquidation or dissolution.
18.4.
Limitation on Sale of Assets
. (i) The Parent Borrower will not, and will not
permit any of the Restricted Subsidiaries to, convey, sell, lease, assign, transfer or otherwise
dispose of any of its property, business or assets (including receivables, Stock and Stock
Equivalents of any other Person and leasehold interests), whether owned as of the Original Closing
Date or thereafter acquired (other than any such sale, transfer, assignment or other disposition
resulting from any casualty or condemnation, of any assets of the Parent Borrower or the Restricted
Subsidiaries) and (ii) the Parent Borrower will not permit any Restricted Subsidiary to issue any
Stock and Stock Equivalents, except, in each case:
(a) the Parent Borrower and the Restricted Subsidiaries may sell, transfer or otherwise
dispose of (i) inventory, used or surplus equipment, vehicles and other assets in the
ordinary course of business and (ii) Permitted Investments;
(b) Restricted Subsidiaries may issue Stock and Stock Equivalents and the Parent
Borrower and the Restricted Subsidiaries may sell, transfer or otherwise dispose of assets
(each of the foregoing, a “
Disposition
”), excluding a Disposition of accounts
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receivable,
except in connection with the Disposition of any business to which such accounts receivable
relate, for fair value in an aggregate amount pursuant to this
clause (b)
, when
aggregated with the amount of Permitted Sale Leaseback Transactions consummated pursuant to
Section 10.4(h)
, not to exceed $6,600,000,000,
provided
that (i) with
respect to any Disposition pursuant to this
clause (b)
for a purchase price in
excess of $100,000,000, the Parent Borrower or a Restricted Subsidiary shall receive not
less than 75% of such consideration in the form of cash or Permitted Investments;
provided
that for the purposes of this
clause (i)
the following shall be
deemed to be cash: (A) any liabilities (as shown on the Parent Borrower’s or such Restricted
Subsidiary’s most recent balance sheet provided hereunder or in the footnotes thereto) of
the Parent Borrower or such Restricted Subsidiary, other than liabilities that are by their
terms subordinated to the payment in cash of the Obligations, that are assumed by the
transferee with respect to the applicable Disposition and for which the Parent Borrower and
all of the Restricted Subsidiaries shall have been validly released by all applicable
creditors in writing, (B) any securities received by the Parent Borrower or such Restricted
Subsidiary from such transferee that are converted by the Parent Borrower or such Restricted
Subsidiary into cash (to the extent of the cash received) within 180 days following the
closing of the applicable Disposition and (C) any Designated Non-Cash Consideration
received by the Parent Borrower or such Restricted Subsidiary in respect of such
Disposition having an aggregate fair market value, taken together with all other Designated
Non-Cash Consideration received pursuant to this
Section 10.4(b)
and
Section
10.4(c)
that is at that time outstanding, shall not be in excess of the sum of (x) 1.5%
of Consolidated Total Assets at the time of the receipt of such Designated Non-Cash
Consideration,
plus
(y) $100,000,000, with the fair market value of each item of
Designated Non-Cash Consideration being measured at the time received and without giving
effect to subsequent changes in value, (ii) with respect to any such sale, transfer or
disposition (or series of related sales, transfers or dispositions), the Parent Borrower
shall be in compliance, on a Pro Forma Basis after giving effect to such sale, transfer or
disposition, with the covenant set forth in Section 10.9 of the CF Agreement for the most
recently ended Test Period and (iii) after giving effect to any such sale, transfer or
disposition, no Default or Event of Default shall have occurred and be continuing;
(c) the Parent Borrower and the Restricted Subsidiaries may make Dispositions to the
Parent Borrower or to any Restricted Subsidiary,
provided
that with respect to any
such Dispositions (x) from Borrowers to Restricted Subsidiaries that are not Borrowers, (y)
from 1993 Indenture Restricted Subsidiaries to the Parent Borrower or any Restricted
Subsidiary that is not a 1993 Indenture Restricted Subsidiary or (z) from Restricted
Subsidiaries that are not Borrowers or 1993 Indenture Restricted Subsidiaries to any
Borrower or 1993 Indenture Restricted Subsidiary (i) such sale, transfer or disposition
shall be for fair value and (ii) with respect to any Disposition pursuant to this
clause
(c)
for a purchase price in excess of $100,000,000, the Person making such Disposition
shall receive not less than 75% of such consideration in the form of cash or Permitted
Investments;
provided
that for the purposes of this
subclause (ii)
the
following shall be deemed to be cash: (A) any liabilities (as shown on the Parent Borrower’s
or such Restricted Subsidiary’s most recent balance sheet provided hereunder or in the
footnotes thereto) of the Parent Borrower or such Restricted Subsidiary, other than
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liabilities that are by their terms subordinated to the payment in cash of the Obligations,
that are assumed by the transferee with respect to the applicable Disposition and for which
the Parent Borrower and all of the Restricted Subsidiaries shall have been validly released
by all applicable creditors in writing, (B) any securities received by the Person making
such Disposition from the purchaser that are converted by such Person into cash (to the
extent of the cash received) within 180 days following the closing of the applicable
Disposition, and (C) any Designated Non-Cash Consideration received by the Person making
such Disposition having an aggregate fair market value, taken together with all other
Designated Non-Cash Consideration received pursuant to this
Section 10.4(c)
and
Section 10.4(b)
that is at that time outstanding, shall not be in excess of the sum
of (x) 1.5% of Consolidated Total Assets at the time of the receipt of such Designated
Non-Cash Consideration, plus (y) $100,000,000, with the fair market value of each item of
Designated Non-Cash Consideration being measured at the time received and without giving
effect to subsequent changes in value;
(d) the Parent Borrower and any Restricted Subsidiary may effect any transaction
permitted by
Section 10.3
,
10.5
or
10.6
(including the making of any
“dividend” (as defined in
Section 10.6
) by any Subsidiary);
(e) Dispositions of accounts receivable and related assets of 1993 Indenture Restricted
Subsidiaries to ABL Entities;
(f) the Parent Borrower and the Restricted Subsidiaries may lease, sublease, license or
sublicense (on a non-exclusive basis with respect to any intellectual property) real,
personal or intellectual property in the ordinary course of business;
(g) Dispositions of property (including like-kind exchanges) to the extent that (i)
such property is exchanged for credit against the purchase price of similar replacement
property or (ii) the proceeds of such Disposition are promptly applied to the purchase price
of such replacement property, in each case under section 1031 of the Code or otherwise;
(h) Dispositions of property pursuant to Permitted Sale Leaseback transactions in an
aggregate amount pursuant to this
clause (h)
when aggregated with the amount of
Dispositions made pursuant to
clause (b)
above not to exceed $6,600,000,000;
(i) Dispositions of Investments in joint ventures (regardless of the form of legal
entity) to the extent required by, or made pursuant to, customary buy/sell arrangements
between the joint venture parties set forth in joint venture arrangements and similar
binding arrangements;
(j) customary Dispositions in connection with any Permitted Receivables Financing;
(k) dispositions of Stock and Stock Equivalents of any Subsidiary or joint venture for
fair market value to Facility Syndication Partners in connection with any Syndication;
provided
that the fair market value of the aggregate amount of Stock and
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Stock
Equivalents disposed of pursuant to this
clause (k)
with respect to any individual
Subsidiary (and not subsequently repurchased or redeemed by the Parent Borrower or any
Restricted Subsidiary) shall not exceed $5,000,000; and
(l) a Disposition of any asset between or among the Parent Borrower and/or its
Restricted Subsidiaries as a substantially concurrent interim Disposition in connection with
a Disposition otherwise permitted pursuant to
clauses (a)
through
(k)
above.
18.5.
Limitation on Investments
. The Parent Borrower will not, and will not permit
any of the Restricted Subsidiaries to, make any Investment except:
(a) extensions of trade credit and asset purchases in the ordinary course of business;
(b) Permitted Investments;
(c) loans and advances to officers, directors and employees of the Parent Borrower (or
any direct or indirect parent thereof) or any of its Subsidiaries or to Physicians with whom
the Parent Borrower or any of its Subsidiaries have contractual relationships (i) for
reasonable and customary business-related travel, entertainment, relocation and analogous
ordinary business purposes (including employee payroll advances), (ii) in connection with
such Person’s purchase of Stock or Stock Equivalents of the Parent Borrower (or any direct
or indirect parent thereof) to the extent that the amount of such loans and advances are
directly or indirectly contributed to the Parent Borrower in cash and (iii) for purposes not
described in the foregoing
subclauses (i)
and
(ii)
, in an aggregate
principal amount outstanding pursuant to this
subclause (iii)
not to exceed
$20,000,000;
(d) Investments existing on, or contemplated as of, the Original Closing Date and
either (x) constituting Indebtedness that is permitted pursuant to
Section
10.1(g)(ii)
or (y) listed on
Schedule 10.5
to the Original Credit Agreement and
any extensions, renewals or reinvestments thereof, so long as the aggregate amount of all
Investments pursuant to this
clause (d)
is not increased at any time above the
amount of such Investments existing on the Original Closing Date;
(e) Investments received in connection with the bankruptcy or reorganization of
suppliers or customers and in settlement of delinquent obligations of, and other disputes
with, customers arising in the ordinary course of business or upon foreclosure with respect
to any secured Investment or other transfer of title with respect to any secured Investment;
(f) Investments to the extent that payment for such Investments is made with Stock or
Stock Equivalents of Holdings;
(g) Investments (i) (a) by the Parent Borrower or any Restricted Subsidiary in any
Subsidiary Borrower, (b) between or among 1993 Indenture Restricted Subsidiaries, (c)
between or among Restricted Subsidiaries that are neither Subsidiary Borrowers nor
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1993
Indenture Restricted Subsidiaries and (d) consisting of intercompany Investments incurred in
the ordinary course of business in connection with the cash management operations (including
with respect to intercompany self-insurance arrangements) among the Parent Borrower and the
Restricted Subsidiaries (
provided
that any such intercompany Investment in
connection with cash management arrangements by a Credit Party in a Subsidiary that is not a
Credit Party is in the form of an intercompany loan or advance) and (ii) (a) by Credit
Parties in any Restricted Subsidiary that is not a Credit Party, (b) by 1993 Indenture
Restricted Subsidiaries in any Restricted Subsidiary that is not a 1993 Indenture Restricted
Subsidiary or (c) by any Restricted Subsidiary that is neither a Credit Party nor a 1993
Indenture Restricted Subsidiary in any 1993 Indenture Restricted Subsidiary, in each case
valued at the fair market value (determined by the Parent Borrower acting in good faith) of
such Investment at the time each such Investment was made, in an aggregate amount pursuant
to this
subclause (ii)
that, at the time each such Investment is made, would not
exceed (x) the excess of (A)
$1,500,000,000 over (B) the amount of Investments outstanding at such time in reliance
on
Section 10.5(i)(ii)(x)
at such time
plus
(y) the Applicable Amount at
such time;
(h) Investments constituting Permitted Acquisitions;
(i) Investments (including, but not limited to (i) minority Investments and Investments
in Unrestricted Subsidiaries and (ii) Investments in joint ventures (regardless of the form
of legal entity) or similar Persons that do not constitute Restricted Subsidiaries), in each
case, as valued at the fair market value (determined by the Parent Borrower acting in good
faith) of such Investment at the time each such Investment is made, in an aggregate amount
pursuant to this
clause (i)
that, at the time each such Investment is made, would
not exceed the sum of (x) the excess of (A) $1,500,000,000 over (B) the amount of
Investments outstanding at such time in reliance on
Section 10.5(g)(ii)(x)
at such
time,
plus
(y) the Applicable Amount at such time
plus
(z) without
duplication of any amount that increased the JV Distribution Amount, an amount equal to any
repayments, interest, returns, profits, distributions, income and similar amounts actually
received in cash in respect of any such Investment (which amount referred to in this
subclause (z)
shall not exceed the amount of such Investment valued at the fair
market value of such Investment at the time such Investment was made);
(j) Investments constituting non-cash proceeds of Dispositions of assets to the extent
permitted by
Section 10.4
;
(k) Investments made to repurchase or retire Stock or Stock Equivalents of the Parent
Borrower or any direct or indirect parent thereof owned by any employee or any employee
stock ownership plan or key employee stock ownership plan of the Parent Borrower (or any
direct or indirect parent thereof);
(l) Investments permitted under
Section 10.6
;
(m) loans and advance to any direct or indirect parent of the Parent Borrower in lieu
of, and not in excess of the amount of, dividends to the extent permitted to be made to such
parent in accordance with
Section 10.6
;
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(n) Investments consisting of extensions of credit in the nature of accounts receivable
or notes receivable arising from the grant of trade credit in the ordinary course of
business, and Investments received in satisfaction or partial satisfaction thereof from
financially troubled account debtors and other credits to suppliers in the ordinary course
of business;
(o) Investments in the ordinary course of business consisting of endorsements for
collection or deposit and customary trade arrangements with customers consistent with past
practices;
(p) advances of payroll payments to employees in the ordinary course of business;
(q) Guarantee Obligations of the Parent Borrower or any Restricted Subsidiary of leases
(other than Capital Leases) or of other obligations that do not constitute Indebtedness, in
each case entered into in the ordinary course of business;
(r) Investments held by a Person acquired (including by way of merger or consolidation)
after the Original Closing Date otherwise in accordance with this
Section 10.5
to
the extent that such Investments were not made in contemplation of or in connection with
such acquisition, merger or consolidation and were in existence on the date of such
acquisition, merger or consolidation;
(s) Investments by 1993 Indenture Restricted Subsidiaries of accounts receivable and
related assets in ABL Entities;
(t) Investments arising out of or in connection with any Permitted Receivables
Financing;
(u) Investments by the Parent Borrower in the European Subsidiary Borrower (as defined
in the CF Agreement) arising as a result of any payment made by the Parent Borrower in
respect of European Tranche Term Loans (as defined in the CF Agreement) pursuant to Section
5.2(a)(ii)
of the CF Agreement;
(v) Investments by the Parent Borrower and the Restricted Subsidiaries in any joint
venture (regardless of the form of legal entity) or Restricted Subsidiary in an aggregate
amount at any time outstanding not to exceed the sum of (A) $600,000,000
plus
(B)
the JV Distribution Amount
plus
(C) without duplication of any amount that increased
the JV Distribution Amount, an amount equal to any repayments, interest, returns, profits,
distributions, income and similar amounts actually received in cash in respect of any such
Investment (which amount referred to in this
subclause (C)
shall not exceed the
amount of such Investment valued at the fair market value of such Investment at the time
such Investment was made);
provided
, that the aggregate amount of Investments made
in reliance on
subclause (B)
or
(C)
above by Credit Parties shall not exceed
the aggregate of the amounts referred to in such subclauses that were directly or indirectly
received by Credit Parties;
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(w) any redemption by Healthtrust, or transfer to Healthtrust or the Parent Borrower,
of shares of Stock of Healthtrust held by Columbia SDH and Epic Properties;
(x) intercompany transfers of creditor positions in respect of Indebtedness outstanding
pursuant to Sections
10.1(a)
,
10.1(g)(ii)
or
10.1(i)
; and
(y) Investments constituting Indebtedness outstanding pursuant to Section
10.1(a)(z)
and
10.1(i)(z)
;
18.6.
Limitation on Dividends
. The Parent Borrower will not declare or pay any
dividends (other than dividends payable solely in its Qualified Equity Interests) or return any
capital to its stockholders
(including any option holders) or make any other distribution, payment or delivery of property
or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, for consideration, any shares of any class of its Stock or Stock Equivalents or the
Stock or Stock Equivalents of any direct or indirect parent outstanding as of the Original Closing
Date or thereafter outstanding, or set aside any funds for any of the foregoing purposes, or permit
any of the Restricted Subsidiaries to purchase or otherwise acquire for consideration (other than
in connection with an Investment permitted by Section 10.5) any Stock or Stock Equivalents of the
Parent Borrower, outstanding as of the Original Closing Date or thereafter outstanding (all of the
foregoing, “
dividends
”), provided that, so long as no Default or Event of Default exists or would
exist after giving effect thereto:
(a) the Parent Borrower may (or may pay dividends to permit any direct or indirect
parent thereof to) redeem in whole or in part any of its (or such parent’s) Stock or Stock
Equivalents for another class of its Stock or Stock Equivalents or with proceeds from
substantially concurrent equity contributions or issuances of new Stock or Stock Equivalents
(other than any amount received by the Parent Borrower in satisfaction of the requirements
of the first sentence of
Section 10.7(d)
),
provided
that such new Stock or
Stock Equivalents contain terms and provisions at least as advantageous to the Lenders in
all respects material to their interests as those contained in the Stock or Stock
Equivalents redeemed thereby;
(b) the Parent Borrower may (or may pay dividends to permit any direct or indirect
parent thereof to) repurchase shares of its (or such parent’s) Stock or Stock Equivalents
held by officers, directors and employees of the Parent Borrower and its Subsidiaries (other
than the Frist Shareholders), so long as such repurchase is pursuant to, and in accordance
with the terms of, management and/or employee stock plans, stock subscription agreements or
shareholder agreements;
(c) the Parent Borrower may pay dividends on the Stock or Stock Equivalents,
provided
that the amount of any such dividends pursuant to this
clause (c)
shall not exceed an amount equal to (i) $600,000,000,
less
(ii) the amount of Junior
Indebtedness purchased in reliance on
Section 10.7(a)(i)(x)
,
plus
(iii) the
Applicable Amount at such time;
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(d) the Parent Borrower may pay dividends:
(i) the proceeds of which will be used to pay (or to pay dividends to allow any
direct or indirect parent of the Parent Borrower to pay) (A) the tax liability to
each relevant jurisdiction in respect of consolidated, combined, unitary or
affiliated returns for the relevant jurisdiction of such parent attributable to the
Parent Borrower or its Restricted Subsidiaries determined as if the Parent Borrower
and its Restricted Subsidiaries filed separately and (B) for as long as Holdings is
a direct or indirect parent of the Parent Borrower, distributions equal to any
taxable income of Holdings resulting from the hedging arrangements
entered into by Holdings on or about September 13, 2006 and with respect to
which the Parent Borrower will be a counterparty multiplied by 45%;
(ii) the proceeds of which shall be used to allow any direct or indirect parent
of the Parent Borrower to pay (A) its operating expenses incurred in the ordinary
course of business and other corporate overhead costs and expenses (including
administrative, legal, accounting and similar expenses provided by third parties),
which are reasonable and customary and incurred in the ordinary course of business,
in an aggregate amount not to exceed $10,000,000 in any fiscal year of the Parent
Borrower
plus
any reasonable and customary indemnification claims made by
directors or officers of the Parent Borrower (or any parent thereof) attributable to
the ownership or operations of the Parent Borrower and its Restricted Subsidiaries
or (B) fees and expenses otherwise due and payable by the Parent Borrower or any of
its Restricted Subsidiaries and permitted to be paid by the Parent Borrower or such
Restricted Subsidiary under this Agreement;
(iii) the proceeds of which shall be used to pay franchise and excise taxes and
other fees, taxes and expenses required to maintain the corporate existence of any
of its direct or indirect parent of the Parent Borrower;
(iv) to any direct or indirect parent of the Parent Borrower to finance any
Investment permitted to be made by the Parent Borrower or a Restricted Subsidiary
pursuant to
Section 10.5
;
provided
that (A) such dividend shall be
made substantially concurrently with the closing of such Investment, (B) such parent
shall, immediately following the closing thereof, cause (1) all property acquired
(whether assets, Stock or Stock Equivalents) to be contributed to the Parent
Borrower or such Restricted Subsidiary or (2) the merger (to the extent permitted in
Section 10.5
) of the Person formed or acquired into the Parent Borrower or
its Restricted Subsidiaries and (C) the Parent Borrower shall comply with
Section 9.11
to the extent applicable; and
(e) the Parent Borrower may pay cash dividends to Holdings for Holdings to pay cash
dividends, after the fifth anniversary of the date of issuance of any Qualified Holdings
Debt, solely for the purpose of paying regularly scheduled interest payments with respect to
such Qualified Holdings Debt, so long as on a Pro Forma Basis after
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giving effect to the
payments of such dividends, (i) the Parent Borrower shall be in compliance with the covenant
set forth in Section 10.9 of the CF Agreement for the most recently ended Test Period and
(ii) the Consolidated EBITDA to Consolidated Interest Expense Ratio would be greater than or
equal to 1.75 to 1.00 for the most recently ended Test Period.
18.7.
Limitations on Debt Payments and Amendments; Matters Relating to Required Additional
Equity Investments
.
(a) The Parent Borrower will not, and will not permit any Restricted Subsidiary to, prepay,
repurchase or redeem or otherwise defease or acquire prior to the scheduled maturity thereof any
Subordinated Indebtedness, Retained Indebtedness (except as permitted in
clause (b)
below)
or Permitted Junior Lien Debt (collectively, “
Junior Indebtedness
”);
provided
,
however
, that so long as no Default or Event of Default shall have occurred and be
continuing at the date of such prepayment, repurchase, redemption or other defeasance or would
result therefrom, the Parent Borrower or any Restricted Subsidiary may prepay, repurchase or redeem
Junior Indebtedness (i) for an aggregate price not in excess of (x) $600,000,000
less
(y)
the amount of Restricted Payments made pursuant to
Section 10.6(c)(i)
,
plus
(z) the
Applicable Amount at the time of such prepayment, repurchase or redemption (ii) in the case of
Subordinated Indebtedness, with the proceeds of Subordinated Indebtedness that (I) is permitted by
Section 10.1
(other than
Section 10.1(o)
) and (II) if such Junior Indebtedness
being repaid, repurchased or redeemed is Subordinated Indebtedness, has terms not materially less
advantageous to the Lenders than those of the Indebtedness being refinanced or (iii) in the case of
Permitted Junior Lien Debt, with the proceeds of refinancing Indebtedness otherwise permitted by
Section 10.1
constituting Permitted Additional Debt or Permitted Junior Lien Debt.
Notwithstanding the foregoing, nothing in this
Section 10.7
shall prohibit (A) the
repayment or prepayment of intercompany Subordinated Indebtedness owed among the Parent Borrower
and, the Restricted Subsidiaries, in either case unless an Event of Default has occurred and is
continuing and the Parent Borrower has received a notice from the Collateral Agent instructing it
not to make or permit any such repayment or prepayment, or (B) transfers of creditor positions in
connection with intercompany debt restructurings so long as such Indebtedness is permitted by
Section 10.1
after giving effect to such transfers. For the avoidance of doubt, nothing in
this
Section 10.7
shall restrict the making of any “AHYDO catch up payment” in respect of
the Junior Lien Notes.
(b) Except as permitted pursuant to
clause (a)
above, the Parent Borrower will not,
and will not permit any Restricted Subsidiary to, prepay, repurchase, or redeem or otherwise
defease or acquire any Retained Indebtedness (other than pursuant to any tender offer in effect on
the Original Closing Date in connection with the Debt Repayment) prior to the stated final maturity
date thereof (as in effect on the Original Closing Date);
provided
,
however
, that
so long as no Default or Event of Default shall have occurred and be continuing at the date of such
prepayment, repurchase, defeasance or acquisition or would result therefrom, (i) Retained
Indebtedness may be prepaid, repurchased, redeemed or defeased prior to its stated maturity if, as
of the Original Closing Date, such Retained Indebtedness to be repaid has a stated final maturity
occurring on any date on or between January 1, 2010 and December 31, 2011, (ii) the Parent Borrower
may prepay, repurchase, redeem, defease or acquire, prior to the stated final
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maturity thereof
Retained Indebtedness with a stated final maturity (as of the Original Closing Date) prior to the
Tranche A Term Loan Maturity Date (as defined in the CF Agreement) (and if at such time all Tranche
A Term Loans (as defined in the CF Agreement) have been repaid in full, the Tranche B Term Loan
Maturity Date (as defined in the CF Agreement)) if on a Pro Forma Basis after giving effect to such
repayment the Consolidated First Lien Debt to Consolidated EBITDA Ratio for the most recent Test
Period is no greater than 4.0:1 and (iii) Retained Indebtedness may be refinanced with the proceeds
of refinancing Indebtedness with respect to such Retained Indebtedness that is permitted under
Section 10.1(g)
.
(c) The Parent Borrower will not waive, amend, modify, terminate or release any Junior
Indebtedness or any Retained Indebtedness to the extent that any such waiver, amendment,
modification, termination or release would be adverse to the Lenders in any material respect.
(d) The Parent Borrower shall have received (i) the Option Note Amount from either (x) the
repayment or prepayment of the Option Note (including through the cancellation pursuant to the
Merger of Stock or Stock Equivalents of the Parent Borrower owned by the issuer of, and having a
value equivalent to, the Option Note) or (y) contributions to its common equity, in either case no
later than December 2, 2006 and (ii) additional common equity in an amount equal to the Delayed
Equity Amount no later than March 31, 2007. Prior to the satisfaction of the requirements of
clause (i)
of the first sentence of this
Section 10.7(d)
, the Parent Borrower will
not permit any waiver, amendment, modification or termination of the Option Note or fail to enforce
its right under the Option Note if the result of any of the foregoing would be adverse in any
material respect to the Lenders. Prior to the satisfaction of the requirements of clause (ii) of
the fist sentence of this
Section 10.7 (d)
, the Parent Borrower will not permit any waiver,
amendment, modification or termination of the Delayed Equity Arrangements or fail to enforce its
right under the Delayed Equity Arrangements if the result of any of the foregoing would be adverse
in any material respect to the Lenders.
(e) Epic Properties and Columbia—SDH shall not permit any consensual Liens to exist on any
shares of Stock of Healthtrust owned by them (other than Liens in favor of the Parent Borrower or
Healthtrust). Following the occurrence and during the continuance of an Event of Default, the
Parent Borrower shall not permit Healthtrust to make any distribution on, or redemption of, Stock
of Healthtrust owned by Epic Properties or Columbia—SDH unless the Collateral Agent shall have
consented thereto.
18.8.
Limitations on Sale Leasebacks
. The Parent Borrower will not, and will not
permit any of the Restricted Subsidiaries to, enter into or effect any Sale Leasebacks, other than
Permitted Sale Leasebacks.
18.9.
Minimum Interest Coverage Ratio
. During the continuance of a Covenant
Compliance Event, the Parent Borrower will not permit the Consolidated EBITDA to Consolidated
Interest Coverage Ratio, calculated as of the last day of the fiscal quarter for the Test Period
most recently then ended for which the Administrative Agent has received financial statements of
the Parent Borrower, to be less than 1.50:1.00.
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18.10.
Changes in Business
.
(a) The Parent Borrower and the Subsidiaries, taken as a whole, will not fundamentally and
substantively alter the character of their business, taken as a whole, from the business conducted
by the Parent Borrower and the Subsidiaries, taken as a whole, on the Original Closing Date and
other business activities incidental or related to any of the foregoing.
(b) Healthtrust shall not engage in any business other than (i) owning (x) its ownership in
the Stock and Stock Equivalents of Subsidiaries of the Parent Borrower and activities and
properties incidental thereto and (y) other assets owned by it on the Original Closing Date and
(ii) performing its obligations pursuant to agreements in effect on the Original Closing Date and
any automatic extensions thereof.
18.11.
1993 Indenture Restricted Subsidiaries
. The Parent Borrower shall not
designate any additional Subsidiary as a “Restricted Subsidiary” under the 1993 Indenture or
reorganize or change the ownership structure of any of its Subsidiaries such that after giving
effect to such reorganization or change a Subsidiary that constituted an “Unrestricted Subsidiary”
under the 1993 Indenture subsequently constitutes a “Restricted Subsidiary” thereunder.
SECTION 19.
Events of Default
.
Upon the occurrence of any of the following specified events (each an “Event of
Default”
):
19.1.
Payments
. Any Borrower shall (a) default in the payment when due of any
principal of the Loans or (b) default, and such default shall continue for five or more days, in
the payment when due of any interest on the Loans or any Fees or any Unpaid Drawings or of any
other amounts owing hereunder or under any other Credit Document; or
19.2.
Representations, Etc
. Any representation, warranty or statement made or deemed
made by any Credit Party herein or in any Credit Document or any certificate delivered or required
to be delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the
date as of which made or deemed made; or
19.3.
Covenants
. Any Credit Party shall: (a) default in the due performance or
observance by it of any term, covenant or agreement contained in
Section 9.1(e)
or
Section 10
; or
(b) default in the due performance or observance by it of any term, covenant or
agreement (other than those referred to in
Section 11.1
or
11.2
or
clause (a)
or
(c)
of this
Section 11.3
) contained in this Agreement,
any Security Document, the Fee Letter dated July 24, 2006 between Holdings and the Agents or
the Fee Letter dated June 20, 2007 between Holdings and Banc of America Securities LLC and
such default shall continue unremedied for a period of at least 30 days after receipt of
written notice by the Parent Borrower from any Administrative Agent or the Required Lenders;
or
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(c) default in the due performance or observance by it of any term, covenant or
agreement contained in
Section 9.15
(other than any such default resulting solely
from actions taken by one or more Persons not controlled directly or indirectly by the
Parent Borrower or such Person’s (or Persons’) failure to act in accordance with the
instructions of the Parent Borrower or the Administrative Agent) and such default shall
continue unremedied for a period of at least 15 Business Days after an Authorized Officer
obtaining knowledge of such default; or
19.4.
Default Under Other Agreements
.
(a) The Parent Borrower or any of the Restricted Subsidiaries shall (i) default in any payment
with respect to any Indebtedness (other than the Obligations) in excess of $150,000,000 in the
aggregate, for the Parent Borrower and such Restricted Subsidiaries, beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto,
or any other event shall occur or condition exist (other than, with respect to Indebtedness
consisting of any Hedge Agreements, termination events or equivalent events pursuant to the terms
of such Hedge Agreements), the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause, any such Indebtedness to become due prior to its stated maturity; or
(b) without limiting the provisions of
clause (a)
above, any such Indebtedness shall be
declared to be due and payable, or required to be prepaid other than by a regularly scheduled
required prepayment or as a mandatory prepayment (and, with respect to Indebtedness consisting of
any Hedge Agreements, other than due to a termination event or equivalent event pursuant to the
terms of such Hedge Agreements), prior to the stated maturity thereof; or
19.5.
Bankruptcy, Etc
. The Parent Borrower or any Specified Subsidiary shall commence
a voluntary case, proceeding or action concerning itself under (a) Title 11 of the United States
Code entitled “Bankruptcy,” or (b) in the case of any Foreign Subsidiary that is a Specified
Subsidiary, any domestic or foreign law relating to bankruptcy, judicial management, insolvency,
reorganization,
administration or relief of debtors legislation of its jurisdiction of incorporation, in each
case as in effect as of the Original Closing Date or thereafter in effect, or any successor thereto
(collectively, the “
Bankruptcy Code
”); or an involuntary case, proceeding or action is commenced
against the Parent Borrower or any Specified Subsidiary and the petition is not controverted within
30 days after commencement of the case, proceeding or action; or an involuntary case, proceeding or
action is commenced against the Parent Borrower or any Specified Subsidiary and the petition is not
dismissed within 60 days after commencement of the case, proceeding or action; or a custodian (as
defined in the Bankruptcy Code), judicial manager, receiver, receiver manager, trustee,
administrator or similar person is appointed for, or takes charge of, all or substantially all of
the property of the Parent Borrower or any Specified Subsidiary; or the Parent Borrower or any
Specified Subsidiary commences any other voluntary proceeding or action under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency, administration or
liquidation or similar law of any jurisdiction whether in effect as of the Original Closing Date or
thereafter in effect relating to the Parent
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Borrower or any Specified Subsidiary; or there is
commenced against the Parent Borrower or any Specified Subsidiary any such proceeding or action
that remains undismissed for a period of 60 days; or the Parent Borrower or any Specified
Subsidiary is adjudicated insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding or action is entered; or the Parent Borrower or any Specified
Subsidiary suffers any appointment of any custodian receiver, receiver manager, trustee,
administrator or the like for it or any substantial part of its property to continue undischarged
or unstayed for a period of 60 days; or the Parent Borrower or any Specified Subsidiary makes a
general assignment for the benefit of creditors; or any corporate action is taken by the Parent
Borrower or any Specified Subsidiary for the purpose of effecting any of the foregoing; or
19.6.
ERISA
. (a) Any Plan shall fail to satisfy the minimum funding standard required
for any plan year or part thereof or a waiver of such standard or extension of any amortization
period is sought or granted under Section 412 of the Code; any Plan is or shall have been
terminated or is the subject of termination proceedings under ERISA (including the giving of
written notice thereof); an event shall have occurred or a condition shall exist in either case
entitling the PBGC to terminate any Plan or to appoint a trustee to administer any Plan (including
the giving of written notice thereof); any Plan shall have an accumulated funding deficiency
(whether or not waived); the Parent Borrower or any ERISA Affiliate has incurred or is likely to
incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code (including the giving of
written notice thereof); (b) there could result from any event or events set forth in
clause
(a)
of this
Section 11.6
the imposition of a lien, the granting of a security interest,
or a liability, or the reasonable likelihood of incurring a lien, security interest or liability;
and (c) such lien, security interest or liability will or would be reasonably likely to have a
Material Adverse Effect; or
19.7.
[Reserved]
; or
19.8.
[Reserved]
; or
19.9.
Security Agreement
. The Security Agreement pursuant to which the assets of the
Borrowers are pledged as Collateral or any material provision thereof shall cease to be in full
force or effect (other than pursuant to the terms hereof or thereof or as a result of acts or
omissions of the Collateral Agent or any Lender) or any grantor thereunder or any Credit Party
shall deny or disaffirm in writing any grantor’s obligations under the Security Agreement (or any
of the foregoing shall occur with respect to Collateral provided by a Subsidiary that is not a
Material Subsidiary and shall continue unremedied for a period of at least 30 days after receipt of
written notice by the Parent Borrower from the Administrative Agent, the Collateral Agent or the
Required Lenders); or
19.10. [
Reserved
]; or
19.11.
Judgments
. One or more judgments or decrees shall be entered against the
Parent Borrower or any of the Restricted Subsidiaries involving a liability of $150,000,000 or more
in the aggregate for all such judgments and decrees for the Parent Borrower and the Restricted
Subsidiaries (to the extent not paid or covered by insurance provided by a carrier not
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disputing
coverage) and any such judgments or decrees shall not have been satisfied, vacated, discharged or
stayed or bonded pending appeal within 60 days after the entry thereof; or
19.12.
Change of Control
. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default shall then be
continuing, the Administrative Agent shall, upon the written request of the Required Lenders, by
written notice to the Parent Borrower, take any or all of the following actions, without prejudice
to the rights of the Administrative Agent or any Lender to enforce its claims against the
Borrowers, except as otherwise specifically provided for in this Agreement (
provided
that,
if an Event of Default specified in
Section 11.5
shall occur with respect to the Parent
Borrower, the
result that would occur upon the giving of written notice by the Administrative Agent as
specified in
clauses (i)
,
(ii)
and
(iv)
below shall occur automatically
without the giving of any such notice): (i) declare the Total New Revolving Credit Commitment and
Swingline Commitment terminated, whereupon the New Revolving Credit Commitment and Swingline
Commitment, if any, of each Lender or the Swingline Lender, as the case may be, shall forthwith
terminate immediately and any Fees theretofore accrued shall forthwith become due and payable
without any other notice of any kind; (ii) declare the principal of and any accrued interest and
fees in respect of all Loans and all Obligations owing hereunder and thereunder to be, whereupon
the same shall become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Parent Borrower; (iii) terminate any
Letter of Credit that may be terminated in accordance with its terms; and/or (iv) direct the Parent
Borrower to pay (and the Parent Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default specified in
Section 11.5
with respect to the Parent
Borrower, it will pay) to the Administrative Agent at the Administrative Agent’s Office such
additional amounts of cash, to be held as security for the Parent Borrower’s respective
reimbursement obligations for Drawings that may subsequently occur thereunder, equal to the
aggregate Stated Amount of all Letters of Credit issued and then outstanding.
Any amount received by the Administrative Agent or the Collateral Agent from any Credit Party
following any acceleration of the Obligations under this Agreement or any Event of Default with
respect to the Parent Borrower under
Section 11.5
shall be applied:
(i) first, to the payment of all reasonable and documented costs and expenses incurred
by the Administrative Agent or Collateral Agent in connection with such collection or sale
or otherwise in connection with any Credit Document, including all court costs and the
reasonable fees and expenses of its agents and legal counsel, the repayment of all advances
made by the Administrative Agent or the Collateral Agent hereunder or under any other Credit
Document on behalf of any Credit Party and any other reasonable and documented costs or
expenses incurred in connection with the exercise of any right or remedy hereunder or under
any other Credit Document (other than in connection with Secured Cash Management Agreements
or Secured Hedge Agreements);
(ii) second, to the repayment of all Protective Advances;
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(iii) third, to the Secured Parties, an amount (x) equal to all Obligations (other than
Secured Cash Management Agreements and Secured Hedge Agreements) owing to them on the date
of any distribution and (y) sufficient to Cash Collateralize all Letters of Credit
Outstanding on the date of any distribution, and, if such moneys shall be insufficient to
pay such amounts in full and Cash Collateralize all Letters of Credit Outstanding, then
ratably (without priority of any one over any other) to such Secured Parties in proportion
to the unpaid amounts thereof and to Cash Collateralize the Letters of Credit Outstanding;
(iv) fourth, to any Cash Management Bank or Hedge Bank, an amount equal to all
Obligations in respect of Secured Cash Management Agreements or Secured Hedge Agreements, as
the case may be, owing to them on the date of any distribution; and
(v) fifth, any surplus then remaining shall be paid to the applicable Credit Parties or
their successors or assigns or to whomsoever may be lawfully entitled to receive the same or
as a court of competent jurisdiction may direct.
19.13.
Certain Amendments and Waivers to CF Agreement
. In the event that (A) Section
10.9 of the CF Agreement (or the definition of “Consolidated Total Debt to Consolidated Total
EBITDA Ratio” or any of its constituent definitions) is amended or the applicability thereof waived
and (B) the agents or lenders under the CF Facility are paid fees in respect of any such amendment
or waiver, then no such amendment or waiver shall be binding upon the parties to this Agreement
(and each reference to Section 10.9 of the CF Agreement hereunder shall read as if such amendment
or waiver had not been executed) unless and until a proportionate fee (based on the relative
aggregate principal amounts of the loans, letters of credit and commitments outstanding under the
CF Facility, on the one hand, and the Loans, Letters of Credit, Protective Advances and Commitments
outstanding hereunder, on the other hand and assuming that each Lender under the CF Facility
consented to such amendment or waiver) is paid to the Administrative Agent for the benefit of the
Lenders hereunder.
SECTION 20.
Investors’ Right To Cure
.
(a) Notwithstanding anything to the contrary contained in
Section 11.3(a)
, in the
event that the Parent Borrower fails to comply with the requirement of the covenant set forth in
Section 10.9
, until the expiration of the tenth day after the date on which Section 9.1
Financials with respect to the Test Period in which the covenant set forth in such Section is being
measured are required to be delivered pursuant to
Section 9.1
, any of the Investors shall
have the right to make a direct or indirect equity investment (other than any amount invested in
satisfaction of the requirements set forth in the first sentence of
Section 10.7(d)
) in the
Parent Borrower in cash (the “
Cure Right
”), and upon the receipt by the Parent Borrower of net cash
proceeds pursuant to the exercise of the Cure Right (including through the capital contribution of
any such net cash proceeds to such person, the “
Cure Amount
”), the covenant set forth in such
Section shall be recalculated, giving effect to a pro forma increase to Consolidated EBITDA for
such Test Period in an amount equal to such net cash proceeds;
provided
that such pro forma
adjustment to Consolidated EBITDA shall be given solely for the purpose of determining the
existence of a Default or an Event of Default under the covenant set forth in such Section with
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respect to any Test Period that includes the fiscal quarter for which such Cure Right was exercised
and not for any other purpose under any Credit Document.
(b) If, after the exercise of the Cure Right and the recalculations pursuant to
clause
(a)
above, the Parent Borrower shall then be in compliance with the requirements of the
covenant set forth in
Section 10.9
during such Test Period (including for purposes of
Section
7.1
), the Parent Borrower shall be deemed to have satisfied the requirements of such
covenant as of the relevant date of determination with the same effect as though there had been no
failure to comply therewith at such date, and the applicable Default or Event of Default under
Section 11.3
that had occurred shall be deemed cured;
provided
that (i) in each
Test Period there shall be at least one fiscal quarter in which no Cure Right is exercised and (ii)
with respect to any exercise of the Cure Right, the Cure Amount shall be no greater than the amount
required to cause the Parent Borrower to be in compliance with the covenant set forth in
Section 10.9
.
SECTION 21.
The Agents
21.1.
Appointment.
(a) Each Lender hereby irrevocably designates and appoints the Administrative Agent as the
agent of such Lender under this Agreement and the other Credit Documents and irrevocably authorizes
the Administrative Agent, in such capacity, to take such action on its behalf under the provisions
of this Agreement and the other Credit Documents and to exercise such powers and perform such
duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and
the other Credit Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent
shall not have any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any other Credit Document
or otherwise exist against the Administrative Agent.
(b) The Administrative Agent, each Lender, the Swingline Lender and the Letter of Credit
Issuer hereby irrevocably designate and appoint the Collateral Agent as the agent with respect to
the Collateral, and each of the Administrative Agent, each Lender, the Swingline Lender and the
Letter of Credit Issuer irrevocably authorizes the Collateral Agent, in such capacity, to take such
action on its behalf under the provisions of this Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated to the Collateral Agent by
the terms of this Agreement and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Collateral Agent shall not have any duties or responsibilities except those
expressly set forth herein, or any fiduciary relationship with any of the Administrative Agent, the
Lenders, the Swingline Lender or the Letter of Credit Issuers, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other
Credit Document or otherwise exist against the Collateral Agent.
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(c) Each of the Co-Syndication Agents, Joint Lead Arrangers and Bookrunners, Joint Bookrunners
and the Documentation Agent, each in its capacity as such, shall not have any obligations, duties
or responsibilities under this Agreement but shall be entitled to all benefits of this
Section
13
.
21.2.
Delegation of Duties
. The Administrative Agent and the Collateral Agent may
each execute any of its duties under this Agreement and the other Credit Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. Neither the Administrative Agent nor the Collateral Agent shall be
responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
21.3.
Exculpatory Provisions
. No 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 or any other
Credit Document (except for its or such Person’s own gross negligence or willful misconduct) or (b)
responsible in any manner to any of the Lenders for any recitals, statements, representations or
warranties made by any of any Borrower, any other Credit Party or any officer thereof contained in
this Agreement or any other Credit Document or in any certificate, report, statement or other
document referred to or provided for in, or received by such Agent under or in connection with,
this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of
any Borrower or any other Credit Party to perform its obligations hereunder or thereunder. No
Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, this Agreement or any other
Credit Document, or to inspect the properties, books or records of any Credit Party. The
Collateral Agent shall not be under any obligation to the Administrative Agent, any Lender, the
Swingline Lender or any Letter of Credit Issuer to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this Agreement or any other
Credit Document, or to inspect the properties, books or records of any Credit Party.
21.4.
Reliance by Agents
. The Administrative Agent and the Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or
other document or instruction 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 counsel to any Borrower), independent accountants and other experts selected by the
Administrative Agent or the Collateral Agent. The Administrative Agent may deem and treat the
Lender specified in the Register with respect to any amount owing hereunder as the owner thereof
for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have
been filed with the Administrative Agent. The Administrative Agent and the Collateral Agent shall
be fully justified in failing or refusing to take any action under this Agreement or any other
Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as
it
deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against
any and all liability and expense that may be incurred by it by reason of
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taking or continuing to
take any such action. The Administrative Agent and the Collateral Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement and the other Credit
Documents in accordance with a request of the Required Lenders, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Loans.
21.5.
Notice of Default
. Neither the Administrative Agent nor the Collateral Agent
shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent or Collateral Agent has received notice from a Lender or
a Borrower 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 Administrative Agent receives
such a notice, it shall give notice thereof to the Lenders and the Collateral Agent. The
Administrative Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders,
provided
that unless and until the
Administrative Agent shall have received such directions, the Administrative 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 Lenders except
to the extent that this Agreement requires that such action be taken only with the approval of the
Required Lenders or each of the Lenders, as applicable).
21.6.
Non-Reliance on Administrative Agent, Collateral Agent and Other Lenders
. Each
Lender expressly acknowledges that neither the Administrative Agent nor the Collateral Agent nor
any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the Administrative Agent or
Collateral Agent hereinafter taken, including any review of the affairs of any Borrower or any
other Credit Party, shall be deemed to constitute any representation or warranty by the
Administrative Agent or Collateral Agent to any Lender, the Swingline Lender or any Letter of
Credit Issuer. Each Lender, the Swingline Lender and each Letter of Credit Issuer represents to
the Administrative Agent and the Collateral Agent that it has, independently and without reliance
upon the Administrative Agent, Collateral Agent or any other Lender, 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 each Borrower
and other Credit Party and made its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without reliance upon the
Administrative Agent, Collateral Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and the other Credit
Documents, 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 Borrowers
and any other Credit Party. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, neither the Administrative Agent nor the Collateral Agent shall
have any duty or responsibility to provide any Lender with any credit or other information
concerning the business, assets, operations, properties, financial condition, prospects or
creditworthiness of any Borrower or any other Credit Party that may come into the possession of
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the
Administrative Agent or Collateral Agent any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
21.7.
Indemnification
. The Lenders agree to indemnify the Administrative Agent and
the Collateral Agent, each in its capacity as such (to the extent not reimbursed by the Borrowers
and without limiting the obligation of the Borrowers to do so), ratably according to their
respective portions of the Total New Revolving Exposure in effect on the date on which
indemnification is sought (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance
with their respective portions of the Total New Revolving Exposure in effect immediately prior to
such date), from and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any
time (including at any time following the payment of the Loans) be imposed on, incurred by or
asserted against the Administrative Agent or the Collateral Agent in any way relating to or arising
out of, the Commitments, this Agreement, any of the other Credit Documents or any documents
contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by the Administrative Agent or the Collateral Agent under or in
connection with any of the foregoing,
provided
that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s or the
Collateral Agent’s gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction. The agreements in this
Section 13.7
shall survive the
payment of the Loans and all other amounts payable hereunder.
21.8.
Administrative Agent in its Individual Capacity
. The Administrative Agent and
its Affiliates may make loans to, accept deposits from and generally engage in any kind of business
with any Borrower, and any other Credit Party as though the Administrative Agent were not the
Administrative Agent hereunder and under the other Credit Documents. With respect to the Loans
made by it, the Administrative Agent shall have the same rights and powers under this Agreement and
the other Credit Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms “Lender” and “Lenders” shall include the Administrative Agent
in its individual capacity.
21.9.
Successor Agents
. Each of the Administrative Agent and Collateral Agent may at any time give notice of its
resignation to the Lenders, the Letter of Credit Issuer and the Parent Borrower. Upon receipt of
any such notice of resignation, the Required Lenders shall have the right, subject to the
reasonable consent of the Parent Borrower so long as no Default under
Section 11.1
or
11.5
is continuing, to appoint a successor, which shall be a bank with an office in the
United States, or an Affiliate of any such bank with an office in the United States. If no such
successor shall have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of its resignation, then the
retiring Agent may on behalf of the Lenders and the Letter of Credit Issuer, appoint a successor
Agent meeting the qualifications set forth above;
provided
that if the retiring Agent shall
notify the Parent Borrower and the Lenders that no qualifying Person has accepted such appointment,
then such resignation shall nonetheless become effective in accordance with such notice and (1) the
retiring Agent shall be discharged from its duties and obligations hereunder and under the
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other
Credit Documents (except in the case of the Collateral Agent holding collateral security on behalf
of any Secured Parties, the retiring Collateral Agent shall continue to hold such collateral
security as nominee until such time as a successor Collateral Agent is appointed) and (2) all
payments, communications and determinations provided to be made by, to or through such Agent shall
instead be made by or to each Lender and the Letter of Credit Issuer directly, until such time as
the Required Lenders appoint a successor Agent as provided for above in this Section. Upon the
acceptance of a successor’s appointment as the Administrative Agent or Collateral Agent, as the
case may be, hereunder, such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be
discharged from all of its duties and obligations hereunder or under the other Credit Documents (if
not already discharged therefrom as provided above in this Section). The fees payable by the
Borrowers (following the effectiveness of such appointment) to such Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Parent Borrower and such
successor. After the retiring Agent’s resignation hereunder and under the other Credit Documents,
the provisions of this
Section 13
(including
13.7
) and
Section 14.5
shall
continue in effect for the benefit of such retiring Agent, its sub-agents and their respective
Related Parties in respect of any actions taken or omitted to be taken by any of them while the
retiring Agent was acting as an Agent.
Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also
constitute its resignation as Letter of Credit Issuer and Swing Line Lender. Upon the acceptance
of a successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to
and become vested with all of the rights, powers, privileges and duties of the retiring Letter of
Credit Issuer and Swing Line Lender, (b) the retiring Letter of Credit Issuer and Swing Line Lender
shall be discharged from all of their respective duties and obligations hereunder or under the
other Credit Documents, and (c) the successor Letter of Credit Issuer shall issue letters of credit
in substitution for the Letters of Credit, if any, outstanding at the time of such succession or
make other arrangements satisfactory to the retiring Letter of Credit Issuer to effectively assume
the obligations of the retiring Letter of Credit Issuer with respect to such Letters of Credit.
21.10.
Withholding Tax
. To the extent required by any applicable law, the Administrative Agent may withhold from
any interest payment to any Lender an amount equivalent to any applicable withholding tax. If the
Internal Revenue Service or any authority of the United States or other jurisdiction asserts a
claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the
account of any Lender (because the appropriate form was not delivered, was not properly executed,
or because such Lender failed to notify the Administrative Agent of a change in circumstances that
rendered the exemption from, or reduction of, withholding tax ineffective, or for any other
reason), such Lender shall indemnify the Administrative Agent (to the extent that the
Administrative Agent has not already been reimbursed by the Borrowers and without limiting the
obligation of the Borrowers to do so) and/or the Borrowers fully for all amounts paid, directly or
indirectly, by the Administrative Agent or a Borrower as tax or otherwise, including penalties and
interest, together with all expenses incurred, including legal expenses, allocated staff costs and
any out of pocket expenses.
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21.11.
Reports and Financial Statements
. By signing this Agreement, each Lender:
(a) is deemed to have requested that the Administrative Agent furnish such Lender,
promptly after they become available, copies of all financial statements required to be
delivered by the Parent Borrower hereunder and all field examinations, audits and appraisals
of the Collateral received by the Agents (collectively, the “
Reports
”);
(b) expressly agrees and acknowledges that the Administrative Agent (i) makes no
representation or warranty as to the accuracy of the Reports, and (ii) shall not be liable
for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that the Administrative Agent or any other party performing any audit or
examination will inspect only specific information regarding the Credit Parties and will
rely significantly upon the Credit Parties’ books and records, as well as on representations
of the Credit Parties’ personnel;
(d) agrees to keep all Reports confidential and strictly for its internal use, and not
to distribute except to its participants, or use any Report in any other manner; and
(e) without limiting the generality of any other indemnification provision contained in
this Agreement, agrees: (i) to hold the Administrative Agent and any such other Lender
preparing a Report harmless from any action the indemnifying Lender may take or conclusion
the indemnifying Lender may reach or draw from any Report in connection with any Loans or
Letters of Credit that the indemnifying Lender has made or may make to the Parent Borrower,
or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, a
Loan or Loans of the Parent Borrower; and (ii) to pay and protect, and indemnify, defend,
and hold the Administrative Agent and any such other Lender preparing a Report harmless from
and against, the claims, actions,
proceedings, damages, costs, expenses, and other amounts (including attorney costs)
incurred by the Agents and any such other Lender preparing a Report as the direct or
indirect result of any third parties who might obtain all or part of any Report through the
indemnifying Lender.
SECTION 22.
Miscellaneous
22.1.
Amendments and Waivers
. Neither this Agreement nor any other Credit Document,
nor any terms hereof or thereof, may be amended, supplemented or modified except in accordance with
the provisions of this
Section 14.1
. The Required Lenders may, or, with the written
consent of the Required Lenders, the Administrative Agent and/or the Collateral Agent may, from
time to time, (a) enter into with the relevant Credit Party or Credit Parties written amendments,
supplements or modifications hereto and to the other Credit Documents for the purpose of adding any
provisions to this Agreement or the other Credit Documents or changing in any manner the rights of
the Lenders or of the Credit Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders or the Administrative Agent and/or Collateral Agent, as the case
may be, may specify in such instrument, any of the requirements of
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this Agreement or the other
Credit Documents or any Default or Event of Default and its consequences;
provided
,
however
, that no such waiver and no such amendment, supplement or modification shall
directly (i) forgive or reduce any portion of any Loan or extend the final scheduled maturity date
of any Loan or reduce the stated rate (it being understood that any change to the definition of
Consolidated Total Debt to Consolidated EBITDA Ratio or in the component definitions thereof shall
not constitute a reduction in the rate and only the consent of the Required Lenders shall be
necessary to waive any obligation of the Borrowers to pay interest at the “default rate” or amend
Section 2.8(c)
), or forgive any portion, or extend the date for the payment, of any
interest or fee payable hereunder (other than as a result of waiving the applicability of any
post-default increase in interest rates or any amendment contemplated by
Section 1.7
), or
extend the final expiration date of any Lender’s Commitment or extend the final expiration date of
any Letter of Credit beyond the L/C Maturity Date, or increase the aggregate amount of the
Commitments of any Lender (it being understood that the making of any Protective Advance, so long
as it is in compliance with the provisions of
Section 2.1(e)
, shall not constitute an
increase of any Commitment of any Lender), or amend or modify any provisions of
Section
5.3(a)
(with respect to the ratable allocation of any payments only) and
14.8(a)
, or
make any Loan, interest, Fee or other amount payable in any currency other than Dollars in each
case without the written consent of each Lender directly and adversely affected thereby, or (ii)
amend, modify or waive any provision of this
Section 14.1
or reduce the percentages
specified in the definitions of the term “Required Lenders” or “Supermajority Lenders”, consent to
the assignment or transfer by any Borrower of its rights and obligations under any Credit Document
to which it is a party (except as permitted pursuant to
Section 10.3
) or alter the order of
application set forth in the final paragraph of
Section 11
, in each case without the
written consent of each Lender directly and adversely affected thereby, or (iii) amend, modify or
waive any provision of
Section 13
without the written consent of the then-current
Administrative Agent and Collateral Agent, or (iv) amend, modify or waive any provision of
Section 3
with respect to any Letter of Credit without the written consent of the Letter of
Credit Issuer, or (v) amend, modify or waive any provisions
hereof relating to Swingline Loans without the written consent of the Swingline Lender, or
(vi) [Reserved], or (vii) release all or substantially all of the Collateral under the Security
Documents (except as expressly permitted by the Security Documents or this Agreement) without the
prior written consent of each Lender, or (viii) amend
Section 2.9
so as to permit Interest
Period intervals greater than six months without regard to availability to Lenders, without the
written consent of each Lender directly and adversely affected thereby, or (ix) change the
definition of the term “Borrowing Base” or any component definition thereof if as a result thereof
the amounts available to be borrowed by the Parent Borrower would be increased, without the written
consent of the Supermajority Lenders,
provided
that the foregoing shall not limit the
discretion of the Administrative Agent to change, establish or eliminate any Reserves without the
consent of any Lenders. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the affected Lenders and shall be binding upon the Borrowers, such
Lenders, the Administrative Agent and all future holders of the affected Loans. In the case of any
waiver, the Borrowers, the Lenders and the Administrative Agent shall be restored to their former
positions and rights hereunder and under the other Credit Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing, it being understood that no such
waiver shall extend to any subsequent or other Default or Event of Default or impair any right
consequent thereon.
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Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to
approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of
such Lender may not be increased or extended without the consent of such Lender (it being
understood that any Commitments or Loans held or deemed held by any Defaulting Lender shall be
excluded for a vote of the Lenders hereunder requiring any consent of the Lenders).
Notwithstanding the foregoing, in addition to any credit extensions and related Joinder
Agreement(s) effectuated without the consent of Lenders in accordance with
Section 2.14
,
this Agreement may be amended (or amended and restated) with the written consent of the Required
Lenders, the Administrative Agent and the Parent Borrower (a) to add one or more additional credit
facilities to this Agreement and to permit the extensions of credit from time to time outstanding
thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of
this Agreement and the other Loan Documents with the New Revolving Credit Loans and the accrued
interest and fees in respect thereof and (b) to include appropriately the Lenders holding such
credit facilities in any determination of the Required Lenders and other definitions related to
such new New Revolving Credit Loans.
The Lenders hereby irrevocably agree that the Liens granted to the Collateral Agent by the
Credit Parties on any Collateral shall be automatically released (i) in full, upon the payment of
the Obligations (other than contingent Obligations that survive in accordance with their terms) in
cash upon the termination of this Agreement, (ii) upon the sale or other disposition such
Collateral (including as part of or in connection with any other sale or other disposition
permitted hereunder) to any Person other than another Credit Party, to the extent such sale or
other disposition is made in compliance with the terms of this Agreement (and the Collateral Agent
may rely conclusively on a certificate to that effect provided to it by any Credit Party upon its
reasonable request without further inquiry), (iii) if the release of such Lien is
approved, authorized or ratified in writing by the Required Lenders (or such other percentage
of the Lenders whose consent may be required in accordance with this
Section 14.1
), (iv) to
the extent the property constituting Collateral is owned by any Subsidiary Borrower, upon the
release of such Subsidiary Borrower from its obligations hereunder (in accordance with the
following sentence) and (v) as required to effect any sale or other disposition of such Collateral
in connection with any exercise of remedies of the Collateral Agent pursuant to the Collateral
Documents. Any such release shall not in any manner discharge, affect or impair the Obligations or
any Liens (other than those being released) upon (or obligations (other than those being released)
of the Credit Parties in respect of) all interests retained by the Credit Parties, including the
proceeds of any sale, all of which shall continue to constitute part of the Collateral except to
the extent otherwise released in accordance with the provisions of the Credit Documents.
Additionally, the Lenders hereby irrevocably agree that the Subsidiary Borrowers shall be released
from the (i) Obligations upon the consummation of any transaction resulting in such Subsidiary
Borrower ceasing to constitute a Restricted Subsidiary or (ii) including upon the designation of
such Subsidiary Borrower as a Designated Non-Borrower Subsidiary (in accordance with the definition
thereof)). The Lenders hereby authorize the Administrative Agent and the Collateral Agent, as
applicable, to execute and deliver any instruments, documents, and agreements necessary or
desirable to evidence and confirm the release of any
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Subsidiary Borrower or Collateral pursuant to
the foregoing provisions of this paragraph, all without the further consent or joinder of any
Lender.
22.2.
Notices
. Unless otherwise expressly provided herein, all notices and other
communications provided for hereunder or under any other Credit Document shall be in writing
(including by facsimile transmission). All such written notices shall be mailed, faxed or
delivered to the applicable address, facsimile number or electronic mail address, and all notices
and other communications expressly permitted hereunder to be given by telephone shall be made to
the applicable telephone number, as follows:
(a) if to the Parent Borrower, any Subsidiary Borrower, the Administrative Agent, the
Collateral Agent, the Letter of Credit Issuer or the Swingline Lender, to the address,
facsimile number, electronic mail address or telephone number specified for such Person on
Schedule 14.2
to the Original Credit Agreement or to such other address, facsimile
number, electronic mail address or telephone number as shall be designated by such party in
a notice to the other parties; and
(b) if to any other Lender, to the address, facsimile number, electronic mail address
or telephone number specified in its Administrative Questionnaire or to such other address,
facsimile number, electronic mail address or telephone number as shall be designated by such
party in a notice to the Parent Borrower, the Administrative Agent, the Collateral Agent,
the Letter of Credit Issuer and the Swingline Lender.
All such notices and other communications shall be deemed to be given or made upon the earlier to
occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by
courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail,
three (3) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile,
when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail,
when delivered;
provided
that notices and other communications to the Administrative Agent
or the Lenders pursuant to
Sections 2.3
,
2.6
,
2.9
,
4.2
and
5.1
shall not be effective until received.
22.3.
No Waiver; Cumulative Remedies
. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent, the Collateral Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Credit Documents 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.
22.4.
Survival of Representations and Warranties
. All representations and warranties
made hereunder, in the other Credit Documents 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 making of the Loans hereunder.
22.5.
Payment of Expenses
. The Borrowers agree (a) to pay or reimburse the Agents for
all their reasonable out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
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this Agreement and
the other Credit Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby and thereby,
including the reasonable fees, disbursements and other charges of Cahill Gordon & Reindel
llp
and one counsel in each local jurisdiction to the extent consented to by the Parent
Borrower (such consent not to be unreasonably withheld), (b) to pay or reimburse the Agent for all
its reasonable and documented costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Credit Documents and any such other
documents, including the reasonable fees, disbursements and other charges of counsel to the Agent,
(c) to pay, indemnify, and hold harmless each Lender and Agent from, any and all recording and
filing fees, (d) to pay, indemnify, and hold harmless each Lender and Agent and their respective
directors, officers, employees, trustees, investment advisors and agents from and against any and
all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever, including reasonable and documented
fees, disbursements and other charges of counsel, with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other Credit Documents and any
such other documents, including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law (other than by such indemnified
person or any of its Related Parties) or to any actual or alleged presence, release or threatened
release of Hazardous Materials involving or attributable to the
operations of the Parent Borrower, any of its Subsidiaries or any of the Real Estate (all the
foregoing in this
clause (d)
, collectively, the “
indemnified liabilities
”) and (e) to pay
for up to two appraisals and field examinations and the preparation of Reports related thereto in
each calendar year based on the fees charged by third parties retained by the Administrative Agent
(notwithstanding any reference to “out-of-pocket” above in this
Section 14.5
);
provided
that the Borrowers shall have no obligation hereunder to any Administrative Agent
or any Lender nor any of their respective Related Parties with respect to indemnified liabilities
to the extent attributable to (i) the gross negligence, bad faith or willful misconduct of the
party to be indemnified or any of its Related Parties, (ii) any material breach of any Credit
Document by the party to be indemnified or (iii) disputes among the Administrative Agent, the
Lenders and/or their transferees. All amounts payable under this
Section 14.5
shall be
paid within ten Business Days of receipt by the Parent Borrower of an invoice relating thereto
setting forth such expense in reasonable retail. The agreements in this
Section 14.5
shall
survive repayment of the Loans and all other amounts payable hereunder.
22.6.
Successors and Assigns; Participations and Assignments
.
(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns permitted hereby (including any
Affiliate of the Letter of Credit Issuer that issues any Letter of Credit), except that (i) except
as expressly permitted by
Section 10.3
, no Borrower may assign or otherwise transfer any of
its rights or obligations hereunder without the prior written consent of the Administrative Agent
and each Lender (and any attempted assignment or transfer by any Borrower without such consent
shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this
Section 14.6
. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person (other than the
parties hereto, their respective successors and assigns permitted hereby (including any Affiliate
of the Letter of
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Credit Issuer that issues any Letter of Credit), Participants (to the extent
provided in
clause (c)
of this
Section 14.6
) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent, the Collateral Agent,
the Letter of Credit Issuer and the Lenders) any legal or equitable right, remedy or claim under or
by reason of this Agreement.
(b) (i) Subject to the conditions set forth in
clause (b)(ii)
below, any Lender may at
any time assign to one or more assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitments and the Loans (including participations in
L/C Obligations or Swingline Loans) at the time owing to it) with the prior written consent (such
consent not be unreasonably withheld or delayed; it being understood that, without limitation, the
Parent Borrower shall have the right to withhold or delay its consent to any assignment if, in
order for such assignment to comply with applicable law, any Borrower would be required to obtain
the consent of, or make any filing or registration with, any Governmental Authority) of:
(A) the Parent Borrower (which consent shall not be unreasonably withheld or delayed),
provided
that, subject to clause (g) below, no consent of the Parent Borrower
shall be required for an assignment to a Lender, an Affiliate of a Lender (unless
increased costs would result therefrom unless an Event of Default under
Section 11.1
or
Section 11.5
has occurred and is continuing), an Approved Fund or, if an Event of
Default under
Section 11.1
or
Section 11.5
has occurred and is continuing,
any other assignee; and
(B) the Administrative Agent (which consent shall not be unreasonably withheld or
delayed), the Swingline Lender and the applicable Letter of Credit Issuer.
Notwithstanding the foregoing, no such assignment shall be made to a natural person.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative Agent) shall
not be less than $5,000,000, and increments of $1,000,000 in excess thereof, or unless each
of the Parent Borrower and the Administrative Agent otherwise consents (which consents shall
not be unreasonably withheld or delayed),
provided
that no such consent of the
Parent Borrower shall be required if an Event of Default under
Section 11.1
or
Section 11.5
has occurred and is continuing;
provided
,
further
, that
contemporaneous assignments to a single assignee made by Affiliates of Lenders and related
Approved Funds shall be aggregated for purposes of meeting the minimum assignment amount
requirements stated above;
(B) each partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender’s rights and obligations under this Agreement,
provided
that this clause shall not be construed to prohibit the assignment of a proportionate part
of
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all the assigning Lender’s rights and obligations in respect of one Class of Commitments
or Loans;
(C) The parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with a processing and recordation fee in the
amount of $3,500;
provided
that the Administrative Agent may, in its sole
discretion, elect to waive such processing and recordation fee in the case of any
assignment; and
(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an administrative questionnaire in a form approved by the Administrative Agent (the
“
Administrative Questionnaire
”).
(iii) Subject to acceptance and recording thereof pursuant to
clause (b)(iv)
of this
Section 14.6
, from and after the effective date specified in each Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations
under this Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of
Sections 2.10
,
2.11
,
3.5
,
5.4
and
14.5
). Any assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this
Section 14.6
shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and obligations in accordance
with
clause (c)
of this
Section 14.6
.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall
maintain at the Administrative Agent’s Office a copy of each Assignment and Acceptance delivered to
it and a register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amount of the Loans and any payment made by the Letter of Credit
Issuer under any Letter of Credit owing to, each Lender pursuant to the terms hereof from time to
time (the “
Register
”). Further, each Register shall contain the name and address of the
Administrative Agent and the lending office through which each such Person acts under this
Agreement. The entries in the Register shall be conclusive, and the Borrowers, the Administrative
Agent, the Collateral Agent, the Letter of Credit Issuer and the Lenders shall treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrowers, the Collateral Agent, the Letter of Credit Issuer and
any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning
Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation fee referred to in
clause
(b)
of this
Section 14.6
and any written consent to such
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assignment required by
clause (b)
of this
Section 14.6
, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the Register.
(c) (i) Any Lender may, without the consent of any Borrower, any Administrative Agent, the
Letter of Credit Issuer or the Swingline Lender, sell participations to one or more banks or other
entities (each, a “
Participant
”) in all or a portion of such Lender’s rights and obligations under
this Agreement (including all or a portion of its Commitments and the Loans owing to it),
provided
that (A) such Lender’s obligations under this Agreement shall remain unchanged,
(B) such Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrowers, the Administrative Agent, the Letter of Credit Issuer and
the other Lenders shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or waiver of any
provision of this Agreement or any other Credit Document,
provided
that such agreement or
instrument may provide that such Lender will not, without the consent of the Participant, agree to
any amendment, modification or waiver described in
clause (i)
of the proviso to
Section
14.1
that affects such Participant. Subject to
clause (c)(ii)
of this
Section
14.6
, the Borrowers agree that each Participant shall be entitled to the benefits of
Sections 2.10
,
2.11
and
5.4
to the same extent as if it were a Lender,
provided
that such Participant agrees to be subject to the requirements of those Sections
as though it were a Lender and had acquired its interest by assignment pursuant to
clause
(b)
of this
Section 14.6
. To the extent permitted by law, each Participant also shall
be entitled to the benefits of
Section 14.8(b)
as though it were a Lender,
provided
such Participant agrees to be subject to
Section 14.8(a)
as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater payment under
Section
2.10
,
2.11
or
5.4
than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Parent Borrower’s prior written consent (which
consent shall not be unreasonably withheld).
(d) Any Lender may, without the consent of any Borrower or the Administrative Agent, at any
time pledge or assign a security interest in all or any portion of its rights under this Agreement
to secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this
Section 14.6
shall not apply to any such pledge or
assignment of a security interest,
provided
that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for such Lender as a party hereto. In order to facilitate such pledge or
assignment, the Borrowers hereby agree that, upon request of any Lender at any time and from time
to time after any Borrower has made its initial borrowing hereunder, each Borrower shall provide to
such Lender, at such Borrower’s own expense, a promissory note, substantially in the form of
Exhibit K
evidencing the New Revolving Credit Loans and Swingline Loans, respectively,
owing to such Lender.
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(e) Subject to
Section 14.16
, the Borrowers authorize each Lender to disclose to any
Participant, secured creditor of such Lender or assignee (each, a “
Transferee
”) and any prospective
Transferee any and all financial information in such Lender’s possession concerning a Borrower and
its Affiliates that has been delivered to such Lender by or on behalf of such Borrower and its
Affiliates pursuant to this Agreement or that has been delivered to such Lender by or on behalf of
such Borrower and its Affiliates in connection with such Lender’s credit evaluation of such
Borrower and its Affiliates prior to becoming a party to this Agreement.
(f) The words “execution,” “signed,” “signature,” and words of like import in any Assignment
and Acceptance shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or enforceability as a
manually executed signature or the use of a paper-based recordkeeping system, as the case may be,
to the extent and as provided for in any applicable law, including the Federal Electronic
Signatures in Global and National Commerce Act, the New York State Electronic Signatures and
Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
(g) Notwithstanding anything to the contrary in
clause (b)
above, unless an Event of
Default under
Section 11.1
or
Section 11.5
has occurred and is continuing, no
assignment by any Lender of all or any portion of its rights and obligations under this Agreement
shall be permitted without the consent of the Parent Borrower if, after giving effect to such
assignment, the assignee in respect thereof, taken together with its Affiliates and Approved Funds,
would hold in the aggregate more than 25% of the Total New Revolving Exposure.
22.7.
Replacements of Lenders under Certain Circumstances
.
(a) The Borrowers shall be permitted to replace any Lender that (a) requests reimbursement for
amounts owing pursuant to
Section 2.10
,
3.5
or
5.4
, (b) is affected in the
manner described in
Section 2.10(a)(iii)
and as a result thereof any of the actions
described in such Section is required to be taken or (c) becomes a Defaulting Lender, with a
replacement bank or other financial institution,
provided
that (i) such replacement does
not conflict with any Requirement of Law, (ii) no Event of Default under
Section 11.1
or
11.5
shall have occurred and be continuing at the time of such replacement, (iii) the
Borrowers shall repay (or the replacement bank or institution shall purchase, at par) all Loans and
other amounts (other than any disputed amounts), pursuant to
Section 2.10
,
2.11
,
3.5
or
5.4
, as the case may be) owing to such replaced Lender prior to the date of
replacement, (iv) the replacement bank or institution, if not already a Lender, and the terms and
conditions of such replacement, shall be reasonably satisfactory to the Administrative Agent, (v)
the replaced Lender shall be obligated to make such replacement in accordance with the provisions
of
Section 14.6
(
provided
that the Borrowers shall be obligated to pay the
registration and processing fee referred to therein) and (vi) any such replacement shall not be
deemed to be a waiver of any rights that the Borrowers, the Administrative Agent or any other
Lender shall have against the replaced Lender.
(b) If any Lender (such Lender, a “
Non-Consenting Lender
”) has failed to consent to a proposed
amendment, waiver, discharge or termination that pursuant to the terms of
Section 14.1
requires the consent of all of the Lenders affected or the Supermajority Lenders and
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with respect
to which the Required Lenders shall have granted their consent, then provided no Event of Default
then exists, the Borrowers shall have the right (unless such Non-Consenting Lender grants such
consent) to replace such Non-Consenting Lender by requiring such Non-Consenting Lender to assign
its Loans, and its Commitments hereunder to one or more assignees reasonably acceptable to the
Administrative Agent,
provided
that: (a) all Obligations of the Borrowers owing to such
Non-Consenting Lender being replaced shall be paid in full to such Non-Consenting Lender
concurrently with such assignment, and (b) the replacement Lender shall purchase the foregoing by
paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and
unpaid interest thereon. In connection with any such assignment, the Borrowers, Administrative
Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with
Section 14.6
.
22.8.
Adjustments; Set-off
.
(a) If any Lender (a “
benefited Lender
”) 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 set-off, pursuant to events or proceedings of the nature
referred to in
Section 11.5
, or otherwise), in a greater proportion than any such
payment to or collateral received by any other Lender, if any, in respect of such other Lender’s
Loans, or interest thereon, such benefited Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender’s Loan, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefited Lender to share the excess payment or benefits of such collateral
or proceeds ratably with each of the Lenders;
provided
,
however
, that if all or any
portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) After the occurrence and during the continuance of an Event of Default, in addition to any
rights and remedies of the Lenders provided by law, except as provided in the last sentence of this
subclause (b)
, each Lender shall have the right, without prior notice to any Borrower, any
such notice being expressly waived by each Borrower to the extent permitted by applicable law, upon
any amount becoming due and payable by any Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute
or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrowers. Each Lender agrees promptly
to notify such Borrower (and the Parent Borrower, if other) and the Administrative Agent after any
such set-off and application made by such Lender,
provided
that the failure to give such
notice shall not affect the validity of such set-off and application. Notwithstanding anything to
the contrary in any Credit Document, any Secured Party and its Affiliates (and each Participant of
any Lender or any of its Affiliates) that is a Government Receivables Bank shall not have the right
and hereby expressly waives any rights it might otherwise have, to set-off or appropriate and apply
any or all deposits (general or special, time or demand, provisional or final), in any currency,
and any other credits, indebtedness or
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claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Secured
Party or its Affiliates (and each Participant of any Lender or any of its Affiliates) or any branch
or agency thereof in a Government Receivables Deposit Account (but no other deposit account or any
subsequent accounts to which the proceeds of Government Accounts may be transferred) to or for the
credit or the account of the Borrowers, in each case to the extent necessary for the Credit Parties
and each Secured Party and its Affiliates (and each Participant of any Lender and its Affiliates)
to remain in compliance with Medicare, Medicaid, TRICARE, CHAMPVA or any other applicable laws,
rules or regulations of a Government Agency.
22.9.
Counterparts
. This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts (including by facsimile or other electronic
transmission), 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 Borrowers and the Administrative Agent.
22.10.
Severability
. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
22.11.
Integration
. This Agreement and the other Credit Documents represent the
agreement of the Borrowers, the Collateral Agent, the Administrative Agent and the Lenders with
respect to the subject matter hereof, and there are no promises, undertakings, representations or
warranties by any Borrower, the Administrative Agent, the Collateral Agent nor any Lender relative
to subject matter hereof not expressly set forth or referred to herein or in the other Credit
Documents.
22.12.
GOVERNING LAW
. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
22.13.
Submission to Jurisdiction; Waivers
. Each Borrower irrevocably and
unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to
this Agreement and the other Credit Documents to which it is a party, 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;
(b) consents that any such action or proceeding may be brought in such courts and
waives any objection that it may have had as of the Original Closing Date or thereafter have
to the venue of any such action or proceeding in any such court or that
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such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such Person at its address set forth on
Schedule 14.2
to
the Original Credit Agreement at such other address of which the Administrative Agent shall
have been notified pursuant to
Section 14.2
;
(d) agrees that nothing herein shall affect the right to effect service of process in
any other manner permitted by law or shall limit the right to sue in any other jurisdiction;
and
(e) waives, to the maximum extent not prohibited by law, any right it may have to claim
or recover in any legal action or proceeding referred to in this
Section 14.13
any
special, exemplary, punitive or consequential damages.
22.14.
Acknowledgments
. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Credit Documents;
(b) (i) the credit facilities provided for hereunder and any related arranging or other
services in connection therewith (including in connection with any amendment, waiver or
other modification hereof or of any other Credit Document) are an arm’s-length commercial
transaction between the Borrowers, on the one hand, and the Administrative Agent, the Lender
and the other Agents on the other hand, and the Borrowers and the other Credit Parties are
capable of evaluating and understanding and understand and accept the terms, risks and
conditions of the transactions contemplated hereby and by the other Credit Documents
(including any amendment, waiver or other modification hereof or thereof); (ii) in
connection with the process leading to such transaction, each of the Administrative Agent
and the other Agents, is and has been acting solely as a principal and is not the financial
advisor, agent or fiduciary for any of the Borrowers, any other Credit Parties or any of
their respective Affiliates, stockholders, creditors or employees or any other Person; (iii)
neither the Administrative Agent nor any other Agent has assumed or will assume an advisory,
agency or fiduciary responsibility in favor of any Borrower or any other Credit Party with
respect to any of the transactions contemplated hereby or the process leading thereto,
including with respect to any amendment, waiver or other modification hereof or of any other
Credit Document (irrespective of whether the Administrative Agent or other Agent has advised
or is currently advising any of the Borrowers, the other Credit Parties or their respective
Affiliates on other matters) and neither the Administrative Agent or other Agent has any
obligation to any of any Borrowers, the other Credit Parties or their respective Affiliates
with respect to the transactions contemplated hereby except those obligations expressly set
forth herein and in the other Credit Documents; (iv) the Administrative Agent and its
Affiliates may be engaged in a broad range of transactions that involve interests that
differ from those of the Borrowers and their respective Affiliates, and neither the
Administrative Agent nor
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other Agent has any obligation to disclose any of such interests by
virtue of any advisory, agency or fiduciary relationship; and (v) neither the Administrative
Agent nor any other Agent has provided and none will provide any legal, accounting,
regulatory or tax advice with respect to any of the transactions contemplated hereby
(including any amendment, waiver or other modification hereof or of any other Credit
Document) and each Borrower has consulted its own legal, accounting, regulatory and tax
advisors to the extent it has deemed appropriate. Each Borrower hereby waives and releases,
to the fullest extent permitted by law, any claims that it may have against the
Administrative Agent or any other Agent with respect to any breach or alleged breach of
agency or fiduciary duty; and
(c) no joint venture is created hereby or by the other Credit Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Lenders or among any
Borrower on the one hand, and any Lender on the other hand.
22.15.
WAIVERS OF JURY TRIAL
. EACH BORROWER, EACH AGENT AND EACH LENDER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
22.16.
Confidentiality
. The Administrative Agent and each Lender shall hold all
non-public information furnished by or on behalf of the Parent Borrower or any of its Subsidiaries
in connection with such Lender’s evaluation of whether to become a Lender hereunder or obtained by
such Lender or the Administrative Agent pursuant to the requirements of this Agreement
(“
Confidential Information
”), confidential in accordance with its customary procedure for handling
confidential information of this nature and (in the case of a Lender that is a bank) in accordance
with safe and sound banking practices and in any event may make disclosure as required or requested
by any governmental agency or representative thereof or pursuant to legal process or (a) to such
Lender’s or the Administrative Agent’s attorneys, professional advisors, independent auditors,
trustees or Affiliates, (b) to an investor or prospective investor in a Securitization that agrees
its access to information regarding the Credit Parties, the Loans and the Credit Documents is
solely for purposes of evaluating an investment in a Securitization and who agrees to treat such
information as confidential, (c) to a trustee, collateral manager, servicer, backup servicer,
noteholder or secured party in connection with the administration, servicing and reporting on the
assets serving as collateral for a securitization and who agrees to treat such information as
confidential and (d) to a nationally recognized ratings agency that requires access to information
regarding the Credit Parties, the Loans and Credit Documents in connection with ratings issued with
respect to a Securitization;
provided
that unless specifically prohibited by applicable
law or court order, each Lender and the Administrative Agent shall notify the Parent Borrower of
any request made to such Lender or the Administrative Agent by any governmental agency or
representative thereof (other than any such request in connection with an examination of the
financial condition of such Lender by such governmental agency) for disclosure of any such
non-public information prior to disclosure of such information, and provided, further, that in no
event shall any Lender or the Administrative Agent be obligated or required to return any materials
furnished by the Parent Borrower or any Subsidiary. Each Lender and the Administrative Agent
agrees that it will not provide to
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prospective Transferees or to any pledgee referred to in
Section 14.6
or to prospective direct or indirect contractual counterparties in swap
agreements to be entered into in connection with Loans made hereunder any of the Confidential
Information unless such Person is advised of and agrees to be bound by the provisions of this
Section 14.16
.
22.17.
Direct Website Communications
.
(a) (i) Any Borrower may, at its option, provide to the Administrative Agent any information,
documents and other materials that it is obligated to furnish to the Administrative Agent pursuant
to the Credit Documents, including, without limitation, all notices, requests, financial
statements, financial and other reports, certificates and other information materials, but
excluding any such communication that (A) relates to a request for a new, or a conversion of an
existing, borrowing or other extension of credit (including any election of an interest rate or
interest period relating thereto), (B) relates to the payment of any principal or other amount due
under this Agreement prior to the scheduled date therefor, (C) provides notice of any default or
event of default under this Agreement or (D) is required to be delivered to satisfy any condition
precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit
thereunder (all such non-excluded communications being referred to herein collectively as
“
Communications
”), by transmitting the Communications in an electronic/soft medium in a format
reasonably acceptable to the Administrative Agent to the Administrative Agent at
liliana.claar@bankofamerica.com. Nothing in this
Section 14.17
shall prejudice the right
of the Borrowers, the Administrative Agent or any Lender to give any notice or other communication
pursuant to any Credit Document in any other manner specified in such Credit Document.
(ii) The Administrative Agent agrees that the receipt of the Communications by the
Administrative Agent at its e-mail address set forth above shall constitute effective delivery of
the Communications to the Administrative Agent for purposes of the Credit Documents. Each Lender
agrees that notice to it (as provided in the next sentence) specifying that the Communications have
been posted to the Platform shall constitute effective delivery of the Communications to such
Lender for purposes of the Credit Documents. Each Lender agrees (A) to notify the Administrative
Agent in writing (including by electronic communication) from time to time of such Lender’s e-mail
address to which the foregoing notice may be sent by electronic transmission and (B) that the
foregoing notice may be sent to such e-mail address.
(b) The Borrowers hereby acknowledge that (a) the Administrative Agent and/or the other Agents
will make available to the Lenders and the Letter of Credit Issuer materials and/or information
provided by or on behalf of the Borrowers hereunder (collectively, “
Borrower Materials
”) by posting
the Borrower Materials on IntraLinks or another similar electronic system (the “
Platform
”) and (b)
certain of the Lenders may be “public-side” Lenders (
i.e
., Lenders that do not wish to receive
material non-public information with respect to the Borrowers or their securities) (each, a “
Public
Lender
”). Each Borrower hereby agrees that it will use commercially reasonable efforts to identify
that portion of the Borrower Materials that do not contain any material non-public information and
that may be distributed to the Public Lenders and that (x) all such Borrower Materials shall be
clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC”
shall appear prominently
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on the first page thereof and (y) by marking Borrower Materials “PUBLIC,”
the Parent Borrower shall be deemed to have authorized the Administrative Agent and the other
Agents to make such Borrower Materials available through a portion of the Platform designated
“Public Investor”.
Notwithstanding the foregoing or any other provision of this Agreement to the contrary,
neither the Parent Borrower nor any of its Related Parties shall be liable, or responsible in any
manner, for the use by any Agent, any Lender, any Participant or any of their Related Parties of
the Borrower Materials. In addition, it is agreed that (i) to the extent any Borrower Materials
constitute Confidential Information, they shall be subject to the confidentiality provisions of
Section 14.16
and (ii) the Borrowers shall be under no obligation to designate any Borrower
Materials as “PUBLIC”.
(c) THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW)
DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE
PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.
NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR
OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE
PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively,
the “
Agent Parties
”) have any liability to any Borrower, any Lender, the Letter of Credit Issuer or
any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort,
contract or otherwise) arising out of any Borrower’s or the Administrative Agent’s transmission of
Borrower Materials through the internet, except to the extent the liability of any Agent Party
resulted from such Agent Party’s (or any of its Related Parties’) gross negligence, bad faith or
willful misconduct or material breach of the Credit Documents.
22.18.
USA Patriot Act
. Each Lender hereby notifies the Borrowers that pursuant to
the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “
Patriot Act
”), it is required to obtain, verify and record information that identifies
each Borrower, which information includes the name and address of each Borrower and other
information that will allow such Lender to identify each Borrower in accordance with the Patriot
Act.
22.19.
Joint and Several Liability
. All Loans, upon funding, shall be deemed to be
jointly funded to and received by the Borrowers. Each Borrower is jointly and severally liable
under this Agreement for all Obligations, regardless of the manner or amount in which proceeds of
Loans are used, allocated, shared or disbursed by or among the Borrowers themselves, or the manner
in which an Agent and/or any Lender accounts for such Loans or other extensions of credit on its
books and records. Each Borrower shall be liable for all amounts due to an Agent and/or any Lender
from the Borrowers under this Agreement, regardless of which Borrower actually receives Loans or
other extensions of credit hereunder or the amount of such Loans and extensions of credit received
or the manner in which such Agent and/or such Lender accounts for such Loans or other extensions
of credit on its books and
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records. Each Borrower’s Obligations with respect to Loans and other
extensions of credit made to it, and such Borrower’s Obligations arising as a result of the joint
and several liability of such Borrower hereunder with respect to Loans made to the other Borrowers
hereunder shall be separate and distinct obligations, but all such Obligations shall be primary
obligations of such Borrower. The Borrowers acknowledge and expressly agree with the Agents and
each Lender that the joint and several liability of each Borrower is required solely as a condition
to, and is given solely as inducement for and in consideration of, credit or accommodations
extended or to be extended under the Credit Documents to any or all of the other Borrowers and is
not required or given as a condition of extensions of credit to such Borrower. Each Borrower’s
Obligations under this Agreement shall, to the fullest extent permitted by law, be unconditional
irrespective of (i) the validity or enforceability, avoidance, or subordination of the Obligations
of any other Borrower or of any promissory note or other document evidencing all or any part of the
Obligations of any other Borrower, (ii) the absence of any attempt to collect the Obligations from
any other Borrower, or any other security therefor, or the absence of any other action to enforce
the same, (iii) the waiver, consent, extension, forbearance, or granting of any indulgence by an
Agent and/or any Lender with respect to any provision of any instrument evidencing the Obligations
of any other Borrower, or any part thereof, or any other agreement executed as of the Original
Closing Date or thereafter executed by any other Borrower and delivered to an Agent and/or any
Lender, (iv) the failure by an Agent and/or any Lender to take any steps to perfect and maintain
its security interest in, or to preserve its rights to, any security or collateral for the
Obligations of any other Borrower, (v) an Agent’s and/or any Lender’s election, in any proceeding
instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (vi) any borrowing or grant of a security interest by any other Borrower, as
debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the disallowance of all or any
portion of an Agent’s and/or any Lender’s claim(s) for the repayment of the Obligations of any
other Borrower under Section 502 of the Bankruptcy Code, or (viii) any other circumstances which
might constitute a legal or equitable discharge or defense of a guarantor or of any other Borrower.
With respect to any Borrower’s Obligations arising as a result of the joint and several liability
of the Borrowers hereunder with respect to New Revolving Credit Loans or other extensions of credit
made to any of the other Borrowers hereunder, such Borrower waives, until the Obligations shall
have been paid in full and this Agreement shall have been terminated, any right to enforce any
right of subrogation or any remedy which an Agent and/or any Lender had as of the Original Closing
Date or may have thereafter against any other Borrower, any endorser or any guarantor of all or any
part of the Obligations, and any benefit of, and any right to participate in, any security or
collateral given to an Agent and/or any Lender to secure payment of the Obligations or any other
liability of any Borrower to an Agent and/or any Lender. Upon any Event of Default, the Agents may
proceed directly and at once, without notice, against any Borrower to collect and recover the full
amount, or any portion of the Obligations, without first proceeding against any other Borrower or
any other Person, or against any security or collateral for the Obligations. Each Borrower
consents and agrees that the Agents shall be under no obligation to marshal any assets in favor of
any Borrower or against or in payment of any or all of the Obligations. Notwithstanding anything
to the contrary in the foregoing, none of the foregoing provisions of this Section 14.19 shall
apply to any Person released from its Obligations as a Borrower in accordance with Section 14.1.
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22.20.
Contribution and Indemnification Among the Borrowers
. Each Borrower is
obligated to repay the Obligations as a joint and several obligor under this Agreement. To the
extent that any Borrower shall, under this Agreement as a joint and several obligor, repay any of
the Obligations constituting Loans made to another Borrower hereunder or other Obligations incurred
directly and primarily by any other Borrower (an “
Accommodation Payment
”), then the Borrower making
such Accommodation Payment shall be entitled to contribution and indemnification from, and be
reimbursed by, each of the other Borrowers in an amount, for each of such other Borrowers, equal to
a fraction of such Accommodation Payment, the numerator of which fraction is such other Borrower’s
Allocable Amount (as defined below) and the denominator of which is the sum of the Allocable
Amounts of all of the Borrowers. As of any date of determination, the “
Allocable Amount
” of each
Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could
be asserted against such Borrower hereunder without (a) rendering such Borrower “insolvent” within
the meaning of Section 101(31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer
Act (“
UFTA
”) or Section 2 of the Uniform Fraudulent Conveyance Act (“
UFCA
”), (b) leaving such
Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Borrower
unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code
or Section 4 of the UFTA, or Section 5 of the UFCA. All rights and claims of contribution,
indemnification, and reimbursement under this Section shall be subordinate in right of payment to
the prior payment in full of the Obligations. The provisions of this Section shall, to the extent
expressly inconsistent with any provision in any Credit Document, supersede such inconsistent
provision.
22.21.
Agency of the Parent Borrower for Each Other Borrower
. Each of the other
Borrowers irrevocably appoints the Parent Borrower as its agent for all purposes relevant to this
Agreement, including the giving and receipt of notices and execution and delivery of all documents,
instruments, and certificates contemplated herein (including, without limitation, execution and
delivery to the Agents of Borrowing Base Certificates, Borrowing Requests and Notices of Conversion
or Continuation) and all modifications hereto. Any acknowledgment, consent, direction,
certification, or other action which might otherwise be valid or effective only if given or taken
by all or any of the Borrowers or acting singly, shall be valid and effective if given or taken
only by the Parent Borrower, whether or not any of the other Borrowers join therein, and the Agents
and the Lenders shall have no duty or obligation to make further inquiry with respect to the
authority of the Parent Borrower under this
Section 14.21
;
provided
that nothing in
this
Section 14.21
shall limit the effectiveness of, or the right of the Agents and the
Lenders to rely upon, any notice (including without limitation a Borrowing Request or Notices of
Conversion or Continuation), document, instrument, certificate, acknowledgment, consent, direction,
certification or other action delivered by any Borrower pursuant to this Agreement.
22.22.
Reinstatement
. This Agreement shall continue to be effective, or be reinstated, as the case may be, if at
any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any other Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Parent Borrower or any Subsidiary
Borrower, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, any
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Borrower or any substantial part of its property, or otherwise,
all as though such payments had not been made.
22.23.
Express Waivers by Borrowers in Respect of Cross Guaranties and Cross
Collateralization
. Each Borrower agrees as follows:
(a) Each Borrower hereby waives: (i) notice of acceptance of this Agreement; (ii)
notice of the making of any Loans, the issuance of any Letter of Credit or any other
financial accommodations made or extended under the Credit Documents or the creation or
existence of any Obligations; (iii) notice of the amount of the Obligations, subject,
however, to such Borrower’s right to make inquiry of the Administrative Agent to ascertain
the amount of the Obligations at any reasonable time; (iv) notice of any adverse change in
the financial condition of any other Borrower or of any other fact that might increase such
Borrower’s risk with respect to such other Borrower under the Credit Documents; (v) notice
of presentment for payment, demand, protest, and notice thereof as to any promissory notes
or other instruments among the Credit Documents; and (vii) all other notices (except if such
notice is specifically required to be given to such Borrower hereunder or under any of the
other Credit Documents to which such Borrower is a party) and demands to which such Borrower
might otherwise be entitled;
(b) Each Borrower hereby waives the right by statute or otherwise to require an Agent
or any Lender to institute suit against any other Borrower or to exhaust any rights and
remedies which an Agent or any Lender has or may have against any other Borrower. Each
Borrower further waives any defense arising by reason of any disability or other defense of
any other Borrower (other than the defense of payment in full) or by reason of the cessation
from any cause whatsoever of the liability of any such Borrower in respect thereof.
(c) Each Borrower hereby waives and agrees not to assert against any Agent, any Lender,
or any Letter of Credit Issuer: (i) any defense (legal or equitable) other than a defense
of payment, set-off, counterclaim, or claim which such Borrower may have had as of the
Original Closing Date or may have at any time thereafter against any other Borrower or any
other party liable under the Loan Documents; (ii) any defense, set-off, counterclaim, or
claim of any kind or nature available to any other Borrower (other than a defense of
payment) against any Agent, any Lender, or any Letter of Credit Issuer, arising directly or
indirectly from the present or future lack of perfection, sufficiency, validity, or
enforceability of the Obligations or any security therefor; (iii) any right or defense
arising by reason of any claim or defense based upon an election of remedies by
any Agent, any Lender, or any Letter of Credit Issuer under any applicable law; (iv)
the benefit of any statute of limitations affecting any other Borrower’s liability
hereunder;
(d) Each Borrower consents and agrees that, without notice to or by such Borrower and
without affecting or impairing the obligations of such Borrower hereunder, the Agents may
(subject to any requirement for consent of any of the Lenders to the extent required by this
Agreement), by action or inaction: (i) compromise, settle, extend the duration or the time
for the payment of, or discharge the performance of, or may
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refuse to or otherwise not
enforce the Letter of Credit Issuer documents; (ii) release all or any one or more parties
to any one or more of the Letter of Credit Issuer documents or grant other indulgences to
any other Borrower in respect thereof; (iii) amend or modify in any manner and at any time
(or from time to time) any of the Letter of Credit Issuer documents; or (iv) release or
substitute any Person liable for payment of the Obligations, or enforce, exchange, release,
or waive any security for the Obligations;
(e) Each Borrower represents and warrants to the Agents and the Lenders that such
Borrower is currently informed of the financial condition of all other Borrowers and all
other circumstances which a diligent inquiry would reveal and which bear upon the risk of
nonpayment of the Obligations. Each Borrower further represents and warrants that such
Borrower has read and understands the terms and conditions of the Credit Documents. Each
Borrower agrees that neither the Agents, any Lender, nor any Letter of Credit Issuer has any
responsibility to inform any Borrower of the financial condition of any other Borrower or of
any other circumstances which bear upon the risk of nonpayment or nonperformance of the
Obligations.
-163-
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to
be duly executed and delivered as of the date first above written.
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HCA INC.
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[ ABL Credit Agreement Signature Page ]
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The SUBSIDIARY BORROWERS listed on
Schedule 1 to the Original Credit Agreement
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By:
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Name:
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[ ABL Credit Agreement Signature Page ]
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BANK OF AMERICA, N.A., as Administrative Agent, as
Collateral Agent, as Swingline Lender, as Letter
of Credit Issuer and as a Lender
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[ ABL Credit Agreement Signature Page ]
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JPMORGAN CHASE BANK, N.A., as
Co-Syndication Agent and as a Lender
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CITIGROUP GLOBAL MARKETS INC., as
Joint Lead Arranger, Joint Bookrunner and
Co-Syndication Agent
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BANC OF AMERICA SECURITIES, LLC, as Joint Lead
Arranger and Bookrunner
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J.P. MORGAN SECURITIES INC., as Joint
Lead Arranger and Bookrunner
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[ ABL Credit Agreement Signature Page ]
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CITIGROUP GLOBAL MARKETS INC., as Joint
Lead Arranger and Bookrunner
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MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, as Joint Lead Arranger and Bookrunner
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[ ABL Credit Agreement Signature Page ]
Exhibit
21
ALABAMA
CareOne Home Health Services, Inc.
Four Rivers Medical Center PHO, Inc.
Selma Medical Center Hospital, Inc.
ALASKA
Chugach PT, Inc.
Columbia Behavioral Healthcare, Inc.
Columbia North Alaska Healthcare, Inc.
ARKANSAS
Columbia Health System of Arkansas, Inc.
BERMUDA
Parthenon Insurance Company, Limited
CALIFORNIA
Center for Advanced Imaging, LLC
CFC Investments, Inc.
CH Systems
Chino Community Hospital Corporation, Inc.
Columbia ASC Management, L.P.
Columbia Riverside, Inc.
Columbia/HCA San Clemente, Inc.
Encino Hospital Corporation, Inc.
Far West Division, Inc.
Galen-Soch, Inc.
Good Samaritan Surgery Center, L.P.
HCA Health Services of California, Inc.
Healdsburg General Hospital, Inc.
L E Corporation
Las Encinas Hospital
Los Gatos Surgical Center, a California Limited Partnership
Los Gatos Surgical Center
Los Robles Regional Medical Center
Los Robles Hospital & Medical Center
Los Robles SurgiCenter, LLC
Los Robles Surgicenter
MCA Investment Company
Mission Bay Memorial Hospital, Inc.
Neuro Affiliates Company
Riverside Healthcare System, L.P.
Riverside Community Hospital
Riverside Holdings, Inc.
Riverside Surgicenter, L.P.
San Joaquin Surgical Center, Inc.
San Jose Healthcare System, Inc.
San Jose Pathology Outreach, LLC
Southwest Surgical Clinic, Inc.
Surgicare of Good Samaritan, LLC
Surgicare of Los Gatos, Inc.
Surgicare of Los Robles, LLC
Surgicare of Riverside, LLC
Surgicare of West Hills, Inc.
West Hills Hospital
West Hills Hospital & Medical Center
West Hills Surgical Center, Ltd.
West Hills Surgical Center
West Los Angeles Physicians’ Hospital, Inc.
Westminster Community Hospital
Westside Hospital Limited Partnership
CAYMAN ISLANDS
Health Midwest Insurance Company, Ltd.
COLORADO
Altitude Mid Level Providers, LLC
Colorado Health Systems, Inc.
Columbine Psychiatric Center, Inc.
Continental Division I, Inc.
Diagnostic Mammography Services, G.P.
Galen of Aurora, Inc.
HCA-HealthONE LLC
North Suburban Medical Center
Presbyterian/St. Luke’s Medical Center
Rose Medical Center
Sky Ridge Medical Center
Swedish Medical Center
The Medical Center of Aurora
Health Care Indemnity, Inc.
HealthONE at Breckenridge, LLC
HealthONE Clear Creek, LLC
HealthONE Clinic Services — Behavioral Health, LLC
HealthONE Clinic Services — Cardiovascular, LLC
HealthONE Clinic Services — Medical Specialties, LLC
HealthONE Clinic Services — Neurosciences, LLC
HealthONE Clinic Services — Obstetrics and Gynecology, LLC
HealthONE Clinic Services — Occupational Medicine, LLC
HealthONE Clinic Services — Pediatric Specialties, LLC
HealthONE Clinic Services — Primary Care, LLC
HealthONE Clinic Services — Surgical Specialties, LLC
HealthONE Clinic Services LLC
HealthOne Lincoln Investment, LLC
HealthONE Lowry, LLC
HealthONE of Denver, Inc.
HealthONE Urologic, LLC
HealthOne Westside Investment, LLC
Hospital-Based CRNA Services, Inc.
Lakewood Surgicare, Inc.
Mountain View MRI Associates, Ltd.
MOVCO, Inc.
New Rose Holding Company, Inc.
Rocky Mountain Pediatric Hematology Oncology, LLC
Rose Health Partners, LLC
Rose POB, Inc.
Surgicare of Denver Mid-Town, Inc.
Surgicare of North Suburban, LLC
Surgicare of Rose, LLC
Surgicare of Sky Ridge, LLC
Surgicare of Southeast Denver, Inc.
Surgicare of Swedish, LLC
Surgicare of Thornton, LLC
Swedish Medpro, Inc.
Swedish MOB II, Inc.
Swedish MOB III, Inc.
Swedish MOB IV, Inc.
Swedish MOB, LLC
DELAWARE
AC Med, LLC
Aligned Business Consortium Group, L.P.
Alpharetta Imaging Services, LLC
Alternaco, LLC
American Medicorp Development Co.
Ami-Point GA, LLC
AOGN, LLC
AR Holding 1, LLC
AR Holding 2, LLC
AR Holding 3, LLC
AR Holding 4, LLC
AR Holding 5, LLC
AR Holding 6, LLC
AR Holding 7, LLC
AR Holding 8, LLC
AR Holding 9, LLC
AR Holding 10, LLC
AR Holding 11, LLC
AR Holding 12, LLC
AR Holding 13, LLC
AR Holding 14, LLC
AR Holding 15, LLC
AR Holding 16, LLC
AR Holding 17, LLC
AR Holding 18, LLC
AR Holding 19, LLC
AR Holding 20, LLC
AR Holding 21, LLC
AR Holding 22, LLC
AR Holding 23, LLC
AR Holding 24, LLC
AR Holding 25, LLC
AR Holding 26, LLC
AR Holding 27, LLC
AR Holding 28, LLC
AR Holding 29, LLC
AR Holding 30, LLC
Arkansas Medical Park, LLC
ASD Shared Services, LLC
Atlanta Healthcare Management, L.P.
Atlanta Market GP, Inc.
Atlanta Orthopaedic Surgical Center, Inc.
Aventura Cancer Center Manager, LLC
Bayshore Partner, LLC
Belton Family Practice Clinic, LLC
Blake Imaging, LLC
Boca Raton Open Imaging Center, LLC
Boynton Beach EFL Imaging Center, LLC
Bradenton Outpatient Services, LLC
Brandon Imaging Manager, LLC
Brandon Regional Cancer Center, LLC
Brandon SRS Management Services, LLC
C/HCA Capital, Inc.
C/HCA, Inc.
California Imaging Center Manager, LLC
Cancer Centers of North Florida, LLC
Cancer Services of Aventura, LLC
Cardiovascular Center of Fort Worth, L.P.
Cardiovascular Ventures of Fort Worth, LLC
Carolina Forest Imaging Manager, LLC
Centerpoint Medical Center of Independence, LLC
Centerpoint Medical Center
Central Florida Diagnostic Cardiology Center, LLC
Central Florida Imaging Services, LLC
Central Health Holding Company, Inc.
Central Health Services Hospice, Inc.
Chattanooga ASC, LLC
CHC Finance Co.
CHC Payroll Agent, Inc.
CHCA Bayshore, L.P.
Bayshore Medical Center
East Houston Regional Medical Center, a Campus of Bayshore Medical Center
CHCA Clear Lake, L.P.
Clear Lake Regional Medical Center
CHCA Conroe, L.P.
Conroe Regional Medical Center
CHCA Hospital LP, Inc.
CHCA Mainland, L.P.
Mainland Medical Center
CHCA Palmyra Partner, Inc.
CHCA West Houston, L.P.
West Houston Medical Center
CHCA Woman’s Hospital, L.P.
Woman’s Hospital of Texas
Cheray and Samuels, LLC
Clear Lake Cardiac Catheterization Center, L.P.
Clear Lake Cardiac GP, LLC
Clear Lake Merger, LLC
Clear Lake Regional Partner, LLC
ClinicServ, LLC
CMS GP, LLC
Coastal Bend Hospital, Inc.
Coastal Healthcare Services, Inc.
Cobb Imaging Services, LLC
Coliseum Health Group, LLC
Coliseum Medical Center, LLC
Coliseum Medical Centers
Coliseum Psychiatric Center, LLC
Coliseum Psychiatric Center
Coliseum Surgery Center, L.L.C.
Columbia Behavioral Health, LLC
Columbia Hospital (Palm Beaches) Limited Partnership
Columbia Hospital
Columbia Hospital Corporation of Fort Worth
Columbia Hospital Corporation of Houston
Columbia Hospital Corporation-Delaware
Columbia Palm Beach GP, LLC
Columbia Rio Grande Healthcare, L.P.
Rio Grande Regional Hospital
Columbia Valley Healthcare System, L.P.
Valley Regional Medical Center
Columbia Westbank Healthcare, L.P.
Columbia/HCA Middle East Management Company
Columbia-SDH Holdings, Inc.
Columbus Cath Lab, Inc.
Columbus Cath Lab, LLC
Concept EFL Imaging Center, LLC
Concept West EFL Imaging Center, LLC
Conroe Partner, LLC
CoralStone Management, Inc.
COSCORP, LLC
CPS TN Processor 1, Inc.
CRMC-M, LLC
Dallas/Ft. Worth Physician, LLC
Danforth Hospital, Inc.
Delray EFL Imaging Center, LLC
Delta Division, Inc.
Doctors Hospital of Augusta, LLC
Doctors Hospital
Douglasville Imaging Services, LLC
Drake Development Company
Drake Development Company III
Drake Development Company IV
Drake Management Company
EarthStone HomeHealth Company
East Florida Imaging Holdings, LLC
Edmond Regional Medical Center, LLC
Edmond Medical Center
Electa Health Network, LLC
EMMC, LLC
EP Health, LLC
EP Holdco, LLC
EPIC Development, Inc.
EPIC Diagnostic Centers, Inc.
EPIC Healthcare Management Company
EPIC Surgery Centers, Inc.
Extendicare Properties, Inc.
Fairview Park GP, LLC
Fairview Partner, LLC
Family Care of E. Jackson County, LLC
FHAL, LLC
Forest Park Surgery Pavilion, Inc.
Forest Park Surgery Pavilion, L.P.
Fort Bend Hospital, Inc.
Galen (Kansas) Merger, LLC
Galen BH, Inc.
Galen Finance, LLC
Galen Global Finance, Inc.
Galen GOK, LLC
Galen Holdco, LLC
Galen Hospital Alaska, Inc.
Alaska Regional Hospital
Galen International Capital, Inc.
Galen International Holdings, Inc.
Galen KY, LLC
Galen LA, LLC
Galen MCS, LLC
Galen Medical Corporation
Galen MRMC, LLC
Galen NMC, LLC
Galen NSH, LLC
Galen SOM, LLC
Galen SSH, LLC
Galendeco, Inc.
GalTex, LLC
Garden Park Community Hospital Limited Partnership
Gardens EFL Imaging Center, LLC
General Healthserv, LLC
Georgia Health Holdings, Inc.
Georgia, L.P.
GHC-Galen Health Care, LLC
Good Samaritan Hospital, L.P.
Good Samaritan Hospital
Good Samaritan Hospital, LLC
Goppert-Trinity Family Care, LLC
GPCH-GP, Inc.
Garden Park Medical Center
Grand Strand Regional Medical Center, LLC
Grand Strand Regional Medical Center
Grandview Health Care Clinic, LLC
H.H.U.K., Inc.
HCA — IT&S Field Operations, Inc.
HCA — IT&S Inventory Management, Inc.
HCA — IT&S TN Field Operations, Inc.
HCA Health Services of Midwest, Inc.
HCA Holdco, LLC
HCA Imaging Services of North Florida, Inc.
HCA International Finance LLP
HCA Management Services, L.P.
HCA Outpatient Imaging Services Group, Inc.
HCA Property GP, LLC
HCA Psychiatric Company
HCA Squared, LLC
HCA Switzerland Holding Sàrl
HCA Wesley Rehabilitation Hospital, Inc.
Health Services (Delaware), Inc.
Health Services Merger, Inc.
Healthcare Technology Assessment Corporation
Healthco, LLC
Healthnet of Kentucky, LLC
Healthserv Acquisition, LLC
Healthtrust MOB Tennessee, LLC
Healthtrust MOB, LLC
Healthtrust Purchasing Group, L.P.
Healthtrust, Inc. — The Hospital Company
Hearthstone Home Health, Inc.
Heathrow Imaging, LLC
Hendersonville ODC, LLC
Henrico Doctors Hospital — Forest Campus Property, LLC
HHNC, LLC
Highway 50 Real Estate, LLC
HM OMCOS, LLC
Hospital Corp., LLC
Hospital Development Properties, Inc.
Hospital Partners Merger, LLC
Houston Healthcare Holdings, Inc.
Houston Woman’s Hospital Partner, LLC
HSS Holdco, LLC
HSS Systems VA, LLC
HSS Systems, LLC
HTI Hospital Holdings, Inc.
Imaging Centers of California, L.P.
Imaging Services of Appomattox, LLC
Imaging Services of Jacksonville, LLC
Imaging Services of Louisiana Manager, LLC
Imaging Services of Louisiana, LLC
Imaging Services of Orlando, LLC
Imaging Services of Richmond, LLC
Imaging Services of Roanoke, LLC
Imaging Services of West Boynton, LLC
Independence Regional Medical Group, LLC
Indian Path, LLC
Indianapolis Hospital Partner, LLC
Integrated Regional Laboratories, LLP
Jackson County Medical Group, LLC
JCSH, LLC
JCSHLP, LLC
JFK Medical Center Limited Partnership
JFK Medical Center
Jupiter EFL Imaging Center, LLC
JV Investor, LLC
Kansas Healthserv, LLC
Katy Medical Center, Inc.
Kendall EFL Imaging Center, LLC
Kendall Regional Medical Center, LLC
Lakeland Medical Center, LLC
Lakeside Radiology, LLC
Lakeview Medical Center, LLC
Lakeview Regional Medical Center
Laredo Medco, LLC
Lee’s Summit Family Care, LLC
Lewis-Gale Medical Center, LLC
Lewis-Gale Medical Center
Low Country Health Services, Inc. of the Southeast
Macon Healthcare, LLC
Macon Northside Health Group, LLC
Macon Northside Hospital, LLC
Coliseum Northside Hospital
Mainland Partner, LLC
Management Services Holdings, Inc.
Management Services LP, LLC
Mayhill Cancer Center, LLC
Medical Arts Hospital of Texarkana, Inc.
Medical Care America, LLC
Medical Care Financial Services Corp.
Medical Care Real Estate Finance, Inc.
Medical Center of Plano Partner, LLC
Medical Centers of Oklahoma, LLC
Medical City Dallas Partner, LLC
Medical Corporation of America
Medical Office Buildings of Kansas, LLC
Medical Specialties, Inc.
Medistone Healthcare Ventures, Inc.
MediVision of Mecklenburg County, Inc.
MediVision of Tampa, Inc.
MediVision, Inc.
Memorial Southside Cancer Center, LLC
Miami Beach EFL Imaging Center, LLC
MidAmerica Oncology, LLC
Mid-Continent Health Services, Inc.
Middle Georgia Hospital, LLC
Midtown Diagnostics, LLC
Midwest Division — ACH, LLC
Allen County Hospital
Midwest Division — CMC, LLC
Midwest Division — LRHC, LLC
Lafayette Regional Health Center
Midwest Division — LSH, LLC
Lee’s Summit Hospital
Midwest Division — MCI, LLC
Midwest Division — MII, LLC
Midwest Division — MMC, LLC
Menorah Medical Center
Midwest Division — OPRMC, LLC
Overland Park Regional Medical Center
Midwest Division — PFC, LLC
Midwest Division — RMC, LLC
Research Medical Center
Midwest Division — RPC, LLC
Research Psychiatric Center
Midwest Division — TLM, LLC
Midwest Holdings, Inc.
Midwest Medicine Associates, LLC
Midwest Metropolitan Physicians Group, LLC
Mobile Corps., Inc.
MRT&C, Inc.
Nashville Shared Services General Partnership
New North Palm Beach County Surgery Center, Ltd.
North Augusta Imaging Management, LLC
North Augusta Imaging Services, LLC
North Brandon Imaging, LLC
North Florida Cancer Center Lake City, LLC
North Florida Cancer Center Live Oak, LLC
North Florida Cancer Center Tallahassee, LLC
North Florida Radiation Oncology, LLC
North Miami Beach Surgery Center Limited Partnership
North Miami Beach Surgical Center
North Miami Beach Surgical Center, LLC
North Tampa Imaging, LLC
North Texas Medical Center, Inc.
Northeast Florida Cancer Services, LLC
Northwest Fla. Home Health Agency, Inc.
Notami Hospitals, LLC
Notami, LLC
Notco, LLC
NTGP, LLC
NTMC Ambulatory Surgery Center, L.P.
NTMC Management Company
NTMC Venture, Inc.
Ocala Stereotactic Radiosurgery Partner, LLC
Ocala Stereotactic Radiosurgery, LLC
OHH Imaging Services, LLC
Oncology Services of Corpus Christi Manager, LLC
Oncology Services of Corpus Christi, LLC
Orlando Outpatient Surgical Center, Inc.
Outpatient Cardiovascular Center of Central Florida, LLC
Outpatient GP, LLC
Outpatient LP, LLC
Outpatient Services — Houston Imaging Manager, LLC
Outpatient Services — Houston Imaging Services, LLC
Outpatient Services — LAD, LLC
Outpatient Services Holdings, Inc.
Palm Beach EFL Imaging Center, LLC
Palms West Hospital Limited Partnership
Palms West Hospital
Palmyra Park GP, Inc.
Paragon SDS, Inc.
Paragon WSC, Inc.
Parkway Hospital, Inc.
Pearland Partner, LLC
Pinellas Medical, LLC
Pioneer Medical, LLC
Plano Heart Institute, L.P.
Plano Heart Management, LLC
Plantation General Hospital L.P.
Plantation General Hospital
PMM, Inc.
POH Holdings, LLC
Portsmouth Regional Ambulatory Surgery Center, LLC
Portsmouth Regional Ambulatory Surgery Center
Preferred Works WC, LLC
Primary Care Acquisition, Inc.
Primary Medical Management, Inc.
Radiation Oncology Manager, LLC
RCH, LLC
Red Rock at Maryland Parkway, LLC
Red Rock at Smoke Ranch, LLC
Red Rock Holdco, LLC
Reston Hospital Center, LLC
Reston Hospital Center
RHA MSO, LLC
Riverside Hospital, Inc.
Riverside Imaging, LLC
RMC HBP, LLC
Round Rock Hospital, Inc.
Samaritan, LLC
San Bernardino Imaging, LLC
San Jose Healthcare System, LP
Regional Medical Center of San Jose
San Jose Hospital, L.P.
San Jose Medical Center, LLC
San Jose, LLC
Sarah Cannon Research Institute, LLC
SCRI Holdings, LLC
SJMC, LLC
Sleep Lab at Menorah Medical Center, LLC
SMCH, LLC
South Bay Imaging, LLC
South Brandon Imaging, LLC
South Dade GP, LLC
South Valley Hospital, L.P.
Southtown Women’s Clinic, LLC
Spalding Rehabilitation L.L.C.
Spalding Rehabilitation Hospital
Spring Branch GP, LLC
Spring Branch LP, LLC
Spring Hill Imaging, LLC
Springview KY, LLC
Stereotactic Radiosurgery Systems of Brandon, LLC
Stones River Hospital, LLC
Suburban Medical Center at Hoffman Estates, Inc.
Summit General Partner, Inc.
Summit Medical Assoc., LLC
Summit Outpatient Diagnostic Center, LLC
Sun Bay Medical Office Building, Inc.
Sun City Imaging, LLC
Sun-Med, LLC
Sunrise Hospital and Medical Center, LLC
Sunrise Hospital & Medical Center
Surgicare of Denton, Inc.
Surgicare of Plano, Inc.
Surgico, LLC
Swedish MOB Acquisition, Inc.
TBHI Outpatient Services, LLC
Terre Haute Hospital GP, Inc.
Terre Haute Hospital Holdings, Inc.
Terre Haute Regional Hospital, L.P.
Terre Haute Regional Hospital
The Medical Group of Kansas City, LLC
Total Imaging — Parsons, LLC
Town Plaza Family Practice, LLC
Trident Medical Center, LLC
Trident Medical Center
Tuckahoe Surgery Center, LP
Tuckahoe Surgery Center
Ultra Imaging Management Services, LLC
Ultra Imaging of Tampa, LLC
Utah Medco, LLC
Value Health Management, Inc.
VHSC Plantation, LLC
Vicksburg Diagnostic Services, L.P.
Washington Holdco, LLC
Wesley Cath Lab, LLC
Wesley Manager, LLC
Wesley Medical Center, LLC
Wesley Medical Center
West Boynton Beach Open Imaging Center, LLC
West Florida Imaging Services, LLC
West Florida PET Services, LLC
West Houston, LLC
Westbury Hospital, Inc.
WHG Medical, LLC
WJHC, LLC
Woman’s Hospital Merger, LLC
Women’s Hospital Indianapolis GP, Inc.
Women’s Hospital Indianapolis, L.P.
FLORIDA
AAL Holdings, Inc.
All About Learning, LLC
All About Staffing, Inc.
Ambulatory Laser Associates, GP
Ambulatory Surgery Center Group, Ltd.
Ambulatory Surgery Center
Atlantis Surgicare, LLC
Aventura Comprehensive Cancer Research Group of Florida, Inc.
Aventura Healthcare Specialists LLC
Aventura Neurosurgery, LLC
BAMI Property, LLC
Bannerman Family Care, LLC
Bay Hospital, Inc.
Gulf Coast Medical Center
Bayonet Point Surgery Center, Ltd.
Bayonet Point Surgery and Endoscopy Center
Beach Primary Care, LLC
Belleair Surgery Center, Ltd.
Belleair Surgery Center
Big Cypress Medical Center, Inc.
Bonita Bay Surgery Center, Inc.
Bonita Bay Surgery Center, Ltd.
Brandon Surgi-Center, Ltd.
Brandon Surgery Center
Broward Cardiovascular Surgeons, LLC
Broward Healthcare System, Inc.
Broward Neurosurgeons, LLC
Cape Coral Surgery Center, Inc.
Cape Coral Surgery Center, Ltd.
Capital Regional Healthcare, LLC
Cardiovascular Consultants of Ocala, LLC
CCH-GP, Inc.
Cedarcare, Inc.
Cedars BTW Program, Inc.
Cedars Cardiovascular Surgeons, LLC
Cedars Gastroenterologists, LLC
Cedars Healthcare Group, Ltd.
Cedars International Cardiology Consultants, LLC
Cedars Medical Center Hospitalists, LLC
Cedars Neurosurgery, LLC
Central Florida Division Practice, Inc.
Central Florida Obstetrics & Gynecology Associates, LLC
Central Florida Physician Network, LLC
Central Florida Radiology, LLC
Central Florida Regional ENT, LLC
Central Florida Regional Hospital, Inc.
Central Florida Regional Hospital
Coastal Cardiac Diagnostics, Ltd.
Collier County Home Health Agency, Inc.
Columbia Behavioral Health, Ltd.
Columbia Behavioral Healthcare of South Florida, Inc.
Columbia Central Florida Division, Inc.
Columbia Development of Florida, Inc.
Columbia Eye and Specialty Surgery Center, Ltd.
Tampa Eye & Specialty Surgery Center
Columbia Florida Group, Inc.
Columbia Hospital Corporation of Central Miami
Columbia Hospital Corporation of Kendall
Columbia Hospital Corporation of Miami
Columbia Hospital Corporation of Miami Beach
Columbia Hospital Corporation of North Miami Beach
Columbia Hospital Corporation of South Broward
Westside Regional Medical Center
Columbia Hospital Corporation of South Dade
Columbia Hospital Corporation of South Florida
Columbia Hospital Corporation of South Miami
Columbia Hospital Corporation of Tamarac
Columbia Hospital Corporation-SMM
Columbia Jacksonville Healthcare System, Inc.
Columbia Lake Worth Surgical Center Limited Partnership
Columbia Midtown Joint Venture
Columbia North Central Florida Health System Limited Partnership
Columbia North Florida Regional Medical Center Limited Partnership
Columbia Ocala Regional Medical Center Physician Group, Inc.
Columbia Palm Beach Healthcare System Limited Partnership
Columbia Park Healthcare System, Inc.
Columbia Park Medical Center, Inc.
Columbia Physician Services — Florida Group, Inc.
Columbia Primary Care, LLC
Columbia Resource Network, Inc.
Columbia Tampa Bay Division, Inc.
Columbia-Osceola Imaging Center, Inc.
Community Hospital Family Practice, LLC
Coral Springs Surgi-Center, Ltd.
Surgery Center at Coral Springs
Countryside Surgery Center, Ltd.
Countryside Surgery Center
Daytona Medical Center, Inc.
Destin Primary Care, LLC
Diagnostic Breast Center, Inc.
Doctors Hospital Physician-Hospital Organization, Inc.
Doctors Osteopathic Medical Center, Inc.
Doctors Same Day Surgery Center, Inc.
Doctors Same Day Surgery Center, Ltd.
Doctors Same Day Surgery Center
DOMC Property, LLC
East Florida Division, Inc.
East Florida Hospitalists, LLC
East Florida Primary Care, LLC
East Pointe Hospital, Inc.
Edward White Hospital, Inc.
Edward White Hospital
Englewood Community Hospital, Inc.
Englewood Community Hospital
Fawcett Memorial Hospital, Inc.
Fawcett Memorial Hospital
Florida Home Health Services-Private Care, Inc.
Florida Outpatient Surgery Center, Ltd.
Florida Surgery Center
Fort Myers Market, Inc.
Fort Pierce Immediate Care Center, Inc.
Fort Pierce Orthopaedics, LLC
Fort Pierce Surgery Center, Ltd.
Fort Walton Beach Medical Center, Inc.
Fort Walton Beach Medical Center
Freeport Family Medicine, LLC
Ft. Pierce Surgicare, LLC
Ft. Walton Beach Anesthesia Services, LLC
Ft. Walton Beach Internal Medicine, LLC
Ft. Walton Beach Medical Practices, LLC
Gainesville GYN Oncology of North Florida Regional Medical Center, LLC
Gainesville Physicians, LLC
Galen Diagnostic Multicenter, Ltd.
Galen Hospital-Pembroke Pines, Inc.
Galen of Florida, Inc.
St. Petersburg General Hospital
Galencare, Inc.
Brandon Regional Hospital
Northside Hospital
Gateway Surgical Group, LLC
Grant Center Hospital of Ocala, Inc.
Gulf Coast General Surgery, LLC
Gulf Coast Medical Center Primary Care, LLC
Hamilton Memorial Hospital, Inc.
HCA Family Care Center, Inc.
HCA Health Services of Florida, Inc.
Blake Medical Center
Oak Hill Hospital
Regional Medical Center Bayonet Point
St. Lucie Medical Center
HD&S Corp. Successor, Inc.
HealthCoast Physician Group, LLC
Heathrow Internal Medicine, LLC
Heritage Family Care, LLC
Homecare North, Inc.
Hospital Corporation of Lake Worth
Hyperbaric and Wound Care Services of Ocala, LLC
Integrated Regional Lab, LLC
Internal Medicine Services of Osceola, LLC
Jacksonville Multispecialty Services, LLC
Jacksonville Physician Practices, Ltd.
Jacksonville Specialists, LLC
Jacksonville Surgery Center, Ltd.
Jacksonville Surgery Center
JFK Hospitalists, LLC
JFK Occupational Medicine, LLC
JFK Orthopedics, LLC
JFK Real Properties, Ltd.
Kendall Healthcare Group, Ltd.
Kendall Regional Medical Center
Kendall Medical Specialists, LLC
Kendall Vascular Surgery, LLC
Kingsley Family Care, LLC
Kissimmee Surgicare, Ltd.
Kissimmee Surgery Center
LAD Imaging, LLC
Lakewood Park Walk-In Clinic, LLC
Largo Cardiology, LLC
Largo Medical Center, Inc.
Largo Medical Center
Sun Coast Hospital, a Facility of Largo Medical Center
Largo Physician Group, LLC
Laurel Grove Surgery Center, LLC
Lawnwood Cardiovascular Surgery, LLC
Lawnwood Healthcare Specialists, LLC
Lawnwood Medical Center, Inc.
Lawnwood Regional Medical Center & Heart Institute
Lawnwood Pavilion Physician Services, LLC
Live Oak Immediate Care Center, LLC
M & M of Ocala, Inc.
Manatee Surgicare, Ltd.
Gulf Coast Surgery Center
Marion Community Hospital, Inc.
Ocala Regional Medical Center
Medical Associates of Ocala, LLC
Medical Center of Port St. Lucie, Inc.
Medical Center of Santa Rosa, Inc.
Medical Imaging Center of Ocala
Medical Partners of North Florida, LLC
Memorial Family Practice Associates, LLC
Memorial Healthcare Group, Inc.
Memorial Hospital Jacksonville
Specialty Hospital
Memorial Neurosurgery Group, LLC
Memorial Primary Care, LLC
Memorial Surgicare, Ltd.
Plaza Surgery Center
Memorial Urgent Care — Mandarin, LLC
MHS Partnership Holdings JSC, Inc.
MHS Partnership Holdings SDS, Inc.
Miami Beach Healthcare Group, Ltd.
Aventura Hospital and Medical Center
Miami Lakes Surgery Center, Ltd.
Miami Lakes Surgery Center
Navarre Family Care, LLC
Network MS of Florida, Inc.
New Port Richey Hospital, Inc.
Community Hospital
New Port Richey Surgery Center, Ltd.
New Port Richey Surgery Center
Niceville Family Practice, LLC
Niceville General Surgery, LLC
North Central Florida Health System, Inc.
North Florida Division I, Inc.
North Florida Division Practice, Inc.
North Florida GI Center GP, Inc.
North Florida GI Center, Ltd.
North Florida Immediate Care Center — Springhill, LLC
North Florida Immediate Care Center, Inc.
North Florida Neurosurgery, LLC
North Florida Outpatient Imaging Center, Ltd.
North Florida Physician Services, Inc.
North Florida Regional Investments, Inc.
North Florida Regional Medical Center, Inc.
North Florida Regional Medical Center
North Florida Regional Otolaryngology, LLC
North Florida Rehab Investments, LLC
North Florida Surgical Associates, LLC
North Palm Beach County Surgery Center, Ltd.
North County Surgicenter
Northside MRI, Inc.
Northwest Broward Neurosurgery and Spine, LLC
Northwest Florida Cardiology, LLC
Northwest Florida Healthcare Systems, Inc.
Northwest Florida Primary Care, LLC
Northwest Florida Women’s Cancer Care, LLC
Northwest Medical Center, Inc.
Northwest Medical Center
Notami Hospitals of Florida, Inc.
Lake City Medical Center
Oak Hill Acquisition, Inc.
Oak Hill Family Care, LLC
Oak Hill Hospitalists, LLC
Ocala Regional Outpatient Services, Inc.
Okaloosa Hospital, Inc.
Twin Cities Hospital
Okeechobee Hospital, Inc.
Raulerson Hospital
OneSource Health Network of South Florida, Inc.
Orange Park Hospitalists, LLC
Orange Park Medical Center, Inc.
Orange Park Medical Center
Orlando Surgicare, Ltd.
Same Day Surgicenter of Orlando
Osceola Neurological Associates, LLC
Osceola Regional Hospital, Inc.
Osceola Regional Medical Center
Osceola Regional Hospitalists, LLC
Osceola Surgical Associates, LLC
Outpatient Surgical Services, Ltd.
Outpatient Surgical Services
P&L Associates
Pace Obstetrics and Gynecology, LLC
Palm Beach General Surgery, LLC
Palm Beach Healthcare System, Inc.
Palm Beach Hospitalists Program, LLC
Palms West Gastroenterology, LLC
Palms West Pediatric Neurosurgery, Inc.
Palms West Surgery Center, Ltd.
Palms West Surgicenter
Park South Imaging Center, Ltd.
Pensacola Primary Care, Inc.
Pinellas Surgery Center, Ltd.
Center for Special Surgery
Port St. Lucie Surgery Center, Ltd.
St. Lucie Surgery Center
Premier Medical Management, Ltd.
Primary Care Medical Associates, Inc.
Putnam Hospital, Inc.
Raulerson Gastroenterology, LLC
Raulerson GYN, LLC
Raulerson Primary Care, LLC
Sarasota Doctors Hospital, Inc.
Doctors Hospital of Sarasota
South Broward Practices, Inc.
South Florida Division Practice, Inc.
South Vero Walk-In Clinic, LLC
Southwest Florida Division Practice, Inc.
Southwest Florida Health System, Inc.
Southwest Florida Regional Medical Center, Inc.
Space Coast Surgical Center, Ltd.
Merritt Island Surgery Center
Spinal Disorder and Pain Treatment Institute, LLC
St. Lucie General Surgery, LLC
St. Lucie Hospitalists, LLC
St. Lucie Medical Center Walk-In Clinic, LLC
St. Lucie Medical Specialists, LLC
St. Lucie West Primary Care, LLC
St. Petersburg General Surgery, LLC
Sun City Hospital, Inc.
South Bay Hospital
Surgery Center of Atlantis, LLC
Surgery Center of Aventura, Ltd.
Surgery Center of Aventura
Surgery Center of Ft. Pierce, Ltd
Surgery Center of Ft. Pierce
Surgery Center of Port Charlotte, Ltd.
Gulf Pointe Surgery Center
Surgical Park Center, Ltd.
Surgical Park Center
Surgicare America — Winter Park, Inc.
Surgicare of Altamonte Springs, Inc.
Surgicare of Aventura, LLC
Surgicare of Bayonet Point, Inc.
Surgicare of Brandon, Inc.
Surgicare of Central Florida, Inc.
Surgicare of Central Florida, Ltd.
Central Florida Surgicenter
Surgicare of Countryside, Inc.
Surgicare of Florida, Inc.
Surgicare of Ft. Pierce, Inc.
Surgicare of Kissimmee, Inc.
Surgicare of Laurel Grove, LLC
Surgicare of Manatee, Inc.
Surgicare of Merritt Island, Inc.
Surgicare of Miami Lakes, LLC
Surgicare of New Port Richey, Inc.
Surgicare of Orange Park, Inc.
Surgicare of Orange Park, Ltd.
Orange Park Surgery Center
Surgicare of Orlando, Inc.
Surgicare of Palms West, LLC
Surgicare of Pinellas, Inc.
Surgicare of Plantation, Inc.
Surgicare of Port Charlotte, LLC
Surgicare of Port St. Lucie, Inc.
Surgicare of St. Andrews, Inc.
Surgicare of St. Andrews, Ltd.
Surgery Center at St. Andrews
Surgicare of Stuart, Inc.
Surgicare of Tallahassee, Inc.
Surgicare of West Palm Beach, Ltd.
Tallahassee Community Network, Inc.
Tallahassee General Surgeons, LLC
Tallahassee Gyn-Oncology, LLC
Tallahassee Imaging Services, LLC
Tallahassee Medical Center, Inc.
Capital Regional Medical Center
Tallahassee Orthopedic Surgery Partners, Ltd.
Tallahassee Outpatient Surgery Center
Tampa Bay Health System, Inc.
Tampa Surgi-Centre, Inc.
The Neurohealth Sciences Center, LLC
Total Imaging — Hudson, LLC
Total Imaging — North St. Petersburg, LLC
Treasure Coast Physician Practices, Ltd.
Twin Cities Primary Care — Destin, LLC
Twin Cities Primary Care, LLC
University Healthcare Specialists, LLC
University Hospital, Ltd.
University Hospital and Medical Center
Venture Ambulatory Surgery Center, LLC
Venture Ambulatory Surgery Center
Venture Medical Management, LLC
West Florida Behavioral Health, Inc.
West Florida Division, Inc.
West Florida HealthWorks, LLC
West Florida Internal Medicine, LLC
West Florida Regional Medical Center, Inc.
West Florida Hospital
Westside Surgery Center, Ltd.
Parkside Surgery Center
Wildwood Medical Center, Inc.
Women’s Health Center of Central Florida, LLC
Wound and Hyperbaric Center, LLC
GEORGIA
Acworth Immediate Care, LLC
Albany Family Practice, LLC
Albany Neurosurgery Center, LLC
AOSC Sports Medicine, Inc.
Atlanta Home Care, L.P.
Atlanta Outpatient Surgery Center, Inc.
Atlanta Surgery Center, Ltd.
Atlanta Outpatient Peachtree Dunwoody Center
Atlanta Outpatient Surgery Center
Augusta Inpatient Services, LLC
Augusta Multispecialty Services, LLC
Augusta Primary Care Services, LLC
Buckhead Surgical Services, L.P.
Buckhead Ambulatory Surgery Center
Byron Family Practice, LLC
Cartersville Medical Center, LLC
Cartersville Medical Center
Cartersville Occupational Medicine Center, LLC
Cartersville Physician Practice I, LLC
Cartersville Urgent Care, LLC
Center for Colorectal Care, LLC
Chatsworth Hospital Corp.
Church Street Partners
Coliseum Health Group, Inc.
Coliseum Park Hospital, Inc.
Coliseum Primary Care Services, LLC
Coliseum Primary Healthcare — Macon, LLC
Coliseum Primary Healthcare — Riverside, LLC
Coliseum Professional Associates, LLC
Coliseum Same Day Surgery Center, L.P.
Coliseum Same Day Surgery Center
Columbia Coliseum Same Day Surgery Center, Inc.
Columbia Polk General Hospital, Inc.
Polk Medical Center
Columbia Surgicare of Augusta, Ltd.
Augusta Surgical Center
Columbia-Georgia PT, Inc.
Columbus Cardiology, Inc.
Columbus Doctors Hospital, Inc.
Diagnostic Services, G.P.
Doctors Hospital Center for Occupational Medicine, LLC
Doctors Hospital of Augusta Neurology, LLC
Doctors Hospital Surgery Center, L.P.
Evans Surgery Center
Doctors-I, Inc.
Doctors-II, Inc.
Doctors-III, Inc.
Doctors-IV, Inc.
Doctors-V, Inc.
Doctors-VI, Inc.
Doctors-VII, Inc.
Doctors-VIII, Inc.
Doctors-IX, Inc.
Doctors-X, Inc.
Dublin Community Hospital, LLC
Dublin Heart Specialists, LLC
Dublin Multispecialty, LLC
Dunwoody Physician Practice Network, Inc.
Eastside General Surgery, LLC
EHCA Diagnostics, LLC
EHCA Eastside Occupational Medicine Center, LLC
EHCA Eastside, LLC
Emory Eastside Medical Center
EHCA Johns Creek Holdings, LLC
EHCA Johns Creek Radiation Therapy, LLC
EHCA Johns Creek, LLC
Emory Johns Creek Hospital
EHCA Metropolitan, LLC
EHCA Parkway, LLC
EHCA Peachtree, LLC
EHCA West Paces, LLC
EHCA, LLC
Fairview Park, Limited Partnership
Fairview Park Hospital
Family Medicine at Northside, LLC
Georgia Psychiatric Company, Inc.
Grace Family Practice, LLC
Grayson Primary Care, LLC
Greater Gwinnett Internal Medicine Associates, LLC
Greater Gwinnett Physician Corporation
Gwinnett Community Hospital, Inc.
HCA Health Services of Georgia, Inc.
HCOL, Inc.
Heritage Medical Care, LLC
Hospitalists at Fairview Park, LLC
Hughston Hospital Services, LLC
Infectious Diseases Consultants of Southwest Georgia, LLC
Johns Creek Family Physicians, LLC
Johns Creek Physician Services Corporation
Marietta Outpatient Medical Building, Inc.
Marietta Outpatient Surgery, Ltd.
Marietta Surgical Center
Marietta Surgical Center, Inc.
Med Corp., Inc.
MedFirst, Inc.
Medical Center- West, Inc.
MOSC Sports Medicine, Inc.
Newnan Hospitals I, L.L.C.
North Georgia Primary Care Group, LLC
Northlake Medical Center, LLC
Northlake MultiSpecialty Associates, LLC
Northlake Physician Practice Network, Inc.
Northlake Surgical Center, L.P.
Northlake Surgical Center
Northlake Surgicare, Inc.
Orthopaedic Specialty Associates, L.P.
Orthopaedic Sports Specialty Associates, Inc.
Palmyra Park Hospital, Inc.
Palmyra Medical Centers
Palmyra Park, Limited Partnership
Palmyra Professional Fees, LLC
Parkway Surgery Center, L.P.
Redmond Anesthesia Services, LLC
Redmond Hospital Services, LLC
Redmond Neurosurgery, LLC
Redmond Park Health Services, Inc.
Redmond Park Hospital, LLC
Redmond Regional Medical Center
Redmond Physician Practice Company
Redmond Physician Practice Company II
Redmond Physician Practice Company III
Redmond Physician Practice XI, LLC
Rockbridge Primary Care, LLC
Rome Imaging Center Limited Partnership
Surgery Center of Rome, L.P.
The Surgery Center of Rome
Surgicare of Augusta, Inc.
Surgicare of Buckhead, LLC
Surgicare of Evans, Inc.
Surgicare of Rome, Inc.
The Rankin Foundation
Urology Center of North Georgia, LLC
West Paces Services, Inc.
IDAHO
Eastern Idaho Health Services, Inc.
Eastern Idaho Regional Medical Center
Eastern Idaho Regional Medical Center Physician Services, LLC
Idaho Physician Services, Inc.
Patients First Neonatology, LLC
Patients First Neurology, LLC
Patients First Plastic Surgery, LLC
West Valley Internal Medicine, LLC
West Valley Medical Center, Inc.
West Valley Medical Center
West Valley Professional Fee Billing, LLC
West Valley Therapy Services, LLC
ILLINOIS
Chicago Grant Hospital, Inc.
Columbia Chicago Division, Inc.
Columbia LaGrange Hospital, Inc.
Columbia Surgicare — North Michigan Ave., L.P.
Galen of Illinois, Inc.
Illinois Psychiatric Hospital Company, Inc.
Smith Laboratories, Inc.
INDIANA
Advanced Neurosurgery, LLC
Advanced Orthopedics, LLC
Advanced Plastic Surgery Center of Terre Haute, LLC
Advanced Radiation Oncology Care, LLC
Basic American Medical, Inc.
Family Medicine of Terre Haute, LLC
Hospitalists of the Wabash Valley, LLC
Jeffersonville MediVision, Inc.
Southwest Indiana Surgical Services, LLC
Surgicare of Indianapolis, Inc.
Surgicare of Terre Haute, LLC
Terre Haute Heart Lung Vascular Associates, LLC
Terre Haute MOB, L.P.
Terre Haute Obstetrics and Gynecology, LLC
Wabash Cardiology Associates, LLC
Wabash Valley Hospitalists, LLC
KANSAS
Care for Women, LLC
Johnson County Neurology, LLC
Johnson County Surgery Center, L.P.
Surgicenter of Johnson County
Johnson County Surgicenter, L.L.C.
Kansas Trauma and Critical Care Specialists, LLC
Mid-America Surgery Center, LLC
Mid-America Surgery Institute, LLC
Mid-America Surgery Institute
Midwest Cardiovascular and Thoracic Surgeons of Kansas, LLC
Midwest Division, Inc.
Midwest Oncology Associates, LLC
MMC Sleep Lab Management, LLC
OB-GYN Diagnostics, Inc.
OPRMC-HBP, LLC
Overland Park Cardiovascular, Inc.
Overland Park Medical Specialists, LLC
Overland Park Orthopedics, LLC
Paragyn Surgical, LLC
Pediatric Specialty Clinic LLC
Physician Associates of Corporate Woods, LLC
Quivira Internal Medicine, Inc.
Surgery Center of Overland Park, L.P.
Overland Park Surgery Center
Surgicare of Overland Park, LLC
Surgicare of Wichita, Inc.
Surgicare of Wichita, Ltd.
Surgicare of Wichita
Surgicenter of Johnson County, Ltd.
Wesley Physician Services, LLC
KENTUCKY
CHCK, Inc.
Commonwealth Specialists of Kentucky, LLC
Frankfort Hospital, Inc.
Frankfort Regional Medical Center
Frankfort Orthopedics, LLC
Frankfort Wound Care, LLC
Galen of Kentucky, Inc.
Greenview Hospital, Inc.
Greenview Regional Hospital
Greenview PrimeCare, LLC
Hospitalists at Greenview Regional Hospital, LLC
Southern Kentucky Neurosurgical Associates, LLC
Southern Kentucky Urology, LLC
Surgery Center of Greenview, L.P.
Surgicare of Greenview, Inc.
Tri-County Community Hospital, Inc.
Western Kentucky Gastroenterology, LLC
LOUISIANA
Acadiana Care Center, Inc.
Acadiana Practice Management, Inc.
Acadiana Regional Pharmacy, Inc.
Avoyelles Family Care (A Medical Limited Liability Company)
Center for Digestive Diseases, LLC
Children’s Multi-Specialty Group, LLC
CLASC Manager, LLC
Columbia Healthcare System of Louisiana, Inc.
Columbia West Bank Hospital, Inc.
Columbia/HCA Healthcare Corporation of Central Louisiana, Inc.
Columbia/HCA of Baton Rouge, Inc.
Columbia/HCA of New Orleans, Inc.
Dauterive Hospital Corporation
Dauterive Hospital
Dauterive Physicians, LLC
Doctors Hospital of Opelousas Limited Partnership
Hamilton Medical Center, Inc.
Southwest Medical Center — Lafayette
HCA Health Services of Louisiana, Inc.
Lafayette OB Hospitalists, LLC
Lafayette Pediatric Neurology Center, LLC
Lafayette Surgery Center Limited Partnership
Lafayette Surgicare, Inc.
Lafayette Urogynecology & Urology Center, LLC
Lakeside Women’s Services, LLC
Lakeview Multispecialty Group, LLC
Louisiana Psychiatric Company, Inc.
Medical Center of Baton Rouge, Inc.
Metairie Primary Care Associates, LLC
Notami (Opelousas), Inc.
Notami Hospitals of Louisiana, Inc.
Rapides Healthcare System, L.L.C.
Avoyelles Hospital
Oakdale Community Hospital
Rapides Regional Medical Center
Savoy Medical Center
Winn Parish Medical Center
Rapides Physicians Management, LLC
Rapides Surgery Center, LLC
Southwest Medical Center Family Practice, LLC
Southwest Medical Center Multi-Specialty Group, LLC
Southwest Medical Center Surgical Group, LLC
Surgicare Merger Company of Louisiana
Surgicare of Lakeview, Inc.
Surgicare Outpatient Center of Baton Rouge, Inc.
Surgicenter of East Jefferson, Inc.
TUHC Anesthesiology Group, LLC
TUHC Hospitalist Group, LLC
TUHC Physician Group, LLC
TUHC Primary Care and Pediatrics Group, LLC
TUHC Radiology Group, LLC
Tulane Clinic, LLC
Tulane Professionals Management, L.L.C.
University Healthcare System, L.C.
Tulane University Hospital and Clinic
Uptown Primary Care Associates, LLC
WGH, Inc.
Women’s & Children’s Pediatric Hematology/Oncology Center, LLC
Women’s & Children’s Pediatric Orthopedic Center, LLC
Women’s and Children’s Hospital, Inc.
Women’s & Children’s Hospital
Women’s and Children’s Professional Management, L.L.C.
Women’s Multi-Specialty Group, LLC
LUXEMBOURG
HCA Luxembourg 1 Sarl
HCA Luxembourg 2 Sarl
MASSACHUSETTS
Columbia Hospital Corporation of Massachusetts, Inc.
Orlando Outpatient Surgical Center, Ltd.
MISSISSIPPI
Brookwood Medical Center of Gulfport, Inc.
Coastal Imaging Center of Gulfport, Inc.
Coastal Imaging Center, L.P.
Galen of Mississippi, Inc.
Garden Park Hospitalist Program, LLC
Garden Park Investments, L.P.
Garden Park Physician Services Corporation
Gulf Coast Medical Ventures, Inc.
HTI Health Services, Inc.
Orange Grove Surgical Associates, LLC
Southern Urology Associates, LLC
VIP, Inc.
MISSOURI
Baptist Lutheran HBP, LLC
Cedar Creek Medical Group, LLC
Centerpoint Cardiology Services, LLC
Centerpoint Hospital Based Physicians, LLC
Centerpoint Orthopedics, LLC
Centerpoint Physicians Group, LLC
Clinishare, Inc.
EHS Remainco, Inc.
Endocrinology Associates of Lee’s Summit, LLC
Eye Care Surgicare, Ltd.
Eye Surgicare of Independence, LLC
Family Care at Arbor Walk, LLC
Family Health Specialists of Lee’s Summit, LLC
Foot & Ankle Specialty Services, LLC
Galen Sale Corporation
HCA Midwest Comprehensive Care, Inc.
Health Midwest Medical Group, Inc.
Health Midwest Office Facilities Corporation
Health Midwest Ventures Group, Inc.
HEI Missouri, Inc.
HM Acquisition, LLC
Independence Neurosurgery Services, LLC
Independence Surgicare, Inc.
Kansas City Neurology Associates, LLC
Kansas City Perfusion Services, Inc.
Kansas City Pulmonology Practice, LLC
Lee’s Summit Urgent Care, LLC
Medical Center Imaging, Inc.
Metropolitan Multispecialty Physicians Group, Inc.
Mid-States Financial Services, Inc.
Midwest Cardiovascular & Thoracic Surgery, LLC
Midwest Division — RBH, LLC
Research Belton Hospital
Midwest Division Spine Care, LLC
Midwest Doctor’s Group, LLC
Midwest Infectious Disease Specialists, LLC
Midwest Newborn Care, LLC
Midwest Trauma Services, LLC
Missouri Healthcare System, L.P.
National Association of Senior Friends
Notami Hospitals of Missouri, Inc.
Nuclear Diagnosis, Inc.
Ozarks Medical Services, Inc.
Precise Imaging, Inc.
Raymore Medical Group, LLC
Research Family Physicians, LLC
Research GYN/Oncology Associates, LLC
Research Internal Medicine, LLC
Research Multi-Specialty Physicians Group, LLC
Research Neurology Associates, LLC
Research Psychiatric — 1500, LLC
RMC — Pulmonary, LLC
RMC Transplant Physicians, LLC
Surgery Center of Independence, L.P.
Centerpoint Ambulatory Surgery Center
Surgicare of Kansas City, LLC
Surgicenter of Kansas City, L.L.C.
Surgicenter of Kansas City
NEVADA
CHC Holdings, Inc.
CHC Venture Co.
CIS Holdings, Inc.
Columbia Hospital Corporation of West Houston
Fremont Women’s Health, LLC
Health Service Partners, Inc.
Las Vegas ASC, LLC
Las Vegas Physical Therapy, Inc.
Las Vegas Surgical Center, a Nevada limited partnership
Las Vegas Surgicare, Inc.
Las Vegas Surgicare, Ltd.
Las Vegas Surgery Center
Nevada Surgery Center of Southern Hills, L.P.
Nevada Surgicare of Southern Hills, LLC
Rhodes Limited-Liability Company
Sahara Outpatient Surgery Center, Ltd.
Sahara Surgery Center
Southern Hills Medical Center, LLC
Southern Hills Hospital & Medical Center
Specialty Surgicare of Las Vegas, LP
Specialty Surgery Center
Sunrise Anesthesia Services, LLC
Sunrise Flamingo Surgery Center, Limited Partnership
Flamingo Surgery Center
Sunrise Mountainview Hospital, Inc.
MountainView Hospital
Sunrise Neuro Sciences, LLC
Sunrise Outpatient Services, Inc.
Sunrise Physician Services, LLC
Sunrise Trauma Services, LLC
Surgicare of Las Vegas, Inc.
Value Health Holdings, Inc.
VH Holdco, Inc.
VH Holdings, Inc.
Western Plains Capital, Inc.
NEW HAMPSHIRE
Appledore Medical Group II, Inc.
Appledore Medical Group, Inc.
Derry ASC, Inc.
Derry Surgery Center, Limited Partnership
HCA Health Services of New Hampshire, Inc.
Parkland Medical Center
Portsmouth Regional Hospital
Med-Point of New Hampshire, Inc.
Parkland Hospitalists Program, LLC
Parkland Oncology, LLC
Parkland Physician Services, Inc.
Salem Surgery Center
PRH Oncology, LLC
Salem Surgery Center, Limited Partnership
Surgicare of Salem, LLC
NORTH CAROLINA
Brunswick Anesthesia, LLC
CareOne Home Health Services, Inc.
Cumberland Medical Center, Inc.
HCA — Raleigh Community Hospital, Inc.
Heritage Hospital, Inc.
HTI Health Services of North Carolina, Inc.
Mecklenburg Surgical Land Development, Ltd.
Raleigh Community Medical Office Building, Ltd.
Wake Psychiatric Hospital, Inc.
OHIO
Columbia/HCA Healthcare Corporation of Northern Ohio
Columbia-CSA/HS Greater Canton Area Healthcare System, L.P.
Columbia-CSA/HS Greater Cleveland Area Healthcare System, L.P.
Lorain County Surgery Center, Ltd.
Surgicare of Lorain County, Inc.
Surgicare of Westlake, Inc.
Westlake Surgicare, L.P.
OKLAHOMA
Columbia Doctors Hospital of Tulsa, Inc.
Columbia Oklahoma Division, Inc.
Columbia/Edge Mobile Medical, L.L.C.
Edmond General Surgery, LLC
Edmond Hospitalists, LLC
Edmond Intensivists, LLC
Edmond Physician Hospital Organization, Inc.
Edmond Physician Services, LLC
Edmond Podiatry Associates, LLC
Edmond Spine and Orthopedic Services, LLC
Green Country Anesthesiology Group, Inc.
HCA Health Services of Oklahoma, Inc.
OU Medical Center
Healthcare Oklahoma, Inc.
Integrated Management Services of Oklahoma, Inc.
Lake Region Health Alliance Corporation
Medi Flight of Oklahoma, LLC
Medical Imaging, Inc.
Millenium Health Care of Oklahoma, Inc.
Oklahoma Outpatient Surgery Limited Partnership
Oklahoma Surgicare
Oklahoma Surgicare, Inc.
Plains Healthcare System, Inc.
Presbyterian Office Building, Ltd.
Rogers County PHO, Inc.
Stephenson Laser Center, L.L.C.
Surgicare of Northwest Oklahoma Limited Partnership
Surgicare of Tulsa, Inc.
SWMC, Inc.
Wagoner Medical Group, Inc.
PENNSYLVANIA
Basic American Medical Equipment Company, Inc.
Chestnut Hill Surgical Investors, Ltd.
Surgicare of Philadelphia, Inc.
SOUTH CAROLINA
C/HCA Development, Inc.
Carolina Forest Imaging Center, LLC
Carolina Regional Surgery Center, Inc.
Carolina Regional Surgery Center, Ltd.
Grande Dunes Surgery Center
Coastal Carolina Home Care, Inc.
Coastal Carolina MultiSpecialty Associates, LLC
Coastal Carolina Primary Care, LLC
Coastal Inpatient Physicians, LLC
Colleton Ambulatory Care, LLC
Colleton Ambulatory Surgery Center
Colleton Diagnostic Center, LLC
Colleton Medical Anesthesia, LLC
Colleton Medical Hospitalists, LLC
Colleton Neurology Associates, LLC
Colleton Otolaryngology, Head and Neck Surgery, LLC
Columbia/HCA Healthcare Corporation of South Carolina
Columbia-CSA/HS Greater Columbia Area Healthcare System, L.P.
Doctors Hospital North Augusta Imaging Center, LLC
Doctor’s Memorial Hospital of Spartanburg, L.P.
Edisto Multispecialty Associates, Inc.
Grand Strand Senior Health Center, LLC
Grand Strand Surgical Specialists, LLC
North Augusta Rehab Health Center, LLC
North Charleston Diagnostic Imaging Center, LLC
Providence Eye Care, Inc.
South Atlantic Division, Inc.
South Carolina Imaging Employer Corp.
Trident Behavioral Health Services, LLC
Trident Eye Surgery Center, L.P.
Trident Eye Surgery Center
Trident Medical Services, Inc.
Trident MRI Associates, L.P.
Trident Neonatology Services, LLC
Walterboro Community Hospital, Inc.
Colleton Medical Center
SWITZERLAND
Glemm SA
HCA Switzerland Finance Sarl
HCA Switzerland Holding Sarl
TENNESSEE
Appalachian OB/GYN Associates, Inc.
Arthritis Specialists of Nashville, Inc.
Athens Community Hospital, Inc.
Atrium Surgery Center, Ltd.
Atrium Memorial Surgery Center
Centennial Cardiovascular Consultants, LLC
Centennial Heart, LLC
Centennial Primary Care, LLC
Centennial Surgery Center, L.P.
Centennial Surgery Center
Centennial Surgical Associates, LLC
Central Tennessee Hospital Corporation
Horizon Medical Center
Chattanooga Diagnostic Associates, LLC
Chattanooga Healthcare Network Partner, Inc.
Chattanooga Healthcare Network, L.P.
Columbia Integrated Health Systems, Inc.
Columbia Medical Group — Centennial, Inc.
Columbia Medical Group — Daystar, Inc.
Columbia Medical Group — Parkridge, Inc.
Columbia Medical Group — River Park, Inc.
Columbia Medical Group — Southern Hills, Inc.
Columbia Medical Group — The Frist Clinic, Inc.
Dickson Corporate Health Services, LLC
Dickson Surgery Center, L.P.
Fairvue Family Practice, LLC
First Onsite, LLC
Frist Clinic Express, LLC
Gastroenterology Specialists of Middle Tennessee, LLC
HCA — Information Technology & Services, Inc.
HCA Central Group, Inc.
HCA Chattanooga Market, Inc.
HCA Development Company, Inc.
HCA Eastern Group, Inc.
HCA Health Services of Tennessee, Inc.
Centennial Medical Center
Centennial Medical Center at Ashland City
Southern Hills Medical Center
StoneCrest Medical Center
Summit Medical Center
HCA Home and Clinical Services, Inc.
HCA Medical Services, Inc.
HCA Physician Services, Inc.
HCA Psychiatric Company
HCA Realty, Inc.
Healthcare Sales National Management Services Group, LLC
Healthtrust, Inc. — The Hospital Company
Hendersonville Hospital Corporation
Hendersonville Medical Center
Hendersonville Hospitalist Services, Inc.
Hendersonville OB/GYN, LLC
Hendersonville Primary Care, LLC
Hermitage Primary Care, LLC
Holly Hill/Charter Behavioral Health System, L.L.C.
Hometrust Management Services, Inc.
Horizon Orthopedics, LLC
Hospital Corporation of Tennessee
Hospital Realty Corporation
Hospitalists at Centennial Medical Center, LLC
Hospitalists at Horizon Medical Center, LLC
Hospitalists at Parkridge, LLC
Hospitalists at StoneCrest, LLC
HTI Memorial Hospital Corporation
Skyline Medical Center
Indian Path Hospital, Inc.
Indian Path Rehabilitation Center, Inc.
Internal Medicine Associates of Southern Hills, LLC
Lookout Valley Medical Center, LLC
Madison Behavioral Health, LLC
Madison Internal Medicine, LLC
McMinnville Cardiology, LLC
Med Group — Southern Hills Hospitalists, LLC
Medical Group — Dickson, Inc.
Medical Group — Southern Hills of Brentwood, LLC
Medical Group — Southern Hills of Nolensville, LLC
Medical Group — Stonecrest FP, Inc.
Medical Group — Stonecrest Pulmonology, LLC
Medical Group — StoneCrest, Inc.
Medical Group — Summit, Inc.
Medical Plaza Ambulatory Surgery Center Associates, L.P.
Plaza Day Surgery
Medical Plaza MRI, L.P.
Medical Resource Group, Inc.
Middle Tennessee Medical Services Corporation
Middle Tennessee Neurology LLC
Mid-State Physicians, LLC
Nashville Psychiatric Company, Inc.
Network Management Services, Inc.
Neurology Associates of Hendersonville, LLC
North Florida Regional Freestanding Surgery Center, L.P.
North Florida Surgical Pavilion
North Nashville Family Health Center, LLC
Old Fort Village, LLC
OneSourceMed, Inc.
Palmer Medical Center, LLC
Parkridge East Specialty Associates, LLC
Parkridge Hospitalists, Inc.
Parkridge Medical Associates, LLC
Parkridge Medical Center, Inc.
Parkridge Medical Center
Parkridge Professionals, Inc.
Parkside Surgery Center, Inc.
Plano Ambulatory Surgery Associates, L.P.
Surgery Center of Plano
Portland Primary Care, LLC
Portland Surgical, LLC
Pulmonary Medicine of Dickson, LLC
Quantum Innovations, Inc.
Rio Grande Surgery Center Associates, L.P.
Rio Grande Surgery Center
Shelbyville Cardiology, LLC
Signal Mountain Primary Care, LLC
Skyline Medical Group, LLC
Skyline Neuroscience Associates, LLC
Skyline Primary Care, LLC
Skyline Rehab Associates, LLC
Skyline Riverside Medical Group, LLC
Southeast Surgical Solutions, LLC
Southern Hills Neurology Consultants, LLC
Southern Hills Orthopaedic Consultants, LLC
Southern Hills Surgery Center, L.P.
Specialist Group at Centennial, LLC
Spring Hill Hospital, Inc.
Spring Hill Physicians, LLC
SRS Acquisition, Inc.
St. Mark’s Ambulatory Surgery Associates, L.P.
St. Mark’s Outpatient Surgery Center
Sterling Primary Care Associates, LLC
Stonecrest Medical Group — Family Practice of Murfreesboro, LLC
Stonecrest Medical Group — SC Murfreesboro Family Practice, LLC
Sullins Surgical Center, Inc.
Summit Convenient Care at Lebanon, LLC
Summit Heart, LLC
Summit Research Solutions, LLC
Summit Surgery Center, L.P.
Summit Surgery Center
Summit Surgical Associates, LLC
Surgery Center of Chattanooga, L.P.
Surgery Center of Chattanooga
Surgicare of Chattanooga, LLC
Surgicare of Dickson, LLC
Surgicare of Madison, Inc.
Surgicare of Southern Hills, Inc.
Surgicare of Wilson County, LLC
Surgicare Outpatient Center of Jackson, Inc.
Sycamore Shoals Hospital, Inc.
TCMC Madison-Portland, Inc.
Tennessee Healthcare Management, Inc.
Tennessee Valley Outpatient Diagnostic Center, LLC
The Charter Cypress Behavioral Health System, L.L.C.
Trident Ambulatory Surgery Center, L.P.
Trident Ambulatory Surgery Center
TriStar Health System, Inc.
TriStar OB/GYN, LLC
Vascular and Endovascular Specialists, LLC
Wilson County Outpatient Surgery Center, L.P.
TEXAS
Administrative Physicians of North Texas, PLLC
All About Staffing of Texas, Inc.
Ambulatory Endoscopy Clinic of Dallas, Ltd.
Arlington Diagnostic South, Inc.
Arlington Primary Medicine, PLLC
Austin Medical Center, Inc.
Bailey Square Ambulatory Surgical Center, Ltd.
Bailey Square Outpatient Surgical Center, Inc.
Barrow Medical Center CT Services, Ltd.
Bay Area Healthcare Group, Ltd.
Corpus Christi Medical Center
Bay Area Surgical Center Investors, Ltd.
Bay Area Surgicare Center, Inc.
Bayshore Occupational and Family Medicine, PLLC
Bayshore Surgery Center, Ltd.
Bayshore Surgery Center
Beaumont Healthcare System, Inc.
Bedford-Northeast Community Hospital, Inc.
Bellaire Imaging, Inc.
Brownsville Specialists of Texas, PLLC
Brownsville Surgical Specialists, PLLC
Brownsville-Valley Regional Medical Center, Inc.
Calloway Creek Surgery Center, L.P.
Calloway Creek Surgery Center
Calloway Creek Surgicare, LLC
Capital Area Occupational Medicine, PLLC
Capital Area Primary Care, PLLC
Capital Area Surgeons, PLLC
Central San Antonio Surgical Center Investors, Ltd.
CHC Management, Ltd.
CHC Payroll Company
CHC Realty Company
CHCA Pearland, L.P.
CHC-El Paso Corp.
CHC-Miami Corp.
Clear Lake Family Physicians, PLLC
Clear Lake Multi-Specialty Group, PLLC
Clear Lake Regional Medical Center, Inc.
Clear Lake Surgicare, Ltd.
Bay Area Surgicare Center
Coastal Bend Hospital CT Services, Ltd.
Collin County Diagnostic Associates, PLLC
COL-NAMC Holdings, Inc.
Columbia Ambulatory Surgery Division, Inc.
Columbia Bay Area Realty, Ltd.
Columbia Call Center, Inc.
Columbia Central Group, Inc.
Columbia Central Verification Services, Inc.
Columbia Champions Treatment Center, Inc.
Columbia GP of Mesquite, Inc.
Columbia Greater Houston Division Healthcare Network, Inc.
Columbia Hospital at Medical City Dallas Subsidiary, L.P.
Medical City Dallas Hospital
Columbia Hospital Corporation at the Medical Center
Columbia Hospital Corporation of Arlington
Columbia Hospital Corporation of Bay Area
Columbia Hospital Corporation of Corpus Christi
Columbia Hospital Securities Corporation
Columbia Hospital-Arlington (WC), Ltd.
Columbia Hospital-El Paso, Ltd.
Columbia Lone Star/Arkansas Division, Inc.
Columbia Medical Arts Hospital Subsidiary, L.P.
Columbia Medical Center at Lancaster Subsidiary, L.P.
Columbia Medical Center Dallas Southwest Subsidiary, L.P.
Columbia Medical Center of Arlington Subsidiary, L.P.
Medical Center of Arlington
Columbia Medical Center of Denton Subsidiary, L.P.
Denton Regional Medical Center
Columbia Medical Center of Las Colinas, Inc.
Las Colinas Medical Center
Columbia Medical Center of Lewisville Subsidiary, L.P.
Medical Center of Lewisville
Columbia Medical Center of McKinney Subsidiary, L.P.
Medical Center of McKinney
Columbia Medical Center of Plano Subsidiary, L.P.
Medical Center of Plano
Columbia North Hills Hospital Subsidiary, L.P.
North Hills Hospital
Columbia North Texas Healthcare System, L.P.
Columbia North Texas Subsidiary GP, LLC
Columbia North Texas Surgery Center Subsidiary, L.P.
Columbia Northwest Medical Center Partners, Ltd.
Columbia Northwest Medical Center, Inc.
Columbia Plaza Medical Center of Fort Worth Subsidiary, L.P.
Plaza Medical Center of Fort Worth
Columbia Psychiatric Management Co.
Columbia South Texas Division, Inc.
Columbia Specialty Hospital of Dallas Subsidiary, L.P.
Columbia Specialty Hospitals, Inc.
Columbia Surgery Group, Inc.
Columbia/HCA Healthcare Corporation of Central Texas
Columbia/HCA Heartcare of Corpus Christi, Inc.
Columbia/HCA International Group, Inc.
Columbia/HCA of Houston, Inc.
Columbia/HCA of North Texas, Inc.
Columbia/HCA Physician Hospital Organization Medical Center Hospital
Columbia-Quantum, Inc.
Comprehensive Radiology Management Services, Ltd.
Congenital Heart Surgery Center, PLLC
Conroe Hospital Corporation
Conroe Specialists of Texas, PLLC
Corpus Christi Healthcare Group, Ltd.
Corpus Christi Surgery Center, L.P.
Corpus Christi Surgery, Ltd.
Corpus Surgicare, Inc.
Dallas CardioThoracic Surgery Consultants, PLLC
Dallas Neuro-Stroke Affiliates, PLLC
Deep Purple Investments, LLC
Denton Pediatric Physicians, PLLC
Denton Primary Care, PLLC
Denton Regional Ambulatory Surgery Center, L.P.
Day Surgery Center at Denton Regional Medical Center
DFW Physicians Group, PLLC
Doctors Bay Area Physician Hospital Organization
Doctors Hospital (Conroe), Inc.
E.P. Physical Therapy Centers, Inc.
El Paso Healthcare Provider Network
El Paso Healthcare System, Ltd.
Del Sol Medical Center
Las Palmas Medical Center
El Paso Nurses Unlimited, Inc.
El Paso Primary Care, PLLC
El Paso Surgery Centers, L.P.
East El Paso Surgery Center
Surgical Center of El Paso
El Paso Surgicenter, Inc.
Eldridge Family Practitioners, PLLC
Elite Family Health of Plano, PLLC
Elite OB-GYN Services of El Paso, PLLC
Elite Orthopaedics of El Paso, PLLC
Elite Orthopaedics of Irving, PLLC
Elite Orthopaedics of Plano, PLLC
Emergency Psychiatric Medicine, PLLC
Endoscopy Clinic of Dallas, Inc.
Endoscopy of Plano, L.P.
Endoscopy Surgicare of Plano, LLC
EPIC Properties, Inc.
EPSC, L.P.
Family Practitioners of Pearland, PLLC
Flower Mound Surgery Center, Ltd.
Fort Worth Investments, Inc.
Frisco Warren Parkway 91, Inc.
Galen Hospital of Baytown, Inc.
General and Cardiovascular Surgeons of Conroe, PLLC
General Surgeons of Pasadena, PLLC
GI Associates of Denton, PLLC
Gramercy Surgery Center, Ltd.
Gramercy Outpatient Surgery Center
Greater Houston Preferred Provider Option, Inc.
Green Oaks Hospital Subsidiary, L.P.
Green Oaks Hospital
Gulf Coast Division, Inc.
Gulf Coast Physician Administrators, Inc.
HCA Central/West Texas Physicians Management, LLC
HCA Health Services of Texas, Inc.
HCA Pearland GP, Inc.
HCA Plano Imaging, Inc.
HCA Western Group, Inc.
Heartcare of Texas, Ltd.
HEI Sealy, Inc.
Hidalgo County Family Practitioners, PLLC
Houston Northwest Surgical Partners, Inc.
Houston Pediatric Pulmonary Associates, PLLC
HPG Energy, L.P.
HPG GP, LLC
HTI Gulf Coast, Inc.
Kingwood Multi-Specialty Group, PLLC
Kingwood Surgery Center, Ltd.
KPH-Consolidation, Inc.
Kingwood Medical Center
Kyle Primary Care, PLLC
Las Colinas Primary Care, PLLC
Las Colinas Surgery Center, Ltd.
Las Colinas Surgery Center
Leadership Healthcare Holdings II L.P., L.L.P.
Leadership Healthcare Holdings L.P., L.L.P.
Longview Regional Physician Hospital Organization, Inc.
M. Jamshidi, D.O., PLLC
Mainland Family Medicine, PLLC
Mainland Multi-Specialty Group, PLLC
Maternal Fetal Medicine Specialists of Corpus Christi, PLLC
Med City Dallas Outpatient Surgery Center, L.P.
Medical City Ambulatory Surgery Center
Med Plus of El Paso, Inc.
Med-Center Hosp./Houston, Inc.
Medical Care Surgery Center, Inc.
Medical City Dallas Hospital, Inc.
MediPurchase, Inc.
Methodist Healthcare System of San Antonio, Ltd., L.L.P.
Methodist Ambulatory Surgery Hospital — Northwest
Methodist Children’s Hospital of South Texas
Methodist Hospital
Methodist Specialty and Transplant Hospital
Metropolitan Methodist Hospital
Northeast Methodist Hospital
Methodist Medical Center ASC, L.P.
Metroplex Surgicenters, Inc.
MGH Medical, Inc.
MHS SC Partner, L.L.C.
MHS Surgery Centers, L.P.
Mid-Cities Surgi-Center, Inc.
National Patient Account Services, Inc.
Navarro Memorial Hospital, Inc.
Neurological Eye Specialists of North Texas, PLLC
Neurological Specialists of McKinney, PLLC
Neurological Specialists, PLLC
Neurosurgical Specialists of El Paso, PLLC
North Austin Surgery Center, L.P.
North Central Methodist ASC, L.P.
North Hills Cardiac Catheterization Center, L.P.
North Hills Catheterization Lab, LLC
North Hills Surgicare, L.P.
Texas Pediatric Surgery Center
North Shore Specialists of Texas, PLLC
North Texas Cardiology, PLLC
North Texas Division, Inc.
North Texas General, L.P.
North Texas Geriatrics, PLLC
North Texas Sports and Orthopedics Center, PLLC
Northeast Methodist Surgicare, Ltd.
Northeast PHO, Inc.
Oakwood Surgery Center, Ltd., LLP
OB/Gyn Associates of Denton, PLLC
Occupational and Family Medicine of South Texas
Orthopedic Hospital, Ltd.
Texas Orthopedic Hospital
Outpatient Women’s and Children’s Surgery Center, Ltd.
Fannin Surgicare
Paragon of Texas Health Properties, Inc.
Paragon Physicians Hospital Organization of South Texas, Inc.
Paragon Surgery Centers of Texas, Inc.
Park Central Surgical Center, Ltd.
Park Central Surgical Center
Parkway Cardiac Center, Ltd.
Parkway Surgery Services, Ltd.
Pasadena Bayshore Hospital, Inc.
Pediatric Cardiac Intensivists of North Texas, PLLC
Pediatric Hospitalists of Conroe, PLLC
Pediatric Intensivists of El Paso, PLLC
Pediatric Specialists of Clear Lake, PLLC
Pediatric Surgicare, Inc.
Plano Urology, PLLC
Plaza Primary Care, PLLC
Primary Care Plano, PLLC
Primary Care South, PLLC
Primary Care West, PLLC
Primary Health Network of South Texas
Quantum/Bellaire Imaging, Ltd.
Rim Building Partners, L.P.
Rio Grande Healthcare MSO, Inc.
Rio Grande NP, Inc.
Rio Grande Regional Hospital, Inc.
Rio Grande Regional Investments, Inc.
Rosewood Medical Center, Inc.
Rosewood Professional Building, Ltd.
Royal Oaks Surgery Center, L.P.
S.A. Medical Center, Inc.
San Antonio Division, Inc.
San Antonio Regional Hospital, Inc.
Sante Fe Family Practitioners, PLLC
SAPN, LLC
South Austin Surgery Center, Ltd.
South Texas Surgicare, Inc.
Southwest Houston Surgicare, Inc.
Spring Branch Family Practitioners, PLLC
Spring Branch Medical Center, Inc.
Spring Branch Medical Center
St. David’s Healthcare Partnership, L.P., LLP
North Austin Medical Center
Round Rock Medical Center
South Austin Hospital
St. David’s Georgetown Hospital
St. David’s Medical Center
St. David’s OB Hospitalist, PLLC
STPN Manager, LLC
Sugar Land Surgery Center, Ltd.
Sugar Land Surgery Center
Sun Towers/Vista Hills Holding Co.
Surgical Center of Irving, Inc.
Surgical Facility of West Houston, L.P.
Surgical Specialists of Clear Lake, PLLC
Surgical Specialists of Corpus Christi, PLLC
Surgicare of Arlington, LLC
Surgicare of Central San Antonio, Inc.
Surgicare of Flower Mound, Inc.
Surgicare of Fort Worth Co-GP, LLC
Surgicare of Fort Worth, Inc.
Surgicare of Gramercy, Inc.
Surgicare of Houston Women’s, Inc.
Surgicare of Kingwood, Inc.
Surgicare of McKinney, Inc.
Surgicare of Medical City Dallas, LLC
Surgicare of North Austin, LLC
Surgicare of North San Antonio, Inc.
Surgicare of Northeast San Antonio, Inc.
Surgicare of Pasadena, Inc.
Surgicare of Round Rock, Inc.
Surgicare of Royal Oaks, LLC
Surgicare of South Austin, Inc.
Surgicare of Sugar Land, Inc.
Surgicare of Travis Center, Inc.
Tarrant County Surgery Center, L.P.
Trinity Park Surgery Center
Texas Medical Technologies, Inc.
Texas Psychiatric Company, Inc.
The West Texas Division of Columbia, Inc.
THN Physicians Association, Inc.
Travis Surgery Center, L.P.
Urology Services of El Paso, PLLC
Village Oaks Medical Center, Inc.
W & C Hospital, Inc.
West Houston ASC, Inc.
West Houston Healthcare Group, Ltd.
West Houston Internal Specialists, PLLC
West Houston Outpatient Medical Facility, Inc.
West Houston Surgicare, Inc.
West LPN Fort Worth Oncology, PLLC
West McKinney Imaging Services, LLC
West Park Surgery Center, L.P.
McKinney Surgery Center
WHMC, Inc.
Woman’s Hospital of Texas, Incorporated
Women Practitioners of Houston, PLLC
Women Specialists of Bayshore, PLLC
UNITED KINGDOM
Columbia U.K. Finance Limited
HCA Finance, LP
HCA International Holdings Limited
HCA International Limited
Princess Grace Hospital
The Harley Street Clinic
The Portland Hospital for Women and Children
The Wellington Hospital
HCA Staffing Limited
HCA UK Capital Limited
HCA UK Holdings Limited
HCA UK Investments Limited
HCA UK Services, Ltd.
HCA United Kingdom Limited
La Tour Finance Limited Partnership
London Radiography & Radiotherapy Services Limited
St. Martins Healthcare Limited
Lister Hospital
London Bridge Hospital
St. Martins Ltd.
The Harley Street Cancer Clinic Limited
UTAH
Brigham City Community Hospital Physician Services, LLC
Brigham City Community Hospital, Inc.
Brigham City Community Hospital
Brigham City Health Plan, Inc.
Columbia Ogden Medical Center, Inc.
Ogden Regional Medical Center
Columbia Utah Division, Inc.
East Layton Internal Medicine, LLC
General Hospitals of Galen, Inc.
Healthtrust Utah Management Services, Inc.
Hospital Corporation of Utah
Lakeview Hospital
HTI Physician Services of Utah, Inc.
Jordan Family Health, L.L.C.
Lakeview Hospital Physician Services, LLC
Lakeview Neurosurgery Clinic, LLC
Lakeview Professional Billing, LLC
Layton Family Practice, LLC
Lone Peak General Surgery, LLC
Lone Peak Primary Care, LLC
Maternal Fetal Services of Utah, LLC
Mountain Division, Inc.
Mountain View Hospital, Inc.
Mountain View Hospital
Mountain View Medical Office Building, Ltd.
Mountainstar Brigham OBGYN, LLC
Mountainstar Cardiovascular Services, LLC
MountainStar Farr West Family Medicine, LLC
Mountainstar Odgen Pediatrics, LLC
MountainStar Primary Care, LLC
Northern Utah Healthcare Corporation
St. Mark’s Hospital
Northern Utah Imaging, L.P.
Ogden Internal Medicine, LLC
Ogden Regional Health Plan, Inc.
Ogden Regional Medical Center Professional Billing, LLC
Ogden Senior Center, LLC
Salt Lake City Surgicare, Inc.
Shadow Mountain Family Medicine, LLC
St. Mark’s Gynecology Oncology Care, LLC
St. Mark’s Investments, Inc.
St. Mark’s Lone Peak Hospital, Inc.
St. Mark’s Millcreek Primary Care, LLC
St. Mark’s Physicians, Inc.
St. Mark’s Professional Services, LLC
St. Mark’s South Jordan Family Practice, LLC
Surgicare of Bountiful, LLC
Surgicare of Salt Lake City, LLC
Surgicare of Utah, LLC
Synergies Surgery Center, L.P.
The Wasatch Endoscopy Center, Ltd.
Timpanogos Regional Medical Services, Inc.
Timpanogos Regional Hospital
Utah Imaging GP, LLC
Utah Surgery Center, L.P.
South Towne Surgery Center
West Jordan Hospital Corporation
VIRGINIA
Alleghany General and Bariatric Services, LLC
Alleghany Hospitalists, LLC
Alleghany Primary Care, Inc.
Ambulatory Services Management Corporation of Chesterfield County, Inc.
Appomattox Imaging, LLC
Arlington Surgery Center, L.P.
Arlington Surgicare, LLC
Ashburn Imaging, LLC
Atrium Surgery Center, L.P.
Atrium Surgicare, LLC
Blacksburg Family Care, LLC
Buford Road Imaging, L.L.C.
Capital Anesthesia Services, LLC
Capital Division, Inc.
Cardiac Surgical Associates, LLC
Cardiothoracic Surgeons of Roanoke Valley, LLC
Carlin Springs Urgent Care, LLC
Central Shared Services, LLC
Chesterfield Imaging, LLC
Chippenham & Johnston-Willis Hospitals, Inc.
CJW Medical Center
Chippenham & Johnston-Willis Sports Medicine, LLC
Chippenham Pediatric Specialists, LLC
Christiansburg Family Medicine, LLC
Christiansburg Internal Medicine, LLC
CJW Infectious Disease, LLC
Colonial Heights Ambulatory Surgery Center, L.P.
Colonial Heights Surgicare, LLC
Columbia Arlington Healthcare System, L.L.C.
Columbia Healthcare of Central Virginia, Inc.
Columbia Medical Group — Southwest Virginia, Inc.
Columbia Pentagon City Hospital, L.L.C.
Columbia/Alleghany Regional Hospital, Incorporated
Alleghany Regional Hospital
Columbia/HCA John Randolph, Inc.
John Randolph Medical Center
CVMC Property, LLC
Daleville Imaging Manager, LLC
Daleville Imaging, L.P.
Dominion Hospital Physicians’ Group, LLC
Fairfax Surgical Center, L.P.
Fairfax Surgical Center
Family Medicine of Blacksburg, LLC
Family Practice at Forest Hill, LLC
Family Practice at Retreat, LLC
Fort Chiswell Family Practice, LLC
Galen of Virginia, Inc.
Galen Property, LLC
Galen Virginia Hospital Corporation
Generations Family Practice, Inc.
GYN-Oncology of Southwest Virginia, LLC
Hanover Outpatient Surgery Center, L.P.
Hanover Outpatient Surgery Center
HCA Health Services of Virginia, Inc.
Henrico Doctors’ Hospital
Retreat Doctors’ Hospital, a Campus of Henrico Doctors’ Hospital
HCA Richmond Division, Inc.
HDH Thoracic Surgeons, LLC
Henrico Doctors’ Family Medicine, LLC
Henrico Doctors’ Neurology Associates, LLC
Henrico Radiation Oncology, LLC
HSS Virginia, L.P.
Institute of Advanced ENT Surgery, LLC
Internal Medicine of Blacksburg, LLC
James River Internists, LLC
John Randolph Family Practice, LLC
John Randolph OB/GYN, LLC
John Randolph Surgeons, LLC
Lewis Gale Physicians Specialists, LLC
Lewis-Gale Hospital, Incorporated
Lewis-Gale Physicians, LLC
LGMC Ambulatory Surgery Center, LLC
Loudoun Surgery Center, L.P.
Loudoun Surgery Center, LLC
Management Services of the Virginias, Inc.
Montgomery Cancer Center, LLC
Montgomery Hospitalists, LLC
Montgomery Regional Hospital, Inc.
Montgomery Regional Hospital
Montgomery Surgery Associates, LLC
Northern Virginia Community Hospital, LLC
Northern Virginia Hospital Corporation
Orthopedics Specialists, LLC
Pediatric Specialists for CJW, LLC
Preferred Hospitals, Inc.
Primary Care of West End, LLC
Primary Health Group, Inc.
Pulaski Community Hospital, Inc.
Pulaski Community Hospital
Pulaski Radiologists, LLC
Pulaski Urology, LLC
Quick Care Centers, LLC
Radford Family Medicine, LLC
Reston Surgery Center, L.P.
Reston Surgery Center
Retreat Cardiology, LLC
Retreat Hospital, LLC
Retreat Internal Medicine, LLC
Retreat Surgical Associates, LLC
Richmond Imaging Employer Corp.
Richmond Pediatric Surgeon’s, LLC
Roanoke Imaging, LLC
Roanoke Neurosurgery, LLC
Roanoke Surgery Center, L.P.
Blue Ridge Surgery Center
Roanoke Valley Gynecology, LLC
Robious Wellness Associates, L.L.P.
Salem Hospitalists, LLC
Short Pump Imaging, LLC
Southwest Virginia Fertility Center, LLC
Southwest Virginia Orthopedics and Spine, LLC
Specialty Physicians of Northern Virginia, LLC
Spotsylvania Medical Center, Inc.
Spotsylvania Regional Surgery Center, LLC
Stafford Imaging, LLC
Surgical Associates of Southwest Virginia, LLC
Surgical Associates of the New River Valley, LLC
Surgicare of Fairfax, Inc.
Surgicare of Hanover, Inc.
Surgicare of Reston, Inc.
Surgicare of Roanoke, LLC
Surgicare of Spotsylvania, LLC
Surgicare of Tuckahoe, Inc.
The Women’s Center at Alleghany, LLC
Urology Specialists of Richmond, LLC
Virginia Gynecologic Oncology, LLC
Virginia Hematology & Oncology Associates, Inc.
Virginia Hospitalists, Inc.
Virginia Psychiatric Company, Inc.
Dominion Hospital
West Creek Ambulatory Surgery Center, LLC
West Creek Medical Center, Inc.
West Creek Medical Center, Inc.
Women’s Health Center of SWVA, LLC
WASHINGTON
ACH, Inc.
Capital Network Services, Inc.
WEST VIRGINIA
Columbia Parkersburg Healthcare System, LLC
Columbia/HCA WVMS Member, Inc.
Galen of West Virginia, Inc.
HCA Health Services of West Virginia, Inc.
Hospital Corporation of America
Parkersburg SJ Holdings, Inc.
Teays Valley Health Services, LLC
Tri Cities Health Services Corp.